Filed by Sierra Income Corporation
pursuant to Rule 425 under the Securities
Act of 1933
and deemed filed under Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Company: Medley Management Inc.
Commission File No. 001-36638
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): August 15, 2018 (August 9, 2018)
Medley
Management Inc.
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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001-36638
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(State or other jurisdiction of incorporation)
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47-1130638
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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280
Park Avenue, 6
th
Floor East
New York, NY 10017
(Address
of Principal Executive Offices and Zip Code)
Registrant’s
telephone number, including area code:
(212) 759-0777
Not
Applicable
(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:
x
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR
§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging
growth company
x
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
x
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Item 1.01
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Entry into a Material Definitive Agreement.
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As previously announced,
on August 9, 2018, Sierra Income Corporation (
“Sierra”
), Medley Capital Corporation (
“MCC”
),
and Medley Management Inc. (
“Medley”
) jointly issued a press release announcing the execution of: (i) an
Agreement and Plan of Merger (the
“MCC Merger Agreement”
) by and between MCC and Sierra, pursuant to
which MCC will, on the terms and subject to the conditions set forth in the MCC Merger Agreement, merge with and into Sierra, with
Sierra as the surviving company in the merger (the
“MCC Merger”
); and (ii) an Agreement and Plan of Merger
(the
“MDLY Merger Agreement”
) by and among Medley, Sierra, and Sierra Management Inc., a wholly-owned
subsidiary of Sierra (
“Merger Sub”
), pursuant to which Medley will, on the terms and subject to the conditions
set forth in the MDLY Merger Agreement, merge with and into Merger Sub, with Merger Sub as the surviving company in the merger
(the
“MDLY Merger”
). As a result of the foregoing, the investment management function relating to the
operation of Sierra, as the surviving company, will be internalized. A description of the MDLY Merger Agreement is set forth
below and is qualified in its entirety by the full text of the MDLY Merger Agreement, which is attached hereto as Exhibit 2.1.
For a description of the MCC Merger Agreement and a copy of the MCC Merger Agreement, please
refer to
the Current Report on Form 8-K filed by Sierra on August 15, 2018
and
the
Current Report on Form 8-K filed by
MCC on August 15, 2018.
Subject to certain required
approvals and other closing conditions, as described above, the parties anticipate that the MCC Merger and the MDLY Merger will
close in the fourth quarter of 2018 or the first quarter of 2019.
The MDLY Merger Agreement
contains representations and warranties that Sierra and Medley have made as of specific dates. Except for its status as a contractual
document that establishes and governs the legal relations among the parties with respect to the transactions described therein,
the MDLY Merger Agreement is not intended to be a source of factual, business or operational information about the parties. The
representations and warranties contained in the MDLY Merger Agreement were made only for purposes of those agreements and as of
specific dates, may be subject to a contractual standard of materiality different from what an investor or a stockholder might
view as material, may have been used for purposes of allocating risk between the respective parties rather than establishing matters
as facts, and may have been qualified by certain disclosures not reflected in the MDLY Merger Agreement that were made to the other
party in connection with the negotiation of the MDLY Merger Agreement and generally were solely for the benefit of the parties
to that agreement. Investors or stockholders should read the MDLY Merger Agreement together with the other information concerning
Medley that it files in reports and statements with the Securities and Exchange Commission (the
“SEC”
).
MDLY Merger Agreement
Pursuant to the MDLY
Merger Agreement, subject to certain conditions described therein, at closing, Medley will merge with and into Merger Sub, and
the separate corporate existence of Medley shall cease. Merger Sub shall be the surviving company in the MDLY Merger and shall
continue its existence as a corporation under the laws of the State of Delaware. The MDLY Merger will become effective at the time
the certificate of merger is filed with the Secretary of State of the State of Delaware or at such later date and time as is specified
in such certificate of merger (the
“MDLY Merger Effective Time”
). Medley’s board of directors (the
“MDLY Board”
), acting upon the recommendation of a special committee consisting solely of independent
and disinterested directors, unanimously approved the MDLY Merger upon the terms and subject to the conditions and limitations
set forth in the MDLY Merger Agreement.
In the MDLY Merger,
each share of Class A Common Stock, par value $0.01 per share, of Medley (
“Class A Common Stock”
), issued
and outstanding immediately prior to the MDLY Merger Effective Time, other than Dissenting Shares (as defined and discussed below)
and shares of Class A Common Stock held by Medley, Sierra or their respective wholly-owned subsidiaries, will be exchanged for
(i) 0.3836 shares of Sierra Common Stock; provided that cash will be paid in lieu of fractional shares of Sierra Common Stock;
plus (ii) cash in an amount equal to $3.44 per share; plus (iii) the First Special Dividend Shortfall (as defined and discussed
below), if any and if applicable; plus (iv) the Second Dividend Shortfall (as defined and discussed below), if any and if applicable.
Under the MDLY Merger
Agreement, (a) Medley shall cause Medley LLC to declare a dividend to all holders of limited liability company units of Medley
LLC (
“Medley LLC Units”
), including Medley, in an amount equal to the lesser of (i) $0.35 per Medley
LLC Unit, and (ii) the maximum dividend per Medley LLC Unit that Medley LLC may make based on its available cash at the time of
such declaration of such dividend, and (b) the Medley Board shall declare a dividend to all holders of shares of Class A Common
Stock in an amount per share equal to the lesser of (i) $0.35 per share of Class A Common Stock, and (ii) the maximum dividend
per share of Class A Common Stock that Medley may make based on its available cash at the time of declaration of such dividend
(collectively, the
“First Special Dividend”
) with the amounts payable in respect of each Unit and each
share of Class A Common Stock in all events being equal, and (b) the Medley Board will declare prior to the MDLY Merger Effective
Time, and pay after the MDLY Merger Effective Time, a dividend (the
“Second Special Dividend”
) in an
amount equal to the lesser of (i) $0.30 per share of Class A Common Stock and (ii) the maximum dividend per share of Class A Common
Stock that Medley may make based on its available cash at the time of declaration of such dividend.
The record date for
determining the holders of Medley LLC Units or shares of Class A Common Stock entitled to payment of the First Special Dividend
shall be the close of business on the second business day immediately preceding the closing date and the First Special Dividend
shall be paid (either by Medley LLC or Medley, but without duplication as to the recipients thereof) on the business day immediately
prior to the Closing Date. Holders of Medley restricted stock units will receive dividend equivalent rights with respect to the
First Special Dividend in accordance with the terms of the Medley 2014 Omnibus Incentive Plan and the related restricted stock
unit award agreements. The record date for determining the holders of shares of Class A Common Stock entitled to payment of the
Second Special Dividend shall be the close of business on the business day immediately preceding the Closing Date and the Second
Special Dividend shall be payable on the business day immediately following the Closing Date.
In the event the First
Special Dividend is less than $0.35 per share, the holders of Medley LLC Units and Class A Common Stock issued and outstanding
on the record date for the First Special Dividend and certain Medley restricted stock units issued and outstanding on the payment
date for the First Special Dividend (and, in each case, who hold Class A Common Stock issued and outstanding immediately preceding
the MDLY Merger Effective Time) shall, as part of the consideration to be paid in the MDLY Merger, be entitled to a cash payment
in an amount equal to the difference between $0.35 per share and the actual per-share amount of the First Special Dividend (the
“First Special Dividend Shortfall”
). In the event the Second Special Dividend is less than $0.30 per
share, the holders of Class A Common Stock issued and outstanding on the record date for the Second Special Dividend (and who hold
Class A Common Stock immediately preceding the MDLY Merger Effective Time) shall, as part of the consideration to be paid in the
MDLY Merger, be entitled to a cash payment in an amount equal to the difference between $0.30 per share and the actual per-share
amount of the Second Special Dividend (the
“Second Special Dividend Shortfall”
). The shares of Sierra
Common Stock to be issued in the MDLY Merger, together with the cash to be paid in lieu of fractional shares, the cash payment
per share of Class A Common Stock, the First Special Dividend Shortfall (if any) and the Second Special Dividend Shortfall (if
any) are referred to collectively as the
“MDLY Merger Consideration”
.
The net effect of the
provisions in the MDLY Merger Agreement and related agreements relating to the First Special Dividend and the Second Special Dividend
is that holders of Class A Common Stock will receive $0.65 per share in cash dividends (or additional merger consideration) and
the holders of Medley LLC Units, Medley Restricted Units and MDLY RSUs will receive $0.35 per share (or equivalent) in cash dividends
dividend equivalents, or additional merger consideration.
Also in the MDLY Merger,
each share of Class B common stock, par value $0.01 per share, of Medley (
“Class B Common Stock”
), other
than Dissenting Shares, issued and outstanding immediately prior to the MDLY Merger Effective Time shall be cancelled and shall
cease to exist and no MDLY Merger Consideration or other amounts or consideration shall be delivered in exchange therefor.
The MDLY Merger Agreement
provides that Medley will take (and will cause Medley LLC to take) all steps necessary to cause all Medley LLC Units held by members
of Medley LLC, other than Medley, issued and outstanding immediately prior to the MDLY Merger Effective Time to be converted into
shares of Class A Common Stock as of immediately prior to the MDLY Merger Effective Time, pursuant to the existing Exchange Agreement
between Medley and the holders of Medley LLC Units (the
“Exchange Agreement”
). In addition, each restricted
Medley LLC Unit outstanding and not previously forfeited (collectively, the
“Medley LLC Restricted Units”
)
shall become fully vested, all restrictions with respect to such Medley LLC Restricted Units shall lapse and the resulting Medley
LLC Units shall be exchanged for Class A Common Stock in accordance with the Exchange Agreement immediately prior to the MDLY Merger
Effective Time. All Class A Common Stock resulting from the exchange of Medley LLC Units (other than Medley LLC Units that immediately
prior to the MDLY Merger Effective Time represented Medley LLC Restricted Units) shall participate in the MDLY Merger on the same
terms applicable to all other shares of Class A Common Stock, other than the right to receive the Second Special Dividend or the
Second Special Dividend Shortfall. All Class A Common Stock resulting from the exchange of Medley LLC Units that immediately
prior to the MDLY Merger Effective Time represented Medley LLC Restricted Units shall participate in the MDLY Merger on the same
terms applicable to all other shares of Class A Common Stock, other than the right to receive the Second Special Dividend or the
Second Special Dividend Shortfall.
Also as of the MDLY
Merger Effective Time, each restricted stock unit of Medley outstanding and not previously forfeited under the Medley 2014 Omnibus
Incentive Plan (collectively, the
“MDLY RSUs”
), other than MDLY RSUs held by non-management directors
of Medley, shall be converted into 0.8532 restricted stock units under an incentive plan to be adopted by Sierra (the
“Sierra
Incentive Plan”
) prior to the MDLY Merger Effective Time (the
“Sierra RSUs”
). Each Sierra
RSU (or portion thereof) into which a MDLY RSU will be converted shall have identical terms as it relates to vesting and forfeiture.
In addition, as of immediately prior to the MDLY Merger Effective Time, the restrictions on each MDLY RSU outstanding and not previously
forfeited under the Medley 2014 Omnibus Incentive Plan held by non-management directors of Medley shall lapse and the relevant
MDLY RSU will be converted into a share of Class A Common Stock that shall participate in the MDLY Merger on the same basis as
the other individual holders of shares of Class A Common Stock, except that such shares of Class A Common Stock shall not be entitled
to receive the Second Special Dividend or the Second Special Dividend Shortfall.
If, between the date of the MDLY Merger
Agreement and the MDLY Merger Effective Time, the outstanding shares of Sierra Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or securities as a result of a reclassification, stock dividend,
stock split, reverse stock split, or other similar change (excluding sales of Sierra Common Stock, sales of Sierra equity-linked
securities, and issuance of Sierra Common Stock pursuant to Sierra’s dividend reinvestment plan or otherwise in lieu of a
portion of any cash dividend declared by Sierra), an appropriate and proportionate adjustment shall be made to the number of shares
of Sierra Common Stock to be issued in the MDLY Merger.It is intended that the MDLY Merger shall constitute a “reorganization”
within the meaning of Section 368(a) of the Code, and that the MDLY Merger Agreement shall constitute a “plan of reorganization”
for such purposes.
The Merger Sub certificate
of incorporation (the
“Merger Sub Charter”
) and bylaws (the
“Merger Sub Bylaws”
),
as in effect immediately prior to the MDLY Merger Effective Time, shall remain the certificate of incorporation and bylaws of the
surviving company in the MDLY Merger, until thereafter amended in accordance with applicable law and the terms of the Merger Sub
Chater or Merger Sub Bylaws. Under the MDLY Merger Agreement, the officers and directors of Merger Sub immediately prior to the
MDLY Merger Effective Time shall be the officers and directors the surviving company in the MDLY Merger, from and after the MDLY
Merger Effective Time until their respective successors have been duly elected or until their respective death, resignation or
removal in accordance with applicable law and the Merger Sub organizational documents.
Promptly following
the date of the MDLY Merger Agreement, the Sierra Board will approve an amendment and restatement of the charter of Sierra (the
“Amended and Restated Charter”
), which Amended and Restated Charter shall be reasonably acceptable to
the Medley Board, including the special committee of the Medley Board, in order to remove terms inconsistent with, and to add terms
advisable to reflect, the publicly traded nature of Sierra, as the surviving company in the MCC Merger, following the MDLY Merger
Effective Time. Following such approval, the Sierra Board shall submit the Amended and Restated Charter to the stockholders of
Sierra for their approval at the special meeting of Sierra’s stockholders. Following the date of the MDLY Merger Agreement,
the Sierra Board will review and approve any amendments to, or amendments and restatements of, the bylaws of Sierra (the
“Sierra
Bylaws”
), which shall be reasonably acceptable to the Medley Board, including the special committee of the Medley
Board, in order to remove terms inconsistent with, and to add terms advisable to reflect, the publicly traded nature of Sierra,
as the surviving company in the MCC Merger, following the MDLY Merger Effective Time. The Sierra Bylaws, as in effect immediately
prior to the MDLY Merger Effective Time, shall remain the bylaws of Sierra, as the surviving company in the MCC Merger, until thereafter
amended in accordance with applicable law and the terms of such bylaws.
Shares of Class A Common
Stock and Class B Common Stock issued and outstanding immediately prior to the MDLY Merger Effective Time that are held by a holder
who has not voted in favor of the MDLY Merger or consented thereto in writing and properly demands appraisal rights of such shares
pursuant to, and who is complying in all respects with, the provisions of Section 262 of the Delaware General Corporation Law (the
“DGCL”
and such shares, the
“Dissenting Shares”
), until such time as such holder
effectively withdraws, fails to perfect or otherwise loses such holder’s appraisal rights under the DGCL with respect to
such shares (at which time such shares shall cease to be Dissenting Shares), shall not be converted into or represent the right
to receive the MDLY Merger Consideration, but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting
Shares (and at the MDLY Merger Effective Time, such Dissenting Shares shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and such holder shall cease to have any rights with respect thereto, except the rights set forth
in Section 262 of the DGCL), unless and until such holder shall have failed to perfect or shall have effectively withdrawn or otherwise
lost such holder’s right to appraisal under the DGCL. If any Dissenting Shares shall lose their status as such (by the holder
thereof effectively withdrawing, failing to perfect, or otherwise losing such holder’s appraisal rights under the DGCL with
respect to such shares), then, as of the later of the MDLY Merger Effective Time or the date of loss of such status, such shares
shall thereupon be deemed to have been converted as of the MDLY Merger Effective Time into the right to receive the applicable
MDLY Merger Consideration, without interest, and shall not thereafter be deemed to be Dissenting Shares.
The MDLY Merger Agreement
contains: (a) representations and warranties from Medley to Sierra, including representations and warranties relating to, among
others: corporate organization, capitalization, corporate authority, absence of conflicts, third party and governmental consents
and approvals, reports and regulatory matters, financial statements, broker’s fees, absence of certain changes and events,
legal proceedings, taxes and tax returns, compliance with applicable law, material contracts, property, intellectual property,
state takeover laws, the fairness opinion received by the special committee of the Medley Board and the fairness opinion received
by the Medley Board, Medley information to be provided for inclusion in the joint proxy statement/prospectus, insurance, environmental
matters, employee benefit plans, other employment matters, related party transactions, investment advisor matters, and broker dealer
matters; (b) representations and warranties from Sierra to Medley, including representations and warranties relating to, among
others: corporate organization, capitalization, corporate authority, absence of conflicts, third party and governmental consents
and approvals, reports and regulatory matters, financial statements, broker’s fees, absence of certain changes and events,
legal proceedings, taxes and tax returns, compliance with applicable law, material contracts, matters relating to Sierra’s
investments and ownership thereof, property, intellectual property, state takeover laws, the fairness opinion received by the special
committee of the Sierra Board, Sierra information to be provided for inclusion in the joint proxy statement/prospectus, insurance,
environmental matters, absence of financing condition and Section 15(f) of the Investment Company Act of 1940, as amended (the
“Investment Company Act”
); (c) covenants of Medley, including covenants to the effect that, prior to
the MDLY Merger Effective Time or the earlier termination of the MDLY Merger Agreement, Medley will, and will cause its subsidiaries
to, conduct its business in the ordinary course, use commercially reasonable efforts to maintain and preserve intact Medley’s
business organization and relationships and retain its key officers and key employees, to take no action that is intended to or
would be reasonably expected to adversely affect or materially delay the ability of Medley or Sierra to obtain any required governmental
approvals required for the transactions contemplated by the MDLY Merger Agreement or to perform its obligations under the MDLY
Merger Agreement or to consummate the MDLY Merger, and to forbear from taking certain material actions without the prior written
consent of Sierra; (d) covenants of Sierra, including covenants to the effect that, prior to the MDLY Merger Effective Time or
the earlier termination of the MDLY Merger Agreement, Sierra will, and will cause its subsidiaries to, conduct its business in
the ordinary course, use commercially reasonable efforts to maintain and preserve intact Sierra’s business organization and
relationships and retain its key officers and key employees, and to take no action that would be reasonably expected to adversely
affect or materially delay the ability of Sierra or Medley to obtain any required governmental approvals required for the transactions
contemplated by the MDLY Merger Agreement or to perform its obligations under the MDLY Merger Agreement or to consummate the MDLY
Merger, and to forbear from taking certain material actions without the prior written consent of Medley; (e) mutual covenants cooperate
with each other and to use their respective commercially reasonable efforts to promptly prepare and file all necessary documentation,
to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals
and authorizations of all third parties and governmental entities that are necessary or advisable to consummate the MDLY Merger,
including, among others; (i) filing the the Form N-14 Registration Statement and a Schedule 13E-3 with the SEC and mail a joint
proxy statement/prospectus to solicit approval of Medley’s stockholders and Sierra’s stockholders for the MDLY Merger
and related matters; (ii) if applicable, filing a notification and report form with the Federal Trade Commission and Department
of Justice as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, amended (the
“HSR Act”
)
and cooperating and coordinating in connection therewith and supplying requested information and taking such other actions reasonably
necessary to cause the expiration or termination of any applicable waiting period under the HSR Act applicable to the Merger as
soon as practicable; and (iii) submitting an application to the Staff of the Division of Investment Management of the SEC
seeking
an exemptive order from the SEC granting relief to Sierra, MCC and Medley from Sections 12(d)(3), 57(a)(4) and 60 of the Investment
Company Act, and Rule 17d-1 thereunder to the extent necessary to permit the MCC Merger and the MDLY Merger
(the
“SEC
Exemptive Relief”
); and (f) certain other covenants, including covenants regarding access to information, filing
of periodic reports, seeking Medley and Sierra stockholder approval, seeking approval of listing of Sierra Common Stock (including
shares of Sierra Common Stock to be issued in the MDLY Merger and the MCC Merger) on the NYSE and the Tel Aviv Stock Exchange,
conversion of Medley LLC Units to Class A Common Stock, post-closing indemnification of officers and directors of MDLY and acquiring
directors’ and officers’ insurance, taking actions to cause dispositions of Class A Common Stock (or conversion of
related derivative securities) in connection with the MDLY Merger to be exempt under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, to the extent permitted thereunder, non-solicitation of competing offers from third parties and
restrictions on changing board recommendations relating to the Merger and related matters, subject to specified exceptions, , taking
steps necessary to terminate or continue existing indebtedness of Medley, and certain other covenants relating to state takeover
statutes, litigation, compliance with Section 15(f) of the Investment Company Act, entering into employment agreements with specified
executives and adoption of the Sierra Incentive Plan prior to closing, waivers of, or amendments to, the MCC Merger Agreement and
repayment of amounts owed to Sierra’s investment adviser.
The obligations of
the parties to complete the MDLY Merger are subject to certain conditions, including: (a) the receipt of the affirmative vote of
the holders of a majority of the outstanding shares of Sierra Common Stock entitled to vote at the meeting at which the Merger
and related matters are voted upon, and receipt of theaffirmative vote of the holders of a majority of the voting power of the
outstanding shares of Medley Common Stock entitled to vote at the meeting at which the Merger and related matters are voted upon
; (b) the registration statement on Form N-14 (the
“Form N-14 Registration Statement”
) having been declared
effective and no stop order suspending the effectiveness of the Form N-14 Registration Statement shall have been issued and no
proceeding therefor initiated or threatened by the SEC; (c) the outstanding Sierra Common Stock and the Sierra Common Stock to
be issued in the MDLY Merger and in the MCC Merger shall be authorized for listing on the NYSE, subject to official notice of issuance;
(d) the SEC Exemptive Relief shall have been granted and be in full force and effect as of the closing date; (e) Sierra shall have
made or obtained such filings and approvals as are required to be made or obtained under the securities or “Blue Sky”
laws of various states in connection with the issuance of the shares of Sierra Common Stock in the MDLY Merger; (f) no order, injunction
or decree issued by any court or agency of competent jurisdiction or other law preventing or making illegal the consummation of
the MDLY Merger or any of the other transactions contemplated by the MDLY Merger Agreement shall be in effect; (g) any applicable
waiting period (and any extension thereof) applicable to the MDLY Merger under the HSR Act shall have expired or been terminated;
(h) on (and not sooner than) the Closing Date, all issued and outstanding Medley LLC Units (including Medley LLC Restricted Units
that have vested) other than Medley LLC Units held by Medley, shall have been converted into Class A Common Stock in accordance
with the exchange agreement in effect between Medley and the holders of Medley LLC Units ; (i) the agreement providing for the
termination of the existing tax receivable agreement (described below) shall have been executed and be in full force and effect;
(j) each of the conditions to closing under the MCC Merger Agreement shall have been satisfied or appropriately waived, and the
MCC Merger shall be consummated simultaneously with the MDLY Merger; (k) Medley shall have obtained written consents to the continuation,
following the MDLY Merger Effective Time, of the advisory relationship with private funds and managed accounts representing sixty-five
percent (65%) of Medley’s total revenues from private funds and managed accounts for the 12-month period ended as of June
30, 2018; (l) the SEC shall have confirmed in a manner reasonably acceptable to the parties that the equity of the surviving company
in the MDLY Merger shall, following the MDLY Merger, be treated as a portfolio investment of Sierra and reflected in Sierra’s
consolidated financial statements at fair value for accounting purposes, and that such surviving company’s financial results
will not be consolidated into the financial statements of Sierra; (m) there shall be no pending suit, action or proceeding by any
governmental entity (i) challenging the acquisition by Sierra of any Medley common stock, seeking to restrain or prohibit the consummation
of the Merger or any other transaction contemplated by the MDLY Merger Agreement or seeking to obtain from Medley or Sierra any
damages that are material in relation to Medley and its subsidiaries taken as a whole, or (ii) seeking to prohibit Sierra or any
of its subsidiaries from effectively controlling in any material respect the business or operations of Medley or its subsidiaries;
and (o) the parties shall have received Eversheds Sutherland (US) LLP (or such other counsel as may be reasonably satisfactory
to the parties) a legal opinion, dated as of the closing date, regarding qualification of the MDLY Merger as a reorganization within
the meaning of Section 368(a) of the Code.
In addition to the
foregoing mutual conditions to closing, (a) Sierra’s obligation to consummate the MDLY Merger are further conditioned upon
(i) the accuracy of the representations and warranties of Medley (subject to the interpretive standards set forth in the MDLY Merger
Agreement), (ii) the performance by Medley, in all material respects, of its obligations under the MDLY Merger Agreement, (iii)
Medley shall have delivered to Sierra fully executed copies of all consents and approvals required under Medley LLC’s existing
debt documents, other than those relating to Medley’s credit facility with City National Bank (which shall be terminated
at closing), in order to keep the indebtedness outstanding thereunder and such debt documents in full force and effect in accordance
with their terms as of the date of the MDLY Merger Agreement without any breach or violation thereof, and (iv) specified executives
shall have entered into employment agreements, effective at the MDLY Merger Effective Time, on terms set forth in the MDLY Merger
Agreement, and (b) Medley’s obligation to consummate the MDLY Merger are further conditioned upon (i) the accuracy of the
representations and warranties of Sierra (subject to the interpretive standards set forth in the MDLY Merger Agreement), (ii) the
performance by Sierra, in all material respects (or, in the case of Sierra’s obligation to not amend or waive the terms of
the MDLY Merger Agreement in a manner adverse to the MCC stockholders, in all respects), of its obligations under the MDLY Merger
Agreement, and (iii) Sierra shall (A) have taken all actions, and executed all documents, reasonably required of Sierra by the
holders of indebtedness under Medley LLC’s existing debt documents, other than those relating to Medley LLC’s credit
facility with City National Bank, in order to keep such indebtedness outstanding and such debt documents in full force and effect
in accordance with their terms as of the date of the MDLY Merger Agreement without any breach or violation thereof and to keep
amounts outstanding thereunder immediately after the MDLY Merger Effective Time; and (B) have taken all actions, and executed all
documents, reasonably required of Sierra in order to keep the indebtedness represented by Sierra’s debt documents outstanding
and the Sierra debt documents in full force and effect in accordance with their terms as of the date of the MDLY Merger Agreement
without any breach or violation thereof.
Sierra and Medley have
the right to terminate the MDLY Merger Agreement under certain circumstances, including (a) by mutual written agreement of each
party; or (b) by either Sierra or Medley if: (i) any governmental entity whose consent or approval is a condition to closing set
forth in Section 8.1 of the MDLY Merger Agreement has denied the granting of any such consent or approval and such denial has become
final and nonappealable, or any governmental entity of competent jurisdiction shall have issued a final and nonappealable order,
injunction or decree permanently enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated
by the MDLY Merger Agreement; (ii) the MDLY Merger has not closed on or prior to March 31, 2019 (provided that the failure of the
MDLY Merger to close by such date is not due to the failure of the party seeking to terminate the MDLY Merger Agreement to comply
with its obligations thereunder and provided that the party seeking to terminate the MDLY Merger Agreement is not then in material
breach of any representation, warranty, covenant or other agreement and such breach has caused or resulted in the failure of the
closing to occur by such date); (iii) if the requisite approval of Sierra stockholders or Medley stockholders is not obtained at
a meeting at which a vote on the MDLY Merger and related transactions is taken, (iv) if the MCC Merger Agreement is terminated;
or (v) there is a breach of any covenants, agreements, representations or warranties by the other party that would result in a
failure of certain closing conditions and is not cured within thirty days following written notice thereof or by its nature cannot
be cured within such time period.
Sierra may also terminate
the MDLY Merger Agreement in the event (i) the Medley Board has made an adverse recommendation change prior to receipt of the requisite
approval of the Medley stockholders (and such termination occurs within 10 business days of such adverse recommendation change),
(ii) the Medley Board shall have approved or authorized Medley or any of its subsidiaries to enter into an agreement with a third
party relating to certain mergers or other acquisition transactions involving Medley, or (iii) Medley fails to include the Medley
Board recommendation in favor of the MDLY Merger and related matters in the joint proxy statement/prospectus. Sierra may also terminate
the MDLY Merger Agreement in the event the Sierra Board changes its recommendation of the MDLY Merger and related matters or to
accept a “superior proposal” from a third party, in each case subject to certain procedural requirements set forth
in the MDLY Merger Agreement.
Medley may also terminate
the MDLY Merger Agreement in the event (i) the Sierra Board has made an adverse recommendation change prior to receipt of the requisite
approval of the Sierra stockholders (and such termination occurs within 10 business days of such adverse recommendation change),
(ii) the Sierra Board shall have approved or authorized Sierra or any of its subsidiaries to enter into an agreement with a third
party relating to certain mergers or other acquisition transactions involving Sierra, or (iii) Sierra fails to include the Sierra
Board recommendation in favor of the MDLY Merger and related matters in the joint proxy statement/prospectus. Medley may also terminate
the MDLY Merger Agreement in the event the MDLY Board changes its recommendation of the MDLY Merger and related matters or to accept
a “superior proposal” from a third party, in each case subject to certain procedural requirements set forth in the
MDLY Merger Agreement.
In certain circumstances,
either party may be obligated to pay the other party a termination fee of $5,350,000 in cash (the
“MDLY Merger Termination
Fee”
). Generally, those circumstances relate to a party’s right to terminate the MDLY Merger Agreement in connection
with an “adverse recommendation change” by the Sierra Board or the Medley Board, as applicable, and the acceptance
by Sierra or Medley, as applicable, of a superior proposal. In addition, either party may be obligated to pay the MDLY Merger Termination
Fee if the MDLY Merger Agreement is terminated because the stockholders of such party vote on, but do not approve, the MDLY Merger
and related matters and thereafter such party (
i.e.
, whichever party’s stockholders did not approve the MDLY Merger
and related matters) consummates a significant corporate transaction with a third party within 12 months of such termination, subject
to the conditions described in the MDLY Merger Agreement regarding receipt of a competing proposal from a third party prior to
such stockholder meeting and the consummation of the subsequent transaction with such third party. In no event will a party have
an obligation to pay a MDLY Merger Termination Fee more than once.
In connection with
the MDLY Merger Agreement, Medley, Medley LLC, Medley Group LLC, the holders of Medley LLC Units and Sierra entered into a Termination,
Waiver and Lockup Agreement pursuant to which the relevant parties agreed that (i) the existing tax receivable agreement between
Medley and holders of Medley LLC Units (other than Medley) will be terminated, effective as of the MDLY Merger Effective Time;
(ii) the existing registration rights agreement between Medley, Medley Group LLC and holders of Medley LLC Units (other than Medley)
will be terminated, effective as of the MDLY Merger Effective Time; (iii) the holders of Medley LLC Units (other than Medley) and
waived any right they may have to sell or exchange Medley LLC Units except as contemplated by the MDLY Merger Agreement, (iv) holders
of Medley LLC Units agreed to not sell the shares of Sierra Common Stock to be received by them in connection with the MDLY Merger
for one year from the MDLY Merger Effective Date, subject to certain exceptions specified therein, and (v) the parties agreed to
mutual releases with respect to the exchange agreement, tax receivable agreement and the registration rights agreement.
In addition, also in
connection with the MDLY Merger Agreement, parties to existing Unit Award Agreements relating to Medley LLC Restricted Units entered
into amendments of such agreements in order to reflect provisions in such agreements that are consistent with the treatment set
forth in the MDLY Merger Agreement.
***********
No Offer or Solicitation
The information in
this communication is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer
to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval in any jurisdiction pursuant
to or in connection with the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer of securities
in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as amended.
Important Information and Where to Find It
In connection with
the proposed transactions, Sierra intends to file with the SEC and mail to its stockholders a Registration Statement on Form N-14
that will include a proxy statement and that also will constitute a prospectus of Sierra, and MCC and Medley intend to file with
the SEC and mail to their respective stockholders a proxy statement on Schedule 14A (collectively, the “
Joint Proxy
Statement/Prospectus
”). The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of Sierra,
MCC, and Medley, respectively. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS, AS WELL AS
ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT SIERRA, MCC, AND MEDLEY, THE PROPOSED TRANSACTIONS AND RELATED MATTERS. When available, investors
and security holders will be able to obtain the Joint Proxy Statement/Prospectus and other documents filed with the SEC by Sierra,
MCC, and Medley, free of charge, from the SEC’s web site at www.sec.gov and from Sierra’s website (www.sierraincomecorp.com),
MCC’s website (www.medleycapitalcorp.com), or Medley’s website (www.mdly.com). Investors and security holders may also
obtain free copies of the Joint Proxy Statement/Prospectus and other documents filed with the SEC from Sierra, MCC, or Medley by
contacting Sam Anderson, Medley’s Investor Relations contact, at 212-759-0777.
Participants in the Potential Solicitation
Sierra, MCC, and Medley
and their respective directors, executive officers, other members of their management, employees and other persons may be deemed
to be participants in the anticipated solicitation of proxies in connection with the proposed transactions. Information regarding
Sierra’s directors and executive officers is available in its definitive proxy statement for its 2018 annual meeting of stockholders
filed with the SEC on March 14, 2018 (the “
Sierra 2018 Proxy Statement
”). Information regarding MCC’s
directors and executive officers is available in its definitive proxy statement for its 2018 annual meeting of stockholders filed
with the SEC on December 21, 2017 (the “
MCC 2018 Proxy Statement
”). Information regarding Medley’s
directors and executive officers is available in its annual report for the year ended December 31, 2017 on Form 10-K filed with
the SEC on March 29, 2018 (the “
Medley 2017 10-K
”). To the extent holdings of securities by such directors
or executive officers have changed since the amounts disclosed in the Sierra 2018 Proxy Statement, the MCC 2018 Proxy Statement,
and the Medley 2017 Form 10-K, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed
by such directors or executive officers, as the case may be, with the SEC. More detailed information regarding the identity of
potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the Joint
Proxy Statement/Prospectus when such documents become available and in other relevant materials to be filed with the SEC.
These documents may be obtained free of charge from the sources indicated above.
Cautionary Statement Regarding Forward-Looking Statements
This communication
contains “forward-looking” statements as that term is defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including
statements regarding the proposed transactions. Such forward-looking statements reflect current views with respect to future events
and financial performance, and each of Sierra, MCC and Medley may make related oral forward-looking statements on or following
the date hereof. Statements that include the words “should,” “would,” “expect,” “intend,”
“plan,” “believe,” “project,” “anticipate,” “seek,” “will,”
and similar statements of a future or forward-looking nature identify forward-looking statements in this material or similar oral
statements for purposes of the U.S. federal securities laws or otherwise. Because forward-looking statements, such as the date
that the parties expect the proposed transactions to be completed and the expectation that the proposed transactions will provide
improved liquidity for Sierra, MCC, and Medley stockholders and will be accretive to net investment income for both Sierra and
MCC, include risks and uncertainties, actual results may differ materially from those expressed or implied and include, but are
not limited to, those discussed in each of Sierra’s, MCC’s and Medley’s filings with the SEC, and (i) the satisfaction
or waiver of closing conditions relating to the proposed transactions described herein, including, but not limited to, the requisite
approvals of the stockholders of each of Sierra, MCC, and Medley; Sierra successfully taking all actions reasonably required with
respect to certain outstanding indebtedness of MCC and Medley to prevent any material adverse effect relating thereto; certain
required approvals of the SEC and the Small Business Administration, the necessary consents of certain third-party advisory clients
of Medley; and any applicable waiting period (and any extension thereof) applicable to the transactions under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired or been terminated, (ii) the parties’ ability to successfully
consummate the proposed transactions, and the timing thereof, and (iii) the possibility that competing offers or acquisition proposals
related to the proposed transactions will be made and, if made, could be successful. Additional risks and uncertainties specific
to Sierra, MCC and Medley include, but are not limited to, (i) the costs and expenses that Sierra, MCC and Medley have, and may
incur, in connection with the proposed transactions (whether or not they are consummated), (ii) the impact that any litigation
relating to the proposed transactions may have on any of Sierra, MCC and Medley, (iii) that projections with respect to dividends
may prove to be incorrect, (iv) Sierra’s ability to invest our portfolio of cash in a timely manner following the closing
of the proposed transactions, (v) the market performance of the combined portfolio, (vi) the ability of portfolio companies to
pay interest and principal in the future; (vii) the ability of Medley to grow its fee earning assets under management; (viii) whether
Sierra, as the surviving company, will trade with more volume and perform better than MCC and Medley prior to the proposed transactions;
and (ix) negative effects of entering into the proposed transactions on the trading volume and market price of the MCC’s
or Medley’s common stock.
The foregoing review
of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements
that will be included in the Joint Proxy Statement/Prospectus relating to the proposed transactions, and in the “Risk Factors”
sections of each of Sierra’s, MCC’s and Medley’s most recent Annual Report on Form 10-K and most recent Quarterly
Report on Form 10-Q. The forward- looking statements in this press release represent Sierra’s, MCC’s and Medley’s
views as of the date of hereof. Sierra, MCC and Medley anticipate that subsequent events and developments will cause their views
to change. However, while they may elect to update these forward-looking statements at some point in the future, none of Sierra,
MCC or Medley have the current intention of doing so except to the extent required by applicable law. You should, therefore, not
rely on these forward-looking statements as representing Sierra’s, MCC’s or Medley’s views as of any date subsequent
to the date of this material.
|
Item 9.01
|
Financial Statements and Exhibits.
|
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
Exhibit No.
|
|
Description
|
2.1
|
|
Agreement and Plan of Merger, dated as of August 9, 2018, by and among Medley Management Inc., Sierra Income Corporation and Sierra Management, Inc.
|
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.
Date: August 15, 2018
|
|
MEDLEY MANAGEMENT INC.
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Richard T. Allorto, Jr.
|
|
Name:
|
|
Richard T. Allorto, Jr.
|
|
Title:
|
|
Chief Financial Officer
|
Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN
OF MERGER
by and among
MEDLEY MANAGEMENT
INC.
SIERRA INCOME CORPORATION
and
SIERRA MANAGEMENT,
INC.
