8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 3, 2021

MEDLEY MANAGEMENT INC.

(Exact name of registrant as specified in its charter)

Delaware	001-36638	47-1130638
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

280 Park Avenue, 6th Floor East

New York, New York 10017

(Address of principal executive offices) (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 (see General Instruction A.2. below):

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	MDLY	New York Stock Exchange

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 ☐

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. ☐

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

Effective as of February 9, 2021, James G. Eaton resigned as a director of Medley Management Inc. (the “Company”). Mr. Eaton’s resignation was not the result of any disagreement with the Company on any matter relating to the operations, policies or practices of the Company.

On February 9, 2021, the Company’s Board of Directors (the “Board”) appointed Peter Kravitz to the Board as a director of the Company, effective as of the same date.

In connection with his appointment to the Board, the Board appointed Mr. Kravitz to chair a newly-constituted subcommittee of the Board created to explore restructuring transactions for Medley LLC (the “Restructuring Subcommittee”), also effective as of February 9, 2021. The Board also appointed independent directors John Dyett and Guy T. Rounsaville, Jr. to the Restructuring Committee. The Restructuring Subcommittee is authorized to, among other things, consider, evaluate and approve possible strategic alternatives including restructuring transactions and/or similar transactions involving Medley LLC, none of which have been implemented at this time.

In connection with his appointment to the Board, the Board also appointed Mr. Kravitz to the Audit Committee of the Board, effective as of February 9, 2021. John Dyett has been appointed as chair of the Compensation Committee of the Board, filling the vacancy on such committee resulting from Mr. Eaton’s resignation.

The Company and Mr. Kravitz entered into a Director Agreement dated February 9, 2021 (the “Effective Date”), pursuant to which Mr. Kravitz will be paid a fee of $45,000 for the first month and then $30,000 per month thereafter, provided that the monthly fee may be reduced at any time following the date that is four months after the Effective Date if the Board determines that Mr. Kravitz’s duties have been materially reduced. Mr. Kravitz will also be entitled to reimbursement of his reasonable out-of-pocket expenses incurred in connection with his Board service subject to limitations and reporting requirements with respect to expenses as may be established by the Company including provision of supporting documentation to the Company. The Director Agreement has a term ending on the earlier of December 31, 2021 or the director’s earlier death, disability, resignation or removal, and may be terminated by the Board with one month’s prior notice to the director or the payment to the director of one month’s fee.

There are no related-party transactions between the Company and Mr. Kravitz that are required to be disclosed under Item 404(a) of Regulation S-K.

Item 8.01. Other Events.

In connection with possible strategic alternatives including restructuring transactions and/or similar transactions involving Medley LLC, including as previously disclosed and as described in Item 5.02 of this Current Report on Form 8-K, and after consultation with the Company’s and Medley LLC’s tax advisors, the Company and Medley LLC determined that it would be advisable and potentially advantageous that Medley LLC elect to be treated as a corporation for tax purposes. On February 3, 2021, Medley LLC filed with the U.S. Internal Revenue Service Form 8832 electing to classify Medley LLC as a corporation for U.S. federal income tax purposes, effective as of January 24, 2021 (the “C-Corp Election”). Prior to the C-Corp Election, Medley LLC had been treated as a partnership for income tax purposes and therefore had not previously been subject to U.S. federal, state or local income taxes since all income, gains and losses were passed through to Medley LLC’s members (other than a portion of taxable income from Medley LLC and its subsidiaries subject to New York City’s unincorporated business tax). As a result of the C-Corp Election, Medley LLC will be treated as a corporation for U.S. federal income tax purposes, and will be subject to U.S. federal income tax on any taxable income at the corporate tax rate, which is currently a maximum of 21%, and would likely pay state and local income tax at varying rates. Following the implementation of the Unit Exchange disclosed in Medley LLC’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 19, 2021, the members of Medley LLC are Medley Management Inc. (holding approximately 98% of the Medley LLC Units) and Freedom 2021 LLC, an entity owned and controlled by Seth Taube (holding approximately 2% of the Medley LLC Units).

On February 3, 2021, Medley LLC and the Company (as Medley LLC’s managing member) executed and adopted a First Amendment (the “Amendment”) to the Fourth Amended and Restated Limited Liability Company Agreement of Medley LLC, dated as of September 23, 2014 (the “Medley LLC Operating Agreement”), for the purpose of expressly permitting the implementation of the C-Corp Election. The Amendment amends the Medley LLC Operating Agreement to provide that the Members of Medley LLC intend to treat Medley LLC as a corporation for income tax purposes, and that Medley LLC shall file as a corporation for income tax purposes, except where otherwise required by applicable law. The Amendment authorizes Medley LLC and the Company (as Medley LLC’s managing member) to implement and effectuate such further appropriate conforming amendments to the Medley LLC Operating Agreement as may be necessary or desirable in connection with implementing the C-Corp Election, and authorizes Medley LLC and the managing member to conduct the business, operations and accounting of Medley LLC in a manner consistent with the procedures appropriate for those of an entity treated and classified as a corporation for income tax purposes.

