Document:

Exhibit 10.3

 

Execution Copy

 

SECURITY AGREEMENT dated as of May 24, 2013 (this Agreement) between EP FUNDING LLC, a Delaware limited liability company (the Pledgor), and Citibank, N.A., a national banking association, as security agent for the Secured Parties referred to below (in such capacity, the Security Agent).

 

WHEREAS:

 

A.            The Pledgor, the financial institutions and other lenders from time to time party thereto as “Lenders” (the Lenders) and Citibank, N.A., a national banking association, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the Administrative Agent), have entered into a Loan Agreement dated as of May 24, 2013 (the Loan Agreement).

 

B.            To induce the Lenders to enter into the Loan Agreement and extend credit thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor has agreed to pledge and grant to the Security Agent for the ratable benefit of the Secured Parties a security interest in the Collateral (as hereinafter defined) as security for the Pledgor’s present and future obligations under the Loan Agreement and the Account Control Agreement (collectively, the Secured Obligations).  Accordingly, the parties hereto agree as follows:

 

DEFINITIONS AND INTERPRETATION

 

1.1          Capitalized terms used but not defined herein have the respective meanings given to such terms in the Loan Agreement.  Terms used but not defined herein or in the Loan Agreement, if defined in the UCC, shall have the respective meanings given to such terms in the UCC.  The principles of construction and rules of interpretation set forth in Section 1.2 of the Loan Agreement shall apply, mutatis mutandis, to this Agreement, with each reference to “this Agreement” in said Section 1.2 being a reference to this Agreement.  In addition, as used herein, the following terms have the following respective meanings:

 

Accounts has the meaning specified in the Account Control Agreement.

 

Account Control Agreement means the Account Control Agreement dated as of the date hereof between the between the Pledgor, the Security Agent, Citibank, N.A., in its capacity as securities intermediary (the Securities Intermediary) and Virtus Group, LP, a Texas limited partnership, in its capacity as collateral administrator (the Collateral Administrator).

 

Administrative Agent has the meaning assigned to such term in the recitals hereto.

 

Agreement has the meaning specified in the first paragraph of this Agreement.

 

Authorized Officer means any officer of the Pledgor or the Security Agent who is authorized to act for the Pledgor or the Security Agent, as the case may be, in matters

 

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relating to, and binding upon, the Pledgor or the Security Agent, as the case may be, which, for the avoidance of doubt, shall include any duly appointed attorney-in-fact and who is listed in the applicable list delivered in the form pursuant to Exhibit A to the Account Control Agreement.

 

Cash means Money and any collected funds standing to the credit of the Accounts.

 

Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC.

 

Collateral has the meaning specified in Section 2.1.

 

Collection Account has the meaning specified in the Account Control Agreement.

 

Collections means, with respect to any Collateral owned by the Pledgor, all principal payments, interest payments, fees and other payments received by the Pledgor with respect thereto and all other amounts paid with respect to such Collateral, including all distributions with respect thereto and any proceeds of collateral for, or any guaranty of, such Collateral or the relevant obligor’s obligation to make payments with respect thereto.

 

Credit Documents means the Loan Agreement and the Support Documents.

 

Custodial Account means the account, referenced as such, established pursuant to the Account Control Agreement.

 

Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC.

 

Firm Bid has the meaning specified in Section 5.1.

 

Instrument has the meaning specified in Section 9-102(a)(47) of the UCC.

 

Money has the meaning specified in Section 1-201(24) of the UCC.

 

Pledgor has the meaning specified in the first paragraph of this Agreement.

 

Pledgor Order means a written order or request dated and signed in the name of the Pledgor by an Authorized Officer of the Pledgor.

 

Proceedings has the meaning specified in Section 8.7.

 

Lenders has the meaning assigned to such term in the recitals hereto.

 

Loan Agreement has the meaning assigned to such term in the recitals hereto.

 

Secured Obligations has the meaning assigned to such term in the recitals hereto.

 

Secured Parties means the Lenders, the Administrative Agent, the Security Agent, the Securities Intermediary, the Collateral Administrator and the Security Agent Custodian.

 

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Security Agent has the meaning specified in the first paragraph of this Agreement.

 

Security Agent Custodian has the meaning specified in Section 6.3(c).

 

UCC means the Uniform Commercial Code as in effect from time to time in the State of New York.

 

GRANT OF SECURITY INTEREST

 

2.1          As collateral security for the prompt payment in full and performance when due (whether at stated maturity, by acceleration, by liquidation or otherwise) of the Secured Obligations, the Pledgor hereby pledges to the Security Agent, for the ratable benefit of the Secured Parties, and grants to the Security Agent, for the ratable benefit of the Secured Parties, a continuing security interest in, lien on, and right of set-off against, all of its right, title and interest in, to and under all accounts, payment intangibles, general intangibles, chattel paper, electronic chattel paper, instruments, deposit accounts, letter-of-credit rights, securities, investment property and any and all other property of any type or nature owned by it, including the Accounts, the Debt Obligations and the Assignment Agreements and all of the Pledgor’s rights and remedies thereunder, and all Collections and other proceeds with respect to any of the foregoing, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence (collectively, the Collateral).

 

REPRESENTATIONS AND WARRANTIES

 

On each Representation Date, the Pledgor represents and warrants to the Secured Parties that:

 

Ownership of Collateral

 

3.1          Immediately before and immediately after giving effect to each transfer of Collateral by the Pledgor to the Security Agent for the benefit of the Secured Parties in accordance herewith, the Pledgor will have good and marketable title to such Collateral, the Pledgor will be the sole beneficial owner of such Collateral, and the Pledgor will have the right to receive all Collections on such Collateral, in each case free and clear of all Liens other than Permitted Liens.

 

Security Interest

 

3.2          The Pledgor has full right to grant the pledge, security interest, lien and right of set-off in its rights in the Collateral to the Security Agent.  Upon each transfer of Collateral by the Pledgor in the manner specified in Section 6.4, and after the other actions described in Section 6.2(a) and Section 6.4 have been taken by the appropriate parties, the Security Agent will have a perfected pledge of and security interest in such Collateral and all proceeds thereof (subject to Section 9-315 of the UCC), which security interest will be prior to all other interests in such Collateral (in the case of proceeds,

 

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subject to Section 9-315 of the UCC).  No filings other than those described or referred to in Section 6.4 or any other action other than those described in Section 6.2(a) and Section 6.4 will be necessary to perfect such security interest in the Collateral.

 

COVENANTS

 

The Pledgor agrees that, until the later of (a) the termination of the Commitments and (b) the payment and satisfaction in full of the Secured Obligations (other than contingent obligations for which no claim has been made):

 

Title Covenants

 

4.1          At no time shall the Pledgor create, permit or suffer to exist any lien or security interest in the Collateral other than Permitted Liens.

 

Security Agent May Perform

 

4.2          If (i) the Pledgor fails to perform any obligation to be performed by it contained herein after the Secured Party has made a written request for the Pledgor to so perform such obligation (and, if the performance of such obligation involves the incurrence of any material expense, the Secured Party has given the Pledgor a reasonable opportunity to so perform such obligation) or (ii) an Event of Default has occurred and is continuing, the Security Agent may itself give, make, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers, and take such acts, as may be necessary or (in the reasonable judgment of the Security Agent) desirable from time to time to create and perfect, and establish, preserve or otherwise protect the priority of, the pledge, security interest, lien and right of set-off of the Security Agent in the Collateral and otherwise perform, or cause performance of, any other such actions as may be necessary or (in the reasonable judgment of the Security Agent) desirable in connection with such failure to perform, and the reasonable and documented out-of-pocket expenses of the Security Agent incurred in connection therewith shall be payable by the Pledgor and shall be part of the Secured Obligations.

