Exhibit 10.11

 

COLLATERAL ADMINISTRATION AGREEMENT

 

This COLLATERAL ADMINISTRATION AGREEMENT, dated as of September 11, 2014 (as the
same may be amended from time to time in accordance with the terms hereof (this
“Agreement”) is entered into by and among Gladwyne Funding LLC, a limited
liability company organized under the laws of the State of Delaware, as issuer
(the “Issuer”), FS Energy and Power Fund, a statutory trust organized under the
laws of the State of Delaware, in its capacity as investment manager under the
Investment Management Agreement referred to below (in such capacity, together
with its successors in such capacity, the “Investment Manager”) and Virtus
Group, LP, a limited partnership organized under the laws of the State of Texas,
as collateral administrator (the “Collateral Administrator”).

 

W I T N E S S E T H:

 

WHEREAS, the Issuer and Citibank, N.A., as trustee (the “Trustee”), have entered
into an Indenture (the “Indenture”) dated as of September 11, 2014, pursuant to
which the Notes (as defined in the Indenture) were issued;

 

WHEREAS, pursuant to the terms of the Indenture, the Issuer pledged certain
Collateral Obligations and Eligible Investments (each as defined in the
Indenture and herein, the “Assets”) as security for the Notes;

 

WHEREAS, the Investment Manager has entered into an investment management
agreement (the “Investment Management Agreement”) with the Issuer, dated as of
September 11, 2014, in connection with which the Investment Manager has agreed
to provide certain services to the Issuer with respect to the Assets;

 

WHEREAS, the Issuer wishes to engage the Collateral Administrator to perform on
its behalf certain administrative duties of the Issuer with respect to the
Assets pursuant to the Indenture; and

 

WHEREAS, the Collateral Administrator, on behalf of the Issuer, is prepared to
perform certain specified obligations of the Issuer under the Indenture or of
the Investment Manager under the Indenture, and certain other services as
specified herein.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:

 

1.                                      Definitions.  Capitalized terms not
otherwise defined in this Agreement shall have the meanings set forth in the
Indenture.

 

2.                                      Powers and Duties of the Collateral
Administrator and the Investment Manager.

 

(a)                                 The Collateral Administrator shall act as
agent for the Issuer until the earlier of (i) its resignation or removal
pursuant to Section 7 hereof or (ii) the termination of this Agreement pursuant
to Section 6 or Section 7 hereof.  The Collateral Administrator shall assist the
Investment Manager in connection with monitoring the Collateral Obligations and
Eligible

 

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Investments on an ongoing basis and providing to the Issuer certain reports,
schedules and other data which the Issuer is required to prepare and deliver
under Article 10 of the Indenture.  The Collateral Administrator’s duties and
authority to act as collateral administrator hereunder are limited to the duties
and authority specifically provided for in this Agreement and under the
Indenture.  The Collateral Administrator shall not be deemed to assume the
obligations of the Issuer under the Indenture or of the Investment Manager under
the Investment Management Agreement or the Indenture.  The Collateral
Administrator shall perform those duties and functions assigned to it in the
Indenture, comply with all obligations applicable to it under the Indenture and
perform its duties hereunder in accordance with the terms of this Agreement and
the terms of the Indenture applicable to it.

 

In addition, the Collateral Administrator shall prepare and provide to the
Specified Holder (as defined in the Indenture), at the addresses from time to
time specified by the Specified Holder, a report on each Business Day setting
forth the cash flows on the Collateral Obligations for the preceding Business
Day and the positions in the Collateral Obligations held by the Issuer at the
end of such preceding Business Day (all in such form and in the scope agreed by
the Collateral Administrator and the Specified Holder on or prior to the Closing
Date), and shall provide to the Specified Holder, at the addresses from time to
time specified by the Specified Holder, notice of all corporate actions
affecting the obligors on the Collateral Obligations promptly following the
Collateral Administrator’s obtaining notice of the same.

 

(b)                                 Promptly following the Closing Date, the
Collateral Administrator shall create a Collateral Obligation and Eligible
Investments database.  Upon request for specific information in the Collateral
Obligation and Eligible Investments database from the Investment Manager, the
Collateral Administrator shall promptly provide such information to the
Investment Manager.  The Collateral Administrator shall update the Collateral
Obligation and Eligible Investments database promptly following (i) the sale or
disposition of any Collateral Obligation or Eligible Investment and (ii) the
purchase of any Collateral Obligation or Eligible Investment.

