Document:

Exhibit 10.9

 

Execution

 

 

 

FSEP TERM FUNDING, LLC
 as Company

 

and

 

FS ENERGY AND POWER FUND
 as Investment Manager

 

 

INVESTMENT MANAGEMENT AGREEMENT

 

 

Dated as of June 24, 2011

 

 

 

 

INVESTMENT MANAGEMENT AGREEMENT, dated as of June 24, 2011 (this “Agreement”), between FSEP TERM FUNDING, LLC, a Delaware limited liability company (the “Company”), and FS ENERGY AND POWER FUND, a Delaware statutory trust (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 Credit Agreement dated as of the date hereof (together with any agreements referred to therein, including, without limitation, the letter from the Manager to the Administrative Agent delivered pursuant to the Credit Agreement, the “Credit Agreement”), between the Company, the lenders from time to time party there and Deutsche Bank AG, New York Branch, as administrative agent (including any successor agent under the Credit Agreement, 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 Credit Documents and the LLC Agreement):

 

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

 

(b)           effecting the purchase and sale of Fund Investments and all other assets of the Company;

 

(c)           subject to the limitations set forth in the Credit Agreement and the Custodial Agreement, negotiating with underlying obligors of the Fund Investments (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 Fund Investments;

 

(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 Fund Investments and

 

 

participating in the committees (official or otherwise) or other groups formed by creditors of an Underlying Obligor;

 

(e)           monitoring the ratings of the Fund Investments;

 

(f)            determining whether each Fund Investment is an Eligible Investment;

 

(g)           monitoring the Fund Investments 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 Credit Agreement or requested by the Company in connection with the preparation of all reports, certificates, schedules and other data which the Company is required to prepare and deliver under the Credit Agreement, in the form and containing all information required by the Credit Agreement, in sufficient time for the Company, or the Person designated by the Company (including but not limited to the Custodian), to review such data and prepare and deliver to the parties entitled thereto all such reports, certificates, schedules and other data required by the Credit Agreement;

 

(h)           determining whether any investment is an Eligible Investment or Excluded Investment;

 

(i)            managing the Company’s investments within the parameters set forth in the Credit Agreement, including, without limitation, the limitations relating to the definitions of Fund Investments, Excluded Investments, Market Value Price, Market Value and Eligible Investments;

 

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

 

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

 

(l)            delivering Borrowing Requests and payment instructions to the Administrative Agent and making the prepayment specifications referred to in Section 3.03(b) of the Credit Agreement.

 

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

 

2

 

be consistent with those followed by institutional managers of national standing relating to assets of the nature and character of Fund Investments, except as expressly provided otherwise in this Agreement or the Credit 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 Credit Agreement.  The Investment Manager shall not be bound to follow any amendment to the Credit Agreement, however, until it has received a copy of the amendment from the Company or the Administrative Agent and, in addition, the Investment Manager shall not be bound by any amendment to the Credit 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 Credit Agreement that adversely affects in any material respects 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.  The Investment Manager shall cause any purchase or sale of any Fund Investments or other asset of the Company to be conducted on an arm’s length basis or on terms that would be obtained in an arm’s length transaction in compliance with Section 2 and Section 8 hereof.

 

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 Fund Investment or other asset of the Company.

 

The Investment Manager shall have no obligation to perform any duties other than those specified herein or in the Credit Agreement or the Custodial 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 Fund Investments, 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 Fund Investments, 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

 

3

 

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 Advisers Act of 1940, as amended, 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, in which case the Investment Manager or any such Affiliate will receive commissions from, and have a potentially conflicting division of loyalties and responsibilities regarding, both parties to the transaction;  provided  that the Company shall the right to revoke such consent at any time by written notice to the Investment Manager.  Also with the prior authorization of the Company and in accordance with Section 11(a) of the Securities Exchange Act of 1934, as amended, and regulation 11a2-2T thereunder (or any similar rule that may be adopted in the future), the Investment Manager is authorized to effect transactions for the Company on a national securities exchange of which any of its Affiliates is a member and retain commissions in connection therewith, and the Investment Manager will use commercially reasonable efforts to provide the Company with information annually disclosing commissions, if any, retained by the Investment Manager’s Affiliates in connection with such transactions for the Company’s account.

 

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

 

3.             The Representations and Warranties of the Company.

 

The Company represents and warrants to the 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 Credit Documents would require, such qualification, except for failures to be so qualified, authorized or licensed that would not in the aggregate have a material adverse effect on the business, operations, assets or financial condition of the Company;

 

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

 

4

 

(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 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 Credit Agreement applicable to the Company thereunder.

 

5

 

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 Credit Documents 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 Credit Documents;

 

(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 Credit Documents applicable to the Investment Manager;

 

(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 Credit Documents 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 articles of organization, limited liability company agreement 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

 

6

 

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 Credit Documents 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) actual and reasonable expenses and costs of legal advisers (including actual and 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 Credit Agreement and (ii) the reasonable cost of asset pricing and asset rating services, and accounting, programming and data entry services that are retained in connection with services of the Investment Manager under this 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 in accordance with and subject to the limitations contained in the Credit Agreement.  Expenses and costs payable to the Investment Manager under this Section 5 shall constitute “Administrative Expenses” (as such term is defined in the Credit Agreement), and shall be paid to the extent of available funds and subject to the conditions set forth in Section 6.02(d) of the Credit Agreement.

 

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 6.02(d) of the Credit Agreement) in an amount equal to 0.35% per annum of the Aggregate Principal Balance of all Fund Investments measured as of the Determination Date immediately preceding such Payment Date (the “Management Fees”).  The Management Fees will be calculated on the basis of a calendar year consisting of 360 days and the actual number of days elapsed.

 

(b)           The Investment Manager may, in its sole discretion, 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.

 

7

 

(c)           If this Agreement is terminated pursuant to Section 11 hereof or otherwise, the Management Fees calculated as provided in Section 6(a) 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.

 

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

 

(e)           The Investment Manager hereby agrees not to cause the filing of a petition in bankruptcy against the Company for any reason whatsoever, including, without limitation, the non payment of the Management Fees, except in accordance with the provisions of Section 20 hereof and the provisions of the Credit 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 Sections 2 and 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 and any restrictions or limitations contained in the Credit Documents, direct the Company (i) to acquire any Fund Investments for the Company from the Investment Manager or any of its Affiliates as principal or (ii) to sell any Fund Investments for the Company to the Investment Manager or any of its Affiliates as principal; provided  that each such acquisition or sale is conducted on terms no less favorable to the Company than would be obtained in an arms’ length transaction with a non-affiliate.

