Exhibit 10.3

 

 

 

 

 

ENERGY FUNDING LLC

as Company

 

and

 

FS ENERGY AND POWER FUND

as Collateral Manager

 

 

 

 

COLLATERAL MANAGEMENT AGREEMENT

 

 

 

Dated as of July 11, 2013

 

 

 

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COLLATERAL MANAGEMENT AGREEMENT, dated as of July 11, 2013 (this “Agreement”),
between ENERGY FUNDING LLC, a Delaware limited liability company (the
“Company”), and FS ENERGY AND POWER FUND, a Delaware statutory trust, as
collateral manager (in such capacity, the “Collateral Manager”).

 

WHEREAS, the Company desires to engage the Collateral Manager to provide the
services described herein, and the Collateral Manager desires to provide such
services; and

 

WHEREAS, capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement,
dated as of July 11, 2013, as amended from time to time (the “Credit
Agreement”), among the Company, the lenders from time to time party thereto,
Natixis, New York Branch, as administrative agent (in such capacity, together
with its successors in such capacity, the “Administrative Agent”) and as
arranger, and Wells Fargo Bank, National Association, as collateral agent and as
custodian.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein,
the parties hereto hereby agree as follows:

 

1.         Management Services.

 

The Company hereby appoints FS Energy and Power Fund as Collateral Manager
pursuant to the terms and conditions of this Agreement and with the authority to
service, administer and exercise rights and remedies, on behalf of the Company,
in respect of the Collateral Loans acquired by the Company.  FS Energy and Power
Fund hereby accepts such appointment and agrees to perform the duties and
responsibilities of the Collateral Manager pursuant to the terms hereof.  The
Collateral Manager will provide the Company with the following services (in
accordance with and subject to the applicable requirements of, and the
restrictions and limitations set forth in, the Credit Agreement, the Company’s
limited liability company agreement (the “LLC Agreement”) and the Master
Transfer Agreement):

 

(a)        determining the specific Collateral Loans or other assets to be
purchased (or otherwise acquired) or sold by the Company, in accordance with the
Servicing Standard; provided that for the avoidance of doubt, notwithstanding
anything to the contrary contained herein or in any Loan Document, the
Collateral Manager does not hereby guarantee the performance of any obligations
of any other Person under any Loan Document;

 

(b)        effecting the purchase (or other acquisition) and sale of Collateral
Loans and all other assets of the Company;

 

(c)        negotiating with Obligors as to proposed amendments and modifications
(including, but not limited to, maturity extensions or releases of collateral)
of the documentation evidencing and governing the Collateral Loans, enforcing
and collecting on the Collateral Loans and otherwise managing the Collateral
Loans on behalf of the Company;

 

(d)       making determinations with respect to the Company’s exercise
(including, but not limited to, any waiver, modification or variation) of any
rights (including, but not

 

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limited to, voting rights and rights arising in connection with the bankruptcy
or insolvency of an Obligor or the consensual or non-judicial restructuring of
the debt or equity of an Obligor) or remedies in connection with the Collateral
Loans and participating in the committees (official or otherwise) or other
groups formed by creditors of an Obligor;

 

(e)        subject to the calculations made by the Collateral Agent pursuant to
Section 8.9(b) of the Credit Agreement, determining compliance with the Coverage
Tests;

 

(f)        determining whether any Collateral Loan is a Senior Secured Loan,
Second Lien Loan, Senior Secured Bond, Fixed Rate Obligation, Cov-Lite Loan, DIP
Loan, Revolving Collateral Loan, Delayed Funding Loan, PIK Loan, Defaulted Loan,
Credit Improved Loan, Current Pay Obligation, Credit Risk Loan, Bridge Loan,
Synthetic Security, Zero Coupon Loan, Real Estate Loan, Structured Finance
Obligation, Discount Loan, Step-Up Loan, Step-Down Loan and/or Subordinated
Loan;

 

(g)        determining whether any payment will be made, and the amount thereof,
pursuant to Section 5.31 of the Credit Agreement;

 

(h)        managing the Company’s investments within the parameters set forth in
the Credit Agreement;

 

(i)         determining whether any investment is an Eligible Investment;

 

(j)         directing the sale of the Collateral Loans in accordance with
Section 10.1 of the Credit Agreement;

 

(k)        providing assistance to the Company and/or the Collateral Agent with
respect to the sale of the Collateral Loans in accordance with Section 10.1 of
the Credit Agreement;

 

(l)         maintaining and implementing administrative and operating procedures
and maintaining all necessary servicing records with respect to the Collateral
Loans in respect of the servicing and collection (subject to the provisions
herein) of the Collateral Loans (including information relating to its
performance under this Agreement) as may be required by the Loan Documents;

 

(m)       monitoring the ratings of the Collateral Loans;

 

(n)        instructing the administrative agents or, in the case of
Participation Interests, the Selling Institutions, in respect of the Collateral
Loans to make payments directly into the Collection Account established and
maintained with the Collateral Agent;

 

(o)        monitoring the Collateral Loans on an ongoing basis and providing to
the Administrative Agent and the Company or to any other Person designated by
the Company all information and data which is generated by, or reasonably
accessible to, the

 

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Collateral Manager and which is required under the Credit Agreement or requested
by the Company in connection with the preparation of all reports, certificates,
schedules and other data which the Company is required to prepare and deliver
under the Credit Agreement, in sufficient time for the Company, or the Person
designated by the Company (including but not limited to the Custodian), to
review such data and prepare and deliver to the parties entitled thereto all
such reports, certificates, schedules and other data required by the Credit
Agreement; provided that the Collateral Manager shall review the contents of the
Collateral Reports, Payment Date Reports, instructions, statements and
certificates and make such reports available to each Rating Agency then rating
the Loans and notify the Collateral Agent of any comments to such reports, in
each case, no later than 10 Business Days after its receipt of such reports from
the Collateral Agent and with respect to the Collateral Reports and Payment Date
Reports, the Collateral Manager shall notify the Collateral Agent of any
discrepancies of which it has knowledge no later than five Business Days after
receipt so that such discrepancies can be reconciled prior to the date such
reports are due;

 

(p)        identifying each Collateral Loan in its servicing records to reflect
that such Collateral Loan is owned by the Company;

 

(q)        supervising the Collateral Loans, including communicating with
Obligors, executing amendments, providing recommendations to the Company to
provide consents and waivers (subject to the terms and conditions set forth in
Section 5.19 of the Credit Agreement), enforcing and (subject to the provisions
hereof) collecting on the Collateral Loans and otherwise managing the Collateral
Loans on behalf of the Company;

 

(r)        providing the Administrative Agent, the Collateral Agent and the
Company notice in writing of a continuing Default under the Credit Agreement
within seven days after a Senior  Officer of the Collateral Manager obtains
actual knowledge of the occurrence thereof.  As used in this Agreement; “Senior
Officer” shall mean, with respect to the Collateral Manager, any chief executive
officer, chief operating officer, chief credit officer, credit committee member,
executive vice president or president (or, in each case, any other officer with
a position analogous to those identified above);

 

(s)        consulting with DBRS at such times as may be reasonably requested by
DBRS and providing DBRS with any information reasonably requested in connection
with its monitoring the acquisition and disposition of the Collateral in
connection with its ratings of the Loans;

 

(t)        advising and assisting the Company with respect to the appraisal and
valuation of the Collateral, to the extent required or permitted by the Credit
Agreement; and

 

(u)        complying with such other duties and responsibilities as may be
expressly required of the Collateral Manager by this Agreement, the Credit
Agreement and the Master Transfer Agreement.