 

Perfection, etc.

 

4.3          The Pledgor shall:

 

(a)                                 give, make, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers and take any other actions, including, without limitation, fulfilling its obligations under the Account Control Agreement, that may be necessary or (in the reasonable judgment of the Security Agent) desirable to create and perfect, and establish, preserve or otherwise protect the priority of, the pledge, security interest, lien and right of set-off granted by it pursuant to Section 2 or to enable the Security Agent to exercise and enforce its rights hereunder with respect to such pledge, security interest, lien and right of set-off;

 

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(b)                                 keep proper books and records relating to the Collateral;

 

(c)                                  permit representatives of the Security Agent, during normal business hours, to examine, copy and make extracts from its books and records pertaining to the Collateral, to inspect any of the Collateral, and to require that the Security Agent be provided with copies of all notices or other communications received by the Pledgor with respect to the Collateral, all to the extent reasonably requested by the Security Agent (including on behalf of any Lender); provided that any exercise of rights under this clause (c) shall be subject to the proviso to Section 5.1(a)(ix) of the Loan Agreement (as if each reference therein to “the Administrative Agent” were also a reference to the Security Agent); and

 

(d)                                 direct each obligor in respect of any Collateral to make any payments due or to become due in respect of such Collateral directly to the Collection Account.

 

No Other Financing Statements

 

4.4          The Pledgor shall not file, or affirmatively authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which the Security Agent (or its nominee) is not named as the sole secured party.

 

Prior Parties; Care of Collateral

 

4.5          The Security Agent shall not be required to take steps necessary to preserve any rights against prior parties with respect to any of the Collateral.  The Security Agent shall use reasonable care in the custody and preservation of Collateral in the Secured Party’s own possession.

 

Continuing Liability of the Pledgor

 

4.6          Anything herein to the contrary notwithstanding, the Pledgor shall remain liable under each interest and obligation included in the Collateral to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and shall do nothing to impair the security interest of the Security Agent in any Collateral (it being agreed that any actions expressly permitted by the Loan Agreement shall not be deemed to impair such security interest).  The Security Agent shall not have any obligation or liability under any such interest or obligation by reason of or arising out of this Agreement or the receipt by the Security Agent of any payment relating to any such interest or obligation pursuant hereto, and the Security Agent shall not be required or obligated in any manner to perform or fulfill any of the obligations of the Pledgor thereunder or pursuant thereto or to make any payment or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such interest or obligation or to present or file any claim or to take any action to collect or

 

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enforce any performance or the payment of any amount thereunder to which it may be entitled at any time.

 

Limitation on Certain Changes

 

4.7          The Pledgor shall not, without at least 30 days prior written notice to the Security Agent, (a) change its location (within the meaning of Section 9-307 of the UCC) or (b) change its corporate name from the name shown on the signature pages hereto.

 

Further Assurances

 

4.8          The Pledgor agrees that, from time to time upon the written request of the Security Agent, it shall execute and deliver such further documents and do such other acts and things as the Security Agent may reasonably request in order fully to effect the purposes of this Agreement.

 

REMEDIES

 

Remedies

 

5.1          At any time that an Event of Default shall have occurred and be continuing:

 

(a)                                 the Pledgor shall, at the request of the Security Agent, assemble any Collateral not held pursuant to the Account Control Agreement at such place or places, reasonably convenient to both the Security Agent and the Pledgor, designated in such request;

 

(b)                                 the Security Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments or otherwise modify the terms of any of the Collateral;

 

(c)                                  the Security Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code (whether or not the Uniform Commercial Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Security Agent were the sole and absolute owner thereof (and the Pledgor agrees to take all such actions as may be appropriate to give effect to such right);

 

(d)                                 the Security Agent in its discretion may, in its name or in the name of the Pledgor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral but shall be under no obligation to do so;

 

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(e)                                  the Security Agent may set-off any amounts payable by the Pledgor with respect to any Secured Obligations against any Collateral in the form of Cash;

 

(f)                                   subject to Section 5.1(g), the Security Agent may, upon ten Business Days’ prior written notice to the Pledgor of the time and place, with respect to the Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Security Agent or any of its agents, sell, assign or otherwise dispose of all or any part of such Collateral, in a commercially reasonable manner, at such place or places as the Security Agent deems best in such manner, and for Cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Security Agent or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise) of the Pledgor, any such demand, notice, claim and right or equity being hereby expressly waived and released to the extent permitted by law.  Subject to Section 5.1(g), the Security Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned; and

 

(g)                                  in the event that any Debt Obligation becomes the subject of a disposition pursuant to this Section 5.1, the Security Agent shall attempt to obtain Firm Bids (or a combination of Firm Bids) for the entire Debt Obligation from three or more Dealers (and may obtain Firm Bids from any other Person or Persons selected by the Security Agent); provided that the Security Agent may in its commercially reasonable discretion obtain Firm Bids with respect to any group or groups of such Debt Obligations.  The Security Agent will give the Pledgor notice of its intention to obtain Firm Bids pursuant to this Section 5.1(g) (such notice to be given telephonically and via electronic mail) not later than 5:00 p.m. New York time on the date 10 Business Days prior to the bid submission deadline specified below.  By notice to the Security Agent not later than such bid submission deadline, the Pledgor may, but shall not be obligated to, designate any Dealer to provide a Firm Bid (and the Security Agent will seek a Firm Bid from such Dealer if so designated by the Pledgor on a timely basis).  A “Firm Bid” shall be a good and irrevocable bid for value, to purchase all or any portion of the relevant Debt Obligation (or an entire specified group of Debt Obligations) for scheduled settlement no later than the date customary for settlement substantially in accordance with the then-current market practice in the principal market for the relevant Debt Obligation (or group of Debt Obligations), submitted by a Dealer as of a time during regular business hours in New York City on the date 10 Business

 

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Days after any date specified by the Security Agent to the Pledgor in its commercially reasonable discretion.  The Security Agent will conduct the bid process in accordance with the procedures set forth in this Section 5.1(g) and otherwise in a commercially reasonable manner.

