Exhibit 10.3

PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement (this “Security Agreement”) is entered into
as of October 17, 2017, by and between Fifth Street Senior Floating Rate Corp.,
a Delaware corporation, as secured party (“Secured Party”), and Fifth Street
Holdings L.P., a Delaware limited partnership, as Pledgor (“Pledgor”).

Reference is made herein to that certain Asset Purchase Agreement, dated as of
July 13, 2017 (as it may be amended from time to time, the “Purchase
Agreement”), by and among Fifth Street Management LLC (“Seller”), a Delaware
limited liability company, Oaktree Capital Management, L.P., a Delaware limited
partnership (“Buyer”), and, solely for the purposes set forth therein, Fifth
Street Asset Management Inc. and, solely for the purposes set forth therein,
Pledgor. Capitalized terms used but not defined herein shall have the meanings
given such terms in the Purchase Agreement.

WHEREAS, Pledgor is the owner of shares of common stock, par value $0.01 per
share (“Shares”) issued by Fifth Street Senior Floating Rate Corp. (in its
capacity as the issuer of the Shares, the “Issuer”);

WHEREAS, Buyer and Pledgor have required, as a condition to the fulfillment of
their obligations under the Purchase Agreement, that Pledgor execute and deliver
this Security Agreement and pledge to Secured Party, the Collateral Shares (as
defined below); and

WHEREAS, Pledgor agrees to grant a security interest in, and pledge and assign
as applicable, the Collateral (as defined below) to Secured Party, as herein
provided.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and agreed, the parties hereto agree to enter into this
Security Agreement as follows:

1.    Security Interest. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby pledges and grants to
Secured Party a continuing first priority security interest in and lien on the
Collateral to secure the payment and the performance of the Secured Obligations
(as defined below).

2.    Collateral. The security interest granted hereunder to Secured Party is in
all of Pledgor’s right, title and interest in and to, or otherwise with respect
to, the following property and assets whether now owned or existing or hereafter
acquired or arising and regardless of where located (collectively, the
“Collateral”):

(a)    (i) 1,131,991 Shares (or security entitlements in respect thereof)
credited to the Collateral Account (the “Collateral Shares”); (ii) all
dividends, shares, securities, cash, instruments, moneys or property
(A) representing a dividend, distribution or return of capital in respect of any
of the Collateral Shares (including, without limitation, any regular, periodic
dividend or any other dividend, issuance or distribution of cash, securities or
property thereon (other than in connection with a Split-off)) or other

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property described in this clause (a), (B) resulting from a split-up (including,
without limitation, a Split-off), revision, reclassification, recapitalization
or other similar change with respect to any of the Collateral Shares or other
property described in this clause (a), (C) otherwise received in exchange for or
converted from any of the Collateral Shares or other property described in this
definition and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, any of the Collateral Shares or other
property described in this clause (a) or (D) resulting from a Spin-off; and
(iii) in the event of any merger with respect to the Issuer in which the Issuer
is not the surviving entity, all shares of each class of the capital stock of
the successor entity formed by or resulting from such event and any other
consideration that is exchanged for the Collateral Shares that consist of
Collateral Shares of such Issuer or into which such Collateral Shares are
converted;

(b)     (i) the Collateral Account (as defined below); (ii) any cash, cash
equivalents, securities (including the Collateral Shares and any other Shares),
general intangibles, investment property, financial assets, and other property
that may from time to time be deposited, credited, held or carried in the
Collateral Account or that is delivered to or in possession or control of
Secured Party or any of Secured Party’s agents pursuant to this Security
Agreement or the Purchase Agreement; (iii) all security entitlements as defined
in §8-102(a)(17) of the UCC (as defined below) with respect to any of the
foregoing; (iv) all income and profits on any of the foregoing and all
dividends, distributions, interest and other payments with respect to any of the
foregoing; (v) all other rights and privileges appurtenant to any of the
foregoing, including any voting rights and any redemption rights, and (vi) any
substitutions for any of the foregoing, in each case whether now existing or
hereafter arising; and

(c)    all Proceeds (as defined below) of the Collateral described in the
foregoing clauses (a) and (b).

The security interest granted hereunder is granted as security only and shall
not subject Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Pledgor with respect to any of the Collateral or any
transaction in connection therewith.

As used herein, the following terms shall have the following meanings:

“Collateral Account” means that certain securities account No. 877-013754-789 of
Pledgor established and maintained at Morgan Stanley Smith Barney LLC, including
any subaccount, substitute, successor or replacement securities or deposit
account in or to which any Collateral is now or hereafter held or credited. Any
renumbering of the Collateral Account shall not limit the rights of Secured
Party hereunder, and, to the extent necessary, such renumbering shall be
automatically incorporated into the definition of Collateral Account.

“Proceeds” means all proceeds (as defined in the UCC) and, to the extent not
included in such term, all proceeds of, and all other profits, products, rents
or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, or other disposition of, or other realization upon, any
Collateral.

 

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“Spin-off” means any distribution, issuance or dividend to holders of Shares of
any capital stock or other securities of another issuer owned (directly or
indirectly) by the Issuer or any subsidiary thereof.

“Split-off” means any exchange offer by the Issuer for its own shares in which
the consideration to be delivered to exchanging holders of such shares is
capital stock or other securities of another issuer owned (directly or
indirectly) by the Issuer.

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests.

3.    Collateral Maintenance and Administration.

(a)    The parties hereto agree that at all times prior to an exercise of
remedies hereunder, Pledgor shall be treated as the owner of the Collateral for
U.S. Federal and state tax purposes.

(b)    Unless an Indemnification Trigger Event (as defined below) has occurred
and is continuing, subject to the Standstill (as defined below), (i) Secured
Party shall not have the right to rehypothecate, use, borrow, lend, pledge or
sell the Collateral Shares or give any entitlement orders or instructions with
respect to the Collateral, except with Pledgor’s consent, and (ii) subject to
the FSFR Voting Agreement, Pledgor shall retain all voting rights with respect
the Collateral Shares.

As used herein, an “Indemnification Trigger Event” means the occurrence and
continuation of any of the following: (x) the incurrence of BDC Existing
Investigation Defense Costs in excess of the amount in the BDC Escrow Fund as of
the date thereof (less the sum of the aggregate amount of any Outstanding BDC
Claims), or (y) the incurrence of BDC Net Losses by the FSFR Indemnified Parties
(the amount of any such incurrence, an “Indemnifiable Loss”) that are
indemnifiable by Seller and FSH pursuant to Article VIII of the Purchase
Agreement (including, without limitation, that such BDC Existing Investigation
Defense Costs and BDC Net Losses are finally determined pursuant to Section 8.4
of the Purchase Agreement).

4.    Secured Obligations. All obligations of Pledgor to indemnify the FSFR
Indemnified Parties for the incurrence of BDC Existing Investigation Defense
Costs that cannot be satisfied by the BDC Escrow Fund and BDC Net Losses, in
each case pursuant to Article VIII of the Purchase Agreement (collectively, the
“Secured Obligations”), are secured by this Security Agreement.

