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MEDLEY CAPITAL CORP. FILED DETAILED INVESTOR PRESENTATION AND OPEN LETTER

Materials Highlight  Rationale for Declining to Pursue NexPoint's Unsolicited Proposal and
    Reiterate Benefits of  Announced Merger Plan

NEW YORK - February 15, 2019 - Medley Capital Corporation (NYSE: MCC, "MCC") (TASE: MCC) today  filed an investor presentation and letter from MCC's lead independent director  on behalf of MCC's Special Committee discussing factors for the Special  Committee's recommendation that the MCC Board of Directors decline to pursue  the unsolicited proposal put forth by NexPoint Advisors, L.P., an affiliate of  Highland Capital Management Fund Advisors, L.P. ("NexPoint"). 

The investor presentation also highlights factors considered by the  MCC Board in approving MCC's proposed merger with Sierra Income Corporation  ("Sierra") and Sierra's concurrent acquisition of Medley Management Inc. (NYSE:  MDLY) ("MDLY" or "Medley") (the "Announced Merger  Plan").

The investor presentation, which has been filed with the Securities  and Exchange Commission, is available on the Events/Investor  Presentation section of MCC's Investor Relations website.

The full  text of the letter follows:

Special Committee of the Board  of Directors
    Medley Capital Corporation

February 14, 2019

  Mr.  Cristiano Guerra
  Institutional  Shareholder Services
  Special  Situations Research
  702 King Farm Boulevard, Suite 400
  Rockville, MD 20850

  Dear Mr. Guerra:


 As you know, I am  Chairman of the Special Committee of the Board of Directors of Medley Capital  Corporation (MCC), which was formed to consider and advise the Board with  respect to the proposed combination of MCC, Sierra Income Corp. (Sierra) and  Medley Management Inc. (MDLY).  I am  writing to you on behalf of the Special Committee.  

The special meeting  of MCC shareholders has been adjourned to March 8, 2019.  Accordingly, shareholders have more than  adequate time to consider the NexPoint proposal.  But the views and recommendation of the  Special Committee remain unchanged.  We  continue to advise in favor of the proposed mergers with Sierra and MDLY, and  in this letter I hope to briefly explain why our views have not changed.

The Special  Committee, which is comprised exclusively of independent directors of MCC, is  keenly aware of its duties and responsibilities.  We are not a hand tool of management.  The actions we have taken have been with a view  to achieving the best outcome for MCC shareholders.  We understand that there are pros and cons to  every course of action, and our mission has been to weigh competing  alternatives, and drawing on our familiarity with the BDC space, and the  business of MCC in particular, recommend what we believe to be the course that  will best serve the MCC shareholder community.   

NexPoint first  advanced its proposal to the Special Committee to become MCC's external manager  on January 24, 2019.  The Special  Committee convened promptly with its legal and financial advisor to consider  the proposal.  On January 31, 2019,  NexPoint sent a second letter to the Special Committee proposing that the MCC  merger with Sierra should be consummated, but that a NexPoint/Highland  affiliate should become the external manager of the combined entity.  Again the Special Committee met with its  advisors to consider the NexPoint proposal.   On both occasions, the Special Committee did not change its  recommendation to move forward with the MCC/Sierra/MDLY combination.

Based on its initial  voting recommendation, it appears to us that ISS understands the compelling  merits of the MCC/Sierra merger, and I will not revisit here what the Special  Committee considered to be its benefits for our shareholders.  Instead, I will explain why we continue to  reject the NexPoint proposal in favor of the proposed merger with MDLY and the  transition to an internally managed BDC.
The Special Committee  has taken into account MCC's long and short-term performance, and while that  has certainly been a factor considered by the committee, our focus remains on  the best way forward for our shareholders.   MCC has been moving to a new model of investing exclusively in sponsor  backed debt, and this model has met expectations.  MCC's performance continues to experience the  drag of its legacy investments, which is in the process of being remedied, and  that will be the case no matter who advises the combined MCC/Sierra entity in  the future. 

