0001144204-16-137894.txt : 20161205 0001144204-16-137894.hdr.sgml : 20161205 20161205161156 ACCESSION NUMBER: 0001144204-16-137894 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20161129 ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20161205 DATE AS OF CHANGE: 20161205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Fifth Street Asset Management Inc. CENTRAL INDEX KEY: 0001611988 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 465610118 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-36701 FILM NUMBER: 162033913 BUSINESS ADDRESS: STREET 1: 777 WEST PUTNAM AVENUE, 3RD FLOOR CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: (203) 992-4533 MAIL ADDRESS: STREET 1: 777 WEST PUTNAM AVENUE, 3RD FLOOR CITY: GREENWICH STATE: CT ZIP: 06830 8-K 1 v454372_8k.htm FORM 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 5, 2016 (November 29, 2016)

Fifth Street Asset Management Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-36701	46-5610118

(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

777 West Putnam Avenue, 3^rd Floor

Greenwich, CT 06830

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (203) 681-3600

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(b) On November 30, 2016, Fifth Street Asset Management Inc. (the “Company”) announced Todd G. Owens will step down from his role as Co-President of the Company, effective as of January 2, 2017.

(c) On November 30, 2016, the Company also announced Patrick J. Dalton will become Co-President of the Company, effective as of January 2, 2017 (the “Commencement Date”).

Mr. Dalton, 48, has over 20 years of credit and investment experience. Mr. Dalton joins the Company from Gordon Brothers Finance Company, where he served as the President, Chief Executive Officer, Chair of the Investment Committee and member of the board of directors from September 2012 to February 2016. Prior to that role, he served as President and Chief Operating Officer at Apollo Investment Corporation, a publicly-traded business development company (NASDAQ: AINV), from November 2008 to February 2012; Chief Investment Officer and Portfolio Manager at Apollo Investment Management, L.P. from 2007 to 2012; and a partner at Apollo Investment Management, L.P. from 2004 to 2012. Before joining Apollo, Mr. Dalton was a Vice President at Goldman, Sachs & Co., Chase Securities Corp., and Chase Manhattan Bank. Mr. Dalton received an M.B.A. in 1997 from Columbia University Business School and a B.S. in Finance from Boston College in 1990.

On November 29, 2016, Fifth Street Management LLC (“FSM LLC”) and FSC CT LLC entered into an employment agreement with Mr. Dalton, pursuant to which Mr. Dalton will serve as Co-President of the Company and Co-President of FSM LLC, effective the Commencement Date. In connection with the commencement of his employment, Mr. Dalton will become a member of the Executive Committee of FSM LLC (the “Executive Committee”). In addition, FSM LLC will recommend to the Boards of Directors of each of Fifth Street Finance Corp. (“FSC”) and Fifth Street Senior Floating Rate Corp. (“FSFR”) that Mr. Dalton be appointed as chief executive officer and a member of the board of each of FSC and FSFR.

The employment agreement provides Mr. Dalton with an initial annual base salary of $500,000 and the opportunity for annual salary increases based on performance. The employment agreement also provides that Mr. Dalton will be eligible to receive an annual bonus with a target range between $1.0 and $1.5 million, based on the achievement of performance criteria established by the Compensation Committee of the Company’s Board of Directors in consultation with Mr. Dalton. Prior to the Commencement Date, the agreement requires that Mr. Dalton and the Executive Committee work together in good faith to create a bonus formula that yields a bonus within the target range above based on the 2016 profitability of FSM LLC, as well as to develop a total compensation program covering all employees under Mr. Dalton’s direct and indirect supervision subject to certain requirements. For each of 2017 and 2018, Mr. Dalton will receive an annual bonus of not less than $1.0 million.

Annual bonuses paid to Mr. Dalton during his employment will be subject to the terms of the Company’s Amended and Restated Deferred Bonus and Retention Plan (the “Bonus Plan”), except that (i) 87.5% of the first $1.0 million of any annual bonus paid to Mr. Dalton will be paid in cash, with the remainder subject to the terms of the Bonus Plan, and (ii) Mr. Dalton’s resignation from employment for “Good Reason” (as defined in the employment agreement) will be treated as a termination without “Cause” (as defined in the employment agreement) for purposes of the Bonus Plan.

The employment agreement provides that Mr. Dalton will be granted two option awards to purchase an aggregate of 1 million shares of the Company’s Class A common stock. The first award is an option to purchase 750,000 shares of Class A common stock and will vest in equal installments of 1/3^rd on each of the first three anniversaries of the grant date, subject to Mr. Dalton’s continued employment. The second award is an option to purchase 250,000 shares of Class A common stock and will vest in full on the fourth anniversary of the grant date, subject to Mr. Dalton’s continued employment. The option granted pursuant to the first award will have a five-year term and the option granted pursuant to the second award will have a six year term. The options will be granted with an exercise price equal to the greater of $6.00 and 100% of the fair market value of the Company’s Class A common stock on the date of grant. In addition, Mr. Dalton will be granted a number of restricted stock units having a grant date fair value equal to $2.0 million, based on the closing price of the Company’s Class A common stock on the date of grant. The restricted stock units will vest in installments of 1/4^th on each of the first four anniversaries of the grant date, subject to Mr. Dalton’s continued employment. In the event of a “change in control” (as defined in the Company’s 2014 Omnibus Incentive Plan) that occurs while Mr. Dalton is employed, all outstanding and unvested options and restricted stock units will vest. Any shares issued upon settlement of the restricted stock units or exercise of the stock options will be subject to sale restrictions that will be released as to 25% of the aggregate shares subject to the award after each of the fourth, fifth, sixth and seventh anniversaries of the grant date.

In the event Mr. Dalton is terminated without Cause or Mr. Dalton terminates his employment for Good Reason, then, subject to his execution and non-revocation of a release of claims and further subject to his continued compliance with his post-termination obligations, he will receive monthly severance payments over a twelve month period totaling $2.0 million and a pro-rata bonus for the year of termination. In addition, upon such termination, (A) the vesting of a portion of Mr. Dalton’s options and restricted stock units will accelerate such that the vested portion of such awards will be calculated by multiplying the total number of shares subject to such award by a fraction, the numerator of which is Mr. Dalton’s total number of full months of service with the Company since the grant date plus 12, and the denominator of which is 48, without regard to the vesting schedule otherwise described above, (B) any unexercised vested options will remain exercisable for one year after termination (but not later than the expiration date of the option), and (C) 100% of any sale restrictions applicable to the awards will have lapsed by the first anniversary of the termination date.

In connection with his employment agreement, Mr. Dalton entered into a non-competition, non-solicitation and non-disclosure agreement which contains certain non-competition restrictions that are effective during his employment and for the one-year period thereafter (or the three-month period thereafter if his employment is terminated without Cause or for Good Reason, or is terminated within the 90-day period prior to, or at any time on or after, a change in control). The non-competition agreement provides that in the event Mr. Dalton’s employment is terminated for any reason other than Cause and subject to his compliance with the terms of the non-competition agreement, he will receive during the applicable non-competition period the sum of (i) the highest base salary ever paid to him during his employment (or a pro rata portion if the non-competition period is less than one year), plus (ii) a bonus (or a pro rata portion if the non-competition period is less than one year) equal to the average of the discretionary bonuses received by Mr. Dalton over the two years preceding his termination (but no less than $1.0 million with respect to any termination occurring in 2017 or occurring prior to the payment of the 2017 annual bonus), provided that payment obligations under the non-competition agreement shall be reduced by all post-termination separation payments paid to Mr. Dalton under his employment agreement and provided further that the Company may waive Mr. Dalton’s obligations under the non-competition agreement, in which case he will not be entitled to any further payments under the non-competition agreement.

