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): May 9, 2013

 

 

INSTITUTIONAL FINANCIAL MARKETS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   1-32026   16-1685692

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania

  19104
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (215) 701-9555

(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)

 

x 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))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

Securities Purchase Agreement with Mead Park Capital Partners LLC and Mead Park Holdings, LP

On May 9, 2013, Institutional Financial Markets, Inc., a Maryland corporation (the “Company”), entered into a Securities Purchase Agreement (the “MP Purchase Agreement”), by and among the Company, Mead Park Capital Partners LLC a Delaware limited liability company, (the “MP Buyer”), and solely for purposes of Section 6.3 thereof, Mead Park Holdings, LP, a Delaware limited partnership (“Mead Park”). Pursuant to the MP Purchase Agreement, the MP Buyer has agreed to purchase from the Company, and the Company has agreed to issue and to sell to the MP Buyer, (i) an aggregate of 1,949,167 newly issued shares (collectively, the “MP Common Shares”) of the Company’s common stock, $0.001 par value per share (“Common Stock”), for a purchase price of $2.00 per share, representing an aggregate purchase price of $3,898,334 (the “MP Common Stock Purchase Price”); and (ii) a convertible senior promissory note (the “MP Note”) in the aggregate principal amount of $5,847,501 (the “MP Note Purchase Price”). The Company anticipates that the closing (the “MP Closing”) of the transactions contemplated by the MP Purchase Agreement (collectively, the “MP Transaction”) will occur during the third quarter of 2013.

Pursuant to the MP Purchase Agreement, on the date of the MP Closing (such date shall be referred to as the “Effective Date”), the MP Buyer will pay to the Company, in cash, the MP Common Stock Purchase Price and the MP Note Purchase Price in consideration for the MP Common Shares and the MP Note.

Under the MP Purchase Agreement, not later than forty-five days after the execution of the MP Purchase Agreement, the Company will call its 2013 annual meeting of stockholders in order to vote on the approval of the issuance of the MP Common Shares, the issuance of the Common Stock into which the MP Note may be converted (the “MP Conversion Shares”), and the issuance, pursuant to the Cohen Purchase Agreement (as defined below), of the Cohen Common Shares (as defined below) and the common stock into which the Cohen Note (as defined below) may be converted (the “Cohen Conversion Shares” and, collectively with the MP Conversion Shares, the “Conversion Shares”). In addition, the Board of Directors of the Company (the “Board of Directors”) has agreed to recommend that the Company’s stockholders vote to approve such issuances.

The MP Purchase Agreement also provides that, at the Company’s 2013 annual meeting of stockholders, the Board of Directors will nominate Jack DiMaio, the CEO and founder of Mead Park Management LLC, an affiliate of Mead Park, and Christopher Ricciard, a partner in Mead Park, the Company’s former President, for election to the Board of Directors, recommend their election to the stockholders, and solicit proxies for their election. Following the 2013 annual meeting, at any meeting at which the Company’s stockholders may vote for the election of directors, for so long as the MP Buyer, Mead Park or any of their controlled affiliates and principals collectively own (i) 15% or more of the Company’s outstanding Common Stock (counting for such purposes all Conversion Shares and units of membership interest of its direct subsidiary, IFMI, LLC (“IFMI Units”) as outstanding shares of Common Stock), the MP Buyer may designate two individuals to stand for election at such meeting; and (ii) less than 15% but greater than or equal to 10% of the Company’s outstanding Common Stock (counting for such purposes all MP Conversion Shares and IFMI Units as outstanding shares of Common Stock), the MP Buyer may designate one individual to stand for election at such meeting. If the collective ownership of the MP Buyer, Mead Park and any of their controlled affiliates and principals falls below these thresholds, the MP Buyer has agreed to cause its representative or representatives, as applicable, to resign from the Board of Directors.

Under the MP Purchase Agreement, as soon as reasonably practicable following the MP Closing, and thereafter for so long as the MP Buyer, Mead Park or any of their controlled affiliates and principals collectively own 10% or more of the Company’s outstanding Common Stock (counting for such purposes

 

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all MP Conversion Shares and IFMI Units as outstanding shares of Common Stock) (a “Minimum Ownership Interest”) and Jack DiMaio is a Company director and agrees to act as Chairman of the Board of Directors, the Company has agreed to cause Jack DiMaio to be elected and appointed as the Chairman of the Board of Directors. In addition, for so long as the MP Buyer, Mead Park or any of their controlled affiliates and principals collectively own a Minimum Ownership Interest, and both (i) Jack DiMaio is no longer Chairman of the Board of Directors due to his death, disqualification or removal from office as director, and (ii) Christopher Ricciardi is a member of the Board of Directors and agrees to act as Chairman thereof, then the Company has agreed to cause Mr. Ricciardi to be elected and appointed as the Chairman of the Board of Directors. In all other situations (including in the event Mr. DiMaio resigns or retires from his positions as Chairman of the Board of Directors), the Chairman of the Board of Directors will be elected and appointed pursuant to the Company’s bylaws.

The MP Purchase Agreement provides that, after the MP Closing, for so long as the MP Buyer, Mead Park or any of their controlled affiliates and principals collectively own a Minimum Ownership Interest, at any time that the Company or its direct subsidiary, IFMI, LLC (“IFMI”) makes any public or nonpublic offering or sale of any new equity securities, the MP Buyer must be afforded the opportunity to acquire, on the same terms, an amount of such equity securities such that the MP Buyer can maintain the same ownership percentage of such equity securities as it enjoyed immediately prior to such issuance.

Further, following the MP Closing, for so long as the MP Buyer, Mead Park or any of their controlled affiliates and principals collectively own a Minimum Ownership Interest, the Company may not redeem, recapitalize or repurchase any shares of capital stock of the Company or any securities that are convertible into or exchangeable into or exercisable for capital stock of the Company unless the MP Buyer is given the right to participate in such redemption, recapitalization, or repurchase in a pro rata manner.

Under the MP Purchase Agreement, following the MP Closing, for so long as the MP Buyer, Mead Park or any of their controlled affiliates and principals collectively own a Minimum Ownership Interest, Mead Park shall use its reasonable best efforts to (i) provide the Company with access to information regarding the funding relationships of Mead Park and its affiliates; (ii) assist the Company in establishing business relationships with credit trading desks at other institutions; (iii) source new corporate medium-term notes and new annuities for distribution through the Company’s distribution channels; (iv) assist the Company with sourcing external personnel to expand key business lines within the Company; and (v) introduce the Company to potential sources of capital. In addition, Mead Park shall, to the extent commercially practicable, offer C&Co/PrinceRidge Holdings LP (formerly PrinceRidge Holdings LP), an indirect subsidiary of the Company (“PrinceRidge”), the opportunity to serve as a co-manager for the placement of securities in connection with collateralized loan obligation (CLO) products and other transactions sponsored, managed and/or advised by Mead Park or its affiliates, on commercially reasonable and arms’ length terms.

Under the MP Purchase Agreement, the MP Closing is subject to the satisfaction of certain conditions, including, without limitation, that (i) the NYSE MKT approves the listing of, and the Company’s stockholders approve the issuance of, the MP Common Shares, the Cohen Common Shares and the Conversion Shares; (ii) the Board of Directors consists of Daniel G. Cohen (the current Chairman, Chief Executive Officer and Chief Investment Officer of both the Company and IFMI), Jack DiMaio, Christopher Ricciardi, and five of the Company’s current independent directors; (iii) Jack DiMaio is appointed as Chairman of the Board of Directors and Daniel G. Cohen is appointed as Vice-Chairman of the Board of Directors and President of the Company’s European operations, including the President of Cohen & Company Financial Limited

 

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(formerly known as EuroDekania Management LTD), a wholly-owned subsidiary of the Company organized under the laws of the United Kingdom; and (iv) pursuant to the Cohen Purchase Agreement, at the time of the MP Closing, the Cohen Buyer (as defined below) purchases the Cohen Common Shares and the Cohen Note (as defined below).

Pursuant to the MP Purchase Agreement, each party shall bear its own expenses in connection with the MP Transaction. However, if the MP Purchase Agreement is terminated under certain circumstances, then the Company will reimburse the MP Buyer for all out-of-pocket expenses incurred by the MP Buyer and its affiliates in connection with the MP Transaction (including fees and expenses of counsel), up to $300,000.

The MP Purchase Agreement contains customary termination provisions and the MP Buyer and the Company offer customary indemnifications thereunder. Further, the MP Buyer and the Company provide each other with customary representations and warranties and the Company makes customary affirmative covenants.

As described above, at the MP Closing, the MP Note will be issued to the MP Buyer in the aggregate principal amount of $5,847,501. Under the MP Note, the outstanding principal amount is due and payable to the holder thereof, in full, five years following the issuance of the MP Note, unless it is earlier converted (in the manner described below). The MP Note accrues 8% interest per year, payable quarterly. If no event of default has occurred under the MP Note, (i) if dividends of less than $0.02 per share are paid on the Common Stock in any fiscal quarter prior to an interest payment date, then the Company may pay one-half of the interest payable on such date in cash, and the remaining one-half of the interest otherwise payable will be added to the principal amount of the MP Note then outstanding; and (ii) if no dividends are paid on the Common Stock in the fiscal quarter prior to an interest payment date, then the Company may make no payment in cash of the interest payable on such date, and all of the interest otherwise payable on such date will be added to the principal amount of the MP Note then outstanding. The MP Note contains a customary “Events of Default” clause. Upon the occurrence or existence of any “Event of Default” under the MP Note, the outstanding principal amount is (or in certain instances, at the option of the holder thereof, may be) immediately accelerated. Further, upon the occurrence of any “Event of Default” under the MP Note and for so long as such Event of Default continues, all principal, interest and other amounts payable under the MP Note will bear interest at a rate equal to 9% per year. The MP Note may not be prepaid in whole or in part prior to the maturity date without the prior written consent of the holder thereof (which may be granted or withheld in its sole discretion).

At any time following the date upon which the MP Note is issued, the holder thereof may convert all or any part of the outstanding principal amount of the MP Note into shares of Common Stock at a $3.00 per share conversion price, subject to customary anti-dilution adjustments.

The indebtedness evidenced by the MP Note and the payment of all principal, interest and any other amounts payable thereunder (i) is senior to all indebtedness of the Company incurred following the date of the MP Note, and any subordinated or junior subordinated indebtedness of the Company outstanding as of the date of the MP Note, and (ii) ranks pari passu to the Cohen Note and any other senior obligations of the Company outstanding as of the date of the MP Note.

The foregoing description of the MP Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the MP Purchase Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

 

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Securities Purchase Agreement with Cohen Bros. Financial, LLC

Contemporaneously with the execution of the MP Purchase Agreement, the Company entered into a Securities Purchase Agreement (the “Cohen Purchase Agreement” and, together with the MP Purchase Agreement, the “Purchase Agreements”), by and between the Company and Cohen Bros. Financial, LLC, a Delaware limited liability company of which Daniel G. Cohen is the sole member (the “Cohen Buyer”), pursuant to which the Cohen Buyer has agreed to purchase from the Company, and the Company has agreed to issue and to sell to the Cohen Buyer (i) an aggregate of 800,000 newly issued shares (collectively, the “Cohen Common Shares”) of Common Stock, for a purchase price of $2.00 per share, representing an aggregate purchase price of $1,600,000; and (ii) a convertible senior promissory note (the “Cohen Note”) in the aggregate principal amount of $2,400,000.

The material terms and conditions of the Cohen Purchase Agreement are substantially the same as the MP Purchase Agreement. However, the Cohen Purchase Agreement provides that, at any meeting at which the stockholders may vote for the election of directors, for so long as the Cohen Buyer or any of its controlled affiliates and principals or any members of Daniel G. Cohen’s “Family Group” (as defined in the Cohen Purchase Agreement) collectively own 10% or more of the Company’s outstanding Common Stock (counting for such purposes all Cohen Conversion Shares and IFMI Units as outstanding shares of Common Stock), the Cohen Buyer may designate one individual to stand for election at such meeting. If the collective ownership of the Cohen Buyer and any of its controlled affiliates and principals and members of Mr. Cohen’s Family Group falls below this threshold, the Cohen Buyer has agreed to cause its representative to resign.

In addition, the terms of the MP Note and the Cohen Note are substantially identical.

The foregoing description of the Cohen Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Cohen Purchase Agreement, which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

The Registration Rights Agreement

Contemporaneously with the execution of the Purchase Agreements, the Company, the MP Buyer and the Cohen Buyer entered into a Registration Rights Agreement (the “Registration Rights Agreement”), which will become effective as of the Effective Date. Pursuant to the Registration Rights Agreement, the Company agreed to, no later than thirty days after the Effective Date, file a registration statement for the resale of the MP Common Shares, the Cohen Common Shares, and the Conversion Shares. The Company will use its reasonable best efforts to cause the registration statement to become effective as soon as practicable after the filing thereof and remain continuously effective for a period of three years, and the Company will file a new registration statement upon request of the MP Buyer or Mr. Cohen.

In addition, in the event that the Company proposes to register any of its Common Stock in connection with an underwritten public offering (whether an offering of Common Stock by the Company, stockholders of the Company, or both, subject to certain exceptions), the Company has agreed to, at the request of the MP Buyer and/or Cohen Buyer, as applicable, include in such registration any of the MP Common Shares, the Cohen Common Shares, and the Conversion Shares, subject to the terms of the Registration Rights Agreement.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

 

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The Preferred Stock Exchange Agreement

Contemporaneously with the execution of the Purchase Agreements, the Company entered into a Preferred Stock Exchange Agreement (the “Exchange Agreement”), between the Company and the Cohen Buyer, pursuant to which the Cohen Buyer exchanged with the Company 4,983,557 shares of Series D Voting Non-Convertible Preferred Stock of the Company (collectively, the “Series D Shares”), representing all of the issued and outstanding Series D Shares, for 4,983,557 newly issued shares of Series E Voting Non-Convertible Preferred Stock of the Company (collectively, the “Series E Shares”). The Exchange Agreement was immediately effective.

The Series D Shares and the Series E Shares have substantially identical rights, preferences, privileges and restrictions other than with respect to the timing of the Company’s obligation to redeem the Series E Shares. The terms of the Series E Shares provide that, if the Company causes the redemption of or otherwise acquires any of the IFMI Units owned by Daniel G. Cohen as of May 9, 2013 (or by certain permitted transferees thereafter), then the Company will redeem an equal number of Series E Shares. The Series E Shares are otherwise perpetual.

Under the Exchange Agreement, a restriction pursuant to which the Cohen Buyer was prohibited from causing the redemption of its IFMI Units until December 31, 2013 was terminated. Thus, similar to the other non-Parent members of IFMI LLC, the Cohen Buyer may now cause the redemption of its IFMI Units at any time.

Pursuant to the Exchange Agreement, the Series D Shares have been cancelled. The Exchange Agreement contains customary representations, warranties, agreements and obligations of the parties.

The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Exchange Agreement, which is attached hereto as Exhibit 10.4 and is incorporated herein by reference.

Section 382 Rights Agreement

In connection with the transactions contemplated by the Purchase Agreements, on May 9, 2013, the Company entered into a Section 382 Rights Agreement (the “Rights Agreement”) between the Company and Computershare Shareowner Services LLC (the “Rights Agent”).

The Rights Agreement provides for a distribution of one preferred stock purchase right (a “Right,” and collectively, the “Rights”) for each share of Common Stock outstanding to stockholders of record at the close of business on May 20, 2013 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company a unit (a “Unit”) consisting of one ten-thousandth of a share of the Company’s Series C Junior Participating Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), at a Purchase Price of $100.00 per Unit (the “Purchase Price”), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement.

The Board of Directors adopted the Rights Agreement in an effort to protect stockholder value by attempting to protect against a possible limitation on the Company’s ability to use its net operating loss and net capital loss carry forwards (the “deferred tax assets”) to reduce potential future federal income tax obligations. The Company has experienced substantial operating and capital losses, and under the Internal Revenue Code of 1986, as amended (the “Code”), and rules promulgated by the Internal Revenue Service, the Company may “carry forward” these losses in certain circumstances to offset any current and future earnings and thus reduce the Company’s federal income tax liability, subject to certain requirements and restrictions. To the extent that the deferred tax assets do not otherwise become limited, the Company believes that it will be able to carry forward a significant amount of deferred tax assets, and therefore these deferred tax assets could be a substantial asset to the Company. However, if the Company experiences an “Ownership Change,” as defined in Section 382 of the Code, its ability to use the deferred tax assets will be substantially limited, and the timing of the usage of the deferred tax assets could be substantially limited and/or delayed, which could therefore significantly impair the value of those assets.

 

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Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Rights Certificates will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a “Distribution Date” will occur upon the earlier of (i) ten (10) days following a public announcement that a person or group of affiliated or associated persons has become an “Acquiring Person” (as defined below) (the “Stock Acquisition Date”) or (ii) ten (10) business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. “Acquiring Person” means any person who or which, together with all affiliates and associates of such person, shall be the beneficial owner of 4.95% or more of the shares of Common Stock then outstanding, excluding the Company and any “Exempted Person” (as defined below). Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock certificates after the Record Date will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate.

Any person who, together with all affiliates and associates of such person, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding on May 9, 2013 or is set forth in the Rights Agreement as such, will be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner (and so long as such person continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock) of additional shares of Common Stock, except (x) pursuant to equity compensation awards granted to such person by the Company or options or warrants outstanding and beneficially owned by such person as of May 9, 2013, or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof; or (y) as a result of a stock split, stock dividend or the like; or (z) as a result of an increase in the principal amount of a Note pursuant to the payment-in-kind interest provisions (as described above) set forth in such Note. In addition, any person who, together with all affiliates and associates of such person, becomes the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock then outstanding as a result of a purchase by the Company or any of its subsidiaries of shares of Common Stock will also be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and will be deemed to be an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner, at any time after the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, of additional shares of Common Stock, except if such additional securities are acquired (x) pursuant to the exercise of options or warrants to purchase Common Stock outstanding and beneficially owned by such person as of the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock or as a result of an adjustment to the number of shares of Common Stock for which such options or warrants are exercisable pursuant to the terms thereof, or (y) as a result of a stock split, stock dividend or the like. In addition, any person who, together with all affiliates and associates of such person, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership would not, as determined by the Board of Directors in its sole discretion, jeopardize or endanger the availability of the Company of its deferred tax assets, will be an “Exempted Person.” However, any such person will cease to be an Exempted Person if (x) such person ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock or (y) the Board of Directors, in its sole discretion, makes a contrary determination with respect to the effect of such person’s beneficial

 

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ownership (together with all affiliates and associates of such person) with respect to the availability to the Company of its deferred tax assets. A purchaser, assignee or transferee of the shares of Common Stock (or options or warrants exercisable for Common Stock) from an Exempted Person will not thereby become an Exempted Person, except that a transferee from the estate of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person shall be an Exempted Person so long as such transferee continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock.

The Rights are not exercisable until the Distribution Date and will expire on the earliest of (i) the close of business on October 1, 2016, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement, (iv) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that the Rights Agreement is no longer necessary or desirable for the preservation of certain tax benefits, and (v) the beginning of a taxable year of the Company to which the Board of Directors determines that certain tax benefits may not be carried forward. At no time will the Rights have any voting power.

As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date. Thereafter, the separate Rights Certificates alone will represent the Rights. Except as otherwise determined by the Board of Directors, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights.

In the event that a person becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company), having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price times the number of Units associated with each Right (initially, one). Notwithstanding any of the foregoing, following the occurrence of an Acquiring Person becoming such (the “Flip-In Event”), all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void.

For example, at an exercise price of $100.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $200.00 worth of Common Stock (or other consideration, as noted above) for $100.00. If the Common Stock at the time of exercise had a market value per share of $20.00, the holder of each valid Right would be entitled to purchase ten (10) shares of Common Stock for $100.00.

In the event that, at any time following the Stock Acquisition Date, (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Common Stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right to receive, upon exercise of the Right, common stock of the acquiring company having a value equal to two times the exercise price of the Right. The events set forth in this paragraph and in the second preceding paragraph are referred to as the “Triggering Events.”

However, Rights are not exercisable following the occurrence of a Flip-In Event until such time as the Rights are no longer redeemable by the Company as set forth below.

 

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The Purchase Price payable, and the number of Units of Series C Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series C Preferred Stock, (ii) if holders of the Series C Preferred Stock are granted certain rights or warrants to subscribe for Series C Preferred Stock or convertible securities at less than the current market price of the Series C Preferred Stock, or (iii) upon the distribution to holders of the Series C Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustments in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Series C Preferred Stock on the last trading date prior to the date of exercise.

At any time after the Stock Acquisition Date, the Company may exchange the Rights (other than Rights owned by an Acquiring Person), in whole or in part, at an exchange ratio equal to (i) a number of shares of Common Stock per Right with a value equal to the spread between the value of the number of shares of Common Stock for which the Rights may then be exercised and the Purchase Price or (ii) if prior to the acquisition by the Acquiring Person of 50% or more of the then outstanding shares of Common Stock, one share of Common Stock per Right (subject to adjustment).

At any time until ten (10) days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. Immediately upon the action of the Board of Directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to shareholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company as set forth above or in the event the Rights are redeemed.

Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board of Directors prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board of Directors in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to adjust the time period governing redemption shall be made at such time as the Rights are not redeemable.

The foregoing description of the Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Rights Agreement, which is attached hereto as Exhibit 4.1 and is incorporated herein by reference.

IFMI, LLC Amendment to Operating Agreement

Contemporaneously with the execution of the Purchase Agreements, the Company and the members of IFMI entered into Amendment No. 2 to Amended and Restated Limited Liability Company Agreement (the “LLC Agreement Amendment”), to amend the limited liability company agreement of

 

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IFMI (the “LLC Agreement”). The LLC Agreement Amendment provides that, among other things, (i) the Board of Managers of IFMI (the “Board of Managers”) and the Board of Directors shall consist of the same persons; and (ii) the Chairman and Vice Chairman (if any) of the Board of Managers shall be the same persons that are the Chairman and Vice Chairman (if any) of the Board of Directors. In addition, the LLC Agreement Amendment eliminates certain rights of those members of IFMI (other than the Company) that own at least 10% of the IFMI Units (the “Designated Non-Parent Members”), and provides for the expiration of certain rights of the Designated Non-Parent Members that continue under the LLC Agreement Amendment. In this regard, the LLC Agreement Amendment provides that, until January 3, 2016, IFMI shall not, without receiving advance approval by the Company and a majority vote of the Designated Non-Parent Members take or permit to be taken any of the following actions: (a) enter into or suffer a transaction constituting a “Company Change of Control” (as defined in the LLC Agreement); (b) further amend the Certificate of Formation of IFMI if such amendment adversely affects the Designated Non-Parent Members; or (c) adopt any IFMI plan of liquidation or dissolution, or file a certificate of dissolution to dissolve IFMI; provided, however, in the case of actions set forth in (a) and (c) above, approval by a majority vote of the Designated Non-Parent Members is not required if the gross cash proceeds received in connection with such action by the sole Designated Non-Parent Member as of May 9, 2013 equal or exceed $6.00 per IFMI Unit and share of Common Stock (as appropriately adjusted in certain circumstances) held by such sole Designated Non-Parent Member at the time of such action.

The foregoing description of the LLC Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the LLC Agreement Amendment, which is attached hereto as Exhibit 10.5 and is incorporated herein by reference.

Voting Agreements

In connection with the transactions contemplated by the Purchase Agreements, Daniel G. Cohen, Christopher Ricciardi, each member of the Board of Directors and certain members of management, collectively representing approximately 52% of the Company’s outstanding voting securities, have entered into Voting Agreements (the “Voting Agreements”). Pursuant to the Voting Agreements, the executing stockholders have agreed to vote, at the Company’s 2013 annual meeting of stockholders, all of their shares of the Company’s voting securities owned, or which they have the power to vote, as of the record date of such annual meeting, in each case in favor of (i) the issuance of the MP Common Shares and the MP Conversion Shares to the MP Buyer, (ii) the issuance of the Cohen Common Shares and the Cohen Conversion Shares to the Cohen Buyer, and (iii) the election of Jack DiMaio, Christopher Ricciardi, and five of the Company’s current independent directors nominated to stand for election to the Board of Directors.

The foregoing description of the Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Voting Agreements, the form of which is attached as Exhibit H to each of the Purchase Agreements.

 

Item 1.02. Termination of Material Definitive Agreement.

See Item 5.02 below for information concerning the termination of the PrinceRidge Executive Agreement (as defined below), which is incorporated by reference in response to this Item 1.02.

 

Item 3.02. Unregistered Sales of Equity Securities.

See Item 1.01 above for information concerning the MP Common Shares, the Cohen Common Shares, the MP Note, the Cohen Note, and the Series E Shares, which is incorporated by reference in

 

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response to this Item 3.02. In issuing the MP Common Shares, the Cohen Common Shares, the MP Notes, the Cohen Notes, and the Series E Shares without registration, the Company relied upon the exemptions contained in Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933, as amended.

 

Item 3.03. Material Modification to Rights of Security Holders

See Item 1.01 above for information concerning the Rights Agreement and the LLC Agreement, each of, which is incorporated by reference in response to this Item 3.03.

 

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

Daniel G. Cohen Amended and Restated Employment Agreement

In connection with the Company’s entering into the Purchase Agreements, Daniel G. Cohen entered into an Amended and Restated Employment Agreement with the Company and IFMI, and, solely for purposes of Sections 6.4 and 7.5 thereof, PrinceRidge and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC) (the “Executive Agreement”), pursuant to which he will serve as Vice Chairman of the Board of Directors, Vice Chairman of the Board of Managers, President of Cohen & Company Financial Limited, and President and Chief Executive of the “European Business” (as defined in the Executive Agreement). The Executive Agreement amends and restates Mr. Cohen’s Employment Agreement, dated February 18, 2010, as amended by Amendment No. 1 to Employment Agreement, dated December 18, 2012, with the Company and IFMI (the “Prior Employment Agreement”) and provides for the termination of Mr. Cohen’s Executive Agreement, dated May 31, 2011, with the Company, PrinceRidge and IFMI and, solely for purposes of Section 5.5 and 5.6 thereof, C&Co/PrinceRidge Partners LLC (the “PrinceRidge Executive Agreement”). The amendment and restatement of the Prior Employment Agreement and the termination of the PrinceRidge Executive Agreement did not trigger any severance payments or provision of any other benefits to Mr. Cohen.

The Executive Agreement only becomes effective upon the earlier of (a) the date on which the Company hires a new Chief Executive Officer, and (b) the Effective Date. In the event that the MP Purchase Agreement is terminated for any reason prior to the Effective Date, the Executive Agreement automatically, without any further action on the part of the parties, terminates and will be of no further force or effect. The initial term of the Executive Agreement ends on December 31, 2014, however, the term will be renewed automatically for additional one year periods, unless terminated by the parties in accordance with the terms of the Executive Agreement.

Pursuant to the Executive Agreement, Mr. Cohen will receive during the term of the Executive Agreement a guaranteed payment from IFMI of at least $600,000 annually (the “Guaranteed Payment”), and be entitled to receive the following allocations from the Company: (a) a payment equal to 25% of the aggregate net income, if any, of the European Business in each calendar year as determined in accordance with generally accepted accounting principles in the United States (“GAAP”), subject to an off-set equal to 25% of the aggregate net losses, if any, in prior periods until such net losses have been fully off-set by net income in future periods, and (2) a payment equal to 20% of the gross revenues generated on transactions that Mr. Cohen is responsible for generating for the Company’s non-European broker-dealers during each semi-annual calendar period as determined in accordance with GAAP.

In the event that the annual allocations would result in allocations earned for that calendar year related to the European Business to exceed $5,000,000 (the “European Business Annual Allocation Cap”), the Compensation Committee of the Board of Directors may, in its sole discretion and at any time prior to the payment of such allocation, reduce the amount of or totally eliminate any such allocation to the extent such allocation is in excess of the European Business Annual Allocation Cap.

 

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During the term of the Executive Agreement, the Compensation Committee of the Board of Directors may, in its sole discretion, award Mr. Cohen additional allocations in amounts and on such terms to be determined by the Compensation Committee. The Executive Agreement provides that Mr. Cohen may participate in any group life, hospitalization or disability insurance plans, health programs, retirement plans, fringe benefit programs and other benefits that may be available to other senior executives of the Company generally, in each case to the extent that Mr. Cohen is eligible under the terms of such plans or programs. Mr. Cohen is entitled to participate in any equity compensation plan of the Company or IFMI in which he is eligible to participate, and may, without limitation, be granted in accordance with any such plan options to purchase IFMI Units, shares of Common Stock and other equity awards in the discretion of the Compensation Committee of the Board of Directors.

Pursuant to the Executive Agreement, in the event Mr. Cohen is terminated by the Company due to his death or disability, Mr. Cohen (or his estate or beneficiaries, as the case may be) will be entitled to receive (a) any Guaranteed Payment and other benefits (including any allocations for any period completed before termination of the Executive Agreement (the “Prior Period Allocations”)) earned and accrued, but not yet paid, under the Executive Agreement prior to the date of termination; (b) a single-sum payment equal to the Guaranteed Payment that would have been paid to him for the remainder of the year in which the termination occurs; (c) a single-sum payment equal to (x) the allocations for the period in which the termination occurs to which he would have been entitled if a termination had not occurred in such period, multiplied by (y) a fraction (1) the numerator of which is the number of days in such period preceding the termination and (2) the denominator of which is the total number of days in such period. In addition, in the event Mr. Cohen is terminated by the Company due to his death or disability, all outstanding unvested equity based awards (including, without limitation, stock options and restricted stock) held by Mr. Cohen will fully vest and become immediately exercisable, as applicable, subject to the terms of such awards.