 NexPoint/Highland has  had successes in the fund space, but it has also had its share of  failures.  Among others, Highland  Crusader, once Highland's flagship fund, closed in 2008-2009 after its  investments plummeted in value.   Its Highland Distressed Opportunities Fund  Inc., a BDC, went public at over $14 per shares and fell to $0.96 per share  before its eventual sale in 2009.    Recently, in 2018, the price of its Highland  Floating Rate Opportunities Fund price declined by 12.2%; during the same  period the CS Leveraged Loan Index gained by 1.14%.  Moreover, the situations in which  NexPoint/Highland has had success are not particularly relevant to the  MCC/Sierra portfolio.  NexPoint Strategic  Opportunities Fund is a closed end fund; NexPoint Residential Trust is a real  estate trust; and NexPoint Capital is focused on the healthcare space.   

The Special Committee  continues to find the benefits to MCC of combining with both Sierra and MDLY  compelling.  The combined MCC/Sierra/MDLY  will save on management fees, will hopefully realize a market uplift as an  internally managed BDC and will benefit from the cash flow and growth potential  of MDLY's asset management business.   According to the Special Committee's financial advisor, NexPoint's  proposed payment is significantly below market, and would not offset the  benefits of the MDLY merger.

There is another  point that should be made.   NexPoint/Highland has had a troubling history of alleged and actual  improprieties in the fund space.   We have seen something similar here as  well.  While NexPoint has been publicly  urging MCC shareholders to vote against MCC/Sierra/MDLY combination, it has not  filed proxy materials with the SEC.   Instead, in apparent reliance on SEC Rule 14a-2(b)(1), it filed a notice  of exempt solicitation.  But because  NexPoint "is likely to receive a benefit from a successful solicitation that would not be shared pro rata by all other holders of the same class of securities," we cannot see how  the Rule 14a-2(b)(1) exemption is available to NexPoint.  As such, NexPoint should have been providing  full proxy disclosure to MCC shareholders regarding its proposal.
These are not the  only issues considered by the Special Committee, but I hope they are sufficient  to demonstrate that the committee has given careful and considered thought to  the NexPoint proposals.  The Special  Committee has dispassionately weighed the relevant factors, positive and  negative, on a scale calibrated solely to the best interests of MCC  shareholders.  With all that, the Special  Committee stands by its original recommendation in favor of the MCC/Sierra/MDLY  combination.   

Because the Special  Committee firmly believes that the MCC/Sierra/MDLY combination remains in the  best interests of MCC shareholders, we urge ISS to revert to its original  recommendation to shareholders to vote in favor of the transaction at the  special meeting now scheduled for March 8, 2019.

If I, or any other  member of the Special Committee, can be of further assistance to ISS in its  reconsideration of the ISS recommendation, please let us know.

   


        Sincerely,
     
       
The MCC Special Committee is served by financial advisor Sandler  O'Neill + Partners, L.P. and legal counsel Kramer Levin Naftalis & Frankel  LLP. 

   

ABOUT MEDLEY CAPITAL CORPORATION
Medley  Capital Corporation is a closed-end, externally managed BDC that trades on the  New York Stock Exchange (NYSE:MCC) and the Tel Aviv Stock Exchange (TASE:MCC).  Medley Capital Corporation's investment objective is to generate current income  and capital appreciation by lending to privately-held middle market companies,  primarily through directly originated transactions, to help these companies  expand their businesses, refinance and make acquisitions. Our portfolio  generally consists of senior secured first lien loans and senior secured second  lien loans. Medley Capital Corporation is externally managed by MCC Advisors  LLC, which is an investment adviser registered under the Investment Advisers  Act of 1940, as amended. For additional information, please visit Medley  Capital Corporation at www.medleycapitalcorp.com.