DATED AS OF AUGUST
9, 2018
TABLE OF CONTENTS
Article I
|
DEFINED TERMS
|
2
|
|
|
|
Article II
|
THE MERGER
|
14
|
|
|
|
Article III
|
CLOSING; DELIVERY OF MERGER CONSIDERATION
|
20
|
|
|
|
Article IV
|
REPRESENTATIONS AND WARRANTIES OF MDLY
|
23
|
|
|
|
Article V
|
REPRESENTATIONS AND WARRANTIES OF SIC
|
39
|
|
|
|
Article VI
|
COVENANTS RELATING TO CONDUCT OF BUSINESS
|
49
|
|
|
|
Article VII
|
ADDITIONAL AGREEMENTS
|
53
|
|
|
|
Article VIII
|
CONDITIONS PRECEDENT
|
65
|
|
|
|
Article IX
|
TERMINATION AND AMENDMENT
|
68
|
|
|
|
Article X
|
GENERAL PROVISIONS
|
72
|
Exhibit A
|
Tax Receivable Termination Agreement
|
|
|
Exhibit B-1
|
Form of Employment Agreement
|
|
|
Exhibit B-2
|
Employees and Economic Terms
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN
OF MERGER
, dated as of August 9, 2018 (this
“Agreement”
), by and among Medley Management Inc., a
Delaware corporation (
“MDLY”
), Sierra Income Corporation, a Maryland corporation (
“SIC”
)
and Sierra Management, Inc., a Delaware corporation and wholly-owned subsidiary of SIC (
“Merger Sub”
).
RECITALS:
WHEREAS
, the
board of directors of MDLY (the “
MDLY Board
”), acting upon the recommendation of a special committee
thereof consisting only of independent and disinterested directors (the “
MDLY Special Committee
”), has
unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the merger of MDLY with and
into Merger Sub, with Merger Sub as the surviving company (the
“Merger”
and Merger Sub, in its capacity
as the surviving company in the Merger, sometimes referred to herein as the
“Surviving Company”
), are
advisable and fair to, and in the best interests of, MDLY and its stockholders, (ii) approved and declared advisable this Agreement
and the transactions contemplated hereby, including the Merger, (iii) resolved to submit this Agreement to the stockholders of
MDLY for its adoption, and (iv) recommended that the stockholders of MDLY approve the adoption of this Agreement;
WHEREAS
, the
board of directors of Merger Sub (the “
Merger Sub Board
”) has (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are advisable and fair to, and in the best interests of, Merger Sub
and its sole stockholder, (ii) approved and declared advisable this Agreement and the transactions contemplated hereby, including
the Merger, (iii) resolved to submit this Agreement to the sole stockholder of Merger Sub for its adoption, and (iv) recommended
that the sole stockholder of Merger Sub approve the adoption of this Agreement;
WHEREAS
, the
board of directors of SIC (the “
SIC Board
”), acting upon the recommendation of a special committee thereof
consisting only of independent and disinterested directors (the “
SIC Special Committee
”), has unanimously
(i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and fair to, and
in the best interests of, SIC and its stockholders, (ii) approved and declared advisable this Agreement and the transactions contemplated
hereby, including the Merger, (iii) resolved to submit this Agreement to the stockholders of SIC for its adoption, and (iv) recommended
that the stockholders of SIC approve the adoption of this Agreement;
WHEREAS
, for
federal income Tax purposes, it is the intent of the parties hereto that the Merger shall qualify as a “reorganization”
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”
),
and this Agreement is intended to be and is adopted as a “plan of reorganization” for such purposes;
WHEREAS
, contemporaneously
herewith, SIC and Medley Capital Corporation (
“MCC”
) are entering into a merger agreement (the
“MCC
Merger Agreement”
) pursuant to which MCC will, on the terms and subject to the conditions set forth in the MCC Merger
Agreement, merge with and into SIC, with SIC as the surviving company in the merger (the
“MCC Merger”
and, together with the Merger, the
“Mergers”
);
WHEREAS,
the
Mergers are part of an integrated transaction designed to combine the BDC operations of SIC and MCC and internalize the investment
management function relating to the operation of SIC, as the surviving company in the MCC Merger;
WHEREAS,
notwithstanding
the foregoing internalization of the investment management function, effective as of Closing, SIC, as the surviving company in
the MCC Merger, will enter into an investment management agreement with MCC Advisors LLC, on the terms set forth in the MCC Merger
Agreement;
WHEREAS
, Eversheds
Sutherland, on behalf of the parties hereto and MCC, has been in ongoing discussions with the Securities and Exchange Commission
(“
SEC
”) concerning the filing of an application with the SEC to obtain the SEC Exemptive Relief (as defined
herein) and each of the parties hereto and MCC intends to file such application with the SEC promptly as soon as practical following
the date hereof and intends that the Mergers not be consummated unless and until the SEC Exemptive Relief is granted to the parties;
WHEREAS,
the
parties are entering into this Agreement and the MCC Merger on the expectation that the SEC will confirm in a manner reasonably
acceptable to the parties that the equity of the Surviving Company, following the Merger, will be treated as a portfolio investment
of SIC and reflected in SIC’s consolidated financial statements at fair value for accounting purposes, and that the Surviving
Company’s financial results will not be consolidated into the financial statements of SIC; and
WHEREAS
, the
parties desire to make certain representations, warranties and agreements in connection with the Merger and to prescribe certain
conditions to the Merger.
NOW, THEREFORE
,
in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby,
the parties agree as follows:
Article
I
DEFINED
TERMS
1.1 For
purposes of this Agreement, the following terms shall have the meanings set forth below:
“Acceptable
Confidentiality Agreement”
has the meaning set forth in Section 7.11(d).
“Adverse
Recommendation Change”
has the meaning set forth in Section 7.11(e).
“Affiliate”
means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control
with such Person. The term “control” means possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise;
provided, however, that in no event shall the term “Affiliate” include any portfolio company of SIC.
“Agreement”
has the meaning set forth in the preamble to this Agreement.
“Alpine
Funding Loan Documents”
means that certain Amended and Restated Loan Agreement, dated as of September 29, 2017, by
and among Alpine Funding LLC, as borrower, JPMorgan Chase Bank, National Association, as Administrative Agent, the Financing Providers
from time to time party thereto, SIC Advisors LLC, as Portfolio Manager, and the Collateral Administrator, Collateral Agent and
Securities Intermediary party thereto.
“Amended
and Restated Charter”
has the meaning set forth in Section 2.6(b).
“Applicable
Law”
means, with respect to a specified Person, any federal, state, local, municipal, or foreign constitution, treaty,
law (including the common law), statute, code, ordinance, rule, regulation, permit, approval, judgment, order, writ, decree or
injunction applicable to the specified Person.
“Arbor
Funding Debt Documents”
means, collectively, (i) ISDA 2002 Master Agreement, together with the Schedule thereto and
Credit Support Annex to such Schedule, each dated as of August 27, 2013, by and between Arbor Funding LLC and Citibank, N.A., and
(ii) Fifth Amended and Restated Confirmation Letter Agreement, dated as of September 29, 2017, by and between Arbor Funding LLC
and Citibank, N.A.
“Bankruptcy
and Equity Exception”
has the meaning set forth in Section 4.3(a).
“BDC”
has the meaning set forth in Section 2(a)(48) of the Investment Company Act.
“
Book-Entry
Shares
” means shares of MDLY Common Stock in non-certificated form represented by book entry.
“Business
Day”
means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized
or required by Applicable Law to close.
“Cash Consideration”
has the meaning set forth in Section 2.4(c).
“Certificate”
has the meaning set forth in Section 2.4(e).
“Certificate
of Merger”
has the meaning set forth in Section 2.2.
“Claim”
means any claim, action, suit, proceeding or investigation, whether civil, arbitral, criminal or administrative.
“Class
A Common Stock”
means the shares of Class A Common Stock, par value $0.01 per share, of MDLY.
“Class
A Unit Award Agreements”
means the Class A Unit Award Agreements under the Fourth Amended and Restated Limited Liability
Company Agreement of Medley LLC between various participants and Medley LLC.
“Class
B Common Stock”
means the shares of Class B Common Stock, par value $0.01 per share, of MDLY.
“Closing”
has the meaning set forth in Section 3.1.
“Closing
Date”
has the meaning set forth in Section 3.1.
“CNB Credit
Facility”
means the credit facility evidenced by (i) the Credit Agreement, dated as of August 19, 2014, among Medley
LLC, the lenders party thereto and City National Bank; (ii) Amendment Number One and Consent dated as of August 12, 2015 to the
Credit Agreement, dated as of August 19, 2014, among Medley LLC, the lenders party thereto and City National Bank; (iii) Amendment
Number Two dated as of May 3, 2016 to the Credit Agreement, dated as of August 19, 2014, among Medley LLC, the lenders party thereto
and City National Bank; (iv) Amendment Number Three to Credit Agreement, dated as of September 22, 2017, by and among the lenders
identified on the signatures pages thereto, City National Bank and Medley LLC; and (v) the Guarantee and Collateral Agreement,
dated as of August 19, 2014, among Medley LLC, the subsidiary guarantors party thereto and City National Bank, in each case as
amended and in effect on the date hereof.
“Code”
has the meaning set forth in the Recitals to this Agreement.
“Competing
Proposal”
means any inquiry, proposal or offer made by any Third Party: (a) to purchase or otherwise acquire, directly
or indirectly, in one transaction or a series of transactions (including any merger, consolidation, tender offer, exchange offer,
stock acquisition, asset acquisition, binding share exchange, business combination, recapitalization, liquidation, dissolution,
joint venture or similar transaction), (i) beneficial ownership (as defined under Section 13(d) of the Exchange Act) of twenty
percent (20%) or more of any class of equity securities of MDLY or SIC, as applicable, or (ii) any one or more assets or businesses
of MDLY or its Subsidiaries or SIC or its Subsidiaries that constitute twenty percent (20%) or more of the revenues or assets of
MDLY and its Subsidiaries, taken as a whole, or SIC and its Subsidiaries, taken as a whole, as applicable; or (b) any liquidation
of MDLY or SIC, in each case other than the Merger and the other transactions to occur at Closing in accordance with this Agreement.
“Confidentiality
Agreement”
has the meaning set forth in Section 7.2(c).
“Delaware
Courts”
has the meaning set forth in Section 10.6.
“Delaware
Secretary”
has the meaning set forth in Section 2.2
“DGCL”
means the General Corporation Law of the State of Delaware.
“Disqualifying
Event”
means any of the disqualifying events listed in Section 506 of Regulation D under the Securities Act.
“Dissenting
Shares”
means shares of MDLY Common Stock issued and outstanding immediately prior to the Effective Time that are
held by a holder who has not voted in favor of the Merger or consented thereto in writing and properly demands appraisal rights
of such shares pursuant to, and who is complying in all respects with, the provisions of Section 262 of the DGCL (until such time
as such holder effectively withdraws, fails to perfect or otherwise loses such holder’s appraisal rights under the DGCL with
respect to such shares, at which time such shares shall cease to be Dissenting Shares).
“DOJ”
means the Antitrust Division of the United States Department of Justice.
“DTC”
has the meaning set forth in Section 3.4(a).
“Effective
Time”
has the meaning set forth in Section 2.2.
“Employment
Agreements”
has the meaning set forth in Section 7.16.
“Environmental
Laws”
means, collectively, with respect to a specified Person, any and all environmental, health or safety matters
or any private or governmental environmental, health or safety investigations or remediation activities of any nature with respect
to any real property owned by the specified Person or its Subsidiaries seeking to impose, or that are reasonably likely to result
in, any liability or obligation of the specified Person or any of its Subsidiaries arising under any local, state or federal environmental,
health or safety statute, regulation, ordinance, or other requirement of any Governmental Entity, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and any similar state laws.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
means any trade or business, whether or not incorporated, that, together with any entity, would be deemed
to be a “single employer” with such entity within the meaning of Section 4001(b) of ERISA or Sections 414(b), (c),
(m) or (o) of the Code.
“Exchange
Act”
means the Securities Exchange Act of 1934, as amended.
“Exchange
Agent”
has the meaning set forth in Section 3.2.
“Exchange
Agent Agreement”
has the meaning set forth in Section 3.2.
“Exchange
Fund”
has the meaning set forth in Section 3.3.
“Excluded
MDLY Shares”
means, collectively, the shares of MDLY Common Stock owned by (a) MDLY, (b) SIC or (c) any wholly-owned
Subsidiary of MDLY or SIC.
“First
Special Dividend”
has the meaning set forth in Section 2.10(a).
“First
Special Dividend Amount”
has the meaning set forth in Section 2.10(a).
“First
Special Dividend Shortfall”
the result of (a) $0.35,
minus
(b) the First Special Dividend Amount.
“Form N-14
Registration Statement”
has the meaning set forth in Section 4.4(a).
“FTC”
means the United States Federal Trade Commission.
“GAAP”
means United States generally accepted accounting principles, consistently applied during the periods involved.
“Governmental
Entity”
means any federal, state, provincial or local government or any court, administrative or regulatory agency
or commission or other governmental or quasi-governmental authority, department, bureau, office, commission, organization, official
or agency, domestic or foreign.
“HSR Act”
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Indebtedness”
of any Person means (a) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities or the sale of property of such Person to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such property) and any accrued interest or prepayment premiums related thereto (for the
avoidance of doubt, excluding trade accounts payable or similar obligations to creditors for goods or services, operating leases
and other customary reservations or retentions under agreements with suppliers); (b) obligations of such Person to pay the
deferred purchase or acquisition price for any property of such Person, including earn-outs; (c) obligations of such Person
in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account
of such Person; (d) obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying
the right to use) any property to such Person to the extent such obligations are required to be classified and accounted for as
a capital lease on a balance sheet of such Person under GAAP; (e) all net obligations under any interest rate swap agreements
or interest rate hedge agreements; or (f) indebtedness of others as described in
clauses (a)
through
(e)
above
in any manner guaranteed by such Person or for which it is or may become contingently liable (but excluding any non-recourse carve-out
guaranties, environmental indemnities or similar guaranties).
“Indemnified
Parties”
has the meaning set forth in Section 7.7(a).
“Intellectual
Property Rights”
means, collectively, all trademarks, trade names, patent rights, copyrights, domain names, licenses,
approvals, trade secrets, software and other similar rights.
“Investment
Advisory Agreements”
means the MCC Investment Management Agreement and the SIC Investment Advisory Agreement.
“Investment
Advisers Act”
means the Investment Advisers Act of 1940, as amended.
“Investment
Company Act”
means the Investment Company Act of 1940, as amended.
“IRS”
means the United States Internal Revenue Service.
“Joint
Proxy Statement/Prospectus”
has the meaning set forth in Section 4.4(a).
“Letter
of Transmittal”
has the meaning set forth in Section 3.4(a).
“Liens”
means liens, pledges, mortgages, charges, Claims and security interests and similar encumbrances.
“Material
Adverse Effect”
means, with respect to SIC or MDLY, as the case may be, any occurrence, change, event, effect or
development that, individually, or taken together with all other occurrences, changes, events, effects or developments, has or
would reasonably be likely to have, a material adverse effect on (a) the financial condition, results of operations, properties,
assets or business of such party and its Subsidiaries taken as a whole;
provided
,
however
, that, with respect to
this subsection (a), the determination of whether a “Material Adverse Effect” exists or has occurred shall not include
effects to the extent attributable to (i) changes, after the date hereof, in GAAP or regulatory accounting requirements applicable
generally to companies in the industry in which such party and its Subsidiaries operate, (ii) changes, after the date hereof, in
laws, rules or regulations or interpretations thereof of general applicability to companies in the industry in which such party
and its Subsidiaries operate, (iii) actions or omissions taken with the prior written consent of the other party, (iv) changes,
after the date hereof, in global or national political conditions or general economic or market conditions generally affecting
other companies in the industry in which such party and its Subsidiaries operate, (v) conditions arising out of acts of terrorism,
war, weather conditions or other force majeure events, (vi) the public disclosure of this Agreement or the transactions contemplated
hereby, (vii) any legal proceedings made or brought by any of the current or former stockholders of such party (on their own behalf
or on behalf of the such party) arising out of or related to this Agreement or any of the transactions contemplated hereby, except,
with respect to clauses (i), (ii), (iv) and (v), to the extent that the effects of such change are disproportionately adverse to
the financial condition, results of operations, properties, assets or business of such party and its Subsidiaries, taken as a whole,
as compared to other companies in the industry in which such party and its Subsidiaries operate) or (b) the ability of such party
to timely consummate the transactions contemplated by this Agreement.
“MCC”
has the meaning set forth in the Recitals to this Agreement.
“MCC Administration
Agreement”
means that certain Administration Agreement by and between MCC and MCC Advisors LLC dated as of January
19, 2011.
“MCC Investment
Management Agreement”
means that certain Amended and Restated Investment Management Agreement by and between MCC
and MCC Advisors LLC dated January 19, 2014.
“MCC Merger”
has the meaning set forth in the Recitals to this Agreement.
“MCC Merger
Agreement”
has the meaning set forth in the Recitals to this Agreement.
“MCC Related
Agreements”
means the MCC Investment Management Agreement and the MCC Administration Agreement.
“MDLY”
has the meaning set forth in the preamble to this Agreement.
“MDLY
Adverse Recommendation Change”
has the meaning set forth in Section 7.3(b).
“MDLY Adviser”
has the meaning set forth in Section 4.23(a).
“MDLY Adviser
Regulation D Covered Persons”
has the meaning set forth in Section 4.23(c).
“MDLY Benefit
Plans”
has the meaning set forth in Section 4.20(a).
“MDLY Board”
has the meaning set forth in the Recitals to this Agreement.
“MDLY Board
Recommendation”
has the meaning set forth in Section 4.3(a).
“MDLY Bylaws”
means the bylaws of MDLY, as amended and/or restated through the date hereof.
“MDLY Certificate”
means the certificate of incorporation of MDLY, as amended and/or restated through the date hereof.
“MDLY Common
Stock”
means, collectively, the Class A Common Stock and the Class B Common Stock.
“MDLY Contracts”
has the meaning set forth in Section 4.3(b).
“MDLY Disclosure
Schedule”
means that certain disclosure schedule delivered by MDLY to SIC and Merger Sub prior to the execution of
this Agreement, which schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in Article IV of this Agreement or as an exception to one or more representations
or warranties contained in Article IV of this Agreement, or to one or more of MDLY’s covenants contained in this Agreement.
“MDLY Material
Contract”
has the meaning set forth in Section 4.12(b).
“MDLY Matters”
means, collectively, (i) the Merger, and (ii) any other matters required to be approved or adopted by the stockholders of MDLY
in order to effect the Merger and the other transactions contemplated by this Agreement.
“MDLY
Pre-Meeting Offeror”
has the meaning set forth in Section 9.4(c).
“MDLY Regulatory
Agreement”
has the meaning set forth in Section 4.5(b).
“MDLY Related
Agreements”
means, collectively, the MCC Related Agreements and the SIC Related Agreements.
“MDLY Required
Approvals”
has the meaning set forth in Section 4.4(a).
“MDLY RIC
Fund”
means any investment vehicle that is registered under the Investment Company Act and/or has elected to be regulated
as a BDC and, in each case, that is a client to which MDLY or any of its Subsidiaries provides investment advisory or investment
management services.
“MDLY RSUs”
has the meaning set forth in Section 2.5(b).
“MDLY SEC
Reports”
has the meaning set forth in Section 4.5(c).
“MDLY Special
Committee”
has the meaning set forth in the Recitals.
“MDLY
Stock Plan”
means the Medley Management Inc. 2014 Omnibus Incentive Plan.
“MDLY Stockholder
Approval”
has the meaning set forth in Section 4.3(a).
“MDLY Stockholder
Meeting”
has the meaning set forth in Section 4.4(a).
“MDLY Subsidiary
Partnership
” has the meaning set forth in Section 4.10(e).
“MDLY Tax
Protection Agreements”
has the meaning set forth in Section 4.10(e).
“MDLY Voting
Debt”
means bonds, debentures, notes or other Indebtedness of MDLY having the right to vote on any matters on which
stockholders of MDLY may vote.
“Medley
LLC Debt Documents”
means, collectively, (i) the Indenture dated as of August 9, 2016 between Medley LLC and U.S.
Bank National Association, (ii) the First Supplemental Indenture dated as of August 9, 2016, between Medley LLC and U.S. Bank National
Association (iii) the Second Supplemental Indenture dated as of October 18, 2016, between Medley LLC and U.S. Bank National Association;
(iv) the Third Supplemental Indenture, dated January 18, 2017, between Medley LLC and U.S. Bank National Association; and (v) the
Fourth Supplemental Indenture, dated February 22, 2017, between Medley LLC and U.S. Bank National Association.
“Medley
LLC Exchange Agreement”
means that certain Exchange Agreement dated as of September 23, 2014 by and among MDLY, Medley
LLC and the holders of Units parties thereto.
“Medley
LLC Outstanding Indebtedness”
means all principal, interest, fees and other amounts outstanding under the Medley
LLC Debt Documents.
“Medley
Registration Rights Agreement”
means that certain Registration Rights Agreement, dated as of September 23, 2014,
by and among MDLY, Medley LLC and the holders of Units parties thereto.
“Medley
Restricted Units”
has the meaning set forth in Section 2.5(a).
“Merger”
has the meaning set forth in the Recitals to this Agreement.
“Merger
Consideration”
has the meaning set forth in Section 2.4(c).
“Merger
Shares”
has the meaning set forth in Section 2.4(c).
“Merger
Sub”
has the meaning set forth in the preamble to this Agreement.
“Merger
Sub Board”
has the meaning set forth in the Recitals to this Agreement.
“Merger
Sub Bylaws”
has the meaning set forth in Section 2.6(a).
“Merger
Sub Certificate”
has the meaning set forth in Section 2.6(a).
“Merger
Sub Common Stock”
means common stock, par value $0.001 per share, of Merger Sub.
“MGCL”
means the Maryland General Corporation Law.
“Notice
of Adverse Recommendation”
has the meaning set forth in Section 7.11(f).
“Notice
of Superior Proposal”
has the meaning set forth in Section 7.11(f).
“NYSE”
means the New York Stock Exchange.
“Organizational
Documents”
means, with respect to a Person other than a natural person, (i) the articles or certificate of incorporation
and the bylaws of a corporation; (ii) the certificate of formation or articles of organization and operating agreement of a limited
liability company; (iii) the partnership agreement and any statement of partnership of a general partnership; (iv) the certificate
of limited partnership and limited partnership agreement of a limited partnership; (v) any charter or similar document adopted
or filed in connection with the creation, formation, or organization of any other Person; (vi) any stockholder or similar agreement
among holders of securities of an issuer; and (vii) any amendment to any of the foregoing.
“Outside
Date”
has the meaning set forth in Section 9.1(c).
“Permit”
means any license, permit, variance, exemption, franchise, consent, approval, authorization, qualification, or order of any Governmental
Entity.
“Permitted
Liens”
means (i) Liens for Taxes and other statutory Liens securing payments not yet due and payable, (ii) Liens
arising under the Medley LLC Debt Documents or SIC Debt Documents, as applicable, (iii) easements, rights of way, and other similar
encumbrances that do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do
not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business
operations at such properties.
“Person”
means a natural person, corporation, partnership, limited liability company, association, trust, joint venture, estate, sole proprietorship,
unincorporated organization, other entity, organization, group (as defined in Section 13(d) of the Exchange Act), or any other
business entity or any Governmental Entity, including a government or political subdivision or an agency or instrumentality thereof.
“Required
Approvals”
has the meaning set forth in Section 5.4(a).
“Sarbanes-Oxley
Act”
means the Sarbanes-Oxley Act of 2002, as amended.
“Schedule
13E-3”
has the meaning set forth in Section 4.4(a).
“SEC”
means the United States Securities and Exchange Commission.
“SEC Exemptive
Relief”
means an exemptive order from the SEC granting relief to SIC, MCC and MDLY from Sections 12(d)(3), 57(a)(4)
and 60 of the 1940 Act and Rule 17d-1 thereunder to the extent necessary to contemplate the transactions contemplated by this Agreement
and the MCC Merger Agreement and to thereafter operate as an internally managed business development company.
“Second
Special Dividend”
has the meaning set forth in Section 2.10(b).
“Second
Special Dividend Amount”
has the meaning set forth in Section 2.10(b).
“Second
Special Dividend Shortfall”
the result of (a) $0.30,
minus
(b) the Second Special Dividend Amount.
“Securities
Act”
means the Securities Act of 1933, as amended.
“SIC”
has the meaning set forth in the preamble to this Agreement.
“SIC Administration
Agreement”
means that certain Administration Agreement by and between SIC and Medley Capital LLC dated as of April
5, 2012.
“SIC Adverse
Recommendation Change”
has the meaning set forth in Section 7.4(b).
“SIC Board”
has the meaning set forth in the Recitals to this Agreement.
“SIC Board
Recommendation”
has the meaning set forth in Section 5.3(a).
“SIC Bylaws”
means the bylaws of incorporation of SIC in effect as of the date hereof.
“SIC Charter”
means the charter of SIC in effect as of the date hereof.
“SIC Common
Stock”
means common stock, par value $0.001 per share, of SIC.
“SIC Contracts”
has the meaning set forth in Section 5.3(b).
“SIC Debt
Documents”
means, collectively, (i) the SIC Revolving Loan Documents; (ii) the Alpine Funding Loan Documents; and
(iii) the Arbor Funding Debt Documents.
“SIC Disclosure
Schedule”
means that certain disclosure schedule delivered by SIC to MDLY prior to the execution of this Agreement,
which schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in Article V of this Agreement or as an exception to one or more representations or
warranties contained in Article V of this Agreement, or to one or more of SIC’s covenants contained in this Agreement.
“SIC Incentive
Plan”
has the meaning set forth in Section 7.16.
“SIC Investment
Advisory Agreement”
means that certain Investment Advisory Agreement by and between SIC and SIC Advisors LLC, dated
April 5, 2012.
“SIC Material
Contract”
has the meaning set forth in Section 5.12(a).
“SIC Matters”
means (i) the Merger, (ii) the Amended and Restated Charter, and (iii) any other matters required to be approved or adopted by
the stockholders of SIC in order to effect the Merger, the related issuance of the Merger Shares, and the other transactions contemplated
by this Agreement.
“SIC Per-Share
Price”
means $7.27 per share.
“SIC
Pre-Meeting Offeror”
has the meaning set forth in Section 9.4(d).
“SIC Related
Agreements”
means the SIC Administration Agreement and the SIC Investment Advisory Agreement.
“SIC Regulatory
Agreement”
has the meaning set forth in Section 5.5(b).
“SIC Required
Approvals”
has the meaning set forth in Section 5.4(a).
“SIC Revolving
Loan Documents”
means, collectively, (i) Amended and Restated Senior Secured Revolving Credit Agreement, dated as
of August 12, 2016, among SIC, as Borrower, the Lenders party thereto, and ING Capital LLC, as Administrative Agent; (ii) Amended
and Restated Guarantee, Pledge and Security Agreement, dated December 4, 2013, among SIC, the Subsidiary Guarantors party thereto,
ING Capital LLC, as Administrative Agent, each Financial Agent and Designated Indebtedness Holder party thereto and ING Capital
LLC, as Collateral Agent; and (iii) Deposit Account Control Agreement, dated as of September 7, 2016, among SIC, ING Capital LLC,
as Collateral Agent, and Customers Bank, as Depository Institution.
“SIC RSUs”
has the meaning set forth in Section 2.5(b)(i).
“SIC SEC
Reports”
has the meaning set forth in Section 5.5(c).
“SIC Special
Committee”
has the meaning set forth in the Recitals.
“SIC Stockholder
Approval”
has the meaning set forth in Section 5.3(a).
“SIC Stockholder
Meeting”
has the meaning set forth in Section 4.4(a).
“SIC Voting
Debt”
means bonds, debentures, notes or other Indebtedness of SIC having the right to vote on any matters on which
stockholders of SIC may vote.
“SRO”
has the meaning set forth in Section 4.4(a).
“Subsidiary”
,
when used with respect to either party, means any corporation, partnership, limited liability company or other organization, whether
incorporated or unincorporated, that is consolidated with such party for financial reporting purposes under GAAP and, to the extent
applicable, Article 6 of Regulation S-X promulgated under the Exchange Act.
“Superior
Proposal”
means any bona fide written Competing Proposal made by a Third Party that the MDLY Board or the MDLY Special
Committee or SIC Board or SIC Special Committee, as applicable, determines in good faith, after consultation with its outside financial
advisors and legal counsel, and taking into account the terms and conditions of such proposal, the party making such proposal,
all financial, legal, regulatory and other aspects of such proposal, as well as the likelihood of consummation of the Competing
Proposal relative to the Merger and such other factors as the MDLY Board or MDLY Special Committee or SIC Board or SIC Special
Committee, as applicable, considers to be appropriate, is more favorable to MDLY’s stockholders or SIC’s stockholders,
as applicable, from a financial point of view than the Merger and the other transactions contemplated by this Agreement (including
any revisions to the terms of this Agreement committed to by SIC to MDLY in writing in response to such Competing Proposal made
to MDLY or by MDLY to SIC in writing in response to such Competing Proposal made to SIC under the provisions of Section 7.11(f);
provided however, for these purposes, to the extent relevant to the Competing Proposal in question, all percentages in subsections
(a)(i) and (a)(ii) of the definition of Competing Proposal shall be increased to fifty percent (50%).
“Surviving
Company”
has the meaning set forth in the Recitals to this Agreement.
“Takeover
Statutes”
has the meaning set forth in Section 4.15.
“Tax”
or
“Taxes”
means (i) all federal, state, local, and foreign income, excise, gross receipts, gross income,
ad valorem
, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding, duties,
intangibles, franchise, backup withholding, value added and other taxes, charges, levies or like assessments together with all
penalties and additions to tax and interest thereon and (ii) any liability for Taxes described in clause (i) above under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law).
“Tax Receivable
Agreement”
means that certain Tax Receivable Agreement, dated as of September 23, 2014, by and among MDLY and each
of the other persons from time to time party thereto.
“Tax Receivable
Termination Agreement”
means that certain Termination Agreement in the form attached hereto as
Exhibit A
providing
for the termination of the Tax Receivable Agreement.
“Tax Return”
means, with respect to a Person, a report, return or other information (including any amendments) required to be supplied
to a Governmental Entity with respect to Taxes including, where permitted or required, combined or consolidated returns for any
group of entities that includes the Person or any of its Subsidiaries.
“Termination
Fee”
has the meaning set forth in Section 9.4(a).
“Third
Party”
means a third party Person (or group of Persons) that is not an Affiliate of MDLY, SIC or MCC.
“Units”
means the issued and outstanding limited liability company interests of Medley LLC.
Article
II
THE
MERGER
2.1
The
Merger
. Subject to the terms and conditions of this Agreement, in accordance with the DGCL, at the Effective Time, MDLY shall
merge with and into Merger Sub and the separate corporate existence of MDLY shall cease. Merger Sub shall be the Surviving Company
in the Merger and shall continue its existence as a corporation under the laws of the State of Delaware.
2.2
Effective
Time
. Contemporaneously with the Closing, Merger Sub shall file or cause to be filed a certificate of merger (the
“Certificate
of Merger”
) with the Secretary of State of the State of Delaware (the
“Delaware Secretary”
).
The Merger shall become effective at the time the Certificate of Merger is filed with the Delaware Secretary or at such later date
and time as is agreed upon by the parties and specified in the Certificate of Merger (such date and time herein after referred
to as the
“Effective Time”
).
2.3
Effects
of the Merger
. At and after the Effective Time, the Merger shall have the effects set forth in this Agreement and the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges
and powers of MDLY and Merger Sub shall be vested in Merger Sub as the Surviving Company, and all debts, liabilities and duties
of MDLY shall become the debts, liabilities and duties of Merger Sub as the Surviving Company.
2.4
Conversion
of Stock
. At the Effective Time, by virtue of the Merger and without any action on the part of SIC, Merger Sub, MDLY or the
holder of any of the following securities:
(a) each
share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding
and shall not be affected by the Merger;
(b) each
Excluded MDLY Share issued and outstanding or held in treasury by MDLY, in each case, immediately prior to the Effective Time shall
be cancelled and shall cease to exist and no Merger Consideration or other amounts or consideration shall be delivered in exchange
therefor;
(c) subject
to Sections 2.4(f) and 3.4(g), at the Effective Time and subject to deduction for any required withholding Tax, each share of Class
A Common Stock issued and outstanding immediately prior to the Effective Time (other than the Excluded MDLY Shares and any Dissenting
Shares) shall be converted into the right to receive the following number of shares of SIC Common Stock and amount of cash:
(i) 0.3836
shares of SIC Common Stock;
plus
(ii) cash
in an amount equal to $3.44 per share;
plus
(iii) with
respect to each such share of Class A Common Stock issued and outstanding on the record date for the First Special Dividend and
which remains outstanding immediately prior to the Effective Time, cash in an amount equal to the First Special Dividend Shortfall,
if any;
(iv) with
respect to each such share of Class A Common Stock issued and outstanding on the record date for the Second Special Dividend and
which remains outstanding immediately prior to Effective Time, cash in an amount equal to the Second Special Dividend Shortfall,
if any;
(v) with
respect to each such share of Class A Common Stock issued in exchange for Units (including Medley Restricted Units) in accordance
with this Agreement and issued and outstanding immediately prior to the Effective Time, cash in an amount equal to the First Special
Dividend Shortfall, if any; and
(vi) with
respect to each such share of Class A Common Stock issued upon the settlement of a MDLY RSU in accordance with this Agreement and
issued and outstanding immediately prior to the Effective Time, cash in an amount equal to the First Special Dividend Shortfall,
if any.
The aggregate shares
of SIC Common Stock to be issued in accordance with Section 2.4(c)(i) (the
“Merger Shares”
), together
with the aggregate cash consideration payable in accordance with Section 2.4(c)(ii) (the
“Cash Consideration”
),
the First Special Dividend Shortfall (if any), the Second Special Dividend Shortfall (if any) and any cash to be paid in lieu of
fractional shares in accordance with Section 3.4(g), shall be referred to collectively as the
“Merger Consideration”
;
(d) each
share of Class B Common Stock (other than any Dissenting Shares) issued and outstanding immediately prior to the Effective Time
shall be cancelled and shall cease to exist and no Merger Consideration or other amounts or consideration shall be delivered in
exchange therefor;
(e) any
shares of Class A Common Stock converted into the right to receive the Merger Consideration pursuant to this Article II shall,
upon such conversion, no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective
Time, and each certificate previously representing any such shares of Class A Common Stock (each, a
“Certificate”
)
shall thereafter represent only the right to receive the Merger Consideration into which the shares of Class A Common Stock represented
by such Certificate have been converted pursuant to this Section 2.4 and Section 3.4(g), as well as any dividends to which former
holders of shares of Class A Common Stock become entitled in accordance with Article III; and
(f) if,
between the date of this Agreement and the Effective Time, the outstanding shares of SIC Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reclassification,
stock dividend, stock split, reverse stock split, or other similar change and specifically excluding sales of SIC Common Stock,
sales of SIC equity-linked securities, and issuance of SIC Common Stock pursuant to SIC’s dividend reinvestment plan or otherwise
in lieu of a portion of any cash dividend declared by SIC, an appropriate and proportionate adjustment shall be made to the number
of shares of SIC Common Stock to be issued in the Merger.
2.5
Restricted
LLC Units; Restricted Stock Units
.
(a) As
of immediately prior to the Effective Time, each restricted Medley LLC ownership unit outstanding and not previously forfeited
(collectively, the
“Medley Restricted Units”
) shall become fully vested, all restrictions with respect
to such Medley Restricted Units shall lapse and the Medley Restricted Units shall be exchanged for shares of Class A Common Stock
in accordance with Section 7.6, and such shares of Class A Common Stock shall participate in the Merger on the same basis as the
other individual holders of shares of Class A Common Stock in accordance with Section 2.4(c);
provided
,
however
,
that the shares of Class A Common Stock issued upon the exchange of Units (including Medley Restricted Units) for shares of Class
A Common Stock shall not be entitled to receive payment of the First Special Dividend or Second Special Dividend with respect to
such shares of Class A Common Stock, and will only be entitled to receive payment of the dividend amount declared and paid by Medley
LLC to the holders of such Units in accordance with Section 2.10(a) and any First Special Dividend Shortfall payable in accordance
with Section 2.4(c)(v).
(b)
(i) As
of the Effective Time, each restricted stock unit of MDLY outstanding and not previously forfeited under the MDLY Stock Plan (collectively,
the
“MDLY RSUs”
), other than MDLY RSUs held by non-management directors of MDLY, shall be converted into
0.8532 restricted stock units under the SIC Incentive Plan (
“SIC RSUs”
). Each SIC RSU (or portion thereof)
into which a MDLY RSU will be converted shall have identical terms as it relates to vesting and forfeiture.
(ii) As
of immediately prior to the Effective Time, the restrictions on each MDLY RSU outstanding and not previously forfeited under the
MDLY Stock Plan held by non-management directors of MDLY shall lapse and the relevant MDLY RSU will be converted into a share of
Class A Common Stock that shall participate in the Merger on the same basis as the other individual holders of shares of Class
A Common Stock in accordance with Section 2.4(c);
provided
,
however,
that the shares of Class A Common Stock issued
upon the conversion of MDLY RSUs for shares of Class A Common Stock shall not be entitled to receive payment of the First Special
Dividend or Second Special Dividend with respect to such shares of Class A Common Stock, and will only be entitled to receive dividend
equivalent payments with respect to payment of the First Special Dividend in accordance with Section 2.10(a) and any First Special
Dividend Shortfall payable in accordance with Section 2.4(c)(vi)
;
provided further, that contemporaneously with the vesting
of such MDLY RSUs, if and to the extent required by applicable Tax law, MDLY shall withhold a number of shares of Class A Common
Stock having a fair market value (determined based on the final trading price of Class A Common Stock on the last trading day immediately
preceding the Closing Date) equal to the aggregate amount required to be deducted and withheld under the Code and any applicable
state or local Tax law with respect to the lapsing of restrictions on all MDLY RSUs held by the relevant holder, and MDLY shall,
as of immediately prior to the Effective Time, pay over to the appropriate taxing authorities a corresponding amount of cash in
satisfaction of such Tax liabilities.
(c) MDLY,
SIC and Merger Sub agree that prior to the Effective Time the MDLY Stock Plan shall be amended to terminate the MDLY Stock Plan
effective immediately prior to the Effective Time (other than with respect to outstanding awards thereunder, which shall be treated
as set forth herein).
2.6
Certificate
of Incorporation and Bylaws of the Surviving Company
.