If Mr. Cohen terminates his employment without “Good Reason” (as defined in the Executive Agreement) or the Company terminates his employment for “Cause” (as defined in the Executive Agreement), Mr. Cohen will only be entitled to any Guaranteed Payment and other benefits earned and accrued, but unpaid, prior to the date of termination.

If Mr. Cohen terminates his employment with Good Reason, or the Company terminates his employment without Cause, or the Company or IFMI terminates the Executive Agreement by not renewing the term of the Executive Agreement as provided therein, then Mr. Cohen will be entitled to receive (a) a single-sum payment equal to accrued but unpaid Guaranteed Payment and other benefits (including any Prior Period Allocations earned by Mr. Cohen), (b) a single-sum payment of an amount equal to three times (1) the average of the Guaranteed Payment amounts paid to Mr. Cohen over the three calendar years prior to the date of termination, (2) if less than three years have elapsed between the date of the Executive Agreement and the date of termination, the highest Guaranteed Payment paid to Mr. Cohen in any calendar year prior to the date of termination, or (3) if less than twelve months have elapsed from the date of the Executive Agreement to the date of termination, the highest Guaranteed Payment received in any month times twelve; provided that if the applicable calculation under (1), (2) or (3) yields less than $3,000,000, then Mr. Cohen will receive a single-sum payment of $3,000,000 in lieu of such amount; and (c) a single-sum payment equal to the allocations for the period in which the termination occurs to which he would have been entitled if a termination had not occurred in such period, multiplied by a fraction (x) the numerator of which is the number of days in such period preceding the termination and (y) the denominator of which is the total number of days in such period. In addition, if Mr. Cohen terminates his

 

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employment with Good Reason, or the Company terminates his employment without Cause, or the Company or IFMI terminates the Executive Agreement by not renewing the term of the Executive Agreement as provided therein, then all outstanding unvested equity based awards (including, without limitation, stock options and restricted stock) held by Mr. Cohen will fully vest and become immediately exercisable, as applicable, subject to the terms of such awards.

In the event of a “Change of Control of the Company” (as defined in the Executive Agreement) all of Mr. Cohen’s outstanding unvested equity-based awards become fully vested and immediately exercisable, as applicable. With respect to a Change of Control transaction, if Mr. Cohen remains with the Company through the first anniversary of a Change of Control, but leaves the Company within six months thereafter, such termination will be treated as a termination for Good Reason, and Mr. Cohen will be entitled to the compensation set forth in the preceding paragraph.

Pursuant to the Executive Agreement, if any amount payable to or other benefit to which Mr. Cohen is entitled would be deemed to constitute a “parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), alone or when added to any other amount payable or paid to or other benefit receivable or received by Mr. Cohen, which is deemed to constitute a parachute payment and would result in the imposition of an excise tax under Section 4999 of the Code, then the parachute payments shall be reduced (but not below zero) so that the maximum amount is $1.00 less than the amount which would cause the parachute payments to be subject to the excise tax. However, if the reduction of the parachute payments is equal to or greater than $50,000, then there will not be any reduction and the full amount of the parachute payment will be payable to Mr. Cohen.

All termination payments, other than for death or disability, are subject to Mr. Cohen signing a general release. In the event Mr. Cohen Agreement is terminated by the Company for Cause, by Mr. Cohen without Good Reason, or by the Executive as a result of not renewing the Executive Agreement, Mr. Cohen will be restricted for a period of six months after the end of the term of the Executive Agreement in his ability to engage in certain activities that are competitive with the Company’s sales and trading of fixed income securities or investment banking activities in any European country in which the Company or any of its controlled affiliates operates (each a “Competing Business”), provided, however, the Executive may serve as a member of the board of directors or equivalent position of any corporation or other company that is a Competing Business, provided, further, that Mr. Cohen is obligated to recuse himself from any discussion in such position if it raises a conflict of interest with respect to Mr. Cohen’s duties to the Company or adversely affects the Company. In addition for a period of 6 months following the end of the term of the Executive Agreement, regardless of the reason the term of the Executive Agreement ends, Mr. Cohen is prohibited under certain circumstances from soliciting the Company’s employees, customers and clients.

The foregoing description of the Executive Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Executive Agreement, which is attached hereto as Exhibit 10.6 and is incorporated herein by reference.

 

Item 5.03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the Company’s entering into the Exchange Agreement, the Institutional Financial Markets, Inc. Articles Supplementary Series E Voting Non-Convertible Preferred Stock (the “Articles Supplementary”) were filed with the Secretary of State of the State of Maryland and became effective on May 9, 2013. The Articles Supplementary are attached as Exhibit 3.1 to this Current Report on Form 8-K and are incorporated herein by reference.

 

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Item 8.01 Other Events.

Press Release Regarding the Rights Agreement

In addition, on May 10, 2013, the Company issued a press release, which is furnished herewith as Exhibit 99.1, announcing the Company’s entering into the Rights Agreement.

Additional Information About the Investment and Where to Find It

This communication is being made in respect of, among other things, the issuance of the MP Common Shares, the Cohen Common Shares, the MP Note and the Cohen Note pursuant to the Purchase Agreements. In connection with such issuance, the Company will file with the U.S. Securities and Exchange Commission (the “SEC”) a proxy statement and will mail or otherwise disseminate the proxy statement and a form of proxy to its stockholders when it becomes available. STOCKHOLDERS ARE ENCOURAGED TO READ THE PROXY STATEMENT (AND OTHER RELEVANT MATERIALS) REGARDING THE ANNUAL MEETING CAREFULLY AND IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE, AND BEFORE MAKING ANY VOTING DECISION, AS IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MATTERS TO BE VOTED ON AT THE COMPANY’S 2013 ANNUAL MEETING OF STOCKHOLDERS. Stockholders and investors will be able to obtain a free copy of the proxy statement (when available), as well as other filings made by the Company, without charge, at the SEC’s website (www.sec.gov). These materials also can be obtained, when available, without charge, by directing a request to Institutional Financial Markets, Inc., Cira Centre, 2929 Arch Street, 17th Floor, Philadelphia, PA, Attn: Investor Relations, (215) 701-9555.

Certain Information Regarding Participants

The Company and its directors and executive officers may be deemed, under SEC rules, to be participants in the solicitation of proxies from the Company’s stockholders regarding the issuance of the MP Common Shares, the Cohen Common Shares, the MP Note and the Cohen Note under the Purchase Agreements. Stockholders may obtain information regarding the names, affiliations and interests of such individuals in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on March 7, 2013, and as amended by Amendment No. 1 thereto, which was filed with the SEC on April 30, 2013. Additional information regarding the interests of such individuals in the matters to be considered at the Company’s 2013 annual meeting of stockholders will be included in the proxy statement when it is filed with the SEC. These documents may be obtained free of charge from the SEC’s website at www.sec.gov and the Company’s website at www.ifmi.com.

Forward-looking Statements

This communication contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are “forward-looking statements.” In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “seek” or “continue” or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this communication are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements including, but not limited to, those discussed under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition” in our filings with the SEC, which are

 

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available at the SEC’s website at www.sec.gov and our website at www.IFMI.com/sec-filings. Such factors include the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, (e) whether and when the transactions contemplated by the Purchase Agreements will be consummated, (f) the ability to attract and retain personnel, (g) litigation and regulatory issues, (h) competitive pressure, (i) an inability to generate incremental income from acquired businesses, (j) unanticipated market closures due to inclement weather or other disasters, (k) satisfaction of closing conditions under the definitive purchase agreements, (l) approval by the Company’s shareholders of the contemplated transactions, and (m) closing of the contemplated transactions. As a result, there can be no assurance that the forward-looking statements included in this communication will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this communication might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
Number
  

Description

3.1*    Institutional Financial Markets, Inc. Articles Supplementary Series E Voting Non-Convertible Preferred Stock.
4.1*    Section 382 Rights Agreement, dated as of May 9, 2013, between Institutional Financial Markets, Inc. and Computershare Shareowner Services LLC.
10.1*    Securities Purchase Agreement, dated as of May 9, 2013, by and among Institutional Financial Markets, Inc., Mead Park Capital Partners LLC, and, solely for purposes of Section 6.3 thereof, Mead Park Holdings, LP.
10.2*    Securities Purchase Agreement, dated as of May 9, 2013, by and between Institutional Financial Markets, Inc. and Cohen Bros. Financial, LLC.
10.3*    Registration Rights Agreement, dated May 9, 2013, by and among Institutional Financial Markets, Inc., Cohen Bros. Financial, LLC and Mead Park Capital Partners LLC.
10.4*    Preferred Stock Exchange Agreement, dated May 9, 2013, by and between Institutional Financial Markets, Inc. and Cohen Bros. Financial, LLC.
10.5*    Amendment No. 2 to Limited Liability Company Agreement of IFMI, LLC, dated as of May 9, 2013, by and among each of the Members set forth on the signature pages thereto.
10.6*    Amended and Restated Employment Agreement, dated May 9, 2012, by and among IFMI, LLC, Institutional Financial Markets, Inc., Daniel G. Cohen, and C&Co/PrinceRidge Partners LLC (formerly PrinceRidge Partners LLC), and, solely for purposes of Sections 6.4 and 7.5 thereof, C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP).
99.1*    Press Release, dated May 10, 2013, announcing Institutional Financial Markets, Inc.’s entering into the Rights Agreement.

 

 

 

* Filed electronically herewith.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    INSTITUTIONAL FINANCIAL MARKETS, INC.
Date: May 10, 2013     By:  

/s/ Joseph W. Pooler, Jr.

      Joseph W. Pooler, Jr.
     

Executive Vice President, Chief Financial

Officer and Treasurer

 

16

Exhibit 3.1

INSTITUTIONAL FINANCIAL MARKETS, INC.

ARTICLES SUPPLEMENTARY

SERIES E VOTING NON-CONVERTIBLE

PREFERRED STOCK

(PAR VALUE $.001 PER SHARE)

INSTITUTIONAL FINANCIAL MARKETS, INC. (the “Corporation”), a Maryland corporation, hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: Pursuant to the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) by the charter of the Corporation (the “Articles”), the Board of Directors on May 6, 2013 adopted a resolution which duly reclassified 4,983,557 authorized but unissued shares of Preferred Stock, par value $.001 per share, of the Corporation as a series of Preferred Stock designated as “Series E Voting Non-Convertible Preferred Stock.”

SECOND: The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption, as established by the Board of Directors of the Corporation for such Series E Voting Non-Convertible Preferred Stock, which, upon any restatement of the Articles, shall become part of Article IV of the Articles, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof, are as follows:

As used in this Article SECOND, the following terms have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa):

Common Stock ” has the meaning assigned to it in Section 4.1 of the Articles.

Holders ” means the Person(s) that hold(s) outstanding shares of the Series E Preferred Stock.

IFMI Units ” means units of membership interest in IFMI, LLC, a limited liability company organized under the laws of the State of Delaware.

Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by any national, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body.

Person ” means any individual, corporation, partnership, limited liability company or partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof) or other entity.

Preferred Stock ” means all preferred stock of the Corporation, par value $.001 per share, regardless of series.

Series E Preferred Stock ” has the meaning assigned to it in Section 1.


Stock ” means any and all shares, interests, participations or other equivalents (however designated) of stock of the Corporation.

Section 1. Designation and Number of Shares . Four million nine hundred eighty-three thousand five hundred fifty-seven (4,983,557) shares of the Preferred Stock of the Corporation are classified as a series of Preferred Stock designated as “Series E Voting Non-Convertible Preferred Stock” (hereinafter referred to as the “Series E Preferred Stock”). The Corporation may not issue fractional shares of Series E Preferred Stock.

Section 2. Dividends and Distributions. Holders of the Series E Preferred Stock shall not be entitled to receive any dividends or other distributions (whether in cash, stock or property of the Corporation).

Section 3. Voting Rights .

(a) Except as may be provided herein, the holders of Series E Preferred Stock and Common Stock shall vote together as a single class on all matters with respect to which a vote of the stockholders of the Corporation is required or permitted under applicable Law. Subject to adjustment as set forth in Section 7, each outstanding share of Series E Preferred Stock shall entitle the holder thereof to one vote on each matter properly submitted to the Holders for their vote.

(b) In addition to the voting rights provided to the Series E Preferred Stock by Section 3(a) above, the affirmative vote of Holders entitled to cast a majority of the votes entitled to be cast by holders of outstanding shares of Series E Preferred Stock (if any Series E Preferred Stock is then outstanding), voting separately as a class, shall be necessary to: (i) approve any amendment, alteration or repeal of any of the provisions of the Articles, whether by merger, consolidation or otherwise, that would adversely affect or cause to be terminated the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series E Preferred Stock; provided, however , that neither the increase in the number of authorized or outstanding shares of Common Stock nor the classification or issuance or any shares of any class or series of Stock other than Series E Preferred Stock shall be deemed to adversely affect or terminate the rights, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series E Preferred Stock, and the Holders shall have no right to vote thereon; and provided further , that the amendment, alteration or repeal of any provision of the Articles in connection with any merger, consolidation or other event shall not be deemed to adversely affect or terminate the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series E Preferred Stock, and the Holders shall have no right to vote thereon, if, following such merger, consolidation or other event, the Holders receive equity securities of the successor or survivor of such merger, consolidation or other event with preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption that are substantially identical to those of the Series E Preferred Stock, taking into account that, upon the occurrence of such merger, consolidation or other event, the Corporation may not be the surviving entity and the surviving entity may not be a corporation; or (ii) classify, reclassify or issue any shares of Series E Preferred Stock.

 

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Section 4. Certain Restrictions on Transfer . No Person holding shares of Series E Preferred Stock beneficially or of record may transfer, and the Corporation shall not register the transfer of, such shares of Series E Preferred Stock, whether by sale, assignment, gift, bequest, appointment, operation of Law or otherwise, except for a transfer upon the death of such holder to any one or more Permitted Transferees; provided, however, that no such transfer of Series E Preferred Stock to any such Permitted Transferee shall be valid unless such Permitted Transferee, as of the date of such holder’s death, either then holds or becomes entitled to receive a number of Cohen IFMI Units (as defined below) equal to or greater than such number of shares of Series E Preferred Stock. For purposes hereof, a “Permitted Transferee” or “Permitted Transferees” shall mean any one or more of (i) Daniel G. Cohen’s spouse and descendants and (ii) any trustees, custodians (under any Uniform Transfer to Minors Act or similar legislation), or other fiduciaries for any one or more of Daniel G. Cohen’s spouse and descendants.

Section 5. Reacquired Shares . Any shares of Series E Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever, shall become authorized but unissued shares of Preferred Stock, without designation as to series.

Section 6. Liquidation, Dissolution or Winding-Up . Holders of the Series E Preferred Stock shall not be entitled to receive any distributions upon liquidation, dissolution or winding-up of the Corporation.

Section 7. Adjustments . The voting power of the Series E Preferred Stock shall be subject to adjustment from time to time as follows:

(a) Splits, Subdivisions, Combinations, Dividends or Distributions . If the Corporation at any time effects a split, combination or subdivision of the outstanding shares of Common Stock or declares a dividend or other distribution on the Common Stock payable in additional shares of Common Stock, then, as of the date of such split, dividend or distribution (or, if a record date is established for such a dividend or distribution, as of such record date), the number of votes entitled to be cast by a holder of one share of Series E Preferred Stock shall be proportionately increased or decreased in the same manner and on the same basis so that the aggregate voting power represented by all of the authorized shares of Series E Preferred Stock immediately following such split, combination, subdivision, dividend or distribution shall bear the same relationship to the number of shares of Common Stock outstanding immediately following such split, combination, subdivision, dividend or distribution as the aggregate voting power represented by all of the authorized shares of Series E Preferred Stock immediately prior to such split, combination, subdivision, dividend or distribution bears to the number of shares of Common Stock outstanding immediately prior to such split, combination, subdivision, dividend or distribution.

(b) Mergers and Other Transactions . To the fullest extent permitted by Law, the Corporation shall not enter into or undertake any consolidation, merger, combination or other transaction (other than a reclassification described in Section 7(c) below) in which shares of Common Stock are exchanged for or converted into stock or securities having voting rights in the surviving or resulting entity unless each share of Series E Preferred Stock shall be entitled to be exchanged for or converted into a number of shares of a separate class of stock or securities in the surviving or resulting entity (the “Resulting Shares”), which shall entitle the holder of one such Resulting Share to cast a number of votes equal to (i) the number of votes entitled to be cast by the holder of one share of stock or other security into which or for which each share of Common Stock is exchanged or converted multiplied by (ii) the number of votes entitled to be cast by the holder of one share of Series E Preferred Stock immediately prior to such exchange; provided, however , in any such case the Resulting Shares shall have no rights to dividends or other distributions.

 

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(c) Reclassification . If, at any time or from time to time, there shall be a reclassification of the outstanding shares of Common Stock into shares of any other class or series of Stock (other than a split, subdivision or combination provided for elsewhere in this Section 7), then the number of votes entitled to be cast by a Holder of one share of Series E Preferred Stock of the Corporation shall be increased or decreased in proportion to the increase or decrease in the aggregate number of shares of Stock to which a holder of one share of Common Stock is entitled in connection with such reclassification; provided , however , that if the shares of stock issued to the holders of Common Stock in connection with such reclassification have more or less than one vote per share, then the number of votes entitled to be cast by a holder of one share of Series E Preferred Stock shall be increased or decreased in proportion to the increase or decrease in the aggregate number of votes of stock that a holder of one share of Common Stock is entitled to cast as a result of such reclassification. Following any reclassification in accordance with this Section 7(c), all references to Common Stock herein shall, if and as applicable, refer thereafter to shares of Stock deliverable to the holders of Common Stock upon such reclassification.

(d) Notices to Series E Preferred Stock . In the event of any proposed action by the Corporation that would require an adjustment pursuant to this Section 7, the Corporation shall mail to the Holders of Series E Preferred Stock, at least twenty (20) days prior to the date of such action, a notice specifying such date and the amount and/or character of such action.

Section 8. Redemption . In the event that, at any time following the date hereof and from time to time, the Corporation shall redeem (in exchange for cash or Common Stock) or otherwise acquire (in any manner whatsoever) any of the IFMI Units owned by Cohen Bros. Financial, LLC as of the date hereof (“Cohen IFMI Units”) or any of such Cohen IFMI Units owned by any of Cohen Bros. Financial, LLC’s Permitted Transferees following the date hereof, the Corporation shall redeem (each a “Redemption”) an equal number of shares of Series E Preferred Stock in exchange for a cash payment (in U.S. Dollars), in full upon such Redemption and out of funds legally available, equal to the aggregate par value of all shares of Series E Preferred Stock redeemed pursuant to such Redemption. Other than as set forth in this Section 8, shares of Series E Preferred Stock are not subject to redemption at the option of the Corporation or subject to any sinking fund or other mandatory right of redemption accruing to the Holders thereof.

Section 9. No Appraisal Rights . Holders of shares of Series E Preferred Stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the Maryland General Corporation Law or any successor statute unless the Board of Directors, upon the affirmative vote of a majority of the Board of Directors, shall determine that such rights apply with respect to the Series E Preferred Stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

 

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THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.

FOURTH: These Articles Supplementary are effective as of May 9, 2013 at 5:00 p.m. Eastern Time.

FIFTH: The undersigned Chief Financial Officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Financial Officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

IN WITNESS WHEREOF, Institutional Financial Markets, Inc. has caused these presents to be signed in its name and on its behalf by its Chief Financial Officer and its corporate seal to be hereunto affixed and attested to by its Secretary this 9th day of May, 2013.

 

 

ATTEST:     INSTITUTIONAL FINANCIAL MARKETS, INC.  
By:  

     /s/  Rachael Fink

    By:  

    /s/  Joseph W. Pooler, Jr.

 
Name:   Rachael Fink     Name:   Joseph W. Pooler, Jr.
Title:   Secretary     Title:   Executive Vice President, Chief Financial Officer and Treasurer
(SEAL)      

 

5

Exhibit 4.1

INSTITUTIONAL FINANCIAL MARKETS, INC.

and

COMPUTERSHARE SHAREOWNER SERVICES LLC

as

Rights Agent

Section 382 Rights Agreement

Dated as of May 9, 2013


TABLE OF CONTENTS

 

         Page  

Section 1.

 

Certain Definitions

     1   

Section 2.

 

Appointment of Rights Agent

     7   

Section 3.

 

Issue of Rights Certificates

     7   

Section 4.

 

Form of Rights Certificates

     8   

Section 5.

 

Countersignature and Registration

     9   

Section 6.

 

Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

     10   

Section 7.

 

Exercise of Rights; Purchase Price; Expiration Date of Rights

     11   

Section 8.

 

Cancellation and Destruction of Rights Certificates

     13   

Section 9.

 

Reservation and Availability of Capital Stock

     13   

Section 10.

 

Preferred Stock Record Date

     14   

Section 11.

 

Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights

     15   

Section 12.

 

Certificate of Adjusted Purchase Price or Number of Shares

     22   

Section 13.

 

Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power

     23   

Section 14.

 

Fractional Rights and Fractional Shares

     24   

Section 15.

 

Rights of Action

     26   

Section 16.

 

Agreement of Rights Holders

     26   

Section 17.

 

Rights Certificate Holder Not Deemed a Stockholder

     27   

Section 18.

 

Concerning the Rights Agent

     27   

Section 19.

 

Merger or Consolidation or Change of Name of Rights Agent

     28   

Section 20.

 

Duties of Rights Agent

     28   

Section 21.

 

Change of Rights Agent

     31   

 

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Section 22.  

Issuance of New Rights Certificates

     31   
Section 23.  

Redemption and Termination

     32   
Section 24.  

Notice of Certain Events

     33   
Section 25.  

Notices

     34   
Section 26.  

Supplements and Amendments

     34   
Section 27.  

Exchange

     35   
Section 28.  

Successors

     37   
Section 29.  

Determinations and Actions by the Board of Directors, etc.

     37   
Section 30.  

Benefits of this Agreement

     37   
Section 31.  

Severability

     37   
Section 32.  

Governing Law

     38   
Section 33.  

Counterparts

     38   
Section 34.  

Descriptive Headings

     38   
Section 35.  

Force Majeure

     38   
Section 1.  

Designation and Amount

     1   
Section 2.  

Dividends and Distributions

     2   
Section 3.  

Voting Rights

     3   
Section 4.  

Certain Restrictions

     5   
Section 5.  

Reacquired Shares

     5   
Section 6.  

Liquidation, Dissolution or Winding Up

     6   
Section 7.  

Consolidation, Merger, etc.

     7   
Section 8.  

No Redemption

     7   
Section 9.  

Amendment

     7   
Section 10.  

Fractional Shares

     7   

 

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SECTION 382 RIGHTS AGREEMENT

SECTION 382 RIGHTS AGREEMENT, dated as of May 9, 2013 (the “ Agreement ”), between Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”), and Computershare Shareowner Services LLC, a New Jersey limited liability company, as Rights Agent (the “ Rights Agent ”).

W I T N E S S E T H :

WHEREAS, the Company has generated NOLs and NCLs (each, as defined in Section 1 hereof) for United States federal income tax purposes, and such NOLs and NCLs may potentially provide valuable tax benefits to the Company, the Company desires to avoid an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the Treasury Regulations promulgated thereunder, and thereby preserve the ability to utilize fully such NOLs and NCLs and certain other tax benefits and, in furtherance of such objective, the Company desires to enter into this Agreement; and

WHEREAS, on May 9, 2013 (the “ Rights Dividend Declaration Date ”), the Board of Directors of the Company authorized and declared a dividend distribution of one preferred share purchase right (a “ Right ”) for each share of common stock, par value $0.001 per share, of the Company (the “ Common Stock ”) outstanding at the close of business on May 20, 2013 (the “ Record Date ”), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(o) hereof) for each share of Common Stock issued between the Record Date (whether originally or not) and the earlier of the close of business on the Distribution Date (as defined in Section 3(a) hereof) and the Expiration Date (as defined in Section 7(a) hereof), each Right initially representing the right to purchase one one ten-thousandth of a share (a “ Unit ”) of Series C Junior Participating Preferred Stock (the “ Preferred Stock ”) of the Company having the rights, powers and preferences set forth in the form of Articles Supplementary attached hereto as Exhibit A , upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

Section 1. Certain Definitions . For purposes of this Agreement, the following terms have the meanings indicated:

(a) “ Acquiring Person ” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.95% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company, or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, or (iv) any Person holding Common Stock for or pursuant to the terms of any such plan, or (v) any Exempted Person.

(b) “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the “ Exchange Act ”), and to the extent not included within the foregoing, shall also include with respect to any Person, any other Person whose shares of Common Stock would be deemed to be constructively owned by such first Person, owned by a “single entity” as defined in Section 1.382-3(a)(1) of the Treasury Regulations, or otherwise aggregated with shares owned by such first Person, pursuant to the provisions of the Code, or any successor or replacement provision, and the Treasury Regulations thereunder”.


(c) A Person shall be deemed the “ Beneficial Owner ” of, and shall be deemed to “ beneficially own ,” any securities:

(i) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time or the occurrence of an event) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event, which Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “ Original Rights ”) or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights, or (D) securities issued or issuable pursuant to any employee benefit plan of the Company or any Subsidiary of the Company or any employment agreement, arrangement or other understanding between the Company or any Subsidiary of the Company and any Person or any of such Person’s Affiliates or Associates; or

(ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security under this subparagraph (ii) as a result of (A) an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (1) arises solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (2) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report), or (B) securities issued or issuable pursuant to any employee benefit plan of the Company or any Subsidiary of the Company or any employment agreement, arrangement or other understanding between the Company or any Subsidiary of the Company and any Person or any of such Person’s Affiliates or Associates;

 

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(iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy or consent as described in the proviso to subparagraph (ii) of this paragraph (c) or disposing of any voting securities of the Company; provided, however, that nothing in this paragraph (c) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of forty (40) days; and provided, further, however, that any stockholder of the Company, with Affiliates, Associates or other Person(s) who may be deemed representatives of it serving as director(s) or officer(s) of the Company, shall not be deemed to beneficially own securities held by other Persons as a result of ( x ) Persons affiliated or otherwise associated with such stockholder serving as director(s) or officer(s) or taking any action in connection therewith, ( y ) discussing the status of its shares with the Company or other stockholders of the Company similarly situated or ( z ) voting or acting in a manner similar to other stockholder(s) similarly situated, absent a specific finding by the Board of Directors of the Company of an express agreement among such stockholders to act in concert with one another as stockholders so as to cause, in the good faith judgment of the Board of Directors of the Company, each such stockholder to be the Beneficial Owner of the shares held by the other stockholder(s); or

(iv) Notwithstanding anything herein to the contrary, to the extent not within the foregoing provisions of this Section 1(c), a Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” or have “beneficial ownership” of, securities which such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such Person pursuant to Section 382 of the Code, or any successor provision or replacement provision and the Treasury Regulations thereunder.

(d) “ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the States of New York or New Jersey are authorized or obligated by law or executive order to close.

(e) “ close of business ” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

(f) “ Code ” shall have the meaning set forth in the preamble to this Agreement.

(g) “ Common Stock ” shall have the meaning set forth in the preamble to this Agreement, except that “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person (or, if such Person is a Subsidiary of another Person, the Person or Persons that ultimately control such first mentioned Person).

(h) “ Common Stock Equivalents ” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

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(i) “ Convertible Note ” means any of those certain Convertible Senior Promissory Notes issued pursuant to either (i) the Securities Purchase Agreement dated May 9, 2013 by and among the Company, Mead Park Capital Partners LLC and Mead Park Holdings, LP, or (ii) the Securities Purchase Agreement dated May 9, 2013 by and between the Company and Cohen Bros. Financial LLC.

(j) “ Current Market Price ” shall have the meaning set forth in Section 11(d) hereof.

(k) “ Current Value ” shall have the meaning set forth in Section 11(a)(iii) hereof.

(l) “ Distribution Date ” shall have the meaning set forth in Section 3(a) hereof.

(m) “ Equivalent Preferred Stock ” shall have the meaning set forth in Section 11(b) hereof.

(n) “ Exempted Person ” shall mean any Person who, together with all Affiliates and Associates of such Person, (i) is either (A) the Beneficial Owner of securities (as disclosed in public filings with the Securities and Exchange Commission on the Rights Dividend Declaration Date), representing 4.95% or more of the shares of Common Stock outstanding on the Rights Dividend Declaration Date, or (B) Daniel G. Cohen (with respect to 7,286,699 shares of Common Stock of which such Person is or may become the Beneficial Owner as of the date of this Agreement), Christopher Ricciardi and Stephanie Ricciardi (with respect to 1,472,175 shares of Common Stock of which such Person is or may become the Beneficial Owner as of the date of this Agreement), and Mead Park Capital Partners LLC (with respect to 3,898,334 shares of Common Stock of which such Person is or may become the Beneficial Owner as of the date of this Agreement), provided, however, that any such Person described in this clause (i) shall no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner (and so long as such Person continues to be the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock), of additional securities representing any additional shares of Common Stock, except (x) pursuant to equity compensation awards granted to such Person by the Company or options or warrants outstanding and beneficially owned by such Person as of the Rights Dividend Declaration Date, or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof, (y) as a result of a stock split, stock dividend or the like, or (z) as a result of an increase in the principal amount of a Convertible Note pursuant to the payment-in-kind interest provisions set forth in Section 1(b) of such Convertible Note; or (ii) becomes the Beneficial Owner of securities representing 4.95% or more of the shares of Common Stock then outstanding because of a reduction in the number of outstanding shares of Common Stock then outstanding as a result of the purchase by the Company or a Subsidiary of the Company of shares of Common Stock, provided, however, that any such Person described in clause (ii) shall no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner, at any time after the date such Person became the Beneficial Owner of (and so long as such Person continues to be the Beneficial Owner of) 4.95% or more of the then outstanding shares of Common Stock, of additional securities representing any additional shares of Common Stock, except (x) pursuant to the exercise of options or warrants to purchase Common Stock outstanding and beneficially owned by such Person as of the date such Person became the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock or as a result of an adjustment to the number of shares of Common Stock for which such options or warrants are exercisable pursuant to the terms thereof, or (y) as a result of a stock split, stock dividend or the like; or (iii) who is a Beneficial Owner of 4.95% or more of the shares of Common Stock outstanding and whose beneficial ownership would not, as determined by the Board of Directors of the Company in its sole discretion, jeopardize or endanger the availability to the Company of its NOLs or NCLs; and provided further, however, that if a Person is an Exempted Person solely by reason of clause (iii) above, then such Person shall cease to be an Exempted Person if (A) such Person ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock or (B) the Board of Directors of the Company, in its sole discretion, makes a contrary determination with respect to the effect of such Person’s beneficial ownership (together with all Affiliates and Associates of such Person) with respect to the availability to the Company of its NOLs, NCLs or both thereof. A purchaser, assignee or transferee of the shares of Common Stock (or warrants or options exercisable for Common Stock) from an Exempted Person shall not thereby become an Exempted Person, except that a transferee from the estate of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person shall be an Exempted Person so long as such Person continues to be the Beneficial Owner of 4.95% or more of the then outstanding shares of Common Stock.

