Exhibit 10.4

SECURITY AGREEMENT

dated as of

March 10, 2010

between

BROAD STREET FUNDING LLC, as Borrower

and

DEUTSCHE BANK AG, NEW YORK BRANCH,

as Lender

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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

   9

SECTION 6.

  

Deposit Accounts

   9

SECTION 7.

  

Bank Loans

   10

SECTION 8.

  

Operation of Collateral Accounts

   11

SECTION 9.

  

Right to Vote

   11

SECTION 10.

  

Remedies upon Event of Default

   11

SECTION 11.

  

Application of Proceeds

   13

SECTION 12.

  

Fees and Expenses; Indemnification

   14

SECTION 13.

  

Authority to Administer Collateral

   14

SECTION 14.

  

Limitation on Duty in Respect of Collateral

   15

SECTION 15.

  

Termination of Transaction Liens; Release of Collateral

   16

SECTION 16.

  

Notices

   16

SECTION 17.

  

No Implied Waivers; Remedies Not Exclusive

   16

SECTION 18.

  

Successors and Assigns

   16

SECTION 19.

  

Amendments and Waivers

   16

SECTION 20.

  

Choice of Law

   17

SECTION 21.

  

Waiver of Jury Trial

   17

SECTION 22.

  

Severability

   17

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EXHIBITS:

Exhibit A    Perfection Certificate

 

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SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”) dated as of March 10, 2010 between
BROAD STREET FUNDING LLC, as Borrower, and DEUTSCHE BANK AG, NEW YORK BRANCH, as
Lender.

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 Lender under the
Credit Documents, by granting Liens on its assets to the Lender as provided in
the Collateral Documents;

WHEREAS, the Lender is 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 Lender
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

Deposit Account

   9-102

Document

   9-102

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Term

   UCC

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 March 10, 2010 between FS Investment Corporation, as contributor, and Broad
Street 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
the Lender.

“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 Lender pursuant to the
Collateral Documents, including the items specified in Section 2(a) below.

 

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“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 March 10, 2010 between
Broad Street Funding LLC, as borrower, and Deutsche Bank AG, New York Branch, as
lender.

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

“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 Lender)
addressed and delivered to the Lender.

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

 

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“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.

“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 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 Lender pursuant to the Credit Documents.

“Secured Party” means the Lender.

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

“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

 

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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
Lender 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;

(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;

 

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(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
Lender 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
Lender from enforcing any of the provisions of the Credit Documents or that
would limit the Lender 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 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 Lender. The information set
forth therein is correct and complete in all material respects as of the Closing
Date.

 

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(e) 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 Lender may reasonably request, in order to:

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

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

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

(iv) enable the Lender 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 Lender or the relevant assignee (as directed by
the Lender) such Assignment Agreements and other documents and instruments
determined by the Lender to be reasonably necessary to effect or evidence any
assignment, purchase or other transfer of Bank Loans as the Lender may request).

To the extent permitted by applicable law, the Borrower authorizes the Lender 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

 

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agrees that the Lender 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 Lender 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 15. 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) 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 Lender prior notice thereof and delivered an Opinion of Counsel with respect
thereto in accordance with Section 4(c).

(c) 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 Lender an
Opinion of Counsel, in form and substance satisfactory to the Lender, 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 Lender, 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.

(d) It will notify the Lender 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).

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

 

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(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
Lender 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 Lender herein, including describing such property as “all assets, whether
now owned or hereafter acquired” or “all personal property, whether now owned or
hereafter acquired”.

SECTION 5. Investment Property. The Borrower represents, warrants and covenants
to the Lender 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 Lender 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 the Lender.

(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 Lender 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(h) of the Credit Agreement, the Administrative

 

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

SECTION 7. Bank Loans. The Borrower represents, warrants and covenants to the
Lender 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 Lender 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 Lender 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 Lender 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 Lender 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 Lender pursuant to the Custodial Agreement.

 

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SECTION 8. Operation of Collateral Accounts.

(a) If an Event of Default shall have occurred and is continuing, the Lender 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 hereto,
the Lender 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 Lender
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 Lender were
the absolute and sole owner thereof, and the Borrower will take all such action
as the Lender 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 Lender of any of the remedies set forth herein or in any of the other
Credit Documents or upon notice by the Lender 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 Lender 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 Lender 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 Lender 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

 

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to pay all the Secured Obligations in full, sell, lease, license or otherwise
dispose of the Collateral or any part thereof at such place or places as the
Lender deems best, and for cash, credit or any combination thereof or for future
delivery, at public or private sale, without demand of performance to effect any
such disposition or of the time or place thereof, and the Lender 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 Lender may effect any such
disposition by selling such Bank Loan in a private sale in which the Lender is
the purchaser followed by a sale by the Lender of participations in such Bank
Loan to one or more third parties (who may be affiliates of the Lender), and
that such manner of disposition shall be deemed to be commercially reasonable.
The Borrower shall remain liable to the Lender for any deficiency following any
such sale of Collateral. In addition to the foregoing remedies, the Lender may
take any action that is necessary in Lender’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 Lender 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 Lender 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 Lender 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) The Lender shall incur no 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 Lender 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 Lender accepts the
first offer received and does not offer the Collateral to more than one offeree.