 

(c)                                  Not later than the Business Day prior to
the day on which each Monthly Report or Valuation Report is required to be
provided by the Issuer to the Trustee pursuant to Section 10.5(a) or
Section 10.5(b) of the Indenture, respectively, the Collateral Administrator
shall prepare the relevant report by calculating, using the information
contained in the Collateral Obligation and Eligible Investments database created
by the Collateral Administrator pursuant to Section 2(b) above, and subject to
the Collateral Administrator’s receipt from the Investment Manager of
information with respect to the Collateral Obligation or Eligible Investment
that is not contained in such database and subject further to the provisions of
this Section 2, each item required to be stated in such Monthly Report or
Valuation Report (together with Payment Date disbursement instructions) in
accordance with the Indenture and provide the results of such calculations to
the Investment Manager so that the Investment Manager may confirm such results. 
Upon approval by the Investment Manager, the Collateral Administrator shall
deliver the Monthly Report or Valuation Report to the Trustee, to be posted to
the Trustee’s website in the manner contemplated in the Indenture.

 

(d)                                 Upon request of the Investment Manager in
connection with a proposed purchase of a Collateral Obligation pursuant to
Section 12.2 of the Indenture (accompanied by such information concerning the
Collateral Obligation to be purchased as may be necessary to

 

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make the calculations referred to in this Section 2(d)), the Collateral
Administrator shall calculate each criterion as a condition to such purchase in
accordance with the Indenture and provide the results of such calculations to
the Investment Manager for comparison to the Investment Manager’s own
calculations in determining whether such purchase is permitted by the Indenture.

 

(e)                                  Upon notification by the Investment Manager
during each time period as set forth in Section 12.1 of the Indenture of a
proposed disposition of a Defaulted Obligation, Equity Security, Withholding Tax
Security or Collateral Obligation (accompanied by such information as may be
necessary to make the calculation referred to in this Section 2(e)), the
Collateral Administrator shall calculate each criterion set forth in the
designated subsection of Section 12.2 of the Indenture as a condition to such
disposition in accordance with the Indenture and shall provide the results of
such calculations to the Investment Manager.

 

(f)                                   The Collateral Administrator shall have no
liability for any determination to purchase or sell a Collateral Obligation made
by the Investment Manager based on the calculations provided by the Collateral
Administrator pursuant to Section 2(d) or Section 2(e), as applicable, except to
the extent due to the gross negligence, fraud or willful misconduct of the
Collateral Administrator.  The Investment Manager hereby agrees that any
determination to purchase or sell a Collateral Obligation made by the Investment
Manager is not based solely upon the calculations of the Collateral
Administrator.

 

(g)                                  [Reserved].

 

(h)                                 [Reserved].

 

(i)                                     The Collateral Administrator shall
assist the Investment Manager in the preparation of such other reports that may
be required by the Indenture and that are reasonably requested in writing by the
Investment Manager and agreed to by the Collateral Administrator, which
agreement shall not be unreasonably withheld.

 

(j)                                    [Reserved].

 

(k)                                 The Collateral Administrator shall promptly
forward to the Investment Manager copies of notices and other writings received
by it,  in its capacity as Collateral Administrator hereunder, from the obligor
or other Person with respect to any Collateral Obligation or from any Clearing
Agency with respect to any Collateral Obligation advising the holders of such
obligation of any rights that the holders might have with respect thereto
(including notices of calls and redemptions thereof) as well as all periodic
financial reports received from such obligor or other Person with respect to
such obligation and Clearing Agencies with respect to such obligor.

 

(l)                                     The Investment Manager reasonably shall
assist and cooperate with the Collateral Administrator in connection with the
preparation by the Collateral Administrator of all reports, instructions, the
Monthly Reports, the Valuation Reports and statements and certificates required
in connection with the acquisition and disposition of Collateral Obligations,
Defaulted Obligations, Withholding Tax Securities, Eligible Investments and
Equity Securities or as

 