 

Notwithstanding anything to the contrary herein,

 

(i)            the Security Agent shall be entitled to disregard any Firm Bid submitted by a Dealer or other Person if, in the Security Agent’s commercially reasonable judgment, (x) such Dealer or other Person is ineligible pursuant to the documentation evidencing or otherwise governing the relevant Debt Obligation to accept assignment or transfer of the relevant Debt Obligation or portion thereof, as applicable, substantially in accordance with the then-current market practice in the principal market for the relevant Debt Obligation, as determined by the Security Agent, or (y) such Dealer or other Person would not, through the exercise of its commercially reasonable efforts, be able to obtain any consent required under any agreement or instrument governing or otherwise relating to the relevant Debt Obligation to the assignment or transfer of the relevant Debt Obligation or portion thereof, as applicable, to it; and

 

(ii)           if the Security Agent determines on any commercially reasonable basis that any Firm Bid is not bona fide, including, without limitation, due to (x) the insolvency of the bidder or (y) the inability, failure or refusal of the bidder to settle the purchase of the relevant Debt Obligation or portion thereof, as applicable, or otherwise settle transactions in the relevant market or perform its obligations generally,

 

such Firm Bid shall be disregarded.  With respect to each Debt Obligation being sold pursuant to this Section 5.1(g), the Security Agent shall transfer, or cause the transfer of, the relevant Debt Obligation to the Person or Persons providing the highest Firm Bid or combination of Firm Bids (other than any Firm Bid that is disregarded as aforesaid) in relation to such Debt Obligation; provided that, if the Security Agent has obtained Firm Bids with respect to any group of Debt Obligations, then the Security Agent shall transfer, or cause the transfer of, a group of Debt Obligations for which Firm Bids were obtained to the Person or Persons providing the highest Firm Bid or combination of Firm Bids (other than any Firm Bid that is disregarded as aforesaid) in relation to such group of Debt Obligations.  If any Debt Obligation is not sold in connection with the Firm Bids so obtained for any reason whatsoever (other than as a result of the failure of the Security Agent to consummate such sale as provided in this Section 5.1(g)), the Security Agent may thereafter dispose of the relevant Debt Obligation in the manner contemplated by Section 5.1(f).

 

The Security Agent shall incur no liability as a result of the sale of any Debt Obligation, or any part thereof, at any private sale pursuant to this Section 5.1 conducted as provided in the foregoing paragraphs of this Section 5.1.  To the extent the sale of any Debt

 

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Obligation is conducted as provided in the foregoing paragraphs of this Section 5.1, the Pledgor hereby waives any claims against the Security Agent arising by reason of the fact that the price at which the relevant Debt Obligation may have been sold at any private sale effected as provided above was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations.

 

The proceeds of each collection, sale or other disposition under this Section 5.1 shall be applied in accordance with Section 5.2.

 

Application of Proceeds

 

5.2          The proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant to Section 5.1 (including any amounts on deposit in, or otherwise standing to the credit of, the Custodial Account) shall be deposited in to the Collection Account and applied by the Security Agent Custodian (at the prior written direction of an Authorized Officer of the Security Agent) in the following order of priority (and, among the items in any one paragraph, equally and ratably in accordance with the respective amounts thereof then due and owing):

 

First, to the payment of the reasonable costs and expenses of such collection, sale or other realization, including reasonable and documented out-of-pocket costs and expenses of the Security Agent and the other Secured Parties and the reasonable and documented fees, charges and expenses of the agents and counsel of the Security Agent and the other Secured Parties and all other reasonable expenses incurred by any of the Security Agent and the other Secured Parties in connection with such collection, sale or other realization;

 

Second, to the payment in full of all remaining Secured Obligations then due and payable; and

 

Third, to the payment to the Pledgor, or as a court of competent jurisdiction may otherwise direct, of any surplus then remaining.

 

Power of Attorney

 

5.3          The Security Agent is hereby appointed the attorney-in-fact of the Pledgor for the purpose of taking, during any period when the Security Agent is attempting to sell all or any portion of any Debt Obligation pursuant to Section 5.1(f) or 5.1(g), of taking any action and executing any instruments which the Security Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement (including with respect to the exercise of any remedies hereunder against the Pledgor), which appointment as attorney-in-fact is irrevocable and coupled with an interest.

 

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CUSTODIAL ACCOUNT AND COLLECTION ACCOUNT

 

Collection of Money

 

6.1          Except as otherwise expressly provided herein, while an Event of Default has occurred and is continuing, the Security Agent shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all Money and other property payable to or receivable by the Security Agent.  All amounts so received or collected shall be deposited in the Collection Account.

 

Custodial Account; Collection Account

 

6.2(a)                The Security Agent Custodian has specified in the Account Control Agreement that it has established a single, segregated trust account which shall be designated as the Custodial Account (which may include any sub-accounts thereof established by the Security Agent Custodian for administrative purposes), and a single, segregated trust account which shall be designated as the Collection Account (which may include any sub-accounts thereof established by the Security Agent Custodian for administrative purposes), each of which shall be held in the name of the Security Agent and over which, except as expressly provided in the Account Control Agreement, the Security Agent shall have control and the sole right of withdrawal.  Any reference in this Agreement to the “Custodial Account” or to the “Collection Account” shall, unless otherwise expressly provided, include a reference to any sub-account of the Custodial Account or the Collection Account, respectively.  To the extent that an obligor does not make the applicable payment directly to the Collection Account, the Pledgor shall from time to time deposit into the Collection Account promptly (and in no event more than one Business Day) following its receipt thereof (i) all proceeds received from the disposition of any Collateral by the Pledgor, (ii) all Collections with respect to the Collateral and (iii) all other funds received by the Pledgor in respect of the Collateral.  The provisions of this Section 6.2 are subject to the terms of the Account Control Agreement.

 

(b)                                 By Pledgor Order executed by an Authorized Officer of the Pledgor (which may be in the form of standing instructions), the Pledgor may direct the Security Agent Custodian in writing (with a copy to the Security Agent) to invest all funds on deposit in the Accounts as so directed in one or more Eligible Investments having stated maturities no later than the Business Day immediately preceding the next Payment Date.  Absent such prior written specific investment direction, all such funds shall be held uninvested.

 

(c)                                  On any date on which interest or any fee is due and payable under the Loan Agreement (including any Payment Date), the Pledgor shall by Pledgor Order executed by an Authorized Officer of the Pledgor, delivered to the Security Agent and the Security Agent Custodian, direct the Security Agent Custodian to withdraw funds on deposit in the Collection Account and remit such funds as

 

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indicated in such Pledgor Order to pay such interest or fee as required by, and subject to the conditions of, Sections 3.2, 3.3, 3.6 and 3.8 of the Loan Agreement.

 

(d)                                 On any date on which principal is due and payable under the Loan Agreement (including the Scheduled Maturity Date), the Pledgor shall by Pledgor Order executed by an Authorized Officer of the Pledgor, delivered to the Security Agent and the Security Agent Custodian, direct the Security Agent Custodian to withdraw funds on deposit in the Collection Account and remit such funds as indicated in such Pledgor Order to pay principal as required by, and subject to the conditions of, Sections 3.1, 3.6, 3.7 and 3.8 of the Loan Agreement.

 

(e)                                  On any date on which any amount (other than principal, interest or any fee owing under the Loan Agreement) is due and payable by the Pledgor under the Loan Agreement or is otherwise permitted under Section 3.8 of the Loan Agreement, the Security Agent shall give the Pledgor written notice of same, and the Pledgor shall by Pledgor Order executed by an Authorized Officer of the Pledgor, delivered to the Security Agent and the Security Agent Custodian, direct the Security Agent Custodian to withdraw funds on deposit in the Collection Account and remit such funds as indicated in such Pledgor Order to pay such amount as required by, and subject to the conditions of, Section 3.8, 3.9, 3.11, 3.12, 3.14 and 8.1 of the Loan Agreement.

 

(f)                                   On any date on which any Equity Restricted Payment is to be made by the Pledgor, the Pledgor may by Pledgor Order executed by an Authorized Officer of the Pledgor, delivered to the Security Agent and the Security Agent Custodian, direct the Security Agent Custodian to withdraw funds on deposit in the Collection Account and remit such funds as indicated in such Pledgor Order to pay such amount, subject to the conditions of Section 3.8(b) of the Loan Agreement.