 

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5.    Pledgor’s Representations and Warranties.    Pledgor hereby represents and
warrants to Secured Party that:

(a)    Pledgor (i) is duly organized and validly existing in good standing as a
limited partnership or other legal entity under the laws of the State of
Delaware; (b) has full limited partnership or other legal power and authority to
carry on its business as it is now being conducted and to own, lease and operate
its properties and assets as currently owned, leased or operated in connection
with its business; and (c) is duly qualified to do business and in good standing
as a foreign or alien Person, as the case may be, in each jurisdiction in which
the conduct of its business or the ownership, leasing or operation of its
properties or assets makes such qualification necessary, except where the
failure to be so qualified, would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect.

(b)    Pledgor has full legal power and authority to execute and to deliver this
Security Agreement, and to consummate the transactions contemplated hereby.
Pledgor has taken all necessary limited partnership action to authorize the
execution and performance of this Security Agreement by it. This Security
Agreement has been duly executed and delivered by Pledgor and, assuming due
authorization, execution and delivery of this Agreement by Secured Party, is the
valid and binding obligation of Pledgor, enforceable against Pledgor in
accordance with its terms subject to the Enforceability Exceptions.

(c)    No consent, approval or authorization of, or filing with, any
Governmental Entity is required to be made or obtained by Pledgor or any of its
affiliates in connection with the execution, delivery and performance of this
Security Agreement or the consummation of the transactions contemplated hereby.

(d)    Pledgor is not, and after giving effect to the asset sale contemplated by
the Purchase Agreement will not be, required to register as an “investment
company” under the Investment Company Act.

(e)    Pledgor owns all of the Collateral credited to the Collateral Account
free and clear of liens.

(f)    The security interest in the Collateral granted to Secured Party by the
Pledgor pursuant to this Security Agreement is a valid and binding security
interest in the Collateral (subject to no other liens).

(g)    Subject to the execution of a Control Agreement (as defined below) with
respect to the Collateral Account by the parties thereto, (i) the security
interest created in favor of Secured Party in the Collateral Account and the
security entitlements in respect of the Collateral Shares and other financial
assets credited thereto will constitute a perfected first priority security
interest securing the Secured Obligations, (ii) Secured Party will have control
(within the meaning of Sections 8-106 and 9-106 of the UCC)

 

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thereof, (iii) Pledgor does not have notice of any adverse claims with respect
to any such security entitlement or such financial assets and (iv) to the extent
Section 9-510(a) of the UCC is applicable and assuming Secured Party has no
notice of any adverse claims with respect to any such security entitlements or
such financial assets, no action based on an adverse claim to such security
entitlement or such financial asset, whether framed in conversion, replevin,
constructive trust, equitable lien or other theory, may be asserted against
Secured Party.

(h)    With respect to all Collateral that may be perfected by filing a
financing statement pursuant to the UCC, when a UCC financing statement in the
form of Exhibit A hereto is filed in the appropriate office against Pledgor in
the location listed on Schedule 1 (naming Pledgor as the debtor and Secured
Party as the secured party), Secured Party will have a valid and perfected first
priority security interest in such Collateral as security for the payment and
performance of the Secured Obligations.

(i)    The Collateral Shares are not subject to any transfer restrictions, other
than those set forth in the FSFR Voting Agreement.

(j)    Pledgor has been advised by counsel in the negotiation, execution and
delivery of this Security Agreement.

6.    Pledgor’s Covenants. During the term of this Security Agreement:

(a)    Pledgor shall use all commercially reasonable efforts to defend the
Collateral against all claims and demands of all persons at any time claiming
any interest therein adverse to Secured Party. Pledgor shall not, at any time,
file or suffer to be on file, or authorize to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which Secured Party is not named as the sole secured party.

(b)    Whether the Collateral is or is not in Secured Party’s possession, and
without any obligation to do so and without waiving Pledgor’s default for
failure to make any such payment, Secured Party at its option may, following
notice to Pledgor when it may reasonably do so without prejudice, pay any such
costs and expenses and discharge encumbrances on the Collateral, and any
payments of such costs and expenses and any payments to discharge such
encumbrances shall be a part of the Secured Obligations. Pledgor agrees to
reimburse Secured Party on demand for any payments of such costs and expenses
and any payments to discharge such encumbrances.

(c)    Pledgor shall take such other actions as Secured Party shall reasonably
determine is necessary or appropriate to perfect and duly record the Lien
created under this Security Agreement in the Collateral, including executing,
delivering, filing and/or recording, in such locations and jurisdictions as
Secured Party shall reasonably specify, any financing statement, register of
mortgages and charges, notice, instrument, document, agreement or other papers
that may be necessary or desirable (in the reasonable judgment

 

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of Secured Party) to create, preserve or perfect the security interest granted
pursuant hereto and the priority thereof or to enable Secured Party to exercise
and enforce its rights under this Security Agreement with respect to such
security interest, including, without limitation, executing and delivering or
causing the execution and delivery of a control agreement substantially in the
form of Exhibit B hereto (with such modifications thereto as may be reasonably
requested by the securities intermediary thereunder), granting Secured Party
control of the Collateral Account (the “Control Agreement”). In the event the
securities intermediary under the Control Agreement terminates the Control
Agreement, Secured Party shall not deliver any instructions regarding a
successor securities intermediary pursuant to Section 10 of the Control
Agreement unless Pledgor agrees in writing that such instructions may be
delivered; provided that if, after 20 days following notice of such termination
by the Securities Intermediary, Secured Party and Pledgor do not agree on such
instructions regarding a successor securities intermediary, the Secured Party
may provide the instructions regarding the delivery of the Collateral to a
successor securities intermediary (provided such successor securities
intermediary shall be Bank of New York Mellon, Deutsche Bank Trust Company
Americas, Wells Fargo Capital Finance, LLC, Brown Brothers Harriman & Co. or
U.S. Bank).

(d)    Without at least ten (10) days’ prior written notice to Secured Party,
Pledgor shall not make any change to Pledgor’s name, or the name under which
Pledgor does business, or the form or jurisdiction of Pledgor’s organization
from the name, form and jurisdiction set forth on the first page of this
Security Agreement.