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otherwise required under the Indenture.  Without limiting the generality of the
foregoing, the Investment Manager shall advise the Collateral Administrator in a
timely manner of the results of any determinations, designations and selections
made by it as required or permitted under the Indenture and supply the
Collateral Administrator with such other information as is in the possession of
the Investment Manager that the Collateral Administrator may from time to time
reasonably request with respect to the Assets and is reasonably needed to
complete the reports and certificates required to be prepared by the Collateral
Administrator hereunder or reasonably required to permit the Collateral
Administrator to perform its obligations hereunder, including any information
that may be reasonably required under the Indenture with respect to or as to the
designation of any Collateral Obligation, including but not limited to a Credit
Risk Obligation, Defaulted Obligation, Equity Security, Withholding Tax
Security, Substitute Collateral Obligation, Bonds, Synthetic Security,
Participation (and the related selling institution and its rating by each Rating
Agency) and Structured Finance Obligation, whether a Specified Amendment or
Specified Event has occurred and the S&P rating and the Market Value of any
Collateral Obligation to the extent required by the Indenture.  Nothing herein
shall obligate the Collateral Administrator to determine independently the
correct characterization, classification or categorization of any Asset held
under the Indenture or the Market Value of any Asset (it being understood that
any such characterization, classification, categorization or Market Value shall
be based exclusively upon the determination and notification received by the
Collateral Administrator from the Investment Manager or the Issuer).  The
Collateral Administrator shall have no obligation to determine whether any Asset
meets the definition of “Collateral Obligation”.  The Investment Manager shall
review and verify the contents of the aforesaid reports, instructions,
statements and certificates and shall send such reports, instructions,
statements and certificates to the Issuer for execution.  Such reports,
instructions, statements and certificates after execution by the Issuer or the
Investment Manager, as applicable, will be made available to Holders on the
Trustee’s website.

 

(m)                             Not later than two Business Days prior to each
Payment Date, the Collateral Administrator shall calculate the Priority of
Payments and provide a written report to the Investment Manager and the Trustee
setting forth all amounts that the Trustee will be required to remit on such
Payment Date and such other information required for the Trustee to make such
remittances.

 

(n)                                 If, in performing its duties under this
Agreement, the Collateral Administrator is required to decide between
alternative courses of action or if there are alternative methodologies that can
be used in connection with any calculations required to be performed by the
Collateral Administrator hereunder, the Collateral Administrator may request
written instructions from the Investment Manager as to the course of action or
methodology to be used by the Collateral Administrator; provided, however, that
except to the extent required by the Indenture or the Investment Management
Agreement, the Investment Manager shall be under no obligation to provide such
instructions.  If the Collateral Administrator does not receive such
instructions within two Business Days after it has requested them, it may, but
shall be under no duty to, take or refrain from taking such action provided that
the Collateral Administrator as promptly as possible notifies the Investment
Manager and the Issuer which course of action, if any (or refrainment from
taking any course of action), it has decided to take.  The Collateral
Administrator shall act in accordance with instructions received after such
two-Business Day

 

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period.  The Collateral Administrator shall be entitled to rely on the advice of
legal counsel selected with due care and Independent certified public
accountants in performing its duties hereunder and shall be deemed to have acted
in good faith if it acts in accordance with such advice, unless such advice is
in conflict with this Agreement.  Nothing herein shall prevent the Collateral
Administrator or any of its Affiliates from engaging in other businesses or from
rendering services of any kind to any Person.

 

3.                                      Compensation.  Subject to Section 13,
the Issuer agrees to pay, and the Collateral Administrator shall be entitled to
receive, as compensation for and reimbursement of expenses in connection with
the Collateral Administrator’s performance of the duties called for herein, the
amounts set forth in a separate fee letter among the Investment Manager, the
Trustee and the Collateral Administrator.  In accordance with Section 13, all
amounts payable under this Section 3 shall be payable only in accordance with,
and subject to, the Priority of Payments as set forth in the Indenture.

 

4.                                      Limitation of Responsibility of the
Collateral Administrator.  (a) The Collateral Administrator will have no
responsibility under this Agreement other than to render the services called for
hereunder in good faith and without willful misfeasance, gross negligence or
reckless disregard of its duties hereunder.  The Collateral Administrator shall
incur no liability to anyone in acting upon, and may rely conclusively upon, any
signature, instrument, statement, notice, resolution, request, direction,
consent, order, certificate, report, opinion, bond or other document or paper
reasonably believed by it to be genuine and reasonably believed by it to be
signed by the proper party or parties.  Subject to Section 12, the Collateral
Administrator may exercise any of its rights or powers hereunder or perform any
of its duties hereunder either directly or by or through agents or attorneys,
and the Collateral Administrator shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed hereunder with due
care by it.  The Collateral Administrator shall be entitled to the same rights,
protections and immunities that are afforded to the Trustee under Article 6 of
the Indenture.  Neither the Collateral Administrator nor any of its Affiliates,
directors, officers, shareholders, members, agents or employees will be liable
to the Investment Manager, the Issuer or others, except by reason of acts or
omissions constituting bad faith, willful misfeasance, gross negligence or
reckless disregard of the Collateral Administrator’s duties hereunder.  Anything
in this Agreement notwithstanding, in no event shall the Collateral
Administrator be liable for special, punitive, indirect or consequential damage
of any kind whatsoever (including but not limited to lost profits), even if the
Collateral Administrator has been advised of such loss or damage and regardless
of the form of action under or pursuant to this Agreement, its duties or
obligations hereunder or arising out of or relating to the subject matter
hereof.  The Collateral Administrator shall in no event have any liability for
the actions or omissions of the Issuer, the Investment Manager or any other
Person, and shall have no liability for any inaccuracy or error in any duty
performed by it that results from or is caused by inaccurate, untimely or
incomplete information or data received by it from the Issuer, the Investment
Manager or another Person except to the extent that such inaccuracies or errors
are caused by the Collateral Administrator’s own bad faith, willful misfeasance,
gross negligence or reckless disregard of its duties hereunder.  The Collateral
Administrator shall not be liable for failing to perform or delay in performing
its specified duties hereunder which results from or is caused by a failure or
delay on the part of the Issuer, the Investment Manager or another Person in
furnishing necessary, timely and accurate