 

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(o) “ Expiration Date ” shall have the meaning set forth in Section 7(a) hereof.

(p) “ Final Expiration Date ” shall have the meaning set forth in Section 7(a) hereof.

(q) “ NCLs ” shall mean the Company’s net capital loss carryforwards.

(r) “ NOLs ” shall mean the Company’s net operating loss carryforwards.

(s) “ Person ” shall mean any individual, firm, corporation, limited liability company, partnership or other entity.

(t) “ Preferred Stock ” shall mean shares of Series C Junior Participating Preferred Stock, par value $0.001 per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series C Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of Preferred Stock, par value $0.001 per share, of the Company designated for such purpose containing terms substantially similar to the terms of the Series C Junior Participating Preferred Stock.

(u) “ Principal Party ” shall have the meaning set forth in Section 13(b) hereof.

(v) “ Purchase Price ” shall have the meaning set forth in Section 4(a) hereof.

(w) “ Record Date ” shall have the meaning set forth in the preamble of this Agreement.

 

5


(x) “ Right ” shall have the meaning set forth in the preamble of this Agreement.

(y) “ Rights Agent ” shall have the meaning set forth in the preamble of this Agreement.

(z) “ Rights Certificate ” shall have the meaning set forth in Section 3(a) hereof.

(aa) “ Rights Dividend Declaration Date ” shall have the meaning set forth in the preamble of this Agreement.

(bb) “ Section 11(a)(ii) Event ” shall mean any event described in Section 11(a)(ii) hereof.

(cc) “ Section 13 Event ” shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof.

(dd) “ Stock Acquisition Date ” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.

(ee) “ Subsidiary ” shall mean, with reference to any Person, any Person of which a majority of the voting power of voting equity securities or equity interests is beneficially owned, directly or indirectly, by such Person or otherwise controlled by such Person.

(ff) “ Substitution Period ” shall have the meaning set forth in Section 11(a)(iii) hereof.

(gg) “ Summary of Rights ” shall have the meaning set forth in Section 3(b) hereof.

(hh) “ Trading Day ” shall have the meaning set forth in Section 11(d) hereof.

(ii) “ Tax Benefits ” shall mean the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, foreign tax credit carryovers, any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the Code, and the Treasury Regulations promulgated thereunder, of the Company or any of its Subsidiaries.

(jj) “ Treasury Regulations ” shall mean final, temporary and proposed income tax regulations promulgated under the Code, as amended.

(kk) “ Triggering Event ” shall mean any Section 11(a)(ii) Event or any Section 13 Event.

 

6


Section 2. Appointment of Rights Agent . The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the express terms and conditions hereof (and no implied terms or conditions), and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and in no event shall be liable for the acts or omissions of, any such co-rights agents.

Section 3. Issue of Rights Certificates .

(a) Until the earlier of (i) the close of business on the tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), or (ii) the close of business on the tenth Business Day (or such later date as the Board of Directors of the Company shall determine prior to such time as any Person becomes an Acquiring Person) after the date that a tender or exchange offer by any Person (other than any Exempted Person, the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would become an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “ Distribution Date ”), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with all necessary information, send) by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit B hereto (the “ Rights Certificates ”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(o) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates, and the Rights will be transferable only by transfer separate from the transfer of the shares of Common Stock previously underlying such Rights. The Company shall promptly give notice in accordance with Section 25 hereof to the Rights Agent upon the occurrence of the Distribution Date and, in any event, if such notice is given orally, the Company shall confirm the same in writing on or before the next Business Day at the address provided in Section 25 hereof. Until such notice is given to the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.

 

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(b) As promptly as practicable following the Record Date, the Company shall send a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “ Summary of Rights ”), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, or issued subsequent to the Record date, unless and until the Distribution Date shall occur, the Rights will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the earliest of the Distribution Date, the Expiration Date (as such term is defined in Section 7(a) hereof) or the redemption of the Rights pursuant to Section 23 hereof, the transfer of any certificates representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock.

(c) Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company’s treasury) after the Record Date but prior to the earliest of the Distribution Date, the Expiration Date or the redemption of the Rights pursuant to Section 23 hereof. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear a legend in substantially the following form: “This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Institutional Financial Markets, Inc. (the “ Company ”) and Computershare Shareowner Services LLC (the “ Rights Agent ”), dated as of May 9, 2013 (the “ Rights Agreement ”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.” With respect to such certificates containing the foregoing legend, until the earlier of the (i) Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates.

Section 4. Form of Rights Certificates .

(a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which legends, summaries or endorsements do not affect the rights, duties or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one ten-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one ten-thousandth of a share, the “ Purchase Price ”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

 

8


(b) Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, provided that the Company has notified the Rights Agent in accordance with Section 25 hereof of the applicability of this Section 4(b), shall contain (to the extent feasible) a legend in substantially the following form: “The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement.”

Section 5. Countersignature and Registration .

(a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman, its Chief Executive Officer, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.

 

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(b) Following the Distribution Date, the Rights Agent shall keep, or cause to be kept, at its office designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates .

(a) Subject to the provisions of Section 4(b), Section 7(e), Section 14 and Section 27 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date or the redemption of the rights pursuant to Section 23 hereof, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one ten-thousandths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. The Rights Certificates are transferable only on the registry books of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have i) properly completed and duly signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate, ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof and the Rights evidenced thereby as the Company shall reasonably request and iii) paid a sum sufficient to cover any tax or charge that might be imposed in connection with such transfer, split up, combination or exchange of any Rights Certificate or Certificates as required by Section 9(e) hereof. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 27 hereof, manually or by facsimile, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. The Rights Agent shall have no duty or obligation to pay any taxes or charges that might be imposed in connection with any transfer, split up, combination or exchange of any Rights Certificate or Certificates pursuant to the terms of this Agreement.

(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

 

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Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights .

(a) Subject to Section 7(e) and Section 27 hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one ten-thousandth of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the close of business on October 1, 2016 (the “ Final Expiration Date ”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, (iii) the time at which all of the Rights (other than Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) are exchanged for Common Stock or other assets or securities as provided in Section 27 hereof, (iv) the close of business on the effective date of the repeal of Section 382 or any successor statute if the Board of Directors of the Company determines that this Agreement is no longer necessary or desirable for the preservation of Tax Benefits, or (v) the close of business on the first day of a taxable year of the Company to which the Board of Directors of the Company determines that no Tax Benefits may be carried forward (the earliest of (i) and (ii) and (iii) and (iv) and (v) being herein referred to as the “ Expiration Date ”).

(b) The Purchase Price for each one ten-thousandth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $100.00, and shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof and shall be payable in accordance with paragraph (c) below.

(c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase properly completed and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one ten-thousandth of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable tax or charge required to be paid hereunder, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one ten-thousandths of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes and directs its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one ten-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby authorizes and directs its depositary agent to comply with such request, (ii) when necessary to comply with this Agreement, requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to, or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) when necessary to comply with this Agreement, after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when necessary in order to comply with the terms of this Agreement. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

 

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(d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof.

(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but neither the Company nor the Rights Agent shall have any liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Affiliates, Associates or transferees hereunder.

 

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(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights or other securities upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request.

Section 8. Cancellation and Destruction of Rights Certificates . All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

Section 9. Reservation and Availability of Capital Stock .

(a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights.

(b) So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

(c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Securities Act of 1933, as amended (the “ Act ”), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights and (iv) take such other actions as may be appropriate under, or to otherwise ensure compliance with, the federal securities laws in connection with the exercisability of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded. The Company shall give copies of such public announcements to the Rights Agent. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective, and the Company shall give prompt notice of such suspension to the Rights Agent in accordance with Section 25 hereof. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective.

 

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(d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one ten-thousandths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (or Units) (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.

(e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one ten-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one ten-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the satisfaction of the Company and the Rights Agent that no such tax is due.

Section 10. Preferred Stock Record Date . Each Person in whose name any certificate for a number of one ten-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

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Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights . The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

(a) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock or capital stock, as the case may be, issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

(i) In the event any Person shall become an Acquiring Person, then, promptly following the occurrence of such event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one ten-thousandths of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one ten-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the “ Adjustment Shares ”).

 

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(ii) In the event that the number of shares of Common Stock which are authorized by the Company’s Charter but not outstanding, subscribed for or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “ Current Value ”), and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock, such as the Preferred Stock, which the Board of Directors of the Company has deemed to have essentially the same value or economic rights as shares of Common Stock (such shares of preferred stock being referred to as “ Common Stock Equivalents ”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “ Section 11(a)(ii) Trigger Date ”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. For purposes of the preceding sentence, the term “Spread” shall mean the excess of (i) the Current Value over (ii) the Purchase Price. If the Board of Directors of the Company determines in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is herein called the “ Substitution Period ”). To the extent that the Company determines that action should to be taken pursuant to the first and/or third sentences of this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (2) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such stockholder approval for such authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of the Common Stock on such date.

 

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(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock (“ Equivalent Preferred Stock ”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock or capital stock, as the case may be, issuable upon exercise of one Right. In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(c) In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or evidences of indebtedness, or of subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Stock or capital stock, as the case may be, issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed.

 

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(d) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the Current Market Price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers Automated Quotation System (“ NASDAQ ”) or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

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(i) For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 10,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the Current Market Price of a Unit shall be equal to the Current Market Price of one share of Preferred Stock divided by 10,000.

(e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share of capital stock or one-ten millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date.

(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Section 7, Section 9, Section 10, Section 13 and Section 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.

(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one ten-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

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(h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and Section 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one ten-thousandths of a share of Preferred Stock (calculated to the nearest one-ten millionth of a share of Preferred Stock) obtained by:

(i) multiplying (x) the number of one ten-thousandths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(ii) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one ten-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one ten-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made, and the Company shall give a copy of such public announcement to the Rights Agent. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued and executed by the Company and countersigned and delivered by the Rights Agent in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.

(i) Irrespective of any adjustment or change in the Purchase Price or the number of one ten-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one ten-thousandth of a share and the number of one ten-thousandths of a share which were expressed in the initial Rights Certificates issued hereunder.

 

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(j) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the number of one ten-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one ten-thousandths of a share of Preferred Stock at such adjusted Purchase Price.

(k) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one ten-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one ten-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. The Company shall give prompt notice of such deferral to the Rights Agent in accordance with Section 25 hereof.

(l) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders.

(m) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(n) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates.

 

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(n) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

(o) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine or consolidate the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.

Section 12. Certificate of Adjusted Purchase Price or Number of Shares . Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment unless and until it shall have received such a certificate.

 

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Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power .

(a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(n) hereof), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement and in lieu of shares of Preferred Stock, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one ten-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one ten-thousandths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event), and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price (determined pursuant to Section 11(d) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event.

(b) “ Principal Party ” shall mean:

(i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and

(ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, “Principal Party” shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value.

 

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(c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will:

(i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and

(ii) take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and

(iii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).

Section 14. Fractional Rights and Fractional Shares .

(a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(o) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.

 

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(b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one ten-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one ten-thousandth of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one ten-thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one ten-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one ten-thousandth of a share of Preferred Stock shall be one ten-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise.

(c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one (1) share of Common Stock shall be the closing price of one (1) share of Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the date of such exercise.

(d) The holder of a Right by the acceptance of the Rights expressly waives his or her right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.

(e) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and/or formulas utilized in calculating such payments and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares under this Agreement unless and until the Rights Agent shall have received such a certificate and such monies.

 

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Section 15. Rights of Action . All rights of action in respect of this Agreement, except the rights of action that are given to the Rights Agent under Section 18 and Section 20 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.

Section 16. Agreement of Rights Holders . Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock;

(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates properly completed and duly executed;

(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary;

(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.

 

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(e) this Agreement may be supplemented or amended from time to time in accordance with the terms of Section 26 hereof; and

(f) the power and authority delegated to the Board of Directors of the Company pursuant to this Agreement shall be exclusive and shall be as set forth in Section 29 hereof.

Section 17. Rights Certificate Holder Not Deemed a Stockholder . No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one ten-thousandths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.

Section 18. Concerning the Rights Agent .

(a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and expenses and other disbursements incurred in the administration, preparation, delivery, amendment and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement approved by the Company, cost or expense (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for any action taken, suffered or omitted to be taken by the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including but not limited to the costs and expenses of defending against any claim of liability in the premises. The reasonable costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company to the extent that the Rights Agent is successful in so enforcing its right of indemnification. The provisions of this Section 18 and Section 20 hereof shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation, replacement or removal of the Rights Agent.

 

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(b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in connection with its administration of this Agreement and the exercise and performance of its duties hereunder in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel in the manner contemplated by Section 20(a) hereof. The Rights Agent shall not be deemed to have knowledge of any event of which it was required to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until such notice has been given to the Rights Agent in accordance with Section 25 hereof.

Section 19. Merger or Consolidation or Change of Name of Rights Agent .

(a) Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the corporate trust, stock transfer or other shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

Section 20. Duties of Rights Agent . The Rights Agent undertakes the duties and obligations expressly imposed by this Agreement (and no implied duties) upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith and in accordance with such advice or opinion.

 

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(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken in the absence of bad faith by it under the provisions of this Agreement in reliance upon such certificate.

(c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent.

(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable.

(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

 

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(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and the Rights Agent shall not be liable for any action taken, suffered or omitted to be taken by it in the absence of bad faith in accordance with the advice or instructions of any such officer.

(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers or employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) in the selection and continued employment thereof.

(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it reasonably and in the absence of bad faith believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been properly completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company.

 

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Section 21. Change of Rights Agent . The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail. The Company may, in its sole discretion, remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be either (a) a legal business entity organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust powers or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a legal business entity described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

Section 22. Issuance of New Rights Certificates . Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

 

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Section 23. Redemption and Termination .

(a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the twentieth day following the Record Date), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “ Redemption Price ”); provided, however, if the Board of Directors of the Company authorizes redemption of the Rights in either of the circumstances set forth in clauses (i) and (ii) below, then such authorization shall require the concurrence of a majority of the members of the Board of Directors of the Company: (i) such authorization occurs on or after the time a Person becomes an Acquiring Person, or (ii) such authorization occurs on or after the date of a change (resulting from a proxy or consent solicitation or an action by written consent of stockholders, whether or not made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act) in a majority of the directors in office at the commencement of such solicitation, or prior to such written consent, if any Person who is a participant in such solicitation, or who signed such consent, has stated (or, if upon the commencement of such solicitation, a majority of the Board of Directors of the Company has determined in good faith) that such Person (or any of its Affiliates or Associates) intends to take, or may consider taking, any action which would result in such Person becoming an Acquiring Person or which would cause the occurrence of a Triggering Event unless, concurrent with such solicitation, such Person (or one or more of its Affiliates or Associates) is making a cash tender offer pursuant to a Schedule TO (or any successor form) filed with the Securities and Exchange Commission for all outstanding shares of Common Stock not beneficially owned by such Person (or by its Affiliates or Associates). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company’s right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the “ Current Market Price ”, as defined in Section 11(d) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors.

(b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.

 

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Section 24. Notice of Certain Events .

(a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(n) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate and the Rights Agent, to the extent feasible and in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock, whichever shall be the earlier.

(b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities.

 

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Section 25. Notices . Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Company with the Rights Agent) as follows:

Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania

Attention: Chief Executive Officer

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

Computershare Shareowner Services

Newport Office Center VII

480 Washington Blvd.

Jersey City, NJ 07310

Attention: Relationship Manager

With a copy to:

Computershare Shareowner Services

Newport Office Center VII

480 Washington Blvd.

Jersey City, NJ 07310

Attention: Legal Department

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

Section 26. Supplements and Amendments . Prior to the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, however, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, (i) no supplement or amendment shall be made which changes the Redemption Price, the Final Expiration Date, the Purchase Price or the number of one ten-thousandths of a share of Preferred Stock for which a Right is exercisable and following the first occurrence of an event set forth in clauses (i) and (ii) of the first proviso to Section 23(a) hereof, (ii) the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agent’s own rights, duties, obligations or indemnties under this Agreement and (iii) any supplement or amendment shall require the concurrence of a majority of the members of the Board of Directors of the Company. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock.

 

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Section 27. Exchange .

(a) The Company may, at its option, at any time after the Stock Acquisition Date, upon resolution by the Board of Directors of the Company, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement (such exchange ratio being hereinafter referred to as the “ Section 27(a) Exchange Ratio ”). Notwithstanding the foregoing, the Company may not effect such exchange at any time after any Acquiring Person, together with all Affiliates and Associates of such Acquiring Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.

(i) The Company may, at its option, at any time after the Stock Acquisition Date, upon resolution by the Board of Directors of the Company, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio specified in the following sentence, as appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement. Subject to such adjustment, each Right may be exchanged for that number of shares of Common Stock obtained by dividing the Adjustment Spread (as defined below) by the then Current Market Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the earlier of (i) the date on which any Person becomes an Acquiring Person or (ii) the date on which a tender or exchange offer by any Person (other than an Exempted Person, the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-4(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof such Person would be the Beneficial Owner of 4.95% or more of the shares of Common Stock then outstanding (such exchange ratio being the “ Section 27(a)(ii) Exchange Ratio ”). The “Adjustment Spread” shall equal (x) the aggregate market price on the date of such event of the number of Adjustment Shares determined pursuant to Section 11(a)(ii) minus (y) the Purchase Price.

(ii) Notwithstanding anything contained in this Section 27(a) to the contrary, the Company may not exchange any Rights pursuant to this Section 27(a) unless such exchange is approved by a majority of the members of the Board of Directors of the Company.

 

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(b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 27 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Section 27(a) Exchange Ratio or Section 27(a)(ii) Exchange Ratio, as the case may be. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.

(c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 27, the Company shall make adequate provision to substitute, to the extent that there are insufficient shares of Common Stock available (1) cash, (2) other equity securities of the Company, (3) debt securities of the Company, (4) other assets or (5) any combination of the foregoing, having an aggregate value per Right equal to (x) in the case of an exchange pursuant to Section 27(a), the then current per share market price (determined pursuant to Section 11(d) hereof) of the Common Stock multiplied by the Section 27(a) Exchange Ratio and (y) in the case of an exchange pursuant to Section 27(a)(ii), the Adjustment Spread, where such aggregate value has been determined by a majority of the members of the Board of Directors of the Company, after receiving advice from a nationally recognized investment banking firm. To the extent that the Company determines that any such substitution must be made, the Company shall provide, subject to Section 7(e) hereof, that such substitution shall apply uniformly to all outstanding Rights.

(d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d) hereof) for the Trading Day immediately prior to the date of the exchange pursuant to this Section 27.

 

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Section 28. Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 29. Determinations and Actions by the Board of Directors, etc . For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company (with, where specifically provided for herein, the concurrence of a majority of the members of the Board of Directors of the Company) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors of the Company (with, where specifically provided for herein, the concurrence of a majority of the members of the Board of Directors of the Company) or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend this Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors of the Company (with, where specifically provided for herein, the concurrence of a majority of the members of the Board of Directors of the Company) in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors of the Company to any liability to the holders of the Rights. The Rights Agent is entitled always to assume the Company’s Board of Directors acted in good faith and shall be fully protected and incur no liability in reliance thereon.

Section 30. Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock).

Section 31. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that if such excluded provision shall, in the reasonable judgment of the Rights Agent, adversely affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign upon five (5) days prior written notice; provided, further, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the twentieth day following the date of such determination by the Board of Directors of the Company.

 

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Section 32. Governing Law . This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Maryland and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts made and to be performed entirely within such state; provided, however, that all provisions regarding the rights, duties, and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state.

Section 33. Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 34. Descriptive Headings . Descriptive headings of the several sections of this Agreement are inserted for convenience on only and shall not control or affect the meaning or construction of any of the provisions hereof.

Section 35. Force Majeure . Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunctions of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest.

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

 

Attest:     INSTITUTIONAL FINANCIAL MARKETS, INC.
By:  

/s/ Rachael Fink

    By:  

/s/ Joseph W. Pooler, Jr.

Name:   Rachael Fink     Name:   Joseph W. Pooler, Jr.
Title:   Senior Vice President, General Counsel and Secretary     Title:   Executive Vice President and Chief Financial Officer
Attest:    

COMPUTERSHARE SHAREOWNER SERVICES LLC

as Rights Agent

By:  

/s/ Rita Swartz

    By:  

/s/ Mitzi Shannon

Name:   Rita Swartz     Name:   Mitzi Shannon
Title:   V.P. Relationship Manager     Title:   Relationship Manager

 

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ARTICLES SUPPLEMENTARY

OF

INSTITUTIONAL FINANCIAL MARKETS, INC.

(formerly known as Cohen & Company Inc.)

SERIES C JUNIOR PARTICIPATING PREFERRED STOCK

(PAR VALUE $0.001 PER SHARE)

Cohen & Company Inc. , a Maryland corporation, having its principal office at Cira Centre, 2929 Arch Street, 17th Floor, Philadelphia, Pennsylvania 19104 (the “ Corporation ”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

First , pursuant to the authority expressly vested in the board of directors of the Corporation (the “ Board of Directors ”) by the charter of the Corporation (the “ Charter ”), the Board of Directors on December 21, 2009 adopted a resolution which duly classified 10,000 shares of Preferred Stock, par value $0.001 per share, into a series of 10,000 shares of Preferred Stock, par value $0.001 per share, designated as “ Series C Junior Participating Preferred Stock ,” and has provided for the issuance of shares of such series.

Second , no shares of the Series C Junior Participating Preferred Stock of the Corporation are issued or outstanding.

Third , on December 21, 2009, the Board of Directors, in accordance with the provisions of Section 2-208 of the Maryland General Corporation Law and the authority expressly vested in the Board of Directors by the Charter, duly adopted the resolution adopting the Articles Supplementary of Cohen & Company Inc. for the Series C Junior Participating Preferred Stock.

Fourth , pursuant to Section 2-208 of the Maryland General Corporation Law, stockholder approval is not required for the adoption of the Articles Supplementary of Cohen & Company Inc. for the Series C Junior Participating Preferred Stock, and such stockholder approval has not been obtained.

Fifth , the terms of the Series C Junior Participating Preferred Stock, as set by the Board of Directors, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, if any, are as follows:

Section 1. Designation and Amount . The shares of such series shall be designated as “ Series C Junior Participating Preferred Stock ” and the number of shares constituting such series shall be 10,000.

 

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Section 2. Dividends and Distributions .

(a) The holders of shares of Series C Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.001 or (b) subject to the provision for adjustment hereinafter set forth, 10,000 times the aggregate per share amount of all cash dividends, and 10,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.001 per share, of the Corporation (the “ Common Stock ”) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series C Junior Participating Preferred Stock. In the event the Corporation shall at any time after December 21, 2009 (the “ Rights Declaration Date ”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series C Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b) The Corporation shall declare a dividend or distribution on the outstanding shares of Series C Junior Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.001 per share on the outstanding shares of Series C Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series C Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof.

 

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Section 3. Voting Rights . The holders of shares of Series C Junior Participating Preferred Stock shall have the following voting rights:

(a) Subject to the provision for adjustment hereinafter set forth, each share of Series C Junior Participating Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series C Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b) Except as otherwise provided herein or by law, the holders of shares of Series C Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(c) If at any time dividends on any Series C Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a “ default period ”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series C Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series C Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) directors.

(i) During any default period, such voting right of the holders of Series C Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(c) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that such voting right shall not be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) directors or, if such right is exercised at an annual meeting, to elect two (2) directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect directors in any default period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series C Junior Participating Preferred Stock.

 

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(ii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to such holder at such holder’s last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than twenty (20) days and not later than sixty (60) days after such order or request, or in default of the calling of such meeting within sixty (60) days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (c)(iii), no such special meeting shall be called during the period within sixty (60) days immediately preceding the date fixed for the next annual meeting of the stockholders.

(iii) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect two (2) directors voting as a class, after the exercise of which right (x) the directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (c)(ii)of this Section 3) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant. References in this paragraph (c) to directors elected by the holders of a particular class of stock shall include directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.

(iv) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of directors shall be such number as may be provided for in the Charter or by-laws of the Corporation irrespective of any increase made pursuant to the provisions of paragraph (c)(ii)of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Charter or by-laws of the Corporation). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors.

(d) Except as set forth herein, holders of Series C Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

 

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Section 4. Certain Restrictions .

(a) Whenever quarterly dividends or other dividends or distributions payable on the Series C Junior Participating Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Junior Participating Preferred Stock;

(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Junior Participating Preferred Stock, except dividends paid ratably on the Series C Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series C Junior Participating Preferred Stock; or

(iv) purchase or otherwise acquire for consideration any shares of Series C Junior Participating Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares . Any shares of Series C Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.

 

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Section 6. Liquidation, Dissolution or Winding Up .

(a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series C Junior Participating Preferred Stock shall have received an amount equal to $100,000 per share of Series C Junior Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “ Series C Liquidation Preference ”). Following the payment of the full amount of the Series C Liquidation Preference, no additional distributions shall be made to the holders of shares of Series C Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “ Common Adjustment ”) equal to the quotient obtained by dividing (i) the Series C Liquidation Preference by (ii) 10,000 (as appropriately adjusted as set forth in subparagraph (c) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “ Adjustment Number ”). Following the payment of the full amount of the Series C Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series C Junior Participating Preferred Stock and Common Stock, respectively, holders of Series C Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.

(b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series C Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.

(c) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

A-6


Section 7. Consolidation, Merger, etc . In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series C Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 10,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption . The shares of Series C Junior Participating Preferred Stock shall not be redeemable.

Section 9. Amendment . The Charter shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series C Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series C Junior Participating Preferred Stock, voting separately as a class.

Section 10. Fractional Shares . Series C Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series C Junior Participating Preferred Stock.

IN WITNESS WHEREOF , Cohen & Company Inc. has caused these presents to be signed in its name and on its behalf by its President and attested to by its Secretary as of this 21st day of December, 2009.

 

ATTEST:     COHEN & COMPANY INC.
By:  

 

    By:  

 

  Rachael Fink       Joseph W. Pooler, Jr.
  Senior Vice President, General Counsel and Secretary       Executive Vice President and Chief Financial Officer

 

A-7


CERTIFICATE

THE UNDERSIGNED , the Executive Vice President and Chief Financial Officer of Cohen & Company Inc. (the “ Corporation ”), who executed on behalf of the Corporation the foregoing Articles Supplementary of which this certificate is made a part, hereby acknowledges in the name and on behalf of the Corporation the foregoing Articles Supplementary to be the corporate act of the Corporation and hereby certifies that to the best of his knowledge, information and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury.

 

 

Joseph W. Pooler, Jr.
Executive Vice President and Chief Financial Officer

 

A-8


Exhibit B

[Form of Rights Certificate]

 

Certificate No. R-    Rights

NOT EXERCISABLE AFTER OCTOBER 1, 2016 OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.

Rights Certificate

INSTITUTIONAL FINANCIAL MARKETS, INC.

This certifies that [    ], or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of May 9, 2013 (the “ Rights Agreement ”), between Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”), and Computershare Shareowner Services LLC , a New Jersey limited liability company (the “ Rights Agent ”), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on October 1, 2016 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one ten- thousandth of a fully paid, non-assessable share of Series C Junior Participating Preferred Stock (the “ Preferred Stock ”) of the Company, at a purchase price of $100.00 per one ten-thousandth of a share (the “ Purchase Price ”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of May 9, 2013 based on the Preferred Stock as constituted at such date. The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock will be issued.

Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.

 

B-1


As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities, which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events.

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent.

This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one ten-thousandths of a share of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.001 per Right at any time prior to the earlier of the close of business on (i) the tenth day following the Stock Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. In addition, the Rights may be exchanged, in whole or in part, for shares of the Common Stock, or shares of preferred stock of the Company having essentially the same value or economic rights as such shares. Immediately upon the action of the Board of Directors of the Company authorizing any such exchange, and without any further action or any notice, the Rights (other than Rights which are not subject to such exchange) will terminate and the Rights will only enable holders to receive the shares issuable upon such exchange. Under certain circumstances set forth in the Rights Agreement, the decision to redeem the Rights shall require the concurrence of a majority of the members of the Board of Directors of the Company.

No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one ten-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

 

B-2


No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.

This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of                     .

 

Attest:     INSTITUTIONAL FINANCIAL MARKETS, INC.

 

   

 

By:       By:
Name:       Name:  
Title:   Secretary     Title:  

Countersigned:

 

Attest:

   

COMPUTERSHARE SHAREOWNER SERVICES LLC

as Rights Agent

 

   

 

By:       By:   Authorized Signature
Name:       Name:  
Title:       Title:  

 

B-3


[Form of Reverse Side of Rights Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED                      hereby sells, assigns and transfers unto                      (Please print name and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.