 

The Company agrees for the benefit of the Collateral Manager and the

 

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Administrative Agent to follow the lawful instructions and directions of the
Collateral Manager in connection with the Collateral Manager’s services
hereunder.

 

The Collateral Manager shall render its services hereunder in accordance with
the Servicing Standard.  The Collateral Manager shall comply with and perform
all the duties and functions that have been specifically delegated to it under
this Agreement, the Credit Agreement and the Master Transfer Agreement.  To the
extent not inconsistent with the foregoing, the Collateral Manager shall follow
its customary standards, policies and procedures in performing its duties
hereunder and under the other Loan Documents.  The Collateral Manager shall not
be bound to follow any amendment to the Credit Agreement, however, until it has
received a copy of the amendment from the Company or the Administrative Agent
and, in addition, the Collateral Manager shall not be bound by any amendment to
the Credit Agreement which adversely affects in any material respects the
obligations of the Collateral Manager unless the Collateral Manager shall have
consented thereto in writing.  The Company agrees that it will not permit any
amendment to the Credit Agreement that adversely affects the duties or
liabilities of the Collateral Manager to become effective unless the Collateral
Manager has been given prior written notice of such amendment and consented
thereto in writing.

 

To the extent necessary or appropriate to perform all of the duties to be
performed by it hereunder, the Collateral Manager shall have the power to
negotiate, execute and deliver all necessary documents and instruments on behalf
of the Company with respect to any Collateral Loan or other asset of the Company
and with respect to the rights and obligations of the Company under the Credit
Agreement.

 

The Collateral Manager shall have no obligation to perform any duties other than
those expressly specified herein, in the Credit Agreement and in the Master
Transfer Agreement.  The Secured Parties, the Administrative Agent, the Lenders
and the Collateral Agent shall not have any obligation or liability with respect
to any Collateral Loans, nor shall any of them be obligated to perform any of
the obligations of the Collateral Manager hereunder.

 

2.         Brokerage.

 

The Collateral Manager shall use commercially reasonable efforts to obtain the
best prices and execution for all orders placed with respect to the Collateral
Loans, and other assets of the Company, considering all reasonable
circumstances.  Subject to the objective of obtaining best prices and execution,
the Collateral Manager may take into consideration research and other brokerage
services furnished to the Collateral Manager or its Affiliates by brokers and
dealers which are not Affiliates of the Collateral Manager.  Such services may
be used by the Collateral Manager or its Affiliates in connection with its other
advisory activities or investment operations.  The Collateral Manager may
aggregate sales and purchase orders placed with respect to the Collateral Loans,
and other assets of the Company, with similar orders being made simultaneously
for other accounts managed by the Collateral Manager or with accounts of the
Affiliates of the Collateral Manager, if in the Collateral Manager’s sole
judgment such aggregation shall result in an overall economic benefit to the
Company taking into consideration the selling or purchase price, brokerage
commission and other expenses.  In accounting for such aggregated order price,
commission and other expenses shall be averaged on a per position basis.

 

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The Company acknowledges that the determination of any such economic benefit by
the Collateral Manager is subjective and represents the Collateral Manager’s
evaluation at the time that the Company will be benefited by better purchase or
sales prices, lower commission expenses and beneficial timing of transactions or
a combination of these and other factors.  When any aggregate sales or purchase
orders occur, the objective of the Collateral Manager (and any of its Affiliates
involved in such transactions) shall be to allocate the executions among the
accounts in an equitable manner.

 

Subject to the Collateral Manager’s execution obligations described herein, the
Collateral Manager is hereby authorized to effect client cross-transactions
where the Collateral Manager causes a transaction to be effected between the
Company and another account advised by it or any of its Affiliates; provided
that, if and to the extent required by the Investment Advisers Act, such
authorization is terminable at the Company’s option without penalty, effective
upon receipt by the Collateral Manager of written notice from the Company.  The
terms and conditions of any transaction between the Company and the Collateral
Manager pursuant to this Agreement shall be conducted and executed in accordance
with applicable law and under terms and at a price that would be applicable in a
materially identical transaction conducted on an arms-length basis.  In
addition, the Company hereby consents to, and authorizes the Collateral Manager
to enter into, agency cross-transactions where it or any of its Affiliates acts
as broker for the Company and for the other party to the transaction, to the
extent permitted under applicable law; provided that the Company shall have the
right to revoke such consent at any time by written notice to the Collateral
Manager.

 

All purchases and sales of Collateral Loans and other assets of the Company by
the Collateral Manager on behalf of the Company shall be in accordance with
reasonable and customary business practices and in compliance with applicable
laws.

 

3.         The Representations and Warranties of the Company.

 

The Company represents and warrants to the Collateral Manager that:

 

(a)        the Company has been duly organized and is validly existing under the
laws of Delaware, has the full power and authority to own its assets and the
obligations proposed to be owned by it and to transact the business in which it
is presently engaged and is duly qualified under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its business
requires, or the performance of its obligations under this Agreement and the
other Loan Documents would require, such qualification, except for failures to
be so qualified, authorized or licensed that would not in the aggregate have a
material adverse effect on the business, operations, assets or financial
condition of the Company;

 

(b)        the Company has full power and authority to execute, deliver and
perform this Agreement, the other Loan Documents and all obligations required
hereunder and under the other Loan Documents, and the performance of all
obligations imposed upon it hereunder and thereunder;

 

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(c)        this Agreement has been duly authorized, executed and delivered by it
and constitutes its valid and binding obligation, enforceable in accordance with
its terms except that the enforceability thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship or other similar laws now or hereafter in effect relating to
creditors’ rights and (ii) general principles of equity (regardless of whether
such enforcement is considered in a Proceeding in equity or at law);

 

(d)       no consent, approval, authorization or order of or declaration or
filing with any government, governmental instrumentality or court or other
Person is required for the performance by the Company of its duties hereunder,
except such as have been duly made or obtained;