 

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information to the Collateral Administrator except to the extent that any
failure or delay is caused by the Collateral Administrator’s own criminal
conduct, fraud, bad faith, willful misfeasance, gross negligence or reckless
disregard of its duties hereunder.  The duties and obligations of the Collateral
Administrator and its employees or agents shall be determined solely by the
express provisions of this Agreement and they shall not be under any obligation
or duty except for the performance of such duties and obligations as are
specifically set forth herein, and no implied covenants shall be read into this
Agreement against them.  For purposes of monitoring changes in ratings, the
Collateral Administrator shall be entitled to use and rely (in good faith)
exclusively upon one or more reputable electronic financial information
reporting services, and shall have no liability for any inaccuracies in the
information reported by, or other errors or omissions of, any such services.

 

(b)                                 To the extent of any ambiguity in the
interpretation of any definition or term contained in the Indenture, the
Collateral Administrator shall request direction from the Investment Manager as
to the interpretation used, and the Collateral Administrator shall follow such
direction, and together with the Trustee, shall be entitled to conclusively rely
thereon without any responsibility or liability therefor.

 

(c)                                  The Issuer shall reimburse, indemnify and
hold harmless the Collateral Administrator, and its Affiliates, directors,
officers, shareholders, members, agents and employees with respect to all
out-of-pocket expenses, losses, damages, liabilities, demands, charges and
claims of any nature (including the reasonable fees and expenses of counsel and
other experts) in connection with or arising out of this Agreement and the
Indenture, other than any such expenses, losses, damages, liabilities, demands,
charges or claims incurred by reason of the bad faith, willful misfeasance,
gross negligence or reckless disregard by the Collateral Administrator of its
duties hereunder.

 

(d)                                 The Collateral Administrator shall
reimburse, indemnify and hold harmless the Investment Manager and the Issuer and
their respective Affiliates, directors, officers, shareholders, members, agents
and employees with respect to all expenses, losses, damages, liabilities,
demands, charges and claims of any nature (including the reasonable fees and
expenses of counsel and other experts) in respect of or arising out of any acts
or omissions performed or omitted, as the case may be, by the Collateral
Administrator, its Affiliates, directors, officers, shareholders, members,
agents or employees hereunder or in connection with the Indenture made in bad
faith or constituting willful misfeasance, gross negligence or reckless
disregard of its duties hereunder.

 

(e)                                  The Investment Manager will have no
responsibility under this Agreement other than to render the services called for
hereunder or in connection with the Indenture in good faith and without willful
misfeasance, gross negligence or reckless disregard of its duties hereunder. 
The Investment Manager will not be liable to the Collateral Administrator, the
Issuer or others, except by reason of acts or omissions constituting bad faith,
willful misfeasance, gross negligence or reckless disregard of the Investment
Manager’s duties hereunder.  The Investment Manager shall reimburse, indemnify
and hold harmless the Collateral Administrator and its Affiliates, directors,
officers, shareholders, members, agents and employees with respect to all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature (including the reasonable fees and expenses of counsel and other experts)
in respect of or arising out of any acts

 

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or omissions performed or omitted, as the case may be, by the Investment
Manager, its Affiliates, directors, officers, shareholders, members, agents or
employees hereunder made in bad faith or constituting willful misfeasance, gross
negligence or reckless disregard of its duties hereunder or under the
Indenture.  Anything in this Agreement notwithstanding, in no event shall the
Investment Manager be liable for special, indirect or consequential damage of
any kind whatsoever (including but not limited to lost profits), even if
Investment Manager has been advised of such loss or damage and regardless of the
form of action.