Mr. Dalton is also subject to non-solicitation restrictions with respect to the Company’s investors, customers and employees during his employment and for the one-year period (with respect to investors and customers) or the two-year period (with respect to employees) thereafter (or the six-month period thereafter if his employment is terminated without Cause or for Good Reason or is terminated within the 90-day period prior to, or at any time on or after, a change in control).

Mr. Dalton’s employment agreement also provides that, in the event that any payments Mr. Dalton may receive in connection with a change in control are subject to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended, such payments will be reduced to the greatest amount payable that would not result in the imposition of such tax, but only if it is determined that such reduction would cause Mr. Dalton to be better off, on a net after-tax basis, than without such reduction and payment of the excise tax under Section 4999 of the Code.

Mr. Dalton will be reimbursed for legal fees incurred in connection with the negotiation of the commencement of his employment, up to a maximum amount of $25,000.

There are no current or proposed transactions between the Company and Mr. Dalton or his immediate family members that would require disclosure under Item 404(a) of Regulation S-K promulgated by the Securities and Exchange Commission.

The foregoing description is not a complete description of the employment agreement and non-competition agreement and is qualified in its entirety by reference to the full text of the employment agreement and the non-competition agreement, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated by reference in this Item 5.02.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

10.1

Employment Agreement by and among Fifth Street Management LLC, FSC CT, Inc. and Patrick Dalton, dated November 29, 2016

10.2

Non-Competition Agreement, Non-Solicitation and Non-Disclosure Agreement by and between FSC CT, Inc. and Patrick Dalton, dated November 29, 2016

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIFTH STREET ASSET MANAGEMENT INC.


Date: December 5, 2016	By:	/s/ Kerry S. Acocella
		Name:	Kerry S. Acocella
		Title:	Secretary

EXHIBIT INDEX

Exhibit

10.1

Employment Agreement by and among Fifth Street Management LLC, FSC CT, Inc. and Patrick Dalton, dated November 29, 2016

10.2

Non-Competition Agreement, Non-Solicitation and Non-Disclosure Agreement by and between FSC CT, Inc. and Patrick Dalton, dated November 29, 2016

EX-10.1 2 v454372_ex10-1.htm EMPLOYMENT AGREEMENT

EXECUTION VERSION

FifthStreet_Center_Logo_color

November 29, 2016

Patrick Dalton

c/o Fifth Street

777 West Putnam Avenue, 3rd Floor

Greenwich, CT 06830

Re: Employment Offer

Dear Patrick:

We are pleased to present you with this offer of employment to join Fifth Street Management LLC (the “Company”) and FSC CT LLC. The terms and conditions of the Company’s offer of employment are set forth in this letter agreement and the annexes and exhibits attached hereto and incorporated herein. The Company and its affiliates take employee development seriously and are dedicated to providing resources and pathways for personal growth and advancement. We believe that your experience and background will contribute much to our organization. If you accept the Company’s offer, your anticipated start date will be January 2, 2017 (the “Commencement Date”).

1. Title; Duties. You will serve as the Company’s Co-President and will report to the Company’s Executive Committee, which, effective on the Commencement Date, shall initially consist of you, Leonard Tannenbaum, Bernard Berman and Alex Frank, it being understood that the composition of the Executive Committee may be changed by Leonard Tannenbaum, or in his absence, Bernard Berman or the Board of Directors of Fifth Street Asset Management Inc. (“FSAM”), provided that (x) no more than two (2) members of the Executive Committee may be replaced without your prior consent, which shall not be unreasonably withheld, conditioned or delayed and (y) you and the Company agree to the Executive Committee composition provisions set forth on Annex A attached hereto. In your capacity as Co-President, you will have the duties, authorities and responsibilities set forth on Annex A attached hereto, as well as such additional duties, authorities and responsibilities that may be assigned to you from time to time by the Board of Directors of FSAM or the Chief Executive Officer and that are consistent with your role as Co-President. In addition, you will serve as the Co-President of FSAM. We may, in our discretion, also request that you serve as an officer of various affiliates of the Company, which you agree to do under the terms of this employment offer. The Company agrees to recommend to the Boards of Directors of each of Fifth Street Finance Corp. (“FSC”) and Fifth Street Senior Floating Rate Corp. (“FSFR”) that you be appointed as chief executive officer and a member of the Board of Directors of each of FSC and FSFR, and if so appointed, you agree to serve in such capacities and shall have the duties, authorities and responsibilities set forth on Annex A attached hereto. Upon your termination of employment for any reason, you acknowledge and agree that, upon the request of the Company, you will resign as a director and officer of the Company’s affiliates and agree to execute such documents as are reasonably necessary to effectuate the foregoing.

Patrick Dalton

November 29, 2016

Page 2

You will perform your duties diligently and to the best of your ability and will comply with the written policies and procedures of FSAM, Fifth Street Holdings L.P. and its subsidiaries, FSC and FSFR (“Fifth Street”), which will be provided to you at the start of your employment. It is your responsibility to read and understand these policies and procedures, and if you have any questions now or in the future, it is your responsibility to make the appropriate inquiries.

2. Salary; Bonus; Equity. As of the Commencement Date, your annual salary will be $500,000; paychecks will be issued semi-monthly on the fifteenth day of each month and the last business day of each month. If the fifteenth day of the month falls on a weekend, paychecks will be issued the Friday prior to or the Monday following the weekend. If the day is a holiday, paychecks will be issued the following business day. You will receive a performance review each year and will be considered eligible for annual salary increases based on your performance.

During your employment, you will be eligible to receive an annual bonus with a target range of $1.0 to $1.5 million that will be based on performance criteria to be established by the Compensation Committee of the Company’s Board of Directors (the “Committee”) in consultation with you. The Executive Committee and you will work in good faith prior to the Commencement Date to create a bonus formula that yields a bonus of $1.0 to $1.5 million based on 2016 profitability of the Company (excluding extraordinary expenses and one-time items) and which would result in the bonus being adjusted proportionally as the Company’s profits increase or decrease. For your service in each of 2017 and 2018, your annual bonuses will be no less than $1.0 million.

Prior to the Commencement Date, you and the Executive Committee will work in good faith to develop a total compensation program covering all employees under your direct and indirect supervision, which shall be subject to the approval of any applicable board of directors (or committee thereof) that is required by applicable law or regulation or by the terms of a relevant plan document as in effect on the date hereof.

All bonuses shall be paid in accordance with the Fifth Street Asset Management Inc. Amended and Restated Deferred Bonus and Retention Plan (the “Plan”), a copy of which is attached hereto, so long as the Plan remains in effect; provided that, (i) for purposes of amounts that may be deferred under the Plan, the definition of “Cause” shall be as defined in Annex C hereto, (ii) for purposes of the Plan your resignation for “Good Reason” (as defined in Annex C hereto) will be treated in the same manner as a termination by the Company without Cause and (iii) while you are employed, 87.5% of the first $1.0 million of any annual bonus paid to you will be paid to you in cash and the remainder of any such bonus payment shall be subject to the terms of the Plan.

The terms and conditions of the grant of Options and RSUs you will receive, subject to Committee approval, are set forth in Annex B attached hereto. The grants of Options and RSUs will be made as soon as reasonably practicable following the Commencement Date.