 

(e)        neither the execution and delivery of this Agreement nor the
fulfillment of the terms hereof conflicts with or results in a breach or
violation of any of the material terms or provisions of or constitutes a
material default under (i) the Company’s certificate of formation, LLC Agreement
or other constituent documents, (ii) the terms of any material indenture,
contract, lease, mortgage, deed of trust, note, agreement or other evidence of
indebtedness or other material agreement, obligation, condition, covenant or
instrument to which the Company is a party or is bound, (iii) any statute
applicable to the Company or (iv) any law, decree, order, rule or regulation
applicable to the Company of any court or regulatory, administrative or
governmental agency, body or authority or arbitrator having or asserting
jurisdiction over the Company or its properties, and which would have a material
adverse effect upon the performance by the Company of its duties under this
Agreement;

 

(f)        neither the Company nor any of its Affiliates is in violation of any
U.S. federal or state securities law or regulation promulgated thereunder and
there is no charge, investigation, action, suit or Proceeding before or by any
court or regulatory agency pending or, to the best knowledge of the Company,
threatened that would have a material adverse effect upon the performance by the
Company of its duties under this Agreement;

 

(g)        the Company has not engaged in any transaction that would result in
the violation of, or require registration as an investment company under, the
Investment Company Act;

 

(h)        the Company is not required to register as an “investment company”
under the Investment Company Act; and

 

(i)         there is no charge, investigation, action, suit or Proceeding before
or by any court pending or, to the best knowledge of the Company, threatened,
that, if determined adversely to the Company, would have a material adverse
effect upon the performance by the Company of its duties under, or on the
validity or enforceability of, this Agreement or the provisions of the other
Loan Documents applicable to the Company thereunder.

 

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4.         Representations and Warranties of the Collateral Manager.

 

The Collateral Manager represents and warrants to the Company that:

 

(a)        the Collateral Manager is duly organized and validly existing under
the laws of Delaware and has the full power and authority to transact the
business in which it is presently engaged and is duly qualified under the laws
of each jurisdiction where the conduct of its business requires, or the
performance of its obligations under this Agreement and the provisions of the
other Loan Documents applicable to the Collateral Manager would require, such
qualification, except for failures to be so qualified, authorized or licensed
which would not, in the aggregate, have a material adverse effect on the
business, operations, assets or financial condition of the Collateral Manager,
or on the ability of the Collateral Manager to perform its obligations under, or
on the validity or enforceability of, this Agreement and the applicable
provisions of such other Loan Documents;

 

(b)        the Collateral Manager has full power and authority to execute and
deliver this Agreement and to perform all of its obligations hereunder and under
the other Loan Documents applicable to the Collateral Manager;

 

(c)        this Agreement has been duly authorized, executed and delivered by
the Collateral Manager and constitutes a valid and binding agreement of the
Collateral Manager, enforceable against it in accordance with its terms, except
that the enforceability thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors’ rights and (ii) general principles of equity (regardless
of whether such enforcement is considered in a Proceeding in equity or at law);

 

(d)       neither the Collateral Manager nor any of its Affiliates is in
violation of any contract or agreement to which it is a party or by which it or
any of its property may be bound, federal or state securities law or regulation
promulgated thereunder or any listing requirements of any exchange on which it
is listed and there is no charge, investigation, action, suit or Proceeding
before or by any court, exchange or regulatory agency pending or, to the best
knowledge of the Collateral Manager, threatened, that in either case would have
a material adverse effect upon the performance by the Collateral Manager of its
duties under this Agreement;

 

(e)        neither the execution and delivery of this Agreement, nor the
performance of the terms hereof or the provisions of the other Loan Documents
applicable to the Collateral Manager, conflicts with or results in a breach or
violation of any of the material terms or provisions of, or constitutes a
material default under, (i) its declaration of trust, bylaws or other
constituent document, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement or other evidence of indebtedness or
other agreement, obligation, condition, covenant or instrument to which the
Collateral Manager is a party or is bound, (iii) any statute applicable to the
Collateral Manager or (iv) any law, decree, order, rule or regulation applicable
to the Collateral Manager of any court or regulatory, administrative or
governmental agency, body or authority or arbitrator having

 

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or asserting jurisdiction over the Collateral Manager or its properties, and
which would have, in the case of any of clauses (ii) through (iv) of this
paragraph (e), a material adverse effect upon the performance by the Collateral
Manager of its duties under this Agreement or the provisions of such other Loan
Documents;

 

(f)        no consent, approval, authorization or order of or declaration or
filing with any government, governmental instrumentality or court or other
Person is required for the performance by it of its duties hereunder, except
such as have been duly made or obtained.

 

5.         Expenses.

 

The Collateral Manager shall pay all expenses and costs (including salaries,
rent and other overhead) incurred by it in connection with its services under
this Agreement; provided that the Collateral Manager shall not be liable for and
the Company shall be responsible for the payment of (i) reasonable expenses and
costs of external legal advisers, consultants and other professionals retained
by the Company or by the Collateral Manager, on behalf of the Company, in
connection with the services provided by the Collateral Manager pursuant to this
Agreement and the other Loan Documents, (ii) the reasonable cost of asset
pricing and asset rating services, and accounting, programming and data entry
services that are retained in connection with services of the Collateral Manager
under this Agreement, (iii) reasonable travel expenses (airfare, meals, lodging
and other transportation) incurred by the Collateral Manager as is reasonably
necessary in connection with the selection of Collateral Loans and the
negotiation, documentation, default or restructuring of any Collateral Loan and
(iv) any extraordinary costs and expenses reasonably incurred by the Collateral
Manager in the performance of its obligations under this Agreement.  To the
extent that such expenses are incurred in connection with obligations that are
also held by the Collateral Manager, the Collateral Manager shall allocate the
expenses among the accounts in a fair and equitable manner.  Any amounts payable
pursuant to this Section 5 shall be reimbursed by the Company to the extent
funds are available therefor in accordance with and subject to the limitations
contained in the Credit Agreement (including the Priority of Payments).

 

6.         Fees.

 

(a)        The Company shall pay to the Collateral Manager, for services
rendered and performance of its obligations under this Agreement, fees which are
payable in arrears on each Quarterly Payment Date (subject to availability of
funds and the conditions set forth in Sections 9.1(a)(i)(D) and 9.1(a)(ii)(A) of
the Credit Agreement) in an amount equal to 0.25% per annum of the Aggregate
Maximum Principal Balance measured as of the Calculation Date immediately
preceding such Quarterly Payment Date (the “Senior Management Fee”).  The Senior
Management Fee will be calculated on the basis of a calendar year consisting of
360 days and the actual number of days elapsed.