 

(f)                                   In connection with the aforesaid
indemnification provisions, upon reasonable prior notice, any indemnified party
will afford to the applicable indemnifying party the right, in its sole
discretion and at its sole expense, to assume the defense of any claim,
including, but not limited to, the right to designate counsel and to control all
negotiations, litigation, arbitration, settlements, compromises and appeals of
such claim; provided, that if the indemnifying party assumes the defense of such
claim, it shall not be liable for any fees and expenses of counsel for any
indemnified party incurred thereafter in connection with such claim except that
if such indemnified party reasonably determines that counsel designated by the
indemnifying party has a conflict of interest, such indemnifying party shall pay
the reasonable fees and disbursements of one counsel (in addition to any local
counsel) separate from its own counsel for all indemnified parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances; and
provided, further, that prior to entering into any final settlement or
compromise, such indemnifying party shall seek the consent of the indemnified
party and use its best efforts in the light of the then-prevailing circumstances
(including, without limitation, any express or implied time constraint on any
pending settlement offer) to obtain the consent of such indemnified party as to
the terms of settlement or compromise.  If an indemnified party does not consent
to the settlement or compromise within a reasonable time under the
circumstances, the indemnifying party shall not thereafter be obligated to
indemnify the indemnified party for any amount in excess of such proposed
settlement or compromise.

 

5.                                      No Joint Venture.  Nothing contained in
this Agreement (i) shall constitute the Collateral Administrator, the Issuer and
the Investment Manager as members of any partnership, joint venture,
association, syndicate, unincorporated business or other separate entity,
(ii) shall be construed to impose any liability as such on any of them or
(iii) shall be deemed to confer on any of them any express, implied or apparent
authority to incur any obligation or liability on behalf of the others.

 

6.                                      Term.  This Agreement shall continue in
effect so long as the Indenture remains in effect with respect to the Notes,
unless this Agreement has been previously terminated in accordance with
Section 7 hereof.  Notwithstanding the foregoing, the indemnification
obligations of all parties under Section 4 hereof shall survive the termination
of this Agreement or release of any party hereto with respect to matters
occurring prior to such termination or release.

 

7.                                      Termination; Resignation and Appointment
of Successor.

 

(a)                                 This Agreement may be terminated without
cause by any party hereto upon not less than 90 days’ prior written notice to
each other party hereto.

 

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(b)                                 At the option of the Investment Manager or
the Issuer, this Agreement shall be terminated upon ten days’ written notice of
termination from the Investment Manager or the Issuer to the Collateral
Administrator if any of the following events shall occur:

 

(i)                                     The Collateral Administrator shall
default in the performance of any of its material duties under this Agreement
and shall not cure such default within thirty days (or, if such default cannot
be cured in such time, shall not give within 30 days such assurance of cure as
shall be reasonably satisfactory to the Investment Manager or the Issuer);

 

(ii)                                  The Collateral Administrator shall be
dissolved (other than pursuant to a consolidation, amalgamation or merger) or
shall have a resolution passed for its winding up, official management or
liquidation (other than pursuant to a consolidation, amalgamation or merger);

 

(iii)                               A court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the Collateral
Administrator in any involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appoint a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Collateral Administrator or for any substantial part of its
property, or order the winding-up or liquidation of its affairs; or

 

(iv)                              The Collateral Administrator shall commence a
voluntary case under applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Collateral Administrator or for any
substantial part of its property, or shall make any general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due.

 

If any of the events specified in clauses (ii), (iii) or (iv) of this
Section 7(b) shall occur, the Collateral Administrator shall give written notice
thereof to the Investment Manager and the Issuer within one Business Day after
the happening of such event.

 

(c)                                  Upon receiving any notice of resignation of
the Collateral Administrator or removal by the Issuer, the Issuer shall promptly
appoint a successor collateral administrator by written instrument, in
duplicate, executed by an Authorized Officer of the Issuer, one copy of which
shall be delivered to the Collateral Administrator so resigning or removed and
one copy to·the successor collateral administrator.  No resignation or removal
of the Collateral Administrator shall be effective until a successor collateral
administrator shall have been appointed and shall have accepted such appointment
hereunder in writing.  If the Issuer shall fail to appoint a successor
collateral administrator within 30 days after such notice of resignation, then
the Collateral Administrator may petition any court of competent jurisdiction
for the appointment of a successor collateral administrator.  Notwithstanding
the foregoing, the Collateral Administrator may resign its duties hereunder
without any requirement that a successor collateral administrator be obligated
hereunder and without any liability for further

 

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performance of any duties hereunder upon at least 90 days’ prior written notice
to the other parties hereto upon the occurrence of any of the following events
and the failure to cure such event within such 90 day notice period: (i) failure
of the Issuer to pay any of the amounts specified in Section 3 within 90 days
after such amount is due pursuant to Section 3 hereof or (ii) failure of the
Investment Manager or the Issuer to provide any indemnity payment or expense
reimbursement to the Collateral Administrator required under Section 4 hereof
within 90 days of the receipt by the Investment Manager or the Issuer of a
written request for such payment or reimbursement.