3. Benefits. You will become eligible to join FSC CT LLC’s health insurance plan on the first of the month following the completion of 60 days of full-time employment in accordance with the terms and conditions of such plan. FSC CT LLC’s health insurance plan is currently structured so that we offer a choice of three plans: a basic plan, a mid-level plan and a high-level plan. The Company will pay your medical premiums for the basic plan on a basis no less favorable than that provided to any other senior executive of the Company, and you will be responsible for the remaining portion of such premiums. If you choose either the mid-level or high-level plan, you will be responsible for the excess cost over the basic plan. We also currently will pay a portion of your dental policy premiums. From time to time, we may make changes to such plans in the future and you will be notified of any such changes.

Patrick Dalton

November 29, 2016

Page 3

You will be entitled to 25 days paid vacation each year (which shall accrue and be earned pro rata over the course of the year), starting with your third full month of employment, five sick days and holidays in accordance with the Company’s written policies. You will be provided with a copy of our written policies on your start date.

You will become eligible to join the Company’s 401(k) plan the first of the month after completing three months as a full-time employee (credit for your first month will be given as long as you have had at least one day of service during the month). Your participation is subject to the terms of the plan which may be amended from time to time.

Your business expenses will be reimbursed under the Company’s expenses and reimbursement policies as in effect from time to time.

Notwithstanding the foregoing, you will be entitled to at least a comparable level of benefits, in the aggregate, provided to other senior executives of the Company of comparable status (other than the Chairman) during the term of your employment by the Company.

4. At-Will Employment; Policies. While we hope that we both find our professional relationship mutually beneficial, you understand that your employment is “at-will.” This means that either you or we may terminate your employment at any time, for any or no reason.

In the event that your employment is terminated by the Company without Cause or you resign for Good Reason, in addition to the payment to you of any unpaid salary and benefits (including reimbursement for reimbursable business expenses incurred prior to such termination) owed to you as of the date of such termination, you shall be entitled to (i) receive monthly severance payments over a twelve month period totaling $2.0 million (subject to applicable taxes and withholding), (ii) accelerated vesting of the Options and RSUs as provided for in Annex B, and (iii) a pro rata bonus under the Plan for the year of termination, the amount of which will be determined based upon the formula agreed by the Executive Committee and you, in each case conditioned on your compliance with your post-termination obligations and your execution, delivery and non-revocation, within thirty days following the date of such termination or resignation, of a general release in favor of the Company and its affiliates in the form attached hereto as Exhibit A, and subject to paragraph 2(f) of the Non-Competition, Non-Solicitation and Non-Disclosure Agreement dated as of November 29, 2017.

5. Non-Solicitation and Non-Disclosure. As a condition to your employment, you will be required to execute a Non-Competition, Non-Solicitation and Non-Disclosure Agreement, a copy of which is provided with this offer letter.

Patrick Dalton

November 29, 2016

Page 4

6. Representations. As a condition to your employment, you represent and warrant as to the matters set forth in Annex D hereto.

7. Miscellaneous. We are required by law to confirm your eligibility for employment in the United States. Thus, you will be required to provide proof of your eligibility to work in the U.S. on your start date. The invalidity or unenforceability of any provision of this offer shall not affect the validity or enforceability of any other provision of this offer, which shall remain in full force and effect. This offer, and the payments and benefits provided herein, are also subject to the provisions of Annex E hereto, with respect to matters arising under Sections 409A and 4999/280G of the Internal Revenue Code.

8. Indemnification. You will be indemnified to the fullest extent permitted by law and the Fifth Street’s organizational documents to the same extent provided to similarly situated senior executives and members of the boards of directors of the Fifth Street entities with respect to which you render services.

9. Legal Fees. The Company shall promptly reimburse you for legal fees up to $25,000 incurred by you in connection with the negotiation of the commencement of your employment with the Company within 10 days following the receipt of an invoice for such fees.

This offer letter (together with the Non-Competition, Non-Solicitation and Non-Disclosure Agreement) sets forth the entire agreement and understanding between us and you relating to your employment and supersedes all prior discussions between us.

All payments pursuant to this offer letter will be subject to applicable withholding taxes.

If this offer of employment is acceptable to you, please sign a copy of this letter and return it to me on or before November 29, 2016.

Patrick Dalton

November 29, 2016

Page 5

We look forward to having you join our team!

Sincerely,

/s/ Bernard D. Berman

Bernard D. Berman

I accept your offer of employment. I represent that I have never been convicted of a felony or a crime involving moral turpitude, and I have not engaged in any conduct which could reasonably tend to bring the Company or any of its affiliates into public disgrace or disrepute. I have never been sanctioned, reprimanded or otherwise punished by the U.S. Securities and Exchange Commission. No oral commitments have been made concerning my employment. I understand that my employment is at-will and can be terminated by either party at any time, with or without cause and with or without notice. I specifically acknowledge and agree that I am an exempt employee and am therefore not eligible to receive overtime pay.

Signature _/s/ Patrick Dalton__

Print Name __Patrick Dalton

Date 11/29/2016

Patrick Dalton

November 29, 2016

Page 6

Annex A – Duties, Authorities and Responsibilities; Executive Committee Composition

Duties, Authorities and Responsibilities as Co-President of the Company

• Authority to hire, terminate and set compensation levels (subject to a compliance with a budget/Incentive Plan approved by the Board of Directors of Fifth Street Asset Management Inc. (“FSAM”) (or Committee thereof)) for all employees of FSAM other than Leonard Tannenbaum, Bernard Berman, Alexander Frank and Ivelin Dimitrov.

• Authority to approve new hires at or above MD level after vetting by executive committee (membership to be determined by Messrs. Tannenbaum and Berman and can be changed) and subject to minimum intelligence test score.

• Quarterly goals and reporting to FSAM Board of Directors.

• Weekly communication to executive committee with quarterly feedback.

• Authority to set organizational structure and determine roles, responsibilities and resources available for each role.

• Develop (with Messrs. Tannenbaum and Berman) a Management Incentive Plan.

• Manage the implementation of the Management Incentive Plan and allocation of Bonus Pool.

• Coordinate all financings and equity and debt capital raises for FSF and FSFR with Mr. Tannenbaum and manage the implementation thereof.

• Reasonable control of all expenses that are tied into the management bonus program.

Duties, Authorities and Responsibilities as Chief Executive Officer of FSC and FSFR

For so long as Fifth Street Management LLC is the investment adviser of FSC and FSFR, you shall have the following duties, authorities and responsibilities in your role as Chief Executive Officer of FSC and FSFR:

• Co-develop with Mr. Tannenbaum & Boards of Directors all Corporate Strategies for FSC and FSFR. Macro-economic decisions, including sector allocation targets and leverage targets, to be approved by executive committee.

• Manage the implementation of all Corporate Actions for FSC and FSFR.

• Manage all FSC and FSFR deal related decisions, including Originations, Underwriting, Portfolio Management, Capital Allocation (subject to previously adopted compliance rules).

• Oversee, develop, coordinate, schedule and present all communications with internal and external constituents related to all matters of FSC and FSFR (subject to coordination and communication with Mr. Tannenbaum and the respective Boards of Directors of FSC and FSFR) and manage the implementation thereof.

• Credit Committee (members to be appointed by Patrick Dalton) has sole deal approval decision making for FSC and FSFR. Changes to the composition of the Credit Committee will require majority approval of the Executive Committee, which consent shall not be unreasonably withheld. Five person committee with each member having one vote with Patrick Dalton also having veto rights on approvals on all new capital commitments.

References to Mr. Tannenbaum or Mr. Berman, as applicable, in the duties, authorities and responsibilities set forth above will be deemed to refer to the successor to Mr. Tannenbaum or Mr. Berman, as applicable.