(e)    Pledgor shall not (and shall not enter into any agreement to) (i) close
the Collateral Account or (ii) sell, transfer, pledge or otherwise dispose of
any Collateral without (x) obtaining the prior written consent of Secured Party
and (y) entering into such agreements as Secured Party may in its sole
discretion require to ensure the continued priority and perfection of its lien
on such Collateral; provided that notwithstanding the foregoing, but subject in
each case to Section 2.03 of the FSFR Voting Agreement, (A) Pledgor shall be
entitled to sell or otherwise dispose of the Collateral Shares provided that the
proceeds of such sale or disposition are deposited directly to and remain in the
Collateral Account and are not reinvested except in US treasuries that would
mature in two years or less and (B) Pledgor shall be entitled to withdraw
dividends and interest paid on Collateral Shares so long as, as of the date of
such release, (i) the amount withdrawn does not exceed the aggregate amount of
dividends and interest on the Collateral deposited into the Collateral Account
and not previously withdrawn and (ii) Pledgor has no actual knowledge that the
FSFR Indemnified Parties will (x) suffer any BDC Existing Investigation Defense
Costs in excess of the amount in the BDC Escrow Fund as of the date thereof
(less the sum of the aggregate amount, if any, of any Outstanding BDC Claims)
and/or (y) suffer a BDC Net Loss, in each case that is indemnifiable pursuant to
Article VIII of the Purchase Agreement and in an amount that exceeds the
aggregate value of the FSFR Collateral Shares (as calculated using the average
closing price of such FSFR Shares over the five (5) business days prior to the
date of such contemplated release). Secured Party agrees to use commercially
reasonable efforts to cooperate with the Pledgor, including providing any
instruction reasonably required by the Securities

 

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Intermediary (as defined in the Control Agreement), to effect any permitted
withdrawal of cash or Collateral Shares pursuant to this Section 6(e). On each
date that Pledgor delivers a Withdrawal Notice (as defined in the Control
Agreement) to the Securities Intermediary to effect any permitted withdrawal of
dividends or interest pursuant to this Section 6(e), Pledgor shall (x) be deemed
to have represented and warranted to Secured Party that (i) the amount requested
to be transferred thereby does not exceed the aggregate amount of dividends and
interest on the Collateral deposited into the Account and not previously
withdrawn and (ii) it has no actual knowledge that the Secured Party will suffer
a BDC Net Loss that is indemnifiable pursuant to Article VIII of the Purchase
Agreement in an amount that exceeds the aggregate value of the Collateral (as
calculated, in the case of the shares of Fifth Street Senior Floating Rate
Corp., using the average closing price of such Collateral over the five
(5) Business Days prior to the date of such Withdrawal Notice) and
(y) concurrently deliver a copy of such Withdrawal Notice to Secured Party.

7.    [Reserved].

8.    Power of Attorney. Pledgor, in such capacity, hereby irrevocably
constitutes and appoints Secured Party and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority, in the name of Pledgor or in its own name, to
take upon the occurrence and during the continuance of an Indemnification
Trigger Event (but subject to the Standstill), any and all action and to execute
any and all documents and instruments that Secured Party at any time and from
time to time deems necessary or desirable to accomplish the purposes of this
Security Agreement, including, without limitation, selling any of the Collateral
on behalf of Pledgor as agent or attorney in fact for Pledgor, in the name of
Pledgor and applying the proceeds received therefrom in fulfillment of the
Secured Obligations (it being understood that such actions may only be taken
with respect to the Collateral necessary to repay the Secured Obligations then
due and owing); provided that nothing in this Section 8 shall be construed to
obligate Secured Party to take any action hereunder nor shall Secured Party be
liable to Pledgor for failure to take any action hereunder. This appointment
shall be deemed a power coupled with an interest, is irrevocable, and shall
continue until the Specified Survival Date. Without limiting the generality of
the foregoing, so long as Secured Party shall be entitled under Section 9 to
make collections in respect of the Collateral, Secured Party shall have the
right and power to receive, endorse and collect all checks made payable to the
order of Pledgor representing any dividend, payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same.

9.    Remedies.

(a)    Upon the occurrence and during the continuance of an Indemnification
Trigger Event (but subject to the Standstill), Secured Party may (1) deliver a
Notice of Exclusive Control (as defined in the Control Agreement) and (2) take
any of the following actions: provide any entitlement orders relating to the
Collateral Account (including, without limitation, to effect the transfer of any
Collateral from the Collateral Account); provided that Secured Party agrees that
it will concurrently deliver such

 

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entitlement orders to Pledgor; take control of proceeds, including stock
received as dividends or by reason of stock splits; release the Collateral in
its possession to Pledgor, temporarily or otherwise; take control of funds
generated by the Collateral, such as cash dividends, interest and proceeds, and
use the same to reduce any part of the Secured Obligations and exercise all
other rights that an owner of such Collateral may exercise; and at any time
transfer any of the Collateral or evidence thereof into its own name or that of
its nominee (such actions described in this sub-clause (2) collectively, the
“Foreclosure Actions”); provided that Secured Party agrees (i) not to take any
Foreclosure Action until (x) the second (2nd) Business Day after the date of
such Indemnification Trigger Event, if Pledgor notifies Secured Party of its
intention to apply cash from the Collateral Account to satisfy the Indemnifiable
Loss and/or (y) the tenth (10th) Business Day after such Indemnification Trigger
Event if the action to be taken is with respect to any of the Collateral other
than cash (such period, the “Standstill”) and (ii) that such Foreclosure Actions
may only be taken with respect to the Collateral necessary to repay the Secured
Obligations then due and owing. Secured Party agrees to use commercially
reasonable efforts to cooperate with the Pledgor, including providing any
instruction reasonably required by the Securities Intermediary, to effect any
withdrawal of Collateral in connection with the provisions of the Standstill
described above. Secured Party shall not be liable for failure to collect any
account or instruments, or for any act or omission on the part of Secured Party,
its officers, agents or employees, except for any act or omission arising out of
their own willful misconduct, gross negligence or fraud. The foregoing rights
and powers of Secured Party will be in addition to, and not a limitation upon,
any rights and powers of Secured Party or Buyer, as applicable, given by law,
elsewhere in this Security Agreement, the Purchase Agreement or otherwise,
subject in each case to the Standstill and the terms of the Purchase Agreement.
Notwithstanding anything to the contrary contained herein or in the Control
Agreement, Secured Party agrees to withdraw any cash or liquid securities (other
than, for the avoidance of doubt, the Collateral Shares) held in the Collateral
Account prior to withdrawing any other Collateral.

(b)    In addition to and not in lieu of the rights set forth in Section 9(a),
upon the occurrence and during the continuance of an Indemnification Trigger
Event (but subject to the Standstill), Secured Party may, without notice of any
kind, which Pledgor hereby expressly waives (except for any notice required
under this Security Agreement or the Purchase Agreement or any notice that may
not be waived under applicable law), at any time thereafter exercise and/or
enforce any of the following rights and the remedies, at Secured Party’s option:

(i)    Deliver or cause to be delivered from the Collateral Account to itself or
to an Affiliate, Collateral Shares (or security entitlements in respect thereof)
and any other Collateral;

(ii)    Demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for any of the Collateral,
and otherwise exercise all of Pledgor’s rights with respect to any and all of
the Collateral, in its own name, in the name of Pledgor or otherwise; provided
that Secured Party shall have no obligation to take any of the foregoing
actions; and

 

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(iii)    Sell, lease, assign or otherwise dispose of all or any part of the
Collateral, at such place or places and at such time or times as Secured Party
deems best, and for cash or for credit or for future delivery (without thereby
assuming any credit risk), at public or private sale, upon such terms and
conditions as it deems advisable, without demand of performance or notice of
intention to effect any such disposition or of the time or place thereof (except
such notice as is required by applicable law and cannot be waived), and Secured
Party may be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale or at one or more private sales and
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind, including any right or equity of redemption (statutory or otherwise), of
Pledgor. Secured Party may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the sale may be so adjourned,

in each case of the foregoing clauses (i), (ii) and (iii), it being understood
that such actions may only be taken with respect to the Collateral necessary to
repay the Secured Obligations then due and owing.