 

(g)                                  On any date on which any Qualifying Purchase of a Debt Obligation is to be made pursuant to clause (i) or (ii) of Section 5.2(a) of the Loan Agreement, the Pledgor shall by Pledgor Order executed by an Authorized Officer of the Pledgor, delivered to the Security Agent and the Security Agent Custodian, direct the Security Agent Custodian to withdraw funds on deposit in the Collection Account and remit such funds as indicated in such Pledgor Order to pay the purchase price for such Debt Obligation.

 

(h)                                 The Security Agent shall at all times be party to the Account Control Agreement.  Any and all assets or securities at any time on deposit in, or otherwise to the credit of, the Accounts shall be held for the benefit of the Security Agent.  Except in connection with a liquidation pursuant to Section 5, the only permitted withdrawal of assets or securities (other than Cash) from the Accounts or in, or otherwise to the credit of, the Accounts shall be as directed, upon Pledgor Order, in accordance with the provisions of this Section 6.2, Section 6.3 and Section 6.4.

 

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(i)                                     The Security Agent agrees to give the Pledgor immediate notice if the Security Agent obtains notice that any Account or any assets or securities on deposit therein, or otherwise to the credit thereof, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

 

(j)                                    The Security Agent agrees with the Pledgor that the Security Agent will not give an Entitlement Order (as defined in the Account Control Agreement) under the Account Control Agreement unless (i) an Event of Default has occurred and is continuing on the date such Entitlement Order is given or (ii) such Entitlement Order is to the effect that instructions of the Pledgor given under the Account Control Agreement are not permitted by Section 6.2 or 6.3 of this Agreement (including as to the permitted application of funds contemplated hereby) or would constitute a Potential Event of Default or Event of Default.

 

Release of Security Interest in Collateral

 

6.3(a)                Upon any sale or other disposition by the Pledgor of the Collateral (or portion thereof) in accordance with the terms of this Agreement and the Loan Agreement, the pledge, security interest, lien and right of set-off of the Security Agent in such Collateral (or the portion thereof which has been sold or otherwise disposed of), and in all Collections and rights with respect to such Collateral (but not in the proceeds of such sale or other disposition), shall, immediately upon the sale or other disposition of such Collateral (or such portion), and without any further action on the part of the Security Agent, be released except to the extent of the interest, if any, in such Collateral which is then retained by the Pledgor or which thereafter reverts to the Pledgor for any reason; provided that the Security Agent shall execute and deliver to the Pledgor any documentation reasonably requested by the Pledgor to effectuate or evidence the foregoing.

 

(b)                                 If no Event of Default has occurred and is continuing, the Security Agent Custodian shall, upon receipt of an Pledgor Order executed by an Authorized Officer of the Pledgor or as otherwise provided by the Account Control Agreement, delivered to the Security Agent and the Security Agent Custodian at least two Business Days prior to the date of delivery directed in such Pledgor Order (or such fewer number of days as the Security Agent may agree), deliver or cause to be delivered to or on the order of the Pledgor any Instrument included in the Collateral to the related debtor for ultimate sale or exchange or for presentation, collection, enforcement, renewal or registration of transfer; provided that the lien of this Agreement on such Instrument remains perfected in accordance with Section 9-312(g) of the UCC and such Instrument shall remain subject to the lien of this Agreement unless and until released in accordance with the foregoing clause (a).

 

(c)                                  The Security Agent shall hold for the benefit of the Secured Parties all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it (the Security Agent Custodian).  Initially, such Security

 

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Agent Custodian shall be Citibank N.A. with its address at 111 Wall Street, 15th Floor, New York, New York 10005, Attention: Global Transaction Services — EP FUNDING LLC.  Any successor custodian shall be a state or national bank or trust company which is not an Affiliate of the Pledgor and has capital and surplus of at least USD1,000,000,000.  There may be only one Security Agent Custodian appointed at any one time, and any successor thereto shall be appointed only as provided in the Account Control Agreement.

 

Method of Collateral Transfer

 

6.4          The transfer of Collateral to the Security Agent Custodian to be held for the benefit of the Security Agent shall be done in the following manner (with any and all other actions necessary to create in favor of the Security Agent a valid, first-priority security interest in each item of Collateral under applicable law and regulations (including Articles 8 and 9 of the UCC) in effect at the time of such transfer):

 

(a)                                 each time that the Pledgor shall direct or cause the acquisition of any Collateral, the Pledgor shall, if such Collateral has not already been transferred to the Custodial Account and credited thereto, cause the transfer of such Collateral to the Security Agent Custodian to be held in and credited to the Custodial Account for the benefit of the Security Agent in accordance with the terms of the Account Control Agreement; and

 

(b)                                 the Pledgor shall, within ten days after the date of execution of this Agreement, file, or cause the filing of, all appropriate financing statements covering the Collateral in the proper filing office in the appropriate jurisdictions under applicable law.

 

Termination

 

6.5          Upon the termination of this Agreement, the termination of the Commitments and the payment and satisfaction in full of the Secured Obligations (other than contingent obligations for which no claim has been made), the Security Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Pledgor.  The Security Agent shall also execute and deliver to the Pledgor upon such termination and payment such UCC termination statements and such other documentation as shall be reasonably requested by the Pledgor to effect the termination and release of the pledge, security interest, lien and right of set-off granted pursuant to Section 2.

 

THE SECURITY AGENT

 

7.1          The Person serving as the Security Agent hereunder shall have the same rights and powers in its capacity as a Secured Party as any other Secured Party and may exercise the same as though it were not the Security Agent, and such Person and its

 

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Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Pledgor or any Subsidiary or other Affiliate thereof as if it were not the Security Agent hereunder.

 

7.2          The Security Agent shall not have any duties or obligations except those expressly set forth herein.  Without limiting the generality of the foregoing, (a) the Security Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default or Potential Event of Default has occurred and is continuing, (b) the Security Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Security Agent is required to exercise by the Required Lenders in writing, and (c) except as expressly set forth herein or in the other Credit Documents, the Security Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Pledgor or any of its Affiliates that is communicated to or obtained by it or any of its Affiliates in any capacity other than as Security Agent hereunder.  The Security Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct.  The Security Agent shall be deemed not to have knowledge of any Event of Default or Potential Event of Default unless and until written notice thereof is given to the Security Agent by the Pledgor or a Secured Party (other than itself), and the Security Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Credit Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Credit Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Schedule I of the Loan Agreement or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Security Agent.

 

7.3          The Security Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person.  The Security Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon.  The Security Agent may consult with legal counsel (who may be counsel for an obligor on the Collateral), independent accountants and other experts selected by it, and shall not be liable (absent gross negligence or willful misconduct) for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts (unless such advice is contrary to an express provision of a Loan Document).

 

7.4          The Security Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Security Agent, to the

 

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extent such sub-agent is an Affiliate of the Security Agent.  The Security Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates.  The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Affiliates of the Security Agent and any such sub-agent.