Patrick Dalton

November 29, 2016

Page 7

Executive Committee Composition

You and the Company agree that, while you are employed, if Mr. Tannenbaum accepts a governmental position, including without limitation, any position with a governmental agency, authority or instrumentality, whether federal, state or local, Mr. Tannenbaum may designate his replacement to the Executive Committee without your consent, provided that Mr. Berman consents to such replacement (which consent will not be unreasonably withheld).

Patrick Dalton

November 29, 2016

Page 8

Annex B – Option and RSU Terms

Option Category and Term: You will be granted an option to purchase an aggregate of 1,000,000 shares of FSAM Class A common stock in two grants, as follows: (i) the first grant will be an option to purchase 750,000 shares of FSAM Class A common stock and will have a five year term (the “First Option Grant”) and (ii) the second grant will be an option to purchase 250,000 shares of FSAM Class A common stock and will have a six year term (the “Second Option Grant”). The options granted to you will have an exercise price equal to the greater of (x) $6.00 per share or (y) 100% of the fair market value of FSAM’s Class A common stock on the date of grant.

Restricted Stock Units: You will be granted a number of RSUs having a grant date fair value equal to $2,000,000, based on the closing price of FSAM Class A common stock on the Commencement Date. The RSUs representing the right to receive shares of FSAM Class A common stock subject to fulfillment of vesting and other conditions.

Vesting and Exercise:

Options – 1/3^rd of the shares subject to the First Option Grant will vest on each of the first three anniversaries of the grant date, subject to continued employment. 100% of the shares subject to the Second Option Grant will vest on the fourth anniversary of the grant date, subject to continued employment.

RSUs – 1/4^th of the RSUs will vest on each of the first four anniversaries of the grant date, subject to continued employment.

Accelerated Vesting of Options and RSUs

Upon a termination by the Company without Cause or termination by you for Good Reason:

Options – Vesting to be determined based on full months of service from date of grant plus 12 months as a percentage of 48 months (without regard to the vesting schedule set forth in 3a. above).

RSUs – Vesting to be determined based on full months of service from date of grant plus 12 months as a percentage of 48 months (without regard to the vesting schedule set forth in 3b. above).

ii.

Upon a “Change in Control” while you are employed, 100% of your then unvested Options and RSUs shall vest. “Change in Control” shall have the meaning set forth in the Fifth Street Asset Management Inc. 2014 Omnibus Incentive Plan.

Exercise – All Options will be exercisable within 1 year following termination by the Company without Cause or by you for Good Reason; in other cases, exercise terms will be as provided for under the terms of grant.

Manner of Exercise – Options to be subject to the same manner of exercise afforded to other senior executives receiving options in FSAM, including broker assisted cashless exercise if available or net settlement in shares of FSAM Class A common stock.

Patrick Dalton

November 29, 2016

Page 9

Settlement of RSUs – No later than 60 days following each vesting date, one share of FSAM Class A common stock shall be issued for each RSU that becomes vested on such vesting date.

Liquidity on Shares Realized Upon Exercise and Settlement

Options – 100% of the net option shares acquired upon exercise of the vested Options may be sold as follows: 25% after the 4^th anniversary of the Grant Date, an additional 25% after the 5^th anniversary of the Grant Date, an additional 25% after the 6^th anniversary of the Grant Date, and an additional 25% after the 7^th anniversary of the Grant Date.

RSUs – 100% of the net shares acquired upon settlement of vested RSUs may be sold as follows: 25% after the 4^th anniversary of the Grant Date, an additional 25% after the 5^th anniversary of the Grant Date, an additional 25% after the 6^th anniversary of the Grant Date, and an additional 25% after the 7^th anniversary of the Grant Date.

Following Termination By Company without Cause/Termination by you for Good Reason – 50% of option shares held by you resulting from your exercise of the Options may be sold within the first year immediately following such termination, and all option shares held by you resulting from your exercise of Options may be sold after the 1^st anniversary of such termination. 50% of the shares received upon vesting of RSUs may be sold within the first year immediately following such termination, and all such shares received upon vesting of RSUs may be sold after the 1^st anniversary of such termination.

Other Restrictions – In all cases, you shall remain subject to any restrictions on the sale of options shares or RSUs arising under applicable law or imposed by the Company or its underwriters in connection with any capital markets transactions or securities trading policies, in each case to the extent equally applicable to all current senior executives of comparable status (other than the Chairman).

Other Provisions

The foregoing terms will be reflected in, and subject to, one or more written Option and RSU agreements as soon as reasonably practicable following the effective date of grant, dated as of such grant date. Except as provided for above, the terms of the Options and RSUs will be subject to the provisions of plan pursuant to which such Options and RSUs are granted, as well as the provisions of the Option and RSU grants, as the case may be, otherwise applicable to all senior executives of the Company (e.g. with respect to forfeiture, clawbacks and post-termination exercise periods).

Patrick Dalton

November 29, 2016

Page 10

Annex C – “Cause” and “Good Reason”

“Cause” for termination means: (i) your conviction or admission of, or plea of guilty or nolo contendere with respect to, a felony or a crime involving moral turpitude (other than a motor vehicle offense); (ii) misconduct by you that brings the Company or its affiliates into public disgrace or disrepute or is otherwise materially injurious to their business, reputation or goodwill; (iii) a demonstrable act of fraud, embezzlement or material misappropriation committed by you in connection with the performance of your duties under the offer letter; (iv) your gross negligence or willful misconduct in connection with the performance of your duties that causes or could reasonably be expected to cause material harm to the business, reputation or goodwill of the Company or its affiliates; (v) your material breach of fiduciary duty in connection with the performance of your duties under the offer letter; (vi) your material breach of the Non-Competition, Non-Solicitation and Non-Disclosure Agreement; (vii) your breach of a term of this offer letter that causes or could reasonably be expected to cause material harm to the business, reputation or goodwill of the Company or its affiliates; (viii) your breach of a representation in Annex D of this offer letter that causes material harm to the Company or impacts your ability to perform your duties under the offer letter; (ix) your commission of a material violation of any applicable banking, securities or commodities laws, rules or regulations; (x) your violation of any securities trading, conflict of interest or material code of conduct policies which has been provided or made available to you prior to any alleged violation; or (xi) your willful and continuing failure to follow the lawful directives of the Board or other governing body of the Company or material breach in the performance of your obligations under the offer letter, and in the case of sub-clauses (x) or (xi), which remains uncured by you after you have been provided with notice and ten (10) days to cure (to the extent curable). To the extent that within sixty (60) days following your resignation or termination other than for “Cause,” the Company reasonably determines that facts or circumstances existed that would have otherwise constituted “Cause” under sub-clauses (i) – (iii) or (ix) above, and such facts or circumstances were not actually known by the Executive Committee at the time of such resignation or termination, the Company may treat such resignation or termination as a termination for “Cause” for all purposes. In order to terminate you for “Cause” (including a determination to terminate you for “Cause” after your resignation or termination as provided in the preceding sentence) the existence of such “Cause” must be determined in good faith by a resolution of a majority of the Board and you must be provided with (A) written notice setting forth the specific details of the act or acts alleged to constitute “Cause” and (B) an opportunity to appear, together with your legal counsel, before a meeting of the Board called for such purpose.

“Good Reason” shall mean the occurrence of any of the following events, without your express written consent, unless such events are cured by the Company within thirty (30) days following written notification by you to the Company that you intend to terminate your employment for one of the reasons set forth below:

(i)

The failure of the Board of Directors of FSAM to appoint you as Co-President of FSAM, the failure of the Board of Directors of FSC to appoint you as FSC’s chief executive officer and as a member of the FSC Board of Directors, and/or the failure of the Board of Directors of FSFR to appoint you as FSFR’s chief executive officer and as a member of the FSFR Board of Directors, in each case as of the Commencement Date.