 

Dated:  

 

Signature:  

 

Signature Guaranteed*:

 

* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

Certificate

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1) this Rights Certificate [    ] is [    ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

(2) after due inquiry and to the best knowledge of the undersigned, it [    ] did [    ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

Dated:  

 

Signature:  

 

Signature Guaranteed*:

 

* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

NOTICE

The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

1


FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise Rights represented by the Rights Certificate.)

 

To: INSTITUTIONAL FINANCIAL MARKETS, INC.:

The undersigned hereby irrevocably elects to exercise                      Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to:

 

Please insert social security

or other identifying number

 

 

     

 

  (Please print name and address):   

 

     
    

 

     
    

 

     
             

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:

Please insert social security or other identifying number

 

  (Please print name and address):   

 

     
    

 

     
    

 

     
     Dated:   

 

     
     Signature:   

 

     

Signature Guaranteed*:

 

* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

 

2


Certificate

The undersigned hereby certifies by checking the appropriate boxes that:

 

  (1) the Rights evidenced by this Rights Certificate

[    ] are [    ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

  (2) after due inquiry and to the best knowledge of the undersigned, it [    ] did [    ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

Dated:  

 

Signature:  

 

Signature Guaranteed*:

 

* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

NOTICE

The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.


Exhibit C

SUMMARY OF RIGHTS TO PURCHASE SERIES C JUNIOR

PARTICIPATING PREFERRED STOCK

On May 9, 2013, the Board of Directors of Institutional Financial Markets, Inc. (the “ Company ”) approved the entry into a Section 382 Rights Agreement (the “ Rights Agreement ”) between the Company and Computershare Shareowner Services LLC (the “ Rights Agent ”). The Rights Agreement provides for a distribution of one preferred stock purchase right (a “ Right ”) for each share of Common Stock, par value $0.001 per share, of the Company (the “ Common Stock ”) outstanding to stockholders of record at the close of business on May 20, 2013 (the “ Record Date ”). Each Right entitles the registered holder to purchase from the Company a unit (a “ Unit ”) consisting of one ten-thousandth of a share of Series C Junior Participating Preferred Stock, par value $0.001 per share (the “ Preferred Stock ”), at a Purchase Price of $100.00 per Unit (the “ Purchase Price ”), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement.

The Board of Directors of the Company adopted the Rights Agreement in an effort to protect stockholder value by attempting to protect against a possible limitation on the Company’s ability to use its net operating loss and net capital loss carryforwards (the “deferred tax assets”) to reduce potential future federal income tax obligations. The Company has experienced substantial operating losses and capital losses, and under the Internal Revenue Code of 1986, as amended (the “ Code ”), and rules promulgated by the Internal Revenue Service, the Company may “carry forward” these losses in certain circumstances to offset any current and future earnings and thus reduce the Company’s federal income tax liability, subject to certain requirements and restrictions. To the extent that the deferred tax assets do not otherwise become limited, the Company believes that it will be able to carry forward a significant amount of deferred tax assets, and therefore these deferred tax assets could be a substantial asset to the Company. However, if the Company experiences an “Ownership Change,” as defined in Section 382 of the Code, its ability to use the deferred tax assets will be substantially limited and/or delayed, and the timing of the usage of the deferred tax assets could be substantially delayed, which could therefore significantly impair the value of those assets.

Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Rights Certificates will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a “Distribution Date” will occur upon the earlier of (i) ten (10) days following a public announcement that a person or group of affiliated or associated persons has become an “Acquiring Person” (as defined below) (the “ Stock Acquisition Date ”) or (ii) ten (10) business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. “Acquiring Person” means any person who or which, together with all affiliates and associates of such person, shall be the beneficial owner of 4.95% or more of the shares of Common Stock then outstanding, excluding the Company and any “Exempted Person” (defined below). Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock certificates after the Record Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate.

 

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Any person who, together with all affiliates and associates of such person, is the beneficial owner of Common Stock, options and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding on May 9, 2013 or is set forth in the Rights Agreement as such, will be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner (and so long as such person continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock), of additional securities representing any additional shares of Common Stock, except (x) pursuant to equity compensation awards granted to such person by the Company or options or warrants outstanding and beneficially owned by such person as of May 9, 2013, or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof or (y) as a result of a stock split, stock dividend or the like. In addition, any person who, together with all affiliates and associates of such person, becomes the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock then outstanding as a result of a purchase by the Company or any of its subsidiaries of shares of Common Stock will also be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and will be deemed to be an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner, at any time after the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, of additional securities representing any additional shares of Common Stock, except if such additional securities are acquired (x) pursuant to the exercise of options or warrants to purchase Common Stock outstanding and beneficially owned by such person as of the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock or as a result of an adjustment to the number of shares of Common Stock for which such options or warrants are exercisable pursuant to the terms thereof, (y) as a result of a stock split, stock dividend or the like, or (z) as a result of an increase in the principal amount of a Convertible Note (as defined in the Rights Agreement) pursuant to the payment-in-kind interest provisions set forth in Section 1(b) of such Convertible Note. In addition, any person who, together with all affiliates and associates of such person, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership would not, as determined by the Board of Directors of the Company in its sole discretion, jeopardize or endanger the availability of the Company of its deferred tax assets, will be an “Exempted Person.” However, any such person will cease to be an Exempted Person if (x) such person ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock or (y) the Board of Directors of the Company, in its sole discretion, makes a contrary determination with respect to the effect of such person’s beneficial ownership (together with all affiliates and associates of such person) with respect to the availability to the Company of its deferred tax assets. A purchaser, assignee or transferee of the shares of Common Stock (or options or warrants exercisable for Common Stock) from an Exempted Person will not thereby become an Exempted Person, except that a transferee from the estate of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person shall be an Exempted Person so long as such transferee continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock.

 

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EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”) is dated as of the 9th day of May, 2013 (the “ Effective Date ”), by and among Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”), and Mead Park Capital Partners LLC, a Delaware limited liability company (“ Buyer ”) and, solely for purposes of Section 6.3 hereof, Mead Park Holdings, LP, a Delaware limited partnership (“ Mead Park ”).

RECITALS :

WHEREAS, Buyer desires to purchase from the Company, and the Company desires to issue and to sell to Buyer, upon the terms and conditions set forth in this Agreement, (i) an aggregate of One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167) newly issued shares (each, a “ Common Share ” and, collectively, the “ Common Shares ”) of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), for a purchase price of Two Dollars ($2.00) per Common Share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334) (the “ Common Stock Purchase Price ”); and (ii) a convertible senior promissory note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501) (the “ Note Purchase Price ”), in substantially the form attached hereto as Exhibit A (the “ Note ”);

WHEREAS, the Company and Buyer are executing and delivering this Agreement in reliance upon an exemption from registration afforded by the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations promulgated thereunder by the U.S. Securities and Exchange Commission (the “ SEC ”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering the Registration Rights Agreement attached hereto as Exhibit B (the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights to Buyer and to Cohen Bros. (as defined below) under the Securities Act and under applicable state securities Laws;

WHEREAS, the Company has approved the shareholder rights plan attached hereto as Exhibit C (the “ Shareholder Rights Plan ”) to reduce the risk of any limitation of net operating loss and net capital loss carryforwards and certain other tax benefits under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder (the “ Code ”) and such plan is effective as of the Effective Date;

WHEREAS, contemporaneously with the execution and delivery of this Agreement, Cohen Bros. and the Company are entering into the following agreements: (i) a securities purchase agreement, pursuant to which Cohen Bros. has agreed to purchase from the Company and the Company has agreed to sell to Cohen Bros. (A) Eight Hundred Thousand (800,000) shares of Common Stock, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000) (the “ Cohen Shares ”) and (B) a convertible senior promissory note (the “ Cohen Note ”) in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000), in the form attached hereto as Exhibit D (the “ Cohen Purchase Agreement ”); and (ii) an exchange agreement providing for the exchange of all of the Institutional Financial Markets, Inc. Series D Voting Non-Convertible Preferred Stock owned by Cohen Bros. for newly issued shares of Institutional Financial Markets, Inc. Series E Voting Non-Convertible Preferred Stock, in the form attached hereto as Exhibit E (the “ Exchange Agreement ”);


WHEREAS, contemporaneously with the execution and delivery of this Agreement, Daniel G. Cohen and the Company are entering into an amended and restated employment agreement, which is amending and restating the Cohen IFMI Employment Agreement and terminating the Cohen PrinceRidge Employment Agreement (each as defined below), in the form attached hereto as Exhibit F (the “ Amended and Restated Cohen Employment Agreement ”);

WHEREAS, on or prior to the Effective Date, each member of IFMI, LLC and the board of managers of IFMI, LLC shall have approved, pursuant to written consents provided to Buyer, the amendment to the IFMI LLC Agreement (as defined below) attached hereto as Exhibit G (“ LLC Agreement Amendment ”); and

WHEREAS, on or prior to the Effective Date, the Company and the Voting Agreement Signatories (as defined below), have entered into and delivered to Buyer voting agreements, each attached hereto as Exhibit H (collectively, the “ Voting Agreements ”).

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereinafter expressed and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

ARTICLE I

RECITALS, EXHIBITS, SCHEDULES

The foregoing Recitals are true and correct and, such Recitals, together with the Schedules and Exhibits referred to therein and referred to hereafter, are hereby incorporated into this Agreement by this reference.

ARTICLE II

DEFINITIONS

Capitalized terms used in this Agreement but otherwise not defined herein shall have the following meanings:

2.1      “ Affiliate ” means, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made. For purposes of this definition, the terms “ control ,” “ controlling ,” “ controlled ” and words of similar import, when used in this context, mean, with respect to any Person, the possession, directly or indirectly, of the power to direct, or cause the direction of, management policies of such Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, that in no event shall Buyer be deemed to be an Affiliate of the Company for purposes of this Agreement or any of the Transaction Documents.

 

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2.2       “ Assets ” means all of the properties and assets of the Company or of the Subsidiaries, whether real, personal or mixed, tangible or intangible, wherever located, whether now owned or hereafter acquired.

2.3       “ Board of Directors ” means the Board of Directors of the Company.

2.4       “ Buyer Fundamental Representations ” means, collectively, the representations and warranties of Buyer contained in Sections 4.1 (Organization; Authority), 4.3 (Investment Purpose), 4.4 (Accredited Buyer Status; Experience of Buyer) and 4.9 (Brokers and Finders).

2.5       “ CCFL ” means Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD) a wholly-owned Subsidiary organized under the laws of the United Kingdom.

2.6       “ Claims ” means any threatened or actual Proceeding, Judgment, settlement, and/or assessment of any nature or kind.

2.7       “ Cohen IFMI Employment Agreement ” means the Employment Agreement, dated February 18, 2010, by and among the Company, IFMI, LLC, and Daniel G. Cohen, as amended by Amendment No. 1, dated December 18, 2012.

2.8       “ Cohen Bros. ” means Cohen Bros. Financial, LLC, a Delaware limited liability company of which Daniel G. Cohen is the sole member.

2.9       “ Cohen Conversion Shares ” means the shares of Common Stock into which the Cohen Note is convertible.

2.10     “ Cohen PrinceRidge Employment Agreement ” means the Executive Agreement, dated May 31, 2011, by and among PrinceRidge, the Company, IFMI, LLC and Daniel G. Cohen and, solely for purposes of Sections 5.5 and 5.6 thereof, C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC).

2.11     “ Company Fundamental Representations ” means, collectively, the representations and warranties of the Company contained in Sections 5.1 (Organization and Qualification), 5.2 (Authorization; Enforcement; Validity), 5.3 (Capitalization), 5.5 (No Conflicts; Consents and Approvals), 5.6 (Issuance of Securities), 5.8 (Absence of Certain Changes), 5.11 (Compliance with Laws), 5.15 (Acknowledgement Regarding Buyer’s Purchase of the Securities) and 5.16 (Brokerage Fees).

2.12     “ Confidentiality Agreement ” means the Confidentiality Agreement, dated March 13, 2012, between the Company and Mead Park Management, LLC, as amended by the Letter Agreement re: Confidentiality Agreement, dated September 26, 2012, and as extended by the Second Letter Agreement re: Confidentiality Agreement, dated March 12, 2013.

2.13     “ Consent ” means any consent, approval, order or authorization of, or any declaration, qualification, filing or registration with, or any application or report to, or any waiver by, or any other action (whether similar or dissimilar to any of the foregoing) of, by or with, any Person, which is necessary in order to take a specified action or actions, in a specified manner and/or to achieve a specific result.

 

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2.14     “ Contract ” means any written or oral contract, agreement, order or commitment of any nature whatsoever, including any sales order, purchase order, lease, sublease, license agreement, services agreement, loan agreement, mortgage, security agreement, guarantee, management contract, employment agreement, consulting agreement, partnership agreement, stockholders agreement, buy-sell agreement, option, warrant, debenture, subscription, call or put.

2.15     “ Conversion Shares ” means the shares of Common Stock issuable upon conversion of the Note.

2.16     “ Convertible IFMI LLC Units means units of membership interest in IFMI, LLC that are redeemable for shares of Common Stock or cash, at the option of the Company, pursuant to the IFMI LLC Agreement (other than any units of membership interest held by the Company).

2.17     “ Current Independent Directors ” means the members of the Board of Directors as of the Effective Date who are considered to be independent directors (as determined in accordance with Section 803 of the NYSE MKT’s Company Guide).

2.18     “ Director ” means a member of the Board of Directors.

2.19     “ DRS ” means the Direct Registration System maintained by the transfer agent for the Common Stock.

2.20     “ Encumbrance ” means any lien, security interest, pledge, mortgage, easement, leasehold, assessment, tax, covenant, reservation, conditional sale, prior assignment, or any other encumbrance, claim, burden or charge of any nature whatsoever.

2.21     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

2.22     “ Exclusivity Agreement ” means the Letter Agreement, dated as of March 11, 2013, by and between Mead Park and the Company.

2.23     “ GAAP ” means generally accepted accounting principles in the United States of America as in effect from time to time.

2.24     “ Governmental Authority ” means any foreign, federal, state or local government, or any political subdivision thereof, or any court, agency or other body, organization, group, stock market or exchange exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government.

2.25     “ IFMI, LLC ” means IFMI, LLC, a Delaware limited liability company and a majority owned Subsidiary.

 

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2.26     “ IFMI LLC Agreement ” means the Amended and Restated Limited Liability Company Agreement of IFMI, LLC, dated as of December 16, 2009 by and among the Company and the Members (as defined therein) that are signatories thereto, as amended.

2.27     “ Judgment ” means any order, ruling, writ, injunction, fine, citation, award, decree, or any other judgment of any nature whatsoever of any Governmental Authority.

2.28     “ Knowledge of the Company ” or words to that effect means the actual knowledge of any of the following Persons: Daniel G. Cohen, Joseph W. Pooler, Jr., Douglas Listman, Rachael Fink, Stephan Burklin and James J. McEntee, III; provided, that for purposes of this definition such Persons shall be deemed to have actual knowledge of facts that would be reasonably expected to come to the attention of such Person in performing his or her duties in accordance with the Company’s or any relevant Subsidiary’s ordinary management practices.

2.29     “ Law ” means any provision of any law, statute, ordinance, code, constitution, charter, treaty, rule or regulation of any Governmental Authority.

2.30     “ Material Adverse Effect ” means any circumstance, event, change, development, effect or occurrence that, individually or in the aggregate, (i) is or would reasonably be expected to be materially adverse to the Company’s financial position, results of operations, business, condition (financial or otherwise) or Assets of the Company and its Subsidiaries, taken as a whole or (ii) would materially impair the ability of the Company to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummations of the transactions contemplated herein; provided, however, that in the case of clause (i) only, any circumstance, event, change, development, effect or occurrence that results from any of the following shall be disregarded in determining whether there has been or would be a “Material Adverse Effect” on the Company (except to the extent that such circumstance, event, change, development, effect or occurrence has a disproportionate adverse effect on the Company and the Subsidiaries relative to other companies engaged in a similar business as the Company): (A) changes, after the Effective Date, in GAAP; (B) changes, after the Effective Date, in Laws or interpretations thereof applicable to the Company or the Subsidiaries by any Governmental Authority; (C) general changes in the national or world economy or securities markets generally; (D) changes in the price or trading volume of the Common Stock on the Trading Market (but not the underlying causes of such changes); or (E) the outbreak or escalation of war or hostilities, any occurrence or threats of terrorist acts or any armed hostilities associated therewith or any national or international calamity, disaster or emergency or escalation thereof.

2.31     “ Meeting ” means any meeting of the stockholders of the Company at which the election of Directors is to be voted upon, however called (and including any postponement or adjournment of any such meeting) and any written consent of the stockholders of the Company with respect to the election of Directors.

2.32     “ Obligation ” means any debt, liability or obligation of any nature whatsoever, whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown or obligations under executory Contracts.

 

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2.33     “ Permit ” means any license, permit, approval, waiver, order or authorization granted, issued or approved by any Governmental Authority.

2.34     “ Person ” means any individual, sole proprietorship, joint venture, partnership, company, corporation, association, cooperation, trust, estate, Governmental Authority, or any other entity of any nature whatsoever.

2.35     “ PrinceRidge ” means C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP), an indirect Subsidiary.

2.36     “ Principal of any Person means, at the time of determination, each principal, partner or member of such Person, any spouse or child of each principal, partner or member, and any trust for the benefit of each principal, partner or member or each such principal’s, partner’s or member’s spouse or lineal descendants.

2.37     “ Proceeding ” means any demand, claim, suit, action, litigation, investigation, audit, study, arbitration, administrative hearing, or any other proceeding of any nature whatsoever.

2.38     “ Sandler O’Neill ” means Sandler O’Neill & Partners, L.P., the independent financial advisor to the Special Committee.

2.39     “ Securities ” means, together, the Common Shares and the Note.

2.40     “ Shell Company ” means an issuer that meets the description of a shell company as defined under Rule 144.

2.41     “ Significant Subsidiary means each of the significant subsidiaries (as such term is defined in Rule 1-02(w) of Regulation S-X) of the Company, as set forth in the Company’s SEC Documents.

2.42     “ Special Committee ” means the special committee of independent directors of the Board of Directors formed in connection with the transactions contemplated by this Agreement and the Transaction Documents.

2.43     “ Subsidiary ” means each subsidiary of the Company.

2.44     “ Tax ” means (i) any foreign, federal, state or local income, profits, gross receipts, franchise, sales, use, occupancy, general property, real property, personal property, intangible property, transfer, excise, accumulated earnings, unemployment compensation, social security, withholding taxes, payroll taxes, or any other tax of any nature whatsoever, (ii) any foreign, federal, state or local organization fee, qualification fee, annual report fee, filing fee, occupation fee, or assessment, or (iii) any deficiency, interest or penalty imposed with respect to any of the foregoing.

2.45     “ Tax Return ” means any tax return, filing, declaration, information statement or other form or document required to be filed in connection with or with respect to any Tax.

 

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2.46     “ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

2.47     “ Transaction Documents ” means (i) any documents or instruments to be executed by the Company, Cohen Bros., Buyer, Mead Park and IFMI, LLC in connection with this Agreement, including the Note, and the Registration Rights Agreement; and (ii) the Voting Agreements, together, in each case, with all modifications, amendments, extensions, future advances, renewals, and substitutions thereof and thereto.

2.48     “ Voting Agreement Signatories ” means, collectively, Daniel G. Cohen, Christopher Ricciardi, Stephanie Ricciardi, The Ricciardi Family Foundation, James J. McEntee, III, Joseph W. Pooler, Jr., Doug Listman, Rachael Fink, Walter Beach, Rodney E. Bennett, Thomas P. Costello, G. Steven Dawson, Joseph M. Donovan, Jack Haraburda, Lance Ullom, Charles W. Wolcott and Neil S. Subin.

In addition, the following terms shall have the respective meanings ascribed to them in the corresponding Sections:

 

Term    Section

2013 Annual Meeting of Stockholders

  

Section 6.8

8-K Filing

  

Section 6.6

Agreement

  

Preamble

Amended and Restated Cohen Employment Agreement

  

Recitals

Articles of Incorporation

  

Section 5.1

Benefit Plan

  

Section 5.18

Buyer

  

Preamble

Buyer Indemnified Parties

  

Section 9.1

Bylaws

  

Section 5.1

Closing

  

Section 3.2

Closing Date

  

Section 3.2

Code

  

Recitals

Cohen Note

  

Recitals

Cohen Purchase Agreement

  

Recitals

Cohen Shares

  

Recitals

Common Share(s)

  

Recitals

Common Stock

  

Recitals

Common Stock Purchase Price

  

Recitals

Company

  

Preamble

Company Indemnified Parties

  

Section 9.2

Company Proxy Statement

  

Section 6.8

Effective Date

  

Preamble

Employees

  

Section 5.18

ERISA

  

Section 5.18

ERISA Plans

  

Section 5.18

 

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Term    Section

Exchange Agreement

  

Recitals

Investment Company Act

  

Section 5.17

Financial Statements

  

Section 5.7

LLC Agreement Amendment

  

Recitals

Listing Application

  

Section 6.7

Mead Park

  

Preamble

Minority Board Representative

  

Section 6.9(c)i(A)

Minority Ownership Interest

  

Section 6.9(c)i

New Security

  

Section 6.10(a)

Note

  

Recitals

Note Purchase Price

  

Recitals

Pension Plan

  

Section 5.18

Qualifying Board Representatives

  

Section 6.9(b)

Qualifying Ownership Interest

  

Section 6.9(b)

Registration Rights Agreement

  

Recitals

Rule 144

  

Section 5.21

Rule 144 Certificate

  

Section 6.2(b)ii

SEC

  

Recitals

SEC Documents

  

Section 5.7

Securities Act

  

Recitals

Securities Being Sold

  

Section 6.2(b)ii

Share Reserve

  

Section 6.5

Shareholder Rights Plan

  

Recitals

Stockholder Proposal

  

Section 6.8

Transaction Deadline

  

Section 10.1(b)ii

Voting Agreements

  

Recitals

ARTICLE III

PURCHASE AND SALE OF SECURITIES

3.1        Purchase and Sale of Securities .   Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, on the Closing Date, (i) Buyer agrees to purchase the Securities; and (ii) the Company agrees to sell and to issue to Buyer the Securities for the aggregate amount of the Common Stock Purchase Price and the Note Purchase Price.

3.2        Closing .   The closing (the “ Closing ”) of the transactions contemplated hereby will occur at the offices of Duane Morris LLP, 30 South 17 th Street, Philadelphia, Pennsylvania, commencing at 9:00 a.m. local time on the second (2 nd ) business day after the satisfaction or waiver of all conditions in Article VII and Article VIII (other than conditions with respect to actions that the respective parties hereto will take at the Closing), or at such other location and on such other date as the parties mutually determine (the “ Closing Date ”).

3.3        Form of Payment; Delivery of Securities .  Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, on the Closing Date, (i) Buyer shall deliver to the Company the Common Stock Purchase Price and the Note Purchase Price, in the form of wire transfers of immediately available U.S. funds; and (ii) the Company shall deliver to Buyer the Securities, duly executed on behalf of the Company, together with any other documents required to be delivered pursuant to this Agreement.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to the Company that:

4.1        Organization; Authority .  Buyer is duly organized, validly existing under the laws of the jurisdiction of its organization with the requisite limited liability company power and authority to enter into and to consummate the transactions contemplated by this Agreement and by each of the Transaction Documents to which Buyer is a party and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by Buyer of this Agreement and of each of the Transaction Documents to which Buyer is a party have been duly authorized by all necessary limited liability company action, on the part of Buyer. Each of this Agreement and the Transaction Documents to which Buyer is a party has been (or upon delivery will have been) duly executed by Buyer, and, when delivered by Buyer in accordance with the terms hereof and thereof, will constitute the valid and legally binding obligation of Buyer, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

4.2        No Conflicts .    The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which Buyer is a party and the consummation by Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any Contract, indenture or instrument to which Buyer is a party, or (iii) result in a violation of any Law, rule, regulation, order, judgment or decree (including federal and state securities Laws) applicable to Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations hereunder.

4.3        Investment Purpose .   Buyer understands that the Securities are not, and the Conversion Shares will not be, registered under the Securities Act or any applicable state securities Laws (subject to the Registration Rights Agreement). Buyer is acquiring the Securities and, upon exercise of the Note (if applicable), will acquire the Conversion Shares issuable upon exercise thereof, as principal for its own account for investment only and not with a view to or for the purpose of distributing or reselling such Securities or Conversion Shares (if applicable) or any part thereof in violation of the Securities Act or any applicable state securities Laws. Buyer does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Securities or the Conversion Shares (if applicable) (or any securities which are derivatives thereof) to or through any person or entity; Buyer is not a registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business that would require it to be so registered as a broker-dealer.

 

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4.4        Accredited Buyer Status; Experience of Buyer .  At the time Buyer was offered the Securities, it was, on each date on which it acquires Securities it will be, and on each date on which it exercises the Note (if applicable) it will be, an “accredited investor” as defined in Rule 501(a) under the Securities Act. Buyer, either alone or together with its representatives (if any), has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Buyer acknowledges that it can bear the economic risk and complete loss of its investment in the Securities.

4.5        Residency .  Buyer has its principal place of business in the State of New York.

4.6        Reliance on Exemptions .  Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities Laws and that the Company is relying upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Securities.

4.7        Information .  Buyer and its advisors have been furnished with all materials relating to the business, finances and operations of the Company and information Buyer deemed material to making an informed investment decision regarding its purchase of the Securities, which have been requested by Buyer. Buyer and its advisors have been afforded with the opportunity to ask questions of the Company and its management. Buyer has sought such accounting, legal, tax and other professional advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

4.8        Restrictions on Transferability .   Buyer understands that because the Securities have not have been registered under the Securities Act, Buyer cannot dispose of any or all of the Securities unless such Securities are subsequently registered under the Securities Act or exemptions from registration are available. Buyer acknowledges and understands that, except as provided in the Registration Rights Agreement, it has no registration rights. By reason of these restrictions, Buyer understands that it may be required to hold the Securities for an indefinite period of time. Buyer understands that each certificate or other instrument representing the Securities and the Conversion Shares will bear appropriate legends reflecting the foregoing as well as state “blue sky” legends. In addition, appropriate transfer restrictions will be affixed to any notation in the DRS for any Securities or Conversion Shares.

4.9        Brokers and Finders .   Buyer has not employed any Person, or incurred any liability, for any financial advisory, brokerage or finder’s fee or commission, and no broker or finder has acted directly or indirectly for Buyer, in connection with the transactions contemplated by this Agreement and the Transactions Documents.

4.10      Independent Investment Decision .   Buyer has evaluated, independently of the Company, the merits of its decision to purchase the Securities pursuant to this Agreement and the Transaction Documents. Buyer understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Buyer in connection with the purchase of the Securities constitutes legal, tax or investment advice.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth and disclosed in the disclosure schedule attached to this Agreement and made a part hereof or as set forth in the SEC Documents (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other statements, in each case, that are predictive or forward-looking in nature), the Company hereby makes the following representations and warranties to Buyer:

5.1         Organization and Qualification .   The Company is an entity duly incorporated, validly existing and in good standing under the laws of the State of Maryland, with the requisite power and authority to own or lease and use its properties and Assets and to carry on its business as currently conducted and as currently proposed to be conducted. The Company is not in violation of any of the provisions of the Articles of Incorporation or the Bylaws. The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and no Proceeding has been instituted, is pending, or, to the Knowledge of the Company, is threatened in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. The Company has furnished or made available to Buyer true, complete and correct copies of: (A) the Company’s Articles of Incorporation, as amended and as in effect on the Effective Date (the “ Articles of Incorporation ”); and (B) the Company’s Bylaws, as in effect on the Effective Date (the “ Bylaws ”).

5.2        Authorization; Enforcement; Validity .  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by the Company of this Agreement and of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby (including, but not limited to, the issuance, sale and delivery of the Securities and the reservation for issuance and the subsequent issuance of the Conversion Shares upon exercise of the Note) have been duly authorized by all necessary corporate action on the part of the Company, and, other than the approval by the Company’s stockholders of the Stockholder Proposal, no further corporate action is required by the Company, the Board of Directors or its stockholders in connection herewith and therewith. Each of this Agreement and the Transaction Documents to which the Company is a party has been (or upon delivery will have been) duly and validly executed by the Company and is, or when delivered in accordance with the terms hereof will constitute, the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. The Board of Directors has resolved that the transactions contemplated by this Agreement and the Transaction Documents are in the best interests of stockholders of the Company.

 

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5.3        Capitalization .   The authorized capital stock of the Company consists of: (a) 100,000,000 shares of Common Stock, of which 12,237,104 shares of Common Stock are issued and outstanding as of the Effective Date; (b) 10,000,000 shares of Preferred Stock, par value $0.001 per share, all of which are designated as Series C Junior Participating Preferred Stock, none of which are issued or outstanding as of the Effective Date; and (c) 50,000,000 shares of Preferred Stock, par value $0.001 per share, of which 4,983,557 shares are designated as Series E Voting Non-Convertible Preferred Stock, all of which are issued and outstanding as of the Effective Date. All outstanding shares of Common Stock and Series E Voting Non-Convertible Preferred Stock have been duly authorized, validly issued and are fully paid and nonassessable. The Common Stock is currently quoted on the NYSE MKT under the trading symbol “IFMI,” and the Company has maintained all requirements on its part for the continuation of such quotation. No shares of Common Stock are subject to preemptive rights or any other similar rights. Except as contemplated hereby and as set forth on Schedule 5.3 hereto, as of the Effective Date: (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, or Contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company, or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company; (ii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other Contracts or instruments evidencing indebtedness of the Company, or by which the Company is or may become bound; (iii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act (except pursuant to the Registration Rights Agreement); (iv) there are no financing statements securing any obligations of the Company; (v) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein; and (vi) there are no outstanding securities or instruments of the Company which contain any redemption or similar provisions, and there are no Contracts by which the Company is or may become bound to redeem a security of the Company. Schedule 5.3 attached hereto contains a pro forma beneficial ownership table for the Company giving effect to the transactions contemplated by this Agreement and the other Transaction Documents.