(c)    Pledgor specifically understands and agrees that any sale by Secured
Party of all or part of the Collateral pursuant to the terms of this Security
Agreement may be effected by Secured Party at times and in manners that could
result in the proceeds of such sale being significantly and materially less than
might have been received if such sale had occurred at different times or in
different manners, and Pledgor hereby releases Secured Party and its officers
and representatives from and against any and all obligations and liabilities
arising out of or related to the timing or manner of any such sale, to the
extent permitted under applicable law. Without limiting the generality of the
foregoing, if, in the reasonable opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, including without limitation, the Securities Act,
Secured Party may offer and sell such Collateral in a transaction exempt from
registration under the Securities Act and/or who will agree, among other things,
to acquire the Collateral for their own account, for investment and not with a
view to the distribution or resale thereof, and any such sale made in good faith
by Secured Party shall be deemed “commercially reasonable”. Furthermore, Pledgor
acknowledges that any such restricted or private sales may be at prices and on
terms less favorable to Pledgor than those obtainable through a public sale
without such restrictions, and agrees such sales shall not be considered to be
not commercially reasonable solely because they are so conducted on a restricted
or private basis. Pledgor further acknowledges that any specific disclaimer of
any warranty of title or the like by Secured Party will not be considered to
adversely affect the commercial reasonableness of any sale of Collateral. The
parties agree and acknowledge that the foregoing actions described in this
Section 9(c) may only be taken with respect to the Collateral necessary to repay
the Secured Obligations then due and owing.

 

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(d)    If the proceeds of sale, collection or other realization of or upon the
Collateral pursuant to this Section 9 are insufficient to cover the costs and
expenses of such sale, collection or realization and the payment in full of the
Secured Obligations, Secured Party may continue to enforce its remedies under
this Security Agreement and the Purchase Agreement to collect the deficiency,
subject in all cases to the terms of the Purchase Agreement.

(e)    Secured Party’s duty of care with respect to Collateral in its possession
(as imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third Person, exercises reasonable
care in the selection of the bailee or other third Person, and Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. Secured
Party shall not be obligated to preserve any rights Pledgor may have against
prior parties, to realize on the Collateral at all or in any particular manner
or order, or to apply any cash proceeds of Collateral in any particular order of
application.

(f)    If Secured Party shall determine to exercise its right to sell all or any
portion of the Collateral pursuant to this Section 9, Pledgor agrees that, upon
the reasonable request of Secured Party, Pledgor will, at its own expense:

(i)    execute and deliver, to any Person or Governmental Authority, as Secured
Party may choose, any and all documents and writings that, in Secured Party’s
reasonable judgment, may be required by any Governmental Entity located in any
city, county, state or country where Pledgor or any Issuer engages in business
in order to permit the transfer of, or to more effectively or efficiently
transfer, the Collateral or otherwise enforce Secured Party’s rights hereunder;
and

(ii)    do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.

(g)    Except as otherwise expressly provided in this Security Agreement, the
proceeds of any collection, sale or other realization of all or any part of the
Collateral pursuant hereto, and any other cash held by Secured Party as
Collateral, following the occurrence, and during the continuance, of an
Indemnification Trigger Event (but subject to the Standstill) shall be applied
by Secured Party to fulfill the Secured Obligations.

(h)    Pledgor acknowledges that there is no adequate remedy at law for failure
by it to comply with the provisions of this Section 9 and that such failure
would not be adequately compensable in damages, and therefore agrees that its
agreements contained in this Section 9 may be specifically enforced.

 

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10.    General.

(a)    Successors and Assigns. The provisions of this Security Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that Pledgor may not assign or
otherwise transfer any of its rights or obligations hereunder or the Purchase
Agreement without the prior written consent of Secured Party (and any attempted
assignment or transfer by Pledgor without such consent shall be null and void).

(b)    No Waiver. No failure or delay by Secured Party or Buyer, as applicable,
in exercising any right or power hereunder or under the Purchase Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of Secured Party
and Buyer, as applicable, hereunder and under the Purchase Agreement are
cumulative and are not exclusive of any rights or remedies that it would
otherwise have. No notice to or demand on Pledgor in any case shall entitle
Pledgor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of Secured Party to any other
or further action in any circumstances without notice or demand.

(c)    Continuing Agreement; Release of Collateral. This Security Agreement
shall constitute a continuing agreement and shall continue in effect until the
Specified Survival Date, at which time the Collateral shall automatically be
released from the Liens created hereby, and this Security Agreement and all
obligations (other than those expressly stated to survive such termination) of
Secured Party and Pledgor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to Pledgor; provided that Secured Party shall deliver a
notice pursuant to the Section 10 of the Control Agreement to the Securities
Intermediary terminating the Control Agreement. At the request and sole expense
of Pledgor following any such termination, Secured Party shall deliver to
Pledgor any Collateral held by Secured Party hereunder, and execute and deliver
to Pledgor such documents as Pledgor shall reasonably request to evidence such
termination, including notice to any securities intermediary terminating the
Control Agreement and authorization of the filing of any UCC-3 financing
statements. No Collateral shall be released prior to the Specified Survival Date
except as otherwise expressly provided hereunder or under the Control Agreement
or otherwise agreed to by Secured Party. Notwithstanding the foregoing, if at
any time, any payment in respect of the Secured Obligations is rescinded or must
be otherwise restored by any holder of any of the Secured Obligations, whether
as a result of any proceedings in insolvency, bankruptcy or reorganization or
otherwise, the rights and obligations of the parties hereunder, and the liens of
Secured Party on the Collateral, shall be automatically reinstated and Pledgor

 

11

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shall promptly deliver any documentation reasonably requested by Secured Party
to evidence such reinstatement. This Section 10(c) shall survive the termination
of this Security Agreement.

(d)    Definitions. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this Security Agreement; if UCC definitions
conflict, Article 8 and/or 9 definitions apply.

(e)    Notice. Each notice to, or other communication with, any party hereunder
shall be given to such party as follows:

if to Secured Party, to:

Oaktree Strategic Income Corporation

333 South Grand Avenue, 28th floor

Los Angeles, CA 90071

Tel: (213) 830-6300

Fax: (213) 830-6293

Attention (email): Mathew Pendo (mpendo@oaktreecapital.com)

with a copy (which shall not constitute notice hereunder and may be transmitted
by email) to:

Oaktree Capital Management, L.P.

333 South Grand Avenue, 28th floor

Los Angeles, CA 90071

Tel: (213) 830-6300

Fax: (213) 830-6293

Attention (email): Mathew Pendo (mpendo@oaktreecapital.com)

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Fax: (212) 455-2502

Attention (email): Gary I. Horowitz (ghorowitz@stblaw.com)

and

Simpson Thacher & Bartlett LLP

900 G Street, NW

Washington, DC 20001

Fax: (202) 636-5502

Attention (email): Rajib Chanda (rajib.chanda@stblaw.com)

if to Pledgor, to:

 

12

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Fifth Street Holdings L.P.