 

7.5          Subject to the appointment and acceptance of a successor Security Agent as provided in this paragraph, the Security Agent may resign at any time by notifying the Secured Parties and the Pledgor.  Upon any such resignation, the Required Lenders shall have the right, after prior written consent from the Pledgor (not to be unreasonably withheld), to appoint a successor.  If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Security Agent gives notice of its resignation, then the retiring Security Agent may, on behalf of the Secured Parties and after prior written consent from the Pledgor (not to be unreasonably withheld), appoint a successor Security Agent, which shall be a bank with an office in New York City or an Affiliate of any such bank.  Upon the acceptance of its appointment as Security Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Security Agent and the retiring Security Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Pledgor to a successor Security Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Pledgor and such successor.  After the Security Agent’s resignation hereunder, the provisions of this Section shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Security Agent.

 

7.6          The Security Agent Custodian shall be entitled to the same rights, protections and immunities as those afforded to the Security Agent in Sections 7.1 through 7.6, mutatis mutandis, together with those set forth in the Account Control Agreement.

 

MISCELLANEOUS

 

Notices

 

8.1          All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested) or sent by facsimile transmission, as follows:

 

(a)                                 if to the Pledgor, to it at c/o FS Energy and Power Fund, Cira Centre, 2929 Arch Street, Suite 675, Philadelphia, PA 19104, Attention:  Ted Gallivan, Chief Financial Officer, and Robert Haas, Vice President (Facsimile No. (215) 222-4649; Telephone No. (215) 495-1167); and

 

(b)                                 if to the Security Agent, to it at 390 Greenwich Street, 4th Floor, New York, New York 10013, Attention:  Mitali Sohoni (Telecopy No. 646-291-5779; Telephone No. 212-723-6181).

 

15

 

Either party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other party hereto.  All notices and other communications given to either party hereto shall be deemed to be effective (i) if in writing and delivered by hand or overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that a transmission report confirming transmission is generated by the sender’s facsimile machine; or (iii) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day.

 

No Waiver

 

8.2          No failure on the part of the Security Agent to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Security Agent of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies herein are cumulative and are not exclusive of any remedies provided by law.

 

Amendments, Etc.

 

8.3          No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the Pledgor and the Security Agent (acting with the consent of the Required Lenders); provided that, without the prior consent of each Lender, the Security Agent shall not (except as provided herein) release any Collateral or otherwise terminate any Lien hereunder, agree to additional obligations being secured by any Collateral security, alter the relative priorities of the Secured Obligations entitled to the benefits of the Lien created hereunder, except that no such consent shall be required, and the Security Agent is hereby authorized, to release any Lien covering property that is the subject of a sale, distribution or other disposition of property permitted under the Loan Agreement.

 

Successors and Assigns

 

8.4          This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Pledgor and the Security Agent.  Neither party shall assign or transfer any of its rights or obligations hereunder without the prior written consent of the other party, and any such purported assignment without such consent shall be void.

 

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Counterparts

 

8.5          This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts, each of which will be deemed an original.  Delivery of an executed counterpart signature page of this Agreement by e-mail (PDF) or facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

Governing Law

 

8.6          This Agreement shall be construed in accordance with, and this Agreement and all matters arising out of this Agreement and the transactions contemplated hereby (whether in contract, tort or otherwise) shall be governed by, the law of the State of New York.

 

Jurisdiction

 

8.7          With respect to any suit, action or proceedings relating to this Agreement or any matter between the parties arising under or in connection with this Agreement (Proceedings), each party irrevocably:  (a) 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 (b) 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 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.

 

Waiver of Jury Trial

 

8.8          THE PLEDGOR AND THE SECURITY AGENT HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Captions

 

8.9          The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

 

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Agents and Attorneys-in-Fact

 

8.10        The Security Agent may employ agents and attorneys-in-fact in connection herewith and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith and with due care; provided that the foregoing shall not constitute the waiver of any rights against any such agent or attorney-in-fact.

 

Severability

 

8.11        If any term, provision, covenant or condition of this Agreement, or the application thereof to either party or any circumstance, is held to be unenforceable, invalid or illegal (in whole or in part) for any reason (in any relevant jurisdiction), the remaining terms, provisions, covenants and conditions of this Agreement, modified by the deletion of the unenforceable, invalid or illegal portion (in any relevant jurisdiction), will continue in full force and effect, and such unenforceability, invalidity, or illegality will not otherwise affect the enforceability, validity or legality of the remaining terms, provisions, covenants and conditions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the deletion of such portion of this Agreement will not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited or unenforceable provision with a valid provision, the economic effect of which comes as close as possible to that of the prohibited or unenforceable provision.

 

Third Party Beneficiaries

 

8.12        Nothing in this Agreement, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement, except Section 5.2 hereof, which shall benefit the Secured Parties.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written.

 

	
EP FUNDING LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Gerald F. Stahlecker
    	
 
    
	
 
    	
Name:
    	
Gerald F. Stahlecker
    	
 
    
	
 
    	
Title:
    	
Executive Vice President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
CITIBANK,   N.A.
    	
 
    
	
as Security Agent
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Vincent Nocerino
    	
 
    
	
 
    	
Name:
    	
Vincent Nocerino
    	
 
    
	
 
    	
Title:
    	
Vice President
    	
 
    

 

19

 

CONTENTS

 

	
SECTION
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    
	
Definitions and Interpretation
    	
 
    	
1
    
	
Grant Of Security Interest
    	
 
    	
3
    
	
Representations And Warranties
    	
 
    	
3
    
	
Ownership of Collateral
    	
 
    	
3
    
	
Security Interest
    	
 
    	
3
    
	
Covenants
    	
 
    	
4
    
	
Title Covenants
    	
 
    	
4
    
	
Security Agent May Perform
    	
 
    	
4
    
	
Perfection, etc.
    	
 
    	
4
    
	
No Other Financing Statements
    	
 
    	
5
    
	
Prior Parties; Care of Collateral
    	
 
    	
5
    
	
Continuing Liability of the   Pledgor
    	
 
    	
5
    
	
Limitation on Certain Changes
    	
 
    	
6
    
	
Further Assurances
    	
 
    	
6
    
	
Remedies
    	
 
    	
6
    
	
Remedies
    	
 
    	
6
    
	
Application of Proceeds
    	
 
    	
9
    
	
Power of Attorney
    	
 
    	
9
    
	
Custodial Account And Collection Account
    	
 
    	
10
    
	
Collection of Money
    	
 
    	
10
    
	
Custodial Account; Collection   Account
    	
 
    	
10
    
	
Release of Security Interest in Collateral
    	
 
    	
12
    
	
Method of Collateral Transfer
    	
 
    	
13
    
	
Termination
    	
 
    	
13
    
	
The Security Agent
    	
 
    	
13
    
	
Miscellaneous
    	
 
    	
15
    
	
Notices
    	
 
    	
15
    
	
No Waiver
    	
 
    	
16
    
	
Amendments, Etc.
    	