 

(b)        The Company shall pay to the Collateral Manager, for services
rendered and performance of its obligations under this Agreement, fees which are
payable in arrears on each Quarterly Payment Date (subject to availability of
funds and the conditions set forth in Section 9.1(a)(i)(I) and 9.1(a)(ii)(D) of
the Credit Agreement) in

 

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an amount equal to 0.50% per annum of the Aggregate Maximum Principal Balance
measured as of the Calculation Date immediately preceding such Quarterly Payment
Date (the “Subordinated Management Fee”, and together with the Senior Management
Fee, the “Management Fees”).  The Subordinated Management Fee will be calculated
on the basis of a calendar year consisting of 360 days and the actual number of
days elapsed.

 

(c)        The Collateral Manager may, in its sole discretion, (i) waive on a
permanent basis all or any portion of the Management Fees or (ii) defer without
interest all or any portion of the Management Fees.  Such deferred amounts (but,
for the avoidance of doubt, not waived amounts) will become payable on the next
Quarterly Payment Date in the same manner and priority as their original
characterization would have required unless deferred again in accordance with,
and subject to the limitations contained in the Priority of Payments.

 

(d)       If this Agreement is terminated pursuant to Section 11 hereof or
otherwise, the Management Fees calculated as provided in Sections 6(a) and
6(b) hereof shall be prorated for any partial periods between Quarterly Payment
Dates during which this Agreement was in effect and shall be due and payable on
the earlier to occur of (i) first Quarterly Payment Date following the effective
date of such termination or (ii) the date of any distribution of proceeds of
Collateral pursuant to Section 6.4 of the Credit Agreement.

 

(e)        The Management Fees will be payable from amounts on deposit in the
Collection Account in accordance with the Priority of Payments and only to the
extent funds are available therefor.  If on any Quarterly Payment Date there are
insufficient funds to pay the Management Fees then due in full, the amount not
so paid shall be deferred without interest and shall be payable on the next
Quarterly Payment Date if any on which any funds are available therefor, as
provided in the Credit Agreement.

 

(f)        The Collateral Manager hereby agrees not to cause the filing of a
petition in bankruptcy against the Company for any reason whatsoever, including,
without limitation, the non-payment of the Management Fees, except in accordance
with the provisions of Section 22 hereof and the provisions of the Credit
Agreement.

 

7.         Non-Exclusivity.

 

The services of the Collateral Manager to the Company are not to be deemed
exclusive, and the Collateral Manager shall be free to render asset management
or management services to other Persons (including Affiliates, other investment
companies and clients having objectives similar to those of the Company).  It is
understood and agreed that the officers, directors and trustees of the
Collateral Manager may engage in any other business activity or render services
to any other Person or serve as partners, officers, directors or trustees of any
other firm or corporation.  Notwithstanding the foregoing, it is understood and
agreed that the Collateral Manager will at no time render any services to, or in
any way participate in the organization or operation of, any investment company
or other entity if such actions would require the Company to register as an
“investment company” under the Investment Company

 

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Act.  Subject to Section 9 hereof, it is understood and agreed that information
or advice received by the Collateral Manager and officers or trustees of the
Collateral Manager hereunder shall be used by such organization or such Persons
to the extent permitted by applicable law.

 

8.         Conflicts of Interest.

 

The Collateral Manager may, subject to applicable legal requirements and any
restrictions or limitations contained in the Loan Documents to which it is a
party or which are applicable to it, direct the Company (i) to acquire (whether
by purchase, contribution or otherwise) any Collateral Loans for the Company
from the Collateral Manager or any of its Affiliates as principal or (ii) to
sell or distribute any Collateral Loans for the Company to the Collateral
Manager or any of its Affiliates as principal, in each case, for fair market
value and on terms substantially comparable to those that would be obtained in
an arms-length transaction with a non-affiliate.

 

Notwithstanding the provisions of the preceding paragraph, various potential and
actual conflicts of interest may arise from the overall investment activity of
the Collateral Manager and its Affiliates.  The Collateral Manager, its
Affiliates and their respective clients may invest in obligations that would be
appropriate for inclusion in the Company’s assets.  Such investments may be
different from those made on behalf of the Company.  The Collateral Manager and
its Affiliates may have ongoing relationships with Obligors and may own equity
or debt obligations issued by Obligors.  The Collateral Manager and its
Affiliates and the clients of the Collateral Manager or its Affiliates may
invest in obligations that are senior to, or have interests different from or
adverse to, the assets of the Company.  The Collateral Manager may serve as
Collateral Manager for, invest in, or be affiliated with, other entities
organized to issue collateralized debt obligations secured by loans, high-yield
debt securities, or other debt obligations.  The Collateral Manager may at
certain times be simultaneously seeking to purchase or sell investments for
other entities for which it serves as Collateral Manager, or for its clients and
Affiliates, and selecting such investments as Collateral Loans for the Company. 
Furthermore, the Collateral Manager and/or its Affiliates may make an investment
on their behalf or on behalf of any account that they manage or advise without
offering the investment opportunity to the Company or making an investment on
behalf of the Company.

 

The Company hereby acknowledges the various potential and actual conflicts of
interest that may exist with respect to the Collateral Manager; provided that
nothing in this Section 8 shall be construed as altering the duties of the
Collateral Manager as set forth in this Agreement, the other Loan Documents or
the requirements of any law, rule, or regulation applicable to the Collateral
Manager.

 

9.         Records; Confidentiality.

 

The Collateral Manager shall keep proper books of record and accounts in which
full, true and correct entries in all material respects in accordance with GAAP
shall be made of all material financial matters and transactions in relation to
services performed hereunder, and shall permit representatives of the
Administrative Agent and the Collateral Agent (in each case at the Company’s
expense, in the case of not more than one inspection during any fiscal year
except during the continuance of an Event of Default) to visit and inspect any
of its properties, to

 

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examine and make abstracts from any of its books and records and to discuss its
affairs, finances and accounts with its officers, employees and independent
public accountants, all at reasonable times in a manner so as to not unduly
disrupt the business of the Collateral Manager, upon reasonable prior notice to
the Collateral Manager and as often as may be reasonable; provided that so long
as no Default or Event of Default shall have occurred and be continuing, no more
than one such inspection shall be conducted during any fiscal year of the
Collateral Manager.

 

If requested by the Majority Lenders, the Collateral Manager agrees that
representatives of the Majority Lenders (or an independent third party auditing
firm selected by the Majority Lenders) shall (at the Company’s expense) conduct
an audit and/or field examination of the Collateral Manager, at reasonable times
in a manner so as to not unduly disrupt the business of the Collateral Manager,
for the purpose of examining the servicing and administration of the Collateral
Loans, the results of which audit and/or field examination shall be promptly
provided to the Lenders; provided that no more than one such audit or field
examination shall be conducted during any fiscal year of the Collateral Manager.