(a) At
the Effective Time, the certificate of incorporation of Merger Sub (the
“Merger Sub Certificate”
), as
in effect immediately prior to the Effective Time, shall be the certificate of incorporation of Merger Sub, as the Surviving Company,
from and after the Effective Time, until thereafter amended in accordance with its terms and Applicable Law. At the Effective Time,
the bylaws of Merger Sub (the
“Merger Sub Bylaws”
), as in effect immediately prior to the Effective Time,
from and after the Effective Time, shall remain the bylaws of Merger Sub, as the Surviving Company, until thereafter amended in
accordance with the terms of the certificate of incorporation of the Surviving Company, Applicable Law, and the terms of such bylaws.
(b) Promptly
following the date hereof, the SIC Board will review and approve an amendment and restatement of the SIC Charter (the
“Amended
and Restated Charter”
), which Amended and Restated Charter shall be reasonably acceptable to the MDLY Board, including
the MDLY Special Committee, in order to remove terms inconsistent with, and to add terms advisable to reflect, the publicly traded
nature of SIC, as the Surviving Company, following the Closing. Following such approval, the SIC Board shall submit the Amended
and Restated Charter to SIC’s stockholders for their approval at the SIC Stockholder Meeting. Following the date hereof,
the SIC Board will review and approve any amendments to, or amendments and restatements of, the SIC Bylaws, which shall be reasonably
acceptable to the MDLY Board, including the MDLY Special Committee, in order to remove terms inconsistent with, and to add terms
advisable to reflect, the publicly traded nature of SIC, as the Surviving Company, following the Closing.
2.7
Directors
and Officers
. The officers and directors of Merger Sub immediately prior to the Effective Time shall be the officers and directors
of the Surviving Company from and after the Effective Time until their respective successors shall have been duly elected and qualified
or until their respective earlier death, resignation or removal in accordance with the certificate of incorporation of the Surviving
Company and Applicable Law.
2.8
Tax
Consequences
. It is intended that the Merger shall constitute a “reorganization” within the meaning of Section
368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” for such purposes.
2.9
Appraisal
Rights
.
(a) Notwithstanding
anything to the contrary contained in this Agreement, Dissenting Shares shall not be converted into or represent the right to receive
the Merger Consideration in accordance with Section 2.4(c), but shall be entitled only to such rights as are granted by the DGCL
to a holder of Dissenting Shares (and at the Effective Time, such Dissenting Shares shall no longer be outstanding and shall automatically
be canceled and shall cease to exist, and such holder shall cease to have any rights with respect thereto, except the rights set
forth in Section 262 of the DGCL), unless and until such holder shall have failed to perfect or shall have effectively withdrawn
or otherwise lost such holder’s right to appraisal under the DGCL. If any Dissenting Shares shall lose their status as such
(by the holder thereof effectively withdrawing, failing to perfect, or otherwise losing such holder’s appraisal rights under
the DGCL with respect to such shares), then, as of the later of the Effective Time or the date of loss of such status, such shares
shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the applicable Merger Consideration
in accordance with Section 2.4(c), without interest, and shall not thereafter be deemed to be Dissenting Shares.
(b) MDLY
shall give SIC notice thereof and SIC shall have the right to participate in all negotiations and proceedings with respect to any
such demands. MDLY shall not, except with the prior written consent of SIC, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. SIC shall contribute or cause to be contributed to the Surviving Company funds
sufficient from time to time to make all payments with respect to the Dissenting Shares.
2.10
Special
Dividend
.
(a) Prior
to Closing, (i) MDLY shall cause Medley LLC to declare a dividend to all holders of Units, including MDLY, in an amount equal to
the lesser of (A) $0.35 per Unit, and (B) the maximum dividend per Unit that Medley LLC may make based on its available cash at
the time of such declaration, and (ii) the MDLY Board shall declare a dividend to all holders of shares of Class A Common Stock
in an amount per share equal to the lesser of (i) $0.35 per share of Class A Common Stock, and (ii) the maximum dividend per share
of Class A Common Stock that MDLY may make based on its available cash at the time of such declaration (collectively, the
“First
Special Dividend”
and the per-share amount of such dividend payable to holders of Units and holders of shares of
Class A Common Stock (which per share amount shall in all events be equal), the
“First Special Dividend Amount”
).
For the avoidance of doubt, the First Special Dividend will be paid to holders of Units (including Medley Restricted Units) (in
all cases, prior to the exchange of Units for shares of Class A Common Stock pursuant to Section 7.6) and holders of shares of
Class A Common Stock outstanding on the record date for the First Special Dividend, in each case, in accordance with this Agreement.
The record date for determining the holders of shares of Class A Common Stock entitled to payment of the First Special Dividend
shall be the close of business on the second Business Day immediately preceding the Closing Date and the First Special Dividend
shall be paid on the Business Day immediately prior to the Closing Date. In addition, the holders of MDLY RSUs will receive dividend
equivalent rights with respect to the First Special Dividend in accordance with the terms of the MDLY Stock Plan and the restricted
stock unit award agreements governing the MDLY RSUs, which amount shall be paid as a dividend equivalent (i) in the case MDLY RSUs
held by non-management directors, at the same time the MDLY RSUs settle pursuant to Section 2.5(b)(ii) and (ii) in the case of
MDLY RSUs held by any other Person, at the same time as underlying SIC RSUs (received pursuant to the conversion described in Section
2.5(b)(i)) are vested and settle.
(b) Prior
to Closing, the MDLY Board shall declare a special dividend, payable in cash to the holders of shares of Class A Common Stock,
in an amount equal to the lesser of (a) $0.30 per share of Class A Common Stock, and (ii) the maximum dividend per share of Class
A Common Stock that MDLY may make based on its available cash at the time of such declaration (the
“Second Special
Dividend”
and the per-share amount of such dividend payable to the holders of shares of Class A Common Stock, the
“Second Special Dividend Amount”
). The record date for determining the holders of shares of Class A Common
Stock entitled to payment of the Second Special Dividend shall be the close of business on the Business Day immediately preceding
the Closing Date and the Second Special Dividend shall be payable (and the Surviving Company shall pay, and SIC shall cause the
Surviving Company to pay, the Second Special Dividend) on the Business Day immediately following the Closing Date. For the avoidance
of doubt,
(i) the
Second Special Dividend will only be payable to holders of record of shares of Class A Common Stock as of the close of business
on the Business Day immediately preceding the Closing Date, which date and time shall be prior to the exchange of Units for Class
A Common Stock in accordance with Section 7.6;
(ii) notwithstanding
provisions in the Class A Unit Award Agreements to the contrary, no dividend or dividend equivalent payment on unvested Medley
Restricted Units shall be paid on account of the Second Special Dividend; and
(iii) no
holder of MDLY RSUs will be entitled to receive any dividend equivalent rights or payments with respect to payment of the Second
Special Dividend under the terms of the MDLY Stock Plan and the restricted stock unit award agreements governing the MDLY RSUs.
(c) The
provisions of this Section 2.10 shall be interpreted in all events so as to ensure that no duplicative distribution, dividend or
dividend equivalent is paid to any holder of a Unit, a Medley Restricted Unit, a MDLY RSU or a holder of shares of Class A Common
Stock.
Article
III
CLOSING;
DELIVERY OF MERGER CONSIDERATION
3.1
Closing
.
On the terms and subject to the conditions set forth in this Agreement, the closing of the Merger (the
“Closing”
)
shall take place at 10:00 a.m. on a date and at a place to be specified by the parties, which date shall be no later than five
Business Days after the satisfaction or waiver (subject to Applicable Law) of the latest to occur of the conditions set forth in
Article VIII (other than those conditions that by their nature are to be satisfied or waived at the Closing), unless extended by
mutual agreement of the parties (the
“Closing Date”
).
3.2
Exchange
Agent
. Prior to the Effective Time, SIC shall appoint a bank or trust company, or SIC’s transfer agent, in each case
reasonably acceptable to MDLY pursuant to an agreement (the
“Exchange Agent Agreement”
) to act as exchange
agent (the
“Exchange Agent”
) hereunder.
3.3
Deposit
of Merger Consideration
. At or prior to the Effective Time, SIC shall (i) authorize the Exchange Agent to issue an aggregate
number of shares of SIC Common Stock equal to the aggregate Merger Shares and (ii) deposit, or cause to be deposited with, the
Exchange Agent sufficient cash to pay the Cash Consideration, the First Special Dividend Shortfall (if any), the Second Special
Dividend Shortfall (if any) and any cash to be paid in lieu of fractional shares in accordance with Section 3.4(g) (collectively,
the
“Exchange Fund”
). The Exchange Agent shall invest any cash included in the Exchange Fund as directed
by SIC;
provided
,
however
, that no gain or loss thereon shall affect the amounts payable to former holders of shares
of Class A Common Stock pursuant to Article II or Article III of this Agreement. Any interest or other income resulting from such
investments shall be the sole property of SIC.
3.4
Delivery
of Merger Consideration
.
(a) As
soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate(s)
which immediately prior to the Effective Time represented outstanding shares of Class A Common Stock (other than Excluded MDLY
Shares) (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to such Certificate(s)
shall pass, only upon delivery of such Certificate(s) (or affidavits of loss in lieu of such Certificates)) to the Exchange Agent
and shall be substantially in such form and have such other provisions as shall be prescribed by the Exchange Agent Agreement (the
“Letter of Transmittal”
) and (ii) instructions for use in surrendering such Certificate(s) in exchange
for the Merger Consideration and any dividends or distributions to which such holder is entitled pursuant to Article II and this
Article III;
provided
,
however
, any holder of Book-Entry Shares shall not be required to deliver a Certificate
or an executed letter of transmittal to the Exchange Agent to receive the Merger Consideration that such holder is entitled to
receive as a result of the Merger. In lieu thereof, each holder of record of one or more Book-Entry Shares (other
than Excluded MDLY Shares) shall upon receipt by the Exchange Agent of an “agent’s message” in customary form
(it being understood that the holders of Book-Entry Shares shall be deemed to have surrendered such shares upon receipt
by the Exchange Agent of such “agent’s message” or such other evidence, if any, as the Exchange Agent may reasonably
request), be entitled to receive, and SIC shall cause the Exchange Agent to pay and deliver as promptly as reasonably practicable
after the Effective Time, the Merger Consideration such holder is entitled to receive as a result of the Merger, and the Book-Entry Shares
so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the Book-Entry Shares.
Prior to the Effective Time, the parties shall reasonably cooperate to establish procedures with the Exchange Agent and The Depository
Trust Company (“
DTC
”) designed to provide that the Exchange Agent will transmit to DTC or its nominee,
on the Closing Date, upon surrender of Book-Entry Shares held of record by DTC or its nominee in accordance with DTC’s
customary surrender procedures and such other procedures as agreed to by SIC, MDLY, the Exchange Agent and DTC, the Merger Consideration
to which the beneficial owners thereof are entitled to receive as a result of the Merger.
(b) Upon
surrender to the Exchange Agent of its Certificate or Certificates, accompanied by a properly completed Letter of Transmittal,
a holder of shares of Class A Common Stock (other than Excluded MDLY Shares) will be entitled to receive promptly after the Effective
Time the Merger Consideration in respect of the shares of Class A Common Stock represented by its Certificate or Certificates,
as well as any dividends payable with respect to such Class A Common Stock at the time of surrender, and any dividends with respect
to shares of SIC Common Stock to which such holder is entitled. Until so surrendered, each such Certificate shall represent after
the Effective Time, for all purposes, only the right to receive, without interest, the Merger Consideration upon surrender of such
Certificate in accordance with, together with any dividends or distributions to which such holder is entitled pursuant to, Article
II or this Article III.
(c) No
dividends or other distributions declared with respect to SIC Common Stock to stockholders of record on or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of SIC Common Stock to which the holder
of such Certificate is entitled upon exchange thereof in accordance with Article II and this Article III, in each case unless and
until the holder thereof shall surrender such Certificate in accordance with this Article III. Subject to the effect of applicable
abandoned property, escheat or similar laws, following surrender of any such Certificate in accordance with this Article III, the
record holder thereof shall be entitled to receive, without interest, (i) the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to the whole shares of SIC Common Stock represented by such
Certificate and not paid prior to the date of surrender, and/or (ii) at the appropriate payment date, the amount of dividends or
other distributions payable with respect to whole shares of SIC Common Stock represented by such Certificate with a record date
after the Effective Time (but before such surrender date) and with a payment date subsequent to the surrender date.
(d) If
any Merger Consideration is to be issued or paid in a name other than that in which a Certificate formerly representing Class A
Common Stock surrendered in exchange therefor is registered, it shall be a condition to the issuance or payment of such Merger
Consideration that such Certificate shall be properly endorsed or otherwise be in proper form for transfer, and the Person requesting
such payment or issuance shall pay any transfer or other similar Taxes required by reason of the payment or issuance to a Person
other than the registered holder of the Certificate or establish to the satisfaction of SIC that the Tax has been paid or is not
applicable.
(e) The
Exchange Agent (or, subsequent to the earlier of (x) the one-year anniversary of the Effective Time and (y) the expiration or termination
of the Exchange Agent Agreement, SIC) shall be entitled to deduct and withhold from any Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of Class A Common Stock such amounts as the Exchange Agent or SIC, as the case
may be, is required to deduct and withhold under the Code, or any provision of state, local or foreign Tax law, with respect to
the making of such payment. To the extent the amounts are so withheld by the Exchange Agent or SIC, as the case may be, and timely
paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of shares of Class A Common Stock in respect of whom such deduction and withholding was made by
the Exchange Agent or SIC, as the case may be.
(f) After
the Effective Time, there shall be no transfers on the stock transfer books of MDLY of the shares of MDLY Common Stock that were
issued and outstanding immediately prior to the Effective Time other than to settle transfers of shares of MDLY Common Stock that
occurred prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares representing such shares
of Class A Common Stock are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the Merger
Consideration payable and issuable in respect of such Certificates or Book-Entry Shares, together with any dividends and distributions
to which such holder is entitled in accordance with this Article III.
(g) Notwithstanding
anything to the contrary contained in this Agreement, no fractional shares of SIC Common Stock shall be issued upon the surrender
of Certificates for exchange, or presentation of Book-Entry Shares for transfer, no dividend or distribution with respect to SIC
Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle
the owner thereof to vote or to any other rights of a stockholder of SIC. In lieu of the issuance of any such fractional share,
SIC shall pay to each former stockholder of MDLY who otherwise would be entitled to receive such fractional share an amount in
cash (rounded to the nearest cent) determined by multiplying (i) $7.27 by (ii) the fraction of a share (after taking into account
all shares of Class A Common Stock held by such holder at the Effective Time and rounded to the nearest thousandth when expressed
in decimal form) of SIC Common Stock to which such holder would otherwise be entitled to receive pursuant to Section 2.4.
(h) Any
portion of the Exchange Fund that remains unclaimed by the stockholders of MDLY as of the first anniversary of the Effective Time
may be paid to SIC. In such event, any former stockholders of MDLY who have not theretofore complied with this Article III shall
thereafter look only to SIC with respect to the Merger Consideration, any cash in lieu of any fractional shares and any unpaid
dividends and distributions in respect of each share of SIC Common Stock such stockholder is entitled to, as determined pursuant
to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of SIC, the Surviving Company,
the Exchange Agent or any other Person shall be liable to any former holder of shares of Class A Common Stock for any amount delivered
in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws.
(i) In
the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by SIC or the Exchange Agent, the posting
by such Person of a bond in such amount as SIC may determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and any unpaid dividends or distributions deliverable in respect thereof pursuant to this
Agreement.
Article
IV
REPRESENTATIONS AND WARRANTIES OF MDLY
Except as disclosed
in (i) MDLY SEC Reports (as defined in Section 4.5(c) below) filed prior to the date of this Agreement, or (ii) MDLY Disclosure
Schedule, MDLY hereby represents and warrants to SIC and Merger Sub as follows:
4.1
Corporate
Organization
.
(a) MDLY
is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. MDLY has the
requisite corporate power and corporate authority to own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified would not, individually or in the aggregate, have
a Material Adverse Effect on MDLY.
(b) True,
complete and correct copies of MDLY Certificate and MDLY Bylaws have previously been made available to SIC. MDLY is not in violation
of the MDLY Certificate or the MDLY Bylaws.
(c) Except
as set forth in Section 4.1(c) of MDLY Disclosure Schedule, MDLY has no Subsidiaries or other equity interest in any other Person.
Each of the Subsidiaries of MDLY (i) is duly formed and validly existing and in good standing under the laws of the state of its
formation, (ii) has the requisite limited partnership or other organizational power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted and (iii) is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified
would not, individually or in the aggregate, have a Material Adverse Effect on MDLY. True, complete and correct copies of the Organizational
Documents of each Subsidiary of MDLY have previously been made available to SIC. No Subsidiary of MDLY is in violation of its Organizational
Documents.
4.2
Capitalization
.
(a) The
authorized capital stock of MDLY consists of 3,000,000,000 shares of Class A Common Stock of which, as of the date of this Agreement,
5,593,375 shares, excluding all MDLY RSUs, are issued and outstanding; 1,000,000 shares of Class B Common Stock of which, as of
the date of this Agreement, 100 shares are issued and outstanding; and 300,000,000 shares of Preferred Stock of which, as of the
date of this Agreement, no shares are issued and outstanding. All of the issued and outstanding shares of MDLY Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable, free of any Liens, and are not be subject to any preemptive
rights, whether arising under the laws of the State of Delaware or the MDLY Certificate, MDLY Bylaws or any MDLY Contract, with
no personal liability attaching to the ownership thereof. As of the date of this Agreement, 1,751,871 MDLY RSUs have been granted
and have not settled, which are held by the Persons and in the amounts set forth in Section 4.2(a) of the MDLY Disclosure Schedule.
The Exchange Rate (as defined in the Exchange Agreement) is one share of Class A Common Stock for one Medley Restricted Unit. An
additional 1,505,969 shares of Class A Common Stock will be issued and outstanding following the exchange of Units and Medley Restricted
Units for Class A Common Stock in accordance with Section 7.6. Shares of Class A Common Stock to be issued upon conversion of a
MDLY RSU or exchange of Medley Restricted Units, when issued, will be validly issued and will be fully paid, nonassessable, free
of any Liens, and will not be subject to any preemptive rights, whether arising under the laws of the State of Delaware or the
MDLY Certificate, MDLY Bylaws or any MDLY Contract, with no personal liability attaching to the ownership thereof. MDLY has obtained
valid waivers from each holder of unvested Medley Restricted Units waiving such holder’s right to receive any dividend or
dividend equivalents in respect of such Medley Restricted Units in connection with the First Special Dividend and the Second Special
Dividend. As of the date of this Agreement, no MDLY Voting Debt is issued or outstanding. As of the date of this Agreement, MDLY
does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of
any character calling for the purchase or issuance of, or the payment of any amount based on, any shares of MDLY Common Stock,
MDLY Voting Debt or any other equity securities of MDLY or any securities representing the right to purchase or otherwise receive
any shares of MDLY Common Stock, MDLY Voting Debt or other equity securities of MDLY. As of the date of this Agreement, except
as it relates to net settlement of Medley Restricted Units and as contemplated by the Medley LLC Exchange Agreement and the Medley
Registration Rights Agreement, there are no contractual obligations of MDLY or any of its Subsidiaries (A) to repurchase, redeem
or otherwise acquire any shares of capital stock of MDLY or any equity security of MDLY or its Subsidiaries or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any other equity security of MDLY or its Subsidiaries
or (B) pursuant to which MDLY or any of its Subsidiaries is or could be required to register shares of MDLY capital stock or other
securities under the Securities Act. Upon exchange of the Medley Restricted Units for Class A Common Stock, the Medley LLC Exchange
Agreement and the Medley Registration Rights Agreement shall be terminated and the obligations of MDLY and its Subsidiaries thereunder
satisfied.
(b) Except
as set forth in Section 4.2(b) of the MDLY Disclosure Schedule, all of the issued and outstanding shares of capital stock or other
equity ownership interests of each Subsidiary of MDLY are owned, directly or indirectly, by MDLY, free and clear of any Liens,
and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and
free of any preemptive rights. No Subsidiary of MDLY has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock
or any other equity security of such Subsidiary.
(c) Except
for amounts outstanding under the Medley LLC Debt Documents, the CNB Credit Facility and as set forth in Section 4.2(c) of the
MDLY Disclosure Schedule, neither MDLY nor any of its Subsidiaries has any Indebtedness for borrowed money.
(d) To
the best knowledge of MDLY, elections under Section 83(b) of the Code have not been made with respect to any Medley Restricted
Unit.
4.3
Authority;
No Violation
. (a) MDLY has full corporate power and authority to execute and deliver this Agreement and, subject to receipt
of the MDLY Stockholder Approval, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by MDLY Board.
MDLY Board, acting upon the recommendation of the MDLY Special Committee, has unanimously (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are advisable and fair to, and in the best interests of, MDLY and its
stockholders, (ii) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger,
(iii) resolved to submit this Agreement to the stockholders of MDLY for its adoption, (iv)recommended that the stockholders of
MDLY approve the adoption of this Agreement, and (v) resolved to include such recommendation in the Joint Proxy Statement/Prospectus
(the “
MDLY Board Recommendation
”). Except for the approval and adoption of MDLY Matters by the affirmative
vote of the holders of a majority of the voting power of the outstanding shares of MDLY Common Stock entitled to vote at such meeting
(the
“MDLY Stockholder Approval”
), no other corporate proceedings on the part of MDLY are necessary to
approve the Merger, this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and
delivered by MDLY and (assuming due authorization, execution and delivery by SIC) constitutes the valid and binding obligation
of MDLY, enforceable against MDLY in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization or similar laws of general applicability relating to or affecting the rights of creditors
generally and subject to general principles of equity (the
“Bankruptcy and Equity Exception”
).
(b) Neither
the execution and delivery of this Agreement by MDLY nor the consummation by MDLY of the transactions contemplated hereby, nor
compliance by MDLY with any of the terms or provisions of this Agreement, will (i) violate any provision of MDLY Certificate or
MDLY Bylaws, or (ii) assuming that the consents, approvals and filings referred to in Section 4.4 are duly obtained and/or made,
(A) violate any Applicable Law applicable to MDLY or any of its Subsidiaries, or any of their respective properties or assets,
or (B) except as would not, individually or in the aggregate, have a Material Adverse Effect on MDLY, violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of
MDLY or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, franchise, agreement or other instrument or obligation to which MDLY or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or assets is bound (collectively, the
“MDLY Contracts”
).
4.4
Consents
and Approvals
.
(a) Except
for (i) receipt of the SEC Exemptive Relief, (ii) the filing with the SEC of (A) a joint proxy statement in definitive form (the
“Joint Proxy Statement/Prospectus”
) relating to the special meeting of MDLY’s stockholders to be
held in order to obtain MDLY Stockholder Approval (the
“MDLY Stockholder Meeting”
) and the special meeting
of SIC’s stockholders to be held to vote on the SIC Matters (the
“SIC Stockholder Meeting”
), (B)
a registration statement on Form N-14 (the
“Form N-14 Registration Statement”
) in which the Joint Proxy
Statement/Prospectus will be included as a prospectus, and (C) a Rule 13E-3 Transaction Statement on Schedule 13E-3 relating to
the transactions contemplated by this Agreement (the
“Schedule 13E-3”
), and declaration of effectiveness
of the Form N-14 Registration Statement by the SEC, (iii) the filing of the Certificate of Merger with the Delaware Secretary pursuant
to the DGCL, (iv) any notices, consents, authorizations, approvals, filings or exemptions in connection with compliance with the
rules and regulations of the NYSE, or any other applicable self-regulatory organization (
“SRO”
), (v)
any notices or filings under the HSR Act and the expiration of applicable waiting periods, (vi) such filings and approvals as are
required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance
of the shares of SIC Common Stock pursuant to this Agreement, (vii) compliance with the Investment Company Act, and the rules and
regulations promulgated thereunder, or (viii) as set forth on Section 4.4(a) of MDLY Disclosure Schedule (the foregoing (i) through
(viii) referred to collectively as the
“MDLY Required Approvals”
), no other consents, authorizations,
approvals, or exemptions from, or notices to, or filings with, any Governmental Entity are necessary in connection with the execution
and delivery by MDLY of this Agreement or the consummation by MDLY of the Merger and the other transactions contemplated by this
Agreement.
(b) Except
for (i) receipt of MDLY Stockholder Approval, (ii) receipt of the relevant consents or releases, or the taking of other actions,
under the Medley LLC Debt Documents, (iii) receipt of the relevant consents or releases, or taking of other actions, under the
MDLY Contracts set forth in Section 4.4(b) of the MDLY Disclosure Schedule, and (iv) matters covered in the immediately preceding
Section 4.4(a), no consents or approvals of any Person are necessary in connection with the execution and delivery by MDLY of this
Agreement or the consummation by MDLY of the Merger and the other transactions contemplated by this Agreement.
4.5
Reports;
Regulatory Matters
.
(a) MDLY
and each of its Subsidiaries have timely filed all reports, registration statements and certifications, together with any amendments
required to be made with respect thereto, that they were required to file since December 31, 2014 with (i) the SEC, (ii) the NYSE,
and (iii) any other applicable SRO or Governmental Entity, and all other reports and statements required to be filed by them since
December 31, 2014, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United
States, any state, any foreign entity, or any SRO or Governmental Entity, and have paid all fees and assessments due and payable
in connection therewith. Except for normal examinations of MDLY and its Subsidiaries conducted by a SRO or Governmental Entity
in the ordinary course of the business, no SRO or Governmental Entity has initiated since December 31, 2014 or has pending any
proceeding, enforcement action or, to the knowledge of MDLY, investigation into the business, disclosures or operations of MDLY
or any of its Subsidiaries. Since December 31, 2014, no SRO or Governmental Entity has resolved any proceeding, enforcement action
or, to the knowledge of MDLY, investigation into the business, disclosures or operations of MDLY or any of its Subsidiaries. There
is no unresolved, or, to MDLY’s knowledge, threatened criticism, comment, exception or stop order by any SRO or Governmental
Entity with respect to any report or statement relating to any examinations or inspections of MDLY or any of its Subsidiaries.
Since December 31, 2014, there have been no formal or informal inquiries by, or disagreements or disputes with, any SRO or Governmental
Entity with respect to the business, operations, policies or procedures of MDLY or any of its Subsidiaries (other than normal examinations
conducted by a SRO or Governmental Entity in MDLY’s ordinary course of business). MDLY has made available to SIC all correspondence
between MDLY or any of its Subsidiaries and the SEC, the NYSE and any other SRO or Governmental Entity since December 31,
2014.
(b) Neither
MDLY nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party
to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been
since December 31, 2014 a recipient of any supervisory letter from, or since December 31, 2014 has adopted any policies, procedures
or board resolutions at the request or suggestion of, any SRO or Governmental Entity that currently restricts in any material respect
the conduct of its business (or to MDLY’s knowledge that, upon consummation of the Merger, would restrict in any material
respect the conduct of the business of SIC or any of its Subsidiaries), or that in any material manner relates to its credit, risk
management or compliance policies, its internal controls, its management or its business (each item in this sentence, a
“MDLY
Regulatory Agreement”
), nor has MDLY or any of its Subsidiaries been advised since December 31, 2014 by any SRO or
Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such MDLY Regulatory Agreement.
(c) MDLY
has filed on the SEC’s EDGAR system each (i) registration statement, prospectus, report, schedule and definitive proxy statement
(including all exhibits, amendments and supplements thereto) required to be filed with or furnished to the SEC by MDLY or any of
its Subsidiaries pursuant to the Securities Act or the Exchange Act since December 31, 2014 (the
“MDLY SEC Reports”
)
and (ii) communication mailed by MDLY to its stockholders since December 31, 2014. No such MDLY SEC Report or communication, at
the time filed, furnished or communicated (and, in the case of registration statements, proxy statements and prospectuses, on the
dates of effectiveness, the dates of the relevant meetings and the dates of use, respectively), contained any untrue statement
of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not misleading, except that information contained in an
MDLY SEC Report as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier
date. As of their respective dates, all MDLY SEC Reports complied as to form in all material respects with the Securities Act,
the Exchange Act and the other rules and regulations of the SEC with respect thereto. No executive officer of MDLY has failed in
any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date
of this Agreement, there are no outstanding or unresolved comments from the SEC with respect to any MDLY SEC Report and, as of
the date of this Agreement, to the knowledge of MDLY, no MDLY SEC Report is subject to any ongoing review by the SEC.
4.6
Financial
Statements
.
(a) The
consolidated financial statements of MDLY and its Subsidiaries included in all MDLY SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in accordance with, the books and records of MDLY and its Subsidiaries, (ii) fairly
present in all material respects the consolidated results of operations, cash flows, changes in stockholders’ equity and
consolidated financial position of MDLY and its Subsidiaries for the respective fiscal periods or as of the respective dates therein
set forth (subject in the case of unaudited statements to recurring year-end audit adjustments immaterial in nature and amount),
(iii) complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto and (iv) have been prepared in accordance
with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes
thereto.
(b) Neither
MDLY nor any of its Subsidiaries has any liability or obligation of any nature whatsoever required by GAAP to be reflected or reserved
for in a balance sheet (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those
liabilities that are reflected or reserved against on the consolidated balance sheet of MDLY included in its Annual Report on Form
10-K for the annual period ended December 31, 2017 (including any notes thereto) and for liabilities and obligations incurred in
a commercially reasonable manner and in the ordinary course of business consistent with past practice since the date of such balance
sheet.
(c) MDLY
has established and maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act) that is designed to provide reasonable assurance (i) regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that receipts and expenditures
of MDLY and its Subsidiaries are being made only in accordance with authorizations of MDLY management and the MDLY Board, and (iii)
regarding prevention or timely detection of the unauthorized acquisition, use or disposition of MDLY and each of MDLY’s Subsidiaries’
assets that could have a material effect on MDLY’s consolidated financial statements. MDLY has disclosed, based on its most
recent evaluation of such internal control over financial reporting prior to the date of this Agreement, to MDLY’s auditors
and the audit committee of the MDLY Board and in Section 4.6(c) of the MDLY Disclosure Schedule (x) any significant deficiency
and material weakness in the design or operation of MDLY’s internal control over financial reporting that is reasonably likely
to adversely affect MDLY’s ability to record, process, summarize or report financial information, and (y) any fraud, whether
or not material, that involves MDLY management or other employees of MDLY or any MDLY Subsidiary who have a significant role in
MDLY’s internal control over financial reporting. For purposes of this Agreement, the terms “significant deficiency”
and “material weakness” shall have the meaning assigned to them in the auditing standards of the Public Company Accounting
Oversight Board, as in effect on the date of this Agreement.
(d) MDLY’s
“disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed
to ensure that all information (both financial and non-financial) required to be disclosed by MDLY in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such information is accumulated and communicated to MDLY’s management as appropriate to
allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial
officer of MDLY required under the Exchange Act with respect to such reports. MDLY’s management has completed an assessment
of the effectiveness of MDLY’s disclosure controls and procedures and, to the extent required by Applicable Law, presented
in any applicable MDLY SEC Report that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on
such evaluation.
(e) Since
December 31, 2014, MDLY and its principal executive officer and principal financial officer have complied in all material respects
with (i) the applicable provisions of the Sarbanes-Oxley Act and the Exchange Act and (ii) the applicable listing and corporate
governance rules and regulations of the NYSE. The principal executive officer and the principal financial officer of MDLY have
made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to each MDLY SEC Report, and the
statements contained in such certifications were true and correct on the date such certifications were made. For purposes of the
preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings
given to such terms in the Sarbanes-Oxley Act.
4.7
Broker’s
Fees
. Except for the fees of Goldman Sachs & Co. LLC and Barclays Capital, Inc., none of MDLY, any of its Subsidiaries
or any of their respective officers or directors has used any broker, finder or financial advisor or incurred any liability for
any broker’s fees, commissions or finder’s fees in connection with the Merger or any other transactions contemplated
by this Agreement.
4.8
Absence
of Certain Changes or Events
. Since December 31, 2017, (a) the respective businesses of MDLY and its Subsidiaries have been
conducted in the ordinary course of business consistent with past practice, (b) none of MDLY or any of its Subsidiaries has taken
any action that, if taken after the date of this Agreement, would result in a breach of the covenants set forth in Section 6.2,
and (c) no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on MDLY.
4.9
Legal
Proceedings
. (a) Except as would not, individually or in the aggregate, have a Material Adverse Effect on MDLY, neither MDLY
nor any of its Subsidiaries is a party to any, and there are no pending or, to the best of MDLY’s knowledge, threatened,
legal, administrative, arbitral or other proceedings, Claims, actions, suits or governmental or regulatory investigations of any
nature against MDLY or any of its Subsidiaries or to which any of their assets are subject.
(b) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on MDLY, there is no judgment, settlement agreement,
order, injunction, decree or regulatory restriction (other than those of general application that apply to similarly situated companies
or their Subsidiaries) imposed upon MDLY, any of its Subsidiaries or the assets of MDLY or any of its Subsidiaries.
4.10
Taxes
and Tax Returns
.
(a) Each
of MDLY and its Subsidiaries (i) has duly and timely filed (including all applicable extensions) all federal, state, local and
foreign income and other material Tax Returns required to be filed by it and all such Tax Returns are accurate and complete, (ii)
has paid all Taxes shown thereon as due and (iii) has duly paid or made provision for the payment of all Taxes that have been incurred
or are due or claimed to be due from it by the IRS or any other federal, state, foreign or local taxing authorities other than
Taxes that are not yet delinquent or are being contested in good faith, have not been finally determined and have been adequately
reserved against under GAAP. There are no material disputes pending, or written claims asserted, for Taxes or assessments upon
MDLY or any Subsidiary for which MDLY does not have reserves that are adequate under GAAP. Neither MDLY nor any Subsidiary is a
party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or
arrangement exclusively between or among MDLY and its Subsidiaries as described in MDLY Disclosure Schedule).
(b) MDLY
and its Subsidiaries have complied in all material respects with all Applicable Laws relating to the payment and withholding of
Taxes and have, within the time and in the manner prescribed by Applicable Law, withheld from and paid over all amounts required
to be so withheld and paid over under Applicable Laws.
(c) There
are no Liens for Taxes upon the assets of MDLY or any of the Subsidiaries, except for Liens for Taxes not yet due and payable and
Liens for Taxes that are both being contested in good faith and adequately reserved for in accordance with GAAP.
(d) Neither
MDLY nor any Subsidiary has granted any waiver, extension, or comparable consent regarding the application of the statute of limitations
with respect to any Taxes or Tax Return that is outstanding, nor any request for such waiver or consent has been made.
(a) Other
than the Tax Receivable Agreement to be terminated pursuant to the Tax Receivable Termination Agreement, there are no MDLY Tax
Protection Agreements (as hereinafter defined) in force or otherwise binding upon MDLY or any MDLY Subsidiary. As used herein,
“
MDLY Tax Protection Agreements
” means any agreement to which MDLY, or any MDLY Subsidiary is a party:
(i) pursuant to which any liability to holders of interests in a MDLY Subsidiary Partnership relating to Taxes may arise,
whether or not as a result of the consummation of the Merger or the other transactions contemplated by this Agreement; and/or (ii) that
was entered into in connection with or related to the deferral of income Taxes of a holder of interests in a MDLY Subsidiary Partnership,
and that requires MDLY, or any MDLY Subsidiary to, or to use efforts to (or to indemnify any Person if it does not) (A) maintain
a minimum level of debt or continue a particular debt, (B) retain or not dispose of assets for a period of time if such period
of time has not since expired or any applicable statute of limitations with respect to any Taxes that would result from a disposition
of such assets at any time during such period has not since expired, (C) make or refrain from making Tax elections, (D) only
dispose of assets in a particular manner, or (E) permit any holder of interests in a MDLY Subsidiary Partnership to guarantee
any debt or restore a deficit in such holder’s capital account. As used herein, “
MDLY Subsidiary Partnership
”
means a MDLY Subsidiary that is a partnership for United States federal income Tax purposes.
4.11
Compliance
with Applicable Law
. MDLY and each of its Subsidiaries hold all Permits necessary for the lawful conduct of their respective
businesses, and have complied in all respects with and are not in default in any respect under any, any Permit or Applicable Law,
except for such failures, non-compliance or defaults that would not, individually or in the aggregate, have a Material Adverse
Effect on MDLY.
4.12
Certain
Contracts
. (a) Section 4.121. of the MDLY Disclosure Schedule sets forth a list of MDLY Contracts, including all amendments,
supplements, exhibits and side letters to any such MDLY Contract, to which MDLY or any MDLY Subsidiary is a party or by which any
of its properties or assets are bound (
provided
that equity interests in any Person shall not be deemed to be the properties
or assets of MDLY or any MDLY Subsidiary), which, as of the date of this Agreement (
provided
that MDLY shall not be required
to list those MDLY Contracts that have been publicly filed by MDLY with the SEC):
(i) is
or will be required to be filed as an exhibit to MDLY’s Annual Report on Form 10-K pursuant to Item 601(b)(2), (4),
(9) or (10) of Regulation S-K promulgated under the Securities Act;
(ii) contains
any non-compete or exclusivity provisions that restrict the line of business or geographic area in which MDLY or any MDLY Subsidiary
can operate, or which restricts the conduct of any line of business of MDLY or any MDLY Subsidiary, in each case, that have or
would reasonably be expected to have a material impact on the business or operations of MDLY or its Subsidiaries, taken as a whole;
(iii) establishes
a material partnership, joint venture or similar arrangement;
(iv) relates
to the borrowing of money from, or extension of credit to, a Third Party, in each case having a principal amount of Indebtedness
in excess of $25,000,000, other than accounts receivable and payable incurred or arising in the ordinary course of business consistent
with past practice;
(v) requires
MDLY or any MDLY Subsidiary to dispose of or acquire assets or properties with a fair market value in excess of $5,000,000, or
involves any pending or contemplated merger, consolidation or similar business combination;
(vi) is
a management or advisory agreement under which MDLY or any of its Subsidiaries acts as an adviser or manager;
(vii) is
with a Governmental Entity; or
(viii) is
material to MDLY and its Subsidiaries, taken as a whole, and contains any so-called “most favored nations” or similar
provisions requiring MDLY or any MDLY Subsidiary to offer a Person any terms or conditions that are at least as favorable as those
offered to any other Person.