 
    	
16
    
	
Successors and Assigns
    	
 
    	
16
    
	
Counterparts
    	
 
    	
17
    
	
Governing Law
    	
 
    	
17
    
	
Jurisdiction
    	
 
    	
17
    
	
Waiver of Jury Trial
    	
 
    	
17
    
	
Captions
    	
 
    	
17
    
	
Agents and Attorneys-in-Fact
    	
 
    	
18
    
	
Severability
    	
 
    	
18
    
	
Third Party Beneficiaries
    	
 
    	
18
    

 

 

Dated as of May 24, 2013

 

EP FUNDING LLC,

a Delaware limited liability company

as Pledgor

 

and

 

CITIBANK, N.A.,

a national banking association

as Security Agent

 

 

SECURITY AGREEMENTExhibit 10.4

 

Execution Copy

 

 

EP FUNDING LLC
 as Company

 

and

 

FS ENERGY AND POWER FUND
 as Investment Manager

 

INVESTMENT MANAGEMENT AGREEMENT

 

Dated as of May 24, 2013

 

 

 

INVESTMENT MANAGEMENT AGREEMENT, dated as of May 24, 2013 (this “Agreement”), between EP FUNDING LLC, a Delaware limited liability company (the “Company”), and FS ENERGY AND POWER FUND, a Delaware statutory trust, as investment manager (in such capacity, the “Investment Manager”).

 

WHEREAS, the Company desires to engage the Investment Manager to provide the services described herein, and the Investment 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 Loan Agreement dated as of May 24, 2013, as amended from time to time (together with any agreements referred to therein, the “Loan Agreement”), among the Company, the financial institutions and other lenders from time to time party thereto (the “Lenders”), and Citibank, N.A., as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

 

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

 

1.                                      Management Services.

 

The Investment 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 Loan Agreement and the Company’s limited liability company agreement (the “LLC Agreement”)):

 

(a)                                 determining the specific Debt Obligations or other assets to be purchased, otherwise acquired or sold by the Company, taking into consideration the payment obligations of the Company on each Payment Date under the Loan Agreement, such that expected distributions on the Debt Obligations and other assets of the Company permit a timely performance of the payment obligations by the Company under the Loan Agreement; provided that the Investment Manager does not hereby guarantee the timely performance of such payment obligations;

 

(b)                                 effecting the purchase, other acquisition and sale of Debt Obligations and all other assets of the Company;

 

(c)                                  subject to the limitations set forth in the Loan Agreement, negotiating with underlying obligors of the Debt Obligations (the “Underlying Obligors”) as to proposed amendments and modifications (including, but not limited to, extensions or releases of collateral) of the documentation evidencing and governing the Debt Obligations;

 

(d)                                 making determinations with respect to the Company’s exercise (including, but not limited to, any waiver) of any rights (including, but not limited to, voting rights and rights arising in connection with the bankruptcy or insolvency of an Underlying Obligor or the consensual or non-judicial restructuring of the debt or equity of an Underlying Obligor) or remedies in connection with the Debt Obligations and participating in the committees (official or otherwise) or other groups formed by creditors of an Underlying Obligor;

 

 

(e)                                  monitoring the ratings of the Debt Obligations;

 

(f)                                   monitoring the Debt Obligations 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 Investment Manager and which is required under the Loan 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 Loan Agreement, in the form and containing all information required by the Loan Agreement, in sufficient time for the Company, or the Person designated by the Company, to review such data and prepare and deliver to the parties entitled thereto all such reports, certificates, schedules and other data required by the Loan Agreement;

 

(g)                                  determining whether any investment meets the Obligation Criteria and Portfolio Criteria;

 

(h)                                 determining whether any investment is a Specified Debt Obligation or Unquoted Debt Obligation;

 

(i)                                     determining whether any payment will be made, and the amount thereof, pursuant to Section 3.8 of the Loan Agreement;

 

(j)                                    managing the Company’s investments within the parameters set forth in the Loan Agreement;

 

(k)                                 complying with such other duties and responsibilities as may be expressly required of the Investment Manager by the Loan Agreement;

 

(l)                                     notifying the Administrative Agent and the Company in writing within one (1) Business Day of an Event of Default under the Loan Agreement to the extent the Investment Manager has actual knowledge of the occurrence thereof; and

 

(m)                             delivering notices of borrowing and payment instructions to the Administrative Agent.

 

The Company agrees for the benefit of the Investment Manager and the Administrative Agent to follow the lawful instructions and directions of the Investment Manager in connection with the Investment Manager’s services hereunder.

 

The Investment Manager shall use reasonable care in rendering its services hereunder, using a degree of skill and attention no less than that which the Investment Manager exercises with respect to comparable assets that it manages for itself and for others in accordance with its existing practices and procedures which the Investment Manager reasonably believes to be consistent with those followed by institutional managers of national standing relating to assets of the nature and character of Debt Obligations, except as expressly provided otherwise in this Agreement or the Loan Agreement.  The Investment Manager shall comply with and perform all the duties and functions that have been specifically delegated to it under this Agreement and the Loan Agreement.  The Investment Manager shall not be bound to follow any amendment to the

 

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Loan Agreement, however, until it has received a copy of the amendment from the Company or the Administrative Agent and, in addition, the Investment Manager shall not be bound by any amendment to the Loan Agreement which adversely affects in any material respects the obligations of the Investment Manager unless the Investment Manager shall have consented thereto in writing.  The Company agrees that it will not permit any amendment to the Loan Agreement that adversely affects the duties or liabilities of the Investment Manager to become effective unless the Investment 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 Investment Manager shall have the power to negotiate, execute and deliver all necessary documents and instruments on behalf of the Company with respect to any Debt Obligation or other asset of the Company and with respect to the rights and obligations of the Company under the Loan Agreement.

 

The Investment Manager shall have no obligation to perform any duties other than those specified herein or in the Loan Agreement.

 

2.                                      Brokerage.

 

The Investment Manager shall use reasonable efforts to obtain the best prices and execution for all orders placed with respect to the Debt Obligations, and other assets of the Company, considering all circumstances.  Subject to the objective of obtaining best prices and execution, the Investment Manager may take into consideration research and other brokerage services furnished to the Investment Manager or its Affiliates by brokers and dealers which are not Affiliates of the Investment Manager.  Such services may be used by the Investment Manager or its Affiliates in connection with its other advisory activities or investment operations.  The Investment Manager may aggregate sales and purchase orders of securities placed with respect to the Debt Obligations, and other assets of the Company, with similar orders being made simultaneously for other accounts managed by the Investment Manager or with accounts of the Affiliates of the Investment Manager, if, in the Investment 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.

 

The Company acknowledges that the determination of any such economic benefit by the Investment Manager is subjective and represents the Investment 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 Investment 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 Investment Manager’s execution obligations described herein, the Investment Manager is hereby authorized to effect client cross-transactions where the Investment 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

 

3

 

Advisers Act, such authorization is terminable at the Company’s option without penalty, effective upon receipt by the Investment Manager of written notice from the Company.  In addition, the Company hereby consents to, and authorizes the Investment 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 Investment Manager.

 

3.                                      The Representations and Warranties of the Company.

 

The Company represents and warrants to the Investment 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 Loan Agreement 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 limited liability company power and authority to execute, deliver and perform this Agreement, the Loan Agreement and all obligations required hereunder and under the Loan Agreement, and the performance of all obligations imposed upon it hereunder and thereunder;

 

(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 material 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, limited liability company 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

 

4

 

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 are 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 Loan Agreement applicable to the Company thereunder.