Patrick Dalton

November 29, 2016

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(ii)

Material diminution in your base salary or your annual target bonus opportunity at the rate in effect immediately prior to the reduction or the failure to pay you any salary or any earned and due bonus or incentive payments; or

(iii)

Material diminution in your duties, authorities or responsibilities as set forth in Annex A or that otherwise exist in connection with your position (other than temporarily while physically or mentally incapacitated or as required by applicable law), including (without limitation) your removal without Cause (as defined above) from (A) the position of Co-President of the Company or FSAM or of the position of CEO of FSC and/or FSFR, (B) the FSC and/or FSFR Board of Directors, or (C) the Executive Committee, or a change in the membership of the Executive Committee other than as set forth in the first paragraph of Section 1 of the offer letter or in Annex A; provided, however, a diminution in your duties that is the result of (X) Fifth Street Management LLC ceasing to be the investment adviser of FSC and/or FSFR for any reason, or (Y) a sale, merger, consolidation, sale of all or substantially all assets, winding up or other corporate event involving FSC or FSFR, shall not constitute “Good Reason”; or

(iv)

the termination of your rights to any material employee benefits, except to the extent that any such benefit is replaced with a comparable benefit, or a material reduction in scope or value thereof, other than as a result of across-the-board reductions or terminations affecting senior executives of comparable status of the Company generally; or

(v)

a change by the Company in the location at which you perform your principal duties for the Company to a new location that is either (x) more than sixty (60) miles from Greenwich, CT or (y) not at the Company’s principal executive offices.

You shall provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within sixty (60) days after the first occurrence of such circumstances (or any claim of such circumstances as “Good Reason” shall be deemed irrevocably waived by you), and in no event shall you be entitled to resign for “Good Reason” more than one hundred and eighty (180) days following the occurrence of any event alleged to constitute “Good Reason.”

Patrick Dalton

November 29, 2016

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Annex D – Representations and Warranties

You represent and warrant as to the following:

(i)

You are not in breach of any agreement requiring you to preserve the confidentiality of any information, client lists, trade secrets or other confidential information or any agreement not to compete, solicit clients or employees of, or interfere with, any prior employer, and that neither the execution of this offer letter nor the performance by you of your obligations hereunder as of the anticipated commencement date will conflict with, result in a breach of, or constitute a default under, any agreement or policy to which you are a party or to which you may be subject, including any garden leave or notice requirement prior to resigning your prior employment.

(ii)

You have not taken and will not take any confidential information from any prior employer and will not use any such information in performing your obligations hereunder but instead will rely on your generalized knowledge and skill in performing your services hereunder.

(iii)

You are not currently and have never been (a) the subject of any investigation by any prior employer or a party in any securities-related or banking litigation or arbitration proceeding; (b) the subject or target of any pending investigation, charge or complaint before a securities regulatory or self-regulatory organization, grand jury or any other forum; or (c) fined, sanctioned or otherwise found to have violated any securities related regulation by any governmental agency or self-regulatory organization, whether or not such finding resulted in statutory disqualification.

(iv)

You have disclosed any material information to the Company regarding your personal investments, professional affairs or any legal or regulatory matter of which you are aware that, if publicly disclosed hereafter, would adversely affect the business, reputation or goodwill of the Company or its affiliates.

(v)

You have not, within the preceding twenty-four (24) months, made a contribution to: (i) any person (including any election committee for the person) who is an incumbent, candidate or successful candidate for state or local office, including any such person who is running for federal office; (ii) a political action committee; or (iii) a state or local political party, other than those contributions that have been previously disclosed to the Company in writing.

Patrick Dalton

November 29, 2016

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(vi)

You have not had an event described in paragraph 9(d)(1)(i)-(viii) of Rule 506 under the Securities Act of 1933 (“Disqualifying Events”), copy of which has been provided to you, except as expressly disclosed in writing to the Company, and you (a) will immediately update any information provided to the Company in accordance with the foregoing sentence whenever it ceases to be accurate in any way and (b) agree to notify the Company immediately of the occurrence after the date hereof of any Disqualifying Event and provide the Company with such further information as the Company or its affiliates may request concerning any Disqualifying Events and consent to the disclosure of any such information as the Company or its affiliates may deem appropriate.

Patrick Dalton

November 29, 2016

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Annex E – Section 409A Matters

It is intended that the provisions of the offer letter comply with Code Section 409A of the Internal Revenue Code, and all provisions of the offer letter shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A. Notwithstanding the foregoing, the Company shall have no liability with regard to any failure to comply with Code Section 409A so long as it has acted in good faith with regard to compliance therewith.

If, under the offer letter, an amount is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment.

A termination of employment shall not be deemed to have occurred for purposes of any provision of the offer letter providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Code Section 409A and, for purposes of any such provision of the Agreement, references to a “resignation,” “voluntary termination,” “termination,” “termination of employment” or like terms shall mean Separation from Service.

If you are deemed on the date of termination of your employment to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code and using the identification methodology selected by the Company from time to time, or if none, the default methodology, then:

With regard to any payment, the providing of any benefit or any distribution of equity upon separation from service that constitutes “deferred compensation” subject to Code Section 409A, such payment, benefit or distribution shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of your Separation from Service or (ii) the date of your death; and

ii.

On the first day of the seventh month following the date of your Separation from Service or, if earlier, on the date of your death, (x) all payments delayed pursuant to this Section (d) (whether they would otherwise have been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to you in a lump sum, and any remaining payments and benefits due under the Agreement shall be paid or provided in accordance with the normal dates in accordance with the terms of the Agreement, and (y) all distributions of equity delayed pursuant to this Section (d) shall be made to you.

Patrick Dalton

November 29, 2016

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In determining the amounts that are subject to the six-month delay requirement described above, the Company shall use all exclusions from the six-month delay rule that are available to the payments made to you. Please be advised that the Company reserves the right to adopt an alternate method of complying with the six-month delay requirement which may result in you being deemed a specified employee.

Whenever a payment under the offer letter specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

With regard to any provision in the offer letter that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, of in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated without regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expense occurred.

Annex E – Section 4999/280G Matters

In the event a nationally recognized accounting firm as shall be designated by the Company (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the Company or any affiliate in the nature of compensation to or for your benefit, whether paid or payable pursuant to this offer letter or otherwise (collectively, the “Total Payments”)) would subject you to the excise tax under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments, the Company will reduce the Total Payments to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (but in no event to less than zero); provided, however, that the Total Payments will only be reduced if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state, municipal and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state, municipal and local income taxes on such Total Payments and the amount of Excise Tax to which you would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

EXHIBIT A

WAIVER AND RELEASE AGREEMENT

EX-10.2 3 v454372_ex10-2.htm NON-COMPETITION AGREEMENT

EXECUTION VERSION

NON-COMPETITION, NON-SOLICITATION
AND NON-DISCLOSURE AGREEMENT

This Non-Competition, Non-Solicitation and Non-Disclosure Agreement (“Agreement”) is entered into between Patrick Dalton (“Employee”) and FSC CT LLC (“Fifth Street”), a Connecticut corporation, as of November 29, 2016. In this Agreement, Employee and Fifth Street are collectively referred to as the “parties”. The term “Company” as used in this Agreement includes Fifth Street and all direct and indirect subsidiaries and affiliates of Fifth Street, including, without limitation, Fifth Street Management LLC (the “Advisor”), Fifth Street Asset Management Inc. (“FSAM”), Fifth Street Holdings, L.P., Fifth Street Finance Corp. (the “BDC”), Fifth Street Senior Floating Rate Corp. (the “BDC II”), Fifth Street Senior Loan Fund I Operating Entity, LLC, Fifth Street Senior Loan Fund II Operating Entity, LLC, Fifth Street Credit Opportunities Fund, L.P., Fifth Street Mezzanine Partners II, L.P., Fifth Street Capital LLC, Fifth Street Capital West, Inc., FSC, Inc., FSC Midwest, Inc. and any entities formed after the date hereof which engage the Company to provide services, and any affiliates of Fifth Street formed after the date hereof.