 

Notwithstanding the provisions of the preceding paragraph, various potential and actual conflicts of interest may arise from the overall investment activity of the Investment Manager and its Affiliates.  The Investment Manager, its Affiliates and their respective clients

 

8

 

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 companies whose obligations are pledged under the Credit Agreement and may own equity or debt obligations issued by issuers of and other obligors of Fund Investments.  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 assets 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 the Company and any similar entity for which it serves as Investment Manager in the future, or for its clients and Affiliates.  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 or making an investment on behalf of the Company.

 

The Company hereby acknowledges the various potential and actual conflicts of interest that may exist with respect to the 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 Credit 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 3 Business Days’ prior notice.

 

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

 

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

 

9

 

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 Fund Investments under the Credit 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 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 Credit Documents 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 (a) any provision of this Agreement or the Credit Documents applicable to it relating to the Investment Manager’s or the Company’s obligation to cause the Fund Investments to comply with (1) the Overcollateralization Test or (2) the conditions for sale of a Fund Investment by the Company or (b) any other material provision of this Agreement or the Credit Documents 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 Credit Documents 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 15 days of its receipt of notice from the Company or the Administrative Agent of such failure;

 

(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

 

10

 

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 15 consecutive days;

 

(v)           the occurrence of an Event of Default under the Credit Documents that results from any breach by the Investment Manager of its duties under the Credit Documents 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.

 

(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 that is reasonably acceptable to the Administrative Agent.  No such resignation or removal will be effective until the date as of which a successor investment manager has assumed in writing the Investment Manager’s duties and obligations as specified herein.

 

12.           Action Upon Termination.

 

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

 

11

 

(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).

 

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.

 

(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 Credit 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 Credit Documents 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.  Unless otherwise agreed in writing, the Investment Manager shall have no liability to the Administrative Agent or other Company’s creditors, 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 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.

 

12

 

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 directors, officers and employees of the Investment Manager and any of its Affiliates from any and all actual and reasonable out-of-pocket expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including reasonable attorneys’ fees and expenses), 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 performance of the Investment Manager’s duties under this Agreement or the Credit Documents 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 as part of the Management Fees and are subject to the availability of funds and to the conditions set forth in the Credit Agreement.

 

(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 Credit Documents 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 Credit Documents 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

 

13

 

an “investment company” under the Investment Company Act, (c) not be permitted under the Company’s operating agreement or certificate of formation (including, but not limited to, Section 9 thereof), (d) cause the Company to violate the terms of the Credit Documents, (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 Credit Documents, including, without limitation, as may result from the performance of any Fund Investment), 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 Credit Documents 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 Credit Documents.  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 Credit Agreement.  The Investment Manager covenants that it shall (i) not hold out the Fund Investments as its assets, (ii) take all action to ensure that the Fund Investments are held in the name of the Company or, if held by an agent of the Company, clearly designate such agent as being the Company’s agent, (iii) cause the Company to comply with the terms of Section 6.01(l) of the Credit Agreement  and (iv) not fail to correct any known misunderstandings regarding the separate identity of the Company and shall not identify itself as a division or department of the Company.

 

15.           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 on Schedule 1 to the Credit Agreement, and the address of the Investment Manager for this purpose shall be:

 

FSEP Term Funding, LLC

Cira Centre

2929 Arch Street, Suite 675

Philadelphia, Pennsylvania 19104

Attention:  Gerald F. Stahlecker

Telephone:  (215) 495-1169

Facsimile:  (215) 222-4649

Electronic Mail:  jerry.stahlecker@franklinsquare.com

 

14

 

All notices are to be effective in accordance with Section 8.03 of the Credit 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 United States Advisers Act of 1940, as amended) shall be made without the consent of the Company and the Administrative Agent.

 

18.           Conflicts with the Credit Agreement.

 

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

 

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 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.

 

15

 

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

 

(i)            The Investment Manager (i) consents to, and agrees to perform, the provisions of the Credit Documents applicable to the Investment Manager, (ii) acknowledges that the Company is assigning all of its right, title and interest in, to and under this Agreement to the Administrative Agent under the Security Agreement, and (iii) agrees that all of the representations, covenants and agreements made by the Investment Manager in this Agreement are also for the benefit of the Administrative Agent.

 

(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

 

16

 

Investment Manager prior to the Closing Date, including all actions and recommendations that were related to the anticipated purchase of assets by the Company or 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-Petition.

 

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 6.02(k) of the Credit Agreement, and agrees not to cause the filing of an involuntary petition in bankruptcy against the Company for any reason whatsoever, including, without limitation, the non-payment to the Investment Manager, until the payment in full of all amounts payable to the Administrative Agent or otherwise under the Credit Agreement and the expiration of a period equal to one year and one day (or, if longer, the applicable preference period then in effect) following all such payments; provided  that nothing in this clause shall preclude, or be deemed to estop, the Investment Manager (A) from taking any action prior to the expiration of the aforementioned one year and one day (or, if longer, the applicable preference period then in effect) period in (x) any case or proceeding voluntarily filed or commenced by the Company or (y) any involuntary insolvency proceeding filed or commenced against the Company, by a Person other than the Investment Manager or its Affiliates, or (B) from commencing against the Company or any properties of the Company any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceeding.  The provisions of this Section 20 shall survive the termination of this Agreement for any reason whatsoever.

 

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]

 

17

 

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.

 

	
 
    	
FSEP   TERM FUNDING, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Gerald F. Stahlecker
    
	
 
    	
Name:   Gerald F. Stahlecker
    
	
 
    	
Title:   EVP
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
FS   ENERGY AND POWER FUND
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Gerald F. Stahlecker
    
	
 
    	
Name:   Gerald F. Stahlecker
    
	
 
    	
Title:   EVP
    

 

[Signature Page to Investment Management Agreement]Exhibit 10.10

 

Execution Copy

 

SECURITY AGREEMENT

 

dated as of

 

June 24, 2011

 

between

 

FSEP TERM FUNDING, LLC, as Borrower

 

and

 

 

DEUTSCHE BANK AG, NEW YORK BRANCH,

as Administrative Agent

 

 

TABLE OF CONTENTS

 

 

	
 
    	
PAGE
    
	
 
    	
 
    
	