 

4.                                      Representations and Warranties of the Investment Manager.

 

The Investment Manager represents and warrants to the Company that:

 

(a)                                 the Investment 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 Loan Agreement applicable to the Investment 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 Investment Manager, or on the ability of the Investment Manager to perform its obligations under, or on the validity or enforceability of, this Agreement and the applicable provisions of the Loan Agreement;

 

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

 

5

 

(c)                                  this Agreement has been duly authorized, executed and delivered by the Investment Manager and constitutes a valid and binding agreement of the Investment 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 Investment Manager nor any of its Affiliates is in violation of any federal or state securities law or regulation promulgated thereunder or any material 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 Investment Manager, threatened, that in either case would have a material adverse effect upon the performance by the Investment 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 Loan Agreement applicable to the Investment Manager, conflicts with or results in a material 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 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 Investment Manager is a party or is bound, (iii) any statute applicable to the Investment Manager or (iv) any law, decree, order, rule or regulation applicable to the Investment Manager of any court or regulatory, administrative or governmental agency, body or authority or arbitrator having or asserting jurisdiction over the Investment 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 Investment Manager of its duties under this Agreement or the provisions of the Loan Agreement applicable to the Investment Manager; and

 

(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 Investment 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 Investment Manager shall not be liable for and the Company shall be responsible for the payment of (i) expenses and costs of legal advisers (including reasonable expenses and costs associated with the use of internal legal counsel of the Investment Manager), consultants and other professionals retained by the Company or by the Investment Manager, on behalf of the Company, in connection with the services provided by the Investment Manager pursuant to this Agreement and the Loan Agreement, (ii) the reasonable cost of asset pricing and asset rating

 

6

 

services, and accounting, programming and data entry services that are retained in connection with services of the Investment Manager under this Agreement, (iii) travel expenses (airfare, meals, lodging and other transportation) incurred by the Investment Manager as is reasonably necessary in connection with the selection of Debt Obligations and the negotiation, documentation, default or restructuring of any Debt Obligation, and (iv) any extraordinary costs and expenses incurred by the Investment Manager in the performance of its obligations under this Agreement and the Loan Agreement.  To the extent that such expenses are incurred in connection with obligations that are also held by the Investment Manager, the Investment 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.

 

6.                                      Fees.

 

(a)                                 The Company shall pay to the Investment Manager, for services rendered and performance of its obligations under this Agreement fees which are payable in arrears on each Payment Date (subject to availability of funds and the conditions set forth in Section 3.8(b)(i)(A) of the Loan Agreement) in an amount equal to 0.35% per annum of the aggregate Par Amount of all Debt Obligations measured as of the Quarterly Date immediately preceding such 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 Investment Manager, for services rendered and performance of its obligations under this Agreement, fees which are payable in arrears on each Payment Date (subject to availability of funds and the conditions set forth in Section 3.8(b)(i)(C) of the Loan Agreement) in an amount equal to 0.15% per annum of the aggregate Par Amount of all Debt Obligations measured as of the Quarterly Date immediately preceding such Payment Date (the “Subordinate Management Fee” and, together with the Senior Management Fee, the “Management Fees”).  The Subordinate 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 Investment Manager may, in its sole discretion, (i) waive all or any portion of the Management Fees or (ii) defer all or any portion of the Management Fees.  Such deferred amounts will become payable on the next Payment Date in the same manner and priority as their original characterization would have required unless deferred again.

 

(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 Payment Dates during which this Agreement was in effect and shall be due and payable, along with any deferred Management Fees, on the first Payment Date following the effective date of such termination.

 

(e)                                  The Management Fees will be payable from the Company’s assets in accordance with the terms of the Loan Agreement.  If on any Payment Date there are

 

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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 Payment Date if any on which any funds are available therefor, as provided in the Loan Agreement.

 

7.                                      Non-Exclusivity.

 

The services of the Investment Manager to the Company are not to be deemed exclusive, and the Investment 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 and directors of the Investment Manager may engage in any other business activity or render services to any other Person or serve as partners, officers or directors of any other firm or corporation.  Notwithstanding the foregoing, it is understood and agreed that the Investment 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 Act.  Subject to Section 9 hereof, it is understood and agreed that information or advice received by the Investment Manager and officers or directors of the Investment Manager hereunder shall be used by such organization or such persons to the extent permitted by applicable law.

 

8.                                      Conflicts of Interest.

 

The Investment Manager may, subject to applicable legal requirements, direct the Company (i) to acquire (whether by purchase, contribution or otherwise) any Debt Obligations for the Company from the Investment Manager or any of its Affiliates as principal or (ii) to sell or distribute any Debt Obligations for the Company to the Investment Manager or any of its Affiliates as principal.

 

Notwithstanding the provisions of the preceding paragraph, various potential and actual conflicts of interest may arise from the overall investment activity of the Investment Manager and its Affiliates.  The Investment 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 Investment Manager and its Affiliates may have ongoing relationships with Underlying Obligors and may own equity or debt obligations issued by Underlying Obligors.  The Investment Manager and its Affiliates and the clients of the Investment Manager or its Affiliates may invest in obligations that are senior to, or have interests different from or adverse to, the Debt Obligations of the Company.  The Investment Manager may serve as Investment 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 Investment Manager may at certain times be simultaneously seeking to purchase or sell investments for other entities for which it serves as Investment Manager, or for its clients and Affiliates, and selecting such investments as Debt Obligations for the Company.  Furthermore, the Investment 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.

 

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

 

9.                                      Records; Confidentiality.

 

The Investment Manager shall maintain appropriate books of account and records relating to services performed hereunder, and such books of account and records shall be accessible for inspection by a representative of the Company, the Administrative Agent and independent accountants appointed by the Company at a mutually agreed time during normal business hours and upon not less than three (3) Business Days’ prior notice.

 

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

 

The Investment 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 Investment 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 Investment Manager, (vi) information related to the performance of the Investment Manager, (vii) information furnished in connection with any successor investment 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 Investment Manager on a non-confidential basis; provided that the Investment 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 Investment 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 Loan Agreement.

 

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 Investment Manager may be removed, without payment to the Investment Manager of any penalty, for cause upon prior written notice by the Company, acting with the consent of the Administrative Agent; provided that such notice may be waived by the Investment Manager.  For this

 

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purpose, “cause” will mean the occurrence of any of the following events or circumstances:

 

(i)                                     the Investment Manager’s breach, in any respect, of any provision of this Agreement or the Loan Agreement applicable to it (except for any breach that has not had, and could not reasonably be expected to have, a material adverse effect on the Company or the Administrative Agent) and the Investment 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 Investment Manager’s intentional breach of any provision of this Agreement or the Loan Agreement applicable to it relating to the Investment Manager’s or the Company’s obligation to comply with any material provision of this Agreement or the Loan Agreement applicable to it, and the Investment Manager’s failure to cure such breach within 15 days of the occurrence of such breach;

 

(iii)                               the failure of any representation, warranty, certification or statement made or delivered by the Investment Manager in or pursuant to this Agreement or the Loan Agreement to be correct in any material respect when made, which failure (a) could reasonably be expected to have a material adverse effect on the Administrative Agent and (b) is not corrected by the Investment Manager within 30 days of its receipt of notice from the Company or the Administrative Agent of such failure, unless, if such failure is not capable of being cured in 30 days but is curable within 90 days, the Investment Manager has taken action that the Investment Manager in good faith believes will remedy, and does in fact remedy, such failure within 90 days after notice of such failure being given to the Investment Manager;

 

(iv)                              the Investment Manager (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, arrangement, adjustment or composition of or in respect of the Investment Manager, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Investment 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 60 consecutive days;

 

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(v)                                 the occurrence of an Event of Default under the Loan Agreement that results from any breach by the Investment Manager of its duties under the Loan Agreement or this Agreement; or

 

(vi)                              the occurrence of an act by the Investment Manager that constitutes fraud or criminal activity in the performance of its obligations under this Agreement, or the Investment Manager being indicted for a criminal offense materially related to its business of providing asset management services.