The foregoing summary of the Amendment to the Medley LLC Operating Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text the Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference into this Item 8.01.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
10.1	First Amendment, dated as of February 3, 2021, to Fourth Amended and Restated Limited Liability Company Agreement of Medley LLC dated as of September 23, 2014.

SIGNATURE

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.

MEDLEY MANAGEMENT INC.
By:	/s/ Richard T. Allorto, Jr.
	Name:	Richard T. Allorto, Jr.
	Title:	Chief Financial Officer

Date: February 9, 2021

EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO

FOURTH AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT OF

MEDLEY LLC

THIS FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Amendment”) of Medley LLC, a Delaware limited liability company (the “Company”), is made effective as of February 3, 2021.

BACKGROUND

WHEREAS, Medley Management Inc. (the “Managing Member”) and Freedom 2021 LLC (collectively with the Managing Member, the “Members”), are the current Members of the Company and are party to that certain Fourth Amended and Restated Limited Liability Company Agreement of the Company, dated as of September 23, 2014 (as amended, modified or supplemented from time to time, the “Agreement”);

WHEREAS, pursuant to Section 11.16 of the Agreement, the Agreement may be amended by the Managing Member in its sole discretion without the approval of any other Member or other Person; provided that no amendment may materially and adversely affect the rights of a holder of Units, as such other than on a pro rata basis with other holders of Units of the same Class without the consent of such holder (or, if there is more than one such holder that is so affected, without the consent of a majority in interest of such affected holders in accordance with their holders of such Class of Units);

WHEREAS, the Managing Member has adopted and approved this Amendment, and the other Member of the Company has acknowledged, agreed and provided its consent to this Amendment, as evidenced by the signature of its duly authorized representative appearing on the signature page hereto; and

WHEREAS, capitalized terms used in this Amendment but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Agreement;

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:

1.    Corporation Classification Election. Notwithstanding anything to the contrary in the Agreement, the Company shall elect to classify the Company as a corporation for U.S. federal income tax purposes, effective as of January 24, 2021. In connection therewith, the following amendments to the Agreement are hereby implemented and authorized:

(a) The second sentence of Section 5.08 of the Agreement is hereby deleted and the following text inserted in lieu thereof:

“The Company shall file as a corporation for federal, state, provincial and local income tax purposes, except where otherwise required by Law.”

(b) Section 11.17 of the Agreement is hereby deleted and the following text inserted in lieu thereof:

“Section 11.17. Corporation Status. The Members intend to treat the Company as a corporation for U.S. federal income tax purposes and notwithstanding anything to the contrary herein, no election to the contrary shall be made.”

(c) Each of the Company and the Managing Member are authorized and empowered to implement and effectuate such further appropriate conforming amendments to the Agreement, and to execute appropriate documentation in connection therewith, as may be necessary or desirable in connection with implementing the classification of Company as a corporation for income tax purposes (including, without limitation, appropriate amendments to the provisions of the Agreement addressing tax allocations, tax returns, and distributions). Each Member authorizes the Company and the Managing Member to conduct the business, operations and accounting of the Company in a manner consistent with the procedures appropriate for those of an entity treated and classified as a corporation for income tax purposes, notwithstanding any provision in the Agreement to the contrary.

2.    Governing Law. This Amendment and all matters arising herefrom or with respect hereto, including tort claims, shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without reference to the choice of law principles thereof.

3.    Section Headings. Section headings used in this Amendment are not to be considered part of this Amendment, are included solely for convenience of reference and are not intended to be full or accurate descriptions of the contents thereof.

4.    Confirmation; Instruments to be Read Together. Except as amended by this Amendment, the Agreement shall remain in full force and effect. This Amendment shall form part of the Agreement for all purposes and the Agreement and this Amendment shall henceforth be read together. In the event of any conflict or inconsistency between the provisions of the Agreement and the provisions of this Amendment, the provisions of this Amendment shall control.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]          

IN WITNESS WHEREOF, the Company and the Managing Member have executed and adopted this First Amendment to Fourth Amended and Restated Limited Liability Company Agreement of Medley LLC, effective as of the date first written above.

COMPANY:
MEDLEY LLC
By:	/s/ Richard T. Allorto
	Name: Richard T. Allorto
	Title: Chief Financial Officer
MANAGING MEMBER:
MEDLEY MANAGEMENT INC.
By:	/s/ Richard T. Allorto
	Name: Richard T. Allorto
	Title: Chief Financial Officer

ACKNOWLEDGED AND AGREED:
FREEDOM 2021 LLC
By:	/s/ Seth Taube
	Name: Seth Taube
	Title: Managing Member