Section 1. Definitions
    	
1
    
	
Section 2. Grant of Transaction Liens
    	
5
    
	
Section 3. General Representations and Warranties
    	
6
    
	
Section 4. Further Assurances; General Covenants
    	
7
    
	
Section 5. Investment Property
    	
10
    
	
Section 6. Deposit Accounts
    	
10
    
	
Section 7. Bank Loans
    	
11
    
	
Section 8. Operation of Collateral Accounts
    	
11
    
	
Section 9. Right to Vote
    	
12
    
	
Section 10. Remedies upon Event of Default
    	
12
    
	
Section 11. Application of Proceeds
    	
14
    
	
Section 12. Fees and Expenses; Indemnification
    	
15
    
	
Section 13. Authority to Administer Collateral
    	
16
    
	
Section 14. Limitation on Duty in Respect of Collateral
    	
16
    
	
Section 15. General Provisions Concerning The Administrative Agent
    	
17
    
	
Section 16. Termination of Transaction Liens; Release of   Collateral
    	
18
    
	
Section 17. Notices
    	
19
    
	
Section 18. No Implied Waivers; Remedies Not Exclusive
    	
19
    
	
Section 19. Successors and Assigns
    	
19
    
	
Section 20. Amendments and Waivers
    	
19
    
	
Section 21. Choice of Law
    	
19
    
	
Section 22. Waiver of Jury Trial
    	
19
    
	
Section 23. Severability
    	
20
    

 

 

EXHIBITS:

 

Exhibit A               Perfection Certificate

 

ii

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of June 24, 2011 is entered into by and among FSEP TERM FUNDING, LLC, as Borrower, and DEUTSCHE BANK AG, NEW YORK BRANCH, as Administrative Agent.

 

RECITALS:

 

The Borrower is entering into the Credit Agreement described in Section 1 hereof, pursuant to which the Borrower intends to borrow funds for the purpose of investing on a leveraged basis in Fund Investments.

 

The Borrower is willing to secure, its obligations to the Secured Parties under the Credit Documents, by granting Liens on its assets to the Administrative Agent, for the benefit of the Secured Parties, as provided in the Collateral Documents;

 

WHEREAS, the Lenders are not willing to make loans under the Credit Agreement unless the foregoing obligations of the Borrower are secured as described above;

 

WHEREAS, upon any foreclosure or other enforcement of the Credit Documents, the net proceeds of the Collateral are to be received by or paid over to the Administrative Agent and applied as provided herein;

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.  Definitions.

 

(a)           Terms Defined in Credit Agreement.  Terms defined in the Credit Agreement and not otherwise defined in subsection (b) or (c) of this Section 1 have, as used herein, the respective meanings provided for therein.

 

(b)           Terms Defined in UCC.  As used herein, each of the following terms has the meaning specified in the UCC:

 

	
Term
    	
 
    	
UCC
    
	
 
    	
 
    	
 
    
	
Account
    	
 
    	
9-102
    
	
Authenticate
    	
 
    	
9-102
    
	
Chattel   Paper
    	
 
    	
9-102
    

 

 

	
Term
    	
 
    	
UCC
    
	
 
    	
 
    	
 
    
	
Deposit   Account
    	
 
    	
9-102
    
	
Document
    	
 
    	
9-102
    
	
Entitlement   Holder
    	
 
    	
8-102
    
	
Entitlement   Order
    	
 
    	
8-102
    
	
Financial   Asset
    	
 
    	
8-102 &   103
    
	
General   Intangibles
    	
 
    	
9-102
    
	
Instrument
    	
 
    	
9-102
    
	
Investment   Property
    	
 
    	
9-102
    
	
Record
    	
 
    	
9-102
    
	
Securities   Account
    	
 
    	
8-501
    
	
Securities   Intermediary
    	
 
    	
8-102
    
	
Security
    	
 
    	
8-102 &   103
    
	
Security   Entitlement
    	
 
    	
8-102
    
	
Supporting   Obligations
    	
 
    	
9-102
    

 

(c)           Additional Definitions.  The following additional terms, as used herein, have the following meanings:

 

“Agreement” has the meaning set forth in the preamble.

 

“Asset Contribution Agreement” means the Asset Contribution Agreement dated as of June 24, 2011 between FS Energy and Power Fund, as contributor, and FSEP Term Funding, LLC, as contributee.

 

“Assignment Agreement” shall mean, with respect to any Bank Loan, an “Assignment and Acceptance Agreement,” “Assignment and Assumption Agreement” or other assignment or transfer document in the form required under the terms of such Bank Loan to assign interests and/or obligations in respect of such Bank Loan or, if there is no required form, in such form as is reasonably acceptable to Administrative Agent.

 

“Cash Collateral Account” has the meaning set forth in the Custodial Agreement.

 

“Cash Distributions” means dividends, interest and other distributions and payments (including proceeds of liquidation, sale or other disposition) made or received in cash upon or with respect to any Collateral.

 

“Collateral” means all property, whether now owned or hereafter acquired, on which a Lien is granted or purports to be granted to the Administrative Agent pursuant to the Collateral Documents, including the items specified in Section 2(a) below.

 

2

 

“Collateral Accounts” means the Custodial Account, the Cash Collateral Account, the Administrative Expense Sub-account and any additional accounts or sub-accounts established by the Custodian pursuant to the Custodial Agreement.

 

“Collateral Documents” means this Agreement, the Custodial Agreement and any other supplemental or additional security agreements, control agreements, custodial agreements or similar instruments delivered pursuant to the Credit Documents.

 

“Control” has the following meanings:

 

(a)           when used with respect to any Security or Security Entitlement, the meaning specified in UCC Section 8-106; and

 

(b)           when used with respect to any Deposit Account, the meaning specified in UCC Section 9-104.

 

“Credit Agreement” means the Credit Agreement dated as of June 24, 2011 between FSEP Term Funding, LLC, as borrower, and Deutsche Bank AG, New York Branch, as lender and as administrative agent, and each other lender party thereto from time to time, as amended.

 

“Custodial Account” has the meaning set forth in the Custodial Agreement.

 

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, from time to time, and any successor statute.

 

“Opinion of Counsel” means a written opinion of legal counsel (who may be counsel to the Borrower or other counsel, in either case approved by the Administrative Agent) addressed and delivered to the Administrative Agent.

 

“own” refers to the possession of sufficient rights in property to grant a security interest therein as contemplated by UCC Section 9-203, and “acquire” refers to the acquisition of any such rights.

 

“Perfection Certificate” means a certificate substantially in the form of Exhibit A, completed and supplemented with the schedules contemplated thereby to the satisfaction of the Administrative Agent, and signed by an Authorized Representative of the Borrower and a Responsible Officer of the Manager (which could be the same person as the Authorized Representative).

 

“Pledged”, when used in conjunction with any type of asset, means at any time an asset of such type that is included (or that creates rights that are included) 

 

3

 

in the Collateral at such time.  For example, “Pledged Fund Investment” means a Fund Investment that is included in the Collateral at such time.