 

If requested by the Administrative Agent or the Majority Lenders, the Collateral
Manager shall participate (and shall use commercially reasonable efforts to
cause the Investment Advisor or Sub-Advisor to participate) in a meeting with
the Administrative Agent and the Lenders requested pursuant to Section 5.6(c) of
the Credit Agreement.

 

At no time will the Collateral Manager make a public announcement concerning the
Credit Agreement, the Collateral Manager’s role hereunder or any other aspect of
the transactions contemplated by this Agreement and the Credit Agreement absent
the written consent of the Company.

 

The Collateral Manager shall, and shall cause its Affiliates to, keep
confidential any and all information obtained in connection with the services
rendered hereunder and shall not disclose any such information to non-affiliated
third parties except (i) with the prior written consent of the Company, (ii) as
required by law, regulation, court order or the rules or regulations of any self
regulating organization, body or official having jurisdiction over the
Collateral Manager, (iii) to its professional advisers, (iv) such information as
shall have been publicly disclosed other than in violation of this Agreement,
(v) the identification of the Company as a client of the Collateral Manager,
(vi) information related to the performance of the Collateral Manager,
(vii) information furnished in connection with any successor collateral manager
or assignee, or any agent that has been assigned duties in accordance with this
Agreement or (viii) such information that was or is obtained by the Collateral
Manager on a non-confidential basis; provided that the Collateral Manager does
not know or have reason to know, after due inquiry, of any breach by such source
of any confidentiality obligations with respect thereto.  For purposes of this
Section 9, the Administrative Agent shall in no event be considered a
“non-affiliated third party,” and the Collateral Manager may disclose any of the
aforementioned information to the Administrative Agent insofar as such
information relates to the Company’s performance of its obligations under the
Credit Agreement and the other Loan Documents.

 

11

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10.       Term.

 

This Agreement shall become effective on the date hereof and shall continue
unless terminated as hereinafter provided.

 

11.       Termination.

 

(a)        This Agreement may be terminated, and the Collateral Manager may be
removed, without payment to the Collateral Manager of any penalty, for cause
upon prior written notice to the Collateral Manager and DBRS by the Company;
provided that such notice may be waived by the Collateral Manager.  For this
purpose, “cause” will mean the occurrence of any of the following events or
circumstances:

 

(i)         the Collateral Manager’s breach (other than a breach contemplated by
the following clause (ii)), in any respect, of any provision of this Agreement, 
the Credit Agreement or the Master Transfer Agreement and the Collateral
Manager’s failure to cure such breach within 30 days of its becoming aware of,
or receiving notice of, the occurrence of such breach;

 

(ii)        the Collateral Manager’s willful breach of any provision of this
Agreement, the Credit Agreement or the Master Transfer Agreement;

 

(iii)       the failure of any representation, warranty, certification or
statement made or delivered by the Collateral Manager in or pursuant to this
Agreement or the other Loan Documents applicable to the Collateral Manager to be
correct in any material respect when made, which failure (a) could reasonably be
expected to have a material adverse effect on the Collateral or the Company and
(b) is not corrected by the Collateral Manager within 15 days of the earlier of
(1) its receipt of notice from the Company of such failure and (2) the
Collateral Manager having actual knowledge of such failure, unless, if such
failure is not capable of being cured in 15 days but is curable within 45 days,
the Collateral Manager has commenced taking action that the Collateral Manager
in good faith believes will remedy, and does in fact remedy, such failure within
45 days after notice of such failure being given to the Collateral Manager;

 

(iv)       the Collateral Manager, the Investment Advisor or the Sub-Advisor
(1) is dissolved (other than pursuant to a consolidation, amalgamation or
merger), (2) files, or consents by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any other petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any jurisdiction,
(3) becomes insolvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become due, (4) makes a
general assignment, arrangement or composition with or for the benefit of its
creditors, (5) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to any
substantial part of its property or (6) is adjudicated as insolvent or bankrupt,
or a petition seeking reorganization,

 

12

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arrangement, adjustment or composition of or in respect of the Collateral
Manager, the Investment Advisor or the Sub-Advisor or appointing a receiver,
liquidator, assignee, or sequestrator (or other similar official) of the
Collateral Manager or of any substantial part of its property, and the
continuance of any such decree or order unstayed and in effect for a period of
45 consecutive days;

 

(v)        the occurrence of an Event of Default under the Loan Documents that
results directly from any breach by the Collateral Manager of its duties under
this Agreement, the Credit Agreement or the Master Transfer Agreement;

 

(vi)       (1) the occurrence of an act by the Collateral Manager, the
Investment Advisor or the Sub-Advisor that constitutes fraud or criminal
activity in the performance of its obligations under this Agreement or the other
Loan Documents, or (2) the Collateral Manager, the Investment Advisor (in its
capacity as investment advisor to the Collateral Manager) or the Sub-Advisor (in
its capacity as sub-advisor to the Collateral Manager) or any director, general
partner, managing member, manager or senior officer of such entity (in such
capacity) is (i) indicted for a criminal offense related to its activities in
any securities, financial advisory, asset management or other investment
business, or (ii) convicted of any felonious criminal offense related to its
activities in any securities, financial advisory, asset management or other
investment business, or the indictment, finding of civil liability or conviction
related to a violation of the Securities Act or any other U.S. federal
securities law or any rules or regulations thereunder, and, in each case, such
director, general partner, managing member, manager or senior officer continues
to have any such position with any such entity (in such capacity) for the
performance by the Collateral Manager, the Investment Advisor or the Sub-Advisor
in such capacity of its activities in any securities, financial advisory, asset
management or other investment business for a period of 10 days after such
indictment or conviction; or

 

(vii)      the occurrence of any Event of Default under Section 6.1(h),
6.1(m) or 6.1(n) of the Credit Agreement.

 

If any such event occurs, the Collateral Manager shall give prompt written
notice (and in all cases within five Business Days) thereof to the Company and
the Administrative Agent upon the Collateral Manager becoming aware of the
occurrence of such event.

 

(b)        The Collateral Manager shall have the right to resign only upon 90
days prior written notice to the Company, the Administrative Agent, the
Collateral Agent and DBRS (or such shorter notice as is acceptable to the
Company and the Administrative Agent).

 

(c)        This Agreement shall be automatically terminated in the event that
the Company determines in good faith that the Company or the Company’s asset
portfolio has become required to be registered under the provisions of the
Investment Company Act.