5.4        Subsidiaries .  Except as set forth on Schedule 5.4 hereto, the Company has no other Subsidiaries and all shares of the outstanding capital stock of each Subsidiary are owned directly or indirectly by the Company. All of such shares so owned by the Company are duly authorized, validly issued and are fully paid and nonassessable, and are owned by it free and clear of any Encumbrance with respect thereto. Each Significant Subsidiary is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the requisite power and authority to own or lease and use its properties and Assets and to carry on its business as currently conducted and as currently proposed to be conducted, in each case except as would not reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth on Schedule 5.4 hereto, the Company does not own beneficially, directly or indirectly, more than five percent (5%) of any class of equity securities or similar interests of any organization, and is not, directly or indirectly, a partner in any partnership or party to any joint venture. Except as set forth on Schedule 5.4 hereto, no equity security of any Subsidiary is or may be required to be issued by reason of any option, warrant, scrip, right to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of such Subsidiary, and there are no Contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of its capital stock, or any option, warrant, scrip, right to subscribe to, call or commitment of any character whatsoever relating to, or securities or rights convertible into, any shares of its capital stock.

 

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5.5        No Conflicts; Consents and Approvals .  The execution, delivery and performance of this Agreement and the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, including the issuance, sale and delivery of any of the Securities and the Conversion Shares, and compliance by the Company with any provisions of the Transaction Documents will not: (i) constitute or result in a violation of or conflict with the Articles of Incorporation, Bylaws, or any other organizational or governing documents of Company or any Subsidiary; (ii) constitute or result in a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, or gives to any other Person any rights of termination, amendment, acceleration or cancellation of, any provision of any Contract, indenture or instrument to which Company or any Subsidiary is a party or by which it may be bound, or to which the Company or any Subsidiary or any of their Assets or properties may be bound (other than immaterial contracts relating to back office operations, systems and facilities or similar matters); (iii) constitute a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, any Judgment; (iv) assuming that, in connection with the transactions contemplated hereby, the parties hereto timely make all of the filings required by applicable state securities Laws and under the applicable rules and regulations of the Trading Market constitute a violation of, or conflict with, any Law, rule, regulation, order, judgment or decree (including federal and state securities Laws); or (v) result in the loss or adverse modification of, or the imposition of any fine, penalty or other Encumbrance with respect to, any Permit granted or issued to, or otherwise held by or for the use of, the Company or any Subsidiary or any of the their Assets or properties; except, in the case of clause (v), for such violations, defaults, breaches, conflicts, losses, modifications or impositions that have not had and would not reasonably be expected to have a Material Adverse Effect. The Company is not in default or breach (and no event has occurred which with notice or lapse of time or both could put the Company in default or breach) under, and the Company has not taken any action or failed to take any action that would give to any other Person any rights of termination, amendment, acceleration or cancellation of, any material Contract to which the Company is a party or by which any property or Assets of the Company are bound or affected. Except with respect to the SEC and the Trading Market and as specifically contemplated by this Agreement or the Transaction Documents, the Company is not required to obtain any Consent of, from, or with any Governmental Authority, or any other Person, and no expiration or termination of any statutory waiting period is necessary, in order for the Company to execute, deliver or perform any of its obligations under this Agreement and the Transaction Documents in accordance with the terms hereof or thereof, or to issue, sell and deliver the Securities and the Conversion Shares in accordance with the terms hereof and thereof. All Consents which the Company is required to obtain pursuant to the immediately preceding sentence have been obtained or effected on or prior to the Effective Date or will be obtained or effected on or prior to Closing or as otherwise required under the rules and regulations of the applicable Governmental Authority.

 

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5.6        Issuance of Securities .  The Securities to be issued pursuant to this Agreement have been duly authorized by all necessary corporate action of the Company and, upon issuance in accordance with the terms hereof, the Common Shares, the Note and the Conversion Shares, as applicable, shall be duly and validly issued, fully paid and non-assessable, and free from all Encumbrances with respect to the issue thereof, and, assuming the accuracy of the representations and warranties of Buyer set forth in Article IV above, will be issued in compliance with all applicable United States federal and state securities Laws.

5.7        Listing and Maintenance Requirements; SEC Documents; Financial Statements .  The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or that is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has filed all reports, schedules, forms, statements and other documents, together with any amendments thereto, required to be filed by it with the SEC under the Exchange Act (all of the foregoing filed within the two (2) years preceding the Effective Date and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “ SEC Documents ”). The Company is current with its filing obligations under the Exchange Act and there are no outstanding comments from the SEC with respect to any report, schedule, form, statement and other document required to be filed by it with the SEC under the Exchange Act. The Company represents and warrants that true and complete copies of the SEC Documents are available on the SEC’s website (www.sec.gov) at no charge. As of their respective dates, the SEC Documents complied in all material respects with the applicable requirements of the Exchange Act, and none of the SEC Documents, at the time they were filed with or furnished to the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002. To the Knowledge of the Company as of the Effective Date, there are no facts or circumstances that would prevent its current Chief Executive Officer and Chief Financial Officer from giving the certifications and attestations required pursuant to Rules 13a-14 and 15d-14 under the Exchange Act, without qualification, with respect to the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013. As of their respective dates, the financial statements of the Company included in the SEC Documents (collectively, the “ Financial Statements ”) (i) have been prepared from the books and records of the Company and the Subsidiaries, (ii) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (iii) have been prepared in accordance with GAAP, consistently applied during the periods involved and (iv) fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the consolidated results of its operations and comprehensive income/loss, changes in equity and cash flows for the periods then ended, subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments.

 

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5.8        Absence of Certain Changes .  Except as otherwise disclosed to Buyer in writing on or prior to the date hereof, since the date upon which the last of the SEC Documents was filed with the SEC, there has been no event or circumstance of any nature whatsoever that has resulted in, or would reasonably be expected to result in, a Material Adverse Effect.

5.9        Absence of Litigation; No Undisclosed Liabilities .  Except as otherwise disclosed to Buyer in writing on or prior to the date hereof or as would not reasonably be expected to have a Material Adverse Effect, (i) there is no Proceeding before or by any Governmental Authority or any other Person, pending, or to the Knowledge of the Company, threatened or contemplated by, against or affecting the Company or any Subsidiary, or their Assets; and (ii) there are no outstanding Judgments against or affecting the Company, any Subsidiary, or their Assets. There are no obligations that are not appropriately reflected or reserved against in the financial statements described in Section 5.7 to the extent required to be so reflected or reserved against in accordance with GAAP, except for (i) liabilities that have arisen since December 31, 2012 in the ordinary course of business consistent with past practice and (ii) liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect.

5.10      Title to Assets .  Except as set forth on Schedule 5.10 hereto, the Company or a Significant Subsidiary has good and marketable title to, or a valid leasehold interest in, all of its Assets which are material to the business and operations of the Company and the Significant Subsidiaries as presently conducted, free and clear of all Encumbrances or restrictions on the transfer or use of same. Except as would not have a Material Adverse Effect, the Company’s Assets are in good operating condition and repair, ordinary wear and tear excepted.

5.11      Compliance with Laws .  The Company and the Subsidiaries (i) are in material compliance with all applicable Laws and Judgments; (ii) to the Knowledge of the Company, have all material Permits and such Permits are in full force and effect and no material suspension or cancellation of any of them is threatened; and (iii) to the Knowledge of the Company, are not under investigation with respect to, and have not been threatened to be charged with or given notice of, any material violation of all applicable Laws and Judgments.

5.12      No Directed Selling Efforts or General Solicitation .  Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has conducted any “general solicitation” or “general advertising” (as those terms are used in Regulation D promulgated under the Securities Act) in connection with the offer or sale of any of the Securities.

5.13      Tax Matters .  The Company and each of its Affiliates has made and timely filed all United States federal income Tax Returns and all foreign income Tax Returns and all other material Tax Returns required to be filed by it, and each such Tax Return has been prepared in material compliance with all applicable Laws, and all such Tax Returns are true and accurate in all material respects. Except and only to the extent that the Company or any of its Affiliates, as the case may be, has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported Taxes, the Company and each of its Affiliates has timely paid all Taxes shown or determined to be due on such Tax Returns, except those being contested in good faith, and the Company and each of its Affiliates has set aside on its books provision reasonably adequate for the payment of all Taxes for periods subsequent to the periods to which such Tax Returns apply. There are no unpaid Taxes of the Company or any of its Affiliates in any material amount claimed to be due by the taxing authority of any jurisdiction, and, to the Knowledge of the Company, no basis for any such claim. The Company and each of its Affiliates has withheld and paid all Taxes to the appropriate Governmental Authority required to have been withheld and paid in connection with amounts paid or owing to any Person. There is no Proceeding or Claim for refund now in progress, pending or threatened against or with respect to the Company or any of its Affiliates, in each case, regarding Taxes. Neither the Company nor any of its Affiliates has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, in each case, that is still in effect, or has pending a request for any such extension or waiver. Neither the Company nor any of its Affiliates has entered into any “listed transaction” within the meaning of Treasury Regulations section 1.6011-4(b)(2). Neither the Company nor any of its Affiliates has liability for the Taxes of any person other than the Company or any of its Affiliates under Treasury Regulations section 1.1502-6 (or any similar provision of state, local or foreign law). Neither the Company nor any of its Affiliates is party to, bound by or has any obligation under any Tax allocation, Tax sharing, Tax indemnity or similar agreement, arrangement or understanding (other than any agreement, arrangement or understanding solely among the Company and its Affiliates). Neither the Company nor any of its Affiliates is currently subject to a section 382 limitation, as defined in section 382 of the Code, with respect to any of its Tax attributes. The representation made in the previous sentence will be true immediately after the end of the Closing Date. The aggregate amount of the net operating loss carryovers for United States federal income tax purposes of the Company and its Affiliates as of December 31, 2011 equals or exceeds $88,830,601 and as of December 31, 2012, as currently estimated in good faith by the Company (but subject to future adjustment), equals or exceeds $86,051,682, and Schedule 5.13 attached hereto sets forth the dates on which such net operating loss carryforwards expire. The aggregate amount of the net capital loss carryovers for United States federal income tax purposes of the Company and its Affiliates as of December 31, 2011 equals or exceeds $41,251,297 and as of December 31, 2012, as currently estimated in good faith by the Company (but subject to future adjustment), equals or exceeds $58,892,311, and Schedule 5.13 attached hereto sets forth the dates on which such net capital loss carryforwards expire.

 

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5.14      Internal Accounting Controls .  The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to Assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for Assets is compared with the existing Assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company (A) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer of the Company by others within those entities, and (B) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors (x) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. Since December 31, 2010, (i) neither the Company nor any Subsidiary nor, to the Knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any Subsidiary has received, or otherwise had or obtained knowledge of, any complaint, allegation, assertion or claim that the Company or any Subsidiary has engaged in questionable accounting or auditing practices, and (ii) no attorney representing the Company or any Subsidiary, whether or not employed by the Company or any Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company.

 

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5.15      Acknowledgment Regarding Buyer’s Purchase of the Securities .  The Company acknowledges and agrees that Buyer is acting solely in the capacity of an “arm’s length” purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by Buyer or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to Buyer’s purchase of the Securities. The Company further represents to Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.

5.16      Brokerage Fees .  There is no Person acting on behalf of the Company as placement agent in connection with the transactions contemplated hereby, and, other than the Special Committee’s retention of Sandler O’Neill, there is no Person acting on behalf of the Company who is entitled to or has any claim for any financial advisory, brokerage or finder’s fee or commission in connection with the execution of this Agreement or the transactions contemplated hereby.

5.17      Investment Company .  The Company is not an “investment company” as defined under the Investment Company Act of 1940, as amended (the “ Investment Company Act ”), and the Company does not sponsor any person that is such an investment company.

 

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5.18      Employee Matters .  All benefit and compensation plans, contracts, policies, programs or arrangements covering current or former employees, Directors and consultants of the Company and its Subsidiaries (the “ Employees ”), including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and employment, consulting, retirement, pension, severance, termination, change in control, vacation, deferred compensation, stock option, stock purchase, stock appreciation rights, equity based, incentive, bonus, profit sharing, insurance, medical, welfare, fringe or other benefit plans, contracts, policies, programs or arrangements (the “ Benefit Plans ”) are listed in this Schedule 5.18 attached hereto, and each Benefit Plan which has received a favorable opinion letter from the Internal Revenue Service National Office, including any master or prototype plan, has been separately identified. All Benefit Plans are in substantial compliance with ERISA, the Code and other applicable laws. Each Benefit Plan which is subject to ERISA (the “ ERISA Plans ”) that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (“ Pension Plan ”) and that is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service and, to the Knowledge of the Company, there are no circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Pension Plan under Section 401(a) of the Code. Neither the Company nor any Subsidiary has engaged in a transaction with respect to any ERISA Plan that, assuming the taxable period of such transaction expired as of the Effective Date, could subject the Company or any Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. Neither the Company nor any of the Subsidiaries has incurred or reasonably expects to incur a material tax or penalty imposed by Section 4980F of the Code or Section 502 of ERISA. Neither the Company, any Subsidiary nor any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (x) maintains or contributes to or has within the past six years maintained or contributed to a Pension Plan that is subject to Subtitles C or D of Title IV of ERISA or (y) maintains or has an obligation to contribute to or has within the past six years maintained or had an obligation to contribute to a multiemployer plan, as defined in Section 3(37) of ERISA. All contributions required to be made under each Benefit Plan, as of the Effective Date, have been timely made and all obligations in respect of each Benefit Plan have been properly accrued and reflected in the Financial Statements. As of the Effective Date, there is no material pending or, to the Knowledge of the Company threatened, litigation relating to the Benefit Plans. Neither the Company nor any Subsidiary has any obligations for retiree health and life benefits under any Benefit Plan or collective bargaining agreement. The Company or its Subsidiaries may amend or terminate any such retiree health and life plan at any time without incurring any liability thereunder other than in respect of claims incurred prior to such amendment or termination. There has been no amendment to, announcement by the Company or any Subsidiary relating to, or change in participation or coverage under, any Benefit Plan which would increase materially the expense of maintaining such plan above the level of the expense incurred therefor for the most recent fiscal year. None of the transactions contemplated by this Agreement or the other Transaction Documents, individually or in the aggregate, (i) constitute a “change in control” or “change of control” (or phrases of similar import) within the meaning of any Benefit Plan, (ii) result in any payment or benefit (including severance, unemployment compensation, “excess parachute payment” (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any Employee, the Directors or any consultant of the Company or any Subsidiary under any Benefit Plan, (iii) result in payments under any of the Benefit Plans which would not be deductible under Section 162(m) of the Code, (iv) increase any compensation or benefits otherwise payable under any Benefit Plan, (v) result in any acceleration of the time of payment or vesting of any such benefits, (vi) require the funding or increase in the funding of any such benefits, or (vii) result in any limitation on the right of the Company or any Subsidiary to amend, merge, terminate or receive a reversion of assets from any Benefit Plan or related trust.

5.19      Risk Management; Derivatives .  The Company and the Significant Subsidiaries have in place risk management policies and procedures designed to protect against material risks of the type and in amounts reasonably expected to be incurred by Persons of similar size and in similar lines of business as the Company and the Significant Subsidiaries.

 

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5.20        Foreign Corrupt Practices and International Trade Sanctions .   To the Knowledge of the Company, neither the Company nor any Subsidiary, nor any of their respective directors, officers, agents, employees or any other persons acting on their behalf (i) has violated the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1 et seq., as amended, or any other similar applicable foreign, federal, or state legal requirement; (ii) has made or provided, or caused to be made or provided, directly or indirectly, any payment or thing of value to a foreign official, foreign political party, candidate for office or any other person knowing that the person shall pay or offer to pay the foreign official, party or candidate, for the purpose of influencing a decision, inducing an official to violate their lawful duty, securing any improper advantage, or inducing a foreign official to use their influence to affect a governmental decision; (iii) has paid, accepted or received any unlawful contributions, payments, expenditures or gifts; (iv) has violated or operated in noncompliance with any export restrictions, money laundering law, anti-terrorism law or regulation, anti-boycott regulations or embargo regulations; or (v) is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department.

5.21        Rule 144 .   With a view to making available to Buyer the benefits of Rule 144 promulgated under the Securities Act (“ Rule 144 ”), or any similar rule or regulation of the SEC that may at any time permit Buyer to sell any of the Securities to the public without registration, the Company represents and warrants that: (i) the Company is, and has been for a period of at least ninety (90) days immediately preceding the Effective Date, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (ii) the Company has filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12) months preceding the Closing Date (or for such shorter period that the Company was required to file such reports); and (iii) the Company is not and has not been an issuer defined as a Shell Company.

Buyer acknowledges and agrees that the Company makes no representations or warranties whatsoever, express or implied, except for those specifically set forth in this Article V, in any certificate delivered hereto or in any other Transaction Document.

ARTICLE VI

COVENANTS

6.1          Use of Proceeds .   The proceeds from the purchase and sale of the Securities shall be used by the Company for general corporate purposes.

6.2         Affirmative Covenants of the Company .   Following the Closing, for so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock), unless waived in writing by Buyer:

(a)        Reporting Status; Listing .   The Company shall (i) file all reports required to be filed under the Securities Act, under the Exchange Act, under any federal or state securities Laws and regulations applicable to the Company, and under the rules and regulations of the Trading Market; and (ii) comply in all material respects with the Company’s required reporting, filing and other obligations under the Bylaws or rules of the Trading Market.

 

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(b)         Rule 144 . The Company shall:

  i.          use its reasonable best efforts to make, keep and ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144, is publicly available;

 ii.          furnish to Buyer, promptly upon reasonable request, such statements, reports, documents or other information as may be reasonably requested by Buyer to permit Buyer to sell any of the Securities or Conversion Shares pursuant to Rule 144 without limitation or restriction;

iii.           promptly, at the request of Buyer, give the Company’s transfer agent instructions to the effect that, upon the transfer agent’s receipt from Buyer of a certificate (a “ Rule 144 Certificate ”) certifying the eligibility for sale under Rule 144 of any portion of the Securities or Conversion Shares which Buyer proposes to sell (the “ Securities Being Sold ”), and receipt by the transfer agent of a “Rule 144 Opinion” from the Company or its counsel (or from Buyer and its counsel), the transfer agent is to effect the transfer of the Securities Being Sold and issue to such transferee(s) thereof the transferred Securities Being Sold. If the transfer agent requires any additional documentation in connection with any proposed transfer by Buyer of any Securities Being Sold, then the Company shall promptly deliver or cause to be delivered to the transfer agent or to any other Person, all such additional documentation as may be necessary to effectuate the transfer of the Securities Being Sold and the issuance of an unlegended certificate to any transferee thereof, all at the Company’s expense; and

iv.          take such further action as Buyer may reasonably request, all to the extent required from time to time to enable Buyer to sell the Securities or the Conversion Shares without registration under the Securities Act.

(c)        Access to Books and Records .   The Company shall afford to Buyer and its representatives (including officers and employees of Buyer, and counsel, accountants and other professionals retained by Buyer), during normal business hours and upon reasonable notice to the Company, such access to the Company’s books, records, properties and personnel and to such other information as Buyer may reasonably request; provided, however, that the Company may withhold such access to Buyer or any such representative in the event that Buyer or such representative shall fail to execute a confidentiality agreement in a form reasonably satisfactory to the Company.

(d)        Efforts .   The Company shall use reasonable best efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary Consents or Permits, or any exemption by, all third parties and Governmental Authorities, and expiration or termination of any applicable waiting periods, necessary or advisable to consummate the transactions contemplated by this Agreement and the other Transaction Documents and to perform covenants contemplated by this Agreement and the other Transaction Documents.

 

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6.3       Affirmative Covenants of Mead Park .   Following the Closing, for so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock), unless waived in writing by the Company, Mead Park shall use its reasonable best efforts to:

(a)       provide the Company with access to information regarding the funding relationships of Mead Park and its Affiliates;

(b)       assist the Company in establishing business relationships with credit trading desks at other institutions;

(c)       source new corporate medium-term notes and new annuities for distribution through the Company’s distribution channels;

(d)       assist the Company with sourcing external personnel to expand key business lines within the Company; and

(e)       introduce the Company to potential sources of capital.

In addition, following the Closing, for so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock), Mead Park and its Affiliates shall, to the extent commercially practicable, offer PrinceRidge the opportunity to serve as a co-manager for the placement of securities in connection with collateralized loan obligation (CLO) products and other similar securitization transactions sponsored and/or managed by Mead Park or its controlled Affiliates, on commercially reasonable and arms’ length terms.

6.4       Fees and Expenses .   Each party shall bear its own expenses in connection with the transactions contemplated by this Agreement and the Transaction Documents; provided, however, that in the event that Buyer terminates this Agreement under Section 10.1(b)i or Section 10.1(e)(i) or the Company terminates this Agreement under Section 10.1(f)(ii), the Company will reimburse Buyer for all out-of-pocket expenses incurred by Buyer and its Affiliates in connection with due diligence, the negotiation and preparation of this Agreement, the Transaction Documents and the undertaking of the transactions contemplated herein and therein (including fees and expenses of counsel), up to an aggregate maximum amount of Three Hundred Thousand Dollars ($300,000).

6.5       Reservation of Shares .   The Company shall, at all times, have authorized and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary for the issuance of all of the Conversion Shares upon conversion of the Note (collectively, the “ Share Reserve ”). If at any time the Share Reserve is insufficient, then the Company shall, as soon as reasonably practicable, take all required measures to implement an increase of the Share Reserve accordingly. If the Company does not have sufficient authorized and unissued shares of Common Stock available to increase the Share Reserve, then the Company shall call and hold a special meeting of the stockholders of the Company within ninety (90) business days of such occurrence, for the purpose of increasing the number of shares of Common Stock authorized, and, at any such special meeting, the Company’s management shall recommend to the stockholders to vote in favor of increasing the number of shares of Common Stock authorized.

 

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6.6       Disclosure of Transactions and Other Material Information .  The Company shall, on or before 8:30 a.m., New York City time, on the first (1 st ) trading day after the date of this Agreement, issue a press release disclosing the material terms of the transactions contemplated by this Agreement and the Transaction Documents. On or before 5:30 p.m., New York City time, on the second (2 nd ) business day after the date of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by this Agreement and by the Transaction Documents in the form required by the Exchange Act (the “ 8-K Filing ”). None of the Company, its Subsidiaries, or Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated by this Agreement or by the Transaction Documents without the express written consent of all of the other parties to this Agreement (such consent not to be unreasonably withheld or delayed); provided, however, that the Company shall be entitled, without the prior approval of Buyer, to file the 8-K Filing or other public disclosure as is required by applicable Law and regulations, subject to providing Buyer with reasonable opportunity to comment thereon. Notwithstanding the foregoing, the Company shall not publicly disclose the name of Buyer or any of its Affiliates, or include the name of Buyer or any of its Affiliates in any filing with the SEC or any regulatory agency or Trading Market, without the prior consent of Buyer (such consent not to be unreasonably withheld or delayed), except: (a) as required by federal securities Laws in connection with (x) the 8-K Filing, (y) any registration statement contemplated by the Registration Rights Agreement, or (z) the filing of this Agreement and the final Transaction Documents with the SEC; and (b) to the extent that such disclosure is required by Law or Trading Market rules and regulations, in which case the Company shall provide Buyer with prior notice of such disclosure permitted under this clause (b).

6.7       NYSE MKT Listing Application .  Following the Effective Date and prior to the Closing, the Company shall prepare and file with the NYSE MKT an Additional Listing Application (the “ Listing Application ”) relating to the Common Shares and the Conversion Shares.

 

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6.8       Stockholder Meeting and Company Proxy Statement .  As promptly as reasonably possible following the Effective Date, but in any event within forty-five (45) days of the Effective Date, the Company shall call a meeting of its stockholders (the “ 2013 Annual Meeting of Stockholders ”) to vote on, among other things, proposals (collectively, the “ Stockholder Proposal ”) regarding the issuance of the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares for purposes of Sections 711 and 713 of the NYSE MKT’s Company Guide, as applicable. The Board of Directors shall recommend to the Company’s stockholders that such stockholders approve the Stockholder Proposal, and shall not modify or withdraw such resolution. In connection with the 2013 Annual Meeting of Stockholders, the Company shall promptly prepare and file with the SEC a Definitive Proxy Statement on Schedule 14A pursuant to Section 14(a) of the Exchange Act (the “ Company Proxy Statement ”), shall use its reasonable best efforts to solicit proxies for such stockholder approval and shall use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause a definitive proxy statement related the 2013 Annual Meeting of Stockholders to be mailed to the Company’s stockholders promptly after clearance by the SEC. The Company shall notify Buyer promptly of the receipt of any comments from the SEC or its staff with respect to the Company Proxy Statement and of any request by the SEC or its staff for amendments or supplements to such proxy statement or for additional information and shall supply Buyer with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to such proxy statement. If at any time prior to the 2013 Annual Meeting of Stockholders there shall occur any event that is required to be set forth in an amendment or supplement to the Company Proxy Statement, the Company shall promptly prepare and mail to its stockholders such an amendment or supplement. The Company agrees promptly to correct any information provided by it or on its behalf for use in the Company Proxy Statement if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall promptly prepare and mail to its stockholders an amendment or supplement to correct such information to the extent required by applicable Laws. The Company shall consult with Buyer prior to mailing the Company Proxy Statement, or any amendment or supplement thereto, and provide Buyer with reasonable opportunity to comment thereon. The Board of Directors’ recommendation described in this Section 6.8 shall be included in the Company Proxy Statement.

6.9       Board Representatives; Chairman of the Board .

(a)       2013 Annual Meeting of Stockholders .  The Board of Directors shall (i) nominate Christopher Ricciardi and Jack DiMaio for election to the Board of Directors at the 2013 Annual Meeting of Stockholders; (ii) recommend to the Company’s stockholders the election of Messrs. Ricciardi and DiMaio at such meeting; and (iii) solicit proxies for Messrs. Ricciardi and DiMaio in connection with such meeting to the same extent as it does for any of its other nominees to the Board of Directors.

(b)       Qualifying Board Representatives .

i.          Following the Closing, if Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own fifteen percent (15%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock) (a “ Qualifying Ownership Interest ”) as of the record date of a Meeting, then:

(A)     Buyer shall be entitled to designate two (2) individuals (the “ Qualifying Board Representatives ”) to stand for election to the Board of Directors at such Meeting; provided, however, that such Qualifying Board Representatives shall have satisfied all of the requirements applicable to the Directors under applicable Law, the Articles of Incorporation, the Bylaws and any customary director qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing; and

(B)     the Board of Directors shall (i) nominate such Qualifying Board Representatives for election to the Board of Directors at such Meeting; (ii) recommend to the Company’s stockholders the election of the Qualified Board Representatives at such Meeting; and (iii) solicit proxies for such Qualifying Board Representatives in connection with such Meeting to the same extent as it does for any of its other nominees to the Board of Directors.

 

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ii.         Upon any Qualifying Board Representative’s death, resignation, retirement, disqualification or removal from office as a Director (including by failure to elect or re-elect), if there is a vacancy on the Board of Directors as a result of such occurrence, then:

(A)     Buyer shall have the right to designate the successor for such Qualifying Board Representative; provided, however, that such successor shall have satisfied all of the requirements applicable to the Directors under applicable Law, the Articles of Incorporation, the Bylaws and any customary director qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing; and

(B)     the Board of Directors take all necessary actions to fill the vacancy resulting therefrom with such successor.

(c)      Minority Board Representative .

i.          Following the Closing, if Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own less than a Qualifying Ownership Interest but at least ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock) (a Minority Ownership Interest ) as of the record date of a Meeting, then:

(A)    Buyer shall be entitled to designate one (1) individual (the “ Minority Board Representative ”) to stand for election to the Board of Directors at such Meeting; provided, however, that such Minority Board Representative shall have satisfied all of the requirements applicable to the Directors under applicable Law, the Articles of Incorporation, the Bylaws and any customary director qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing; and

(B)    the Board of Directors shall (i) nominate such Minority Board Representative for election to the Board of Directors at such Meeting; (ii) recommend to the Company’s stockholders the election of the Minority Board Representative at such Meeting; and (iii) solicit proxies for such Minority Board Representative in connection with such Meeting to the same extent as it does for any of its other nominees to the Board of Directors.

ii.        Upon any Minority Board Representative’s death, resignation, retirement, disqualification or removal from office as a Director (including by failure to elect or re-elect), if there is a vacancy on the Board of Directors as a result of such occurrence, then:

(A)    Buyer shall have the right to designate the successor for such Minority Board Representative; provided, however, that such successor shall have satisfied all of the requirements applicable to the Directors under applicable Law, the Articles of Incorporation, the Bylaws and any customary director qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing; and

 

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(B)     the Board of Directors take all necessary actions to fill the vacancy resulting therefrom with such successor.