 

“Pledged Shares” means all Equity Securities that are part of the Collateral.

 

“Post-Petition Interest” means any interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Borrower (or would accrue but for the operation of applicable bankruptcy or insolvency laws), whether or not such interest is allowed or allowable as a claim in any such proceeding.

 

“Proceeds” means all proceeds of, and all other profits, products, rents or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, any Collateral, including all claims of the Borrower against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.

 

“Release Conditions” means the following conditions for terminating all the Transaction Liens:

 

(i)    the Commitment under the Credit Agreement shall have expired or been terminated; and

 

(ii)   all Secured Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) shall have been paid in full.

 

“Secured Obligations” means all principal of all Loans outstanding from time to time under the Credit Agreement, all interest (including Post-Petition Interest) on such Loans and all other amounts now or hereafter payable by the Borrower to the Secured Parties pursuant to the Credit Documents.

 

“Secured Parties” means the Administrative Agent and the Lenders.

 

“Transaction Liens” means the Liens granted by the Borrower under the Collateral Documents.

 

4

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any Transaction Lien on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

 

(d)           Terms Generally.  The definitions of terms herein (including those incorporated by reference to the UCC or to another document) apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun includes the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Sections and Exhibits shall be construed to refer to Sections of, and Exhibits to, this Agreement and (v) the word “property” shall be construed to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

Section 2.  Grant of Transaction Liens.

 

(a)           The Borrower, in order to secure the Secured Obligations, grants to the Administrative Agent for the benefit of the Secured Parties a continuing security interest in all the following property of the Borrower whether now owned or existing or hereafter acquired or arising and regardless of where located:

 

(i)    all Accounts;

 

(ii)   all Chattel Paper;

 

(iii)  all Deposit Accounts;

 

(iv)  all Documents;

 

5

 

(v)   all General Intangibles (including, all right, title and interest of the Borrower in, to and under (1) all Bank Loans, (2) the Management Agreement, (3) the Custodial Agreement, and (4) the Asset Contribution Agreement);

 

(vi)  all Instruments;

 

(vii) all Investment Property;

 

(viii) all books and records (including documentation, credit files, computer programs, printouts and other computer materials and records) of the Borrower pertaining to any of the Collateral;

 

(ix)   (1) the Collateral Accounts, (2) all Financial Assets credited to the Collateral Accounts from time to time and all Security Entitlements in respect thereof and (3) all Cash held in the Collateral Accounts from time to time; and

 

(x)    all Proceeds of the Collateral described in the foregoing clauses (i) through (ix).

 

(b)           With respect to each right to payment or performance included in the Collateral from time to time, the Transaction Lien granted therein includes a continuing security interest in (i) any Supporting Obligation that supports such payment or performance and (ii) any Lien that (x) secures such right to payment or performance or (y) secures any such Supporting Obligation.

 

(c)           The Transaction Liens are granted as security only and shall not subject the Administrative Agent or any other Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Borrower with respect to any of the Collateral or any transaction in connection therewith.

 

Section 3.  General Representations and Warranties.  The Borrower represents and warrants that:

 

(a)           It has good and marketable title to all its Collateral, free and clear of any Lien other than Permitted Liens.

 

(b)           It has not performed any acts that would reasonably be likely to prevent the Administrative Agent from enforcing any of the provisions of the Credit Documents or that would limit the Administrative Agent in any such enforcement.  No financing statement, security agreement, mortgage or similar or equivalent document or instrument covering all or part of the Collateral owned by the Borrower is on file or of record in any jurisdiction in which such filing or 

 

6

 

recording would be effective to perfect or record a Lien on such Collateral.  After the Closing Date, no Collateral owned by the Borrower will be in the possession or under the Control of any other Person having a claim thereto or security interest therein, other than a Permitted Lien.

 

(c)           The Transaction Liens on all Collateral owned by the Borrower (i) have been validly created, (ii) will attach to each item of such Collateral on the Closing Date (or, if the Borrower first obtains rights thereto on a later date, on such later date) and (iii) when so attached, will secure all the Secured Obligations.

 

(d)           It has delivered a Perfection Certificate to the Administrative Agent.  The information set forth therein is correct and complete in all material respects as of the Closing Date.

 

(e)           To its knowledge, all of the Pledged Shares have been validly issued and are fully paid and non-assessable.

 

(f)            It and none of its Affiliates are Affiliates of the issuers of any Pledged Shares or Equity Securities into which Convertible Securities may be converted..

 

(g)           When UCC financing statements describing the Collateral as “all personal property” or “all assets” have been filed in the offices specified in such Perfection Certificate, the Transaction Liens will constitute perfected security interests in the Collateral owned by the Borrower to the extent that a security interest therein may be perfected by filing pursuant to the UCC, prior to all Liens and rights of others therein.  Except for the filing of such UCC financing statements, no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of the Collateral Documents or is necessary for the validity or enforceability thereof or for the perfection or due recordation of the Transaction Liens or for the enforcement of the Transaction Liens.

 

Section 4.  Further Assurances; General Covenants.  The Borrower covenants as follows:

 

(a)           It will, from time to time, at its own expense, execute, deliver, file and record any statement, assignment, instrument, document, agreement or other paper and take any other action (including any filing of financing or continuation statements under the UCC) that from time to time may be reasonably necessary or desirable, or that the Administrative Agent may reasonably request, in order to:

 

(i)    create, preserve, perfect, confirm or validate the Transaction Liens on the Collateral;

 

7

 

(ii)   in the case of any Collateral Account, cause the Administrative Agent to have Control thereof;

 

(iii)  enable the Administrative Agent and the other Secured Parties to obtain the full benefits of the Credit Documents;

 

(iv)  enable the Administrative Agent to exercise and enforce any of its rights, powers and remedies with respect to any of the Collateral (including, from time to time, duly execute and deliver to the Administrative Agent or the relevant assignee (as directed by the Administrative Agent) such Assignment Agreements and other documents and instruments determined by the Administrative Agent to be reasonably necessary to effect or evidence any assignment, purchase or other transfer of Bank Loans as the Administrative Agent may request).