(b) Each
Contract of the type described above in Section 4.12(a), whether or not set forth in Section 4.12(a) of the MDLY
Disclosure Schedule, is referred to herein as an “
MDLY Material Contract
.” Except as has not resulted
in or would not reasonably be expected to result in a Material Adverse Effect with respect to MDLY, each MDLY Material Contract
is legal, valid, binding and enforceable in accordance with its terms on MDLY and each MDLY Subsidiary that is a party thereto
and, to the knowledge of MDLY, each other party thereto, and is in full force and effect, except as may be limited by the Bankruptcy
and Equity Exception.
(c) Neither
MDLY nor any MDLY Subsidiary is in default under any MDLY Material Contract, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default, in each case, except as has not resulted in or
would not reasonably be expected to result in a Material Adverse Effect with respect to MDLY. Neither MDLY nor any MDLY Subsidiary
has received written notice of any violation or default under any MDLY Material Contract, except for violations or defaults that,
individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither MDLY nor any MDLY
Subsidiary has received written notice of termination under any MDLY Material Contract, and, to the knowledge of the Company, no
party to any MDLY Material Contract has threatened to cancel any MDLY Material Contract, except as would not, individually or in
the aggregate, would not reasonably be expected to have a MDLY Material Adverse Effect.
(d) MDLY
has delivered or made available to SIC or provided to SIC for review, prior to the execution of this Agreement, true and complete
copies of all of the MDLY Material Contracts.
4.13
Property
.
MDLY or one of its Subsidiaries (a) has good and marketable title to all the properties and assets reflected in the latest audited
balance sheet included in such MDLY SEC Reports as being owned by MDLY or one of its Subsidiaries or acquired after the date thereof
(except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of
all Liens of any nature whatsoever, except Permitted Liens, and (b) is the lessee of all leasehold estates reflected in the latest
audited financial statements included in such MDLY SEC Reports or acquired after the date thereof (except for leases that have
expired by their terms since the date thereof), free and clear of all Liens of any nature whatsoever, except for Permitted Liens,
and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder
by the lessee or, to MDLY’s knowledge, the lessor.
4.14
Intellectual
Property
. MDLY owns or possesses sufficient rights to use all Intellectual Property Rights used in the conduct of its business
as now conducted, all of which shall remain in effect following the Closing, except where the failure to own or possess such rights
would not reasonably be expected to result in a Material Adverse Effect on MDLY; and the expected expiration or termination of
any of such Intellectual Property Rights would not result in a Material Adverse Effect on MDLY.
4.15
State
Takeover Laws
. Assuming the accuracy of the representation and warranty contained in Section 5.16, the MDLY Board has unanimously
approved this Agreement and the transactions contemplated hereby as required to render inapplicable to this Agreement and such
transactions the restrictions on “business combinations” set forth in the DGCL or any other “moratorium,”
“control share,” “fair price,” “takeover” or “interested stockholder” law (any
such laws,
“Takeover Statutes”
) to the extent any of the foregoing is applicable to this Agreement and/or
the transactions contemplated hereby.
4.16
Opinion
.
The MDLY Special Committee has received the opinion of Barclays Capital Inc. that, subject to certain assumptions, limitations,
qualifications and other matters set forth therein, as of the date hereof, from a financial point of view, the aggregate consideration
to be offered to the non-management holders of shares of Class A Common Stock in connection with the Merger, consisting of the
First Special Dividend, the Second Special Dividend, and the Merger Consideration, is fair to such holders of shares of Class A
Common Stock; it being agreed that SIC is not entitled to rely upon such opinion. The MDLY Board has received the opinion of Goldman
Sachs & Co. LLC, dated as of the date of this Agreement, that, as of such date and subject to certain assumptions, limitations,
qualifications and other matters set forth therein, the aggregate of the Merger Consideration, the First Special Dividend and the
Second Special Dividend to be paid to the holders of Class A Common Stock is fair, from a financial point of view, to the holders
of Class A Common Stock (other than SIC, MCC and any of their respective affiliates, the holders of Units and the holders of Medley
Restricted Units and the holders of MDLY RSUs).
4.17
MDLY
Information
. The information relating to MDLY and its Subsidiaries that is provided by MDLY or its representatives for inclusion
in the Form N-14 Registration Statement, the Joint Proxy Statement/Prospectus and/or the Schedule 13E-3, or in any application,
notification or other document filed with any other SRO or Governmental Entity (including the SEC) in connection with the transactions
contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances in which they are made, not misleading. The Joint Proxy Statement/Prospectus
and the Schedule 13E-3 as it relates to MDLY and its Subsidiaries and other portions within the reasonable control of MDLY and
its Subsidiaries will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.
4.18
Insurance
.
MDLY and its Subsidiaries maintain, or are covered by, policies of insurance in such amounts and against such risks as are customary
in the industries in which MDLY and its Subsidiaries operate. Except as would not be reasonably expected to have a Material Adverse
Effect on MDLY, all such insurance policies are in full force and effect and will not in any way be affected by, or terminate
or lapse by reason of, the execution (but not the performance) of this Agreement.
4.19
Environmental
Matters
. Except as would not, individually or in the aggregate, have a Material Adverse Effect on MDLY and its Subsidiaries,
taken as a whole, there are no legal, administrative, arbitral or other proceedings, Claims, actions, causes of action or notices
with respect to any Environmental Laws, pending or threatened against MDLY or any of its Subsidiaries. Neither MDLY nor any of
its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity
or Third Party imposing any liability or obligation with respect to any of the foregoing.
4.20
Employee
Benefit Plans
.
(a) Section
4.20(a) of the MDLY Disclosure Schedule sets forth a true, complete and correct list of each (i) (A) “employee benefit plan”
as defined in Section 3(3) of ERISA, and (B) incentive, deferred compensation, paid-time-off, equity-based, phantom equity, severance,
termination, retention, change-of-control, pension, profit-sharing, retirement, leave of absence, medical, disability, welfare,
cafeteria, material fringe benefit, or other similar plan, program, agreement, arrangement, practice or commitment for the benefit
of any current or (to the extent MDLY, its Subsidiaries or its Affiliates still have liability) former employee, partner, independent
contractor or director of MDLY, its Subsidiaries or any of its ERISA Affiliates, entered into, maintained or contributed to, or
in the preceding three (3) years, required to be maintained or contributed to, by MDLY, its Subsidiaries or any of their ERISA
Affiliates, and (ii) each employment agreement between MDLY, or its Subsidiaries or Affiliates, and any employee which is not terminable
on notice of thirty (30) days or less without penalty or continuing obligation (such plans, programs, agreements, arrangements,
practices and commitments, herein referred to as the
“MDLY Benefit Plans”
).
(b) (i)
Each MDLY Benefit Plan has been administered in accordance with its terms in all material respects, (ii) all MDLY Benefit Plans
are in compliance in form and operation with the applicable provisions of ERISA, the Code and all other Applicable Laws, including
Section 409A of the Code in all material respects, (iii) to MDLY’s knowledge, no non-exempt “prohibited transaction”
(as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred with respect to any MDLY Benefit Plan which would
result in a material penalty, (iv) all contributions to, and payments from, MDLY Benefit Plans have been made in accordance with
the terms of the MDLY Benefit Plans, ERISA, the Code and all other Applicable Laws in all material respects, (v) there are no current
or, to MDLY’s knowledge, threatened investigations by any Governmental Entity), ERISA termination proceedings, or other material
claims by any Person (except routine claims for benefits) with respect to MDLY Benefit Plans. No “employee benefit plan”
as defined in Section 3(3) of ERISA that is or has been maintained or contributed to by MDLY or any of its current or former ERISA
Affiliates is or has been subject to Title IV of ERISA or Section 412 of the Code, and neither MDLY nor any of its current or former
ERISA Affiliates is or ever has been a party to any multi-employer plan, within the meaning of Section 3(37) of ERISA, or a multiple
employer welfare arrangement, within the meaning of Section 3(40) of ERISA or made (or been obligated to make) contributions to
any such multi-employer or multiple employer plan.
(c) A
favorable determination letter has been received from the IRS with respect to each such MDLY Benefit Plan that is intended to comply
with Section 401 of the Code (or the sponsor of such MDLY Benefit Plan is entitled to rely on a favorable opinion letter issued
to the plan’s prototype sponsor by the IRS) and no event has occurred that will or could reasonably be expected to give rise
to disqualification of any such MDLY Benefit Plan or to liability for a material Tax under Section 511 of the Code.
(d) There
have been no acts or omissions by MDLY or any ERISA Affiliate that have given rise to or could reasonably be expected to give rise
to material fines, penalties, taxes or related charges under Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code
for which MDLY or any ERISA Affiliate may be liable. Neither MDLY nor any ERISA Affiliate nor any of their respective partners,
directors, officers, employees or any other fiduciary has committed any breach of fiduciary responsibility imposed by ERISA that
would subject MDLY or any ERISA Affiliate or any of their respective partners, directors, officers or employees to liability under
ERISA. Neither MDLY nor its Subsidiaries or Affiliates is a fiduciary within the meaning of Section 3(21) or 3(38) of ERISA with
respect to assets of a plan within the meaning of Treasury Regulation Section 2510.3-101, as revised by Section 3(42) of ERISA.
(e) Other
than pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or any equivalent state
statute, neither MDLY nor any ERISA Affiliate maintains any MDLY Benefit Plan that provides benefits described in Section 3(1)
of ERISA to any former employees, partners or retirees of MDLY or any of its ERISA Affiliates.
(f) MDLY
has made available to SIC correct and complete copies of all MDLY Benefit Plans and, where applicable, each of the following documents
with respect to such MDLY Benefit Plans: (i) the plan document together with all amendments thereto and restatements thereof (including,
without limitation, complete copies of any plans that may have been merged into such plan), and any trust agreements; (ii) any
service contracts; (iii) any documents governing the investment and management of the MDLY Benefit Plan, or the assets thereof,
including, without limitation, any investment management agreements, annuity contracts and documents scheduling fees incurred by
the sponsor or participants and beneficiaries; (iv) the most recent summary plan descriptions and summaries of material modifications;
and (v) written communications by MDLY to employees regarding the MDLY Benefit Plans, to the extent the substance of the MDLY Benefit
Plans described therein differ materially from the other documentation furnished under this clause.
(g) Neither
MDLY, nor its Subsidiaries or Affiliates maintains any nonqualified deferred compensation plan or arrangement subject to Section
409A of the Code.
(h) Other
than with respect to Medley Restricted Units and MDLY RSUs, no partner or employee of MDLY or any of its Affiliates is entitled
to, and no partner or employee of MDLY or any of its Affiliates will accrue or receive, additional benefits, accelerated rights
to payment of benefits or accelerated vesting, whether pursuant to any MDLY Benefit Plan or otherwise, or become entitled to severance,
termination allowance or other similar payments as a result of this Agreement and the transactions contemplated hereby. The execution
of this Agreement and the consumption of the transactions contemplated hereby do not result in any payment or right to payment
that (either alone or upon the occurrence of any additional or subsequent event will or may result in any “parachute payment”
(as defined under Section 280G of the Code) or will or may result in a violation of Section 409A of the Code.
4.21
Other
Employment Matters
.
(a) Except
as disclosed on Schedule 4.21(a), (i) MDLY, its Subsidiaries and their Affiliates (A) are in compliance in all material respects
with all Applicable Laws and other obligations respecting employment and employment practices and terms and conditions of employment,
including all minimum wage and overtime Applicable Laws and wage payment Applicable Laws, employee notification, leave, affirmative
action, child labor, immigration, employment discrimination, or disability rights, (B) since December 31, 2014, have not received
any notice of an investigation, charge, citation, penalty, or assessment from any Governmental Entity with respect to such labor
and employment Applicable Laws which will or could reasonably be expect to result in a material liability, and (C) since December
31, 2014, have not, and are not, engaged in any unfair labor practice which will or could reasonably be expect to result in a material
liability, (ii) since December 31, 2014, no unfair labor practice charge or complaint or labor arbitration proceeding is pending
against MDLY, its Subsidiaries or their Affiliates which will or could reasonably be expect to result in a material liability,
(iii) since December 31, 2014, there have been no and there currently are no labor strike(s), dispute(s), slowdown(s), or work
stoppage(s) pending or, to the knowledge of MDLY or its Subsidiaries, threatened against or involving MDLY, its Subsidiaries or
any of their Affiliates which will or could reasonably be expect to result in a material liability, (iv) neither MDLY, its Subsidiaries
nor any of their Affiliates is or has been party to any collective bargaining agreement and no collective bargaining agreement
or other contract, agreement, arrangement or understanding with a labor union or labor union organization is currently being negotiated
by MDLY, its Subsidiaries or their Affiliates, and (v) to the knowledge of MDLY, no collective bargaining representation question
exists respecting employees of MDLY, its Subsidiaries and their Affiliates.
(b) All
employees of MDLY, its Subsidiaries and their Affiliates are legally authorized to work in the United States either because of
their status as United States citizens, legal permanent residents, or by virtue of possessing a visa under Applicable Law relating
to immigration control which visa allows for such employee to work in the United States. To the knowledge of MDLY, none of MDLY,
its Subsidiaries and their Affiliates has employed a Person that is not legally authorized to be employed in the United States
or continued to employ a Person knowing the Person ceased to be legally authorized to be employed in the United States. Each of
MDLY, its Subsidiaries and their Affiliates has properly completed all legally required reporting and verification requirements
pursuant to Applicable Law relating to immigration control for all of its employees, including the Form I-9. Each of MDLY, its
Subsidiaries and their Affiliates has retained for each current employee the Form I-9 throughout such employee’s period of
employment with MDLY, its Subsidiaries or their Affiliates and has retained a Form I-9 for each former employee of MDLY, its Subsidiaries
or their Affiliates for a period of one (1) year from the date of termination of such employee or three (3) years from the date
of hire, whichever is later. In the preceding three years, neither MDLY, its Subsidiaries nor their Affiliates has received any
written notice from any Governmental Entity that MDLY, its Subsidiaries or their Affiliates is in violation of any Applicable Law
pertaining to immigration control or that any current or former employee of MDLY, its Subsidiaries or their Affiliates is or was
not legally authorized to be employed in the United States or is or was using an invalid social security number, and there is no
pending, or to the MDLY’s knowledge threatened, charge or complaint under the Immigration Reform and Control Act of 1986
against MDLY, its Subsidiaries or their Affiliates.
(c) All
individuals considered by MDLY, its Subsidiaries and any of their Affiliates to be (i) independent contractors are, and could only
be reasonably considered to be, in fact “independent contractors” and are not “employees” or “common
law employees” for tax, benefits, wage, labor or any other legal purpose (other than workers compensation), and (ii) employees
are, and could only be reasonably considered to be, in fact “employees” and “common law employees” and
are not “partners” for tax, benefits, wage, labor or any other legal purpose.
4.22
Related
Party Transactions
. As of the date of this Agreement, neither MDLY nor any of its Subsidiaries is party to any transaction
or arrangement under which any (i) present or former director or executive officer of MDLY or any of its Subsidiaries, (ii) beneficial
owner (within the meaning of Section 13(d) of the Exchange Act) of five percent (5%) or more of any class of equity of
MDLY or (iii) “affiliate,” “associate” or member of the “immediate family” (as such terms
are respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any of the foregoing is a party to any actual or
proposed loan, lease or other contract with or binding upon MDLY or any of its Subsidiaries or owns or has any interest in any
of their respective properties or assets, in each case as would be required to be disclosed by MDLY pursuant to Item 404 of Regulation
S-K promulgated under the Exchange Act.
4.23
Investment
Advisor Matters
.
(a) Each
of MDLY and its Subsidiaries which is registered as an investment adviser with the SEC (each, a “
MDLY Adviser
”)
has (i) adopted a formal code of ethics complying in all material respects with Rule 204A-1 under the Investment Advisers
Act and, to the extent applicable, Rule 17j-1 under the Investment Company Act and (ii) adopted and implemented written
policies and procedures that are reasonably designed to prevent and detect any material violations under applicable securities,
commodities or other investment-related or trading-related laws (including the Investment Advisers Act). None of the MDLY
Advisers nor any Persons “associated” (as defined in Section 202(a)(17) of the Investment Advisers Act) with the MDLY
Advisers is in material violation of such code of ethics or policies and procedures. Since December 31, 2014, there has been no
noncompliance by the MDLY Advisers or any of their respective employees or associated Persons with such code of ethics or policies
and procedures, except for such matters that would not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect with respect to MDLY.
(b) None
of the MDLY Advisers, any officer, director or employee thereof, MDLY or, to the knowledge of MDLY, any other “affiliated
person” (as defined in the Investment Company Act) of the MDLY Advisers who is required to be eligible, is ineligible, or
subject to potential ineligibility, pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve in any
capacity referred to in Section 9(a) thereof to a registered investment company; and none of the MDLY Advisers, any officer,
director or employee thereof, MDLY or, to the knowledge of MDLY, any other Person “associated” (as defined in Section
202(a)(17) of the Investment Advisers Act) with the MDLY Advisers who is required to be qualified, is subject to potential disqualification
pursuant to Section 203 of the Investment Advisers Act from serving as an investment adviser or as a Person associated with
an investment adviser to any Person or is subject to disqualification under Rule 206(4)-3 under the Investment Advisers Act;
in each case, except for any such disqualification (x) that would not reasonably be expected to be material to the MDLY Adviser,
or (y) with respect to which MDLY or another relevant Person has received exemptive relief from the SEC or another relevant
Governmental Entity that has the effect of nullifying such disqualification; nor is there any proceeding or investigation pending
or, to the knowledge of MDLY, threatened by any Governmental Entity that would result in any such ineligibility or disqualification,
except for any such ineligibilities or disqualifications that would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect with respect to MDLY.
(c) None
of the MDLY Advisers or any of a MDLY Adviser’s directors or officers (together with the MDLY Advisers, “
MDLY
Adviser Regulation D Covered Persons
”) is subject to a Disqualifying Event, and, to the knowledge of MDLY, there
is no inquiry, investigation, proceeding or action pending against any MDLY Adviser Regulation D Covered Person that could reasonably
be expected to result in a Disqualifying Event.
(d) Each
MDLY Adviser is not prohibited from providing investment advisory services, or from charging fees therefor, by the “pay-to-play”
rules of any jurisdiction, including Rule 206(4)-5 under the Investment Advisers Act.
(e) All
deficiency letters and examination reports that the MDLY Advisers has received since December 31, 2014 from any Governmental Entity
are listed on Section 4.23(e) of the MDLY Disclosure Schedule, true, correct and complete copies of which have been made available
to SIC, along with all written responses thereto. All remedial actions necessary to cure in all material respects the deficiencies
or violations set forth in such letters or reports have been taken by the MDLY Adviser. MDLY has made available to SIC all material
correspondence relating to any material inquiry, examination or investigation by any Governmental Entity received since December
31, 2014 regarding the MDLY Advisers and any of their respective employees or associated Persons in connection with the services
performed by such employees or associated Persons in connection with the business of MDLY or any of its Subsidiaries.
(f) None
of the MDLY Advisers, any officer, director or employee thereof, MDLY or, to the knowledge of MDLY, any other “affiliated
person” (as defined in the Investment Company Act) of the MDLY Advisers has any express or implied understanding or arrangement
which would reasonably be expected to impose an “unfair burden” (for purposes of Section 15(f) of the Investment Company
Act) on any MDLY RIC Fund as a result of the Merger or the other transactions contemplated by this Agreement.
(i)
Broker-Dealer
Matters
. Neither MDLY nor any of its Subsidiaries is, or on the Closing Date will be, required to be registered as a broker-dealer
under the Exchange Act, or with any other Governmental Entity.
4.21
No
Other Representations or Warranties
. Except for the representations and warranties contained in this Article IV and any closing
certificate delivered to SIC, neither MDLY nor any other Person on behalf of MDLY makes any express or implied representation or
warranty with respect to MDLY, any of its Subsidiaries, or any other information provided to SIC in connection with the Merger
and the other transactions contemplated by this Agreement, including the accuracy, completeness or timeliness thereof. Neither
MDLY nor any other Person will have or be subject to any claim, liability or indemnification obligation to SIC or any other Person
resulting from the distribution or failure to distribute to SIC, or SIC’s use of, any such information, including any information,
documents, projections, estimates, forecasts or other material made available to SIC in the electronic data room maintained by
MDLY for purposes of the transactions contemplated by this Agreement or management presentations in expectation of the transactions
contemplated by this Agreement, unless and to the extent any such information is expressly included in a representation or warranty
contained in this Article IV.
Article
V
REPRESENTATIONS AND WARRANTIES OF SIC
Except as disclosed
in (i) the SIC SEC Reports (as defined in Section 5.5(c) below) filed prior to the date of this Agreement, or (ii) the SIC Disclosure
Schedule, SIC and Merger Sub hereby represent and warrant to MDLY as follows:
5.1
Corporate
Organization
.
(a) SIC
is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland. Merger Sub is
a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each of SIC and
Merger Sub has the requisite corporate power and corporate authority to own or lease all of its properties and assets and to carry
on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed or qualified would not, individually or in the
aggregate, have a Material Adverse Effect on SIC.
(b) True,
complete and correct copies of the SIC Charter, SIC Bylaws, Merger Sub Certificate and Merger Sub Bylaws have previously been made
available to MDLY. SIC is not in violation of the SIC Charter or the SIC Bylaws.
(c) Except
for Merger Sub and as set forth in Section 5.1(c) of the Disclosure Schedule, SIC has no Subsidiaries or other equity interest
in any other Person. Each of SIC’s Subsidiaries (i) is duly formed and validly existing and in good standing under the laws
of the state of its formation, (ii) has the requisite corporate or other organizational power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being conducted and (iii) is duly licensed or qualified
to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or
qualified would not, individually or in the aggregate, have a Material Adverse Effect on SIC. True, complete and correct copies
of the Organizational Documents of each Subsidiary of SIC have previously been made available to MDLY. No Subsidiary of SIC is
in violation of its Organizational Documents.
5.2
Capitalization
.
(a) The
authorized capital stock of SIC consists of 250,000,000 shares of SIC Common Stock of which, as of the date of this Agreement,
96,925,815 shares were issued and outstanding. As of the date of this Agreement, no shares of SIC Common Stock were reserved for
issuance. All of the issued and outstanding shares of SIC Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date
of this Agreement, no SIC Voting Debt is issued or outstanding. As of the date of this Agreement, except pursuant to this Agreement,
SIC does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements
of any character calling for the purchase or issuance of, or the payment of any amount based on, any shares of SIC Common Stock,
SIC Voting Debt or any other equity securities of SIC or any securities representing the right to purchase or otherwise receive
any shares of SIC Common Stock, SIC Voting Debt or other equity securities of SIC. As of the date of this Agreement, except pursuant
to this Agreement, there are no contractual obligations of SIC or any of its Subsidiaries (A) to repurchase, redeem or otherwise
acquire any shares of capital stock of SIC or any equity security of SIC or its Subsidiaries or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other equity security of SIC or its Subsidiaries or (B)
pursuant to which SIC or any of its Subsidiaries is or could be required to register shares of SIC capital stock or other securities
under the Securities Act.
(b) Except
as set forth in Section 5.2(b) of the SIC Disclosure Schedule, all of the issued and outstanding shares of capital stock or other
equity ownership interests of each Subsidiary of SIC are owned, directly or indirectly, by SIC, free and clear of any Liens, and
all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free
of any preemptive rights. No Subsidiary of SIC has or is bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security
of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
(c) The
Merger Shares, when issued in compliance with the provisions of this Agreement and the Form N-14 Registration Statement, will be
validly issued and will be fully paid and nonassessable, free of any Liens, and will not be subject to any preemptive rights, whether
arising under the laws of the State of Maryland or the SIC Charter or the SIC Bylaws, as amended or restated, or any SIC Contract.
(d) Except
for amounts outstanding under the SIC Debt Documents, neither SIC nor any of its Subsidiaries has any Indebtedness for borrowed
money.
5.3
Authority;
No Violation
.
(a) Each
of SIC and Merger Sub has full corporate power and authority to execute and deliver this Agreement and, subject to receipt of the
SIC Stockholder Approval, to consummate the transactions contemplated hereby; provided, that in the case of Merger Sub, this Agreement
and the consummation of the transactions contemplated hereby is subject to the approval and adoption of this Agreement by the sole
stockholder of Merger Sub (which will occur via written consent in lieu of a meeting promptly following the execution and delivery
of this Agreement). The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by the SIC Board, acting upon recommendation of the SIC Special Committee, and the
Merger Sub Board. The Merger Sub Board has (i) determined that this Agreement and the transactions contemplated hereby, including
the Merger, are advisable and fair to, and in the best interests of, Merger Sub and its sole stockholder, (ii) approved and declared
advisable this Agreement and the transactions contemplated hereby, including the Merger, (iii) resolved to submit this Agreement
to the sole stockholder of Merger Sub for its adoption, and (iv) recommended that the sole stockholder of Merger Sub approve the
adoption of this Agreement. The SIC Board, acting upon the recommendation of the SIC Special Committee, has unanimously determined
that the Merger, this Agreement, the issuance of the Merger Shares and the other transactions contemplated by this Agreement are
advisable and in the best interests of SIC and its stockholders, has approved the SIC Matters and has directed that the SIC Matters
be submitted to the SIC’s stockholders for approval and adoption at a duly held meeting of such stockholders, together with
the recommendation of the SIC Board that the stockholders approve and adopt the SIC Matters (the
“SIC Board Recommendation”
)
and has adopted a resolution to the foregoing effect. Except for the approval and adoption of the SIC Matters by the affirmative
vote of the holders of a majority of the outstanding shares of SIC Common Stock (the
“SIC Stockholder Approval”
)
at the SIC Stockholder Meeting and the approval by SIC, in its capacity as the sole stockholder of Merger Sub (which will occur
via written consent in lieu of a meeting promptly following the execution and delivery of this Agreement), no other corporate proceedings
on the part of SIC or Merger Sub are necessary to approve the Merger, this Agreement, the issuance of the Merger Shares or the
other transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by SIC and Merger Sub (assuming
due authorization, execution and delivery by MDLY) constitutes the valid and binding obligation of each of SIC and Merger Sub,
enforceable against SIC and Merger Sub, as the case may be, in accordance with its terms (subject to the Bankruptcy and Equity
Exception).
(b) Neither
the execution and delivery of this Agreement by SIC or Merger Sub nor the consummation by SIC or Merger Sub of the transactions
contemplated hereby, nor compliance by SIC or Merger Sub with any of the terms or provisions of this Agreement, will (i) violate
any provision of the SIC Charter, SIC Bylaws, Merger Sub Certificate or Merger Sub Bylaws, or (ii) assuming that the consents,
approvals and filings referred to in Section 5.4 are duly obtained and/or made, (A) violate any Applicable Law applicable to Merger
Sub, SIC or any of its Subsidiaries, or any of their respective properties or assets, or (B) except as would not, individually
or in the aggregate, have a Material Adverse Effect on SIC, violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or assets of Merger Sub, SIC or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, franchise,
agreement or other instrument or obligation to which Merger Sub, SIC or any of its Subsidiaries is a party or by which any of them
or any of their respective properties or assets is bound (collectively, the
“SIC Contracts”
).
5.4
Consents
and Approvals
.
(a) Except
for (i) the SEC Exemptive Relief, (ii) the filing with the SEC of the Form N-14 Registration Statement, the Joint Proxy Statement/Prospectus
and the Schedule 13E-3, and declaration of effectiveness thereof by the SEC, (iii) the filing of the Certificate of Merger with
the Delaware Secretary pursuant to the DGCL, (iv) any notices, consents, authorizations, approvals, filings or exemptions in connection
with compliance with the rules and regulations of the NYSE or any SRO, (v) any notices or filings under the HSR Act and the expiration
of applicable waiting periods, (vi) such filings and approvals as are required to be made or obtained under the securities or “Blue
Sky” laws of various states in connection with the issuance of the shares of SIC Common Stock pursuant to this Agreement,
(vii) compliance with the Investment Company Act and the rules and regulations promulgated thereunder and (viii) as set forth on
Section 5.4(a) of the SIC Disclosure Schedule (the foregoing (i) through (viii) referred to collectively as the
“SIC
Required Approvals”
and together with the MDLY Required Approvals, the
“Required Approvals”
),
no other consents, authorizations, approvals, or exemptions from, or notices to, or filings with, any Governmental Entity are necessary
in connection with the execution and delivery by SIC and Merger Sub of this Agreement or the consummation by Merger Sub of the
Merger and the other transactions contemplated by this Agreement.
(b) Except
for matters covered in the immediately preceding Section 5.4(a), no consents or approvals of any Person are necessary in connection
with the execution and delivery by SIC or Merger Sub of this Agreement or the consummation by Merger Sub of the Merger and the
other transactions contemplated by this Agreement.
5.5
Reports;
Regulatory Matters
.
(a) SIC
and each of its Subsidiaries have timely filed all reports, registration statements and certifications, together with any amendments
required to be made with respect thereto, that they were required to file since December 31, 2014 with (i) the SEC and (ii) any
SROs and with each applicable Governmental Entity, and all other reports and statements required to be filed by them since December
31, 2014, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United States,
any state, any foreign entity, or any SRO or Governmental Entity, and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations of SIC and its Subsidiaries conducted by a SRO or Governmental Entity in the ordinary
course of the business, no SRO or Governmental Entity has initiated since December 31, 2014 or has pending any proceeding, enforcement
action or, to the knowledge of SIC, investigation into the business, disclosures or operations of SIC or any of its Subsidiaries.
Since December 31, 2014, no SRO or Governmental Entity has resolved any proceeding, enforcement action or, to the knowledge of
SIC, investigation into the business, disclosures or operations of SIC or any of its Subsidiaries. There is no unresolved, or,
to SIC’s knowledge, threatened criticism, comment, exception or stop order by any SRO or Governmental Entity with respect
to any report or statement relating to any examinations or inspections of SIC or any of its Subsidiaries. Since December 31, 2014,
there have been no formal or informal inquiries by, or disagreements or disputes with, any SRO or Governmental Entity with respect
to the business, operations, policies or procedures of SIC or any of its Subsidiaries (other than normal examinations conducted
by a SRO or Governmental Entity in SIC’s ordinary course of business). SIC has made available to MDLY all correspondence
between SIC or any of its Subsidiaries and the SEC and any other SRO or Governmental Entity since December 31, 2014.
(b) Neither
SIC nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party
to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been
since December 31, 2014 a recipient of any supervisory letter from, or since December 31, 2014 has adopted any policies, procedures
or board resolutions at the request or suggestion of, any SRO or Governmental Entity that currently restricts in any material respect
the conduct of its business, or that in any material manner relates to its credit, risk management or compliance policies, its
internal controls, its management or its business (each item in this sentence, a
“SIC Regulatory Agreement”
),
nor has SIC or any of its Subsidiaries been advised since December 31, 2014 by any SRO or Governmental Entity that it is considering
issuing, initiating, ordering, or requesting any such SIC Regulatory Agreement.
(c) SIC
has filed on the SEC’s EDGAR system each (i) registration statement, prospectus, report, schedule and definitive proxy statement
(including all exhibits, amendments and supplements thereto) filed with or furnished to the SEC by SIC or any of its Subsidiaries
pursuant to the Securities Act or the Exchange Act since December 31, 2014 (the
“SIC SEC Reports”
) and
(ii) communication mailed by SIC to its stockholders since December 31, 2014. No such SIC SEC Report or communication, at the time
filed, furnished or communicated (and, in the case of registration statements, proxy statements and prospectuses, on the dates
of effectiveness, the dates of the relevant meetings and dates of use, respectively), contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except that information contained in any SIC SEC Report
as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their
respective dates, all SIC SEC Reports complied as to form in all material respects with the Securities Act, the Exchange Act and
the other rules and regulations of the SEC with respect thereto. No executive officer of SIC has failed in any respect to make
the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement,
there are no outstanding or unresolved comments from the SEC with respect to any SIC SEC Report and, as of the date of this Agreement,
to the knowledge of SIC, no SIC SEC Report is subject to any ongoing review by the SEC.
5.6
Financial
Statements
.
(a) The
consolidated financial statements of SIC and its Subsidiaries included in the SIC SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in accordance with, the books and records of SIC and its Subsidiaries, (ii) fairly
present in all material respects the consolidated results of operations, cash flows, changes in stockholders’ equity and
consolidated financial position of SIC and its Subsidiaries for the respective fiscal periods or as of the respective dates therein
set forth (subject in the case of unaudited statements to recurring year-end audit adjustments immaterial in nature and amount),
(iii) complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto and (iv) have been prepared in accordance
with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes
thereto.
(b) Neither
SIC nor any of its Subsidiaries has any liability or obligation of any nature whatsoever required by GAAP to be reflected or reserved
for in a balance sheet (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those
liabilities that are reflected or reserved against on the consolidated balance sheet of SIC included in its Annual Report on Form
10-K for the annual period ended December 31, 2017 (including any notes thereto) and for liabilities and obligations incurred in
a commercially reasonable manner and in the ordinary course of business consistent with past practice since the date of such balance
sheet.
(c) SIC
has established and maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act) that is designed to provide reasonable assurance (i) regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that receipts and expenditures
of SIC and its Subsidiaries are being made only in accordance with authorizations of SIC management and the SIC Board, and (iii)
regarding prevention or timely detection of the unauthorized acquisition, use or disposition of SIC and each of SIC’s Subsidiaries’
assets that could have a material effect on SIC’s consolidated financial statements. SIC has disclosed, based on its most
recent evaluation of such internal control over financial reporting prior to the date of this Agreement, to SIC’s auditors
and the audit committee of the SIC Board and in Section 4.6(c) of the SIC Disclosure Schedule (x) any significant deficiency and
material weakness in the design or operation of SIC’s internal control over financial reporting that is reasonably likely
to adversely affect SIC’s ability to record, process, summarize or report financial information, and (y) any fraud, whether
or not material, that involves SIC management or other employees of SIC or any SIC Subsidiary who have a significant role in SIC’s
internal control over financial reporting. For purposes of this Agreement, the terms “significant deficiency” and “material
weakness” shall have the meaning assigned to them in the auditing standards of the Public Company Accounting Oversight Board,
as in effect on the date of this Agreement.
(d) SIC’s
“disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed
to ensure that all information (both financial and non-financial) required to be disclosed by SIC in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such information is accumulated and communicated to SIC’s management as appropriate to
allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial
officer of SIC required under the Exchange Act with respect to such reports. SIC’s management has completed an assessment
of the effectiveness of SIC’s disclosure controls and procedures and, to the extent required by Applicable Law, presented
in any applicable SIC SEC Report that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on
such evaluation.
(e) Since
December 31, 2014, SIC and its principal executive officer and principal financial officer of SIC have complied in all material
respects with the applicable provisions of the Sarbanes-Oxley Act and the Exchange Act. The principal executive officer and the
principal financial officer of SIC have made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to each SIC SEC Report, and the statements contained in such certifications were true and correct on the date such certifications
were made. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer”
shall have the meanings given to such terms in the Sarbanes-Oxley Act.
5.7
Broker’s
Fees
. Except for Broadhaven Capital Partners, none of Merger Sub, SIC or any of its Subsidiaries or any of their respective
officers or directors has used any broker, finder or financial advisor or incurred any liability for any broker’s fees, commissions
or finder’s fees in connection with the Merger or any other transactions contemplated by this Agreement.
5.8
Absence
of Certain Changes or Events
. Since December 31, 2017, (a) the respective businesses of SIC and its Subsidiaries have been
conducted in the ordinary course of business consistent with past practice, (b) none of SIC or any of its Subsidiaries has taken
any action that, if taken after the date of this Agreement, would result in a breach of the covenants set forth in Section 6.3,
and (c) no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on SIC.
5.9
Legal
Proceedings
.
(a) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on SIC, none of Merger Sub, SIC or any of its Subsidiaries
is a party to any, and there are no pending or, to the best of SIC’s knowledge, threatened, legal, administrative, arbitral
or other proceedings, Claims, actions, suits or governmental or regulatory investigations of any nature against Merger Sub, SIC
or any of its Subsidiaries or to which any of their assets are subject.
(b) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on SIC, there is no judgment, settlement agreement,
order, injunction, decree or regulatory restriction (other than those of general application that apply to similarly situated companies
or their Subsidiaries) imposed upon Merger Sub, SIC, any of its Subsidiaries or the assets of Merger Sub, SIC or any of its Subsidiaries
(or that, upon consummation of the Merger, would apply to Merger Sub, SIC or any of its Subsidiaries).
5.10
Taxes
and Tax Returns
. (a) Each of SIC and its Subsidiaries (i) has duly and timely filed (including all applicable extensions) all
federal, state, local and foreign income and other material Tax Returns required to be filed by it and all such Tax Returns are
accurate and complete, (ii) has paid all Taxes shown thereon as due and (iii) has duly paid or made provision for the payment of
all Taxes that have been incurred or are due or claimed to be due from it by the IRS or any other federal, state, foreign or local
taxing authorities other than Taxes that are not yet delinquent or are being contested in good faith, have not been finally determined
and have been adequately reserved against under GAAP. There are no material disputes pending, or written claims asserted, for Taxes
or assessments upon SIC or any Subsidiary for which SIC does not have reserves that are adequate under GAAP. Neither SIC nor any
Subsidiary is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such
an agreement or arrangement exclusively between or among SIC and its Subsidiaries as described in the SIC Disclosure Schedule).
(b) Effective
for the year ending December 31, 2012, SIC made a valid election under Subchapter M of Chapter 1 of the Code to be taxed as a regulated
investment company. SIC has qualified as a regulated investment company at all times subsequent to such election, and expects to
qualify as such for its current taxable year. With respect to each relevant taxable year, SIC has satisfied the distribution requirements
imposed on a regulated investment company under Section 852 of the Code.
(c) SIC
and its Subsidiaries have complied in all material respects with all Applicable Laws relating to the payment and withholding of
Taxes and have, within the time and in the manner prescribed by Applicable Law, withheld from and paid over all amounts required
to be so withheld and paid over under Applicable Laws.