 

8.                                      Representations and Warranties.

 

(a)                                 The Issuer hereby represents and warrants to
the Collateral Administrator and the Investment Manager as follows:

 

(i)                                     The Issuer has been duly incorporated
and is validly existing and in good standing under the laws of the State of
Delaware and has the full power and authority to execute, deliver and perform
this Agreement and all obligations required hereunder and has taken all
necessary action to authorize this Agreement on the terms and conditions hereof,
the execution, delivery and performance of this Agreement and the performance of
all obligations imposed upon it hereunder.  No consent of any other person
including, without limitation, members, shareholders and creditors of the
Issuer, and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required to be obtained or made by the Issuer in
connection with this Agreement or the execution, delivery, performance, validity
or enforceability of this Agreement and the obligations imposed upon it
hereunder.  This Agreement constitutes, and each instrument or document required
hereunder, when executed and delivered by the Issuer hereunder, will constitute,
the legally valid and binding obligations of the Issuer enforceable against the
Issuer in accordance with their terms subject, as to enforcement, (a) to the
effect of bankruptcy, insolvency or similar laws affecting generally the
enforcement of creditors’ rights as such laws would apply in the event of any
bankruptcy, receivership, insolvency or similar event applicable to the Issuer
and (b) to general equitable principles (whether enforceability of such
principles is considered in a proceeding at law or in equity).

 

(ii)                                  The execution, delivery and performance by
the Issuer of this Agreement, the Issuer’s obligations hereunder and the
documents and instruments required hereunder will not violate any provision of
any existing law or regulation binding on the Issuer, or any order, judgment,
award or decree of any court, arbitrator or governmental authority binding on
the Issuer, or the governing instruments of, or any securities issued by, the
Issuer or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which the Issuer is a party or by which the Issuer
or any of its assets may be bound, the violation of which would have a material
adverse effect on the business, operations, assets or financial condition of the
Issuer and will not result in, or require, the creation or imposition of any
lien on any of its property, assets or revenues pursuant to the provisions of
any such mortgage, indenture, lease, contract or other agreement, instrument or
undertaking.

 

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(b)                                 The Investment Manager hereby represents and
warrants to the Collateral Administrator and the Issuer as follows:

 

(i)                                     The Investment Manager has been duly
formed and is validly existing and in good standing under the laws of the State
of Delaware as a statutory trust and has the full power and authority to
execute, deliver and perform this Agreement and all obligations required
hereunder and has taken all necessary action to authorize this Agreement on the
terms and conditions hereof, the execution, delivery and performance of this
Agreement and the performance of all obligations imposed upon it hereunder.  No
consent of any other person including, without limitation, shareholders and
creditors of the Investment Manager, and no license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required by the Investment
Manager in connection with this Agreement or the execution, delivery,
performance, validity or enforceability of this Agreement and the obligations
imposed upon it hereunder.  This Agreement constitutes, and each instrument or
document required hereunder, when executed and delivered by the Investment
Manager hereunder, will constitute, the legally valid and binding obligations of
the Investment Manager enforceable against the Investment Manager in accordance
with their terms subject, as to enforcement, (a) to the effect of bankruptcy,
insolvency or similar laws affecting generally the enforcement of creditors’
rights as such laws would apply in the event of any bankruptcy, receivership,
insolvency or similar event applicable to the Investment Manager and (b) to
general equitable principles (whether enforceability of such principles is
considered in a proceeding at law or in equity).

 

(ii)                                  The execution, delivery and performance of
this Agreement, the Investment Manager’s obligations hereunder and the documents
and instruments required hereunder will not violate any provision of any
existing law or regulation binding on the Investment Manager, or any order,
judgment, award or decree of any court, arbitrator or governmental authority
binding on the Investment Manager, or the governing instruments of, or any
securities issued by, the Investment Manager or of any mortgage, indenture,
lease, contract or other agreement, instrument or undertaking to which the
Investment Manager is a party or by which the Investment Manager or any of its
assets may be bound, the violation of which would have a material adverse effect
on the business, operations, assets or financial condition of the Investment
Manager and will not result in, or require, the creation or imposition of any
lien on any of its property, assets or revenues pursuant to the provisions of
any such mortgage, indenture, lease, contract or other agreement, instrument or
undertaking.