(d)      Removal of Board Representatives .  Notwithstanding any other provision of this Agreement, if Buyer, Mead Park and its or their controlled Affiliates and Principals shall collectively own less than a Qualifying Ownership Interest but continue to collectively own a Minority Ownership Interest, then (i) the terms and conditions set forth in Section 6.9(b) shall be null and void; and (ii) if so requested by the Board of Directors (in its sole discretion), Buyer shall cause one (1) of the Qualifying Board Representatives (or its successor designated by Buyer pursuant to Section 6.9(b)) of Buyer’s choosing to resign from his or her position as Director. Notwithstanding any other provision of this Agreement, if Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own less than a Qualifying Ownership Interest or a Minority Ownership Interest, then (A) the terms and conditions set forth in Section 6.9(b) and Section 6.9(c) shall be null and void; and (B) if so requested by the Board of Directors (in its sole discretion), Buyer shall cause any Qualifying Board Representatives, Minority Board Representative, or any of their respective successors designated by Buyer pursuant to Section 6.9(b) and/or Section 6.9(c), to resign from his or her position as Director.

(e)      Chairman .  No later than the Closing Date, and thereafter for so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own a Minority Ownership Interest and Jack DiMaio is a Director and agrees to act as Chairman of the Board of Directors, the Company shall cause Jack DiMaio to be elected and appointed as the Chairman of the Board of Directors subject to his satisfaction of all of the requirements applicable to the Chairman position under applicable Law, the Articles of Incorporation, the Bylaws and any customary chairman qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing. For so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own a Minority Ownership Interest, and both (i) Jack DiMaio is no longer Chairman of the Board of Directors due to his death, disqualification or removal from office as Director and (ii) Christopher Ricciardi is a Director and agrees to act as Chairman of the Board of Directors, then the Company shall cause Christopher Ricciardi to be elected and appointed as the Chairman of the Board of Directors subject to satisfaction of all of the requirements applicable to the Chairman position under applicable Law, the Articles of Incorporation, the Bylaws and any customary chairman qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing. In all other situations (including in the event Mr. DiMaio resigns or retires from his positions as Chairman of the Board of Directors), the Chairman of the Board of Directors shall be elected and appointed pursuant to the Bylaws.

 

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6.10     Gross-Up Rights .

(a)       Sale of New Securities .  After the Closing, for so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock) (before giving effect to any issuances triggering provisions of this Section 6.10), at any time that the Company or IFMI, LLC makes any public or nonpublic offering or sale of any equity (including the Common Stock, or any preferred stock or restricted stock), or any securities, options or debt that is convertible or exchangeable into equity (including Convertible IFMI LLC Units) or that includes an equity component (such as, an “equity” kicker) (including any hybrid security) (any such security, a “ New Security ”) other than (i) pursuant to the granting or exercise of employee stock options or other stock incentives pursuant to the Company’s stock incentive plans approved by the Board of Directors (so long as the authorized awards under the Company’s stock incentive plans represent less than ten percent (10%) of the outstanding shares of the Company’s capital stock) or the issuance of capital stock pursuant to any employee stock purchase plan of the Company approved by the Board of Directors or similar plan where stock is being issued or offered to a trust, other entity or otherwise, for the benefit of any employees, officers or directors of the Company, in each case, in the ordinary course of providing incentive compensation, (ii) issuances of capital stock as full or partial consideration for a merger, acquisition, joint venture, strategic alliance, license agreement or other similar nonfinancing transaction, (iii) issuances of shares of the Common Stock upon the conversion or exercise of any convertible preferred stock or notes outstanding as of the Effective Date or issued pursuant to the Transaction Documents, in each case, in accordance with the terms thereof as of the Effective Date); (iv) issuances of rights, stock or other property pursuant to the Shareholder Rights Plan; or (v) issuances of Convertible IFMI LLC Units pursuant to Section 6.10(x) or (y) of the IFMI LLC Agreement, Buyer shall be afforded the opportunity to acquire from the Company and/or IFMI, LLC for the same price (net of any underwriting discounts or sales commissions) and on the same terms as New Securities are proposed to be offered to others, up to the amount of New Securities in the aggregate required to enable it to maintain its proportionate equivalent interest in the Company immediately prior to any such issuance of New Securities (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock).

(b)       Notice .  In the event the Company and/or IFMI, LLC proposes to offer or sell New Securities that are subject to Buyer’s rights under Section 6.10(a), the Company and/or IFMI, LLC (as applicable) shall give Buyer written notice of its intention, describing the price (or range of prices), anticipated amount of securities, timing and other terms upon which the Company and/or IFMI, LLC proposes to offer the same (including, in the case of a registered public offering and to the extent possible, a copy of the prospectus included in the registration statement filed with respect to such offering), no later than five (5) business days, as the case may be, after the initial filing of a registration statement with the SEC with respect to an underwritten public offering, after the commencement of marketing with respect to a Rule 144A offering or after the Company and/or IFMI, LLC proposes to pursue any other offering. Buyer shall then have ten (10) business days from the date of receipt of such a notice to notify the Company and/or IFMI, LLC (as applicable) in writing that it intends to exercise its rights provided in this Section 6.10 and as to the amount of New Securities Buyer desires to purchase, up to the maximum amount calculated pursuant to Section 6.10(a). Such notice shall constitute a nonbinding indication of interest of Buyer to purchase the amount of New Securities so specified at the price and other terms set forth in the Company’s and/or IFMI, LLC’s notice to it. The failure of Buyer to respond within such ten (10) business day period shall be deemed to be a waiver of Buyer’s rights under this Section 6.10 only with respect to the offering described in the applicable notice. The Company shall cause IFMI, LLC to comply with this Section 6.10.

 

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6.11     Redemption Transactions .  Following the Closing, for so long as Buyer, Mead Park and its or their controlled Affiliates and Principals collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock), the Company shall not redeem, recapitalize or repurchase any shares of capital stock of the Company, or rights, options or warrants to purchase shares of capital stock of the Company, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for capital stock of the Company (except with respect to the Conversion Shares) unless Buyer is given the right to participate in such redemption, recapitalization, or repurchase in a pro rata manner.

6.12     Additional Covenants Prior to Closing .  Prior to the earlier of the Closing Date and the termination of this Agreement pursuant to Section 10.1, except as expressly provided in this Agreement or as otherwise consented to in writing in advance by Buyer:

(a)      The Company shall promptly provide Buyer with written notice of the occurrence of any circumstance, event, change, development or effect occurring after the date hereof and relating to the Company or any Subsidiary of which the Company has Knowledge and which constitutes a Material Adverse Effect or otherwise causes or renders any of the representations and warranties of the Company or any Subsidiary, as applicable, set forth in this Agreement to be inaccurate.

(b)      The Company shall not agree to any amendment, waiver or modification of the Transaction Documents to which Buyer is not a party.

(c)      The Company will not modify, in any manner, the limited liability company agreement of IFMI, LLC, other than by the effectiveness of the LLC Agreement Amendment, which amendment shall not be modified in any manner.

(d)      The Company shall and shall cause the Subsidiaries to take all actions necessary to ensure that none of the transactions contemplated by this Agreement or the other Transaction Documents, individually or in the aggregate, shall give rise to a “change in control” or “change of control,” the acceleration of any right, or result in any additional rights, under any Benefit Plan.

(e)      The Company shall, and shall cause each Subsidiary to conduct its and their businesses only in the ordinary course of business consistent with past practice and shall use reasonable best efforts to maintain and preserve its and each Subsidiary’s business (including its business organization, Assets, goodwill and insurance coverage) and preserve business relationships with customers, strategic partners and others having business dealings with it.

(f)      Except as required pursuant to any existing written, binding agreements in effect prior to the date of this Agreement, the Company shall not, and shall cause each Subsidiary to not, take any of the following actions:

i.          other than in the ordinary course of business, incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person or incur any indebtedness of the Company that would be senior in right of payment or any other respect to the Note;

 

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ii.          (A) adjust, split, combine or reclassify any capital stock of the Company; (B) make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of capital stock or any securities or obligations convertible into or exchangeable for any shares of the capital stock (except dividends paid by any Subsidiary to the Company or any of the Company’s other wholly-owned Subsidiaries and regular quarterly dividends in an amount not to exceed $0.02 per share); (C) grant any stock options, stock appreciation rights, performance shares, restricted stock units, restricted shares or other equity-based awards or interests, or grant any Person any right to acquire any shares of capital stock; or (D) issue, sell or otherwise permit to become outstanding any additional shares of capital stock or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock or any options, warrants, or other rights of any kind to acquire any shares of capital stock, except pursuant to the exercise of stock options or the settlement of equity compensation awards outstanding as of the Effective Date in accordance with their terms or as otherwise permitted by this Agreement;

iii.          sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or Assets to any Person other than a wholly-owned Subsidiary, or cancel, release or assign any indebtedness to any such Person or any Claims held by any such Person, in each case other than in the ordinary course of business or pursuant to contracts or agreements in force at the date of this Agreement;

iv.          except for transactions in the ordinary course of business or pursuant to Contracts or agreements in force at the date of this Agreement or permitted by this Agreement, make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or non-investment assets of any other Person other than a wholly-owned Subsidiary or make any capital expenditure in excess of Two Hundred Thousand Dollars ($200,000);

v.          except for transactions in the ordinary course of business, terminate, materially amend, or waive any material provision of, any material Contract, as the case may be, or make any change in any instrument or agreement governing the terms of any of its securities, or material Contract, other than normal renewals of Contracts without material adverse changes of terms, or enter into any material Contract;

 

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vi.          except as required under applicable law or the terms of any Benefit Plan existing as of the Effective Date, as applicable, (A) enter into, adopt or terminate any employee benefit or compensation plan, program, policy or arrangement for the benefit or welfare of any current or former employee, officer, director or consultant, (B) amend (whether in writing or through the interpretation of) any employee benefit or compensation plan, program, policy or arrangement for the benefit or welfare of any current or former employee, officer, director or consultant, (C) materially increase the compensation or benefits payable to any current or former employee, officer, director or consultant (other than in connection with a promotion or change in responsibilities), (D) pay or award, or commit to pay or award, any bonuses or incentive compensation other than in the ordinary course consistent with past practice, (E) grant or accelerate the vesting of any equity-based awards or other compensation, (F) enter into any new, or amend any existing, employment, severance, change in control, retention, bonus guarantee, collective bargaining agreement or similar agreement or arrangement, (G) fund any rabbi trust or similar arrangement, (H) terminate the employment or services of any officer or any employee whose target annual compensation is greater than One Hundred Thousand Dollars ($100,000), other than for cause, or (I) hire any officer, employee, independent contractor or consultant who has target annual compensation (excluding targeted annual compensation based on commission) greater than One Hundred Thousand Dollars ($100,000);

vii.          settle any material Claim, except in the ordinary course of business or for settlement of a Claim that is settled in an amount and for consideration not in excess of Five Hundred Thousand Dollars ($500,000) and that would not impose any material restriction on the business of the Company or any Subsidiary;

viii.         amend its organizational documents or its bylaws or comparable governing documents;

 ix.          other than in prior consultation with Buyer, materially restructure or materially change its investment securities or derivatives portfolio or its interest rate exposure, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported or purchase any security rated below investment grade other than in the ordinary course of business within the capital limits currently in use by the Company;

  x.         enter into any new line of business;

 xi.         take any action that, or fail to take any action the failure of which to be taken, could reasonably be expected to prevent or materially delay the consummation of the transactions contemplated in this Agreement and the Transaction Documents; or

xii.         take, offer, propose or authorize any of, or commit or agree to take any of, the foregoing.

6.13     Efforts .  Each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to consummate and make effective as promptly as practicable the transactions contemplated hereby and under the other Transaction Documents and to cooperate with the other parties in connection with the foregoing. Without limiting the generality of the foregoing, the Company shall use its reasonable best efforts to (i) obtain any required approvals or consents as promptly as practicable, (ii) to lift or rescind as promptly as practicable any injunction or restraining order or other order adversely affecting the ability of the parties hereto to consummate the transactions contemplated hereby, (iii) to effect all necessary registrations and filings, if any, and (iv) to fulfill all of the conditions to the obligations of the parties to consummate the transactions contemplated by this Agreement set forth in Article VIII. Without limiting the generality of the foregoing, Buyer shall use its reasonable best efforts to fulfill all of the conditions to the obligations of the parties to consummate the transactions contemplated by this Agreement set forth in Sections 7.1 and 7.4.

 

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ARTICLE VII

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL

The obligation of the Company hereunder to issue and to sell the Securities to Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

7.1       Buyer’s Execution of Transaction Documents .   Buyer shall have executed the Transaction Documents that require Buyer’s execution, and delivered such Transaction Documents to the Company.

7.2       NYSE MKT Approval of the Listing of the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares .    Pursuant to the Listing Application, the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares shall have been approved for listing on the NYSE MKT by the NYSE MKT.

7.3       Company Stockholder Approval of Contemplated Transactions .   In connection with the Company Proxy Statement, the Company’s stockholders shall have approved the issuance of the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares.

7.4       Accuracy of Buyer’s Representations; Compliance with Covenants .     The representations and warranties of Buyer other than the Buyer Fundamental Representations shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article IV above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), the Buyer Fundamental Representations shall be true and correct in all respects (except for de minimis failures) and Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer at or prior to the Closing Date.

ARTICLE VIII

CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS TO PURCHASE

The obligation of Buyer hereunder to purchase the Securities at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions (which conditions shall be deemed satisfied upon the occurrence of the Closing), provided that these conditions are for Buyer’s sole benefit and may be waived by Buyer at any time in its sole discretion:

8.1       Company Execution of the Transaction Documents .   The Company shall have executed and delivered the Transaction Documents that require the Company’s execution and delivered such Transaction Documents to Buyer and all such Transaction Documents shall have been fully executed by all other parties thereto (other than Buyer) and remain in full force and effect.

 

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8.2       NYSE MKT Approval of the Listing of the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares .    Pursuant to the Listing Application, the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares shall have been approved for listing on the NYSE MKT by the NYSE MKT.

8.3       Company Stockholder Approval of Contemplated Transactions .   In connection with the Company Proxy Statement, the Company’s stockholders shall have approved the issuance of the Common Shares, the Conversion Shares, the Cohen Shares and the Cohen Conversion Shares.

8.4       Composition of the Board of Directors .  The Board of Directors shall consist of Daniel G. Cohen, Jack DiMaio, Christopher Ricciardi, and five (5) of the Current Independent Directors. In addition, Jack DiMaio shall be Chairman of the Board of Directors, and Daniel G. Cohen shall be Vice-Chairman of the Board of Directors and President of the Company’s European operations, including the President of CCFL.

8.5       Employment Agreements .  The Cohen IFMI Employment Agreement shall have been amended and restated and the Cohen PrinceRidge Employment Agreement shall have been terminated, in each case, as provided in the Amended and Restated Cohen Employment Agreement, which shall be in full force and effect as of the Closing.

8.6       Cohen Purchase Agreement .   The Cohen Purchase Agreement shall remain in effect and, simultaneous with the Closing, Cohen Bros. shall purchase from the Company and the Company shall sell to Cohen Bros. (i) the Cohen Shares, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000); and (ii) the Cohen Note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000), pursuant to the Cohen Purchase Agreement.

8.7       Accuracy of Company’s Representations; Compliance with Covenants .   The representations and warranties of the Company other than the Company Fundamental Representations and the representations set forth in Section 5.13 (Tax Matters) shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article V above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, in which case they shall be true and correct in all material respects as of such specified date), the Company Fundamental Representations and the representations set forth in Section 5.13 (Tax Matters) shall be true and correct in all respects (except for de minimis failures) and, with respect to any matter disclosed to Buyer in writing in response to a representation set forth Article V, there shall have been no materially adverse developments that would reasonably be expected to result in a Material Adverse Effect in connection with any such matter. The Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

31


8.8       Closing Certificates .  The Company shall have executed and delivered to Buyer a closing certificate in substance and form reasonably required by Buyer, which closing certificate shall include and attach as exhibits: (i) a true copy of a certificate of good standing evidencing the formation and good standing of the Company, from the State of Maryland Department of Assessments and Taxation, as of a date within thirty (30) days of the Closing Date; (ii) the Articles of Incorporation; (iii) the Bylaws; and (iv) copies of the resolutions of the of the Company, consistent with Section 5.2, as adopted by the Board of Directors in a form reasonably acceptable to Buyer, and a senior executive officer of the Company shall have executed and delivered to Buyer a closing certificate, dated as of the Closing Date, certifying to the effect that the conditions set forth in Section 8.7 have been satisfied.

8.9       Opinion .  Buyer shall have received from outside counsel to the Company, a written opinion dated as of the Closing Date that addresses (i) the due incorporation of the Company, (ii) the due authorization and valid issuance of the Common Shares and (iii) the due authorization, execution and delivery of this Agreement and the Transaction Documents and shall also have received a 10b-5 letter in form and substance reasonably satisfactory to Buyer.

8.10     Tax Benefits .  Since the date of this Agreement, (i) there shall have been no material change to any rules under Sections 382, 383 or 384 of the Code that adversely affect the application of Sections 382, 383 or 384 of the Code to any net operating losses, unrealized built-in losses or other tax attributes of the Company and any Affiliate (if relevant) that exist on or after the Closing Date; and (ii) an Ownership Change (as defined by Section 382(g) of the Code), in Buyer’s reasonable judgment, has not occurred and will not occur as a result of the transactions contemplated herein. The Shareholder Rights Plan shall be in effect and shall have been in continuous effect since the Effective Date, with the distribution of preferred stock purchase rights occurring promptly thereafter.

8.11     Articles Supplementary; Designation and Issuance of Series E Voting Non-Convertible Preferred Stock .  Articles supplementary to the Company’s Articles of Incorporation that provide for the designation of the Series E Voting Non-Convertible Preferred Stock shall have been filed with the State of Maryland Department of Assessments and Taxation and shall be effective. In accordance with the terms and provisions of the Exchange Agreement, any and all outstanding shares of Series D Voting Non-Convertible Preferred Stock shall have been exchanged into outstanding shares of Series E Voting Non-Convertible Preferred Stock, which series shall be perpetual, and all such shares of Series E Voting Non-Convertible Preferred Stock shall have been duly authorized, validly issued and shall be fully paid and nonassessable.

8.12     Amendment to IFMI LLC Agreement .  The LLC Agreement Amendment shall be effective.

 

32


8.13     No Injunctions .  No provision of any applicable Law and no Judgment shall prohibit the Closing or shall prohibit or restrict Buyer or its Affiliates from owning, voting, converting or exercising any Securities or Conversion Shares in accordance with the terms thereof and no Proceeding shall have been commenced by a Governmental Authority seeking to effect any of the foregoing.

ARTICLE IX

INDEMNIFICATION

9.1       Company’s Obligation to Indemnify .  The Company hereby agrees to defend, indemnify and hold harmless Buyer and Buyer’s Affiliates and subsidiaries, and its respective directors, officers, partners, employees, agents and representatives, and any Person who controls Buyer, and the successors and assigns of each of the foregoing (collectively, the “ Buyer Indemnified Parties ”), to the fullest extent lawful, from and against any and all Claims made, brought or asserted against the Buyer Indemnified Parties, or any one of them, and the Company hereby agrees to pay or reimburse the Buyer Indemnified Parties for any and all amounts arising out of Claims payable by any of the Buyer Indemnified Parties to any Person, as well as reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and other similar costs, as a result of, or arising out of, or relating to: (i) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (ii) any breach of any covenant, agreement or Obligation of the Company contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Claims covered hereby, which is permissible under applicable Law. The Company will not be liable to Buyer under this indemnity: (x) for any settlement by Buyer in connection with any Claim effected without the Company’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; or (y) to the extent that a Claim is attributable to Buyer’s breach of any of the representations, warranties, covenants or agreements made by Buyer in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. Notwithstanding anything to the contrary contained in this Section 9.1 or anywhere else in this Agreement or in the Transaction Documents, the aggregate amount of indemnification which may be sought, claimed and/or recovered by the Buyer Indemnified Parties (collectively) from the Company pursuant to this Section 9.1 relating to a breach of a representation or warranty by the Company (other than a breach of the Company Fundamental Representations, excluding the representation and warranty of the Company set forth in clause (ii) of Section 5.5) shall not, under any circumstances, exceed Ten Million Dollars ($10,000,000).

 

33


9.2       Buyer’s Obligation to Indemnify .  Buyer agrees to defend, indemnify and hold harmless the Company and each of the Company’s Affiliates and Subsidiaries, and their respective directors, officers, partners, employees, agents and representatives, and the successors and assigns of each of the foregoing (collectively, the “ Company Indemnified Parties ”), to the fullest extent lawful, from and against any and all Claims made, brought or asserted against the Company Indemnified Parties, or any one of them, and Buyer hereby agrees to pay or reimburse the Company Indemnified Parties for any and all amounts arising out of Claims payable by any of the Company Indemnified Parties to any Person, as well as reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and other similar costs, as a result of, or arising out of, or relating to: (i) any misrepresentation or breach of any representation or warranty made by Buyer in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (ii) any breach of any covenant, agreement or Obligation of Buyer contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by Buyer may be unenforceable for any reason, Buyer shall make the maximum contribution to the payment and satisfaction of each of the Claims covered hereby, which is permissible under applicable Law. Buyer will not be liable to the Company under this indemnity: (x) for any settlement by the Company in connection with any Claim effected without Buyer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; or (y) to the extent that a Claim is attributable to the Company’s breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. Notwithstanding anything to the contrary contained in this Section 9.2 or anywhere else in this Agreement or in the Transaction Documents, the aggregate amount of indemnification which may be sought, claimed and/or recovered by the Company Indemnified Parties (collectively) from Buyer pursuant to this Section 9.2 relating to a breach of representation or warranty made by Buyer (other than a breach of the Buyer Fundamental Representations) shall not, under any circumstances, exceed Three Hundred Thousand Dollars ($300,000).

ARTICLE X

TERMINATION

10.1     Termination Events .  This Agreement may be terminated at any time prior to the Closing:

(a)     by the written consent of the Company and Buyer.

(b)     by Buyer with written notice to the Company if:

 i.     a material breach of this Agreement has been committed by the Company and such material breach has not been (i) waived in writing by Buyer, or (ii) cured by the Company to the reasonable satisfaction of Buyer within fifteen (15) days following the Company’s receipt of written notice of such material breach from Buyer; or

ii.     the Closing shall not have occurred on or before September 30, 2013 (the “ Transaction Deadline ”), unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by Buyer prior to the Closing.

(c)      by the Company with written notice to Buyer if:

i.     a material breach of this Agreement has been committed by Buyer and such material breach has not been (i) waived in writing by the Company, or (ii) cured by Buyer to the reasonable satisfaction of the Company within fifteen (15) days following Buyer’s receipt of written notice of such material breach from the Company; or

 

34


ii.     the Closing shall not have occurred on or before the Transaction Deadline, unless such failure shall be due to the failure of the Company to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by the Company prior to the Closing.

(d)      by Buyer or the Company in the event that there shall be (i) any Law that makes the consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited, or (ii) any Judgment restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement and such Judgment shall have become final and non-appealable.

(e)      (i) by Buyer, if any of the conditions to Closing set forth in Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.11, or 8.12 are not capable of being satisfied on or before the Transaction Deadline, provided, in each case, that Buyer is not the reason that such condition is not capable of being satisfied, or (ii) by Buyer, if any of the conditions to Closing set forth in Sections 8.10 or 8.13 are not capable of being satisfied on or before the Transaction Deadline, provided, in each case, that Buyer is not the reason that such condition is not capable of being satisfied.

(f)      (i) by the Company, if any of the conditions to Closing set forth in Article VII (other than Sections 7.2 , 7.3 and 7.4) are not capable of being satisfied on or before the Transaction Deadline, or (ii) by the Company, if any of the conditions to Closing set forth in Sections 7.2 and 7.3 are not capable of being satisfied on or before the Transaction Deadline, provided, in each case, that the Company is not the reason that such condition is not capable of being satisfied.

10.2     Effect of Termination .  If this Agreement is terminated pursuant to this Article X, then all further obligations of the parties under or pursuant to this Agreement and under or pursuant to the Transaction Documents (other than Section 6.4, if applicable) shall terminate without further liability of any party to the other parties; provided that nothing herein shall relieve any party from liability for willful breach of this Agreement of breach of this Agreement prior to any termination thereof.

ARTICLE XI

MISCELLANEOUS

11.1     Interpretation .  In this Agreement, unless the express context otherwise requires: (i) the words “herein,” “hereof” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (ii) references to the words “Article” or “Section” refer to the respective Articles and Sections of this Agreement, and references to “Exhibit” or “Schedule” refer to the respective Exhibits and Schedules annexed hereto; (iii) references to a “party” mean a party to this Agreement and include references to such party’s permitted successors and permitted assigns; (iv) references to a “third party” mean a Person not a party to this Agreement; (v) the terms “dollars” and “$” mean U.S. dollars; (vi) wherever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation.”

 

35


11.2     Notices .  All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

 

If to the Company:

  

Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

Attn: Joseph W. Pooler, Jr.

Facsimile: (215) 701-8280

E-mail: jpooler@ifmi.com

 

and to:

 

  

Institutional Financial Markets, Inc.

1633 Broadway, 28th Floor

New York, New York 10019

Attn: Rachael Fink

Facsimile: (866) 543-2907

E-mail: rfink@ifmi.com

 

With a copy to:

  

 

Duane Morris LLP

430 South 17th Street

Philadelphia, Pennsylvania 19103

Attn: Darrick M. Mix

Facsimile: (215) 239-4958

Email: dmix@duanemorris.com

 

If to Buyer:

  

 

Mead Park Capital Partners LLC

c/o Mead Park Holdings LP

126 East 56th Street, 19th Floor

New York, New York 10022

Attn: Christopher Ricciardi

Facsimile: (212) 432-4770

Email: cricciardi@meadpark.com

 

and to:

 

Mead Park Capital Partners LLC

c/o Mead Park Holdings LP

126 East 56th Street, 19th Floor

New York, New York 10022

Attn: Dennis J. Crilly

Facsimile: (212) 432-4770

Email: dcrilly@meadpark.com

 

36


With a copy to:

  

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10022

Attn: Mitchell Eitel

Facsimile: (212) 558-3588

Email: eitelm@sullcrom.com

 

If to Mead Park:

  

Mead Park Holdings LP

126 East 56th Street, 19th Floor

New York, NY 10022

Attn: Dennis Crilly

Facsimile: (212) 432-4770

Email: dcrilly@meadpark.com

 

With a copy to:

  

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10022

Attn: Mitchell Eitel

Facsimile: (212) 558-3588

Email: eitelm@sullcrom.com

unless the address is changed by the party by like notice given to the other parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address above, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express (FedEx), the United Parcel Service (UPS), or another nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., New York City time, on a business day. Any notice hand delivered after 5:00 p.m. New York City time, shall be deemed delivered on the following business day. Notwithstanding the foregoing, notices, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

11.3     Entire Agreement .  This Agreement and (i) the Exhibits and Schedules attached hereto, (ii) the documents delivered pursuant hereto, including the Transaction Documents, (iii) the Confidentiality Agreement, and (iv) the Exclusivity Agreement, collectively, set forth all the promises, covenants, agreements, conditions and understandings between the parties hereto with respect to the subject matter hereof and thereof, and supersede all prior and contemporaneous agreements, understandings, inducements or conditions, expressed or implied, oral or written.

11.4     Assignment .  No party hereto may sell or assign this Agreement or any of the Transaction Documents, or any portion thereof or any rights thereunder, either voluntarily or by operation of law, nor delegate any of their respective duties or obligations hereunder or thereunder, without the prior written consent of all of the other parties to this Agreement, except that Buyer shall be permitted to assign its rights or obligations hereunder to Mead Park and Buyer’s and Mead Park’s controlled Affiliates and Principals (any such transferee shall be included in the term “Buyer”); provided, that no such assignment shall relieve Buyer of any of its obligations under this Agreement.

 

37


11.5     Binding Effect .  This Agreement shall be binding upon the parties hereto, their respective successors and permitted assigns.

11.6     Amendment .  The parties hereby irrevocably agree that no attempted amendment, modification, or change of this Agreement shall be valid and effective, unless the parties shall unanimously agree in writing to such amendment, modification or change.

11.7     No Waiver .  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver of any provision of this Agreement shall be effective, unless it is in writing and signed by the party against whom it is asserted, and any such written waiver shall only be applicable to the specific instance to which it relates and shall not be deemed to be a continuing or future waiver.

11.8     Gender and Use of Singular and Plural .  All pronouns shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the party or parties or their personal representatives, successors and assigns may require.

11.9     Execution .  This Agreement may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and the same Agreement, and the same shall become effective when counterparts have been signed by each party and each party has delivered its signed counterpart to the other party. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.

11.10   Headings .   The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of the Agreement.

11.11   Governing Law .   This Agreement shall be construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws that would result in the application of the laws of another jurisdiction. The parties further agree that any action between them shall be heard in New York City, New York, and expressly consent to the jurisdiction and venue of the state and federal courts sitting in New York City, New York, for the adjudication of any civil action asserted pursuant to this Agreement.

11.12   Further Assurances .   The parties hereto will execute and deliver such further instruments and do such further acts and things as may be reasonably required to carry out the intent and purposes of this Agreement and the other Transaction Documents.

 

38


11.13   Survival .  The covenants and agreements made by the Company and Buyer herein shall survive for the duration of any statutes of limitations applicable thereto or until, by their respective terms, they are no longer operative. The representations and warranties made by the Company and Buyer herein shall survive for a period of eighteen (18) months following the Closing Date, provided, however, that the Company Fundamental Representations and Buyer Fundamental Representations shall survive for a period of three (3) years following the Closing Date. Notwithstanding the foregoing in this Section 11.13, the representations and warranties contained in Section 5.13 (Tax Matters) shall survive until the expiration of the statute of limitation applicable thereto.

11.14   Time is of the Essence .  The parties hereby agree that time is of the essence with respect to performance of each of the parties’ obligations under this Agreement. The parties agree that in the event that any date on which performance is to occur falls on a Saturday, Sunday or state or national holiday, then the time for such performance shall be extended until the next business day thereafter occurring.