   

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 has filed with the Securities and  Exchange Commission (the "SEC") a Registration Statement on Form N-14  that includes a joint proxy statement of Sierra, MCC, and Medley Management  Inc. (NYSE: MDLY) and, with respect to Sierra, constitutes a prospectus  (collectively, the "Joint Proxy Statement/Prospectus") of Sierra,  MCC, and MDLY. The Joint Proxy Statement/Prospectus, as applicable, was first  mailed or otherwise delivered to stockholders of Sierra, MCC, and MDLY on or  about December 21, 2018. 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 BECAUSE THEY CONTAIN IMPORTANT  INFORMATION ABOUT SIERRA, MCC, AND MDLY, THE PROPOSED TRANSACTIONS AND RELATED  MATTERS. Investors and security holders can obtain the Joint Proxy  Statement/Prospectus and other documents filed with the SEC by Sierra, MCC, and  MDLY, 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 MDLY'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 MDLY by contacting Sam Anderson,  Medley's Investor Relations contact, at 212-759-0777.

   

Participants in the Solicitation
Sierra, MCC,  and MDLY and their respective directors, executive officers, other members of  their management, employees and other persons may be deemed to be participants  in the solicitation of proxies in connection with the proposed transactions.  Information regarding the persons who may, under the rules of the SEC, be  considered participants in the solicitation of the Sierra, MCC, and MDLY  stockholders in connection with the proposed transactions is set forth in the  Joint Proxy Statement/Prospectus filed with the SEC. More detailed information  regarding the identity of potential participants, and their direct or indirect  interests, by security holdings or otherwise, is set forth in the Joint Proxy  Statement/Prospectus and in other relevant materials that may 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, 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 MDLY 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 sustainable and  increased profits, greater likelihood of dividend growth, lower cost of capital  and improved liquidity for Sierra, MCC, and MDLY 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 MDLY'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 MDLY, Sierra successfully taking all  actions reasonably required with respect to certain outstanding indebtedness of  MCC and MDLY 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 MDLY, 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  MDLY include, but are not limited to, (i) the costs and expenses that Sierra,  MCC and MDLY 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 MDLY,  (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 MDLY 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 MDLY prior  to the proposed transactions; and (ix) negative effects of entering into the  proposed transactions on the trading volume and market price of MCC's or MDLY's  common stock. There can be no assurance of the level of any dividends to be  paid, if any, following consummation of the merger.

The  foregoing review of important factors should not be construed as exhaustive and  should be read in conjunction with the other cautionary statements that  included in each of Sierra's, MCC's and MDLY's filings with the SEC, including  the Joint Proxy Statement/Prospectus relating to the proposed transactions, and  in the "Risk Factors" sections of each of Sierra's, MCC's and MDLY's  most recent Annual Report on Form 10-K and most recent Quarterly Report on Form  10-Q. The forward- looking statements in this communication represent Sierra's,  MCC's and MDLY's views as of the date of hereof. Sierra, MCC and MDLY  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 MDLY 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 MDLY's views as of any date subsequent to the  date of this material.
   

Investor Relations Contact:
        Sam Anderson
        Head of  Capital Markets & Risk
        Medley  Management Inc.
        212-759-0777

   

Media Contacts:
        Jonathan  Gasthalter/Nathaniel Garnick
        Gasthalter  & Co.
        212-257-4170

   
   
      
       

1"Investors Sue Highland Capital over  Crusader Fund," Wall Street Journal (July 11, 2016).

         
          
       

2Source: Highland Distressed Opportunities  Fund SEC filings.

         
          
 

3See "Highland Capital Unit Sued for Allegedly  Using Fund Assets to Rescue Separate MLP Offering," Pension and Investments (September 7, 2018); "Highland Capital Used  False Pretexts in Ousting Portfolio Manager, Panel Finds," Wall Street Journal (December 1, 2017); "Highland Capital Investors  Allege Wrongdoing in Long-Closed Hedge Funds," Wall Street Journal (October 24, 2016); In the Matter of Highland Capital Management L.P., SEC Release No.  3939 (September 25, 2014) (SEC alleged that Highland Capital was trading  securities between its clients' accounts and accounts in which Highland and its  principals maintained an ownership interest; Highland Capital settled with the  SEC); United States v. James D. Dondero (D..D.C. filed May 21, 2007) (Suit against James Dondero, President of NexPoint  for violation of the Hart-Scott-Rodino Act; after a consent judgment, Dondero  paid a $250,000 fine).

         
   
 

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