 

13

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(d)       If the Collateral Manager is removed for cause or resigns, the Company
may choose (subject to the right of the Majority Lenders to terminate the
Reinvestment Period or to accelerate and/or terminate the Commitments in
accordance with the terms of the Credit Agreement) to appoint a successor
collateral manager, subject to the satisfaction of the Rating Condition, which
appointment shall take effect upon the successor collateral manager accepting
such appointment by a written assumption (pursuant to which it shall agree to be
bound by the terms set forth in this Agreement) in form and substance reasonably
satisfactory to the Administrative Agent (at the direction of the Majority
Lenders) and the Company.

 

12.       Action Upon Termination.

 

(a)        Upon the effective termination of this Agreement or if the Collateral
Manager resigns or is removed in accordance with the terms hereof, the
Collateral Manager shall as soon as practicable deliver to the Company all
property and documents of the Company or otherwise relating to the Company’s
assets then in the custody of the Collateral Manager and, in the case of a
resignation or removal, take all other actions reasonably requested by the
Administrative Agent, in each case to facilitate the transition of the
performance of such activities to the successor collateral manager.

 

Notwithstanding such termination, the Collateral Manager shall remain liable to
the extent set forth herein (but subject to Section 13 hereof) for its acts or
omissions hereunder arising prior to termination and for any expenses, losses,
damages, liabilities, demands, charges and claims (including reasonable
attorney’s fees) in respect of or arising out of a breach of the representations
and warranties made by the Collateral Manager in Section 4 hereof or from any
failure of the Collateral Manager to comply with the provisions of this
Section 12.

 

(b)        The Collateral Manager agrees that, notwithstanding its resignation
or removal or the termination of this Agreement, it shall reasonably cooperate
in any suit, action or Proceeding relating to this Agreement arising in
connection with this Agreement, the other Loan Documents or any of the Company’s
assets (excluding any such Proceeding in which claims are asserted against the
Collateral Manager or any Affiliate of the Collateral Manager) so long as the
Collateral Manager shall have been offered reasonable security, indemnity or
other provisions against the cost, expenses and liabilities that might be
incurred in connection therewith, subject to the limitations contained in the
Credit Agreement.

 

13.       Liability of Collateral Manager; Delegation.

 

(a)        The Collateral Manager assumes no responsibility under this Agreement
other than to render the services called for hereunder and under the terms of
the other Loan Documents applicable to it.  The Collateral Manager shall not be
responsible for any action of the Company in declining to follow any advice,
recommendation or direction of the Collateral Manager.  The Collateral Manager
shall have no liability to the Administrative Agent or other creditors of the
Company, for any error of judgment, mistake of law, or for any loss arising out
of any investment, or for any other act or

 

14

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omission in the performance of its obligations to the Company except for
liability to which it would be subject by reason of willful misfeasance, bad
faith, gross negligence in performance, or reckless disregard of its obligations
hereunder.  The Collateral Manager may delegate to an agent selected with
reasonable care, which shall include any Person that is party to a sub-advisory
agreement with the Collateral Manager or any of its Affiliates as of the date
hereof, any or all duties (other than its asset selection or trade execution
duties) assigned to the Collateral Manager hereunder; provided that (i) no such
delegation by the Collateral Manager of any of its duties hereunder shall
relieve the Collateral Manager of any of its duties hereunder nor relieve the
Collateral Manager of any liability with respect to the performance of such
duties, (ii) the Collateral Manager shall be responsible for the fees and
expenses payable to such agent, subject to its right to expense reimbursement
and indemnification from the Company set forth in Section 13(b), and (iii) no
such delegation will subject the Company to any additional federal, state or
other income taxation.  For the avoidance of doubt, asset selection and trade
execution duties shall include the services described in Section 1(a) hereof.

 

(b)        The Company shall reimburse, indemnify and hold harmless the
Collateral Manager, its trustees, officers, agents and employees and any of its
Affiliates from any and all actual and reasonable out-of-pocket expenses,
losses, damages, liabilities, demands, charges and claims of any nature
whatsoever (including reasonable attorneys’ fees and expenses, and, for the
avoidance of doubt, excluding extraordinary, special, indirect, consequential or
punitive damages), as are incurred in investigating, preparing, pursuing or
defending any claim, action, Proceeding or investigation with respect to any
pending or threatened litigation caused by, or arising out of or in connection
with, any acts or omissions of the Collateral Manager, its trustees, officers,
shareholders, agents and employees made in good faith and in the performance of
the Collateral Manager’s duties under this Agreement or the other Loan Documents
except to the extent resulting from such Person’s bad faith, willful
misfeasance, gross negligence or reckless or intentional disregard of its duties
hereunder or thereunder or breach of the Servicing Standard.  The Collateral
Manager, its trustees, officers, shareholders, agents and employees may consult
with counsel and accountants with respect to the affairs of the Company and
shall be fully protected and justified, to the extent allowed by law, in acting,
or failing to act, if such action or failure to act is taken or made in good
faith and is in accordance with the advice or opinion of such counsel or
accountants.  Notwithstanding anything contained herein to the contrary, the
obligations of the Company under this Section 13(b) shall be payable from the
Company’s assets as part of the Administrative Expenses and are subject to the
availability of funds and to the conditions set forth in the Credit Agreement.

 

(c)        The Collateral Manager shall reimburse, indemnify and hold harmless
the Company, its members, manager, officers, agents and employees from any and
all expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including reasonable attorneys’ fees and expenses, and, for
the avoidance of doubt, excluding extraordinary, special, indirect,
consequential or punitive damages), as are incurred in investigating, preparing,
pursuing or defending any claim, action, Proceeding or investigation with
respect to any pending or threatened litigation caused by, or arising out of or
in connection with, (i) any acts or omissions of the Collateral

 

15

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Manager constituting bad faith, willful misconduct, gross negligence or reckless
or intentional disregard of its duties under this Agreement or the other Loan
Documents or breach of the Servicing Standard and (ii) any breach of the
representations and warranties made by the Collateral Manager in Section 4
hereof.