777 West Putnam Avenue, 3rd Floor

Greenwich, CT 06830

Tel: (203) 681-6800

Fax: (203) 681-3879

Attention: Bernard D. Berman (Bernie@fifthstreetfinance.com)

with a copy (which shall not constitute notice hereunder and may be transmitted
by email) to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

Fax: (212) 735-2000

  Attention (email):   Todd E. Freed (Todd.Freed@skadden.com)     Jon A. Hlafter
(Jon.Hlafter@skadden.com)

Each notice, request or other communications given to any party hereunder shall
be in writing and be deemed given and received (a) if delivered in person, on
the date delivered, (b) if transmitted by facsimile (provided receipt is
confirmed by telephone), on the date sent, (c) if delivered by an express
courier, on the second (2nd) business day after mailing and (d) if transmitted
by email, on the date sent, in each case, to the parties at the following
addresses (or at such other address for a party as is specified to the other
parties hereto by like notice).

(f)    Modifications. This Security Agreement may not be amended, altered or
modified except by written instrument executed by each of the parties hereto.
The provisions of this Security Agreement shall not be modified or limited by
course of conduct or usage of trade.

(g)    Financing Statement. Pledgor hereby irrevocably authorizes Secured Party
(or its designee) at any time and from time to time to file in any jurisdiction
any financing or continuation statement and amendment thereto or any
registration of charge, mortgage or otherwise, containing any information
required under the UCC or the law of any other applicable jurisdiction (in each
case without the signature of Pledgor to the extent permitted by applicable
law), necessary or appropriate in the judgment of Secured Party to perfect or
evidence its security interest in and lien on the Collateral which describes the
Collateral as set forth on Exhibit A hereto. Pledgor agrees to provide to
Secured Party (or its designees) any and all information required under the UCC
or the law of any other applicable jurisdiction for the effective filing of a
financing statement and/or any amendment thereto or any registration of charge,
mortgage or otherwise.

(h)    Counterparts; Integration; Effectiveness. This Security Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each

 

13

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of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Security Agreement, the Purchase
Agreement, the Control Agreement and the FSFR Voting Agreement constitute the
entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof. This Security
Agreement shall become effective when it shall have been executed by Secured
Party and when Secured Party shall have received counterparts hereof that, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Security Agreement by facsimile or electronic
transmission shall be effective as delivery of an original executed counterpart
of such signature page.

(i)    Severability. Any provision of this Security Agreement or the Purchase
Agreement held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions thereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.

(j)    Conflicts. In the event of any conflict between the provisions of this
Security Agreement and the provisions of the Purchase Agreement, the provisions
of the Purchase Agreement shall govern and control.

(k)    Governing Law; Submission to Jurisdiction. The provisions of Sections
10.9 and 10.10 of the Purchase Agreement shall apply mutatis mutandis to this
Security Agreement as if such provisions were fully set forth herein.

[Signature Page Follows]

 

14

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed by their duly authorized representatives as of the date first
above written.

PLEDGOR:

FIFTH STREET HOLDINGS L.P.

 

By:  

/s/ Leonard Tannenbaum

Name:   Leonard Tannenbaum Title:   Chief Executive Officer

[Signature Page to Security Agreement]

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

SECURED PARTY:

FIFTH STREET SENIOR FLOATING RATE CORP.

 

By:  

/s/ Bernard Berman

Name:   Bernard Berman Title:   Chief Executive Officer

[Signature Page to Security Agreement]

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Schedule 1

UCC Filing Location

1. Delaware

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

Exhibit A

Form of UCC Financing Statement

Schedule I

To UCC Financing Statement

 

Debtor: Fifth Street Holdings L.P.

777 West Putnam Avenue, 3rd Floor

Greenwich, CT 06830

Tel: (203) 681-6800

Fax: (203) 681-3879

Attention (email): Bernard D. Berman

(Bernie@fifthstreetfinance.com)

 

Secured Party:     Oaktree Strategic Income Corporation

333 South Grand Avenue, 28th floor

Los Angeles, CA 90071

Tel: (213) 830-6300

Fax: (213) 830-6293

Attention (email): Mathew Pendo

(mpendo@oaktreecapital.com)

This financing statement covers all of Debtor’s right, title and interest in and
to, or otherwise with respect to, the following property and assets whether now
owned or existing or hereafter acquired or arising and regardless of where
located (collectively, the “Collateral”):

(a)    (i) 1,131,991 Shares (or security entitlements in respect thereof)
credited to the Collateral Account (the “Collateral Shares”); (ii) all
dividends, shares, securities, cash, instruments, moneys or property
(A) representing a dividend, distribution or return of capital in respect of any
of the Collateral Shares (including, without limitation, any regular, periodic
dividend or any other dividend, issuance or distribution of cash, securities or
property thereon (other than in connection with a Split-off)) or other property
described in this clause (a), (B) resulting from a split-up (including, without
limitation, a Split-off), revision, reclassification, recapitalization or other
similar change with respect to any of the Collateral Shares or other property
described in this clause (a), (C) otherwise received in exchange for or
converted from any of the Collateral Shares or other property described in this
definition and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, any of the Collateral Shares or other
property described in this clause (a) or (D) resulting from a Spin-off; and
(iii) in the event of any merger with respect to the Issuer in which the Issuer
is not the surviving entity, all

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

shares of each class of the capital stock of the successor entity formed by or
resulting from such event and any other consideration that is exchanged for the
Collateral Shares that consist of Collateral Shares of such Issuer or into which
such Collateral Shares are converted;

(b)     (i) the Collateral Account (as defined below); (ii) any cash, cash
equivalents, securities (including the Collateral Shares and any other Shares),
general intangibles, investment property, financial assets, and other property
that may from time to time be deposited, credited, held or carried in the
Collateral Account or that is delivered to or in possession or control of
Secured Party or any of Secured Party’s agents pursuant to this Security
Agreement or the Purchase Agreement; (iii) all security entitlements as defined
in §8-102(a)(17) of the UCC (as defined below) with respect to any of the
foregoing; (iv) all income and profits on any of the foregoing and all
dividends, distributions, interest and other payments with respect to any of the
foregoing; (v) all other rights and privileges appurtenant to any of the
foregoing, including any voting rights and any redemption rights, and (vi) any
substitutions for any of the foregoing, in each case whether now existing or
hereafter arising; and

(c)    all Proceeds (as defined below) of the Collateral described in the
foregoing clauses (a) and (b).

As used herein:

“Collateral Account” means that certain securities account No. 877-013754-789 of
Pledgor established and maintained at Morgan Stanley Smith Barney LLC, including
any subaccount, substitute, successor or replacement securities or deposit
account in or to which any Collateral is now or hereafter held or credited. Any
renumbering of the Collateral Account shall not limit the rights of Secured
Party hereunder, and, to the extent necessary, such renumbering shall be
automatically incorporated into the definition of Collateral Account.

“Proceeds” means all proceeds (as defined in the UCC) and, to the extent not
included in such term, all proceeds of, and all other profits, products, rents
or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, or other disposition of, or other realization upon, any
Collateral.