 

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(e) Without limiting the generality of the foregoing, if an Event of Default
shall have occurred and is continuing, the Lender 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 Lender 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 Lender specifically identified herein are intended to limit the
rights of the Lender under the Credit Documents.

SECTION 11. Application of Proceeds. If an Event of Default shall have occurred
and is continuing, the Lender 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 Lender, and all
expenses, liabilities and advances incurred or made by the Lender in connection
with the Credit Documents, and any other amounts then due and payable to the
Lender pursuant to Section 12 of this Agreement or Section 8.01 of the Credit
Agreement;

second, to pay ratably all interest (including Post-Petition Interest) on the
Secured Obligations 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 ratably, until
payment in full of the principal of all Secured Obligations shall have been made
(or so provided for);

fourth, to pay all other Secured Obligations ratably, until payment in full of
all such other Secured Obligations 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 Lender may make such distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.

 

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

(i) the amount of any taxes that the Lender 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 Lender 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 Lender 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 Lender and that shall have become due and payable in accordance with
such written agreement; and

(iv) the amount required to indemnify the Lender 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 Lender in connection with the Credit
Documents, except to the extent that such loss, liability or expense directly
and primarily arises from the Lender’s gross negligence or willful misconduct or
a breach of any duty that the Lender has under this Agreement (after giving
effect to Section 14).

Any such amount not paid to the Lender on demand will bear interest for each day
thereafter until paid at a rate per annum equal to the 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 Lender or as otherwise required by law.

SECTION 13. Authority to Administer Collateral. The Borrower irrevocably
appoints the Lender 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 Lender, 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,

 

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(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 Lender 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
Lender 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 Lender
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 Lender 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 Lender 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 Lender in good faith,
except to the extent that such liability arises directly and primarily from the
Lender’s gross negligence or willful misconduct.

 

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SECTION 15. Termination of Transaction Liens; Release of Collateral.

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

(b) At any time before the Transaction Liens terminate, the Lender may, at the
written request of the Borrower, elect to release any Collateral in its sole and
absolute discretion.

(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 Lender.

(d) Upon any termination of a Transaction Lien or release of Collateral, the
Lender will, at the Borrower’s expense, execute and deliver to the Borrower such
documents as the Borrower shall reasonably request to evidence the termination
of such Transaction Lien or the release of such Collateral, as the case may be.

SECTION 16. Notices. Each notice, request or other communication given to any
party hereunder shall be given in accordance with Section 8.03 of the Credit
Agreement.

SECTION 17. No Implied Waivers; Remedies Not Exclusive. No failure by the Lender
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 Lender 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 18. Successors and Assigns. This Agreement is for the benefit of the
Lender. If all or any part of Lender’s interest in any Secured Obligation is
assigned or otherwise transferred in accordance with Section 8.05 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 19. 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 Lender. No such waiver,
amendment or modification shall be binding upon the Borrower, except with its
written consent.

 

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SECTION 20. 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 21. 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 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 22. 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
Lender 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]

 

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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.

 

BROAD STREET FUNDING LLC
as Borrower

By:

  /S/ GERALD F. STAHLECKER   Name: Gerald F. Stahlecker   Title:   Executive
Vice President

DEUTSCHE BANK AG, NEW YORK BRANCH,
as Lender

By:

  /S/ SATISH RAMAKRISHNA   Name: Satish Ramakrishna   Title:   Managing Director

By:

  /S/ FRANK NELSON   Name: Frank Nelson   Title:   Managing Director

[Signature page to Security Agreement]

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EXHIBIT A

to Security Agreement

PERFECTION CERTIFICATE

The undersigned is a duly authorized officer of BROAD STREET FUNDING LLC (the
“Lien Grantor”). With reference to the Security Agreement dated as of March 10,
2010 between BROAD STREET FUNDING LLC, as borrower, and DEUTSCHE BANK AG, NEW
YORK BRANCH, as lender (terms defined therein being used herein as therein
defined), the undersigned certifies to the Lender 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:

BROAD STREET 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 Investment Corporation (the “Equity Owner”)
pursuant to the Asset Contribution Agreement dated as of March 10, 2010 between
the Equity Owner and the Borrower.

 

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

26-1630040

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]

 

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IN WITNESS WHEREOF, I have hereunto set my hand this          day of
                    , 2010.

 

BROAD STREET FUNDING LLC

By:

      Name:   Title:

[Signature page to Perfection Certificate]

 

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EXHIBIT A

to Perfection Certificate

UCC Filing Search

Attached

 

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