 

(c)                                  The Collateral Administrator hereby
represents and warrants to the Investment Manager and the Issuer as follows:

 

(i)                                     The Collateral Administrator is a
limited partnership duly organized and validly existing under the laws of the
State of Texas and has full power and authority to execute and deliver this
Agreement and perform all obligations required hereunder and has taken all
necessary action to authorize this Agreement on the terms and conditions hereof,
the execution and delivery of this Agreement and the performance of all
obligations required hereunder.  No consent of any other person including,
without

 

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limitation, partners and creditors of the Collateral Administrator, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Collateral Administrator in connection with this Agreement or
the execution, delivery, performance, validity or enforceability of this
Agreement and the obligations imposed upon it hereunder.  This Agreement
constitutes, and each instrument and document required hereunder, when executed
and delivered by the Collateral Administrator hereunder, will constitute, the
legally valid and binding obligations of the Collateral Administrator
enforceable against the Collateral Administrator in accordance with their terms
subject, as to enforcement, (a) to the effect of bankruptcy, insolvency or
similar laws affecting generally the enforcement of creditors’ rights as such
laws would apply in the event of any bankruptcy, receivership, insolvency or
similar event applicable to the Collateral Administrator and (b) to general
equitable principles (whether enforceability of such principles is considered in
a proceeding at law or in equity).

 

(ii)                                  The execution, delivery and performance of
this Agreement, the Collateral Administrator’s obligations hereunder and the
documents and instruments required hereunder will not violate any provision of
any existing law or regulation binding on the Collateral Administrator, or any
order, judgment, award or decree of any court, arbitrator or governmental
authority binding on the Collateral Administrator, or the organizational
documents of the Collateral Administrator or of any mortgage, indenture, lease,
contract or other agreement, instrument or undertaking to which the Collateral
Administrator is a party or by which the Collateral Administrator or any of its
assets may be bound, the violation of which would have a material adverse effect
on the business, operations, assets or financial condition of the Collateral
Administrator and will not result in, or require, the creation or imposition of
any lien on any of its property, assets or revenues pursuant to the provisions
of any such mortgage, indenture, lease, contract or other agreement, instrument
or undertaking.

 

9.                                      Amendments.  This Agreement may not be
amended, changed, modified or terminated (except as otherwise expressly provided
herein) except by the Investment Manager, the Issuer, the Collateral
Administrator and, for so long as the Notes issued under the Indenture remain
Outstanding, Holders of a Majority of the Notes in writing.

 

10.                               Governing Law.  THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND THIS AGREEMENT AND ANY MATTERS ARISING OUT OF
OR RELATING IN ANY WAY WHATSOEVER TO THIS AGREEMENT (WHETHER IN CONTRACT, TORT
OR OTHERWISE) SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.

 

11.                               Notices.  All notices, requests, directions
and other communications permitted or required hereunder shall be in writing and
shall be deemed to have been duly given (i) when delivered personally, (ii) when
transmitted by facsimile or other electronic means of communication (it being
agreed that such notice shall be effective at the time that a transmission
report confirming transmission is generated by the sender’s facsimile machine)
or (iii) when mailed, first class postage prepaid, or sent by overnight courier
service, to the parties at their

 

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respective addresses set forth below (or to such other address as a party may
have specified by written notice given to the other parties pursuant to this
provision.

 

If to the Collateral Administrator, to:

 

Virtus Group, LP

5400 Westheimer Court

Suite 760

Houston, Texas 77056

Telecopy: (866) 816-3203

 

If to the Issuer, to:

 

Gladwyne Funding LLC

c/o FS Energy and Power Fund

Cira Centre

2929 Arch Street, Suite 675

Philadelphia, Pennsylvania 19104

Facsimile: (215) 222-4649

Attention: Gerald F. Stahlecker

 

If to the Investment Manager, to:

FS Energy and Power Fund

Cira Centre

2929 Arch Street, Suite 675

Philadelphia, Pennsylvania 19104

Facsimile: (215) 222-4649

Attention: Gerald F. Stahlecker

 

12.                               Successors and Assigns.  This Agreement shall
inure to the benefit of, and be binding upon, the successors and assigns of each
of the Investment Manager, the Issuer and the Collateral Administrator
(including by merger or consolidation); provided, however, that the Collateral
Administrator may not assign its rights and obligations hereunder without the
prior written consent of the Investment Manager and the Issuer, except that the
Collateral Administrator may delegate to, employ as agent, or otherwise cause
any duty or obligation hereunder to be performed by, any Affiliate of the
Collateral Administrator or its successors without the prior written consent of
the Investment Manager and the Issuer, provided that the Collateral
Administrator shall remain directly liable to the Issuer for the performance of
its duties hereunder.