 

14.       Obligations of Collateral Manager.

 

Unless otherwise required by this Agreement, the other Loan Documents or by
applicable law, the Collateral Manager shall not intentionally take any action,
which it knows or should know would (a) materially adversely affect the Company
for purposes of United States federal or state law or any other law known to the
Collateral Manager to be applicable to the Company, (b) require registration of
the Company or the Company’s assets as an “investment company” under the
Investment Company Act, (c) not be permitted under the Company’s LLC Agreement
or certificate of formation (including, but not limited to, Section 9 of the
Company’s LLC Agreement), (d) cause the Company to violate the terms of the
Credit Agreement or the other Loan Documents or (e) subject the Company to
federal, state or other income taxation; it being understood that in connection
with the foregoing the Collateral Manager will not be required to make any
independent investigation of any facts or laws not otherwise known to it in
connection with its obligations under this Agreement or the other Loan Documents
or the conduct of its business generally.  The Collateral Manager covenants that
it shall comply in all material respects with all laws and regulations
applicable to it in connection with the performance of its duties under this
Agreement and the other Loan Documents.  Notwithstanding anything in this
Agreement, the Collateral Manager shall not take any discretionary action that
would reasonably be expected to cause an Event of Default under the Credit
Agreement.  The Collateral Manager covenants that it shall (i) not hold out the
Collateral Loans as its assets, (ii) take all actions reasonably necessary to
ensure that the Collateral Loans are held in the name of the Company or, if held
by an agent of the Company, clearly designate such agent as being the Company’s
agent, (iii) cause the Company to comply with the terms of Section 5.18 of the
Credit Agreement and (iv) not fail to correct any known misunderstandings
regarding the separate identity of the Company and shall not identify itself as
a division or department of the Company.

 

15.       Good Standing.

 

The Collateral Manager will remain qualified to do business and in good standing
(as applicable) in every jurisdiction in which the nature of its businesses so
requires, except where the failure to be so qualified and in good standing
(other than in the State of Delaware or, in the case of a successor collateral
manager, the applicable jurisdiction of the successor collateral manager) could
reasonably be expected to have a Material Adverse Effect.

 

16.       Compliance with Laws.

 

The Collateral Manager will comply in all material respects with all applicable
material laws, ordinances, rules, regulations, and requirements of governmental
authorities except where the necessity of compliance therewith is contested in
good faith by appropriate Proceedings.

 

16

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17.       No Partnership or Joint Venture.

 

The Company and the Collateral Manager are not partners or joint venturers with
each other and nothing herein shall be construed to make them such partners or
joint venturers or impose any liability as such on either of them.  The
Collateral Manager’s relation to the Company shall be deemed to be that of an
independent contractor.

 

18.       Notices.

 

Any notice under this Agreement shall be in writing and sent by facsimile,
confirmed by telephonic communication, or addressed and delivered or mailed
postage paid to the other party at such address as such other party may
designate for the receipt of such notice.  Until further notice to the other
party it is agreed that the address of the Company and the address of the
Collateral Manager for this purpose shall be:

 

Company:

Energy Funding LLC

 

Cira Centre

 

2929 Arch Street, Suite 675

 

Philadelphia, Pennsylvania 19104

 

Attention: Gerald F. Stahlecker

 

Telephone: (215) 495-1169

 

Facsimile: (215) 222-4649

 

Electronic Mail: jerry.stahlecker@franklinsquare.com

 

 

Collateral Manager:

FS Energy and Power Fund

 

Cira Centre

 

2929 Arch Street, Suite 675

 

Philadelphia, Pennsylvania 19104

 

Attention: Gerald F. Stahlecker

 

Telephone: (215) 495-1169

 

Facsimile: (215) 222-4649

 

Electronic Mail: jerry.stahlecker@franklinsquare.com

 

19.       Succession/Assignment.

 

(a)        This Agreement shall inure to the benefit of and be binding upon the
successors to the parties hereto.  No assignment of this Agreement by the
Collateral Manager (including, without limitation, a change in control or
management of the Collateral Manager which would be deemed an “assignment” under
the Investment Advisers Act) shall be made without the consent of the Company
and the Administrative Agent (at the direction of the Majority Lenders);
provided that the Collateral Manager shall be permitted to assign any or all of
its rights and delegate any or all of its obligations to any Affiliate of the
Collateral Manager that (i) is directly or indirectly wholly owned by, and under
the voting control of, FS Energy and Power Fund, (ii) is duly qualified to
professionally and competently perform duties similar to those imposed upon the
Collateral Manager under this Agreement and the other Loan Documents, (iii) is
legally qualified and has the capacity to act as Collateral Manager under this
Agreement and the other Loan Documents and (iv) performs its obligations under
this

 

17

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Agreement and the other Loan Documents using substantially the same credit and
collection policies; provided further that such assignment shall not (i) cause
or result in the Company being required to register as an investment company
under the Investment Company Act or (ii) require the pool of Collateral to be
registered as an investment company under the Investment Company Act.

 

Any assignment so consented to (and any assignment made in accordance with the
proviso to the second sentence of this Section 19(a)) shall bind the assignee
hereunder in the same manner as the Collateral Manager is bound.  In addition,
in the case of an assignment of all of the rights and duties of the Collateral
Manager, the assignee shall execute and deliver to the Company, the
Administrative Agent and the Collateral Agent a counterpart of this Agreement
(which shall be reasonably acceptable to the Administrative Agent (at the
direction of the Majority Lenders)) naming such assignee as Collateral Manager.

 

(b)        This Agreement shall not be assigned by the Company without the prior
written consent of the Collateral Manager and the Administrative Agent (at the
direction of the Majority Lenders), except in the case of (i) an assignment by
the Company to an entity which is a successor to the Company permitted under the
Credit Agreement, in which case such successor organization shall be bound
hereunder and by the terms of said assignment in the same manner as the Company
is bound hereunder, and (ii) the collateral assignment by the Company to the
Collateral Agent for the benefit of the Secured Parties under the Credit
Agreement.  In the event of any permitted assignment by the Company of this
Agreement to a successor, the Company shall cause such successor to execute and
deliver to the Collateral Manager, the Administrative Agent and the Collateral
Agent such documents as the Collateral Manager and the Administrative Agent
shall consider reasonably necessary to effect fully such assignment.

 

(c)        Notwithstanding anything to the contrary in this Section 19, any
successor to the Collateral Manager by way of transfer, merger, conversion,
consolidation or acquisition of all or substantially all of the Collateral
Manager’s asset management business relating to debt securities and loans shall
be the successor to the Collateral Manager under this Agreement.

 

20.       Conflicts with the Credit Agreement.

 

Subject to the provisions of Section 1 hereof pertaining to the binding effect
of certain amendments to the Credit Agreement on the Collateral Manager, in the
event that this Agreement requires any action to be taken with respect to any
matter and the Credit Agreement requires that a different action be taken with
respect of such matter, and such actions are mutually exclusive, the provisions
of the Credit Agreement in respect thereof shall control.

 

21.       Miscellaneous.

 

(a)        This Agreement shall be governed by and construed in accordance with
the law of the State of New York.  With respect to any Proceeding, each party
irrevocably (i) submits to the non-exclusive jurisdiction of the courts of the
State of New York and the United States District Court located in the Borough of
Manhattan in New York City and (ii) waives any objection which it may have at
any time to the laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have

 

18

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been brought in an inconvenient forum and further waives the right to object,
with respect to such Proceedings, that such court does not have any jurisdiction
over such party.  Nothing in this Agreement precludes either party from bringing
Proceedings in any other jurisdiction, nor will the bringing of Proceedings in
any one or more jurisdictions preclude the bringing of Proceedings in any other
jurisdiction.