“Spin-off” means any distribution, issuance or dividend to holders of Shares of
any capital stock or other securities of another issuer owned (directly or
indirectly) by the Issuer or any subsidiary thereof.

“Split-off” means any exchange offer by the Issuer for its own shares in which
the consideration to be delivered to exchanging holders of such shares is
capital stock or other securities of another issuer owned (directly or
indirectly) by the Issuer.

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

“Issuer” means Oaktree Strategic Income Corporation.

“Shares” means shares of common stock, par value $0.01 per share (“Shares”), of
Oaktree Strategic Income Corporation.

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests.

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

Exhibit B

Form of Control Agreement

CONTROL AGREEMENT

Re: Account No(s).:

SECURED PARTY

FBO

1. This agreement refers to the above-referenced and entitled Account(s)
identified above (together with any substitution or replacement thereof, the
“Account”) custodied by and carried on the books of Morgan Stanley Smith Barney
LLC (together with its successors and assigns, the “Securities Intermediary”)
pursuant to the instructions of the undersigned account holder(s) (jointly and
severally, if more than one) (collectively, the “Account Holder”), to which
certain financial assets of the Account Holder are or may be credited.

2. The Account Holder and the Securities Intermediary hereby acknowledge and
agree that the Account is a cash securities account and is not a delivery versus
payment account, a retirement account, a margin account or an account linked to
any credit facility. All parties agree that the Account is a “securities
account” within the meaning of Article 8 of the Uniform Commercial Code as in
effect in the State of New York from time to time (the “UCC”) and that all
property, including cash, held by the Securities Intermediary in the Account
shall be treated as “financial assets” within the meaning of Article 8 of the
UCC. For purposes of the Hague Securities Convention1 (the “Convention”) the
Account shall be deemed to be a “securities account” (within the meaning of
Article 1(1)(b) of the Convention).

The Securities Intermediary confirms and agrees that (w) it is a “securities
intermediary” within the meaning of Article 8 of the UCC and acting in such
capacity with respect to the Collateral, (x) for purposes of Article 8 of the
UCC, the State of New York is the Securities Intermediary’s jurisdiction and
(y) as of the date hereof, it has an office in the United States which satisfies
the requirements of clause (1) and (2) of Article 4 of the Convention.

3. The Account Holder and the undersigned Secured Party (the “Secured Party”)
hereby notify the Securities Intermediary that the Account Holder has granted
the Secured Party a security interest in the Account and all financial assets
therein, all proceeds thereof and distributions in connection therewith, and
income received thereon, and any additions thereto (the “Collateral”) pursuant
to a security or similar agreement dated on or about the date hereof made by the
Account Holder in favor of the Secured Party (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Security Agreement”).
The terms “entitlement order”, “financial asset”, “proceeds”, “security” and
“securities intermediary” shall have the meanings set forth in Articles 8 and 9
of the UCC and the term “security” shall also include property included in the
term “securities” in the Convention. The Account Holder represents and warrants
to the Secured Party and the Securities Intermediary that no person other than
the Secured Party or the Securities Intermediary has a security interest in,
lien on or adverse claim against the Account or any of the

 

1 

“Hague Securities Convention” means the Convention on the Law Applicable to
Certain Rights in Respect of Securities Held with an Intermediary, July 5, 2006,
17 U.S.T. 401, 46 I.L.M. 649.

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

other Collateral therein, and that it will not attempt to grant such a security
interest in or lien on the Account or any of the other Collateral therein
without the authorization of the Secured Party and the Securities Intermediary.
The Securities Intermediary confirms that, as of the date hereof, its personnel
generally responsible for maintaining records of liens or security interests
with respect to customer securities accounts have no knowledge of any restraint,
security interest, lien or other adverse claim in or to the Account or any item
therein and represents and warrants that it will not consent to any further or
subsequent security interest or lien while the Secured Party’s security interest
remains in effect; provided that the Securities Intermediary shall have the
rights set forth in Section 7 herein and may retain a subordinated lien in
connection with any obligations that Account Holder may have incurred or from
time to time may incur to the Securities Intermediary. In addition, the
Securities Intermediary agrees to use reasonable efforts to notify the Secured
Party and the Account Holder in the event it receives any written notice of any
lien, encumbrance or adverse claim against the Account or any of the other
Collateral therein.

Notwithstanding the foregoing sentence, the Account Holder and the Secured Party
each hereby acknowledges and agrees that if the Securities Intermediary receives
a levy, order or other instruction from a governmental, judicial or regulatory
body including, but not limited to, any self-regulatory organization, directing,
ordering or instructing the Securities Intermediary to transfer out, or effect
the transfer out of, any or all securities positions from the Account or to
withdraw or disburse principal or cash or any combination thereof, from the
Account, then the Securities Intermediary may comply with such levy, order or
other instruction addressed to it, without prior notice to, or authorization
from, the Account Holder or the Secured Party.

4. Absent instructions from the Secured Party to the contrary pursuant to a
Notice of Exclusive Control (as defined below), the Account Holder shall be
authorized to operate the Account in accordance with the terms of this Control
Agreement and the Account Holder’s existing client agreements with the
Securities Intermediary (the “Client Agreements”), subject to Secured Party’s
security interest in the Collateral. Account Holder may not withdraw or transfer
any Collateral from the Account other than in connection with “Permitted
Trading.” “Permitted Trading” for purposes of this Control Agreement is (i) the
right of the Account Holder, or its properly designated investment manager, to
sell Collateral held in the Account and invest the proceeds of such sale, as
well as other cash available in the Account from time to time, in actively
traded marketable securities, cash or cash equivalents, so long as such proceeds
of such sale, as well as securities, cash and cash equivalents, are credited to
the Account and become Collateral and (ii) the right of the Account Holder, or
its properly designated investment manager, to withdraw dividends and interest
paid on the Collateral; provided that for purposes of this clause (ii) the
Account Holder delivers to Secured Party and the Securities Intermediary a
withdrawal notice substantially in the form of the notice attached as Exhibit B
hereto (a “Withdrawal Notice”) (it being understood that Permitted Trading may
be conducted by the Account Holder without the need for authorization from the
Secured Party so long as a Notice of Exclusive Control has not been delivered to
the Securities Intermediary and that the Securities Intermediary shall not be
responsible for, or have any liability for, Secured Party receiving such
Withdrawal Notice). However, the Account Holder hereby acknowledges and agrees
that the Secured Party’s consent to Permitted Trading in no way constitutes a
waiver of any of the Secured Party’s rights under the Security Agreement and
that it is the obligation of the Account Holder to ensure at all times that the
type and amount of the Collateral in the Account meets the maintenance
requirements contained in the Security Agreement or any other agreement related
thereto.