 

13.                               Bankruptcy Non-Petition and Limited Recourse. 
Notwithstanding any other provision of this Agreement, the Collateral
Administrator and the Investment Manager may not, prior to the date which is one
year and one day (or, if longer, the then applicable preference period plus one
day) after the payment in full of all the Notes, institute against, or join any
other Person in instituting against, the Issuer, any bankruptcy, reorganization,
arrangement, insolvency, moratorium or liquidation proceedings, or other
proceedings under United States

 

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federal or state bankruptcy laws, or any similar laws; provided, however, that
nothing in this agreement by the Investment Manager, the Collateral
Administrator or the Issuer (i) shall preclude, or be deemed to estop, the
Investment Manager or the Collateral Administrator (A) from taking any action
prior to the expiration of the aforementioned one year plus one day period (or
if longer, the applicable preference period plus one day) in (x) any case or
proceeding voluntarily filed or commenced by the Issuer or (y) any involuntary
insolvency proceeding filed or commenced against the Issuer by a Person other
than the Investment Manager or the Collateral Administrator or any of their
respective Affiliates or (B) from commencing against the Issuer or any
properties of the Issuer, any legal action which is not a bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceeding. 
The Issuer’s obligations hereunder will be solely the corporate obligations of
the Issuer, and the Collateral Administrator and the Investment Manager will not
have any recourse to any of the directors, officers, employees, shareholders,
members, governors or Affiliates of the Issuer with respect to any claims,
losses, damages, liabilities, indemnities or other obligations in connection
with any transactions contemplated hereby.  The obligations of the Issuer
hereunder shall be limited to the net proceeds of the Assets (if any), payable
solely in accordance with the order specified in the Priority of Payments under
the Indenture, and following realization of the Assets and the application of
their proceeds in accordance with the Priority of Payments under the Indenture,
any outstanding obligations of the Issuer hereunder, and any claims in respect
thereof, shall be extinguished and shall not thereafter revive.  The provisions
of this Section 13 shall survive the termination of this Agreement.

 

14.                               Counterparts.  This Agreement may be executed
in any number of counterparts, including by facsimile or other electronic means
of communication, each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same instrument.  Delivery of an
executed counterpart of this Agreement by e-mail (PDF) or telecopy shall be as
effective as delivery of a manually executed counterpart of this Agreement.

 

15.                               Conflict with the Indenture.  If this
Agreement shall require that any action be taken with respect to any matter and
the Indenture shall require that, a different action be taken with respect to
such matter, and such actions shall be mutually exclusive, or if this Agreement
should otherwise conflict with the Indenture, the Indenture shall govern.

 

16.                               Assignment of Issuer’s Rights.  The parties
hereto hereby acknowledge the Issuer’s Grant pursuant to the Indenture of its
right, title and interest in, to and under this Agreement.

 

17.                               Jurisdiction.  The parties hereto hereby
irrevocably submit to the non-exclusive jurisdiction of any New York State or
Federal court sitting in the Borough of Manhattan in The City of New York in any
action or proceeding arising out of or relating to this Agreement, and the
parties hereto hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in such New York State or
Federal court.  The parties hereto hereby irrevocably waive, to the fullest
extent that they may legally do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.  The parties hereto hereby 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.

 

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18.                               Waiver of Jury Trial Right.  EACH PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY (BUT NO OTHER JUDICIAL REMEDIES)
IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY.  Each party hereby (i) certifies that no
representative, agent or attorney of the other has represented, expressly or
otherwise, that the other would not, in the event of such proceedings, seek to
enforce the foregoing waiver and (ii) acknowledges that it has been induced to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 18.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Administration Agreement to be executed effective as of the day first above
written.

 

 

GLADWYNE FUNDING LLC

 

the Issuer

 

 

 

 

 

By:

/s/ Gerald F. Stahlecker

 

 

Name: Gerald F. Stahlecker

 

 

Title: Executive Vice President

 

 

 

 

 

FS ENERGY AND POWER FUND

 

the Investment Manager

 

 

 

 

 

By:

/s/ Gerald F. Stahlecker

 

 

Name: Gerald F. Stahlecker

 

 

Title: Executive Vice President

 

 

 

 

 

VIRTUS GROUP, LP

 

the Collateral Administrator

 

 

 

 

 

By:

/s/ Joseph U. Elston

 

 

Name: Joseph U. Elston

 

 

Title: Partner

 

 

[Signature Page to Collateral Administration Agreement]

 

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