 

If any such event occurs, the Investment Manager shall give prompt written notice thereof to the Company and the Administrative Agent promptly upon the Investment Manager becoming aware of the occurrence of such event.

 

(b)                                 The Investment Manager shall have the right to terminate this Agreement only upon 90 days prior written notice to the Company and the Administrative Agent, and this Agreement shall terminate automatically in the event of its assignment by the Investment Manager which is not made in accordance with Sections 13 and 17 of this Agreement.

 

(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.

 

(d)                                 Within 30 days of the resignation or removal of the Investment Manager, the Company may appoint a successor investment manager; provided that such appointment is subject to the prior approval of the Administrative Agent.

 

12.                               Action Upon Termination.

 

(a)                                 Upon the effective termination of this Agreement, the Investment Manager shall as soon as practicable:

 

(i)                                     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 Investment Manager; and

 

(ii)                                  deliver to the Administrative Agent an account with respect to the books and records delivered to the Administrative Agent or the successor investment manager appointed pursuant to Section 11(d) hereof.

 

Notwithstanding such termination, the Investment 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 Investment Manager in Section 4 hereof or from any failure of the Investment Manager to comply with the provisions of this Section 12.

 

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(b)                                 The Investment Manager agrees that, notwithstanding any termination, it shall reasonably cooperate in any suit, action or proceeding relating to this Agreement (each, a “Proceeding”) arising in connection with this Agreement, the Loan Agreement or any of the Company’s assets (excluding any such Proceeding in which claims are asserted against the Investment Manager or any Affiliate of the Investment Manager) so long as the Investment Manager shall have been offered reasonable security, indemnity or other provisions against the cost, expenses and liabilities that might be incurred in connection therewith and a reasonable per diem fee.

 

13.                               Liability of Investment Manager; Delegation.

 

(a)                                 The Investment Manager assumes no responsibility under this Agreement other than to render the services called for hereunder and under the terms of the Loan Agreement made applicable to it pursuant to the terms of this Agreement.  The Investment Manager shall not be responsible for any action of the Company in declining to follow any advice, recommendation or direction of the Investment Manager.  The Investment 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 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 Investment 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 Investment 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 Investment Manager hereunder; provided that no such delegation by the Investment Manager of any of its duties hereunder shall relieve the Investment Manager of any of its duties hereunder nor relieve the Investment Manager of any liability with respect to the performance of such duties.  For the avoidance of doubt, asset selection and trade execution duties shall include the services described in Section 1(a) hereof.

 

Notwithstanding the above and Section 17, the Investment Manager shall be permitted to assign any or all of its rights and delegate any or all of its obligations to an Affiliate reasonably acceptable to the Administrative Agent that (i) will professionally and competently perform duties similar to those imposed upon the Investment Manager under this Agreement and (ii) is legally qualified and has the capacity to act as the Investment Manager under this Agreement.  The Investment Manager shall not be liable for any consequential damages hereunder.

 

(b)                                 The Company shall reimburse, indemnify and hold harmless the Investment Manager, its directors, officers, agents and employees and any of its Affiliates from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including reasonable attorneys’ fees and expenses), 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 Investment Manager, its directors, officers, stockholders, agents and employees made in good faith and in the

 

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performance of the Investment Manager’s duties under this Agreement or the Loan Agreement except to the extent resulting from such person’s bad faith, willful misfeasance, gross negligence or reckless disregard of its duties hereunder or thereunder.  The Investment Manager, its directors, officers, stockholders, 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 and are subject to the availability of funds.

 

(c)                                  The Investment 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), as are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect o any pending or threatened litigation caused by, or arising out of or in connection with, (i) any acts or omissions of the Investment Manager constituting bad faith, willful misconduct, gross negligence or reckless disregard of its duties under this Agreement or under the Loan Agreement and (ii) any breach of the representations and warranties made by the Investment Manger in Section 4 hereof.

 

14.                               Obligations of Investment Manager.

 

Unless otherwise required by any provision of the Loan Agreement or this Agreement or by applicable law, the Investment 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 Investment 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 certificate of formation or limited liability company agreement (including, but not limited to, Section 9 thereof), (d) cause the Company to violate the terms of the Loan Agreement, (e) subject the Company to federal, state or other income taxation or (f) adversely affect the interests of the Administrative Agent in any material respect (other than as permitted or required hereunder or under the Loan Agreement, including, without limitation, as may result from the performance of any Debt Obligation), it being understood that in connection with the foregoing the Investment 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 and the Loan Agreement or the conduct of its business generally.  The Investment 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 Loan Agreement.  Notwithstanding anything in this Agreement, the Investment Manager shall not take any discretionary action that would reasonably be expected to cause an Event of Default under the Loan Agreement.  The Investment Manager covenants that it shall 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.

 

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15.                               No Partnership or Joint Venture.

 

The Company and the Investment 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 Investment Manager’s relation to the Company shall be deemed to be that of an independent contractor.

 

16.                               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 Administrative Agent for this purpose shall be as set forth in Section 8.3 of the Loan Agreement, and the address of the Investment Manager for this purpose shall be:

 

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

 

All notices are to be effective in accordance with Section 8.3 of the Loan Agreement.

 

17.                               Succession/Assignment.

 

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 Investment Manager (including, without limitation, a change in control or management of the Investment 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.

 

18.                               Conflicts with the Loan Agreement.

 

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

 

19.                               Miscellaneous.

 

(a)                                 This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles.  With respect to any Proceeding, each party irrevocably (i) submits to the non-exclusive

 

14

 

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 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 16 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 LEGAL 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.

 

(h)                                 This Agreement and the Loan Agreement contain the entire understanding and agreement between the parties and supersedes all other prior understandings and

 

15

 

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.

 

(i)                                     The Investment Manager (i) consents to, and agrees to perform, the provisions of the Loan Agreement applicable to the Investment Manager and (ii) agrees that all of the representations, covenants and agreements made by the Investment Manager in this Agreement are also for the benefit of the Lenders.

 

(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 Investment Manager.

 

(l)                                     The Company hereby acknowledges and accepts all actions that were taken by the Investment Manager and/or recommended to the Company by the Investment Manager prior to the Closing Date, including all actions and recommendations that were otherwise consistent with the services to be provided by the Investment 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.

 

20.                               Non-Payment.

 

The Investment Manager shall continue to serve as Investment Manager under this Agreement notwithstanding that the Investment 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 Section 3.8(b) of the Loan Agreement.

 

21.                               No Recourse.

 

The Investment Manager hereby acknowledges and agrees that the Company’s obligations hereunder will be solely the corporate obligations of the Company, and the Investment Manager will not have any recourse to any of the directors, officers, employees, holders of the membership interest of 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 all claims against the Company arising from this Agreement or any transactions contemplated hereby shall be extinguished.  The provisions of this Section 21 shall survive the termination of this Agreement for any reason whatsoever.

 

[signature page follows]

 

16

 

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

 

	
 
    	
EP   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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