Notwithstanding anything herein to the contrary, within a reasonable period of
time following effectiveness pursuant to Section 9 below of a written notice
from the Secured Party to the

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

Securities Intermediary substantially in the form of the sample notice attached
as Exhibit A hereto (a “Notice of Exclusive Control”), not to extend beyond 5:00
p.m., Eastern Time, on the second Business Day following the date of receipt of
a Notice of Exclusive Control by the Securities Intermediary, the Account Holder
shall have no right to engage in any further Permitted Trading, and the
Securities Intermediary shall not accept or honor any instructions or
entitlement orders from or on behalf of the Account Holder in respect of the
Account (including without limitation any Permitted Trading), in each case
without the prior consent of the Secured Party. “Business Day” for purposes of
this Control Agreement means a day of the year on which the New York Stock
Exchange is open for trading. The Securities Intermediary agrees that all
property in the Account at any time shall be treated as a financial asset for
purposes of the Uniform Commercial Code in effect in New York as of the date
thereof.

5. The Account Holder hereby authorizes the Securities Intermediary to, and they
(or one of them) shall, provide the Secured Party with both account statements
and trade confirmations when issued and disclose to the Secured Party such
information relative to the Account and the financial assets and credit balances
therein, in each case at the sole cost, if any, of the Account Holder, as the
Secured Party may at any time and from time to time request, and as frequently
as Secured Party may reasonably require (but no more than once per seven (7) day
period) to permit it to monitor the Collateral for compliance with the Security
Agreement, in each case without any reference to any further authority for, or
inquiry as to the justification for, such disclosure.

6. Upon the effectiveness pursuant to Section 9 below of the Notice of Exclusive
Control, the Securities Intermediary will comply with all entitlement orders
relating to the Account or any financial asset credited thereto originated by
the Secured Party without further action or consent by Account Holder or any
other person, and will, as frequently as requested by the Secured Party,
transfer all available credit balances and financial assets in the Account to
such account as may be designated by the Secured Party by wire transfer,
depository transfer check, automatic clearing house electronic transfer, or
otherwise, as the Secured Party may direct in its sole discretion, and maintain
the Account and all financial assets and other items therein as the Secured
Party may direct from time to time (including using its best efforts to place or
negotiate orders to sell securities in the Account, including but not limited to
sell orders pursuant to stock powers issued in favor of the Securities
Intermediary, and transferring the proceeds of sale to the Secured Party in
accordance herewith). All entitlement orders, instructions, requests and
directions of the Secured Party hereunder shall (i) be delivered in the manner
set forth in Section 9 hereof and (ii) be concurrently delivered to Account
Holder (it being understood that Securities Intermediary shall not be
responsible for, or have any liability for, Account Holder receiving such
entitlement orders, instructions, requests and directions of the Secured Party).

7. Any security interest in or lien on the Account or any of the other
Collateral therein granted to or otherwise obtained by the Securities
Intermediary (including, without limitation, by operation of law) shall be
junior and subordinate to the security interest and lien of the Secured Party in
and on the Account and any of the other Collateral, as defined in this Control
Agreement, regardless of the order of perfecting any such security interest or
lien, the filing or absence of filing any financing statement or the taking or
failure to take any other action. The Securities Intermediary acknowledges the
Secured Party’s perfected security interest in the Account and the other
Collateral as defined in this Control Agreement, and agrees that, except as
provided herein, it will not (i) foreclose upon, sell or otherwise dispose of
the Account or any such other Collateral, or exercise any bankers’ or other lien
or right of setoff or similar right in connection with the Account or any such
other Collateral, in each case without the prior consent of the Secured Party or
(ii) receive, accept or

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

apply any proceeds of the Account or any such other Collateral to or on account
of any indebtedness or obligation of the Account Holder to it, in each case
until the Secured Party has released its security interest in the Account and
any such other Collateral; provided, however, that nothing herein shall limit
the right of the Securities Intermediary to debit the Account in payment of the
then current commissions, charges and other such fees of the Securities
Intermediary associated with the Account and due to the Securities Intermediary,
as the case may be, and from time to time to debit the Account in an amount
equal to the amount of any deposit that the Securities Intermediary has credited
to the Account that is thereafter returned to the Securities Intermediary
because of insufficient funds or is otherwise unpaid. The Securities
Intermediary shall not advance margin or other credit against the Account, nor
hypothecate any financial assets or other items carried in the Account, without
the prior consent of the Secured Party. The Securities Intermediary shall not
enter into any agreement with any other person or entity related to the Account
or any financial asset credited thereto pursuant to which the Securities
Intermediary agrees to comply (and the Securities Intermediary shall not comply)
with any withdrawal, transfer, payment or redemption instruction, or any other
entitlement order or other order, from such person or entity concerning the
Account or any financial assets or other items therein, without the prior
consent of the Secured Party, and any such agreement entered into without such
consent shall be null and void.

8. The Account Holder and the Secured Party each acknowledge and agree that the
Securities Intermediary shall not be held responsible for (i) any decline in the
market value of the Collateral or the failure to notify the Account Holder or
the Secured Party thereof or (ii) the failure to take any action with respect to
the Collateral, except as expressly provided in this Control Agreement, or as
instructed by the Secured Party to the Securities Intermediary in accordance
with this Control Agreement, and, except as expressly provided in this Control
Agreement, this Control Agreement shall not abridge any rights the Securities
Intermediary otherwise may have. To the extent that any provisions of this
Control Agreement conflict with any provisions of the Client Agreements, the
provisions of this Control Agreement shall control.

Except with respect to the obligations and duties expressly provided in this
Control Agreement, this Control Agreement shall not impose or create any
obligations or duties upon the Securities Intermediary that are greater than or
in addition to the usual and customary obligations and duties, if any, of the
Securities Intermediary, as applicable, with respect to the Account or the
Account Holder. Except as expressly provided in this Control Agreement, the
Securities Intermediary shall not have any obligation or duty whatsoever to
interpret the terms of any agreements between the Account Holder and the Secured
Party other than this Agreement or to determine whether any default exists
hereunder or thereunder.

The Account Holder hereby irrevocably authorizes and instructs the Securities
Intermediary to perform and comply with the terms of this Control Agreement. The
Account Holder hereby indemnifies and holds harmless the Securities Intermediary
from and against any and all claims, actions and suits (whether groundless or
otherwise), losses, damages, costs, expenses (including attorney’s fees and
expenses) and liabilities of every nature and character arising out of or
related to this Control Agreement or the transactions contemplated hereby or any
actions taken or omitted to be taken by the Securities Intermediary hereunder,
including, without limitation, claims arising out of the Securities
Intermediary’s permitting or failing to permit the Account Holder or any other
party to withdraw funds from the Account other than in strict compliance with
the terms of this Control Agreement, except to the extent directly caused by the
Securities Intermediary’s gross negligence or willful misconduct. The Secured
Party shall indemnify and hold harmless the Securities Intermediary from and
against any and all claims, actions and suits (whether groundless or otherwise),
losses,

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

damages, costs, expenses (including attorney’s fees and expenses) and
liabilities of every nature and character that may result by reason of the
Securities Intermediary complying with instructions or requests of the Secured
Party as permitted or required under this Control Agreement, except to the
extent directly caused by the Securities Intermediary’s gross negligence or
willful misconduct. The foregoing indemnifications shall survive any termination
of this Control Agreement.