11.15   Joint Preparation .  The preparation of this Agreement has been a joint effort of the parties and the resulting documents shall not, solely as a matter of judicial construction, be construed more severely against one of the parties than the other.

11.16   Severability .  If any provision of this Agreement is held to be invalid or unenforceable in any respect, then the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

11.17   No Third Party Beneficiaries .  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that the provisions of Article IX are intended for the benefit of the Persons referred to in that Article.

11.18   WAIVER OF JURY TRIAL .   EACH OF BUYER AND THE COMPANY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH BUYER AND THE COMPANY ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BUYER TO PURCHASE THE SECURITIES.

[SIGNATURES ON THE FOLLOWING PAGE]

 

39


IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be executed as of the date and year first set forth above.

 

  COMPANY:  
  INSTITUTIONAL FINANCIAL MARKETS, INC.
  By:        /s/ Joseph W. Pooler, Jr.                           
  Name:   Joseph W. Pooler, Jr.  
  Title:   Executive Vice President, Chief Financial Officer and Treasurer  
  BUYER:  
  MEAD PARK CAPITAL PARTNERS LLC
 

By:  Mead Park Advisors LLC, its investment adviser

 

By:        /s/ Christopher Ricciardi                         

 
  Name:   Christopher Ricciardi  
  Title:   Authorized Officer  
 

MEAD PARK, solely for purposes of Section 6.3:

  MEAD PARK HOLDINGS, LP  
  By:        /s/ Christopher Ricciardi                           
  Name:   Christopher Ricciardi  
  Title:   Authorized Officer  

 

[Signature page to Securities Purchase Agreement]


DISCLOSURE SCHEDULES

TO

SECURITIES PURCHASE AGREEMENT

May 9, 2013

These Schedules relate to that certain Securities Purchase Agreement (the “ Securities Purchase Agreement ”), dated May 9, 2013, by and among Institutional Financial Markets, Inc., a Maryland corporation (“ IFMI, Inc. ” or the “ Company ”), and Mead Park Capital Partners LLC, a Delaware limited liability company (“ Buyer ”) and, solely for purposes of Section 6.3 thereof, Mead Park Holdings, LP.

Section and subsection references in these Schedules are references to the corresponding sections and subsections of the Securities Purchase Agreement and are inserted solely for the sake of convenience. All capitalized terms not otherwise defined shall have the meanings ascribed to them in the Securities Purchase Agreement. Any matter disclosed in any section of these Schedules shall be deemed disclosed in all other sections of the Schedules to the extent that such disclosure is reasonably apparent to be applicable to such other sections, notwithstanding the reference to a particular section or subsection.

To the extent that any representation or warranty contained in the Securities Purchase Agreement is limited or qualified by the materiality of the matters to which the representation or warranty is given, the inclusion of any matter in these Schedules does not constitute a determination by Buyer or the Company that such matters are material. Nor in such cases where a representation or warranty is limited or qualified by the materiality of the matters to which the representation or warranty is given shall the disclosure of any matter in these Schedules imply that any other undisclosed matter having a greater value or significance is material.

The inclusion in these Schedules of any matter or document shall not constitute any representation, warranty or undertaking not expressly set forth in the Securities Purchase Agreement nor shall such disclosure be taken as extending the scope of any such representations or warranties. Nothing in these Schedules constitutes an admission of liability or obligation of Buyer or the Company to any third party, or any admission against Buyer or the Company or the interest of Buyer or the Company.

 

1


SCHEDULE 5.3

CAPITALIZATION

(i)

RESTRICTED IFMI, INC. COMMON STOCK

 

Recipient   

Vesting

Date

  

Amount of
Shares or

Units

   Entity           

Beach, Walter

   3/4/2014    19,231    IFMI, Inc.

Bennett, Rodney

   3/4/2014    19,231    IFMI, Inc.

Brahney, Tom

   1/13/2014    22,523    IFMI, Inc.

Burklin, Stephan

   1/13/2014    16,216    IFMI, Inc.

Caton, Cameron

   1/13/2014    22,523    IFMI, Inc.

Cohen, Daniel G.

  

100,000         -

12/31/2013;

100,000         -

12/31/2014

   200,000    IFMI, Inc.

Costello, Thomas

   3/4/2014    19,231    IFMI, Inc.

 

 

Curcio, Vincent

  

 

 

1/13/2014

  

 

 

22,523

  

 

 

IFMI, Inc.

Dawson, G. Steven

   3/4/2014    19,231    IFMI, Inc.

DiGennaro, Daniel

   1/13/2014    6,757    IFMI, Inc.

Donovan, Joseph

   3/4/2014    19,231    IFMI, Inc.

Haraburda, Jack

   3/4/2014    19,231    IFMI, Inc.

Hatton, John

   1/13/2014    45,045    IFMI, Inc.

House, David

   1/13/2014    22,523    IFMI, Inc.

Jacobs, Michael

   1/13/2014    17,568    IFMI, Inc.

Listman, Doug

   09/30/2013    30,000    IFMI, Inc.

Lukas, JoAnn

   1/13/2014    4,505    IFMI, Inc.

Pooler, Joseph

  

32,500         -

12/31/2013;

17,500         -

12/31/2014

   50,000    IFMI, Inc.

Powell, James

   6/30/2013    52,788    IFMI, Inc.

Quijano-Martinez,

Lizette

   1/13/2014    33,784    IFMI, Inc.

 

2


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

Recipient   

Vesting

Date

  

Amount of
Shares or

Units

   Entity           

Subin, Neil

   3/4/2014    19,231    IFMI, Inc.

Tessar, John

   12/31/2014    32,258    IFMI, Inc.

Ullom, Lance

   3/4/2014    19,231    IFMI, Inc.

Wolcott, Charles

   3/4/2014    19,231    IFMI, Inc.
     

 

  

TOTAL:

      752,092   
     

 

  

RESTRICTED IFMI , LLC AND IFMI, INC. UNITS

 

Recipient   

Vesting

Date

  

Amount of

Shares or

Units

   Entity

Burklin, Stephan

   1/13/2014    9,938    IFMI, LLC

Butkevits, Vince

   1/13/2014    74,536    IFMI, LLC

DiGennaro, Daniel

   1/13/2014    9,938    IFMI, LLC

Ferry, James

   1/13/2014    74,536    IFMI, LLC

Jacobs, Michael

   1/13/2014    5,591    IFMI, LLC

Lukas, JoAnn

   1/13/2014    6,212    IFMI, LLC

Weaver, Daniel

   1/13/2014    5,591    IFMI, LLC

Hohns, Andrew

   Variable; based on performance thresholds    500,000    IFMI, Inc.

Vernhes, Paul

   3/31/2014    132,450    IFMI, Inc.
     

 

  

TOTAL:

      818,792   
     

 

  

 

3


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

VESTED IFMI, LLC UNITS

 

Recipient   

Vesting

Date

    

Amount of

Shares or

Units

   Entity               

Cohen, Daniel G.

 

  

N/A

 

    

4,983,557   

 

  

IFMI, LLC

 

Koster, Linda

 

  

N/A

 

    

72,088   

 

  

IFMI, LLC

 

Ricciardi, Christopher

 

  

N/A

 

    

223,520   

 

  

IFMI, LLC

 

Ricciardi, Stephanie

 

  

N/A

 

    

44,925   

 

  

IFMI, LLC

 

       

 

  

TOTAL:

        5,324,090      
       

 

  

UNVESTED RESTRICTED PRINCERIDGE UNITS

 

Recipient   

Vesting

Date

    

Amount of

Shares or

Units

   Entity               

Holmes, James

 

  

2/28/2014

 

    

234   

 

  

PrinceRidge

 

Pelletier, Renault

 

  

2/28/2014

 

    

335   

 

  

PrinceRidge

 

Teng, Sophia

 

  

2/28/2014

 

    

167   

 

  

PrinceRidge

 

       

 

  

TOTAL:

        736      
       

 

  

Other Securities / Instruments with Redemptive Features

The PrinceRidge units not owned by IFMI, LLC; ($532,527 as of March 31, 2013) are subject to redemption by PrinceRidge upon the withdrawal of limited partners.

(ii)

Outstanding Debt Securities

 

  1. $28,125,000 of outstanding par value of junior subordinated notes - Alesco Capital Trust I;
  2. $20,000,000 of outstanding par value of junior subordinated notes - Sunset Financial Statutory Trust I; and
  3. $8,121,000 of outstanding par value of 10.50% Contingent Convertible Senior Notes Due 2027 (convertible into common shares at approximately $116.37 per share).

 

4


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

Pro Forma Beneficial Ownership Table

 

    IFMI, Inc. Common Stock                                                  
       Common Stock            Restricted    
Stock
        Total         Series E
   Voting Non-   

Convertible
Preferred
Stock
       Total   
   Voting   
    Securities
Purchase
   Agreement   
    Pro Forma
without
   Converts   
       Percentage            Convertible    
Debt (2)
    Pro Forma
Assuming
    Conversion    
       Percentage     

Cohen, Daniel G.

    503,142        200,000        703,142        4,983,557        5,686,699        800,000        6,486,699        32.5%         800,000        7,286,699        32.1%    

Mead Park

                                       1,949,167        1,949,167        9.8%         1,949,167        3,898,334        17.2%    

Ricciardi, Christopher (1)

    1,472,175               1,472,175               1,472,175               1,472,175        7.4%                1,472,175        6.5%    

McEntee, Jay

    573,445               573,445               573,445               573,445        2.9%                573,445        2.5%    

Pooler, Joseph

    117,895        50,000        167,895               167,895               167,895        0.8%                167,895        0.7%    

Listman, Doug

    49,616        30,000        79,616               79,616               79,616        0.4%                79,616        0.4%    

Fink, Rachael

    18,392               18,392               18,392               18,392        0.1%                18,392        0.1%    

Beach, Walter

    105,731        19,231        124,962               124,962               124,962        0.6%                124,962        0.6%    

Bennett, Rodney

    61,412        19,231        80,643               80,643               80,643        0.4%                80,643        0.4%    

Costello, Thomas

    62,922        19,231        82,153               82,153               82,153        0.4%                82,153        0.4%    

Dawson, G. Steven

    76,931        19,231        96,162               96,162               96,162        0.5%                96,162        0.4%    

Donovan, Joseph

    57,578        19,231        76,809               76,809               76,809        0.4%                76,809        0.3%    

Haraburda, Jack

    62,722        19,231        81,953               81,953               81,953        0.4%                81,953        0.4%    

Ullom, Lance

    83,072        19,231        102,303               102,303               102,303        0.5%                102,303        0.5%    

Wolcott, Charles

    65,662        19,231        84,893               84,893               84,893        0.4%                84,893        0.4%    

Subin, Neil S.

    123,627        19,231        142,858               142,858               142,858        0.7%                142,858        0.6%    

Public and Other

    8,050,690        299,013        8,349,703               8,349,703               8,349,703        41.8%                8,349,703        36.8%    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL:

    11,485,012        752,092        12,237,104        4,983,557        17,220,661        2,749,167        19,969,828        100.0%         2,749,167        22,718,995        100.0%    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

Note: The pro forma beneficial ownership table in this Schedule 5.3 excludes the following securities, which do not have voting rights at the IFMI, Inc. level:

 

     Vested
  IFMI, LLC   
Units (i)
     Unvested
Restricted
  IFMI, LLC  
Units
     Unvested
Restricted
Units of
   IFMI, Inc.   
                  Total  

Koster, Linda

     72,088          –          –          72,088   

Ricciardi, Christopher

     223,520          –          –          223,520   

Ricciardi, Stephanie

     44,925          –          –          44,925   

Burklin, Stephan

     –          9,938          –          9,938   

Butkevits, Vince

     –          74,536          –          74,536   

DiGennaro, Daniel

     –          9,938          –          9,938   

Ferry, James

     –          74,536          –          74,536   

Jacobs, Michael

     –          5,591          –          5,591   

Lukas, JoAnn

     –          6,212          –          6,212   

Weaver, Daniel

     –          5,591          –          5,591   

Hohns, Andrew

     –          –          500,000          500,000   

Vernhes, Paul

     –          –          132,450          132,450   
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL:

     340,533          186,342          632,450          1,159,325   
  

 

 

    

 

 

    

 

 

    

 

 

 


SCHEDULE 5.4

SUBSIDIARIES

Please see the attached organizational chart for a list of Subsidiaries and details regarding the Company’s ownership thereof.

C&Co/PrinceRidge Holdings LP Profit Units:

 

    

Vested

    

Unvested

    

Total

    

Percentage

 

Daniel G. Cohen

     6                 6         0.00%   

Armand Pastine

     440                 440         0.16%   

Leland Harrs

     846                 846         0.31%   

John McNicholas

     1,924                 1,924         0.71%   

Paul Pasqua

     133                 133         0.05%   

IFMI, Inc.

     268,283                 268,283         98.50%   

James Holmes

             234         234         0.09%   

Renault Pelletier

             335         335         0.12%   

Sophia Teng

             167         167         0.06%   

TOTAL:

     271,632         736         272,368         100.00%   

 

C&Co/PrinceRidge Holdings LP Equity Units:

 

    

Vested

    

Unvested

    

Total

    

Percentage

 

Daniel G. Cohen

     6                 6         0.00%   

Armand Pastine

     440                 440         0.16%   

Leland Harrs

     846                 846         0.31%   

John McNicholas

     1,924                 1,924         0.71%   

Paul Pasqua

     133                 133         0.05%   

IFMI, Inc.

     267,153                 267,153         98.49%   

James Holmes

             234         234         0.09%   

Renault Pelletier

             335         335         0.12%   

Sophia Teng

             167         167         0.06%   

TOTAL:

     270,502         736         271,238         100.00%   

 

3


SCHEDULE 5.10

TITLE TO ASSETS

 

Balance Sheet Category

 

  

Description

 

1.  Receivables from brokers, dealers, and clearing agencies

  

The Company’s clearing arrangements may restrict its ability to transfer these receivables. These are not Encumbered, but may be restricted as to transfer.

 

2.  Investments - trading

  

This serves as collateral for the Company’s margin loan with its clearing agent. Therefore, this would be considered Encumbered.

 

3.  Receivables under resale agreements

  

The collateral the Company has for these loans is re-pledged to the Company’s counterparty under its repurchase agreement. Therefore, the collateral may be restricted as to transfer and may be considered Encumbered.

 

4.  Other Assets - Equity Method Affiliations

  

In order to transfer the Company’s investment in Star Asia Japan Special Situations LP, the Company would need the consent of Star Asia Partners Ltd., the fund’s general partner, which cannot be unreasonably withheld. The Company owns approximately 33% of Star Asia Partners Ltd.

 

 

   

CIT Communications Finance Corporation has filed a UCC financing statement evidencing a security interest in certain assets of JVB Financial Group, L.L.C.

 

   

PrinceRidge has filed a UCC financing statement evidencing a security interest in all of IFMI, LLC’s interests in its capital accounts in, and units of, both PrinceRidge and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC).

 

4


SCHEDULE 5.13

TAX MATTERS

 

FEDERAL NOL ROLLFORWARD

  Year

 

 

   12/31/2008
($)
  

Loss        /
(Income)
2009

($)

   12/31/2009
($)
  

Loss        /
(Income)
2010

($)

  

12/31/2010

($)

  

Loss        /
(Income)
2011

($)

   12/31/2011
($)
  

Loss        /
(Income)
2012

($)

   12/31/2012
($)
  

Expiration  

 

 

  2008

   44,593,542       44,593,542       44,593,542       44,593,542    (2,778,919)    41,814,623    2028  

  2009

      6,999,151      6,999,151         6,999,151         6,999,151         6,999,151    2029  

  2010

                     --    16,240,310    16,240,310       16,240,310       16,240,310    2030  

  2011

                     --                   --    20,997,598    20,997,598       20,997,598    2031  

  2012

                     --                   --                   --                   --   

  TOTAL:

   44,593,542    6,999,151    51,592,693    16,240,310    67,833,003    20,997,598    88,830,601    (2,778,919)    86,051,682   

Note: 2012 is currently estimated in good faith and is subject to future adjustment. The Company expects to file its return by September 15, 2013.

 

 

FEDERAL NCL ROLLFORWARD

  Year

 

 

   12/31/2008
($)
  

Loss        /
(Income)
2009

($)

   12/31/2009
($)
  

Loss        /
(Income)
2010

($)

  

12/31/2010

($)

  

Loss        /
(Income)
2011

($)

   12/31/2011
($)
  

Loss        /
(Income)
2012

($)

   12/31/2012
($)
  

Expiration  

 

 

  2008

               --                   --                   --                   --                   --    2013  

  2009

      34,819,158    34,819,158       34,819,158       34,819,158       34,819,158    2014  

  2010

                     --    6,432,139      6,432,139         6,432,139         6,432,139    2015  

  2011

                     --                   --                   --                   --    2016  

  2012

                     --                   --                   --    17,641,014    17,641,014    2017  

  TOTAL:

               --    34,819,158    34,819,158    6,432,139    41,251,297                --    41,251,297    17,641,014    58,892,311   

Note: 2012 is currently estimated in good faith and is subject to future adjustment. The Company expects to file its return by September 15, 2013.

 

5


SCHEDULE 5.18

EMPLOYEE MATTERS

 

1. In addition to the Benefit Plans set forth in the SEC Documents, the Company and its Subsidiaries have the following other such plans, contracts, policies, programs or arrangements:

 

   

401(k) Plan

   

General vacation policy

   

Health insurance plans

   

Dental insurance plan

   

Short & long-term disability plan

   

NY short-term disability plan

   

Expat medical, dental, life & long-term disability plans

   

Supplemental life, STD, LTD, cancer, accident insurance

   

Flex spending accounts (medical, dependent care, transit, parking)

   

COBRA benefits

   

Life & Accidental Death & Dismemberment

   

NY Disability Benefits Law

   

Malakoff Mederic Disability

Employment & Compensation Agreements

Current Employees – European Capital Markets :

 

Arif, Saleem

   Broker Dealer, Sales & Trading

Caselunghe, Sara

   Broker Dealer, Sales

Estaun, Sarah

   Broker Dealer, Sales

Genovart, Jaime

   Broker Dealer, Sales

Khan, Sherjeel

   Broker Dealer, Real Estate Finance

Koster, Linda

   Broker Dealer, Sales

Noonan, Gareth

   Broker Dealer, Sales

Woergaard, Henrik

   Broker Dealer, Sales

Thaker, Rajiv

   Broker Dealer, Support

Cahill, Edward

   Broker Dealer, Sales/Trading & Investment Banking

Scarlat, Viorel

  
   Broker Dealer, Investment Banking

Current Employees – JVB :

 

Jim Ferry

   CMO Trader

Vince Butkevits

   CMO Trader

Mike Jacobs

   CMO Trader

J.P. Lauria

   CMO Trader

Chris Glacken

   Pass Through (MBS) Trader

Jim Powell

   Head Agency Trader

 

6


David Epstein

   Agency Trader

Kelly Stapleton

   Assistant Agency Trader

Omelio Armas

   Municipal Trader

John Hatton

   Municipal Trader, Head

David Cooper

   Municipal Trader

Dan Digennaro

   Corporate Trader, Head

Cameron Caton

   Corporate Trader

Keith Cronin

   Corporate Trader, US Credit & International Trading

Dan Weaver

   Primary CD Trader

Michael Hughes

   Managing Director, Head of CD Department

Zachary Morris

   Assistant CD Trader

Tom Brahney

   Secondary CD Trader

Chris Palmer

   Secondary CD Trader,

Gordon Kiernan

   Treasury Trader, Yield Curve Arbitrage & Hedging

Rocco Capoccia

   Treasury Trader

John Tessar

   Structured Products Trader, Head of Structured Products

Scott Greenwood

   Structured Products Trader

David House

   Sales Manager

James Coulter

   Dealer Sales

John Borris

   Dealer Sales

Debbie McNulty

   Dealer Sales

Vinnie Curcio

   Dealer Sales

Bill Wetmore

   Dealer Sales

Jim Rafferty

   Dealer Sales

Scott Swanson

   Dealer Sales

Suzanne O’Connell

   Dealer Sales

Daniel Menscher

   Dealer Sales

Adam Kerstetter

   Advisor Sales

Charles Johnson

   Advisor Sales

Matt Johnson

   Advisor Sales

Mark McKeever

   Advisor Sales

Justin Plante

   Advisor Sales

Harry Fleck

   CMBS Trader

Lizette Quijano - Martinez

   CMBS Trader

Brad Cimo

   CMO Derivatives Trader

Brett Murray

   Treasury Trader

Jason Jenkins

   Treasury Trader

Gregg Desort

   Treasury Trader

Geoff Nash

   Institutional Sales

Sean Rich

   Institutional Sales

Joseph Ryan

   Institutional Sales

Andrew Ahn

   Institutional Sales

Cary Appel

   Institutional Sales / Trader, Fixed Income Arbitrage

 

7


Carmen Marino

   Institutional Sales / Manager

William Seery

   Institutional Sales

Stephan Burklin

   Chief Operating Officer

Katharine Vacca (Katie)

   Compliance

Joann Lukas

   Compliance Officer/HR Manager

Jim Barreto

   Accounting

Joseph Stincic

   Accounting

Aileen Colucci

   Administrative Assistant, Boca Raton

Rob Castro

   IT

Aron Green

   IT

Giovanny Rozo

   IT

Jaime Hogan

   Marketing

Shawn Chen

   Risk Management

Staci Paul

   Operations

Staci Raymond

   Operations

Sandra Brewer

   Operations

Current Employees – PrinceRidge :

 

Castelluccio, Joseph

   Middle Markets – Management

Pastine, Armand

   Middle Markets & Rates Group - Management

Filipski, Marianne

   Middle Markets - Sales

Rasel, Jayson

   Middle Markets - Sales

Wieske, Joe

   Middle Markets - Sales

Warley, Theodore

   Middle Markets - Sales

Dillon, Justin

   Middle Markets - High Grade Corps - Trading

Karlic, Michael

   Middle Markets - High Grade Corps - Trading

Kinnear, Michael

   Middle Markets - High Grade Corps - Trading

Korb, David

   Middle Markets - High Grade Corps - Trading

Books, Aaron

   Middle Markets - High Grade Corps - Trading

Utter, David

   Middle Markets - High Grade Corps - Trading

Moogan, Richard

   Middle Markets - High Grade Corps - Trading

Ford, John

   Middle Markets - Municipals - Trading

Meehan, James

   Middle Markets - Municipals - Trading

Lundvall, Mark

   Middle Markets - Municipals - Trading

Marlin, Dennis

   Middle Markets - Municipals - Trading

Marlin, Derek

   Middle Markets - Municipals - Trading

Communiello, Michael

   Middle Markets - Preferred - Trading

Zawacki, Joseph

   Middle Markets - Preferred - Trading

Cocco, Stephen

   Middle Markets - Structured Notes - Trading

Rosciano, Anthony

   Middle Markets - Structured Notes - Trading

Hansraj, Manie

   Middle Markets - Operations Specialist

McHugh, Thomas

   Rates Group - Repo/Funding - Trading

Kelly, Jake

   Rates Group - Repo/Funding - Support

Anderson, Brian

   Rates Group - RMBS Trading - Structured Products - Sales

 

8


Amadeo, Brian

   Rates Group - RMBS Trading - Structured Products - Sales

Hanlon, Mark

   Rates Group - RMBS Trading - Structured Products - Sales

Santoro, Lawrence

   Rates Group - RMBS Trading - Structured Products - Sales

Harvey, Bob

   Rates Group - RMBS Trading - Structured Products - MBS Trader

Lupin, Michael

   Rates Group - RMBS Trading - Structured Products - Agency & MBS

Plinio, Anthony

   Rates Group - RMBS Trading - Structured Products - Trader

Sias, William

   Rates Group - RMBS Trading - TBA Sales

Fuchs, Robert

   Rates Group - RMBS Trading - TBA Sales

Perschetz, Kenny

   Rates Group - RMBS Trading - Agency - Trading

Kissane, Brendan

   Rates Group - RMBS Trading - TBA Trading

McGovern, Michael

   Corporate Credit - Head of Dept.

Hurwitz, Steven

   Corporate Credit - Research

Ziets, Kevin

   Corporate Credit - Research

Dodd, Stephen

   Corporate Credit - Sales

Hindenach, James

   Corporate Credit - Sales

Levine, Peter

   Corporate Credit - Sales

Marvin, Bradford

   Corporate Credit - Sales

Schmidt, Stephen

   Corporate Credit - Sales

Silverman, Jeffrey

   Corporate Credit - Sales

Vandersnow, Scott

   Corporate Credit - Sales

Pannuzzo, Brian

   Corporate Credit - Trading

Connors, Thomas

   Structured Products - Sales

Pasqua, Paul

   CDO / CLO - Trading

Bertoni, Jeffrey

   CDO / CLO - Sales

Kim, Jason

   Non-Agency - RMBS Sales & Trading

Roth, Lance

   Asset-Backed Securities Desk - Origination

Soltesz, James

   Asset Backed Securities Desk - Trading

Videla, Alejandro

   Asset Backed Securities Desk - Sales & Structuring

Mitrikov, Plamen

   Asset Backed Securities Desk - Management

D’Agostino, Steve

   Asset Backed Securities Desk - Management

Dyer, James

   Equities - Sales & Trading

Parchment, Gerry

   Equities - Sales & Trading

Gatlin, Brandi

   Equities - Sales & Trading

Appel, Jeffrey

   Equities - Sales & Trading

Stamler, Joseph

   Equities - Sales & Trading

Wald, Ari

   Equities - Sales & Trading

Harrs, Lee

   Corporate Finance - Banking

McNicholas, John

   Corporate Finance - Banking

Stock, Keith

   Corporate Finance - Banking

Saalwachter, Ric

   Corporate Finance - Banking

Fischer, Ryan

   Corporate Finance - Banking

Grady, Michael

   Corporate Finance - Banking

Farha, Red

   Corporate Finance - Banking

 

9


Holmes, James

   Corporate Finance - Support

Pelletier, Renaud

   Corporate Finance - Support

Teng, Sophia

   Corporate Finance - Support

Park, Daniel

   Corporate Finance - Support

Holman, Bryce

   Corporate Finance - Support

Brennan, Kevin

   Corporate Finance - Support

Brining, Ryan

   Corporate Finance - Support

Fecowicz, Jonathan

   Corporate Finance - Support

Kerr, Michelle

   Corporate Finance - Admin

Batalion, David

   Equity Capital Markets - Banking

Bacchus, Michael

   Compliance

McCann, Joseph

   Executive

Tissen, Jayne

   HR

Cenuser, Vanessa

   HR

Karayannis, Amy

   Legal

Silberman, Jeffrey

   Legal

Cianci, Joseph

   Operations

Tarnovsky, Jane

   Operations

Current Employees – Other IFMI :

 

Addei, Peter

   Asset Management, Alesco

Creighton, Amy

   Asset Management, Alesco

Masuyama, Taro

   Asset Management, Cohen Asia

Poljevka, Frank

   Asset Management, Cohen Asia

Talton, Brian

   Asset Management, Cohen Asia

Conreur, Xavier

   Asset Management, Paris

Ebensperger, Uli

   Asset Management, Paris

Ghnassia, Nathalie

   Asset Management, Paris

de Clermont-Tonnerre, Amedee

   Asset Management, Paris

Vernhes, Paul

   Asset Management, Paris

Carocci, Massimo

   Asset Management, Spain

Grasso, Sergio

   Asset Management, Spain

Kuhnel Torma, Marta

   Asset Management, Spain

Jimenez Lucas, Gustavo

   Asset Management, Spain

De Rotaeche Amade, Ana

   Asset Management, Spain

Ignacio Perea, Jose

   Asset Management, Spain

Garcia Bartolome, Andres

   Asset Management, Spain

Rodriguez, Luis

   Asset Management, Spain

Pasan, Carlos

   Asset Management, Spain

Rey Herzog, Patricia

   Asset Management, Spain

Sapone, Domenico

   Asset Management, Paris

Cohen, Daniel

   Management

McEntee, Jay

   Management

Pooler, Joe

   Management

 

10


Fink, Rachael

   Management/Legal

Dobie, Bob

   Finance

Forrestel, Sean

   Finance

Listman, Doug

   Finance

Livewell, Megan

   Finance

O’Rourke, John

   Finance

Patel, Manish

   Finance

Verros, Sophia

   Finance

Cashman, Milly

   Administrative

Cuddahy, Jonnell

   Administrative

DiArenzo, Rich

   Operations

Noel, Ron

   Administrative

Weisback, Regina

   Administrative

Pendlebury, Alan

   IT

Coger, Theresa

   Legal

 

Former Employees (still being paid) :

 

Berkeley, Barry

   PrinceRidge, Broker Dealer, Sales & Trading

Sussman, Shelly

  

European      Capital      Markets,      Broker       Dealer,

Management

 

2. In addition to the foregoing Benefit Plans, the Company and its Subsidiaries, upon hiring employees, generally sets forth certain terms of employment in an offer letter, as may have been amended from time to time.

 

3. Each of the following Benefit Plans has received a favorable opinion letter from the Internal Revenue Service National Office:

IFMI, Inc. 401(k) Plan (Tradition and Roth Contribution) – favorable determination letter was received May 15, 2012.

 

11


EXHIBIT A

NEITHER THIS NOTE NOR THE SHARES ISSUABLE UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. BY ACQUIRING THIS NOTE, THE HOLDER REPRESENTS THAT THE HOLDER WILL NOT SELL OR OTHERWISE DISPOSE OF THIS NOTE OR THE SHARES ISSUABLE UPON CONVERSION HEREOF WITHOUT REGISTRATION OR EXEMPTION THEREFROM.