(d) There
are no Liens for Taxes upon the assets of SIC or any of the Subsidiaries, except for Liens for Taxes not yet due and payable and
Liens for Taxes that are both being contested in good faith and adequately reserved for in accordance with GAAP.
(e) Neither
SIC nor any Subsidiary has granted any waiver, extension, or comparable consent regarding the application of the statute of limitations
with respect to any Taxes or Tax Return that is outstanding, nor any request for such waiver or consent has been made.
5.11
Compliance
with Applicable Law
. Merger Sub, SIC and each of its Subsidiaries hold all Permits necessary for the lawful conduct of their
respective businesses, and have complied in all respects with and are not in default in any respect under any, any Permit or Applicable
Law, except for such failures, non-compliance or defaults that would not, individually or in the aggregate, have a Material Adverse
Effect on SIC.
5.12
Certain
Contracts
. (a) Except as set forth in Section 5.12(a) of the SIC Disclosure Schedule or as expressly contemplated by this Agreement,
neither SIC nor any of its Subsidiaries is a party to or bound by any SIC Contract that is a “material contract” (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has
not been filed or incorporated by reference in the SIC SEC Reports filed prior to the date hereof (collectively, the
“SIC
Material Contracts”
).
(b) Except
as set forth in Section 5.12(b) of the SIC Disclosure Schedule, (i) each SIC Material Contract is valid and binding on SIC
or its applicable Subsidiary, enforceable against it in accordance with its terms (subject to the Bankruptcy and Equity Exception),
and is in full force and effect, (ii) SIC and each of its Subsidiaries and, to SIC’s knowledge, each other party thereto
has duly performed all obligations required to be performed by it to date under each SIC Material Contract and (iii) no event or
condition exists that constitutes or, after notice or lapse of time or both, will constitute, a breach, violation or default on
the part of SIC or any of its Subsidiaries or, to SIC’s knowledge, any other party thereto under any such SIC Material Contract.
Except as set forth in Section 5.12 of the SIC Disclosure Schedule, there are no disputes pending or, to SIC’s knowledge,
threatened with respect to any SIC Material Contract.
5.13
Investment
Securities
. SIC has good title to all securities (including any evidence of Indebtedness) owned by it, free and clear of any
Liens, except (a) for those Liens or restrictions arising under the Organizational Documents of the issuers of such securities,
(b) to the extent such securities are pledged in connection with the SIC Debt Documents, (c) for restrictions on transferability
arising under federal or state securities laws or (d) for Liens or restrictions which would not individually or in the aggregate
be material with respect to the value, ownership or transferability of such securities.
5.14
Property
.
SIC or one of its Subsidiaries (a) has good and marketable title to all the properties and assets (excluding securities, which
are addressed in Section 5.13 above) reflected in the latest audited balance sheet included in such SIC SEC Reports as being owned
by SIC or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all Liens of any nature whatsoever, except Permitted Liens,
and (b) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such SIC SEC Reports
or acquired after the date thereof (except for leases that have expired by their terms since the date thereof), free and clear
of all Liens of any nature whatsoever, except for Permitted Liens, and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the lessee or, to SIC’s knowledge, the lessor.
5.15
Intellectual
Property
. SIC owns or possesses sufficient Intellectual Property Rights reasonably necessary to conduct its business as now
conducted and as described in the SIC SEC Reports, except where the failure to own or possess such rights would not reasonably
be expected to result in a Material Adverse Effect on SIC; and the expected expiration of any of such Intellectual Property Rights
would not result in a Material Adverse Effect on SIC.
5.16
State
Takeover Laws
.
(a) Neither
SIC nor Merger Sub is or has been, at any time during the three (3) years preceding the date hereof, an “interested stockholder”
of MDLY, as defined in Section 203 of the DGCL, that is subject to the restrictions imposed by Section 203 of the DGCL.
(b) Either
(i) no Takeover Statute under the laws of the State of Maryland applies to SIC in connection with the Merger or the other transactions
contemplated by this Agreement, or (ii) the SIC Board has unanimously approved this Agreement and the transactions contemplated
hereby as required to render inapplicable to this Agreement and such transactions the restrictions imposed by any Takeover Statute.
5.17
Opinion
.
The SIC Special Committee has received the opinion of Broadhaven Capital Partners to the effect that, subject to certain assumptions,
limitations and qualifications set forth therein, the consideration to be issued by SIC as set forth in this Agreement and the
MCC Merger Agreement, considered as a whole and not in separate parts, is fair, from a financial point of view, to SIC from a financial
point of view; it being agreed that MDLY is not entitled to rely upon such opinion.
5.18
SIC
Information
. The information relating to SIC and its Subsidiaries that is provided by SIC or its representatives for inclusion
in the Form N-14 Registration Statement, Joint Proxy Statement/Prospectus and/or the Schedule 13E-3, or in any application, notification
or other document filed with any other SRO or Governmental Entity (including the SEC) in connection with the transactions contemplated
by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made, not misleading. The Form N-14 Registration Statement
and the Schedule 13E-3 as it relates to SIC and its Subsidiaries and other portions within the reasonable control of SIC and its
Subsidiaries will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.
5.19
Insurance
.
SIC and its Subsidiaries maintain, or are covered by, policies of insurance in such amounts and against such risks as are customary
in the industries in which SIC and its Subsidiaries operate. Except as would not be reasonably expected to have a Material Adverse
Effect on SIC, all such insurance policies are in full force and effect and will not in any way be affected by, or terminate
or lapse by reason of, the execution (but not the performance) of this Agreement.
5.20
Environmental
Matters
. Except as would not, individually or in the aggregate, have a Material Adverse Effect on SIC and its Subsidiaries,
taken as a whole, there are no legal, administrative, arbitral or other proceedings, Claims, actions, causes of action or notices
with respect to any Environmental Laws, pending or threatened against SIC or any of its Subsidiaries. Neither SIC nor any of its
Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or Third
Party imposing any liability or obligation with respect to any of the foregoing.
5.21
No
Financing Condition
. SIC has sufficient immediately available funds in cash or cash equivalents, or available under lines of
credit in effect as of the date hereof, and at Closing will have sufficient immediately available funds in cash or cash equivalents,
in each case as necessary to pay the full amount of the cash portion of the Merger Consideration in accordance with the terms of
this Agreement.
5.22
Section
15(f)
. Neither SIC nor any of its Affiliates has any express or implied understanding or agreement which would
impose an unfair burden on SIC that would preclude satisfaction of the safe harbor provided by Section 15(f) of the Investment
Company Act as a result of the Merger and the other transactions contemplated by this Agreement.
5.23
No
Other Representations or Warranties
. Except for the representations and warranties contained in this Article V and any closing
certificate delivered to MDLY, neither SIC nor any other Person on behalf of SIC makes any express or implied representation or
warranty with respect to SIC, any of its Subsidiaries, any investment assets or portfolio company, or any other information provided
to MDLY in connection with the Merger and the other transactions contemplated by this Agreement, including the accuracy, completeness
or timeliness thereof. Neither SIC nor any other Person will have or be subject to any claim, liability or indemnification obligation
to MDLY or any other Person resulting from the distribution or failure to distribute to MDLY, or MDLY’s use of, any such
information, including any information, documents, projections, estimates, forecasts or other material made available to MDLY in
the electronic data room maintained by SIC for purposes of the transactions contemplated by this Agreement or management presentations
in expectation of the transactions contemplated by this Agreement, unless and to the extent any such information is expressly included
in a representation or warranty contained in this Article V.
Article
VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1
Conduct
of Businesses Prior to the Effective Time
. Except as expressly contemplated by or permitted by this Agreement or the MCC Merger
Agreement or with the prior written consent of the other party, during the period from the date of this Agreement to the Effective
Time, (a) each of MDLY and SIC shall, and shall cause each of its respective Subsidiaries to, (i) conduct its business in the ordinary
course in all material respects, as such business is being conducted as of the date hereof, and (ii) use commercially reasonable
efforts to maintain and preserve intact its business organization and advantageous business relationships and retain the services
of its key officers and key employees, and (b) each of MDLY and SIC shall, and shall cause each of its respective Subsidiaries
to, take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability of MDLY
or SIC either to obtain any necessary approvals of any SRO or Governmental Entity required for the transactions contemplated hereby
or to perform its covenants and agreements under this Agreement or to consummate the transactions contemplated hereby or thereby.
6.2
MDLY
Forbearances
. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or
permitted by this Agreement or as provided in Section 6.2 of the MDLY Disclosure Schedule, MDLY shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of SIC (which consent shall not be unreasonably withheld, conditioned
or delayed):
(a) Except
for borrowings under the CNB Credit Facility, incur any Indebtedness for borrowed money, assume, guarantee, endorse or otherwise
as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or, make any loan
or advance or capital contribution to, or investment in, any Person;
(b) (i) adjust,
split, combine or reclassify any of its capital stock;
(ii) make,
declare or pay any dividend, other than (A) its regular quarterly dividend consistent with past practice of no more than $0.20
per share, and (B) dividends paid by any of the Subsidiaries of MDLY (other than Medley LLC) to any of its wholly-owned Subsidiaries;
(iii) make
any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or
other ownership interests or any securities or rights convertible (whether currently convertible or convertible only after the
passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock or other ownership
interest; or
(iv) grant
any stock options or restricted shares or restricted units or restricted stock units, or grant any Person any right to acquire
any shares of its capital stock or other ownership interests or other securities or issue or sell any additional shares of capital
stock or other ownership interests or securities or rights convertible (whether currently convertible or convertible only after
the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock or other ownership
interest; provided, however, that MDLY shall be entitled enter into such documentation as is reasonably necessary to evidence the
carried interest awards previously approved by the MDLY Board on May 10, 2018;
(c) sell,
transfer, pledge, lease, license, mortgage, encumber or otherwise dispose of any material amount of its properties or assets (including
pursuant to securitizations) to any Person other than a wholly owned Subsidiary or cancel, release or assign any material amount
of Indebtedness owed to or any claims held by MDLY or any of its Subsidiaries, in each case other than pursuant to contracts in
force as of the date of this Agreement and set forth in Section 6.2(c) of the MDLY Disclosure Schedule;
(d) take
any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code or take any action, or knowingly fail to take any
action, inconsistent with the treatment of the Merger as a reorganization for federal income Tax purposes;
(e) amend
the MDLY Certificate or MDLY Bylaws or the Organizational Documents of any Subsidiary of MDLY, or take any action to exempt any
Person (other than SIC or its Subsidiaries) or any action taken by any Person from any Takeover Statute or similarly restrictive
provisions of its Organizational Documents;
(f) enter
into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any MDLY Material
Contract (or any contract that, if existing as of the date hereof, would be a MDLY Material Contract), other than (A) any termination
or renewal in accordance with the terms of any existing MDLY Material Contract that occurs automatically without any action (other
than notice of renewal) by MDLY or any of its Subsidiaries, (B) the entry into any modification or amendment of, or waiver or consent
under, any MDLY Material Contract as required or necessitated to obtain any MDLY Required Approval, (C) the termination of a MDLY
Material Contract specifically contemplated by this Agreement, or (D) amendments, waivers or consents to or under the MDLY Debt
Documents in the ordinary course of business consistent with past practice;
(g) form
any Person that would comprise a Subsidiary or dissolve or liquidate any Subsidiary;
(h) except
as required pursuant to the terms of a MDLY Benefit Plan in effect as of the date hereof, or as otherwise required by Applicable
Law, (i) increase the rate of compensation or benefits payable to any partner, director, executive officer, employee or other service
provider of MDLY or any of its Subsidiaries, except, for employees who are not executive officers or partners, increases in annual
salary or wage rate in the ordinary course of business consistent with past practice that do not exceed ten percent (10%) in the
aggregate, (ii) establish, adopt, materially amend or terminate any MDLY Benefit Plan or any plan, agreement or arrangement that
would be a MDLY Benefit Plan if in effect on the date hereof, (iii) take any action to accelerate the vesting, accrual or payment
of, or to fund or in any other way secure the payment, of compensation or benefits under any MDLY Benefit Plan, except as otherwise
provided in this Agreement, or (iv) hire any senior management employee or partner or terminate the employment or services of any
senior management employee or partner other than for cause;
(i) (i)
except for the Tax Receivables Termination Agreement, enter into, amend or modify any MDLY Tax Protection Agreement, (ii) materially
amend any income Tax Return or any other material Tax Return, (iii) settle or compromise any material U.S. federal, state, local
or foreign income Tax liability, audit, Claim or assessment or (iv) enter into any material closing agreement related to Taxes,
except in each case unless required by Tax law or necessary or appropriate to preserve the status of any Subsidiary of MDLY as
a disregarded entity or partnership for U.S. federal income Tax purposes;
(j) acquire
the assets, business, or properties of any non-Affiliated entity, or make any loans, advances or capital contributions to, or investments
in, any Person (other than any wholly owned Subsidiary of MDLY);
(k) allow
the lapse or termination of policies of insurance covering material assets and businesses (other than the replacement of existing
policies with substantially comparable policies);
(l) take
any action or willfully fail to take any action that is intended or may reasonably be expected to result in any of the conditions
to the Merger set forth in Article VIII not being satisfied;
(m) implement
or adopt any change in its Tax accounting or financial accounting principles, practices or methods, other than as may be required
by Applicable Law, GAAP or regulatory guidelines;
(n) take
any action that would be reasonably expected to prevent, materially impede or delay beyond the date set forth in Section 9.1(c)
the consummation of the transactions contemplated by this Agreement; or
(o) agree
to take, or publicly announce an intention to take, any of the actions prohibited by this Section 6.2.
6.3
SIC
Forbearances
. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or
permitted by this Agreement or as provided in Section 6.3 of the SIC Disclosure Schedule, SIC shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of MDLY (which consent shall not be unreasonably withheld, conditioned
or delayed):
(a) (i) adjust,
split, combine or reclassify any of its capital stock;
(ii) make,
declare or pay any dividend, other than (A) its regular quarterly dividend consistent with past practice, (B) dividends paid by
any of the Subsidiaries of SIC to SIC or to any of its wholly-owned Subsidiaries and (C) any dividend necessary to comply with
Subchapter M of Chapter 1 of the Code;
(iii) make
any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or
other ownership interests or any securities or obligations other than in the ordinary course of business consistent with past practice
or as required by the SIC Charter or SIC Bylaws or under Subchapter M of Chapter 1 of the Code;
(iv) grant
any stock options or restricted shares or restricted stock units, or grant any Person any right to acquire any shares of its capital
stock, or other ownership interests or other securities or issue or sell any additional shares of capital stock or other ownership
interests or securities or rights convertible (whether currently convertible or convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for any shares of its capital stock or other ownership interest, other than
in the ordinary course of business consistent with past practice or as contemplated by the SIC SEC Reports; or
(v) issue
any additional shares of capital stock or other securities other than in the ordinary course of business consistent with past practice
or as contemplated by the SIC SEC Reports;
(b) sell,
transfer, pledge, lease, license, mortgage, encumber or otherwise dispose of any material amount of its properties or assets (including
pursuant to securitizations) to any Person other than a wholly owned Subsidiary or cancel, release or assign any material amount
of Indebtedness owed to or any claims held by any such Person, in each case other than pursuant to contracts in force at the date
of this Agreement, except in furtherance of its investment objective as set forth in the SIC SEC Reports;
(c) take
any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to prevent the Merger from
qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;
(d) except
as permitted pursuant to Section 2.6(b), amend, repeal or otherwise modify any provision of the SIC Charter, the SIC Bylaws, the
Merger Sub Certificate or the Merger Sub Bylaws in a manner that would adversely affect MDLY, the stockholders of MDLY or the transactions
contemplated by this Agreement;
(e) take
any action, or permit the taking of any action, that will result in SIC not having in cash or cash equivalents amounts sufficient
to make payment of the cash portion of the Merger Consideration due at Closing;
(f) take
any action or willfully fail to take any action that is intended or may reasonably be expected to result in any of the conditions
to the Merger set forth in Article VIII not being satisfied;
(g) take
any action that would be reasonably expected to prevent, materially impede or delay beyond the date set forth in Section 9.1(c)
the consummation of the transactions contemplated by this Agreement; or
(h) agree
to take, or publicly announce an intention to take, any of the actions prohibited by this Section 6.3.
Article
VII
ADDITIONAL AGREEMENTS
7.1
Regulatory
and Other Matters
.
(a) The
parties shall, and shall cause their respective Subsidiaries to, cooperate with each other and use their respective commercially
reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and
filings with any Third Party or Governmental Entity and to take any further actions reasonably requested by the other party to
obtain as promptly as practicable the Required Approvals and other consents required to be obtained in connection with the Merger
and the other transactions contemplated by this Agreement. MDLY and SIC shall have the right to review in advance, and, to the
extent practicable, each will consult with the other on, in each case subject to Applicable Laws relating to the confidentiality
of information, all information relating to MDLY or SIC, as the case may be, and any of their respective Subsidiaries, that appear
in any filing made with, or written materials submitted to, any Third Party or any Governmental Entity in connection with obtaining
the Required Approvals. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as reasonably
practicable. The parties shall consult with each other with respect to the obtaining of the Required Approvals and each party will
keep the other apprised of the status of matters relating to completion of the transactions contemplated by this Agreement.
(b) Without
in any way limiting the foregoing Section 7.1(a):
(i) SIC
and MDLY shall as promptly as reasonably practicable prepare and file with the SEC the Form N-14 Registration Statement and the
Schedule 13E-3. Each of SIC and MDLY shall use its reasonable best efforts to have the Form N-14 Registration Statement declared
effective under the Securities Act and to obtain clearance of the Schedule 13E-3 from the SEC as promptly as practicable after
such filing, and MDLY and SIC shall promptly mail or deliver the Joint Proxy Statement/Prospectus to their respective stockholders
upon such effectiveness. SIC shall also use its reasonable best efforts to obtain all necessary state securities Law or “Blue
Sky” Permits required to issue the Merger Shares, and MDLY shall use reasonable best efforts to furnish all information concerning
MDLY and the holders of shares of Class A Common Stock as may be reasonably requested in connection with any such action. Each
of SIC and MDLY shall, upon request, furnish to the other all information concerning itself, its Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Form N-14 Registration
Statement, the Schedule 13E-3 or any other statement, filing, notice or application made by or on behalf of SIC, MDLY or any of
their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated
by this Agreement and provide the other party with a reasonable opportunity to review and comment on any such document. The information
supplied or to be supplied by either SIC or MDLY, as the case may be, for inclusion in the Form N-14 Registration Statement and
the Schedule 13E-3 shall not at the time the Form N-14 Registration Statement or the Schedule 13E-3, as applicable, is filed with
the SEC or declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. Without limiting the generality of the foregoing, prior to the Effective Time each party shall notify the
other party as promptly as practicable (i) upon becoming aware of any event or circumstance that should be described in an amendment
to the Form N-14 Registration Statement, the Schedule 13E-3 or in a supplement to the Joint Proxy Statement/Prospectus or Schedule
13E-3, and MDLY and SIC shall cooperate in the prompt filing with the SEC of any necessary amendment to the Form N-14 Registration
Statement or supplement to the Joint Proxy Statement/Prospectus or Schedule 13E-3 and, to the extent required by Law, in disseminating
the information contained in such amendment or supplement to stockholders of MDLY and SIC and (ii) promptly after the receipt by
it of any written or oral comments of the SEC with respect to, or of any written or oral request by the SEC for amendments or supplements
to, the Form N-14 Registration Statement, the Joint Proxy Statement/Prospectus or the Schedule 13E-3, and shall promptly supply
the other party with copies of all correspondence between it or any of its Representatives and the SEC with respect to any of the
foregoing filings.
(ii) Each
of SIC and MDLY shall, if and to the extent required, file with the FTC and the DOJ a Notification and Report Form relating to
this Agreement and the transactions contemplated hereby as required by the HSR Act as promptly as reasonably practicable following
the execution and delivery of this Agreement. Each of SIC and MDLY shall (A) cooperate and coordinate with the other in the making
of such filings (if required), (B) supply the other with any information that may be required in order to make such filings, (C)
supply any additional information that reasonably may be required or requested by the FTC or the DOJ, and (D) take all other actions
reasonably necessary to cause the expiration or termination of any applicable waiting period under the HSR Act applicable to the
Merger as soon as practicable. Each of SIC and MDLY shall promptly inform the other of any communication from any Governmental
Entity regarding any of the transactions contemplated by this Agreement in connection with such filings. If any party hereto or
Affiliate thereof shall receive a request for additional information or documentary material from any Governmental Entity with
respect to the transactions contemplated by this Agreement pursuant to the HSR Act, then such party shall make (or cause to be
made), as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with
such request.
(iii) Promptly
following the date hereof, the parties will submit the application for the SEC Exemptive Relief to the Staff of the Division of
Investment Management of the SEC and thereafter each Party shall provide all such supplemental information reasonably requested
by the Staff in connection therewith and shall use its commercially reasonable efforts to obtain the SEC Exemptive Relief. In the
event the SEC conditions the granting of SEC Exemptive Relief upon a change to the transaction structure or other matters contemplated
by this Agreement and the MCC Merger Agreement, the parties shall work together in good faith to make such changes and, if and
to the extent necessary, to amend this Agreement to reflect such modified terms; provided, however, in no event shall any party
be obligated to agree to any term that adversely changes the economic terms of this Agreement in any material respect or is inconsistent
with the assumptions or other provisions set forth in the opinions of such party’s financial advisor; provided further that,
in addition to any other approvals required by Applicable Law or this Agreement, any changes to the transaction structure or other
matters contemplated by this Agreement (including, without limitation, any amendments to this Agreement) shall be subject to the
prior approval of the MDLY Special Committee and the SIC Special Committee.
(c) Subject
to Applicable Law, each of SIC and MDLY shall promptly advise the other upon receiving any communication from any Governmental
Entity the consent or approval of which is required for consummation of the transactions contemplated by this Agreement that causes
such party to believe that there is a reasonable likelihood that any Required Approval will not be obtained or that the receipt
of any such approval may be materially delayed.
7.2
Access
to Information
. (a) Upon reasonable notice and subject to Applicable Laws relating to the confidentiality of information, each
of MDLY and SIC shall, and shall cause each of its Subsidiaries to, afford to the officers, employees, accountants, counsel, advisors,
agents and other representatives of the other party, reasonable access, during normal business hours during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and records, and, during such period, such party shall,
and shall cause its Subsidiaries to, make available to the other party (i) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the requirements of federal securities laws (other than
reports or documents that such party is not permitted to disclose under Applicable Law) and (ii) all other information concerning
its business, properties and personnel as the other party may reasonably request. Neither MDLY nor SIC, nor any of their respective
Subsidiaries, shall be required to provide access to or to disclose information where such access or disclosure would jeopardize
the attorney-client privilege of such party or its Subsidiaries or contravene any Applicable Law, fiduciary duty or binding confidentiality
agreement with a Third Party entered into prior to the date of this Agreement. The parties shall make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding sentence apply.
(b) MDLY
shall file all periodic reports required to be filed by it between the date hereof and the Effective Time. Each such filing shall
be prepared in accordance with the applicable forms, rules and regulations of the SEC and shall satisfy the standard set forth
in Section 4.5(c) for MDLY SEC Reports. SIC shall file all periodic reports required to be filed by it between the date hereof
and the Effective Time. Each such filing shall be prepared in accordance with the applicable forms, rules and regulations of the
SEC and shall satisfy the standard set forth in Section 5.5(c) for SIC SEC Reports.
(c) All
information and materials provided pursuant to this Agreement shall be subject to the provisions of the Confidentiality Agreement
entered into between the parties as of July 16, 2018 (the
“Confidentiality Agreement”
).
(d) Each
party acknowledges that it has had the opportunity to conduct due diligence and investigation with respect to the other party,
and in no event shall either party have any liability to the other party with respect to a breach of representation or warranty
under this Agreement to the extent that the non-breaching party knew of such breach as of the date hereof.
7.3
MDLY
Stockholder Approval
.
(a) Subject
to the earlier termination of this Agreement in accordance with Article IX, MDLY shall, as soon as practicable following the effectiveness
of the Form N-14 Registration Statement and clearance of the Schedule 13E-3 by the SEC, duly call, take any action required by
the DGCL, the MDLY Certificate or MDLY Bylaws and any applicable requirements of the SEC or the NYSE necessary to give notice of,
convene and hold, as promptly as practicable, MDLY Stockholder Meeting for the purpose of obtaining MDLY Stockholder Approval.
The record date for MDLY Stockholder Meeting shall be determined in prior consultation with and subject to the prior written approval
of SIC (which prior written approval shall not be unreasonably delayed, conditioned or withheld). In connection therewith, each
of the MDLY Board and the MDLY Special Committee shall be permitted to adjourn, delay or postpone MDLY Stockholder Meeting in accordance
with Applicable Law (but not beyond the Outside Date) (i) to the extent necessary to allow reasonable additional time for the filing
and mailing of any supplemental or amended disclosure which MDLY Board has determined in good faith after consultation with outside
counsel is reasonably likely to be necessary or appropriate under Applicable Law and for such supplemental or amended disclosure
to be disseminated and reviewed by MDLY’s stockholders prior to MDLY Stockholder Meeting, (ii) if there are insufficient
shares of MDLY Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business
of MDLY Stockholder Meeting, or (iii) to allow reasonable additional time to solicit additional proxies to the extent MDLY Board
or any committee thereof reasonably believes necessary in order to obtain MDLY Stockholder Approval. Unless MDLY Board has made
an MDLY Adverse Recommendation Change, MDLY shall, through MDLY Board, make MDLY Board Recommendation, and shall include such MDLY
Board Recommendation in the Joint Proxy Statement/Prospectus, and use its commercially reasonable efforts to (x) solicit from MDLY
stockholders proxies in favor of MDLY Stockholder Approval, and (y) take all other action necessary or advisable to secure MDLY
Stockholder Approval. For the avoidance of doubt, the MDLY Stockholder Meeting may be held prior to receipt of the SEC Exemptive
Relief; provided, however, that receipt of the SEC Exemptive Relief shall be a condition to Closing.
(b) Except
as expressly permitted in Section 7.11(e), neither MDLY Board nor any committee thereof shall (i) withhold, withdraw or modify
or qualify, or propose publicly to withhold, withdraw or modify or qualify MDLY Board Recommendation, (ii) fail to publicly announce,
within fifteen (15) Business Days after a tender offer or exchange relating to the securities of MDLY shall have been commenced,
a statement disclosing that MDLY Board recommends rejection of such tender offer or exchange offer, or (iii) approve, determine
to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, any Competing Proposal
(any of the foregoing (i) through (iii) being referred to as a
“MDLY Adverse Recommendation Change”
).
7.4
SIC
Stockholder Approval
.
(a) Subject
to the earlier termination of this Agreement in accordance with Article IX, SIC shall, as soon as practicable following the effectiveness
of the Form N-14 Registration Statement and clearance of the Schedule 13E-3 by the SEC, duly call, take any action required by
the MGCL, the SIC Charter or SIC Bylaws and any applicable requirements of the SEC necessary to give notice of, convene and hold,
as promptly as practicable, the SIC Stockholder Meeting for the purpose of obtaining the SIC Stockholder Approval. The record date
for the SIC Stockholders Meeting shall be determined in prior consultation with and subject to the prior written approval of MDLY
(which prior written approval shall not be unreasonably delayed, conditioned or withheld). In connection therewith, the SIC Board
shall be permitted to delay or postpone, and the duly appointed Chairman of the SIC Stockholder Meeting permitted to adjourn, the
SIC Stockholder Meeting in accordance with Applicable Law (but not beyond the Outside Date) (i) to the extent necessary to allow
reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the SIC Board has determined
in good faith after consultation with outside counsel is reasonably likely to be necessary or appropriate under Applicable Law
and for such supplemental or amended disclosure to be disseminated and reviewed by the SIC’s stockholders prior to the SIC
Stockholder Meeting, (ii) if there are insufficient shares of SIC Common Stock represented (either in person or by proxy) to constitute
a quorum necessary to conduct the business of the SIC Stockholder Meeting, or (iii) to allow reasonable additional time to solicit
additional proxies reasonably necessary in order to obtain the SIC Stockholder Approval. Unless the SIC Board has made an SIC Adverse
Recommendation Change, SIC shall, through the SIC Board, make the SIC Board Recommendation, and shall include such SIC Board Recommendation
in the Joint Proxy Statement/Prospectus, and use its commercially reasonable efforts to (x) solicit from SIC stockholders proxies
in favor of the SIC Stockholder Approval, and (y) take all other action necessary or advisable to secure the SIC Stockholder Approval.
For the avoidance of doubt, the SIC Stockholder Meeting may be held prior to receipt of the SEC Exemptive Relief; provided, however,
that receipt of the SEC Exemptive Relief shall be a condition to Closing.
(b) Except
as expressly permitted in Section 7.11(e), neither the SIC Board nor any committee thereof shall (i) withhold, withdraw or modify
or qualify, or propose publicly to withhold, withdraw or modify or qualify the SIC Board Recommendation, (ii) fail to publicly
announce, within fifteen (15) Business Days after a tender offer or exchange relating to the securities of SIC shall have been
commenced, a statement disclosing that the SIC Board recommends rejection of such tender offer or exchange offer, or (iii) approve,
determine to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, any Competing
Proposal (any of the foregoing (i) through (iii) being referred to as a
“SIC Adverse Recommendation Change”
).
7.5
Exchange
Listing
. SIC shall (i) take all steps as may be reasonably necessary to cause the outstanding SIC Common Stock, the Merger
Shares and the shares of SIC Common Stock to be issued in the MCC Merger to be listed for trading on the NYSE, and (ii) use its
commercially reasonable efforts to cause the outstanding SIC Common Stock, the Merger Shares and the shares of SIC Common Stock
to be issued in the MCC Merger to be listed for trading on the Tel Aviv Stock Exchange.
7.6
Conversion
of Medley LLC Units
. Immediately prior to Closing, MDLY shall take, and shall cause Medley LLC to take, all such steps as may
be necessary to cause the Units (including Medley Restricted Units that have vested) held by members of Medley LLC, other than
MDLY, to be converted into Class A Common Stock of MDLY in accordance with the MDLY LLC Exchange Agreement as of immediately prior
to the Effective Time. For the avoidance of doubt, in no event shall any exchange of Units occur prior to the record date for both
the First Special Dividend and the Second Special Dividend, such that the shares of Class A Common Stock issued in connection with
such exchange will not be entitled to any portion of the First Special Dividend or the Second Special Dividend. No dividend equivalent
payments shall be made on Medley Restricted Units for the First Special Dividend or the Second Special Dividend; provided, however,
that each holders of Medley Restricted Units shall be entitled to distributions from Medley LLC on account of the First Special
Dividend.
7.7
Indemnification;
Directors’ and Officers’ Insurance
.
(a) In
the event of any threatened or actual Claim against any individual who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer of MDLY or any of its Subsidiaries or who is or was
serving at the request of MDLY or any of its Subsidiaries as a director or officer of another person (the
“Indemnified
Parties”
), based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that
he or she is or was a director or officer of MDLY or any of its Subsidiaries prior to the Effective Time or (ii) this Agreement
or any of the transactions contemplated by this Agreement, whether asserted or arising before or after the Effective Time, the
parties shall cooperate and use their commercially reasonable efforts to defend against and respond thereto. All rights to indemnification
and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing on the date of this
Agreement in favor of any Indemnified Party as provided in their respective certificates or articles of incorporation or by-laws
(or comparable Organizational Documents), and any existing indemnification agreements set forth in Section 7.7 of MDLY Disclosure
Schedule, shall, notwithstanding that the separate corporate existence of MDLY shall cease as of the Effective Time, survive the
Merger as a contractual obligation of the Surviving Company and shall continue in full force and effect in accordance with their
terms for a period of six (6) years from the Closing Date, and shall not be amended, repealed or otherwise modified in any manner
that would adversely affect the rights thereunder of such individuals for acts or omissions occurring at or prior to the Effective
Time or taken at the request of SIC pursuant to Section 7.8 hereof, it being understood that nothing in this sentence shall require
any amendment to the articles or certificate of incorporation or bylaws of the Surviving Company.
(b) For
a period of six (6) years from the Closing Date, the Surviving Company shall to the fullest extent permitted by Applicable Law,
indemnify, defend and hold harmless, and provide advancement of expenses (subject to an undertaking, in such form as may be reasonably
required by the Surviving Company, to reimburse the portion (if any) of any expenses advanced to the Indemnified Party relating
to Claims as to which it shall ultimately be adjudged that the standard of conduct has not been met by the Indemnified Party for
entitlement to such indemnification) to, each Indemnified Party against all losses, Claims, damages, costs, expenses, liabilities
or judgments or amounts that are paid in settlement of or in connection with any Claim based in whole or in part on or arising
in whole or in part out of the fact that such person is or was a director or officer of MDLY or any of its Subsidiaries, and pertaining
to any matter existing or occurring, or any acts or omissions occurring, at or prior to the Effective Time, whether asserted or
claimed prior to, or at or after, the Effective Time (including matters, acts or omissions occurring in connection with the approval
of this Agreement and the consummation of the transactions contemplated hereby) or taken at the request of SIC pursuant to Section
7.8 hereof;
provided
, that the Surviving Company (i) shall not be liable for any amounts paid in the settlement of any Claim
without its prior written consent, (ii) shall be obligated to pay the fees and expenses of only one counsel (approved in advance
by the Surviving Company) for all Indemnified Parties (except with respect to the MDLY Special Committee, which may retain its
own separate counsel in its sole discretion) with respect to any single Claim unless the Surviving Company assumes the defense
of such Claim, in which case it shall not be liable for any fees and expenses of counsel to the Indemnified Parties in respect
of such Claim (except for any fees and expenses of any separate counsel to the MDLY Special Committee); and (iii) shall not be
liable to the extent that a judgment of a court of competent jurisdiction determines that any Claim is the result of the gross
negligence or willful misconduct or results from a decision made by the Indemnified Party when he or she had no good faith belief
that he or she was acting in the best interests of MDLY or any of its Subsidiaries.
(c) SIC
shall, at its sole cost, cause the individuals serving as officers and directors of MDLY or any of its Subsidiaries immediately
prior to the Effective Time to be covered for a period of six years from the Effective Time by the directors’ and officers’
liability insurance policy maintained by MDLY through the purchase of so-called “tail” insurance
(provided
that
SIC or the Surviving Company may substitute therefor policies of at least the same coverage and amounts containing terms and conditions
that are not less advantageous in any material respect than such policy) with respect to acts or omissions occurring prior to the
Effective Time that were committed by such officers and directors in their capacity as such. In connection with the foregoing,
SIC shall not be required to expend in the aggregate for the entire six-year period referred to above amount in excess of 300%
of the annual premiums currently paid by MDLY for such insurance.
(d) The
provisions of this Section 7.7 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs and representatives.
(e) Except
to the extent required by Applicable Law, nothing in this Section 7.7 shall require SIC or the Surviving Company to indemnify any
Indemnified Party with respect to any Claim arising with respect to acts or omissions by such Indemnified Party taken prior to
the Effective Time pursuant to the MDLY Related Agreements for which such Indemnified Party is not entitled to indemnification
under any of the MDLY Related Agreements.
7.8
Additional
Agreements
. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes
of this Agreement or to vest the Surviving Company with full title to all properties, assets, rights, approvals, immunities and
franchises of either party to the Merger, the proper officers and directors of each party and their respective Subsidiaries shall,
at SIC’s sole expense, take all such necessary action as may be reasonably requested by SIC.
7.9
Advice
of Changes
. Each of SIC and MDLY shall promptly advise the other of any change or event (i) having or reasonably likely to
have a Material Adverse Effect on it, (ii) that it believes would or would be reasonably likely to cause or constitute a breach
of any of its representations, warranties or covenants contained in this Agreement that would result in the conditions to Closing
set forth in Article VIII not being satisfied;
provided
,
however
, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
7.10
Exemption
from Liability Under Section 16(b)
. Prior to the Effective Time, SIC and MDLY shall each take all such steps as may be necessary
or appropriate to cause any disposition of shares of Class A Common Stock or conversion of any derivative securities in respect
of such shares of Class A Common Stock in connection with the consummation of the transactions contemplated by this Agreement to
be exempt under Rule 16b-3 promulgated under the Exchange Act to the extent permitted thereunder.
7.11
No
Solicitation
.
(a) Subject
to Section 7.11(d), each of MDLY and SIC shall, and shall use commercially reasonable efforts to cause its representatives to,
immediately cease and cause to be terminated any existing solicitation of, or discussions or negotiations with, any Third Party
relating to any Competing Proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to a
Competing Proposal.
(b) Until
the earlier of the Effective Time and termination of this Agreement, each of MDLY and SIC shall, as promptly as reasonably practicable,
and in any event within two (2) Business Days of receipt by it or any of its representatives of any Competing Proposal or any inquiry
that could reasonably be expected to lead to a Competing Proposal, deliver to the other party a written notice setting forth: (A)
the identity of the Third Party making such Competing Proposal or inquiry (to the extent not prohibited by any applicable confidentiality
agreement existing prior to the date of this Agreement) and (B) the material terms and conditions of any such Competing Proposal.
MDLY and SIC shall keep the other party reasonably informed of any material amendment or modification of any such Competing Proposal
on a prompt basis, and in any event within two (2) Business Days thereafter.
(c) Except
as otherwise provided in this Agreement (including Section 7.11(d)), until the earlier of Effective Time and termination of this
Agreement in accordance with its terms, each of MDLY and SIC shall not, and shall not permit their respective Subsidiaries to,
and shall use commercially reasonable efforts to cause their respective representatives not to, directly or indirectly, (i) initiate,
solicit, induce or knowingly encourage or facilitate any inquiry with respect to the making of any proposal or offer with respect
to a Competing Proposal or (ii) engage in negotiations or discussions with, or furnish any material nonpublic information to, or
enter into any agreement, arrangement or understanding with, any Third Party relating to a Competing Proposal or any inquiry or
proposal that could reasonably be expected to lead to a Competing Proposal; provided however, that notwithstanding the foregoing,
(A) each of MDLY and SIC may inform Persons of the provisions contained in this Section 7.11, and (B) each of MDLY and SIC shall
be permitted to grant a waiver of, or terminate, any “standstill” or similar obligation of any Third Party with respect
to MDLY or SIC, as applicable, in order to allow such Third Party to submit a Competing Proposal, if the MDLY Board (or the MDLY
Special Committee) or SIC Board (or the SIC Special Committee), as applicable, determines in good faith (after consultation with
such party’s legal counsel) that a failure to take such action with respect to such “standstill” or similar obligation
could reasonably be expected to be inconsistent with its duties under Applicable Law.