1. Consideration. Employee acknowledges that he has been advised by Fifth Street that the restrictions and covenants contained in this Agreement, and Employee's agreement to such terms, are of the essence to this Agreement and constitute a material inducement to Fifth Street (i) to enter into this Agreement (including, without limitation, agreeing to the terms of Section 2) for the benefit of the Company, and (ii) to employ Employee. Employee acknowledges that the Company will not employ Employee without Employee’s agreement to comply with the restrictions and covenants contained in this Agreement and without Employee’s execution of this Agreement. Employee acknowledges and agrees that the Company’s providing employment to Employee is full and complete consideration for the promises and agreements made by Employee herein.

2. Non-Compete.

(a) Non-Competition Period. As used in this Agreement, the term “Non-Competition Period” shall mean the period of Employee's employment with the Company and the one-year period commencing on the date that Employee’s employment with the Company terminates, regardless of the reason for such termination and regardless of whether the termination was voluntary or involuntary; provided that if either (i) Employee’s employment with the Company is terminated by Employee for “Good Reason” or by the Company other than for “Cause” (each as defined in Exhibit A) within ninety (90) days prior to a “Change in Control” (as defined in Section (4) below), or (ii) Employee’s employment is terminated at any time (and for any reason) on or after a “Change in Control”, then the “Non-Competition Period” shall mean the period of Employee’s employment with the Company and the three (3) month period commencing on the date Employee’s employment terminates. In the event of a termination of Employee’s employment for any reason other than for Cause, the Company shall, subject to the following conditions, pay Employee during the Non-Competition Period the sum of (i) his base salary (or a pro-rata portion, if the Non-Competition Period is less than one year in duration) pursuant to the Company’s customary payroll policies, plus (ii) a bonus (or a pro-rata portion, if the Non-Competition Period is less than one year in duration) equal to the average of the discretionary

bonuses received by Employee over the preceding two years (but no less than $1.0 million with respect to any termination in 2017, with respect to a termination prior to the payment of the 2017 bonus); provided that (I) the commencement of the foregoing payments are conditioned on the effectiveness (i.e., the expiration of any applicable revocation period without a revocation by Employee) of a release and waiver of all claims (the “Release”) by Employee, in the form attached as Exhibit A to the Offer Letter from Fifth Street to Employee dated as of November 29, 2016 (the “Offer Letter”), within 30 days from the date of termination; (II) the foregoing payments are conditioned on Employee’s compliance in all material respects with the post-termination obligations set forth in this Agreement, (III) the post-termination obligations of Employee under this Agreement shall remain in full force and effect, and Employee shall remain bound in full by such obligations, regardless of whether Employee elects to accept payment of such amounts, (IV) if the Company, in its sole discretion, waives compliance with Section 2(a) of the Agreement in writing, the payments provided for in this sub-clause (a) shall no longer be paid from and after the effective date of such waiver (it being understood that no such waiver shall affect the Company’s payment obligations under the Offer Letter, including its obligations under Section 4 thereof. In the event of such a waiver, the other covenants contained in this Agreement shall not be affected and will continue in full force and effect in accordance with the terms of this Agreement), (V) if the termination occurs within 90 days prior to, or at any time on or after a “Change in Control” (as defined in Section (4) below) the payment under this sub-clause (a) shall equal three (3) months of base salary and a pro rata portion of the applicable bonus equal to three (3) months and (VI) any payment obligations under this Agreement shall be reduced by all post-termination separation payments paid to the Employee under the Offer Letter. Employee covenants, during the one year period following the termination of his employment, to provide to the Company, as promptly as reasonably practicable prior to commencing employment, with advance written notice of the name of his new employer. For purposes of this Agreement, “base salary” shall mean an amount equal to the highest base salary ever paid to Employee during his employment by the Company.

(b) Non-Competition. In order to protect the Company’s Confidential or Protected Information, Employee agrees that, during the Non-Competition Period, Employee shall not, directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of, or be connected as an officer, employee, director, consultant, advisor, agent, independent contractor, partner, member, stockholder, trustee, or otherwise with, or have any financial interests in, or aid or assist anyone else in the conduct of, or in any other capacity be engaged directly or indirectly in, any entity or business (i) that is in competition with the Company's business of arranging and/or providing financing solutions to sponsor-led, middle market acquisitions or (ii) that is in competition with any other type of business in which the Company is also then engaged, or is a business that the Executive Committee of the Advisor has discussed and is a planned expansion of the Company’s then business (each, a “Competitive Business”). The ownership of less than two percent (2%) of any class of the outstanding securities of any corporation whose shares are traded on a U.S. national securities exchange or quoted on The Nasdaq Stock Market, even though such corporation may be a Competitive Business, shall not be deemed to constitute an interest in such competitor which violates this paragraph. Following the termination of Employee’s employment, the foregoing shall not prevent Employee from providing services to any enterprise engaged in a Competitive Business to the extent that such services, or any supervisory responsibility of Employee associated with such position, are related only to the products or lines of business of such entity which, standing alone, would not constitute a Competitive Business, so long as the portion of the enterprise that is a Competitive Business does not represent more than fifty percent (50%) of the revenues of such enterprise at any time.

(c) Timing of Payments. The payments described in Section 2(a) above shall be paid, minus applicable deductions, including deductions for tax withholding, in equal payments on the regular payroll dates during the Non-Competition Period following Employee’s termination of employment. Commencement of payments described in Section 2(a) shall begin on the payroll date within 30 days of the effective date of the Release. The first payment shall include those payments that would have previously been paid if the payments described in Section 2(a) had begun on the first payroll date following Employee’s termination of employment. This timing of the commencement of payments is subject to Section 22 below and Annex E to the Offer Letter.

(d) For purposes of this Agreement, “termination of employment” shall mean a “separation of service” as defined in Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) and Treasury Regulations Section 1.409A-1(h) without regard to the optional alternative definitions available thereunder.

(e) The payments described in Section 2(a) shall be treated as a series of separate payments for purposes of Section 409A of the Code.

(f) Any amounts payable to Employee by the Company under this Agreement or under any other plan or arrangement of the Company which are subject to Section 409A and are conditioned upon execution of a waiver and release that may be executed and/or revoked in a calendar year following the calendar year in which the payment event (such as termination of employment) occurs shall commence payment only in such following calendar year, to the extent necessary to comply with Section 409A.

3. Non-Solicitation Covenants.

(a) Restricted Period.

As used in this Agreement, the term “Investor Restricted Period” shall mean (x) the term of Employee's employment with the Company, and (y) (I) the one-year period commencing on the date that Employee's employment with the Company terminates, regardless of the reason for such termination and regardless of whether the termination was voluntary or involuntary, or, if applicable, (II) the six (6) month period commencing on the date that Employee’s employment with the Company terminates, provided that (i) such termination was by the Company other than for “Cause” or by Employee for “Good Reason” (each as defined in Exhibit A) and was within ninety (90) days prior to a “Change in Control” (as defined in Section (4) below) or (ii) such termination (for any reason) was on or after a “Change in Control” (as defined in Section (4) below).

ii.