The Securities Intermediary may act upon, any instrument or other writing
believed by the Securities Intermediary in good faith to be genuine and to have
been signed or presented by a person purporting to be the authorized
representative of the Secured Party or the Account Holder, as the case may be.
The Securities Intermediary shall not be liable in connection with the
performance or non-performance of its duties hereunder, except for its own gross
negligence or willful misconduct. The Securities Intermediary’s duties shall be
determined only with reference to this Control Agreement and applicable laws,
and the Securities Intermediary shall not be charged with knowledge of, or any
duties or responsibilities in connection with, any other document or agreement.
If in doubt as to its duties and responsibilities hereunder, the Securities
Intermediary may consult with counsel of its choice and shall be protected in
any action taken or omitted to be taken in connection with the advice or opinion
of such counsel. The Securities Intermediary shall not have any liability to any
party for any incidental, punitive or consequential damages resulting from any
breach by such party of its obligations hereunder.

9. Each notice, request or other communication given to any party hereunder
shall be in writing and shall be delivered by hand, mailed by United States
registered or certified first class mail, postage prepaid and return receipt
requested, or sent by overnight courier, or sent by facsimile, to such party at
its address or facsimile number set forth on the signature page hereof or, in
each case, to such other address for notices or such other manner as any of the
parties to this Control Agreement shall last have notified in writing the other
parties hereto in accordance with this Section. Any such notice or communication
shall be deemed to have been duly given or made and to have become effective at
the time of the receipt thereof by the party to which it is directed (except
that, if not given by 5:00 p.m., Eastern Time, shall be deemed to have been
given at the opening of business on the next Business Day for the recipient),
which may be evidenced by confirmation of delivery from any overnight or hand
courier, at its address specified on the signature page hereof.

10. This Control Agreement may not be amended or modified without the prior
consent of the Securities Intermediary, the Account Holder and the Secured
Party. This Control Agreement shall continue in full force until delivery of a
notice from the Secured Party to the Securities Intermediary terminating this
Control Agreement. Upon receipt of such notice, all obligations of the
Securities Intermediary under this Control Agreement shall cease, including
without limitation any and all obligations hereunder with respect to the
maintenance of the Account. Thereafter, the Securities Intermediary may take
such steps as the Account Holder may request, at the Account Holder’s sole
expense, if any, to vest full ownership and control of the Account in the
Account Holder. This Control Agreement may also be terminated by the Securities
Intermediary, in each case upon 60 days’ notice to the Secured Party and the
Account Holder. Upon such notice, the Secured Party shall provide the Securities
Intermediary with instructions regarding the delivery of the Collateral to a
successor securities intermediary, after which the Securities Intermediary shall
have no further obligations under this Control Agreement. All entitlement
orders, instructions, requests and directions of the Secured Party hereunder
shall be delivered in the manner set forth in Section 9 hereof.

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11. No delay or omission on the part of the Secured Party or the Securities
Intermediary in exercising any right hereunder shall operate as a waiver of such
right or of any other right under this Control Agreement. No waiver of any right
under this Control Agreement shall be effective unless in writing and signed by
the Secured Party and the Securities Intermediary, and no waiver on one occasion
shall be construed as a bar to or waiver of any such right on any other
occasion.

12. This Control Agreement and any waiver or amendment hereto may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. This Control Agreement may be
executed and delivered by facsimile or other electronic transmission all with
the same force and effect as if the same were a fully executed and delivered
original manual counterpart.

13. This Control Agreement shall be governed by and construed in accordance with
the laws of the State of New York (without giving effect to the conflicts of law
principles thereof) and shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. As permitted by
Article 4 of the Convention on the Law Applicable to Certain Rights in Respect
of Securities Held with an Intermediary, the parties hereto agree that the state
of New York is the securities intermediary’s jurisdiction for purposes of the
Uniform Commercial Code and the law of the State of New York shall govern each
of the issues specified in Article 2(1) of the Convention. To the extent the
immediately preceding sentence conflicts with the provisions of any other
account agreement governing the Account, such preceding sentence shall control.

14. This Control Agreement constitutes the entire agreement, and supersedes any
prior agreements, of the parties hereto concerning its subject matter. In the
event a provision of this Control Agreement is unenforceable, this agreement
shall be construed to the extent possible as if the unenforceable provision were
omitted.

15. ALL PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THE ACCOUNT OR THIS AGREEMENT.

Remainder of Page Intentionally Left Blank.

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Please indicate your agreement with the foregoing by signing below and returning
this Control Agreement to the Secured Party and the Securities Intermediary.

ACCOUNT HOLDER

 

Signature   

 

      Date                                              Authorized Signer:      
   Address:         

SECURED PARTY

 

Signature   

 

      Date                                             

Authorized Signer:

        

Title:

           

Address:

           

Facsimile:

           

 

Signature   

 

      Date                                             

Authorized Signer:

        

Title:

           

Address:

           

Facsimile:

           

SECURITIES INTERMEDIARY

MORGAN STANLEY SMITH BARNEY LLC

 

Signature   

 

      Date                                             

Name:

        

Title: Complex Manager

        

Address:

           

Branch Telephone Number:

        

Facsimile:

        

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SAMPLE FORM ONLY – DO NOT COMPLETE UNLESS ACCOUNT HOLDER WILL BE DENIED TRADING
PRIVILEGES

EXHIBIT A: Form of Notice of Exclusive Control

                             ,         

 

Morgan Stanley Smith Barney LLC

 

 

Attn.:  

 

 

[Account Holder]

 

 

Attn.:  

 

Re: Control Agreement dated [    ]

Ladies and Gentlemen:

Reference is made to the Control Agreement dated ______________ (the
“Agreement”; capitalized terms used herein shall have the meanings assigned
thereto in the Agreement) among you, us and __________________ (the “Account
Holder”). This letter constitutes a Notice of Exclusive Control under the
Agreement.

In accordance with Section 4 of the Agreement, and continuing until we shall
authorize you in writing to do otherwise, you shall no longer accept or honor
any instructions from or on behalf of the Account Holder in respect of the
Account or any financial assets or credit balances in the Account and, instead,
shall only accept and honor our instructions, as further provided in the
Agreement.

 

Very truly yours, (SECURED PARTY) [SAMPLE] By:     Name:   Title:

 

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

EXHIBIT B: Form of Withdrawal Notice

                             ,         

 

Morgan Stanley Smith Barney LLC

 

 

Attn.:  

 

 

[Secured Party]

 

 

Attn.:  

 

Re: Control Agreement dated [    ]

Ladies and Gentlemen:

Reference is made to the Control Agreement dated ______________ (the
“Agreement”; capitalized terms used herein shall have the meanings assigned
thereto in the Agreement) among you, us and __________________ (the “Secured
Party”). This letter constitutes a Withdrawal Notice under the Agreement.

In accordance with Section 4 of the Agreement, we direct Morgan Stanley Smith
Barney LLC to transfer $[___] to [Account No. ________ at _________].

 

Very truly yours, (ACCOUNT HOLDER) [SAMPLE] By:     Name:   Title: