Item 1.01.
Entry into a Material Definitive Agreement.
On October 3, 2016 (the Effective Date), IFMI, LLC (IFMI), a majority owned subsidiary of Institutional Financial Markets, Inc., a Maryland corporation (the Company), entered into an Investment Agreement (the Investment Agreement), by and between IFMI and JKD Capital Partners I LTD (the Investor). The Investor is owned by Jack J. DiMaio, the Chairman of the Companys Board of Directors, and his spouse.
Pursuant to the Investment Agreement, the Investor agreed to invest up to $12,000,000 into IFMI (the Investment), $6,000,000 of which was paid by Investor to IFMI on the Effective Date.
In exchange for the Investment, IFMI agreed to pay to the Investor, in arrears following each calendar quarter during the term of the Investment Agreement, an amount equal to 50% of the difference between (i) the revenues generated during such quarter by the activities of the Institutional Corporate Trading business of J.V.B. Financial Group, LLC, IFMIs wholly owned broker dealer subsidiary (JVB), and (ii) certain expenses incurred by the Institutional Corporate Trading business during such calendar quarter (each such quarterly payment, an Investment Return Payment).
The term of the Investment Agreement commenced on the Effective Date and will continue until a Redemption (as defined below) occurs, unless the Investment Agreement is earlier terminated.
The Investor may terminate the Investor Agreement (i) upon 90 days prior written notice to IFMI if IFMI or its affiliates modify any of their policies or procedures governing the operation of their businesses or change the way they operate their business and such modification has a material adverse effect on the amounts payable to the Investor under the Investment Agreement; or (ii) upon 60 days prior written notice to IFMI if the employment of Lester Brafman, the Companys Chief Executive Officer, is terminated. IFMI may terminate the Investment Agreement upon 60 days prior written notice to the Investor if Mr. DiMaio ceases to control the day-to-day operations of the Investor.
Upon a termination of the Investment Agreement, IFMI will pay to the Investor an amount equal to the Investment Balance (as such term is defined in the Investment Agreement) as of the day prior to such termination.
At any time following the third anniversary of the Effective Date, the Investor or IFMI may, upon two months notice to the other party, cause IFMI to pay (a Redemption) to the Investor an amount equal to the Investment Balance (as such term is defined in the Investment Agreement) as of the day prior to such Redemption.
If IFMI or JVB sells JVBs Institutional Corporate Trading business to any unaffiliated third party, and such sale is not part of a larger sale of all or substantially all of the assets or equity securities of IFMI or JVB, IFMI will to pay to the Investor an amount equal to 25% of the net consideration paid to IFMI in connection with such sale, after deducting certain amounts and certain expenses incurred by IFMI or JVB in connection with such sale.
The Investment Agreement contains customary representations and warranties on the part of each of IFMI and the Investor.
The foregoing description of the Investment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Investment Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
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