Exhibit 10.3

 

 

 

BROAD STREET FUNDING LLC

as Company

and

FS INVESTMENT CORPORATION

as Investment Manager

INVESTMENT MANAGEMENT AGREEMENT

Dated as of March 10, 2010

 

 

 

--------------------------------------------------------------------------------

INVESTMENT MANAGEMENT AGREEMENT, dated as of March 10, 2010 (this “Agreement”),
between BROAD STREET FUNDING LLC, a Delaware limited liability company (the
“Company”), and FS INVESTMENT CORPORATION, a Maryland corporation (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 Manager Letter, the “Credit Agreement”),
between the Company and Deutsche Bank AG, New York Branch (the “Lender”).

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
Lender 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 Lender 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 Lender and
making the prepayment specifications referred to in Section 3.03(d) of the
Credit Agreement.

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

The Investment Manager shall use reasonable care in rendering its services
hereunder, using a degree of skill and attention no less than that which the
Investment Manager exercises with respect to comparable assets that it manages
for itself and for others in accordance with its existing practices and
procedures which the Investment Manager reasonably believes to be consistent
with those followed by institutional managers of national standing relating to
assets of the nature and character of 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

 

2

--------------------------------------------------------------------------------

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 Lender 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 of its Affiliates
involved in such transactions) shall be to allocate the executions among the
accounts in an equitable manner.

 

3

--------------------------------------------------------------------------------

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 Advisers Act, such authorization is
terminable at the Company’s option without penalty, effective upon receipt by
the Investment Manager of written notice from the Company. In addition, the
Company hereby consents to, and authorizes the Investment Manager to enter into,
agency cross-transactions where it or any of its Affiliates acts as broker for
the Company and for the other party to the transaction, to the extent permitted
under applicable law, 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;

(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,

 

4

--------------------------------------------------------------------------------

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, operating 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 Maryland 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;

(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, operating 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 or asserting

 

6

--------------------------------------------------------------------------------

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
Lender, and independent accountants appointed by the Company at a mutually
agreed time during normal business hours and upon not less than three
(3) Business Days’ prior notice.

At no time will the Investment Manager make a public announcement concerning the
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 Lender.

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 Lender
shall in no event be considered a “non affiliated third party,” and the
Investment Manager may disclose any of the aforementioned information to the
Lender 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 Lender; 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 Lender) 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 Lender and (b) is not corrected by the Investment Manager within 15 days of
its receipt of notice from the Company or the Lender 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
advantage of any bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (3) becomes insolvent or is unable to pay its
debts

 

10

--------------------------------------------------------------------------------

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 Lender 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 Lender, 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 Lender. 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:

(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

 

11

--------------------------------------------------------------------------------

(ii) deliver to the Lender an account with respect to the books and records
delivered to the Lender 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 Lender 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.

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 Lender that (i) will
professionally and competently perform duties similar to those imposed upon the
Investment Manager under this

 

12

--------------------------------------------------------------------------------

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 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

 

13

--------------------------------------------------------------------------------

interests of the Lender 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 Lender 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:

FS Investment Corporation

Cira Centre

2929 Arch Street, Suite 675

Philadelphia, Pennsylvania 19104

Attention: Gerald F. Stahlecker

Telephone: (215) 495-1169

Facsimile: (215) 222-4649

Electronic Mail: jerry.stahlecker@franklinsquare.com

All notices are to be effective in accordance with Section 8.03 of the Credit
Agreement.

 

14

--------------------------------------------------------------------------------

  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 Lender.

 

  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 Lender 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 Lender.

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

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

(l) The Company hereby acknowledges and accepts all actions that were taken by
the Investment Manager and/or recommended to the Company by the Investment
Manager prior to the Closing Date, including all actions and

 

16

--------------------------------------------------------------------------------

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 Lender 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.

 

BROAD STREET FUNDING LLC By:   /S/ GERALD F. STAHLECKER Name:  

Gerald F. Stahlecker

Title:  

Executive Vice President

FS INVESTMENT CORPORATION By:   /S/ MICHAEL C. FORMAN Name:  

Michael C. Forman

Title:  

President and Chief Executive Officer