 

To the extent permitted by applicable law, the Borrower authorizes the Administrative Agent to (A) execute and file such financing statements or continuation statements without the Borrower’s signature appearing thereon and, (B) upon the occurrence and during the continuance of an Event of Default, execute, deliver and complete, and seek required consents in respect of, any Assignment Agreement delivered by the Borrower with respect to any Bank Loan pursuant to Section 7.  The Borrower agrees that the Administrative Agent may utilize a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement as a financing statement.  The Borrower constitutes the Administrative Agent its attorney-in-fact to (1) execute and file all filings required or so requested for the foregoing purposes and, (2) upon the occurrence and during the continuance of an Event of Default, execute, deliver and complete, and seek required consents in respect of, any Assignment Agreement delivered by the Borrower with respect to any Bank Loan, all acts of such attorney being hereby ratified and confirmed; and such power, being coupled with an interest, shall be irrevocable until all the Transaction Liens granted by the Borrower terminate pursuant to Section 16.  The Borrower will pay the costs of, or incidental to, any recording or filing of any financing or continuation statements or other documents recorded or filed pursuant hereto.

 

(b)      It will take such action as necessary so that the Pledged Shares, at all times, (i) qualify as Fund Investments, (ii) do not constitute “restricted shares” under Rule 144 under the Securities Act and are not otherwise subject to any restrictions on transfer or pledge, (iii) do not require the removal of any legends or other similar types of restrictions on such Pledge Shares, any opinions from issuer’s counsel, or the removal of any “stop transfer order” prior to the sale of such Pledged Shares, and (iv) are not subject to any shareholders agreement, 

 

8

 

investor rights agreements, or any other similar agreements or any voting or other contractual restrictions.

 

(c)       The Borrower will not (i) change its name or corporate structure, (ii) change its location (determined as provided in UCC Section 9-307) or (iii) become bound, as provided in UCC Section 9-203(d) or otherwise, by a security agreement entered into by another Person, unless it shall have given the Administrative Agent prior notice thereof and delivered an Opinion of Counsel with respect thereto in accordance with Section 4(d).

 

(d)      At least 30 days before it takes any action contemplated by Section 4(b), the Borrower will, at its own expense, cause to be delivered to the Administrative Agent an Opinion of Counsel, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that (i) all financing statements and amendments or supplements thereto, continuation statements and other documents required to be filed or recorded in order to perfect and protect the Transaction Liens against all creditors of and purchasers from the Borrower after it takes such action (except any continuation statements specified in such Opinion of Counsel that are to be filed more than six months after the date thereof) have been filed or recorded in each office necessary for such purpose, (ii) all fees and taxes, if any, payable in connection with such filings or recordations have been paid in full and (iii) except as otherwise agreed by the Administrative Agent, such action will not adversely affect the perfection or priority of the Transaction Lien on any Collateral after it takes such action or the accuracy of the representations and warranties herein relating to such Collateral.

 

(e)       It will notify the Administrative Agent as soon as it has knowledge or reasonable belief that the value of any Collateral has been or may be materially impaired (including as a result of a Default or Event of Default occurring with respect to any Collateral).

 

(f)       It will, promptly upon request, provide to the Administrative Agent all information and evidence concerning the Collateral that the Administrative Agent may reasonably request from time to time to enable it to enforce the provisions of the Collateral Documents.

 

(f)       It agrees that any financing statement may contain an indication or description of the Collateral that describes such property in any manner as the Administrative Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Administrative Agent herein, including describing such property as “all assets, whether now owned or hereafter acquired” or “all personal property, whether now owned or hereafter acquired”.

 

9

 

Section 5.  Investment Property.  The Borrower represents, warrants and covenants to the Secured Parties as follows:

 

(a)        Securities and Security Entitlements.  On or prior to the Closing Date, the Borrower will deliver or cause to be delivered to the Custodian, in the manner specified in Section 5(c), all Securities, Security Entitlements and negotiable Instruments then owned by the Borrower, for credit by the Custodian to the Custodial Account.  Thereafter, whenever the Borrower acquires any other Security, Security Entitlement or negotiable Instrument, the Borrower will, as promptly as practicable, cause such Security, Security Entitlement or negotiable Instrument to be delivered to the Custodian, in the manner specified in Section 5(c), for credit by the Custodian to the Custodial Account.

 

(b)        Perfection as to Security Entitlements.  Upon the execution and delivery of the Custodial Agreement by the parties thereto, so long as any Financial Asset owned by the Borrower is credited to the Custodial Account, (i) the Transaction Lien on the Borrower’s Security Entitlement in respect of such Financial Asset will be perfected, subject to no Liens or rights of others (except Permitted Liens), (ii) the Administrative Agent will have Control of such Security Entitlement and (iii) no action based on an adverse claim to such Security Entitlement or such Financial Asset, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may be asserted against any Secured Party.

 

(c)        Delivery.  All Securities, Security Entitlements and negotiable Instruments shall be delivered to the Custodian in the manner specified in the definition of “delivery” under the Credit Agreement.

 

Section 6.  Deposit Accounts.  The Borrower represents, warrants and covenants to the Secured Parties as follows:

 

(a)        Deposit of Cash.  On or prior to the Closing Date, the Borrower will deposit or cause to be deposited in the Cash Collateral Account (or, to the extent permitted under Section 4.01(g) of the Credit Agreement, the Administrative Expense Sub-account) all Cash then owned by the Borrower.  Thereafter, the Borrower will cause all Cash owned by Borrower from time to time, including all Cash Distributions received with respect to assets held in the Collateral Accounts and all Proceeds of Collateral, to be deposited in the Cash Collateral Account, to be held and administered as provided under the Credit Documents.

 

(b)        Perfection as to Deposit Accounts.  Upon the execution and delivery of the Custodial Agreement by the parties thereto, (i) the Transaction Lien on the Cash Collateral Account and the Administrative Expense Sub-account will be 

 

10

 

perfected, subject to no Liens or rights of others (except Permitted Liens) and (ii) the Administrative Agent will have Control of such Collateral Accounts.

 

Section 7.  Bank Loans.  The Borrower represents, warrants and covenants to the Secured Parties as follows:

 

(a)        Delivery of Assignment Agreements.  On or prior to the Closing Date, the Borrower will deliver to the Custodian three Assignment Agreements in respect of each Bank Loan then owned by the Borrower, each undated and duly executed in blank by the Borrower as assignor.  Thereafter, promptly upon its acquisition of any interest in a Bank Loan, the Borrower will deliver to the Administrative Agent three Assignment Agreements in respect of such Bank Loan, each undated and duly executed in blank by the Borrower as assignor.

 

(b)        Delivery of Promissory Notes.  On or prior to the Closing Date, in respect of each Bank Loan owned by the Borrower that is evidenced by a promissory note, but excluding any Participation Interests, the Borrower will deliver the original of such promissory note to the Custodian, to be held by the Custodian as agent and bailee of the Administrative Agent pursuant to the Custodial Agreement.  Thereafter, promptly upon its acquisition of any interest in a Bank Loan that is evidenced by a promissory note, but excluding any Participation Interests, the Borrower will deliver the original of such promissory note to the Custodian, to be held by the Custodian as agent and bailee of the Administrative Agent pursuant to the Custodial Agreement.