(d) Notwithstanding
anything to the contrary contained in this Agreement, at any time prior to the date that MDLY Stockholder Approval is obtained
(in the case of MDLY), or the SIC Stockholder Approval is obtained (in the case of SIC), in the event that MDLY (or its representatives
on MDLY’s behalf) or SIC (or its representatives on SIC’s behalf) receives a Competing Proposal from any Third Party,
(i) MDLY and its representatives or SIC and its representatives, as applicable, may contact such Third Party to clarify any ambiguous
terms and conditions thereof (without the MDLY Board or SIC Board, as applicable, being required to make the determination in clause
(ii) of this Section 7.11(d)) and (ii) MDLY and the MDLY Board (or the MDLY Special Committee) and its representatives or SIC and
the SIC Board (or the SIC Special Committee) and its representatives, as applicable, may engage in negotiations or substantive
discussions with, or furnish any information and other access to, any Third Party making such Competing Proposal and its representatives
and Affiliates if the MDLY Board (or the MDLY Special Committee) or SIC Board (or the SIC Special Committee), as applicable, determines
in good faith (after consultation with its outside financial advisors and legal counsel) that (A) such Competing Proposal either
constitutes a Superior Proposal or could reasonably be expected to lead to a Superior Proposal and (B) failure to consider such
Competing Proposal could reasonably be expected to be inconsistent with the fiduciary duties of the directors of MDLY or SIC, as
applicable, under Applicable Law; provided, that (x) such Competing Proposal did not result from any material breach of any of
the provisions set forth in this Section 7.11, (y) prior to furnishing any material non-public information concerning MDLY or SIC,
as applicable, MDLY or SIC, as applicable, receives from such Third Party, to the extent such Third Party is not already subject
to a confidentiality agreement with MDLY or SIC, as applicable, a confidentiality agreement containing confidentiality terms that
are not less favorable in the aggregate to MDLY or SIC, as the case may be, than those contained in the Confidentiality Agreement
(unless MDLY or SIC, as applicable, offers to amend the Confidentiality Agreement to reflect such more favorable terms) (it being
understood and agreed that such confidentiality agreement need not restrict the making of Competing Proposals (and related communications)
to MDLY or the MDLY Board or to SIC or the SIC Board, as the case may be) (an
“Acceptable Confidentiality Agreement”
)
and (z) MDLY or SIC, as the case may be, shall (subject to the terms of any confidentiality agreement existing prior to the date
hereof) promptly provide or make available to the other party any material written non-public information concerning it that it
provides to any Third Party given such access that was not previously made available to the other party or its representatives.
(e) Except
as otherwise provided in this Agreement, (i) the MDLY Board shall not effect a MDLY Adverse Recommendation Change and the SIC Board
shall not effect an SIC Adverse Recommendation Change (each an
“Adverse Recommendation Change”)
, (ii)
MDLY Board shall not approve or recommend, or allow MDLY to execute or enter into, any letter of intent, memorandum of understanding
or definitive merger or similar agreement with respect to any Competing Proposal (other than an Acceptable Confidentiality Agreement),
and (iii) the SIC Board shall not approve or recommend, or allow SIC to execute or enter into, any letter of intent, memorandum
of understanding or definitive merger or similar agreement with respect to any Competing Proposal (other than an Acceptable Confidentiality
Agreement); provided however, that notwithstanding anything in this Agreement to the contrary, at any time prior to the receipt
of MDLY Stockholder Approval (in the case of MDLY) or the SIC Stockholder Approval (in the case of SIC), the MDLY Board or SIC
Board, as applicable, may (x) make an Adverse Recommendation Change if the board of directors effecting the Adverse Recommendation
Change (or the MDLY Special Committee or SIC Special Committee, as applicable) determines in good faith (after consultation with
its outside financial advisor and legal counsel) that failure to make an Adverse Recommendation Change could reasonably be expected
to be inconsistent with the fiduciary duties of the MDLY Board or SIC Board, as applicable, under Applicable Law, or (y) if MDLY
or SIC, as the case may be, has received a Competing Proposal that its board of directors (or the MDLY Special Committee or SIC
Special Committee, as applicable) has determined in good faith (after consultation with its outside financial advisor and legal
counsel) constitutes a Superior Proposal, authorize, adopt or approve such Superior Proposal and cause or permit MDLY or SIC, as
applicable, to enter into a definitive agreement with respect to such Superior Proposal concurrently with the termination of this
Agreement in accordance with Section 9.1(g) or 9.1(i), as applicable, but in each case only after providing the Notice of Adverse
Recommendation or Notice of Superior Proposal, as applicable, and entering into good faith negotiations as required by Section
7.11(f). The MDLY Board or the SIC Board, as applicable, shall (i) make an Adverse Recommendation Change, or (ii) terminate this
Agreement in accordance with Section 9.1(g) or Section 9.1(i), in each case, only in accordance with this Section 7.11(e), only
after complying with the requirements in Section 7.11(f), and only if directed to take such action by the MDLY Special Committee
or the SIC Special Committee, as applicable.
(f) Notwithstanding
anything to the contrary in this Agreement, no Adverse Recommendation Change may be made and no termination of this Agreement pursuant
to Section 9.1(g) or Section 9.1(i), as applicable, may be effected, in each case until after the third (3
rd
) Business
Day following receipt of written notice from the party intending to effect any Adverse Recommendation Change to the other party
advising the other party that its board of directors intends to make an Adverse Recommendation Change (a
“Notice of
Adverse Recommendation”
) or terminate this Agreement pursuant to Section 9.1(g) or 9.1(i), as applicable (a
“Notice
of Superior Proposal”
), and specifying the reasons therefor, including, if the basis of the proposed action is a
Superior Proposal, the material terms and conditions of any such Superior Proposal. At the option of the party not seeking to make
an Adverse Recommendation Change or terminate this Agreement pursuant to Section 9.1(g) or 9.1(i), the parties shall negotiate
in good faith during such period to amend this Agreement in such a manner that the relevant party no longer intends to make the
Adverse Recommendation Change or the offer that was determined to constitute a Superior Proposal no longer constitutes a Superior
Proposal. In determining whether to make an Adverse Recommendation Change or in determining whether a Competing Proposal constitutes
a Superior Proposal, the applicable board of directors (including the MDLY Special Committee or the SIC Special Committee, as applicable)
shall take into account any revisions to the terms of this Agreement proposed in writing by the other party in response to a Notice
of Adverse Recommendation, a Notice of Superior Proposal or otherwise. Any material amendment to such Superior Proposal shall require
a new Notice of Superior Proposal and the applicable party shall be required to comply again with the requirements of this Section
7.11(f).
(g) Nothing
in this Agreement shall restrict MDLY or SIC from taking or disclosing a position contemplated by Rules 14d-9 or 14e-2(a) under
the Exchange Act, or otherwise making disclosure to comply with Applicable Law (it being agreed that a “stop, look and listen”
communication by the MDLY Board or SIC Board to its stockholders pursuant to Rule 14d-9(f) under the Exchange Act or a factually
accurate public statement by MDLY or SIC that describes MDLY’s or SIC’s receipt, as applicable, of a Competing Proposal
and the operation of this Agreement with respect thereto shall not be deemed to be an Adverse Recommendation Change).
7.12
Treatment
of Outstanding Indebtedness
.
(a) MDLY
shall cause the termination of the CNB Credit Facility on or prior to the Closing Date.
(b) Except
as set forth in Section 7.12(a), on or prior to the Closing, MDLY and SIC shall each use commercially reasonable efforts to take
or cause to be taken all actions with respect to their respective Indebtedness and the Indebtedness of their respective Subsidiaries
that is necessary or advisable in connection with the Merger, including without limitation, obtaining all necessary consents of
the holders of such Indebtedness, executing and delivering all documents, instruments, certificates and opinions of counsel required
under the terms of such Indebtedness, making all necessary filings, and taking all other actions that the respective boards of
directors or officers of MDLY and SIC determine to be necessary or advisable in connection with such Indebtedness, including any
assumption, refinancing or consolidation of such Indebtedness.
7.13
Takeover
Statutes
. The parties shall use their respective commercially reasonable efforts (a) to take all action necessary so that no
Takeover Statute is or becomes applicable to the Merger or any of the other transactions contemplated by this Agreement, and (b)
if any such Takeover Statute is or becomes applicable to any of the foregoing, to take all action necessary so that the Merger
and the other transactions contemplated by this Agreement may be consummated as promptly as reasonably practicable on the terms
contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Takeover Statute on the Merger and the
other transactions contemplated by this Agreement.
7.14
Stockholder
Litigation
. Between the date hereof and the Effective Time, the parties shall cooperate and consult with one another in connection
with any proceeding, including by either party’s stockholders and other stakeholders against any of them or any of their
respective directors, officers or Affiliates with respect to this Agreement, the Merger and/or the transactions contemplated hereby.
In furtherance of and without in any way limiting the foregoing, each of the parties shall use its respective commercially reasonable
efforts to prevail in any such stockholder or stakeholder proceeding so as to permit the consummation of the Merger and/or the
transactions contemplated by his agreement in the manner contemplated by this Agreement.
7.15
Section
15(f)
.
(a) SIC
acknowledges that MDLY is entering into this Agreement in reliance upon the benefits and protections provided by Section 15(f)
of the Investment Company Act. Subject to Applicable Law and the fiduciary duties of the SIC Board, SIC shall, to the extent within
its control, not take any action, or omit to take any action, that would have the effect of causing the requirements of any of
the provisions of Section 15(f) of the Investment Company Act not to be met in respect of the transactions contemplated by this
Agreement. In that regard, subject to Applicable Law and the fiduciary duties of the SIC Board, SIC shall take such actions as
are within its control so that:
(i) for
a period of not less than three years after the Closing, at least 75% of the members of the SIC Board are not (A) “interested
persons” (within the meaning of Section 2(a)(19) of the Investment Company Act) of the investment adviser of SIC after the
Closing or (B) “interested persons” (within the meaning of Section 2(a)(19) of the Investment Company Act) of the investment
adviser of SIC immediately prior to the Closing; and
(ii) for
a period of not less than two years after the Closing, there shall not be imposed on SIC an “unfair burden” (as interpreted
under Section 15(f) of the Investment Company Act) as a result of the transactions contemplated by this Agreement, or any express
or implied terms, conditions or understandings applicable thereto.
(b) To
the extent within the control of MDLY and its Subsidiaries, MDLY shall not, and shall cause its Subsidiaries not to, take any action
that would cause the foregoing covenants to not be satisfied by SIC.
(c) Section
7.15(a) shall not apply in the event that the parties reasonably agree that Section 15(f) of the Investment Company Act no longer
applies to the transactions contemplated by this Agreement. Section 7.15(a)(i) shall not apply to the extent SIC or any of its
Affiliates obtains an exemptive order from the SEC as contemplated by Section 15(f)(3) of the Investment Company Act. Notwithstanding
anything to the contrary contained herein, the covenants of the parties hereto contained in this Section 7.15 are intended only
for the benefit of such parties and for no other Person.
7.16
Employment
Matters
. At the Closing, MDLY shall cause Medley Capital, LLC to enter into employment agreements substantially in the form
attached hereto as
Exhibit B-1
(the
“Employment Agreements”
) with the individuals identified in,
and on the economic terms set forth in,
Exhibit B-2
. In addition, prior to Closing, the SIC Board shall adopt an incentive
plan on substantially the same terms as the existing MDLY Stock Plan (the
“SIC Incentive Plan”
), which
SIC Incentive Plan shall become effective at the Effective Time.
7.17
Interaction
with MCC Merger Agreement
. Without the consent of MDLY, SIC agrees that it will not agree to any waiver or amendment of the
MCC Merger Agreement to the extent such waiver or amendment would adversely affect the economic or other rights or interests of
MDLY and its stockholders under this Agreement or the MCC Merger Agreement in any material respect.
7.18
Other
Matters
. On or prior to the Closing Date, SIC shall pay all accrued but unpaid fees payable to SIC Advisors LLC pursuant to
the SIC Investment Advisory Agreement.
Article
VIII
CONDITIONS PRECEDENT
8.1
Conditions
to Each Party’s Obligation To Effect the Merger
. The respective obligations of the parties to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a)
Stockholder
Approval
. (i) The MDLY Stockholder Approval shall have been obtained, and (ii) the SIC Stockholder Approval shall have been
obtained.
(b)
Form
N-14 Registration Statement
. The Form N-14 Registration Statement shall have been declared effective by the SEC under the Securities
Act and no stop order suspending the effectiveness of the Form N-14 Registration Statement shall have been issued and no proceedings
for that purpose shall have been initiated or threatened by the SEC.
(c)
Exchange
Listing
. The outstanding shares of SIC Common Stock, the Merger Shares and the shares of SIC Common Stock to be issued in the
MCC Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance.
(d)
SEC
Exemptive Relief
. The SEC Exemptive Relief shall have been granted and be in full force and effect as of the Closing Date.
(e)
Blue
Sky Filing
s. SIC shall have made or obtained such filings and approvals as are required to be made or obtained under the securities
or “Blue Sky” laws of various states in connection with the issuance of the shares of SIC Common Stock pursuant to
this Agreement.
(f)
No
Injunctions or Restraints; Illegality
. No order, injunction or decree issued by any court or agency of competent jurisdiction
or other law preventing or making illegal the consummation of the Merger or any of the other transactions contemplated by this
Agreement shall be in effect.
(g)
HSR
Act
. Any applicable waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have expired
or been terminated.
(h)
Exchange
of Medley LLC Units
. All issued and outstanding Units of Medley LLC (including Medley Restricted Units that have vested) other
than Medley LLC Units held by MDLY, shall have been converted into Class A Common Stock in accordance with the MDLY LLC Exchange
Agreement on (and not sooner than) the Closing Date.
(i)
Tax
Receivable Termination Agreement
. The Tax Receivable Termination Agreement, to be effective as of the Effective Time, shall
have been executed and delivered by all necessary parties.
(j)
MCC
Merger
. Each of the conditions to closing under the MCC Merger Agreement shall have been satisfied or appropriately waived,
and the MCC Merger shall be consummated simultaneously with the Merger.
(k)
Third
Party Consents
. MDLY shall have obtained written consents to the continuation, following the Effective Time, of the advisory
relationship with private funds and managed accounts representing sixty-five percent (65%) of MDLY’s total revenues from
private funds and managed accounts for the 12-month period ended as of June 30, 2018.
(l)
Accounting
Treatment
. The SEC shall have confirmed in a manner reasonably acceptable to the parties that the equity of the Surviving Company,
following the Merger, will be treated as a portfolio investment of SIC and reflected in SIC’s consolidated financial statements
at fair value for accounting purposes, and that the Surviving Company’s financial results will not be consolidated into the
financial statements of SIC.
(m)
No
Governmental Actions
. There shall be no pending suit, action or proceeding by any Governmental Entity (i) challenging the acquisition
by SIC of any MDLY Common Stock, seeking to restrain or prohibit the consummation of the Merger or any other transaction contemplated
by this Agreement or seeking to obtain from MDLY or SIC any damages that are material in relation to MDLY and its Subsidiaries
taken as a whole, or (ii) seeking to prohibit SIC or any of its Subsidiaries from effectively controlling in any material respect
the business or operations of MDLY and its Subsidiaries.
(n)
Section
368 Opinion
. The parties shall have received the written opinion of Eversheds Sutherland (US) LLP (or such other counsel as
may be reasonably satisfactory to the parties), dated as of the Closing Date and in form and substance reasonably satisfactory
to the parties, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion,
the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
8.2
Conditions
to Obligations of SIC
. The obligation of SIC to effect the Merger is also subject to the satisfaction, or waiver by SIC, at
or prior to the Effective Time, of the following conditions:
(a)
Representations
and Warranties
. Subject to the standard set forth in Section 8.4, the representations and warranties of MDLY set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the
Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement
or another date shall be true and correct as of such date); and SIC shall have received a certificate signed on behalf of MDLY
by the Chief Executive Officer or the Chief Financial Officer of MDLY to the foregoing effect.
(b)
Performance
of Obligations of MDLY
. MDLY shall have performed in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time; and SIC shall have received a certificate signed on behalf of MDLY by the Chief
Executive Officer or the Chief Financial Officer of MDLY to such effect.
(c)
Outstanding
Indebtedness
. MDLY shall have delivered to SIC fully executed copies of all consents and approvals required in order to keep
the Medley LLC Outstanding Indebtedness outstanding and the Medley LLC Debt Documents in full force and effect in accordance with
their terms as of the date of this Agreement without any breach or violation thereof.
(d)
Employment
Matters
. Each of the individuals identified on Exhibit B-2 shall have entered into an Employment Agreement in the form set
forth on Exhibit B-1, as amended to reflect the economic terms applicable to such individual, as set forth in Exhibit B-2.
8.3
Conditions
to Obligations of MDLY
. Subject to Section 9.7, the obligation of MDLY to effect the Merger is also subject to the satisfaction
or waiver by MDLY at or prior to the Effective Time of the following conditions:
(a)
Representations
and Warranties
. Subject to the standard set forth in Section 8.4, the representations and warranties of SIC set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the
Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement
or another date shall be true and correct as of such date); and MDLY shall have received a certificate signed on behalf of SIC
by the Chief Executive Officer or the Chief Financial Officer of SIC to the foregoing effect.
(b)
Performance
of Obligations of SIC
. SIC shall have (i) performed in all material respects all obligations required to be performed by it
under this Agreement (other than its obligations under Section 7.17) at or prior to the Effective Time, and (ii) performed in all
respects all obligations required to be performed by it under Section 7.17 at or prior to the Effective Time; and MDLY shall have
received a certificate signed on behalf of SIC by the Chief Executive Officer or the Chief Financial Officer of SIC to such effect.
(c)
Outstanding
Indebtedness
.
(i) SIC
shall have taken all actions, and executed all documents, reasonably required of SIC by the holders of Medley LLC Outstanding Indebtedness
in order to keep the Medley LLC Outstanding Indebtedness outstanding and the Medley LLC Debt Documents in full force and effect
in accordance with their terms as of the date of this Agreement without any breach or violation thereof; provided, however, neither
SIC nor any of its Subsidiaries shall be obligated to provide any guarantees or other credit support for any such Medley LLC Outstanding
Indebtedness.
(ii) SIC
shall have taken all actions, and executed all documents, reasonably required of SIC in order to keep the Indebtedness represented
by the SIC Debt Documents outstanding and the SIC Debt Documents in full force and effect in accordance with their terms as of
the date of this Agreement without any breach or violation thereof.
8.4
Standard
.
No representation or warranty of MDLY contained in Article IV or of SIC contained in Article V shall be deemed untrue, inaccurate
or incorrect for purposes of Section 8.2(a) or 8.3(a), as applicable, under this Agreement, as a consequence of the existence or
absence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all
other facts, circumstances or events inconsistent with any representations or warranties contained in Article IV, in the case of
MDLY, or Article V, in the case of SIC, has had or would reasonably be expected to have a Material Adverse Effect with respect
to MDLY or SIC, respectively (disregarding for purposes of this Section 8.4, except as it relates to Section 4.8 and Section 5.8,
all qualifications or limitations set forth in any representations or warranties as to “materiality,” “Material
Adverse Effect” and words of similar import). Notwithstanding the immediately preceding sentence, the representations and
warranties contained in (i) Section 4.2(a) and Section 5.2(a) shall be deemed untrue and incorrect if not true and correct except
to a
de minimis
extent (relative to Section 4.2(a) or Section 5.2(a), respectively, taken as a whole), and (ii) Sections
4.3(a) and 4.3(b)(i), in the case of MDLY, and Sections 5.3(a) and 5.3(b)(i), in the case of SIC, shall be deemed untrue and incorrect
if not true and correct in all material respects.
8.5
Frustration
of Closing Conditions
. Neither MDLY nor SIC may rely on the failure of any condition set forth in Section 8.1, Section 8.2
or Section 8.3, as applicable, to be satisfied if such failure was primarily caused by the party relying on such failure to perform
any of its material obligations under this Agreement.
Article
IX
TERMINATION AND AMENDMENT
9.1
Termination
.
This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the MDLY Stockholder
Approval or the SIC Stockholder Approval:
(a) by
mutual consent of MDLY and SIC in a written instrument authorized by MDLY Board and SIC Board;
(b) by
either MDLY or SIC, if any Governmental Entity whose consent or approval is a condition to Closing set forth in Section 8.1 has
denied the granting of any such consent or approval and such denial has become final and nonappealable or any Governmental Entity
of competent jurisdiction shall have issued a final and nonappealable order, injunction or decree permanently enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated by this Agreement;
(c) by
either MDLY or SIC, if the Merger shall not have been consummated on or before March 31, 2019 (the
“Outside Date”
),
unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party set forth in this Agreement provided that the terminating party
is not then in material breach of any representation, warranty, covenant or other agreement contained herein, and such breach has
caused or resulted in the failure of the Closing to occur by or prior to the Outside Date;
(d) by
either SIC or MDLY, at any time prior to the Effective Time, in the event that (i) MDLY or SIC, as the case may be, shall have
failed to obtain MDLY Stockholder Approval or SIC Stockholder Approval, as applicable, at the MDLY Stockholder Meeting or the SIC
Stockholder Meeting, respectively, at which a vote is taken on the Merger, or (ii) the MCC Merger Agreement shall have been terminated;
(e) by
either MDLY or SIC (
provided
that the terminating party is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), if there shall have been a breach of any of the covenants or agreements or any of
the representations or warranties set forth in this Agreement on the part of MDLY, in the case of a termination by SIC, or SIC,
in the case of a termination by MDLY, which breach, either individually or in the aggregate, would result in, if occurring or continuing
on the Closing Date, the failure of the conditions set forth in Section 8.2 or 8.3, as the case may be, and which is not cured
within thirty (30) days following written notice to the party committing such breach or by its nature or timing cannot be cured
within such time period;
(f) by
SIC, (i) within ten (10) Business Days after the MDLY Board shall have effected an MDLY Adverse Recommendation Change prior to
receipt of the MDLY Stockholder Approval, (ii) in the event the MDLY Board shall have approved or authorized MDLY or any of its
Subsidiaries to enter into a merger agreement, letter of intent, acquisition agreement, purchase agreement or other similar agreement
with respect to a Competing Proposal or (iii) MDLY fails to include the MDLY Board Recommendation in the Joint Proxy Statement/Prospectus;
(g) by
MDLY (at the direction of the MDLY Board or the MDLY Special Committee), in the event that:
(i) (A)
MDLY shall have received a Superior Proposal, (B) subject to MDLY’s compliance with its obligations under Section 7.11(f),
the MDLY Board or any authorized committee thereof (including the MDLY Special Committee) shall have authorized MDLY to enter into
a definitive agreement to consummate the transaction contemplated by such Superior Proposal, and (C) concurrently with the termination
of this Agreement, MDLY pays SIC the Termination Fee contemplated by Section 9.4 and enters into the definitive agreement to consummate
the transaction contemplated by such Superior Proposal; or
(ii) The
MDLY Board (whether at the direction of the MDLY Special Committee or otherwise) shall have effected an MDLY Adverse Recommendation
Change in accordance with the terms of Section 7.11.
(h) by
MDLY, (i) within ten (10) Business Days after the SIC Board shall have effected a SIC Adverse Recommendation Change prior to receipt
of SIC Stockholder Approval, (ii) in the event the SIC Board shall have approved, or authorized SIC or any of its Subsidiaries
to enter into, a merger agreement, letter of intent, acquisition agreement, purchase agreement or other similar agreement with
respect to a Competing Proposal or (iii) SIC fails to include the SIC Board Recommendation in the Joint Proxy Statement/Prospectus;
or
(i) by
SIC (at the direction of the SIC Board or the SIC Special Committee), in the event that:
(i) (A)
SIC shall have received a Superior Proposal, (B) subject to SIC’s compliance with its obligations under Section 7.11(f),
the SIC Board or any authorized committee thereof (including the SIC Special Committee shall have authorized SIC to enter into
a definitive agreement to consummate the transaction contemplated by such Superior Proposal, and (C) concurrently with the termination
of this Agreement, SIC pays MDLY the Termination Fee contemplated by Section 9.4 and enters into the definitive agreement to consummate
the transaction contemplated by such Superior Proposal; or
(ii) the
SIC Board or any authorized committee thereof shall have effected a SIC Adverse Recommendation Change in accordance with the terms
of Section 7.11.
The party desiring to terminate this Agreement
pursuant to clause (b), (c), (d), (e), (f), (g), (h), or (i) of this Section 9.1 shall give written notice of such termination
to the other party in accordance with Section 10.2, specifying the provision or provisions hereof pursuant to which such termination
is effected.
9.2
Effect
of Termination
. In the event of termination of this Agreement by either MDLY or SIC as provided in Section 9.1, this Agreement
shall become void and have no effect, and none of MDLY, SIC, Merger Sub, any of their respective Subsidiaries or any of the officers
or directors of any of them shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions
contemplated by this Agreement, except that (i) Sections 7.2(c), 9.2, 9.3, 9.4, and Article X shall survive any termination of
this Agreement, and (ii) except as provided in Section 10.9(c), neither MDLY nor SIC shall be relieved or released from any liabilities
or damages arising out of its fraud or knowing and intentional breach of any provision of this Agreement.
9.3
Fees
and Expenses
. All fees and expenses incurred in connection with the Merger, this Agreement, and the transactions contemplated
by this Agreement shall be paid by the party incurring such fees or expenses;
provided
, that the costs and expenses
of preparing, filing, printing and mailing the Form N-14 Registration Statement and related Joint Proxy Statement/Prospectus, all
other filing fees and amounts paid to the SEC in connection with the Merger, and the fees of any HSR Act filing shall be borne
equally by MDLY and SIC.
9.4
Termination
Fee
.
(a) In
the event that this Agreement is terminated pursuant to Section 9.1(f) or Section 9.1(g) then,
provided
that SIC was
not in material breach of its representations, warranties, covenants or agreements hereunder at the time of termination, MDLY will
pay to SIC, as its sole recourse in connection with termination of this Agreement in accordance with Section 9.1(f) or Section
9.1(g), as applicable, a fee in an amount equal to $5,350,000 (the
“Termination Fee”
).
(b) In
the event that this Agreement is terminated pursuant to Section 9.1(h) or Section 9.1(i) then,
provided
that MDLY was
not in material breach of its representations, warranties, covenants or agreements hereunder at the time of termination, SIC will
pay to MDLY, as its sole recourse in connection with termination of this Agreement in accordance with Section 9.1(h) or Section
9.1(i), as applicable, the Termination Fee.
(c) In
the event that (i) prior to the MDLY Stockholder Meeting, a Third Party (the
“MDLY Pre-Meeting Offeror”
)
makes a Competing Proposal to MDLY and/or its stockholders, or such Competing Proposal is otherwise publicly announced, and in
each case such Competing Proposal not withdrawn prior to the MDLY Stockholder Meeting, (ii) this Agreement is validly terminated
by either SIC or MDLY pursuant to Section 9.1(d)(i) (with respect to the failure to obtain MDLY Stockholder Approval), and (iii)
within twelve (12) months following the date of such termination, MDLY consummates a Competing Proposal with the MDLY Pre-Meeting
Offeror (provided that for purposes of this Section 9.4(c), the references to “twenty percent (20%)” in the definition
of Competing Proposal shall be deemed references to “fifty percent (50%)”), MDLY will pay to SIC, as its sole recourse
in connection with termination of this Agreement in accordance with Section 9.1(d)(i) (with respect to the failure to obtain
MDLY Stockholder Approval), the Termination Fee.
(d) In
the event that (i) prior to the SIC Stockholder Meeting, a Third Party (the
“SIC Pre-Meeting Offeror”
)
makes a Competing Proposal to SIC and/or its stockholders, or such Competing Proposal is otherwise publicly announced, and in each
case such Competing Proposal not withdrawn prior to the SIC Stockholder Meeting, (ii) this Agreement is validly terminated by either
SIC or MDLY pursuant to Section 9.1(d)(i) (with respect to the failure to obtain SIC Stockholder Approval), and (iii) within twelve
(12) months following the date of such termination, SIC consummates a Competing Proposal with the SIC Pre-Meeting Offeror (provided
that for purposes of this Section 9.4(d), the references to “twenty percent (20%)” in the definition of Competing Proposal
shall be deemed references to “fifty percent (50%)”), SIC will pay to MDLY, as its sole recourse in connection with
termination of this Agreement in accordance with Section 9.1(d)(i) (with respect to the failure to obtain SIC Stockholder
Approval), the Termination Fee.
(e) The
Termination Fee, if applicable, shall be payable (i) no later than two Business Days after the date on which this Agreement is
terminated by SIC pursuant to Section 9.1(f) or by MDLY pursuant to Section 9.1(h), (ii) immediately prior to the time of termination
by MDLY pursuant to Section 9.1(g) or by SIC pursuant to Section 9.1(i), (iii) pursuant to Section 9.4(c), within three (3) Business
Days of the date on which MDLY consummates the Competing Proposal with the MDLY Pre-Meeting Offeror, and (iv) pursuant to Section
9.4(d), within three (3) Business Days of the date on which SIC consummates such Competing Proposal with the SIC Pre-Meeting Offeror.
The parties hereto acknowledge and hereby agree that in no event shall any party be required to pay a Termination Fee on more than
one occasion.
(f) Each
of the parties hereto acknowledges that (i) the agreements contained in this Section 9.4 are an integral part of the transactions
contemplated by this Agreement, (ii) the Termination Fee is not a penalty, but is liquidated damages, in a reasonable amount that
will compensate the other party, in the circumstances in which the Termination Fee is payable, for the efforts and resources expended
and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation
of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision and (iii) without
these agreements, the parties would not enter into this Agreement.
9.5
Amendment
.
This Agreement may be amended by the parties, by action taken or authorized by the MDLY Board, the MDLY Special Committee, the
SIC Board and the SIC Special Committee, at any time before or after receipt of MDLY Stockholder Approval or the SIC Stockholder
Approval;
provided
,
however
, that after receipt of MDLY Stockholder Approval or SIC Stockholder Approval, there may
not be, without further approval of such stockholders, any amendment of this Agreement that requires further approval of the stockholders
of MDLY or SIC under Applicable Law. This Agreement may not be amended except by an instrument in writing signed on behalf of each
of the parties.
9.6
Extension;
Waiver
. At any time prior to the Effective Time, the parties, by action taken or authorized by the MDLY Board, the MDLY Special
Committee, the SIC Board and the SIC Special Committee, may, to the extent legally allowed, (a) extend the time for the performance
of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained
in this Agreement or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
9.7
Effect
of SIC Related Agreements
. Notwithstanding anything in this Agreement to the contrary, SIC will not be considered in breach
of any of its representations, warranties, covenants or other agreements contained in this Agreement to the extent such breach
was or should reasonably have been known to MDLY as of the date of this Agreement or arose as a result of any act or omission by
MDLY or any of its Subsidiaries not in compliance with their duties under the SIC Related Agreements.
Article
X
GENERAL PROVISIONS
10.1
Nonsurvival
of Representations, Warranties and Agreements
. None of the representations, warranties, covenants and agreements set forth
in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the matters
set forth in Section 7.7 and for those other covenants and agreements contained in this Agreement that by their terms apply or
are to be performed in whole or in part after the Effective Time.
10.2
Notices
.
All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered
personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered
by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall
be specified by like notice):
(a) If
to Medley, to:
Medley Management,
Inc.
280 Park Ave,
6th Floor East
New York, NY
10017
Attn: Brook
Taube
e-mail: brook@mdly.com
with a copy
to:
Medley Management
Inc.
600 Montgomery
Street
35
th
Floor
San Francisco,
CA 94111
Attn.: John
Fredericks, General Counsel
e-mail:
john.fredericks@mdly.com
(b) If
to SIC or Merger Sub, to:
Sierra Income
Corporation
280 Park Avenue,
6th Floor East
New York, NY
10017
Attention:
Oliver T. Kane
with a copy
to:
Sullivan &
Worcester LLP
1666 K Street,
NW
Washington,
DC 20006
Attention: David M. Leahy
Fax: (202) 293-2275
10.3
Interpretation
.
When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article
or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall
be deemed to be followed by the words “without limitation.” MDLY Disclosure Schedule and the SIC Disclosure Schedule,
as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to
this Agreement. This Agreement shall not be interpreted or construed to require any Person to take any action, or fail to take
any action, if to do so would violate any Applicable Law.
10.4
Counterparts
.
This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood
that each party need not sign the same counterpart.
10.5
Entire
Agreement
. This Agreement (including the documents and the instruments referred to in this Agreement), together with the Confidentiality
Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter of this Agreement, other than the Confidentiality Agreement.
10.6
Governing
Law; Jurisdiction
. This Agreement shall be governed and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and wholly-performed within such state, without regard to any applicable conflicts of law principles.
Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction
of the Delaware Court of Chancery, or, if (and only if) such court lacks subject matter jurisdiction, any Federal court of the
United States of America sitting in the State of Delaware, and the respective appellate courts from the foregoing (all of the foregoing,
collectively, the
“Delaware Courts”
), in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition
or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not
to commence any such action or proceeding except in the applicable Delaware Court, (ii) agrees that any claim in respect of any
such action or proceeding may be heard and determined in the applicable Delaware Court, (iii) waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any such action or
proceeding in the applicable Delaware Court, and (iv) waives, to the fullest extent permitted by Applicable Law, the defense of
an inconvenient forum to the maintenance of such action or proceeding in the applicable Delaware Court. Each of the parties agrees
that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by Applicable Law. Each party irrevocably consents to service of process in the manner
provided for by Applicable Law. Nothing in this Agreement will affect the right of any party to serve process in any other manner
permitted by Applicable Law.
10.7
Publicity
.
THE INITIAL PRESS RELEASE CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE A JOINT PRESS RELEASE.
Neither
MDLY nor SIC shall, and neither MDLY nor SIC shall permit any of its Subsidiaries or representatives to, issue or cause the publication
of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the prior written consent of SIC, in the case of a proposed announcement or statement by
MDLY, or MDLY, in the case of a proposed announcement or statement by SIC;
provided, however,
that either party may, after
prior written notice to the other party, issue or cause the publication of any press release or other public announcement or filing
to the extent required by law or by the rules and regulations of the NYSE; provided, however, the party issuing such press release
or other public announcement or filing must consult with the other party before issuing such press release or other public announcement
or filing and provide such party with an opportunity to review and comment upon such press release or other public announcement
or filing, which comments the other party shall consider in good faith
.
10.8
Assignment;
Third Party Beneficiaries
. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall
be assigned by either of the parties (whether by operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each
of the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 7.7, this Agreement
(including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any Person
other than the parties hereto any rights or remedies under this Agreement. Except as provided in Section 7.7 only, SIC and MDLY
hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the
other parties hereto, in accordance with and subject to the terms of this Agreement, and this Agreement is not intended to, and
does not, confer upon any Person other than the parties hereto any rights or remedies hereunder, including, without limitation,
the right to rely upon such representations and warranties set forth herein. The parties hereto further agree that the rights of
Third Party beneficiaries under Section 7.7 shall not arise unless and until the Effective Time occurs. The representations
and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties
hereto. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto
of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Consequently, Persons other
than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts
or circumstances as of the date of this Agreement or as of any other date.
10.9
Remedies
.
(a) Except
as otherwise provided in this Agreement, any and all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of
any one remedy will not preclude the exercise of any other remedy.
(b) The
parties hereto hereby agree that irreparable damage would occur in the event that any provision of this Agreement to be performed
by either party was not performed in accordance with its specific terms or was otherwise breached, and that money damages or other
legal remedies would not be an adequate remedy for any such damages. Accordingly, the parties hereto acknowledge and hereby agree
that in the event of any breach or threatened breach by either party of any of its respective covenants or obligations set forth
in this Agreement, the non-breaching party shall be entitled to an injunction or injunctions to prevent or restrain breaches or
threatened breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement to prevent breaches
or threatened breaches of, or to enforce compliance with, the covenants and obligations of the other under this Agreement. Each
party hereby agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent
or restrain breaches or threatened breaches of this Agreement by such party, and to specifically enforce the terms and provisions
of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of
such party under this Agreement. The parties hereto further agree that (i) by seeking the remedies provided for in this Section
10.9(b), neither party shall in any respect waive its right to seek any other form of relief that may be available to a party under
this Agreement (including monetary damages) in the event that this Agreement has been terminated or in the event that the remedies
provided for in this Section 10.9(b) are not available or otherwise are not granted, and (ii) nothing set forth in this Section
10.9(b) shall require either party to institute any proceeding for (or limit such party’s right to institute any proceeding
for) specific performance under this Section 10.9(b) prior or as a condition to exercising any termination right under Section
9.1 (and pursuing damages after such termination), nor shall the commencement of any legal proceeding pursuant to this Section
10.9(b) or anything set forth in this Section 10.9(b) restrict or limit such party’s right to terminate this Agreement in
accordance with Section 9.1 or pursue any other remedies under this Agreement that may be available then or thereafter.
(c) Notwithstanding
anything to the contrary in this Agreement, the parties hereto expressly acknowledge and agree that the remedies set forth in Section
9.4 shall be the sole and exclusive remedies available to SIC, in the event this Agreement is terminated under Section 9.1(d) (i)(with
respect to the failure to obtain MDLY Stockholder Approval), Section 9.1(f) or Section 9.1(g), and MDLY, in the event this Agreement
is terminated under Section 9.1(d)(i) (with respect to the failure to obtain SIC Stockholder Approval), Section 9.1 (h) or Section
9.1(i). To the extent SIC or MDLY is entitled to receive the Termination Fee, the receipt of such amounts shall be deemed to be
full and final payment for any and all losses or damages suffered or incurred by SIC or MDLY, as applicable, or any of their respective
Affiliates or any other Person in connection with this Agreement (and the termination hereof), the transactions contemplated hereby
(and the abandonment thereof) or any matter forming the basis for such termination, and none of SIC nor any of its Affiliates,
or MDLY or any of its Affiliates, as applicable, or any other Person shall be entitled to bring or maintain any other Claim against
MDLY or SIC, as applicable, or any of their Affiliates arising out of this Agreement, any of the transactions contemplated hereby
or any matters forming the basis for such termination.
10.10
Waiver
of Jury Trial
. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION
HEREWITH OR THE MERGER AND OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10.
10.11
Severability
.
If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and
will in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated
by this Agreement is not affected in any manner materially adverse to any party. Upon such determination, the parties will negotiate
in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
IN WITNESS WHEREOF,
the undersigned parties have caused this Agreement to be executed by their respective officers thereunto duly authorized as of
the date first above written.
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MEDLEY MANAGEMENT INC.
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|
|
|
|
By:
|
/s/ Brook Taube
|
|
|
Name: Brook Taube
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
SIERRA INCOME CORPORATION
|
|
|
|
|
By:
|
/s/ Seth Taube
|
|
|
Name: Seth Taube
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
SIERRA MANAGEMENT, INC.
|
|
|
|
|
By:
|
/s/ Brook Taube
|
|
|
Name: Brook Taube
|
|
|
Title: Chief Executive Officer
|
Signature Page
EXHIBIT A
Tax Receivable Termination
Agreement
[See attached.]
TERMINATION, WAIVER AND LOCKUP AGREEMENT
This TERMINATION, WAIVER
AND LOCKUP AGREEMENT, dated as of August 9, 2018 (this “
Agreement
”), is entered into by and among Medley Management
Inc., a Delaware corporation (the “
MDLY
”), Medley LLC, a Delaware limited liability company (“Medley”),
Medley Group LLC, a Delaware limited liability company (“
Medley Group
”), each of the undersigned on the signature
page hereto (the “
Unitholders
”) and Sierra Income Corporation (“
SIC
”, and collectively with
MDLY, Medley, Medley Group and the Unitholders, the “
Parties
”).
WHEREAS, MDLY, Medley,
and the Unitholders, are parties to that certain Exchange Agreement, dated as of September 23, 2014 (as amended or otherwise modified
from time to time, the “
Exchange Agreement
”);
WHEREAS, MDLY and the
Unitholders, as the TRA Parties thereunder, are parties to that certain Tax Receivable Agreement dated as of September 23, 2014
(as amended or otherwise modified from time to time, the “
Tax Receivable Agreement
”);
WHEREAS, MLDY, Medley
Group and the Unitholders, as the Covered Persons thereunder, are parties to that certain Registration Rights Agreement, dated
September 23, 2014 (as amended or otherwise modified from time to time, the “
Registration Rights Agreement
”);
WHEREAS, MDLY has entered
into an Agreement and Plan of Merger (the “
MDLY Merger Agreement
”), dated as of the date hereof, with SIC and
Sierra Management Inc. (“
Merger Sub
”) pursuant to which MDLY will be merged (the “
MDLY Merger
”)
with and into Merger Sub and the separate corporate existence of MDLY will cease (capitalized terms used in this Agreement without
definition are used with the meanings given them in the MDLY Merger Agreement);
WHEREAS, SIC has also
entered into an Agreement and Plan of Merger (the “
MCC Merger Agreement
”), dated as of the date hereof, with
Medley Capital Corporation (“
MCC
”) pursuant to which MCC will be merged (the “
MCC Merger
”)
with and into SIC and the separate corporate existence of MCC will cease;
WHEREAS, the MDLY Merger
Agreement requires, among other things, as a condition precedent to the closing of the transactions contemplated by the Merger
Agreement, that this Agreement be executed and delivered by the Unitholders to terminate the Tax Receivable Agreement and the Registration
Rights Agreement effective as of the Effective Time and to reflect the agreement of the Unitholders not to exchange any of their
Units for shares of Class A Common Stock pursuant to the Exchange Agreement until immediately prior to the Effective Time and to
agree to not sell any of the shares of SIC Common Stock that they may receive upon consummation of the MDLY Merger or the MCC Merger
for one year following the Effective Time;
WHEREAS, the cash consideration
to be received by the Unitholders under the MDLY Merger Agreement was calculated by the Unitholders in consultation with their
tax advisors and was based on their estimate of what would be approximately equal to and used to pay the Unitholders’ taxes
arising as a result of the exchange of their Units into shares of Class A Common Stock as of the Effective Time.
NOW, THEREFORE, in
consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties hereby agree as follows:
|
1.
|
Termination of Tax Receivable Agreement
.
|
|
(a)
|
Effective as of the Effective Time, and without any further action on the part of any person (including, without limitation, any of the Parties) and without any further consideration by MDLY or SIC, the Tax Receivable Agreement is hereby irrevocably and unconditionally terminated and shall be of no further force or effect with respect to the Parties, other than the provisions set forth in Section 7.12 (Confidentiality). Each of the Unitholders acknowledges and agrees that effective with the termination of the Tax Receivable Agreement any outstanding obligations of MDLY under the Tax Receivable Agreement to the Unitholders shall have been satisfied in full.
|
|
(b)
|
Notwithstanding anything to the contrary contained in the Tax Receivable Agreement, from an after the Effective Time, no party to the Tax Receivable Agreement shall have any further rights or obligations thereunder, including without limitation the obligation to pay, or the right to receive, any amount or benefit, including without limitation the Early Termination Payment (as defined in the Tax Receivable Agreement), other than the rights and obligations set forth in Section 7.12 (Confidentiality).
|
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2.
|
Termination of Registration Rights Agreement
. Effective as of the Effective Time, and without any further action on the part of any person (including, without limitation, any of the Parties) the Registration Rights Agreement is hereby irrevocably and unconditionally terminated and shall be of no further force or effect with respect to the Parties.
|
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3.
|
Waiver
. Each Unithholder hereby agrees to (i) waive any and all rights to exchange Units for MDLY Class A Common Stock pursuant to the Exchange Agreement prior to the Effective Time, (ii) exchange Units for MDLY Class A Common Stock only as contemplated in the Merger Agreement, and (iii) not sell, transfer or otherwise dispose of any Units prior to the Effective Time, except to Permitted Transferees; provided, that such Permitted Transferees execute a joinder to this Agreement in form reasonably acceptable to the parties.
|
|
4.
|
Lock Up
. Each of the Unitholders hereby agrees:
|
|
(a)
|
Definitions
. For purposes of this Section 4, the following terms shall have the meanings set forth below:
|
“Common Shares’
means the shares of common stock, par value $0.001 per share, of SIC.
“Lock-Up Period”
means the period beginning on the Effective Time and ending on the first anniversary of the Effective Time; provided, however,
in the case of a Unitholder identified on the signature pages hereto as an “Individual Unitholder” who is also an employee
of Medley Capital LLC, SIC or any of its Affiliates on or after the Effective Time, with respect to such Individual Unitholder
and his or her Permitted Transferees, the Lock-Up Period shall end as of the date of termination of such Unitholder’s employment
in the event that such termination is without Cause (as that term is defined in the form of Employment Agreement attached to the
MDLY Merger Agreement) or such Individual Unitholder terminates his or her employment with Good Reason (as that term is defined
in the form of Employment Agreement attached to the MDLY Merger Agreement).
“Lock-Up Shares”
means any Common Shares that a Unitholder acquires pursuant to the MDLY Merger Agreement, including any that have been Transferred
to a Permitted Transferee in accordance with Section 4(b) hereof (and shall include any shares of capital stock of SIC issued in
respect thereof as a result of any stock split, stock dividend, share exchange, merger, consolidation or similar recapitalization).
For the avoidance of doubt, Common Shares shall cease to be Lock-Up Shares hereunder as of the end of the Lock-Up Period.
“Permitted Transfer”
means any of the following:
|
(i)
|
the Transfer of any Lock-Up Shares to one (1) or more Permitted Transferees;
|
|
(ii)
|
the existence or creation of a testamentary power of appointment that may be exercised with respect to any Lock-Up Shares held by a trust; provided, however, that the Transfer of any Lock-Up Shares upon the exercise of a testamentary power of appointment to someone other than a Permitted Transferee shall not be a “Permitted Transfer” within the meaning of this paragraph (ii) of this definition; or
|
|
(iii)
|
any Transfer by will or pursuant to the Laws of descent and distribution by any Person described in paragraph (i) or (ii) of the definition of Permitted Transferee.
|
“Permitted
Transferee” means any of the following:
|
(i)
|
any Immediate Family Member of the Unitholder or any lineal descendant of any such Immediate Family Member;
|
|
(ii)
|
any trust for the direct or indirect benefit of the Unitholder or any Immediate Family Member of the Unitholder; and
|
|
(iii)
|
any other entity directly or indirectly wholly-owned and controlled by the Unitholder or such Unitholder’s Permitted Transferees described in clauses (i) and (ii) of this definition.
|
For purposes of this definition,
“lineal descendants” shall not include individuals adopted after attaining the age of eighteen (18) years and the adopted
individual’s descendants.
“Transfer” means,
with respect to Lock-Up Shares: (i) any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), pledge, encumbrance,
grant of an option, hypothecation, mortgage, exchange, transfer or other disposition of (whether directly or indirectly, whether
with or without consideration and whether voluntarily or involuntarily or by operation of law), or agreement to do any of the foregoing,
of any interest (legal or beneficial) in any Lock-Up Shares; (ii) the entry into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of Common Shares or any securities convertible into
or exercisable or exchangeable for Common Shares, or warrants or other rights to purchase Common Shares, whether any such transaction
is to be settled by delivery of Common Shares or such other securities, in cash or otherwise; or (iii) any public announcement
of an intention to effect any transaction specified in clause (i) or (ii); provided, however, that the term “Transfer”
does not include any revocable proxy granted by the Unitholder or a Permitted Transferee or any exercise of rights by an executor,
administrator, trustee, committee, guardian, conservator or receiver of the Unitholder or a Permitted Transferee, including the
sale of Lock-Up Shares to pay any applicable estate taxes.
|
(b)
|
Restrictions on Transfer of Common Shares
. Each Unitholder agrees that, during the Lock-Up Period, they will not Transfer any Lock-Up Shares other than pursuant to a Permitted Transfer; provided, however, that upon any Permitted Transfer each Permitted Transferee in such Transfer shall agree in writing to be bound by the restrictions set forth in this Section 4.
|
|
(c)
|
Legend
. At the request of SIC, all share certificates or share statements evidencing Lock-Up Shares shall bear or contain a legend or notation substantially in the following form (or in such other form as SIC’s board of directors may determine):
|
THE SECURITIES REPRESENTED BY
THIS [CERTIFICATE / STATEMENT] ARE SUBJECT TO RESTRICTIONS ON TRANSFER SPECIFIED IN AN EMPLOYMENT AGREEMENT WITH THE CORPORATION,
AS THE SAME MAY BE AMENDED AND MODIFIED FROM TIME TO TIME, AND THE CORPORATION RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITIES UNTIL SPECIFIED CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE CORPORATION TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
The term “Corporation”
shall mean SIC for purposes of the above legend.
|
(d)
|
Stop Transfer
. SIC and its transfer agent are hereby authorized to decline to make any Transfer of Lock-Up Shares if such Transfer would constitute a violation or breach of this Section 4 and the Unitholder agrees and consents to the entry of stop transfer instructions with the SIC transfer agent and registrar against any Transfer of the Lock-Up Shares not made in compliance with this Section 4.
|
|
5.
|
Release
. Each of the Parties (each a “
Releasor
”) hereby releases and forever discharges each other party to the Exchange Agreement, Tax Receivable Agreement and the Registration Rights Agreement, as applicable, and their respective predecessors, successors and assigns, and all of their respective partners, independent contractors, officers, directors, shareholders, employees, agents, advisers and representatives (collectively in each case, the “
Released Parties
”), of and from any and all liabilities, actions, suits, debts, accounts, obligations, covenants, claims and demands whatsoever, in law or in equity, which the Releasor ever had, now has, or may have, or which any successor or assign of the Releasor hereafter can, shall or may have, against any Released Party, relating to, resulting from or arising out of the Exchange Agreement, Tax Receivable Agreement or Registration Rights Agreement; provided, however, that the foregoing Release shall in no event constitute a future release or waiver of rights under Section 7.12 of the Tax Receivable Agreement (Confidentiality) to the extent a breach thereof occurs following the Effective Time. In addition to the foregoing release, the Unitholders shall execute and deliver at the Effective Time a bring down release agreement in the form of Exhibit A attached hereto.
|
|
6.
|
Representations and Warranties of the Unitholders
. Each Unitholder represents and warrants, on behalf of such Unitholder, as follows, as of the date of this Agreement:
|
|
(a)
|
Unitholder has full power and authority to execute and deliver this Agreement, to perform such Unitholder’s obligations hereunder and to consummate the transactions contemplated hereby. If Unitholder is not an individual, such Unitholder is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation. The execution and delivery of this Agreement, the performance of Unitholder’s obligations hereunder, and the consummation of the transactions contemplated hereby, have been duly authorized by all requisite actions of such Unitholder. This Agreement has been duly and validly executed and delivered by Unitholder and constitutes a legal, valid and binding obligation of such Unitholder, enforceable against such Unitholder in accordance with its terms, except as may be limited by the Bankruptcy and Equity Exception.
|
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(b)
|
Except for assignments that have occurred prior to the date hereof between Unitholders party hereto, Unitholder has not transferred, assigned, pledged or otherwise encumbered any of such Unitholder’s Class A Units or any of such Unitholder’s rights under the Tax Receivable Agreement, the Registration Rights Agreement or the Exchange Agreement. True and correct copies of the Tax Receivable Agreement, the Registration Rights Agreement and the Exchange Agreement are attached hereto as
Exhibit A
.
|
|
7.
|
Governing Law
. This Agreement and any dispute arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
|
|
8.
|
Counterparts
. This Agreement may be executed in one or more counterparts (including by means of facsimile or PDF), each of which shall be deemed an original but all of which together will constitute one and the same instrument.
|
|
9.
|
Amendment
. This Agreement may not be terminated or amended in any manner, and no terms or conditions of this Agreement may be waived by any party hereto, without the prior written consent of SIC and, prior to the Effective Time, the MDLY Special Committee (as defined in the MDLY Merger Agreement).
|
|
10.
|
Entire Agreement
. The Merger Agreement and this Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all previous agreements and representations, written or oral, between the Parties.
|
|
11.
|
Further Assurances
. If any Party reasonably determines or is reasonably advised that any further instruments, actions, or things are necessary or desirable to carry out the terms of this Agreement, each Party shall execute and deliver such instruments, perform all such actions and provide all such things reasonably necessary and proper to carry out the terms of this Agreement.
|
[Signature page follows]
EXECUTED as of the
date first set forth above.
|
MEDLEY MANAGEMENT INC.
|
|
|
|
|
By:
|
/s/ Brook Taube
|
|
Name: Brook Taube
|
|
Title: Chief Executive Officer
|
|
|
|
|
MEDLEY LLC
|
|
|
|
|
By:
|
/s/ Brook Taube
|
|
Name: Brook Taube
|
|
Title: Chief Executive Officer
|
|
|
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MEDLEY GROUP LLC
|
|
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|
By:
|
/s/ Brook Taube
|
|
Name: Brook Taube
|
|
Title: Member
|
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UNITHOLDERS:
|
|
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|
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B. TAUBE 2014 ASSOCIATES, LLC
|
|
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|
|
By:
|
/s/ Brook Taube
|
|
Name: Brook Taube
|
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Title: Special Managing Member
|
|
|
|
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BROOK TAUBE TRUST
|
|
|
|
|
By:
|
/s/ Brook Taube
|
|
Name: Brook Taube
|
|
Title: Trustee
|
[
Signature Page – Termination Agreement
]
|
A. TAUBE 2014 ASSOCIATES, LLC
|
|
|
|
|
By:
|
/s/ Seth Taube
|
|
Name: Seth Taube
|
|
Title: Special Managing Member
|
|
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|
S. TAUBE 2014 ASSOCIATES, LLC
|
|
|
|
|
By:
|
/s/ Seth Taube
|
|
Name: Seth Taube
|
|
Title: Special Managing Member
|
|
|
|
|
SETH AND ANGIE TAUBE TRUST
|
|
|
|
|
By:
|
/s/ Seth Taube
|
|
Name: Seth Taube
|
|
Title: Trustee
|
[
Signature Page – Termination Agreement
]
|
PERCY HOLDINGS, LLC
|
|
|
|
|
By:
|
/s/ Jeffrey Tonkel
|
|
Name: Jeffrey Tonkel
|
|
Title: Manager
|
Individual Unitholders:
|
/s/ Jeffrey Tonkel
|
|
Jeffrey Tonkel
|
|
|
|
/s/ Richard T. Allorto, Jr.
|
|
Richard T. Allorto, Jr.
|
|
|
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/s/ John D. Fredericks
|
|
John D. Fredericks
|
|
|
|
/s/ Christopher Taube
|
|
Christopher Taube
|
|
|
|
/s/ Samuel Anderson
|
|
Samuel Anderson
|
[
Signature Page – Termination Agreement
]
|
SIERRA INCOME CORPORATION
|
|
|
|
|
By:
|
/s/ Seth Taube
|
|
Name: Seth Taube
|
|
Title: Chief Executive Officer
|
[
Signature Page
– Termination Agreement
]
Exhibit A
Bring Down Release
Dated as of ______________
This Bring Down Release
is hereby incorporated in its entirety into the Termination, Waiver and Lockup Agreement, dated as of August [__], 2018 (the “Termination
Agreement”), by and among Medley Management Inc., a Delaware corporation (the “
MDLY
”), Medley LLC, a Delaware
limited liability company (“Medley”), Medley Group LLC, a Delaware limited liability company (“
Medley Group
”),
each of the undersigned on the signature page hereto (the “
Unitholders
”) and Sierra Income Corporation (“
SIC
”
and collectively with MDLY, Medley, Medley Group and the Unitholders, the “
Parties
”).
As of the Effective
Time, each of the Parties (each a “
Releasor
”) hereby releases and forever discharges each other party to the
Exchange Agreement, Tax Receivable Agreement and the Registration Rights Agreement, as applicable, and their respective predecessors,
successors and assigns, and all of their respective partners, independent contractors, officers, directors, shareholders, employees,
agents, advisers and representatives (collectively in each case, the “
Released Parties
”), of and from any and
all liabilities, actions, suits, debts, accounts, obligations, covenants, claims and demands whatsoever, in law or in equity, which
the Releasor ever had, now has, or may have, or which any successor or assign of the Releasor hereafter can, shall or may have,
against any Released Party, relating to, resulting from or arising out of the Exchange Agreement, Tax Receivable Agreement or Registration
Rights Agreement; provided, however, that the foregoing Release shall in no event constitute a future release or waiver of rights
under Section 7.12 of the Tax Receivable Agreement (Confidentiality) to the extent a breach thereof occurs following the Effective
Time.
The representations
and warranties of the Unitholders set forth in Section 6 of the Termination Agreement are true and correct in all material respects
on and as of the Effective Time, as though made on and as of such date.
[Signature Pages Follow]
EXECUTED as of the
date first set forth above.
|
MEDLEY MANAGEMENT INC.
|
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
|
|
MEDLEY LLC
|
|
|
|
|
By:
|
|
|
Name:
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|
Title:
|
|
|
|
|
MEDLEY GROUP LLC
|
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|
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By:
|
|
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Name:
|
|
Title:
|
|
|
|
|
UNITHOLDERS:
|
|
|
|
B. TAUBE 2014 ASSOCIATES, LLC
|
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
|
|
BROOK TAUBE TRUST
|
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
[
Signature Page – Bring Down Release
]
|
A. TAUBE 2014 ASSOCIATES, LLC
|
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
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S. TAUBE 2014 ASSOCIATES, LLC
|
|
|
|
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By:
|
|
|
Name:
|
|
Title:
|
|
|
|
|
SETH AND ANGIE TAUBE TRUST
|
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
[
Signature Page – Bring Down Release
]
|
PERCY HOLDINGS, LLC
|
|
|
|
|
By:
|
|
|
Name: Jeffrey Tonkel
|
|
Title: Manager
|
Individual Unitholders:
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Jeffrey Tonkel
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Richard T. Allorto, Jr.
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John D. Fredericks
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Christopher Taube
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Samuel Anderson
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[
Signature Page – Bring Down Release
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SIERRA INCOME CORPORATION
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By:
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Name:
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Title:
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[
Signature Page – Bring Down Release
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EXHIBIT B-1
Form of Employment
Agreement
[See attached.]
EMPLOYMENT AGREEMENT
This Employment Agreement
(the “Agreement”) is made and entered into as of [ , 201_] (the “Effective
Date”) between Medley Capital LLC (the “Company”) and [ ]
(the “Employee”) (each a “Party,” collectively, “Parties”).
The Company wishes
to engage Employee to provide services to the Company, Sierra Income Corporation and each of their respective subsidiaries and
affiliates (the “Company Group”) and Employee wishes to provide such services, pursuant to the terms and conditions
set forth in this Agreement.
In consideration of
the mutual promises set forth below and other valuable consideration (the mutuality, adequacy and sufficiency of which are hereby
acknowledged), the Parties agree as follows.
1.
Position
.
The Company hereby employs Employee as [ ]
or in such capacity as may later be agreed to by the Parties, and Employee agrees to serve the Company in such capacity in a manner
consistent with the terms and conditions of this Agreement.
2.
Term
.
This Agreement shall commence on the Effective Date and shall expire on the thirty (30) month anniversary of the Effective Date
(the “Initial Term”), unless terminated earlier pursuant to the provisions of Section 8 hereof. The term of employment
shall be renewed automatically for successive periods of one (1) year (each, a “Renewal Term”) after the expiration
of the Initial Term, unless the Company provides Employee, or Employee provides the Company, with written notice to the contrary
at least one hundred twenty (120) calendar days prior to the end of the Initial Term or any Renewal Term. For the avoidance of
doubt, this Agreement shall remain in effect during the Renewal Term unless terminated earlier pursuant to the provisions of Section
8 hereof. The Initial Term and any Renewal Terms are collectively referred to herein as the “Term.”
3.
Duties
.
a.
Employee
shall have the duties, authorities and responsibilities forth in Exhibit B attached to this Agreement. Employee’s principal
place of employment with the Company shall be at the Company’s offices, currently at 280 Park Avenue, 6
th
Floor
East, New York, New York, provided that Employee understands and agrees that Employee may be required to travel from time to time
for business purposes.
b.
Employee
shall devote Employee’s full business time, energy, business judgment, knowledge, skill and best efforts to the performance
of Employee’s duties with the Company Group, in conformance with rules and policies of the Company Group in effect from time
to time and otherwise provided or made available to Employee. Employee will not, during the Term, directly or indirectly engage
in any other business, either as an employee, employer, consultant, principal, officer, director, advisor or in any other capacity,
either with or without compensation, without the prior written consent of the Company’s Board of Directors (the “Board”).
However, Employee may devote reasonable time to activities such as supervision of personal investments and activities involving
professional, charitable, civic, educational, religious and similar types of activities, speaking engagements and membership on
other boards, provided such activities do not interfere in any material way with the business of the Company Group and provided
further that Employee cannot serve on the board of directors of (or provide services to) any publicly traded company without the
written consent of the Board, which shall not be unreasonably withheld. The time involved in such activities shall not be treated
as vacation time. Employee shall be entitled to keep any amounts paid to him in connection with such activities (such as director
fees and honoraria).
4.
Compensation
.
a.
Generally
.
As compensation, Employee shall receive a Base Salary (as defined below) and may, as determined at the discretion of the Board
or Compensation Committee of the Board (the “Compensation Committee”), as applicable, participate in an annual bonus
program (the “Annual Bonus”). Annual Bonuses may be provided to align the goals and objectives of the Employee with
those of the Company, business units within the Company and the expected goals and objectives of the Company’s shareholders,
as applicable, and according to standards of good governance, ethical leadership and the successful growth and well-being of the
Company Group. The award of any Annual Bonus will generally depend upon the satisfaction of personal and/or Company Group performance
metrics as determined by Board or Compensation Committee, as applicable, for the year.
Compensatory payments
made to Employee under the terms of this Agreement are subject to tax and other withholding required or permitted by law and such
additional withholding as may be requested by Employee.
b.
Base
Salary
. The Company agrees to pay Employee a base salary at an annual rate of [ ]
($ ) (the “Base Salary”),
payable in accordance with the regular payroll practices of the Company. This Base Salary shall compensate Employee for all hours
of work, and this position shall not be eligible for overtime. The Base Salary shall be subject to change at the discretion of
the Board or Compensation Committee, as applicable. The term “Base Salary” will refer to the Base Salary as may be
modified from time to time.
c.
Annual
Bonus
.
(i)
Annual
Bonus for 2018
. Employee shall be eligible to receive an Annual Bonus with respect to performance for the 2018 year equal to
[$__________, as set forth in the economic terms set forth in Exhibit B-2 of the Agreement and Plan of Merger by and among Medley
Management Inc., Sierra Income Corporation, and Sierra Management, Inc., dated as of August 9, 2018 and on a similar basis for
other selected senior executives] to be paid no later than March 15, 2019. The Board or Compensation Committee, as applicable,
may increase the 2018 Annual Bonus in recognition of performance in excess of performance objectives. No Annual Bonus shall be
earned for 2018 unless the Employee remains employed through the date of payment.
(ii)
Annual
Bonus for 2019 and Thereafter
. Each year during the first quarter of the year, the Board or Compensation Committee, as applicable,
shall establish a target annual bonus for the year of no less than [____% of Base Salary] and performance and other objectives
for the year for such bonus, all as determined, in consultation with the Company’s senior executive officers (“Management”),
by the Board or Compensation Committee, as applicable.
No earlier
than January 1 nor later than March 15 of the following year, the Board or Compensation Committee, as applicable, shall determine
the amount of the final Annual Bonus, if any, to be paid for the preceding year, which amount may be based in whole or in part
on satisfaction of the performance and other objectives for the preceding year. The extent to which performance and other objectives
are met will be determined based on actual achievement (as determined, in consultation with Management, by the Board or Compensation
Committee, as applicable, in good faith). The Board or Compensation Committee, as applicable, may increase the Annual Bonus in
recognition of performance in excess of performance objectives. No Annual Bonus shall be earned for a year unless the Employee
remains employed through the date of payment.
d.
Form
of Annual Bonus
. The Annual Bonus for the preceding year (including for 2018) shall be paid [___%] in cash immediately and
[___%] in the form of an RSU award. With respect to the Annual Bonus for 2018, the RSU shall vest in three (3) equal annual installments,
beginning on the first anniversary of the Effective Date.
e.
Clawback
.
The Annual Bonus made under this Agreement shall be subject to recoupment by the Company to the extent required by applicable law
(including without limitation Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act) and/or the rules and regulations of the NYSE.
5.
Employee
Benefits
.
a.
Benefits
.
The Company intends to continue existing benefit plans maintained by Medley Capital LLC, or plans to adopt benefit plans consistent
with or generally more favorable in the aggregate than the current benefit plans of Medley Capital LLC, and the Employee will remain
or become eligible for participation in those plans made available to other similarly situated employees of the Company, including,
but not limited to group health plan coverage, short and long term disability insurance coverage, life insurance coverage, qualified
retirement benefit plan coverage, non-qualified benefit plan coverage and tax and financial planning benefits, in accordance with
and subject to the terms and conditions of those plans. Notwithstanding the preceding sentence, the Company reserves the right
to adopt, amend or terminate any benefit plan, program or arrangement.
b.
Paid
Time Off
. Employee shall be entitled to no less than twenty-five (25) business days paid time off, subject to the terms and
conditions of the Company’s vacation policies, procedures and practices. Paid time off accrues with each pay period, subject
to an annual cap, and cannot be carried over to the subsequent calendar year, except to the extent required by applicable law.
Any unused vacation will not be paid upon termination of employment.
6.
Business
Expenses
. The Company agrees to reimburse Employee for reasonable and customary business expenses related to Employee’s
performance of services under this Agreement, subject to appropriate approvals by the Board as applicable. As a condition of reimbursement,
Employee must account for and substantiate all such expenses in accordance with applicable Company policies and consistent with
Internal Revenue Service requirements for reimbursable business expenses.
7.
Freedom
to Contract
. The Company does not infringe upon the proprietary information, trade secrets or confidential information of third
parties. Employee represents and warrants that Employee has the right to enter into this Agreement, that Employee is eligible for
employment by the Company, that no other written or verbal agreements exist that would be in conflict with or prevent the performance
by Employee of any portion of this Agreement, and that Employee is not subject to or in breach of any non-disclosure agreement
or restrictive covenant of any nature separate from the provisions included in this Agreement.
Employee will not enter into
this Agreement without first disclosing to the Board any non-disclosure agreement or restrictive covenant agreement Employee has
entered into (verbally or in writing) at any time that is still in effect on its terms as of the Effective Date of this Agreement,
regardless of whether Employee believes or has reason to believe such agreement is void or unenforceable in whole or in part.
8.
Termination
.
a.
Death
.
Employee’s employment shall terminate on the date of Employee’s death. In the event of the death of Employee during
the Term, the Company shall pay to Employee’s legal representatives or named beneficiaries (as designated in a writing delivered
to the Company):
(i) Employee’s
earned but unpaid Base Salary as of the date of Employee’s death;
(ii) Any
unpaid Annual Bonus for the year prior to the date of Employee’s death, based on actual performance for that year, payable
at the same time (and in the same form) such amounts are paid to continuing employees; and
(iii) A
pro-rated amount of the Annual Bonus for the year of death, assuming performance at the target level, if any, for the year in which
death occurs and paid as soon as practicable following death.
In addition, vesting
of any outstanding RSU awards at death shall be fully accelerated.
In addition, group health
benefits will be provided to the Employee’s qualified beneficiaries following the death of Employee to the extent such benefits
are elected under COBRA and at no cost for a period of one (1) year following Employee’s death. All amounts due under this
paragraph shall, except as otherwise provided, be paid as soon as practicable following Employee’s termination on account
of death.
b.
Disability
.
Notwithstanding the foregoing, Employee’s employment shall terminate on the date specified in a written notice from the Company
terminating Employee’s employment due to Disability during the Term or, in the event no date is specified in such notice,
on the date on which such notice is delivered to Employee or Employee’s legal representative. For purposes of this Agreement,
“Disability” shall mean that Employee is, by reason of any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, (i)
unable to engage in any substantial gainful activity, as determined by a licensed physician as reasonably chosen by the Company,
or (ii) receiving income replacement benefits for a period of not less than three (3) months under the Company’s group disability
plan. In the event of the termination of Employee’s employment due to Disability, the Company shall:
(i) Pay
Employee’s earned but unpaid Base Salary as of the date of Employee’s termination;
(ii) Pay
any unpaid Annual Bonus for the year prior to the date of Employee’s termination, based on actual performance for that year,
payable at the same time (and in the same form) such amounts are paid to continuing employees;
(iii) Pay
a pro-rated amount of the Annual Bonus for the year of termination, assuming performance at the target level, if any, for the year
in which termination; and
(iv) Fully
accelerate vesting of any outstanding RSU awards as of the date of termination.
In addition, group
health benefits will be provided to the Employee and his qualified beneficiaries following the Employee’s termination on
account of Disability to the extent such benefits are elected under COBRA and at no cost for a period of one (1) year following
Employee’s termination on account of Disability. All amounts due under this paragraph shall, except as otherwise provided,
be paid as soon as practicable following termination on account of the Employee’s Disability.
c.
Termination
by the Company for Cause
. Notwithstanding the foregoing, the Company may terminate Employee’s employment under this Agreement
at any time for Cause. “Cause” shall mean: (i) fraud against the Company Group, which causes material harm to any member
of the Company Group; (ii) willful failure or any willful refusal to implement or undertake the lawful directives of the Board
or such other supervisor as may be assigned by the Company Group when such directives are materially consistent with Employee’s
duties under this Agreement; (iii) engaging in willful conduct (other than at the direction of the Company) that causes material
injury, monetary or otherwise, to any member of the Company Group, or that reflects adversely on any member of the Company Group,
or that materially affects Employee’s ability to perform Employee’s duties; (iv) conviction of, or the entering of
a plea of guilty or nolo contendere, by Employee to a financial crime that constitutes a felony (or any state-law equivalent) or
involves moral turpitude; (v) the entry of any order or consent decree, whether or not liability is admitted or denied, by the
Securities and Exchange Commission against Employee in respect of charges that Employee violated any provision of the Investment
Company Act of 1940, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than
provisions requiring the maintenance of proper books and records; (vi) theft, misappropriation, embezzlement or conversion of the
assets or opportunities of any member of the Company Group; (vii) a material breach of the terms, covenants or representations
of this Agreement or any agreement between Employee and any member of the Company Group; or (viii) a willful violation of the written
rules or policies of any member of the Company Group, which causes material harm to any member of the Company Group, provided that,
in the case of the occurrence of an event described in clause (vii) or (viii) above, Employee shall have ten (10) business days
after receipt of written notice thereof, stating in reasonable detail the actions or omissions purporting to constitute such breach
or violation, to cure, and upon such cure, such event shall not be deemed to be the basis for a termination of Employee for Cause,
unless the Company acting in good faith, otherwise determines that such occurrence is not reasonably subject to being cured; provided,
however, that with respect to the occurrence of an event described in clause (vii) above, the foregoing cure period shall be available
to Employee only with respect to the first occurrence of the same event described in clause (vii) above, and such cure period shall
not be available to Employee with respect to any subsequent occurrence of an event described in clause (vii) above. For purposes
of this Agreement, no act or failure to act on Employee’s part shall be considered “willful” unless it is done,
or omitted to be done, by Employee in bad faith or without reasonable belief that Employee’s action or omission was in the
best interests of the Company Group. Any act or failure to act based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done,
in good faith and in the best interests of the Company Group. In the event of Termination for Cause, Employee shall be entitled
to receive any earned but unpaid Base Salary, paid as soon as practicable following termination.
d.
Termination
by the Company Without Cause or by Employee with Good Reason
. The Company may terminate Employee’s employment without
Cause at any time under this Agreement. In the event of termination of Employee’s employment by the Company without Cause
or Employee terminates employment with Good Reason (as defined below), the Company shall:
(i) Pay
Employee’s earned but unpaid Base Salary as of the date of Employee’s termination;
(ii) Pay
any unpaid Annual Bonus for the year prior to the date of Employee’s termination, based on actual performance, for that year
and payable at the same time (and in the same form) such amounts are paid to continuing employees;
(iii) Pay
a pro-rated amount of the Annual Bonus for the year of termination, assuming performance at the target level, if any, for the year
in which termination occurs (which amount shall be included in the amount payable in Section 8(d)(iv));
(iv) Pay,
on an equal monthly basis and using regularly scheduled payroll periods over [eighteen (18) / twenty-four (24) / thirty (30)]
1
months, an amount equal to the sum of (x) one-twelfth (1/12
th
) the Employee’s Base Salary plus (y) one-twelfth
(1/12
th
) of the cash portion of the Employee’s Annual Bonus for the year of termination, assuming performance
at the target level (for the avoidance of doubt, the amount referred to in Section 8(d)(iii)); and
(v) Fully
accelerate vesting of any outstanding RSU awards as of the date of termination.
e.
Termination
for Notice of Non-Renewal
. If the Company provides notice to Employee that the Company is not renewing the Term under Section
2, at the end of the Initial Term or any Renewal Term, Employee’s employment shall terminate and the Company shall:
1
[Thirty (30) months for the CEO, twenty-four (24) months for the Vice Chairman, and eighteen (18) months for other employees who
enter into this Agreement.]
(i) Pay
Employee’s earned but unpaid Base Salary as of the date of Employee’s termination;
(ii) Pay
any unpaid Annual Bonus for the year prior to the date of Employee’s termination, based on actual performance for that year,
payable at the same time (and in the same form) such amounts are paid to continuing employees;
(iii) Pay
a pro-rated amount of the Annual Bonus for the year of termination, assuming performance at the target level, if any, for the year
in which termination occurs (which amount shall be included in the amount payable in Section 8(e)(iv));
(iv) Pay,
on an equal monthly basis and using regularly scheduled payroll periods over [eighteen (18) / twenty-four (24) / thirty (30)]
2
months, an amount equal to the sum of (x) one-twelfth (1/12
th
) the Employee’s Base Salary plus (y) one-twelfth
(1/12
th
) of the cash portion of the Employee’s Annual Bonus for the year of termination, assuming performance
at the target level (for the avoidance of doubt, the amount referred to in Section 8(e)(iii)); and
(v) Fully
accelerate vesting of any outstanding RSU awards as of the date of termination.
f.
Good
Reason
. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following without
Employee’s consent: (i) a material diminution in Employee’s base compensation opportunity; (ii) a material diminution
in Employee’s authority, duties or responsibilities; (iii) a requirement that Employee report to a corporate officer or employee
instead of reporting directly to the Board or Employee’s supervisor; (iv) a material diminution in the budget over which
Employee retains authority; (v) a material change in the geographic location at which Employee must perform the services; or (vi)
any other action or inaction that constitutes a material breach by the Company of this Agreement. Employee must provide notice
to the Company of the existence of the condition described above within a period not to exceed ninety (90) calendar days of the
initial existence of the condition, and the Company will have a period of at least thirty (30) calendar days following the notice
during which it may remedy the condition. Any termination for Good Reason must occur within two (2) years following the initial
existence of one or more of the foregoing conditions.
g.
Termination
by Employee other than for Good Reason
. Notwithstanding the foregoing, Employee may terminate Employee’s employment under
this Agreement for any reason, provided such termination may take place no earlier than the end of the month that is not less than
three (3) months after Employee has provided written notice to the Company of Employee’s intent to terminate Employee’s
employment. The Company may elect to accept Employee’s resignation at any time prior to the end of such notice period. In
the event of any termination of Employee’s employment under this Section, the Company shall pay to Employee Employee’s
earned but unpaid Base Salary.
2
[Thirty (30) months for the CEO, twenty-four (24) months for the Vice Chairman, and eighteen (18) months for other employees who
enter into this Agreement.]
h.