As used in this Agreement, the term “Customer Restricted Period” shall mean (x) the term of Employee's employment with the Company, and (y) (I) the one-year period commencing on the date that Employee's employment with the Company terminates, regardless of the reason for such termination and regardless of whether the termination was voluntary or involuntary, or, if applicable, (II) the six (6) month period commencing on the date that Employee’s employment with the Company terminates, provided that (i) such termination was by the Company other than for “Cause” or by Employee for “Good Reason” (each as defined in Exhibit A) and was within ninety (90) days prior to a “Change in Control” (as defined in Section (4) below) or (ii) such termination was on or after a “Change in Control” (as defined in Section (4) below).

iii.

As used in this Agreement, the term “Employee Restricted Period” shall mean (x) the term of Employee's employment with the Company, and (y) (I) the two-year period commencing on the date that Employee's employment with the Company terminates, regardless of the reason for such termination and regardless of whether the termination was voluntary or involuntary, or, if applicable, (II) the six (6) month period commencing on the date that Employee’s employment with the Company terminates, provided that (i) such termination was by the Company other than for “Cause” or by Employee for “Good Reason” (each as defined in Exhibit A) and was within ninety (90) days prior to a “Change in Control” (as defined in Section (4) below) or (ii) such termination was on or after a “Change in Control” (as defined in Section (4) below).

(b) Non-Solicitation of Investors. Employee agrees that, during the Investor Restricted Period, Employee shall not, directly or indirectly, for himself or for any person or entity other than the Company: (i) solicit or accept any investment from any person or entity that was an Investor, at any time prior to the termination of Employee's employment with the Company; (ii) induce or influence any such Investor to discontinue, modify, or reduce its business relationship with the Company; or (iii) assist or cause any person or entity to engage in any of the actions in which Employee has agreed not to engage under this paragraph. The term “Investor” means the investors, and the affiliates of such investors, that, in each case, did business with the Company, or any account, fund or other entity for which the Advisor or any affiliate of the Advisor provided investment advisory or management services at any time during Employee's employment and all potential investors which, as of the last day of Employee's employment, the Company was soliciting or marketing (including, without limitation, any potential investor (or affiliate thereof) that could reasonably be expected to do business with the Company to which the Company had delivered a PPM or similar offering memorandum and with which the Company had at least two conversations regarding a potential investment within the one year preceding the termination of Employee's employment). Notwithstanding the foregoing, no person shall be deemed to be an Investor solely based on the fact that such person is or was a stockholder of FSAM, the BDC, BDC II, or any other affiliate of the Company that is publicly traded.

(c) Non-Solicitation of Customers. Employee agrees that, during the Customer Restricted Period, Employee shall not, directly or indirectly, for himself or for any person or entity other than the Company: (i) solicit business (unless such business is noncompetitive to the Company's business) from any customer or client of the Company (a “Covered Customer”); (ii) induce or influence any Covered Customer to discontinue, modify, or reduce its business relationship with the Company; (iii) solicit, induce or influence any entity to not accept a written term sheet or commitment letter that was issued in the six months prior to Employee's termination from the Company or discontinue a loan arrangement with the Company that that was in existence at the time of Employee's termination; or (iv) assist or cause any person or entity to engage in any of the actions in which Employee has agreed not to engage under this paragraph.

(d) Non-Solicitation of Employees. Employee agrees that, during the Employee Restricted Period, Employee shall not, directly or indirectly, for himself or for any person or entity other than the Company: (i) induce, encourage, or solicit any individual who is employed by the Company as of the date of Employee's termination of employment, or within one year prior thereto, to leave such employment or to become employed by or provide services to any person or entity other than the Company, or (ii) assist or cause any person or entity to engage in any of the actions in which Employee has agreed not to engage under this paragraph.

4. Definition of “Change in Control”. As used in this Agreement, the term “Change in Control” shall have the meaning set forth in the Fifth Street Asset Management Inc. 2014 Omnibus Incentive Plan.

5. Confidential or Protected Information. As used in this Agreement, “Confidential or Protected Information” means:

(a) confidential, proprietary or trade secret information (including, without limitation, all information as to which the Company has made efforts to maintain secrecy or that the law protects from disclosure) made available to Employee, or to which Employee has access during his employment or other service, or of which Employee becomes aware through his employment, including, without limitation, information related to investments made by the Company, information related to the Company's or any other entity's businesses, systems, operations, finances, investments, transactions, negotiations, claims, potential claims, sales, marketing, plans, pricing, customers, prospective customers, policies, practices, procedures, products, services, finances, accounting practices or procedures, financial or investment performance (including, without limitation, any “track record” data or information), return on investment or capital, internal rate of return (“IRR”), relationships with third parties, ownership, investors, partners, employees, and management, as well as the Company's or any other entity's software (in any stage of development), programs (whether or not in final form), ideas, inventions, concepts, formulas, methods, development, research, designs, drawings, schematics, specifications, techniques, models, data, source code, object code, flow diagrams, and documentation; and

(b) all information concerning any Inventions or Copyright Works. The term “Invention” means any new or useful art, discovery, contribution, finding, or improvement, whether or not patentable. The term “Copyright Works” means materials for which copyright protection may be obtained, including, but not limited to, computer programs, artistic works (including designs, graphs, drawings, blueprints and other works), literary works, recordings, photographs, slides, motion pictures, and audiovisual works.

The forgoing description of “Confidential or Protected Information” includes all such information in any and all forms, whether written, oral, on a computer, tape, chip, or disk, whether prepared by Employee, by the Company, or by others, whether or not fixed in tangible form, and includes all originals, summaries, portions, and copies of any and all such information.

6. Nondisclosure of Confidential or Protected Information. Except as provided below in Paragraph 7, Employee agrees that during Employee's employment with the Company and after Employee's employment with the Company terminates, regardless of why such employment terminated and regardless of whether the termination was voluntary or involuntary, Employee will not disclose to anyone, publish, sell, assign, license, or attempt to do so, and will not use for Employee's own personal benefit or the benefit of anyone other than the Company, whether directly or indirectly, any Confidential or Protected Information. Employee also agrees to:

(a) maintain in a confidential and protected manner all Confidential or Protected Information that is within his possession;

(b) take no action reasonably likely to subvert or obstruct the Company’s right and ability to protect Confidential or Protected Information; and

(c) promptly report to the Chief Executive Officer of Fifth Street whenever Employee learns it is likely that any unauthorized person or entity seeks or plans to obtain, disseminate, or use any Confidential or Protected Information.

7. Exceptions. The restrictions relating to Confidential or Protected Information set forth in Paragraph 6 above do not apply:

(a) where such disclosure or use is necessary for Employee to faithfully perform his duties as an employee for the Company or for other employees to faithfully perform their duties for the Company;

(b) to information which is now or hereafter becomes known or generally available to the public at large, except if such knowledge results from a breach of this Agreement or another obligation of confidentiality owed to the Company;

(d) where necessary to comply with any legal obligation applicable to Employee; provided, however, that before disclosing or permitting disclosure of any Confidential or Protected Information pursuant to a legal obligation, Employee agrees to (i) promptly notify the Chief Executive Officer of Fifth Street of the legal obligation that Employee believes requires that he make or permit such disclosure, and (ii) delay, if and to the extent lawful to do so, making such disclosure to afford the Company a reasonable opportunity to oppose disclosure, or restrict, limit or condition such disclosure.

Notwithstanding the foregoing, nothing contained in this Agreement will prohibit Employee from reporting possible violations of federal or state law or regulations to any governmental agency or self-regulatory organization, or making other disclosures that are protected under whistleblower or other provisions of any applicable federal or state law or regulations.

8. Intellectual Property.

(a) Ownership of Confidential or Protected Information, Inventions, and Copyright Works. Upon conception, all Confidential or Protected Information, Inventions, and Copyright Works shall become the exclusive property of Fifth Street whether or not patent or copyright applications are filed on the subject matter of the conception.

(b) Rights in Copyrights. Unless otherwise agreed in writing by the Chief Executive Officer of Fifth Street, original works of authorship fixed in any tangible form that are or were prepared by Employee (alone or jointly with others) within the scope of Employee's employment with Fifth Street shall be deemed “works made for hire” under copyright laws and shall be owned by Fifth Street. Employee understands that any sale, assignment, license, or release of such works can only be made by Fifth Street. Employee will do everything reasonably necessary to enable Fifth Street or its nominee to protect its rights in such works, including, without limitation, assigning the copyright and all rights, throughout the world, in and to the work product to Fifth Street and hereby assigns to Fifth Street all such copyright and rights as of the date hereof.

(c) Non-compliance with the disclosure provisions of this Release shall not subject the Employee to criminal or civil liability under any federal or state trade secret law for the disclosure of a Company trade secret with respect to the following: (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney in confidence solely for the purpose of reporting or investigating a suspected violation of law; (ii) in a complaint or other document filed in a lawsuit or other proceeding, provided that any complaint or document containing the trade secret is filed under seal; or (iii) to an attorney representing the Employee in a lawsuit for retaliation by the Company for reporting a suspected violation of law or to use the trade secret information in that court proceeding, provided that any document containing the trade secret is filed under seal and the Employee does not disclose the trade secret, except pursuant to court order.

9. Company's Property. Upon termination of Employee's employment with the Company, regardless of the reason (whether voluntary or involuntary), Employee agrees immediately to surrender to Fifth Street all property of the Company in Employee's possession, control, or custody, including, but not limited to, the equipment, computers, software, credit cards, books, records, reports, files, manuals, literature, the work product of Employee and all other Company employees and all property containing Confidential or Protected Information (including all originals, summaries, portions, and copies).

10. Nondisparagement.

(a) Employee agrees that, during and at any time after Employee’s employment with the Company, regardless of the reason (whether voluntary or involuntary), Employee will not, directly or indirectly, through any agent or affiliate, make any comments or criticisms (whether of a professional or personal nature) to any individual or other third party or entity regarding the Company (or the terms of any agreement or arrangement of the Company) or any of its respective affiliates, members, partners or employees, disparaging the business or reputation of the Company or any of its affiliates, members, partners or employees.

(b) The Company agrees to (i) instruct the members the Board of Directors of FSAM and (ii) require the members of the Executive Committee of the Advisor during their employment with the Advisor to not, during and at any time after Employee’s employment with the Company, regardless of the reason Employee’s employment terminates (whether voluntary or involuntary), directly or indirectly, make any comments or criticisms (whether of a professional or personal nature) to any individual not affiliated with the Company or other third party or entity other than the Company regarding Employee (or the terms of any agreement or arrangement with Employee) or any of Employee’s family members, disparaging Employee or any of his family members.

11. Remedies. The parties acknowledge and agree that monetary damages may not be a sufficient remedy for any breach of this Agreement, including, without limitation, a breach of the covenants contained in Paragraphs 2, 3, and 10 or the unauthorized use or disclosure of Confidential or Protected Information, and that the non-breaching party shall be entitled, without waiving any other rights or remedies, to obtain injunctive or equitable relief as may be deemed proper by a court of competent jurisdiction, without obligation to post any bond. The periods of time during which a court of competent jurisdiction determines Employee is in violation of the covenants set forth in this Agreement shall be added to the Investor Restricted Period, the Customer Restricted Period, the Employee Restricted Period and the Non-Competition Period, as applicable.

12. Reasonableness. Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and will not prevent him from finding other employment if his employment with the Company ends. Employee also acknowledges and agrees that if Employee uses the Company's confidential information, or competes with the Company in violation of the terms of this Agreement, that he will be causing the Company irreparable harm.

13. Severability; Revision by Court. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision in this Agreement is found by a court of competent jurisdiction to be unenforceable or unreasonable as written, Employee and Fifth Street hereby specifically and irrevocably authorize and request said court to revise the unenforceable or unreasonable provisions in a manner that shall result in the provision being enforceable while remaining as similar as legally possible to the purpose and intent of the original.

14. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the obligations addressed herein and supersedes all prior or contemporaneous oral or written agreements regarding the subject matter hereof, except that Nondisclosure Agreement between Employee and the Advisor dated as of September 26, 2016 shall remain in full force and effect in accordance with its terms.

15. Amendments; Waivers. Any addition or modification to this Agreement, or waiver of any provision hereof, must be in writing and signed by the parties hereto.

16. Successors and Assigns. Employee understands and agrees that he cannot assign or otherwise transfer any of his obligations under this Agreement. Employee understands and agrees that Fifth Street may, at its option, assign or transfer its rights under this Agreement to another organization or individual. Employee understands and agrees that if there is an assignment or transfer of Fifth Street's rights under this Agreement, then this Agreement will continue to be effective, will continue to bind Employee, and will inure to the benefit of the organization or individual to whom the transfer or assignment is made.

17. Choice of Law. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Connecticut, excluding its conflicts of laws principles.

18. Jurisdiction. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against either party only in the courts of the State of Connecticut located in Fairfield County. Both parties hereby irrevocably consent to the jurisdiction of any such court in any such action or proceeding and waive any objection to venue laid in such courts.

19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature.

20. Employee's Acknowledgment of Voluntary Agreement. Employee acknowledges that he has carefully read this Agreement, that he has had the opportunity to receive advice with respect to this Agreement by counsel of his choice, that he understands its terms and its legal effect, and that Employee has entered into this Agreement voluntarily and not in reliance upon any promises or representations made by the Company other than those made in this Agreement itself.

21. No Change in Status. Nothing contained in the Agreement shall affect or in any way change Employee's at-will employment status.

22. Section 409A.

(a)

Potential Six-Month Delay. Notwithstanding any other provisions of the Agreement, any payment that may be provided under this Agreement that the Company reasonably determines is subject to Section 409A(a)(2)(B)(i) of the Code shall not be paid or payment commenced until six (6) months after the date of Employee’s termination of employment (or, if earlier, Employee’s death). On the earliest date on which such payments can be commenced without violating the requirements of Section 409A(a)(2)(B)(i) of the Code, Employee shall be paid, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence.

(b) Savings Clause. It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including Treasury regulations and other published guidance related thereto) so as not to subject Employee to payment of any additional tax, penalty or interest imposed under Section 409A of the Code. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Section 409A of the Code yet preserve (to the nearest extent reasonably possible) the intended benefit payable to Employee. Notwithstanding the foregoing, the Company makes no representation or warranty and shall have no liability to Employee or to any other person if any of the provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A, but that do not satisfy an exemption from, or the conditions of, that section.

[Signature page follows]

By signing below, the Company (on behalf of itself and its affiliates) and Employee, intending to be legally bound, agree to the terms of this Agreement as listed and stated above.

	FSC CT LLC



Dated: 11/29/2016	By: /s/ Bernard D. Berman
	Name: Bernard D. Berman
	Title: President


	Employee:

Dated: 11/29/2016	/s/ Patrick Dalton
	Patrick Dalton

EXHIBIT A

As used in this Agreement, “Cause” and “Good Reason” shall have the meanings ascribed to them in the Offer Letter.

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