 

(c)           Delivery of Participation Agreements.  On or prior to the Closing Date, in respect of each Participation Interest owned by the Borrower, the Borrower will deliver a copy of the applicable participation agreement to the Custodian, to be held by the Custodian as agent and bailee of the Administrative Agent pursuant to the Custodial Agreement.  Thereafter, promptly upon its entry into any Participation Interest, the Borrower will deliver a copy of the applicable participation agreement to the Custodian, to be held by the Custodian as agent and bailee of the Administrative Agent pursuant to the Custodial Agreement.

 

Section 8.  Operation of Collateral Accounts.

 

(a)        If an Event of Default shall have occurred and is continuing, the Administrative Agent may (i) instruct the Custodian to retain all cash and investments then held in any Collateral Account, (ii) instruct the Custodian to liquidate any or all investments held therein and/or (iii) withdraw any amounts held therein and apply such amounts as provided in Section 10.

 

(b)        If immediately available cash on deposit in any Collateral Account is not sufficient to make any distribution or withdrawal to be made pursuant 

 

11

 

hereto, the Administrative Agent will cause to be liquidated, as promptly as practicable, such investments held in or credited to such Collateral Account as shall be required to obtain sufficient cash to make such distribution or withdrawal and, notwithstanding any other provision hereof, such distribution or withdrawal shall not be made until such liquidation has taken place.

 

Section 9.  Right to Vote.  (a) Unless an Event of Default shall have occurred and is continuing, the Borrower will have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to any Pledged Fund Investment or any other Collateral.

 

(b)        If an Event of Default shall have occurred and is continuing, the Administrative Agent will have the right to the extent permitted by law to vote, to give consents, ratifications and waivers and to take any other action with respect to the Pledged Fund Investments, with the same force and effect as if the Administrative Agent were the absolute and sole owner thereof, and the Borrower will take all such action as the Administrative Agent may reasonably request from time to time to give effect to such right.

 

Section 10.  Remedies upon Event of Default.  (a) If an Event of Default shall have occurred and is continuing (for the avoidance of doubt, upon commencement by the Administrative Agent of any of the remedies set forth herein or in any of the other Credit Documents or upon notice by the Administrative Agent to the Borrower or the Manager that it intends to promptly commence the exercise of any such remedies, such Event of Default shall be deemed to be continuing, and may not be cured or curable by any subsequent actions or events), the Administrative Agent may exercise (or cause its sub-agents to exercise) any or all of the remedies available to it (or to such sub-agents) under the Credit Documents.

 

(b)        Without limiting the generality of the foregoing, if an Event of Default shall have occurred and is continuing, the Administrative Agent may exercise all the rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) with respect to any Collateral.  In addition, the Administrative Agent may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, withdraw all cash held in the Collateral Accounts and apply such cash as provided in Section 11 and, if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) in full, sell, lease, license or otherwise dispose of the Collateral or any part thereof at such place or places as the Administrative Agent deems best, and for cash, credit or any combination thereof or for future delivery, at public or private sale, without 

 

12

 

demand of performance to effect any such disposition or of the time or place thereof, and the Administrative Agent or any one 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 Borrower, any such demand, right or equity being hereby expressly waived and released.  The Borrower hereby agrees that in the case of any Collateral that is a Bank Loan, the Administrative Agent may effect any such disposition by selling such Bank Loan in a private sale in which the Administrative Agent is the purchaser followed by a sale by the Administrative Agent of participations in such Bank Loan to one or more third parties (who may be affiliates of a Secured Party), and that such manner of disposition shall be deemed to be commercially reasonable.  The Borrower shall remain liable to the Secured Parties for any deficiency following any such sale of Collateral.  In addition to the foregoing remedies, the Administrative Agent may take any action that is necessary in Administrative Agent’s sole good faith discretion to protect, preserve or enforce its rights hereunder or to reduce any risk of loss that it may suffer.

 

(c)        The Administrative Agent may 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.  Notice of any such sale or other disposition shall be given to the Borrower to the extent required by Section 13 and by applicable law.  If so requested by the Administrative Agent or by any buyer of the Collateral or any part thereof, the Borrower shall further ratify and confirm any action taken pursuant to the power of attorney granted herein by executing and delivering to the Administrative Agent or to such buyer or buyers at the expense of the Borrower all instruments of assignment, conveyance or transfer, releases, instructions and entitlement orders as may be designated in any such request.

 

(d)        Neither the Administrative Agent nor any Secured Party shall incur any liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to this Section 10 conducted in a commercially reasonable manner.  The Borrower hereby waives any claims against the Administrative Agent and the Secured Parties arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale, even if the Administrative Agent accepts the first offer received and does not offer the Collateral to more than one offeree.

 

13

 

(e)        Without limiting the generality of the foregoing, if an Event of Default shall have occurred and is continuing, the Administrative Agent may, pursuant hereto and the Management Agreement, terminate (or cause to be terminated) the Management Agreement and replace (or cause to be replaced) the Manager with an institution selected by the Administrative Agent in its sole and absolute discretion (which may be Deutsche Bank AG or any of its Affiliates) legally qualified, permitted under applicable law and with the capacity to assume the responsibilities, duties and obligations of the Manager under the Credit Documents and the Management Agreement.

 

(f)         Notwithstanding anything to the contrary contained herein, none of the rights of the Administrative Agent specifically identified herein are intended to limit the rights of the Administrative Agent or any other Secured Party under the Credit Documents.

 

Section 11.  Application of Proceeds.  If an Event of Default shall have occurred and is continuing, the Administrative Agent shall apply (i) any Cash held in the Collateral Accounts and (ii) the Proceeds of any sale or other disposition of all or any part of the Collateral, in the following order of priority:

 

first, to pay the expenses of such sale or other disposition, including reasonable compensation to agents of and counsel for the Administrative Agent, and all expenses, liabilities and advances incurred or made by the Administrative Agent in connection with the Credit Documents, and any other amounts then due and payable to the Administrative Agent pursuant to Section 12 of this Agreement or Section 9.01 of the Credit Agreement;

 

second, to pay ratably all interest (including Post-Petition Interest) on the Secured Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) payable under the Credit Agreement, until payment in full of all such interest and fees shall have been made;

 

third, to pay the unpaid principal of the Secured Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) ratably, until payment in full of the principal of all Secured Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) shall have been made (or so provided for);

 

fourth, to pay all other Secured Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) ratably, until payment in full of all such other Secured 

 

14

 

Obligations (except for contingent indemnity obligations in respect of which no claim has been asserted in writing) shall have been made (or so provided for); and

 

finally, to pay to the Borrower, or as a court of competent jurisdiction may direct, any surplus then remaining from such Cash or the Proceeds of the Collateral;

 

The Administrative Agent may make such distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof.

 

Section 12.  Fees and Expenses; Indemnification.  (a) The Borrower will forthwith upon demand pay to the Administrative Agent:

 

(i)    the amount of any taxes that the Administrative Agent may have been required to pay by reason of the Transaction Liens or to free any Collateral from any other Lien thereon;

 

(ii)   the amount of any and all reasonable out-of-pocket expenses, including transfer taxes and reasonable fees and expenses of counsel and other experts, that the Administrative Agent may incur in connection with (x) the administration or enforcement of the Credit Documents, including such expenses as are incurred to preserve the value of the Collateral or the validity, perfection, rank or value of any Transaction Lien, (y) the collection, sale or other disposition of any Collateral or (z) the exercise by the Administrative Agent of any of its rights or powers under the Credit Documents;

 

(iii)  the amount of any fees that the Borrower shall have agreed in writing to pay to the Administrative Agent and that shall have become due and payable in accordance with such written agreement; and

 

(iv)  the amount required to indemnify the Administrative Agent for, or hold it harmless and defend it against, any loss, liability or expense (including the reasonable fees and expenses of its counsel and any experts or sub-agents appointed by it hereunder) incurred or suffered by the Administrative Agent in connection with the Credit Documents, except to the extent that such loss, liability or expense directly and primarily arises from the Administrative Agent’s gross negligence or willful misconduct or a breach of any duty that the Administrative Agent has under this Agreement (after giving effect to Section 14).

 

Any such amount not paid to the Administrative Agent on demand will bear interest for each day thereafter until paid at a rate per annum equal to the 

 

15

 

Weighted Average Rate in effect from time to time plus the Applicable Margin plus 2%.

 

(b)        If any transfer tax, documentary stamp tax or other tax is payable in connection with any transfer or other transaction provided for in the Collateral Documents, the Borrower will pay such tax and provide any required tax stamps to the Administrative Agent or as otherwise required by law.

 

Section 13.  Authority to Administer Collateral.  The Borrower irrevocably appoints the Administrative Agent its true and lawful attorney, with full power of substitution, in the name of the Borrower or otherwise, for the sole use and benefit of the Secured Parties, but at the Borrower’s expense, to the extent permitted by law to exercise, at any time and from time to time following the occurrence and continuance of an Event of Default, all or any of the following powers with respect to all or any of the Collateral:

 

(a)       to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof,

 

(b)      to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto,

 

(c)       to sell, lease, license or otherwise dispose of the same or the proceeds or avails thereof, as fully and effectually as if the Administrative Agent were the absolute owner thereof,

 

(d)      to extend the time of payment of any or all thereof and to make any allowance or other adjustment with reference thereto,

 

provided that, except in the case of Collateral that threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Administrative Agent will give the Borrower prior written notice of the time and place of any public sale thereof or the time after which any private sale or other intended disposition thereof will be made (which the parties agree may be less than ten (10) days prior thereto); provided that, if no notice of such action is required under the UCC, then the Borrower agrees that no such notice shall be required hereunder.  Any such notice shall (i) contain the information specified in UCC Section 9-613, (ii) be Authenticated and (iii) be sent to the parties required to be notified pursuant to UCC Section 9-611(c); provided that, if the Administrative Agent fails to comply with this sentence in any respect, its liability for such failure shall be limited to the liability (if any) imposed on it as a matter of law under the UCC.

 

Section 14.  Limitation on Duty in Respect of Collateral.  Beyond the exercise of reasonable care in the custody and preservation thereof, the 

 

16

 

Administrative Agent will have no duty as to any Collateral in its possession or control or in the possession or control of any sub-agent or bailee or any income therefrom or as to the preservation of rights against prior parties or any other rights pertaining thereto.  The Administrative Agent will be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded treatment substantially equal to that which it accords its own property, and will not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of any act or omission of any sub-agent or bailee selected by the Administrative Agent in good faith, except to the extent that such liability arises directly and primarily from the Administrative Agent’s gross negligence or willful misconduct.

 

Section 15.  General Provisions Concerning The Administrative Agent.

 

(a)        The provisions of Article 8 of the Credit Agreement shall inure to the benefit of the Administrative Agent, and shall be binding upon the Borrower and all Secured Parties, in connection with this Agreement and the other Collateral Documents.  Without limiting the generality of the foregoing, (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing, (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Credit Documents that the Administrative Agent is required in writing to exercise by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.13 of the Credit Agreement), and (iii) except as expressly set forth in the Credit Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for any failure to disclose, any information relating to the Borrower that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall not be responsible for the existence, genuineness or value of any Collateral or for the validity, perfection, priority or enforceability of any Transaction Lien, whether impaired by operation of law or by reason of any action or omission to act on its part under the Collateral Documents.  The Administrative Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Secured Party.

 

(b)        Sub-Agents and Related Parties.  The Administrative Agent may perform any of its duties and exercise any of its rights and powers through one or more sub-agents appointed by it.  The Administrative Agent and any such sub-agent may perform any of its duties and exercise any of its rights and powers 

 

17

 

through its Related Parties.  The exculpatory provisions of Section 14 and this Section shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent.

 

(c)        Information as to Secured Obligations and Actions by Secured Parties.  For all purposes of the Credit Documents, including determining the amounts of the Secured Obligations or whether any action has been taken under any Collateral Document, the Administrative Agent will be entitled to rely on information from (i) its own records for information as to the Secured Parties, their Secured Obligations and actions taken by them, (ii) any Secured Party for information as to its Secured Obligations and actions taken by it, to the extent that the Administrative Agent has not obtained such information from its own records, and (iii) the Borrower, to the extent that the Administrative Agent has not obtained information from the foregoing sources.

 

(d)        Refusal to Act.  The Administrative Agent may refuse to act on any notice, consent, direction or instruction from any Secured Party or any agent, trustee or similar representative thereof that, in the Administrative Agent’s opinion, (i) is contrary to law or the provisions of any Collateral Document, (ii) may expose the Administrative Agent to liability (unless the Administrative Agent shall have been indemnified, to its reasonable satisfaction, for such liability by the Secured Parties that gave such notice, consent, direction or instruction) or (iii) is unduly prejudicial to Secured Parties not joining in such notice, consent, direction or instruction.

 

Section 16.  Termination of Transaction Liens; Release of Collateral.