Executed
Waiver and Forfeiture
. No amount shall be payable under this Section 8 unless a General Release of Claims, substantially in
the form attached as Exhibit A (the “Release Form”), has been duly executed by Employee and delivered to the Company
and any applicable revocation period has expired within the sixty (60) day period following termination of employment, provided
that to the extent Internal Revenue Code Section 409A (“Section 409A”) applies to a payment, such payment will be deferred
and paid in a lump sum on the sixtieth (60
th
) day following termination.
i.
Post-Termination
Knowledge of Cause or Breach
. If (i) Employee’s employment with the Company terminates for any reason other than Cause
and, after the date of Employee’s termination, matters constituting Cause become known to the Company or (ii) Employee materially
breaches any of Employee’s post-employment obligations, including non-competition, non-solicitation, non-disparagement and
non-disclosure obligations, then the Company may, by written notice to Employee (describing in reasonable detail the facts giving
rise to such Cause or breach) obligate Employee to repay in full on a net after-tax within thirty (30) days of that notice: (1)
any Annual Bonus(es) paid after the earliest date of occurrence of matters constituting Cause or breach, as determined by the Board
in good faith; (2) any amounts of severance Employee has received hereunder; and (3) the amount of any compensation received upon
exercise, settlement or other payment of any equity award that was exercised, settled or otherwise paid after the earliest date
of occurrence of matters constituting Cause or breach, as determined by the Board in good faith. In addition, any unpaid Annual
Bonus(es), severance, and any outstanding equity awards, shall be forfeited.
j.
No
Mitigation or Offset
. Employee shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement
by seeking other employment or otherwise, and the amount of any payment provided for pursuant to this Agreement shall not be reduced
by any compensation earned as a result of Employee’s other employment or otherwise.
9.
Work
Product
.
a.
Definition
.
Employee acknowledges and agrees that during the Term, there will be certain restrictions on Employee’s development of technology,
ideas and inventions (collectively, “Work Product”). The term Work Product shall mean all ideas, processes, trademarks,
service marks, inventions, technology, computer programs, original works of authorship, designs, formulas, discoveries, patents
and copyrights, and all improvements, rights and claims related to the foregoing, which are within the scope of Employee’s
employment, or that results from or is suggested by any work performed by Employee for the Company Group, or that relate to actual
or demonstrably anticipated research or development for the Company, and which are conceived, developed or reduced to practice
by Employee alone or with others, except to the extent that applicable law prohibits the assignment of these rights. Employee agrees
that all original works of authorship that are made by Employee (solely or jointly with others) within the scope of Employee’s
employment, or that results from or is suggested by any work performed by Employee for the Company Group, or that relate to actual
or demonstrably anticipated research or development for the Company Group, and that are protectable by copyright, are “works
made for hire,” as that term is defined in the United States Copyright Act of 1976, as amended (17 U.S.C. § 101).
b.
Disclosure
.
Employee agrees to maintain adequate and current written records on the development of all Work Product and to disclose promptly
to the Company all Work Product and relevant records, which records will remain the sole property of the Company Group. Employee
further agrees that all information and records pertaining to any idea, process, trademark, service mark, invention, technology,
computer program, original work or authorship, design formula, discovery, patent or copyright that Employee does not believe to
be Work Product, but is conceived, developed or reduced to practice by Employee (alone or with others) during Employee’s
employment, or during the one (1) year period following termination of Employee’s employment, shall be promptly disclosed
to the Company (such disclosure to be received in confidence). The Company shall examine such information to determine if in fact
it constitutes Work Product subject to this Agreement. The Company’s determination that the information is Work Product subject
to this Agreement shall be final and binding.
c.
Assignment
.
Employee hereby assigns to the Company, without further consideration, all right, title and interest that Employee may presently
have or acquire (throughout the United States and in all foreign countries), free and clear of all liens and encumbrances, in and
to each Work Product, which will be the sole property of the Company Group, whether or not patentable or otherwise registrable.
In the event any Work Product will be deemed by the Company to be patentable or otherwise registrable, Employee agrees to assist
the Company Group (at its expense) in obtaining letters patent or other applicable registrations, and Employee will execute all
documents and do all other things (including testifying at the Company’s expense) necessary or proper to obtain letters patent
or other applicable registrations and to vest the Company or a member of the Company Group with full title to them. Employee further
agrees that Employee’s obligation to assist the Company Group in obtaining and enforcing patents, registrations or other
rights for such inventions in any and all countries, will continue beyond the termination of Employee’s employment, but the
Company shall compensate Employee at a reasonable rate after such termination for the time actually spent by Employee at the Company’s
request for such assistance. Should the Company or a member of the Company Group be unable to secure Employee’s signature
on any document necessary to apply for, prosecute, obtain or enforce any patent, copyright or other right or protection relating
to any Work Product, whether due to Employee’s mental or physical incapacity or any other cause, Employee hereby irrevocably
designates and appoints the Company and each of its duly authorized officers and agents as Employee’s agent and attorney-in-fact,
to act for and on Employee’s behalf, to execute and file any such document and to do all other lawfully permitted acts to
further the prosecution, issuance and enforcement of patents, copyrights or other rights of protections with the same force and
effect as if executed and delivered by Employee.
If Employee resides in
California, the foregoing assignment clause in this Section 9(c) will not apply to an invention that Employee developed entirely
on Employee’s own time without using the Company Group’s equipment, supplies, facilities or trade secret information
except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to the
Company’s business, or actual or demonstrably anticipated research or development of the Company; or (ii) result from any
work performed by Employee for the Company Group. Cal. Lab. Code § 2870(a).
d.
Waiver
of Moral Rights
. Employee hereby waives any and all moral rights that might otherwise accrue with respect to any Work Product.
10.
Confidential
Information
. Employee agrees that, during Employee’s employment with the Company or any member of Company Group, and
following termination of Employee’s employment, except as required by law, Employee will not, directly or indirectly, at
any time, disclose to any third person or use in any way any non-public information or Confidential Information (i) regarding the
business of any member of the Company Group and (ii) concerning any Business Opportunities (as defined below).
a.
Definitions
.
For purposes of this Agreement –
(i) “Confidential
Information” shall mean all confidential information, proprietary information or trade secrets (whether oral or written,
whether maintained in hard copy, electronically (including, without limitation, in email or text messages) or otherwise) and including:
(i) Know-How (as defined below), Trade Secrets (as defined in Section 11), information related to Business Opportunities, prospects,
pricing, trading, trading strategies and methodologies, portfolio management strategies, programs, methods of operation, prospective
and existing contracts, business plans, procedures, and strategies, costs profits, databases, personnel, operational methods, financial
models, potential transactions, pending negotiations, computer programs, algorithms, negotiations, lists of actual and/or prospective
clients and/or investors, financial results, business developments, internal controls, security procedures and confidential programs
or procedures; (ii) Company Intellectual Property Rights (as defined below) that constitute proprietary Know-How and Customer Information
(as defined below and if and to the extent that such proprietary Know-How and Customer Information has been maintained as Company’s
confidential information as of the date of this Agreement) and Trade Secrets; and (iii) information received by the Company Group
from third parties under confidential conditions.
(ii) “Business
Opportunities” shall mean: (1) any business plan or prospective new business developed or provided by Employee to the Company
Group; and (2) any business plan or prospective new business developed by the Company or, to Employee’s knowledge, any of
members of the Company Group that Employee has access to or otherwise becomes aware of during Employee’s employment with
the Company or Company Group.
(iii) “Company
Intellectual Property Rights” shall mean all Work Product and any other intellectual property owned or licensed by any member
of the Company Group, including:
(1) all
United States and foreign patents and patent applications that describe or claim inventions and improvements currently used, or
currently conceived or currently developed for use, that when used herein includes any electronic medium or tangible embodiment
of the Company Group, any United States or foreign counterparts, non-provisionals, divisionals, continuations, continuations-in-part,
and reissues thereof, heretofore or hereafter filed or having legal force in any country of the world, and the inventions and improvements
disclosed therein (the “Patents”);
(2) all
know-how that is currently used, or currently conceived or currently developed for use, in the business of the Company Group, including
the following: (A) Trade Secrets, formulae, ideas, inventions and invention disclosures not subject to clause (1) above; (B) discoveries,
innovations, improvements, results, reports, information and data (including all business and technical information and information
and data relating to research, development, analytical methods, processes, formulations and compositions) and development work;
(C) proprietary technology and information, designs, drawings, specifications or blueprints; and (D) all copies and tangible embodiments
of the foregoing (in whatever form or medium, including electronic media) (collectively, “Know-How”);
(3) customer
lists, supplier lists, pricing information, cost information, business and marketing research, plans and proposals and the like
that are currently used, or currently conceived or currently developed for use, in the business of the Company Group (the “Customer
Information”);
(4) all
trademarks, service marks, trade dress, trade names, logos, commercial symbols and corporate names, whether or not registered,
together with all translations, adaptations, derivations and combinations thereof that are currently used, or currently conceived
or currently developed for use, in the business of the Company Group, and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith;
(5) all
copyrightable works, whether or not registered, that are currently used, or currently conceived or currently developed for use,
in the business of the Company Group, and all copyright applications, registrations and renewals in connection therewith;
(6) all
internet domain names, URLs and applications therefor, that are currently used, or currently conceived or currently developed for
use, in the business of the Company Group; and
(7) all
computer software and programs in object code or source code form, databases and documentation and flow charts that are currently
used, or currently conceived or currently developed for use, in the business of the Company Group.
b.
Notwithstanding
the foregoing, Confidential Information and Business Opportunities shall not include information: (i) that at the date hereof is
in the public domain; (ii) that has come within the public domain through no fault or action of Employee that has the obligation
of confidentiality (provided, however, that the fact that general information may be in or become part of the public domain, in
and of itself, does not exclude any specific information from the obligations of this Agreement); (iii) that after the date hereof
has been obtained lawfully from any third party that was entitled to disclose such information; and/or (iv) that an Employee is
compelled to disclose by any judicial or administrative order after having given prompt notice of such order to the Company. Specific
aspects or details of the Confidential Information will not be deemed to be published, generally known in the trade or otherwise
within the public domain, or to be in possession of Employee, merely because the aspects of the Confidential Information are embraced
by general disclosures in the public domain or in Employee’s possession. In addition, any combination of aspects of the Confidential
Information will not be considered in the public domain or in the possession of Employee merely because individual elements thereof
are in the public domain or in Employee’s possession unless the combination and its principles are in the public domain or
in Employee’s possession. The burden of proving these exceptions to the confidentiality and use provisions of this Agreement
resides with Employee.
c.
Obligations
with respect to Confidential Information
. Employee agrees to:
(i) hold
the Confidential Information in strict confidence;
(ii) not
give, sell or disclose Confidential Information to any other third party, unless such party is an auditor or contractor hired by
any member of the Company Group and then only upon written approval of the Board;
(iii) not
share or otherwise use the Confidential Information in violation of or in any manner inconsistent with the Company’s information
protection and transfer policies in place from time to time, applicable privacy laws, applicable state and federal law, any other
applicable laws, and GDPR (EU General Data Protection Regulation 2016/679) to the extent that it applies; and
(iv) not
share or otherwise use the Confidential Information in violation of or in any manner inconsistent with the Company’s policies
or reasonable requests made by the Company from time to time.
For avoidance of doubt, nothing in this
Agreement shall prevent Employee from responding to any lawful subpoena or legal process, or sharing any Confidential Information
or other information with regulators or appropriate governmental agencies without notice to the Company, whether in response to
subpoena or otherwise, under the whistleblower provisions of federal law or regulation, and no prior authorization or notification
is required prior to Employee making any such reports or disclosures, provided that no attorney client privilege shall be waived.
11.
Trade
Secrets
. Employee acknowledges that Employee’s obligations under Section 10 are separate and distinct from Employee’s
promise and obligation, affirmed by this Agreement, not to disclose or use the Company Group’s “Trade Secrets,”
as defined by the applicable state statutory and common law and by federal law. During and at all times after the Term, Trade Secrets
of the Company Group shall be subject to the maximum protections available under applicable law and no less protection than that
provided by this Agreement applicable to “Confidential Information,” as described in Section 10. Employee further acknowledges
and agrees that protection of the Company Group’s Trade Secrets is governed by Employee’s promises in this Agreement
and by any applicable law.
12.
Protected
Rights
. Nothing in this Agreement prohibits Employee from reporting to any governmental authority information concerning possible
violations of law or regulation. Provided Employee does so consistent with 18 U.S.C. § 1833, Employee may disclose trade secret
information to a government official or to an attorney for the purposes of obtaining legal advice or use it in certain court proceedings
without fear of prosecution or liability.
13.
Restrictive
Covenants
.
a.
Restricted
Business; Restricted Territory
. Employee expressly acknowledges that during the course of Employee’s employment with
the Company, Employee will be provided with specialized knowledge, information and training with respect to the products and services
of the Company Group. Employee acknowledges and agrees that Employee’s specialized knowledge, expertise and training will
be of special value to the Company Group. Employee acknowledges: (i) that the Company Group engages in the business of middle market
lending to borrowers in the United States (collectively, the “Restricted Business”); (ii) that, as of the date hereof,
the Company Group conducts the Restricted Business across the United States (“Restricted Territory”); (iii) that Employee
will, during the Term, customarily and regularly be engaged in the development, production and distribution of the products and
services of the Company Group; (iv) that Employee has, during the Term, the primary duty of managing the Restricted Business; and
(v) that Employee’s position is a position of trust and responsibility with access to Confidential Information, Work Product,
Company Intellectual Property, Trade Secrets, information concerning employees of the Company Group, information concerning the
customers and investors of the Company Group and information concerning prospective customers and investors of the Company Group.
b.
Noncompetition
.
Employee covenants and agrees that Employee will not, during the Term and for a period of twelve (12) months following Employee’s
termination of employment for any reason (the “Restricted Period”), directly or indirectly (whether through an entity,
employee or other agent of any kind) acquire, develop, own, operate, lease, manage, have any financial interest in or otherwise
participate in the acquisition, development, ownership, operation, leasing, management or financing of, any business or enterprise
involved in the Restricted Business or engaged in Competition with any member of the Company Group in the Restricted Territory.
A person or entity (including, without limitation, Employee) shall be deemed to be engaging in “Competition” with a
member of the Company Group if such person or entity either engages primarily in the Restricted Business or engages in any other
type of business that comprises a significant portion of any member of the Company Group’s revenues as of the date of Employee’s
termination and for which Employee had responsibility or authority, or about which business Employee received Confidential Information
during the course of Employee’s employment. Notwithstanding the foregoing, the provisions of this Section 13(b) shall not
be deemed to prohibit Employee’s (i) ownership of not more than two percent (2%) of the total shares of all classes of stock
outstanding of any publicly held company or (ii) ability to invest, as a limited partner, in any private equity, mezzanine or similar
investment fund, provided in either event Employee is solely a passive investor in such entity.
c.
No
Interference with Customers
. Employee covenants and agrees that during the Restricted Period, Employee will not, without the
prior consent of the Board, solicit or attempt to solicit, directly or by assisting others, any Relevant Customer of any member
of the Company Group for the purpose of selling to such Relevant Customer, any products or services which are the same as, or substantially
similar to, or competitive with the Restricted Business or, to Employee’s knowledge, that are the same as, or substantially
similar to, or competitive with the products or services sold by any member of the Company Group at such date in the Restricted
Territory. “Relevant Customer” shall mean any person, firm or company that was a customer or client of, or was a prospective
customer or client being actively sought by, any member of the Company Group during the twelve (12) month period immediately preceding
the date of Employee’s termination (“Relevant Period”) and with whom Employee had material contact during the
Relevant Period. For purposes of this Section 13, “material contact” shall mean contact between Employee and each Relevant
Customer: (i) with whom or which Employee dealt on behalf of the Company or any member of the Company Group; (ii) whose dealings
with the Company Group were coordinated or supervised by Employee; or (iii) about whom Employee obtained confidential information
in the ordinary course of business as a result of Employee’s association with the Company Group.
d.
No
Interference with Employees
. Employee covenants and agrees that Employee shall not, during the Restricted Period, directly
or indirectly (whether through an entity, employee or other agent of any kind) solicit or recruit any Restricted Employee or induce
or attempt to induce any Restricted Employee to leave his or her employment with the Company or, to Employee’s knowledge,
any member of the Company Group; provided, however, that general advertisements with respect to a position that are not directed
to employees of any member of the Company Group will not violate the solicitation prohibition of this Section 13(d). “Restricted
Employee” shall mean any individual who was employed by any member of the Company Group during the course of Employee’s
term of employment and with whom Employee had material contact during the twelve (12) month period immediately preceding the date
of Employee’s termination.
e.
Non-Disparagement
.
Both during and after Employee’s employment, he or she will not, whether in private or in public, directly or indirectly,
make, publish, encourage, ratify, or authorize, or aid, assist or direct any other person or entity in making or publishing, any
statements that in any way defame or disparage any member of the Company Group, or any of its directors or executive employees.
14.
Enforcement
.
Employee acknowledges and agrees that: (i) the provisions and covenants set forth in Sections 9 through 13 are in addition to,
and not in lieu of, any rights or remedies that the Company Group may have available to it under any laws (including any law preventing
the disclosure of Trade Secrets or other Confidential Information); (ii) any enforcement of the Sections 9 through 13 by the Company
shall not be construed as a waiver of any other rights or remedies that the Company Group may possess at law or in equity absent
this Agreement; (iii) on account of Employee’s service to the Company Group, Employee has been, and will in the future be,
made aware of Trade Secrets and other valuable Confidential Information, including information relating to any member of the Company
Group, and their respective customers, clients and employees, in each case that could be used to the great competitive disadvantage
of, and cause great financial harm to, the Company Group if provided to any competitor; (iv) Sections 9, 10, 11 and 13 are necessary
to prevent the use and disclosure of Trade Secrets and other Confidential Information, to protect the relationships between the
Company Group members and their respective customers and employees, to protect the goodwill of the Company Group and to protect
other legitimate business interests of the Company Group; and (v) all of the restrictive covenants are reasonable in all respects,
including duration, territory and scope of activity restricted. Employee acknowledges and agrees that (1) the restrictions in Sections
9, 10, 11 and 13 shall be construed as separate agreements between Employee and the Company Group and shall be enforceable independent
of, and in addition to, any other provision of this Agreement or any provision of any other agreement between Employee and the
Company Group and (2) the existence of any claim or cause of action by Employee against any member of the Company Group, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the obligations
imposed by Sections 9, 10, 11 and 13 on Employee. The time periods referenced in Section 13 shall be extended on a day-for-day
basis for each day during which Employee is found by a court of competent jurisdiction to have violated the provisions of Section
13 in any respect, so that Employee is restricted from engaging in the activities prohibited by Section 13 for the full Restricted
Period.
15.
Injunctive
Relief
. Employee acknowledges and agrees that the breach by Employee of Sections 9, 10, 11 and 13 will cause the members of
the Company Group irreparable injury that cannot be adequately compensated by monetary damages alone. Therefore, Employee acknowledges
and agrees that any member of the Company Group, without limiting any other legal or equitable remedies available to the member
of the Company Group, shall be entitled to enforce this Agreement against Employee directly and shall be entitled to obtain equitable
relief by injunction or otherwise from any court of competent jurisdiction, including injunctive relief to prevent any failure
by Employee to comply with the terms and conditions of Sections 9, 10, 11 and 13.
16.
Company
Property
. All information, materials, documents, supplies, equipment and other property furnished to Employee by the Company
Group in connection with performance of services under this Agreement will be and remain the sole property of the Company Group.
On the date of the termination of Employee’s employment under this Agreement for any reason, or at any other time at the
Company’s request, Employee must return to the Company Group all tangible and intellectual property in whatever form belonging
to the Company Group (including, but not limited to, the Company Group vehicle, any laptops, computers, cell phones, wireless electronic
mail devices or other equipment, or information, documents and other property).
17.
Non-Disclosure
.
Except as may be required by law, Employee shall not disclose the financial terms of this Agreement to any person or entity, except
that this Agreement may be disclosed to: (a) Employee’s attorneys, accountants or financial or tax advisors; and (b) members
of Employee’s immediate family; provided, however, that in the case of each of (a) and (b) such persons agree not to further
reveal the terms of this Agreement.
18.
Insurance
.
If the Company desires at any time or from time to time during the Term to apply in its own name or otherwise for life, health,
accident or other insurance covering Employee, the Company may do so at its sole cost and expense and may take out such insurance
for any sum that the Company may deem necessary to protect its interests. Employee will have no right, title or interest in or
to such insurance, but will, nevertheless, assist the Company in procuring and maintaining the same by submitting from time to
time to the usual customary medical, physical and other examinations and by signing such applications, statements and other instruments
as may reasonably be required by the insurance company or companies issuing such policies.
19.
Indemnification
and Insurance
. The Company shall indemnify, protect, defend and save Employee harmless from and against any threatened, pending,
contemplated or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which Employee
is made a party by reason of the fact that Employee is or was an officer, employee or agent of the Company, or any judgment, amount
paid in settlement (with the consent of the Company), fine, loss, expense, cost, damage and reasonable attorneys’ fees incurred
by reason of the fact that Employee is or was an officer, employee or agent of the Company; provided, however, that Employee acted
in good faith and in a manner Employee reasonably believed to be in the best interests of the Company Group, and with respect to
any criminal action or proceeding, had no reasonable cause to believe Employee’s conduct was unlawful. Employee also shall
be indemnified under the Company’s LLC Agreement and By-Laws, and covered by directors’ and officers’ liability
insurance policies that are the same as or equivalent to those the Company carries for its directors and other senior executives.
20.
Lock-Up
.
a. Definitions.
For purposes of this Section 20 of this Agreement, the following terms shall have the meanings set forth below.
“Common Shares
”
means the shares of common stock, par value $0.001 per share, of Sierra.
“
Lock-Up Period
”
means the period beginning on the date of the closing under the Merger Agreement and ending on the first anniversary of such closing[;
provided, however, in the event of a termination by the Company without Cause or Employee terminates employment with Good Reason,
the Lock-Up Period shall end as of the date of termination of employment].
3
“
Lock-Up Shares
”
means any Common Shares that the Employee acquires pursuant to the Merger Agreement, including any that have been Transferred to
a Permitted Transferee in accordance with Section 20 hereof (and shall include any shares of capital stock of Sierra issued in
respect thereof as a result of any stock split, stock dividend, share exchange, merger, consolidation or similar recapitalization).
For the avoidance of doubt, Common Shares shall cease to be Lock-Up Shares hereunder as of the end of the Lock-Up Period.
“Merger Agreement”
means that certain Agreement and Plan of Merger by and among Medley Management Inc., Sierra and Sierra Management, Inc. dated
as of August 9, 2018.
3
[This proviso will not be included in employment agreements for the CEO or Vice Chair.]
“
Permitted Transfer
”
means any of the following:
(a) the
Transfer of any Lock-Up Shares to one (1) or more Permitted Transferees;
(b) the
existence or creation of a testamentary power of appointment that may be exercised with respect to any Lock-Up Shares held by a
trust; provided, however, that the Transfer of any Lock-Up Shares upon the exercise of a testamentary power of appointment to someone
other than a Permitted Transferee shall not be a “
Permitted Transfer
” within the meaning of this paragraph (b)
of this definition; or
(c) any
Transfer by will or pursuant to the Laws of descent and distribution by any Person described in the definition of Permitted Transferee.
“
Permitted Transferee
”
means any of the following:
(a) any
Immediate Family Member of the Employee or any lineal descendant of any such Immediate Family Member; and
(b) any
trust for the direct or indirect benefit of the Employee or any Immediate Family Member of the Employee.
For purposes of this
definition, “
lineal descendants
” shall not include individuals adopted after attaining the age of eighteen (18)
years and the adopted individual’s descendants.
“
Person
”
means and includes any natural person, general partnership, limited partnership, corporation, limited liability company, joint
venture, real estate investment trust, business trust or other trust, cooperative, unincorporated association or other form of
organization, whether or not a legal entity.
“Sierra”
means Sierra Income Corporation, a Maryland corporation.
“
Transfer
”
means, with respect to Lock-Up Shares: (i) any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), pledge,
encumbrance, grant of an option, hypothecation, mortgage, exchange, transfer or other disposition of (whether directly or indirectly,
whether with or without consideration and whether voluntarily or involuntarily or by operation of law), or agreement to do any
of the foregoing, of any interest (legal or beneficial) in any Lock-Up Shares; (ii) the entry into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares or any securities
convertible into or exercisable or exchangeable for Common Shares, or warrants or other rights to purchase Common Shares, whether
any such transaction is to be settled by delivery of Common Shares or such other securities, in cash or otherwise; or (iii) any
public announcement of an intention to effect any transaction specified in clause (i) or (ii); provided, however, that the term
“Transfer” does not include any revocable proxy granted by the Employee or a Permitted Transferee or any exercise of
rights by an executor, administrator, trustee, committee, guardian, conservator or receiver of the Employee or a Permitted Transferee,
including the sale of Lock-Up Shares to pay any applicable estate taxes.
b. Restrictions
on Transfer of Common Shares.
The Employee agrees that, during the Lock-Up Period, Employee will not Transfer any Lock-Up Shares
other than pursuant to a Permitted Transfer; provided, however, that upon any Permitted Transfer each Permitted Transferee in such
Transfer shall agree in writing to be bound by the restrictions set forth in this Section 20.
c. Legend.
At the request of Sierra, all share certificates or share statements evidencing Lock-Up Shares shall bear or contain a legend or
notation substantially in the following form (or in such other form as Sierra’s board of directors may determine):
THE SECURITIES REPRESENTED BY
THIS [CERTIFICATE / STATEMENT] ARE SUBJECT TO RESTRICTIONS ON TRANSFER SPECIFIED IN AN EMPLOYMENT AGREEMENT WITH THE CORPORATION,
AS THE SAME MAY BE AMENDED AND MODIFIED FROM TIME TO TIME, AND THE CORPORATION RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITIES UNTIL SPECIFIED CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE CORPORATION TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
The term “
Corporation
”
shall mean Sierra for purposes of the above legend.
d. Stop
Transfer.
Sierra and its transfer agent are hereby authorized to decline to make any Transfer of Lock-Up Shares if such Transfer
would constitute a violation or breach of this Section 20 and the Employee agrees and consents to the entry of stop transfer instructions
with Sierra’s transfer agent and registrar against any Transfer of the Lock-Up Shares not made in compliance with Section
20.
21.
Miscellaneous
.
a.
Successors
and Assigns; No Third-Party Beneficiaries
. The rights and obligations of the Company under this Agreement shall be binding
upon and shall inure to the benefit of the members of the Company Group and their successors and assigns. The rights and obligations
of Employee under this Agreement shall be binding upon and shall inure to the benefit of the heirs and legal representatives of
Employee. Employee may not assign this Agreement or any right or obligation hereunder, without the prior written consent of the
Company. The Company may assign this Agreement or any right or obligation hereunder to (i) any member of the Company Group, (ii)
any other entity in connection with any reorganization, change in capital structure or similar transaction or (iii) any other entity
in connection with the sale of all or substantially all of the assets of the Company. For the avoidance of doubt, the Company’s
right to assign this Agreement may be exercised without the prior written consent of Employee. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement.
b.
Waiver;
Amendments
. Any waiver by either party of a breach of any provision of this Agreement shall not operate as, or be construed
to be, a waiver of any other breach of such provision of this Agreement. The failure of either party to insist on strict adherence
to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive either party of the right thereafter
to insist on strict adherence to that term or any other term of this Agreement. Neither this Agreement nor any part of it may be
waived, changed or terminated orally, and any waiver, amendment or modification must be in a writing signed by Employee and the
Company.
c.
Governing
Law; Choice of Forum
. This Agreement will be governed and construed and enforced in accordance with the laws of the State of
New York, without regard to its conflicts of law rules. Employee hereby submits to the exclusive jurisdiction and venue of the
federal and state courts located in New York, New York for resolution of any and all claims, causes of action or disputes arising
out of, related to or otherwise concerning this Agreement, and Employee agrees to waive any claim relating to
forum non conveniens
.
EACH OF THE PARTIES FURTHER ACKNOWLEDGES AND AGREES THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, OF ANY
KIND OR NATURE BROUGHT BY EITHER PARTY ARISING OUT OF THE INTERPRETATION, ENFORCEMENT OR BREACH OF THIS AGREEMENT SHALL BE RESOLVED
BY A JUDGE ALONE, AND BOTH PARTIES HEREBY WAIVE AND FOREVER RENOUNCE THE RIGHT TO A TRIAL BEFORE A CIVIL JURY OF ANY SUCH SUIT,
ACTION OR PROCEEDING.
d.
Legal
Fees and Expenses
. The Company will pay legal fees and expenses incurred by Employee in connection with the drafting and negotiation
of this Agreement and any related agreements.
e.
Entire
Agreement; Construction
. This Agreement and any further agreements dated as of the date hereof and relating to the subject
matter described herein contains the entire understanding of the parties relating to the subject matter of this Agreement and supersede
all other prior written or oral agreements, understandings or arrangements between the parties relating to the subject matter hereof.
Employee acknowledges and agrees that the compensation paid under the terms of this Agreement shall be in full satisfaction of
any amounts due in connection with Employee’s employment with the Company and members of the Company Group. Employee acknowledges
that, in entering into this Agreement, Employee did not rely and has not relied on any statements or representations not contained
in this Agreement. The parties acknowledge and agree that each of the parties has participated in the drafting of this Agreement.
Accordingly, it is the intention and agreement of the parties that the language, terms and conditions of this Agreement are not
to be construed in any way against or in favor of any party hereto by reason of the responsibilities in connection with the preparation
of this Agreement.
f.
Severability
.
Any term or provision of this Agreement that is determined to be invalid or unenforceable by any court of competent jurisdiction
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability
of any of the terms or provisions of this Agreement in any other jurisdiction, and such invalid or unenforceable provision shall
be modified by such court so that it is enforceable to the extent permitted by applicable law.
g.
Notices
.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall
be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier
service, by registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following
addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 19(g)):
If to the Company:
|
Medley Capital LLC
|
|
280 Park Avenue, 6
th
Floor East
|
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New York, New York 10017
|
|
|
with a copy to:
|
Sullivan & Worcester LLP
|
|
1666 K Street, N.W., Suite 700
|
|
Washington, DC 20006
|
|
Attention: David Leahy, Esq.
|
|
|
If to Employee:
|
[______]
|
|
|
with a copy to:
|
[______]
|
h.
Section
409A Compliance
. Although the Company makes no guarantee with respect to the tax or other treatment of payments or benefits
under this Agreement and shall not be responsible in any event with regard to this Agreement’s compliance with Section 409A,
payments under this Agreement are intended to be exempt from or comply with the applicable requirements of Section 409A and shall
be limited, construed and interpreted in a manner so as to comply therewith. In furtherance of the foregoing:
(i) notwithstanding
any provision of this Agreement to the contrary, to the extent any payment hereunder constitutes deferred compensation subject
to Section 409A, and if Employee is a “specified employee” as defined for purposes of Section 409A, then all payments
to be made to Employee hereunder due to the termination of Employee’s employment shall not be paid, or commence to be paid,
until the earlier of (1) the date that is immediately following the date that six (6) months after the date that Employee’s
employment is terminated or (2) the date of Employee’s death following such a separation from service. Upon the expiration
of the preceding period, any payments that would have otherwise been made during that period (whether in a single sum or in installments)
in the absence of this provision shall be paid to Employee or Employee’s beneficiary in one lump sum (without interest).
(ii) notwithstanding
any provision of this Agreement to the contrary, Employee’s employment with the Company Group shall not be deemed to have
been terminated unless and until Employee has had a “separation from service,” as determined under Section 409A;
(iii) each
payment that is part of a series of payments shall be a single payment for purposes of Section 409A; and
(iv)
any taxable reimbursements under this Agreement, including, without limitation, those under Section 21(d), will be made no later
than the end of the calendar year following the calendar year the expense was incurred. For purposes of complying with Section
409A, any such reimbursements and any in-kind benefit under this Agreement will be subject to the following: (1) payment of such
reimbursements or in-kind benefits during one calendar year will not affect the amount of such reimbursement or in-kind benefits
provided during a subsequent calendar year; and (2) such reimbursement benefit or rights or in-kind benefits may not be exchanged
or substituted for another form of compensation to Employee.
i.
Survival
.
The representations, warranties, covenants and other agreements contained herein, which by their nature are intended to survive
the termination of Employee’s employment with the Company Group, shall survive such termination (regardless of the reason
for such termination) in accordance with their stated terms.
j.
Counterparts
.
This Agreement may be executed in multiple counterparts, each of which shall constitute an original, and all of which together
shall constitute one agreement. Any photocopy or scanned copy in portable document format (PDF) shall be deemed an original copy
for all purposes.
EMPLOYEE
|
|
COMPANY
|
|
|
|
|
|
Signed:
|
|
Signed:
|
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|
|
|
|
Date:
|
|
Name:
|
|
|
|
|
|
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Title:
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Date:
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Exhibit A
GENERAL RELEASE OF CLAIMS
This General Release
of Claims (the “Release”) is being executed and delivered in accordance with Section 8(h) of the Employment Agreement
between Medley Capital LLC and you. Each capitalized term used in this Release without definition has the meaning given to such
term in the Agreement. This Release must be signed and dated no later than forty-five (45) days after you receive it. You will
have [seven (7) days] after signing this Release to revoke your signature by delivering a signed notice of revocation to the Company.
This Release will become binding on the eighth day after the Release is signed unless you have revoked your signature. You have
the right to consult with an attorney prior to signing this Release.
In exchange for the
promises and payments described in the Agreement, you (on behalf of yourself and your heirs, executors, administrators and assigns)
hereby release and forever discharge the Company Group, its divisions, subsidiaries and affiliates, and all of their respective
present and former directors, officers, shareholders, trustees, employees, agents, representatives, consultants, successors and
assigns in their official and individual capacities (collectively, the “Released Parties”), from any and all suits,
claims, demands, debts, sums of money, damages, interest, attorneys’ fees, expenses, actions, causes of action, judgments,
accounts, promises, contracts, agreements, and any and all claims of law or in equity, whether now known or unknown, which you
now have or ever had against the Released Parties, or any of them, including, but not limited to, any claims under Title VII of
the Civil Rights Act of 1964, the Americans With Disabilities Act, the Family and Medical Leave Act, the Age Discrimination in
Employment Act (“ADEA”), the Older Workers Benefit Protection Act of 1990, 29 U.S.C. § 626(f) (“OWBPA”),
the Worker Adjustment Retraining and Notification Act (“WARN”), the Genetic Information Nondiscrimination Act, any
state antidiscrimination law that is analogous to the foregoing, and any other federal, state or local statute, regulation, ordinance
or common law creating employment-related causes of action, and all claims related to or arising out of your employment or the
termination of your employment with the Company Group. You also waive any right you may have to recover any compensation or damages
in any action against any of the Released Parties brought by any governmental entity on your behalf or on behalf of any class of
which you may be a member. You hereby represent that you have not previously filed or joined in any complaints, charges or lawsuits
against the Company Group pending before any governmental agency or court of law relating to your employment and/or the termination
thereof.
CALIFORNIA ONLY (Delete
highlighted section if outside of California)
In giving this Release, you specifically
agree to waive the provisions of Section 1542 of the California Civil Code (and any other similar provisions of other applicable
law), which section reads as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.
MASSACHUSETTS ONLY
(Delete highlighted section if outside of Massachusetts)
In giving this Release,
you specifically agree to waive the provisions of the Massachusetts Wage Act, G.L. c. 149 and in so doing you explicitly waive
any claims for unpaid wages.
This Release shall
not apply to: (1) any vested interest you may have in any 401(k), pension or profit sharing plan, equity compensation agreement
or any other employee benefit plan by virtue of your employment with the Company Group; (2) any claims that may arise after this
Release is signed; (3) any claim that may not be waived by law; and (4) any right you may have to indemnification and/or advancement
of legal fees by the Company Group or under its director’s and officer’s liability insurance coverage, under any agreement
between you and the Company Group, under any provision of the Company Group’s bylaws or plans, or by application of law.
IN WITNESS WHEREOF,
the undersigned has executed this Release as of this ___ day of _____________, 20__.
EXHIBIT B-2
Employees and Economic
Terms
[See attached.]
|
|
Base Salary
|
|
|
2018 Annual
Bonus (% of Base)
|
|
|
2018 Annual
Bonus ($)
|
|
|
Cash Portion
of 2018 Annual
Bonus
|
|
|
% of Total
Bonus
|
|
|
RSU Award Portion of
2018 Annual Bonus
|
|
|
% of Total
Bonus
|
|
|
Total (Base Plus
2018 Annual Bonus)
|
|
Brook Taube, Chief Executive Officer and Board Member
|
|
$
|
600,000
|
|
|
|
533.3
|
%
|
|
$
|
3,200,000
|
|
|
$
|
1,200,000
|
|
|
|
37.5
|
%
|
|
$
|
2,000,000
|
|
|
|
62.5
|
%
|
|
$
|
3,800,000
|
|
Seth Taube, Vice Chairman
|
|
$
|
480,000
|
|
|
|
364.6
|
%
|
|
$
|
1,750,000
|
|
|
$
|
600,000
|
|
|
|
34.3
|
%
|
|
$
|
1,150,000
|
|
|
|
65.7
|
%
|
|
$
|
2,230,000
|
|
Jeffrey Tonkel, President
|
|
$
|
480,000
|
|
|
|
364.6
|
%
|
|
$
|
1,750,000
|
|
|
$
|
600,000
|
|
|
|
34.3
|
%
|
|
$
|
1,150,000
|
|
|
|
65.7
|
%
|
|
$
|
2,230,000
|
|
Richard Allorto, Chief Financial Officer
|
|
$
|
360,000
|
|
|
|
361.1
|
%
|
|
$
|
1,300,000
|
|
|
$
|
450,000
|
|
|
|
34.6
|
%
|
|
$
|
850,000
|
|
|
|
65.4
|
%
|
|
$
|
1,660,000
|
|
John Fredericks, General Counsel and Chief Compliance Officer
|
|
$
|
360,000
|
|
|
|
361.1
|
%
|
|
$
|
1,300,000
|
|
|
$
|
450,000
|
|
|
|
34.6
|
%
|
|
$
|
850,000
|
|
|
|
65.4
|
%
|
|
$
|
1,660,000
|
|
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