 

(b)        THE PARTIES HERETO IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL
PROCESS IN ANY ACTION OR PROCEEDING BY THE MAILING OR DELIVERY OF COPIES OF SUCH
PROCESS TO EACH SUCH PARTY AT THE ADDRESS SPECIFIED IN SECTION 18 HEREOF.  THE
PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

(c)        EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(d)       No failure on the part of either party hereto to exercise and no delay
in exercising, and no course of dealing with respect to, any right, remedy,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise of any right, remedy, power or privilege
under this Agreement preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence.  No waiver shall be effective unless it is in writing and
is signed by the party asserted to have granted such waiver.

 

(e)        The captions in this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.

 

(f)        In the event any provision of this Agreement shall be held invalid or
unenforceable, by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provisions hereof.

 

(g)        This Agreement may not be amended or modified or any provision
thereof waived except by an instrument in writing signed by the parties hereto
and in accordance with Section 12.5 of the Credit Agreement.

 

(h)        This Agreement and the other Loan Documents contain the entire
understanding and agreement between the parties and supersedes all other prior
understandings and agreements, whether written or oral, between the parties
concerning this subject matter.  The express terms of this Agreement control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof.

 

19

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(i)         The Collateral Manager (i) consents to, and agrees to perform in all
material respects, the provisions of the Credit Agreement applicable to the
Collateral Manager, (ii) acknowledges that (subject to the proviso set forth
below in this Section 21(i)) the Company is collaterally assigning all of its
right, title and interest in, to and under this Agreement to the Collateral
Agent on behalf of the Secured Parties under the Credit Agreement and
(iii) agrees subject to such proviso that all of the representations, covenants
and agreements made by the Collateral Manager in this Agreement are also for the
benefit of the Collateral Agent on behalf of the Secured Parties and the
Administrative Agent on behalf of the Lenders, each of which Agents shall be a
third-party beneficiary of this Agreement and entitled to rely thereon; provided
that (1) the collateral assignment of this Agreement shall not in any event
include any assignment of the Company’s right to terminate this Agreement or to
terminate the Collateral Manager’s rights and responsibilities hereunder or to
remove the Collateral Manager and (2) the right of the Administrative Agent, the
Collateral Agent, the Lenders and the Secured Parties to enforce the terms of
this Agreement in any manner or to otherwise seek specific performance or
damages from any party hereto for any breach of this Agreement, in each case
shall exist only after the occurrence and during the continuance of an Event of
Default.

 

(j)         This Agreement may be executed in any number of counterparts, each
of which so executed shall be deemed an original, but all such counterparts
shall together constitute but one and the same instrument.  This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

 

(k)        Each representation and warranty made or deemed to be made herein or
pursuant hereto, and each indemnity provided for hereby, shall survive the
execution and delivery and any termination or assignment of this Agreement or
resignation or removal of the Collateral Manager.

 

(l)         The Company hereby acknowledges and accepts all actions that were
taken by the Collateral Manager and/or recommended to the Company by the
Collateral Manager prior to the Closing Date, including all actions and
recommendations that were related to the anticipated purchase or receipt of
assets by the Company that were otherwise consistent with the services to be
provided by the Collateral Manager to the Company pursuant to Section 1 of this
Agreement prior to the Closing Date, in each case, as if this Agreement had been
in effect at the time that such actions were taken or such recommendations were
made.

 

(m)       The Collateral Manager (i) agrees that the payment of all amounts to
which it is entitled pursuant to this Agreement shall be paid subject to the
Priority of Payments and (ii) agrees to be bound by the provisions of
Article XIV of the Credit Agreement as if the Collateral Manager were a party to
the Credit Agreement and (ii) consents to the assignment of this Agreement as
provided in Article XIV of the Credit Agreement.

 

20

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22.       Non-Payment/Non-Petition.

 

The Collateral Manager shall continue to serve as Collateral Manager under this
Agreement notwithstanding that the Collateral Manager shall not have received
amounts due to it under this Agreement because sufficient funds were not then
available hereunder to pay such amounts in accordance with the Priority of
Payments set forth in the Credit Agreement, and agrees not to cause the filing
of an involuntary petition in bankruptcy against the Company for any reason
whatsoever, including, without limitation, the non-payment to the Collateral
Manager, until the payment in full of all the Obligations and the expiration of
a period equal to one year and one day (or, if longer, the applicable preference
period then in effect) following all such payments; provided that nothing in
this clause shall preclude, or be deemed to estop, the Collateral Manager
(A) from taking any action prior to the expiration of the aforementioned one
year and one day (or, if longer, the applicable preference period then in
effect) period in (x) any case or Proceeding voluntarily filed or commenced by
the Company or (y) any involuntary insolvency Proceeding filed or commenced
against the Company, by a Person other than the Collateral Manager or its
Affiliates, or (B) from commencing against the Company or any properties of the
Company any legal action which is not a bankruptcy, reorganization, arrangement,
insolvency, moratorium or liquidation Proceeding.  The provisions of this
Section 22 shall survive the termination of this Agreement for any reason
whatsoever.

 

23.       No Recourse.

 

(a)        The Collateral Manager hereby acknowledges and agrees that the
Company’s obligations hereunder will be solely the corporate obligations of the
Company, and the Collateral Manager will not have any recourse to any of the
directors, managers, officers, employees or holders of the membership interest
of the Company with respect to any claims, losses, damages, liabilities,
indemnities or other obligations in connection with any transactions
contemplated hereby.  Recourse in respect of any obligations of the Company
hereunder will be limited to the Company’s assets and, on the exhaustion
thereof, and application in accordance with the Priority of Payments set forth
in the Credit Agreement, all claims against the Company arising from this
Agreement or any transactions contemplated hereby shall be extinguished.

 

(b)        The provisions of this Section 23 shall survive the termination of
this Agreement for any reason whatsoever.

 

 

[signature page follows]

 

21

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IN WITNESS WHEREOF, the parties hereto have caused this COLLATERAL MANAGEMENT
AGREEMENT to be executed by their respective authorized representatives on the
day and year first above written.

 

 

 

ENERGY FUNDING LLC

 

 

 

 

 

 

 

 

 

 

 

By:

 /s/ Gerald F. Stahlecker

 

 

Name:   Gerald F. Stahlecker

 

 

Title:     Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

FS ENERGY AND POWER FUND

 

 

 

 

 

 

 

 

 

 

 

By:

 /s/ Gerald F. Stahlecker

 

 

Name:   Gerald F. Stahlecker

 

 

Title:     Executive Vice President

 

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