 

(a)        The Transaction Liens shall terminate when the Administrative Agent has determined that all the Release Conditions have been satisfied.

 

(b)        At any time before the Transaction Liens terminate, the Administrative Agent  may, at the written request of the Borrower, (i) release any Collateral (but not all or substantially all the Collateral) with the prior written consent of the Required Lenders or (ii) release all or substantially all the Collateral with the prior written consent of all Lenders.

 

(c)        Upon any sale of a Fund Investment or any other Collateral in accordance with the terms of the Credit Agreement, the Transaction Lien thereon shall automatically terminate, without any action by the Borrower or the Administrative Agent.

 

(d)        Upon any termination of a Transaction Lien or release of Collateral, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the Borrower such documents as the Borrower shall reasonably request to 

 

18

 

evidence the termination of such Transaction Lien or the release of such Collateral, as the case may be.

 

Section 17.  Notices.  Each notice, request or other communication given to any party hereunder shall be given in accordance with Section 9.03 of the Credit Agreement.

 

Section 18.  No Implied Waivers; Remedies Not Exclusive.  No failure by the Administrative Agent or any Secured Party to exercise, and no delay in exercising and no course of dealing with respect to, any right or remedy under any Credit Document shall operate as a waiver thereof; nor shall any single or partial exercise by the Administrative Agent or any Secured Party of any right or remedy under any Credit Document preclude any other or further exercise thereof or the exercise of any other right or remedy.  The rights and remedies specified in the Credit Documents are cumulative and are not exclusive of any other rights or remedies provided by law.

 

Section 19.  Successors and Assigns.  This Agreement is for the benefit of the Administrative Agent and the other Secured Parties.  If all or any part of any Secured Party’s interest in any Secured Obligation is assigned or otherwise transferred in accordance with Section 9.05 of the Credit Agreement, the transferor’s rights hereunder, to the extent applicable to the obligation so transferred, shall be automatically transferred with such obligation.  This Agreement shall be binding on the Borrower and its successors and assigns.

 

Section 20.  Amendments and Waivers.  Neither this Agreement nor any provision hereof may be waived, amended, modified or terminated except pursuant to an agreement or agreements in writing entered into by the Administrative Agent, with the consent of such Lenders as are required to consent thereto under Section 9.13 of the Credit Agreement.  No such waiver, amendment or modification shall be binding upon the Borrower, except with its written consent.

 

Section 21.  Choice of Law.  This Agreement shall be construed in accordance with and governed by the laws of the State of New York, except as otherwise required by mandatory provisions of law and except to the extent that remedies provided by the laws of any jurisdiction other than the State of New York are governed by the laws of such jurisdiction.

 

Section 22.  Waiver of Jury Trial.  EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY COLLATERAL DOCUMENT OR ANY 

 

19

 

TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 23.  Severability.  If any provision of any Credit Document is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions of the Credit Documents shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Secured Parties in order to carry out the intentions of the parties thereto as nearly as may be possible and (ii) the invalidity or unenforceability of such provision in such jurisdiction shall not affect the validity or enforceability thereof in any other jurisdiction.

 

[Signatures begin on the next page]

 

20

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

	
 
    	
FSEP TERM FUNDING, LLC 
   as Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gerald F. Stahlecker
    
	
 
    	
 
    	
Name:
    	
Gerald   F. Stahlecker
    
	
 
    	
 
    	
Title:
    	
EVP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
DEUTSCHE BANK AG, NEW YORK BRANCH, as   Administrative Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Frank Nelson
    
	
 
    	
 
    	
Name:
    	
Frank   Nelson
    
	
 
    	
 
    	
Title:
    	
Managing   Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Dirvin
    
	
 
    	
 
    	
Name:
    	
David   Dirvin
    
	
 
    	
 
    	
Title:
    	
Managing   Director
    

 

[Signature page to Security Agreement]

 

 

EXHIBIT A
 to Security Agreement

 

PERFECTION CERTIFICATE

 

The undersigned is a duly authorized officer of FSEP TERM FUNDING, LLC (the “Lien Grantor”).  With reference to the Security Agreement dated as of June 24, 2011 between FSEP TERM FUNDING, LLC, as borrower, and DEUTSCHE BANK AG, NEW YORK BRANCH, as administrative agent (terms defined therein being used herein as therein defined), the undersigned certifies to the Secured Parties as follows:

 

A.            Information Required for Filings and Searches for Prior Filings.

 

1.       Jurisdiction of Organization.  The Lien Grantor is a limited liability company organized under the laws of Delaware.

 

2.       Name.  The exact name of the Lien Grantor as it appears in its certificate of formation is as follows:

 

FSEP TERM FUNDING, LLC

 

3.       Prior Names; Predecessors.  (a) Set forth below is each other name that the Lien Grantor has had since its organization, together with the date of the relevant change:

 

None

 

(b)           The Lien Grantor has not changed its corporate structure in any way within the past five years.

 

(c)           None of the Lien Grantor’s Collateral was acquired from another Person within the past five years, except

 

(i)            property sold to the Lien Grantor by another Person in the ordinary course of such other Person’s business;

 

(ii)           property with respect to which the Transaction Liens are to be perfected by taking possession or control thereof; and

 

(iii)          property contributed by FS Energy and Power Fund (the “Equity Owner”) pursuant to the Asset Contribution Agreement dated as of June 24, 2011 between the Equity Owner and the Borrower.

 

A-1

 

4.       Organizational ID Number.  Set forth below is the Organizational Identification Number, if any, issued by the jurisdiction of organization of the Lien Grantor.

 

4997639

 

5.       Chief Executive Office.  The chief executive office of the Lien Grantor (or its place of business if there is only one) is located at the address set forth below:

 

	
Mailing Address
    	
 
    	
County
    	
 
    	
State
    
	
Cira   Centre, 2929 Arch Street, Suite 675
    	
 
    	
Philadelphia
    	
 
    	
PA,   19104
    

 

B.            Search Reports.

 

Attached hereto as Schedule A is a true copy of a file search report from the central UCC filing office in Delaware with respect to the Borrower.

 

C.            Absence of Certain Property.

 

The Lien Grantor does not own any assets of material value which constitute commercial tort claims, farm products, electronic chattel paper, letter-of-credit rights which are not supporting obligations or as-extracted collateral, as each of the foregoing terms is defined in the UCC.

 

[Signatures begin on the next page]

 

A-2

 

IN WITNESS WHEREOF, I have hereunto set my hand this        day of                        , 2011.

 

 

	
 
    	
FSEP   TERM FUNDING, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature page to Perfection Certificate]

 

A-3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00191-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00191-of-00352.parquet"}]]