CONVERTIBLE SENIOR PROMISSORY NOTE

 

$5,847,501    [               ], 2013

For value received, Institutional Financial Markets, Inc., a Maryland corporation, (together with its successors and assigns, the “ Company ”) promises to pay to Mead Park Capital Partners LLC (the “ Holder ”), the principal amount of $5,847,501, together with all accrued and unpaid interest thereon (the “ Outstanding Amount ”). This convertible senior promissory note (the “ Note ”) has been issued pursuant to that certain Securities Purchase Agreement dated as of May [       ], 2013 by and among the Company, Mead Park Holdings, LP (“ Mead Park ”) and the Holder (the “ Purchase Agreement ”). This Note is subject to the following terms and conditions:

1.        Note .

(a)       Maturity .  The Outstanding Amount shall be due and payable in full on [              ], 2018 (the “ Maturity Date ”), unless this Note shall have been earlier converted in accordance with Section 2. 1

(b)       Interest .  Interest shall accrue from the date of this Note on the unpaid principal amount at a rate equal to eight percent (8%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days from the date of this Note until the principal amount and all interest accrued thereon are paid (or converted, as provided in Section 2). Interest shall be payable in cash quarterly on each January 1, April 1, July 1, and September 1 (each, an “ Interest Payment Date ”) until the Maturity Date, commencing on the first Interest Payment Date to occur after the Closing under the Purchase Agreement; provided, however, that if no Event of Default has occurred, (i) in the event that dividends of less than Two Cents ($0.02) per share are paid on the Common Stock in the fiscal quarter prior to any Interest Payment Date, then the Company shall have the option, in its sole discretion, to pay one-half of the interest payable on such Interest Payment Date in cash, in which event the remaining one-half of the interest otherwise payable on such Interest Payment Date shall accrue and be added to the Outstanding Amount as of such Interest Payment Date; and (ii) in the event that no dividends are paid on the Common Stock in the fiscal quarter prior to such Interest Payment Date, then the Company shall have the option, in its sole discretion, to make no payment in cash of the interest payable on such Interest Payment Date, in which event all of the interest otherwise payable on such Interest Payment Date shall accrue and be added to the Outstanding Amount as of such Interest Payment Date; provided, further, that if the Company takes an action permitted under clause (i) or (ii) above, it will provide written notice to the Holder at least ten (10) days prior to the relevant Interest Payment Date. Such notice shall set forth the amount of interest in cash not paid, as well as the revised Outstanding Amount. Upon the occurrence of any Event of Default and after any applicable cure period as described in Section 7 and for so long as such Event of Default continues, all principal, interest and other amounts payable under this Note shall bear interest at a rate equal to nine percent (9%) per annum (the “ Default Rate ”).

 

 

1   Maturity Date to be five years from the date of issuance of this Note.

 

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(c)      No Prepayment Without Consent. This Note shall not be prepaid in whole or in part prior to the Maturity Date without the prior written consent of the Holder (which may be granted or withheld in its sole discretion).

2.        Conversion .  At any time following the date hereof (including, for the avoidance of the doubt, at any time prior to 5:00 p.m. (ET) on the business day prior to the Maturity Date), the Holder shall have the right, in the Holder’s sole discretion, to convert all or any part of the Outstanding Amount of this Note (the “ Conversion ”), without the payment of any additional consideration therefor, into the number of fully paid and nonassessable shares of the Company’s Common Stock that is determined by dividing (i) the then applicable Outstanding Amount by (ii) $3.00 (the “ Conversion Price ”). The Conversion Price is subject to adjustment if the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of this Note), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company or (v) takes any similar action or any action designed to have a similar effect, then in each case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon Conversion shall be proportionately adjusted such that the aggregate Conversion Price of this Note shall remain unchanged. Any adjustment made pursuant to this Section 2 shall become effective immediately after the record date for the determination of stockholders entitled to participate in such event described in clauses (i) through (v) and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification or similar action. Whenever the Conversion Price is adjusted pursuant to this Section 2, the Company shall promptly notify the Holder, in accordance with the Purchase Agreement, of the Conversion Price after such adjustment, any resulting adjustment to the number of shares of Common Stock issuable upon Conversion and a brief statement of the facts requiring such adjustment.

 

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3.        Mechanics and Effect of Conversion .

(a)      If the Holder wishes to exercise its right to effect a Conversion, the Holder shall provide the Company with a written notice of its election.

(b)      No fractional shares will be issued upon conversion of this Note. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall pay to the Holder in cash the unconverted amount that would otherwise be converted into such fractional share.

(c)      In the event that all of this Note is converted pursuant to Section 2, promptly after such Conversion, the Holder shall surrender this Note, duly endorsed, to the Company and the Note shall thereupon be canceled. At its expense, the Company shall as promptly as practicable (but in no event more than five (5)days after the Conversion of this Note) issue and deliver to the Holder the number of shares of the Company’s Common Stock to which the Holder is entitled upon such Conversion, together with (i) any accrued interest from the Interest Payment Date immediately prior to Conversion through the date of Conversion and (ii) if applicable, a check payable to the Holder for any cash amounts payable as described in Section 3(b).

(d)      Upon issuance of shares of Common Stock in respect of Conversion of the entire Outstanding Amount in accordance with Section 2, all rights with respect to this Note shall terminate, whether or not this Note has been surrendered for cancellation. The Holder shall be treated for all purposes as the record holder of Common Stock issued upon Conversion.

4.        Covenants of the Company .   The Company covenants to the Holder that, from the date hereof until all principal, interest and other amounts payable under this Note have been paid in full, the Company shall, except as otherwise agreed in writing by the Holder:

(a)      take such corporate action as may be necessary from time to time to (i) at all times maintain an authorized number of shares of Common Stock as is sufficient for issuance of shares of Common Stock upon Conversion of this Note pursuant to Section 2 and (ii) cause the shares of Common Stock issued upon Conversion to be duly authorized, validly issued, fully paid and non-assessable;

(b)      punctually pay the principal and interest payable on this Note, and any other amount due and payable under this Note in the manner specified in this Note;

(c)      give written notice promptly to the Holder of any condition or event that constitutes, or is reasonably expected to constitute, an Event of Default;

(d)      not avoid or seek to avoid the observance or performance of any of the terms of this Note through any reorganization, recapitalization, transfer of assets or other voluntary action; and

(e)      not create or incur any Encumbrance in or on its property or Assets, whether now owned or hereinafter acquired, or upon any income or revenues or rights therefrom, except:

 

  (i) Encumbrances existing on the date hereof and previously disclosed to the Holder;

 

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  (ii)

Encumbrances for property taxes and assessments or other governmental charges or levies and liens that are not overdue for more than 90 days; or

 

  (iii) Encumbrances of or resulting from any Judgment, the time for appeal or petition for rehearing of which shall not have expired or in respect of which the Company shall in good faith be prosecuting an appeal or other Proceeding for a review and in respect of which a stay of execution pending such appeal or Proceeding shall have been secured.

5.         Form of Payment .  Except as otherwise set forth herein, all payments due hereunder shall be made in lawful money of the United States of America to such account or at such place as may be designated in writing by the Holder from time to time. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.

6.        Priorities .  The indebtedness evidenced by this Note and the payment of all principal, interest and any other amounts payable hereunder is a senior obligation of the Company and shall: (i) be Senior (as hereinafter defined) to, and have priority in right of payment over, all Indebtedness (as hereinafter defined) of the Company incurred following the date hereof and any subordinated or junior subordinated Indebtedness outstanding as of the date hereof, and (ii) rank pari passu to the notes issued pursuant to the Cohen Purchase Agreement (as defined in the Purchase Agreement) and any other senior obligations of the Company outstanding as of the date hereof. “ Senior ” means that, in the event of any default in the payment of the obligations represented by this Note or of any liquidation, insolvency, bankruptcy, reorganization or similar proceedings relating to the Company, all amounts payable under this Note shall first be paid in full before any payment is made upon any other Indebtedness hereinafter incurred (including any Indebtedness guaranteed by the Company) or any subordinated or junior subordinated Indebtedness outstanding as of the date hereof, and, in any such event, any payment or distribution of any character which shall be made in respect of any other Indebtedness of Company shall be paid to the Holder for application to the payment hereof, unless and until the obligations under this Note shall have been paid and satisfied in full. “Indebtedness” means, with respect to a specified Person: (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than current accounts payable and accrued expenses incurred in the ordinary course of business irrespective of when paid); (c) all obligations of such Person evidenced by bonds, debentures, notes, loan agreements, credit agreements or other similar instruments; (d) all obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreements with respect to property used and/or acquired by such Person; (e) all capitalized lease obligations of such Person; (f) all aggregate mark-to-market exposure of such Person under hedging agreements; (g) all obligations in respect of letters of credit (whether drawn or supporting obligations that constitute Indebtedness) and bankers’ acceptances; (h) all obligations referred to in clauses (a) through (g) of this definition of another Person guaranteed by the specified Person or secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) an Encumbrance upon property owned by the specified Person, whether or not the specified Person has assumed or become liable for the payment of such Indebtedness.

 

A-4


7.         Events of Default .  An “ Event of Default ” shall be deemed to have occurred if:

(a)      subject to the accrual of interest as provided in Section 1(b) hereof, the Company shall fail to pay as and when due any principal or interest hereunder and such nonpayment shall continue uncured for a period of five (5) business days;

(b)      except for an event described in Section 7(a), the Company fails to perform any covenant or agreement hereunder, and such failure continues or is not cured within five (5) business days after written notice by the Holder to the Company;

(c)      the Company or any significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) (a “ Significant Subsidiary ”) applies for or consents to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) makes a general assignment for the benefit of itself or any of its creditors, or (iii) commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect;

(d)      proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or any Significant Subsidiary, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or any Significant Subsidiary, or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect are commenced and an order for relief entered or such proceeding is not dismissed or discharged within ninety (90) days of commencement;

(e)      there is entered against the Company or any Subsidiary a final Judgment for the payment of money in an aggregate amount exceeding $300,000 and such Judgment shall remain unsatisfied or without a stay in respect thereof for a period of thirty (30) days;

(f)      the Company or any Subsidiary shall fail to pay when due any obligation, whether direct or contingent, for Indebtedness exceeding $300,000, or shall breach or default with respect to any term of any loan agreement, mortgage, indenture or other agreement pursuant to which such obligation for Indebtedness was created or securing such obligation if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

(g)      a Change in Control shall have occurred. For purposes of this Note, the term “ Change in Control ” shall mean any one of the following events: (i) any Person or group (other than the Holder, Mead Park and its or their controlled Affiliates and Principals) is or becomes a beneficial owner, directly or indirectly, of more than 50% of the aggregate voting power represented by all issued and outstanding capital stock of the Company, (ii) individuals who, on the date hereof, constitute the Board of Directors (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board of Directors; provided that any person becoming a director subsequent to the date hereof whose election or nomination for election was approved by a majority of the Incumbent Directors then on the Board of Directors (either by a specific vote or by approval of the proxy statement of the relevant party in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director (except that no individuals who were not directors at the time any contested election is reached shall be treated as Incumbent Directors); (iii) the stockholders of the Company approve a plan of liquidation or dissolution of the Company or a sale of all or substantially all of the Company’s assets; or (iv) the Company has entered into a definitive agreement, the consummation of which would result in the occurrence of any of the events described in clauses (i) through (iii) of this definition above.

 

A-5


Upon the occurrence or existence of any Event of Default described in Section 6(a), Section 6(b), Section 6(e), Section 6(f) or Section 6(g) and at any time thereafter during the continuance of such Event of Default, the Holder may, by written notice to the Company, declare the entire unpaid principal amount outstanding and all interest accrued and unpaid on the Note to be immediately due and payable without presentment, demand, protest or any other notice or demand of any kind. Upon the occurrence or existence of any Event of Default described in Section 6(c) or Section 6(d), immediately and without notice, the entire unpaid principal amount outstanding and all interest accrued and unpaid on the Note shall automatically become immediately due and payable, without presentment, demand, protest or any other notice or demand of any kind. Upon the occurrence of any Event of Default and after any applicable cure period as described herein and for so long as such Event of Default continues, all principal, interest and other amounts payable under this Note shall bear interest at the Default Rate. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right power or remedy granted to it by this Note or the Purchase Agreement or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

8.        Miscellaneous .

(a)      This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York without regard to its conflicts of law principles or the conflicts of law principles of any other state in either case that would result in the application of the laws of any other state.

(b)      Any notice or other communication required or permitted to be given hereunder shall be in writing and given as provided in the Purchase Agreement.

(c)      In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

(d)      Amendments to any provision of this Note may be made or compliance with any term, covenant, agreement, condition or provision set forth in this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) only upon written consent of the Company and the Holder. Any amendment or waiver effected in accordance herewith shall apply to and be binding upon the Holder, upon each future holder of this Note and upon the Company, whether or not this Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon.

 

A-6


(e)      This Note may not be assigned by any holder (except that the Holder shall be permitted to assign this Note to Mead Park and Holder’s and Mead Park’s controlled Affiliates and Principals) without the prior written approval of the Company.

(f)      The Company hereby waives diligence, presentment, protest and demand, notice of protest, notice of dishonor, notice of nonpayment and any and all other notices and demands in connection with the delivery, acceptance, performance, default or enforcement of this Note. The Company further waives, to the full extent permitted by Law, the right to plead any and all statutes of limitations as a defense to any demand on this Note.

(g)      The Company agrees to pay all reasonable costs and expenses actually incurred by the Holder in connection with an Event of Default, including without limitation the fees and disbursements of counsel, advisors, consultants, examiners and appraisers for the Holder, in connection with (i) any enforcement (whether through negotiations, legal process or otherwise) of this Note in connection with such Event of Default, (ii) any workout or restructuring of this Note during the pendency of such Event of Default and (iii) any bankruptcy case or proceeding of the Company or any appeal thereof.

(h)      The section and other headings contained in this Note are for reference purposes only and shall not affect the meaning or interpretation of this Note.

(i)      Capitalized terms used herein and not otherwise defined, shall have the meanings ascribed to them in the Purchase Agreement.

Signature page follows

 

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and delivered by its authorized officer, as of the date first above written.

 

INSTITUTIONAL FINANCIAL MARKETS, INC.
By:    
Name:    
Title:    

AGREED AND ACKNOWLEDGED:

MEAD PARK CAPITAL PARTNERS LLC

By: Mead Park Advisors LLC, its investment adviser

 

By:      
Name:    
Title:    

 

A-8


EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

[See Exhibit 10.3 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT C

SHAREHOLDER RIGHTS PLAN

[See Exhibit 4.1 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT D

FORM OF COHEN PURCHASE AGREEMENT

[See Exhibit 10.2 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT E

FORM OF EXCHANGE AGREEMENT

[See Exhibit 10.4 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT F

FORM OF AMENDED AND RESTATED COHEN EMPLOYMENT AGREEMENT

[See Exhibit 10.6 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT G

LLC AGREEMENT AMENDMENT

[See Exhibit 10.5 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT H

VOTING AGREEMENT

THIS VOTING AGREEMENT, dated as of May 9, 2013 (this “ Agreement ”), is made by                                                           (the “ Shareholder ”) for the benefit of Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”), pursuant to the Securities Purchase Agreement (the “ Securities Purchase Agreement ”), dated of even date herewith, by and among the Company, Mead Park Holdings, LP, and Mead Park Capital Partners LLC (the “ Buyer ”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Securities Purchase Agreement.

W I T N E S S E T H:

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company is entering into the Securities Purchase Agreement, pursuant to which the Company has agreed to sell to Buyer and Buyer has agreed to purchase from the Company (i) an aggregate of One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167) newly issued shares (collectively, the “ Buyer Common Shares ”) of the Company’s Common Stock, par value $.001 per share (“ Common Stock ”), for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334); and (ii) a convertible senior promissory note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501) (the “ Buyer Note ”);

WHEREAS, the Buyer Note is convertible into the “Conversion Shares” as defined in the Securities Agreement (the “ Buyer Conversion Shares ”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and Daniel G. Cohen are executing and delivering a securities purchase agreement (the “ Cohen Purchase Agreement ”), pursuant to which the Company has agreed to sell to Mr. Cohen and Mr. Cohen has agreed to purchase from the Company (i) an aggregate of Eight Hundred Thousand (800,000) newly issued shares (collectively, the “ Cohen Common Shares ” and, together with the Buyer Common Shares, the “ Transaction Shares ”) of the Common Stock, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000); and (ii) a convertible senior promissory note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000) (the “ Cohen Note ” and, together with the Buyer Note, the “ Notes ”);

WHEREAS, the Cohen Note is convertible into the “Conversion Shares” as defined in the Cohen Purchase Agreement (the “ Cohen Conversion Shares ”);

WHEREAS, in connection with the transactions contemplated by the Securities Purchase Agreement and the Cohen Securities Agreement, the issuance of the Transaction Shares, the Buyer Conversion Shares and the Cohen Conversion Shares, and the election of certain directors to the Board of Directors of the Company (the “ Board of Directors ”) will be submitted to the Company’s shareholders for approval at the Company’s 2013 annual meeting of shareholders (the “ Annual Meeting ”), which is anticipated to be held on or about July 25, 2013;

WHEREAS, as an inducement to Buyer to enter into the Securities Purchase Agreement, the Shareholder is entering into this Agreement;

 

H-1


WHEREAS, as of the date hereof, the Shareholder owns of record, or has the power to vote, certain of the outstanding voting equity securities of the Company (the “ Voting Securities ”); and

WHEREAS, with this Agreement, the Shareholder wishes to undertake certain obligations with respect to the Voting Securities of which the Shareholder is the owner of record, or with respect to which the Shareholder has the power to vote, on the Record Date (as defined below) (such Voting Securities as of such date, the “ Total Voting Securities ”).

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Shareholder hereby agrees as follows:

ARTICLE I

VOTING

1.1     Agreement to Vote .  Except as otherwise provided in this Agreement and except as prohibited by applicable Law, the Shareholder agrees that, from and after the date hereof and until the date on which this Agreement is terminated pursuant to Section 3.2, at the Annual Meeting or any other meeting of the shareholders of the Company at which any of the Transaction Matters (as defined below) are to be voted upon, however called (and including any postponement or adjournment of any such meeting), or in connection with any written consent of the shareholders of the Company with respect to any of the Transaction Matters, the Shareholder shall:

(a)      appear at each such meeting (in person or by proxy) or otherwise cause all Total Voting Securities owned of record by the Shareholder, or with respect to which the Shareholder has the power to vote, in each case as of the record date used for determining the holders of voting securities of the Company entitled to vote at such meeting or to deliver such consent (the “ Record Date ”), to be counted as present thereat for purposes of calculating a quorum; and

(b)      vote or cause to be voted (in person or by proxy) or deliver a written consent (or cause a consent to be delivered) covering all Total Voting Securities owned of record by the Shareholder or as to which the Shareholder has the power to vote, in each case as of the Record Date, in favor of: (i) the issuance by the Company of the Buyer Common Shares and the Buyer Conversion Shares to Buyer; (ii) the issuance by the Company of the Cohen Common Shares and the Cohen Conversion Shares to Daniel G. Cohen; and (iii) the election to the Board of Directors of the nominees for Director nominated by the Board of Directors in accordance with Section 8.4 of the Securities Purchase Agreement (clauses (i) through (iii) collectively, the “ Transaction Matters ”).

1.2     No Inconsistent Agreements .  The Shareholder hereby covenants and agrees that, except as set forth in this Agreement and except for actions taken in furtherance of this Agreement, the Shareholder has not granted, and shall not grant at any time while this Agreement remains in effect, any proxy, consent or power of attorney with respect to the Total Voting Securities that would conflict with the provisions of Section 1.1.

 

H-2


1.3     No Other Restrictions .  Except as set forth in Section 1.1, the Shareholder shall not be restricted from voting in favor of, against or abstaining with respect to any matter presented to the shareholders of the Company.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1     Representations and Warranties of the Shareholder .  Except as set forth on the signature page hereof, the Shareholder hereby represents and warrants as follows as of the date hereof:

(a)        Authorization; Validity of Agreement; Necessary Action .  This Agreement has been duly executed and delivered by the Shareholder and constitutes a valid and binding obligation of the Shareholder, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and general equitable principles).

(b)       Ownership .  The Voting Securities set forth below the Shareholder’s name on the signature page hereto are owned of record by the Shareholder or the Shareholder has the power to vote such Voting Securities, in each case as of the date hereof (such Voting Securities, the “ Existing Voting Securities ”). The Shareholder’s Existing Voting Securities constitute all voting equity securities of the Company held of record by the Shareholder or for which voting power is held by the Shareholder as of the date hereof. The Shareholder has sole power to issue instructions with respect to the matters set forth in Article I hereof, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shareholder’s Existing Voting Securities, with no limitations, qualifications or restrictions on such rights, subject to applicable federal and state securities laws and the terms of this Agreement. The Shareholder has good title to the Shareholder’s Existing Voting Securities, free and clear of any Encumbrances.

(c)       No Consents; Conflicts and Violations .  Except for any applicable requirements of the Securities Exchange Act of 1934, as amended, the execution and delivery of this Agreement by the Shareholder does not, and the performance by the Shareholder of its obligations under this Agreement will not, (i) require any consent, approval, authorization of or other order of, action by, filing with, or notification to any Governmental Authority; (ii) violate or conflict with or result in the breach of any provision of the organizational documents of the Shareholder; (iii) cause a violation by the Shareholder of any Law, ordinance or regulation of any Governmental Authority applicable to the Shareholder or by which any of the Existing Voting Securities is bound; or (iv) conflict with, result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of any Encumbrance on the properties or assets of the Shareholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Shareholder is a party or by which any of the Existing Voting Securities is bound, except, in the case of clauses (i), (iii) and (iv), as could not reasonably be expected, either individually or in the aggregate, to materially impair the ability of the Shareholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

 

H-3


ARTICLE III

MISCELLANEOUS

3.1     Limitation on Liability .   Notwithstanding anything in this Agreement to the contrary, no party to this Agreement shall have any liability for damages to any other party for any breach or violation of this Agreement unless such breach or violation was willful or intentional.

3.2     Termination .  This Agreement shall terminate upon the earliest to occur of (i) the date and time of termination of the Securities Purchase Agreement; (ii) the Closing and (iii) the written agreement of the parties hereto and Buyer to terminate this Agreement. Upon such termination, no party hereto shall have any further obligations or liabilities hereunder; provided, however, that such termination shall not relieve any party from liability for any willful or intentional breach or violation of this Agreement prior to such termination.

3.3     Further Assurances .  From time to time, at the other party’s request and without further consideration, each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate the transactions contemplated by this Agreement.

3.4     No Ownership Interest .  Nothing contained in this Agreement shall be deemed to vest in the Company or Buyer any direct or indirect ownership or incident of ownership of or with respect to any Total Voting Securities. All rights, ownership and economic benefits of and relating to the Total Voting Securities shall remain vested in and belong to the Shareholder.

3.5    Notices.  All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

(a)      if to the Company, to:

Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

Attn: Joseph W. Pooler, Jr.

Facsimile: (215) 701-8280

E-mail: jpooler@ifmi.com

With a copy to:

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attn: Darrick M. Mix

Facsimile: (215) 239-4958

Email: dmix@duanemorris.com

 

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(b)      if to the Shareholder, to the address listed next to the Shareholder’s name on the Shareholder’s signature page hereto,

unless the address is changed by the party by like notice given to the other parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address above, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if sent by Federal Express (FedEx), the United Parcel Service (UPS), or another nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same with, or in a regularly maintained receptacle of, such overnight courier on or prior to 5:00 p.m., New York City time, on a business day; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., New York City time, on a business day. Any notice hand delivered after 5:00 p.m. New York City time, shall be deemed delivered on the following business day. Notwithstanding the foregoing, notices, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

3.6     Interpretation .  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

3.7     Entire Agreement .  This Agreement (including any exhibits hereto) and the Transaction Documents (as defined in the Securities Purchase Agreement) collectively constitute the entire agreement, and supersede all other prior agreements, understandings, and representations and warranties, both written and oral with respect to the subject matter hereof.

3.8     Governing Law and Jurisdiction .  This Agreement shall be construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws. The parties further agree that any action between them shall be heard in New York City, New York, and expressly consent to the jurisdiction and venue of the state and federal courts sitting in New York City, New York, for the adjudication of any civil action asserted pursuant to this Agreement.

 

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3.9     Consent to Jurisdiction .  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR ANY NEW YORK STATE COURT IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN); PROVIDED , HOWEVER , THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE PURPOSE REFERRED TO IN THIS SECTION 3.9 AND SHALL NOT BE DEEMED TO BE A GENERAL SUBMISSION TO THE JURISDICTION OF SAID COURTS OR IN THE STATE OF NEW YORK OTHER THAN FOR SUCH PURPOSE.

3.10     Enforcement .  The Shareholder agrees that in the event that the Shareholder fails to perform any of the Shareholder’s obligations under this Agreement in accordance with their specific terms, the Company and Buyer will be irreparably harmed and there will be no adequate remedy at Law. It is accordingly agreed that the Company and Buyer shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at Law or in equity.

3.11     Amendment .  The parties hereby irrevocably agree that no attempted amendment, modification, or change of this Agreement shall be valid and effective, unless the parties and Buyer shall unanimously agree in writing to such amendment, modification or change.

3.12     Severability .  If any provision of this Agreement is held to be invalid or unenforceable in any respect, then the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

3.13     Assignment; Third Party Beneficiaries .  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Company and its successors and permitted assigns. This Agreement is not intended to confer any rights or remedies hereunder upon any Person other than the Company pursuant to the terms and conditions of the Securities Purchase Agreement, except that Buyer is an express third party beneficiary with full rights to enforce this Agreement, including Section 3.10, as if it were the Company.

 

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3.14     Shareholder Capacity .  By executing and delivering this Agreement, the Shareholder makes no agreement or understanding herein in the Shareholder’s capacity or with respect to the Shareholder’s actions as a manager, director, officer or employee of the Company or any of its Subsidiaries. The Shareholder is signing and entering into this Agreement solely in the Shareholder’s capacity as the record owner of the Shareholder’s Total Voting Securities or in the Shareholder’s capacity as the individual with voting power with respect to certain Total Voting Securities, and nothing herein shall limit or affect in any way any actions that may be hereafter taken by the Shareholder in the Shareholder’s capacity as an employee, director, officer or manager of the Company or any of its Subsidiaries or in any other capacity and no such actions shall be deemed to be a breach of this Agreement. Nothing contained in this Agreement shall restrict, limit, prohibit or preclude the Shareholder from exercising or discharging the Shareholder’s fiduciary duties as a director, officer or manager of the Company or any of its Subsidiaries under applicable Law. Any trustee executing this Agreement is executing this Agreement solely in his or her fiduciary capacity and shall have no personal liability or obligation under this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Shareholder has signed this Voting Agreement as of the date first written above.

 

 

SHAREHOLDER:

  
 

 

 

 

 

  
 

Name:

  
 

[Title:]

  
 

 

Total Voting Securities owned by the Shareholder as of the date hereof:

 

 

Number of Shares:

    

 

  
      

 

 

 

  

 

Address for Notices:

 

 

  
 

 

 

  
 

 

 

  

Exceptions to Shareholder’s representations and warranties set forth in ARTICLE II hereof, if any (please describe in the space provided below):

 

[Signature Page to Voting Agreement]

 

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AGREED TO AND ACCEPTED BY:

 
    INSTITUTIONAL FINANCIAL MARKETS, INC.  
   

   By:

 

 

 
   

Name:

   
   

Title:

   

 

 

 

[Signature Page to Voting Agreement]

 

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EXHIBIT 10.2

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”) is dated as of the 9th day of May, 2013 (the “ Effective Date ”), by and between Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”) and Cohen Bros. Financial, LLC, a Delaware limited liability company of which Daniel G. Cohen is the sole member (“ Buyer ”).

RECITALS :

WHEREAS, Buyer desires to purchase from the Company, and the Company desires to issue and to sell to Buyer, upon the terms and conditions set forth in this Agreement, (i) an aggregate of Eight Hundred Thousand (800,000) newly issued shares (each, a “ Common Share ” and, collectively, the “ Common Shares ”) of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), for a purchase price of Two Dollars ($2.00) per Common Share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000) (the “ Common Stock Purchase Price ”); and (ii) a convertible senior promissory note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000) (the “ Note Purchase Price ”), in substantially the form attached hereto as Exhibit A (the “ Note ”);

WHEREAS, the Company and Buyer are executing and delivering this Agreement in reliance upon an exemption from registration afforded by the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations promulgated thereunder by the U.S. Securities and Exchange Commission (the “ SEC ”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering the Registration Rights Agreement attached hereto as Exhibit B (the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights to Buyer and to the Mead Park Buyer (as defined below) under the Securities Act and under applicable state securities Laws;

WHEREAS, the Company has approved the shareholder rights plan attached hereto as Exhibit C (the “ Shareholder Rights Plan ”) to reduce the risk of any limitation of net operating loss and net capital loss carryforwards and certain other tax benefits under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder (the “ Code ”) and such plan is effective as of the Effective Date;

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company, Mead Park Capital Partners LLC (the “ Mead Park Buyer ”) and Mead Park Holdings, LP are entering into a securities purchase agreement, pursuant to which the Mead Park Buyer has agreed to purchase from the Company and the Company has agreed to sell to the Mead Park Buyer (i) One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167) shares of Common Stock, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334) (the “ Mead Park Shares ”); and (ii) a convertible senior promissory note (the “ Mead Park Note ”) in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501), in the form attached hereto as Exhibit D (the “ Mead Park Purchase Agreement ”);


WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and Buyer are entering into an exchange agreement providing for the exchange of all of the Institutional Financial Markets, Inc. Series D Voting Non-Convertible Preferred Stock indirectly owned by Buyer for newly issued shares of Institutional Financial Markets, Inc. Series E Voting Non-Convertible Preferred Stock, in the form attached hereto as Exhibit E (the “ Exchange Agreement ”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, Daniel G. Cohen and the Company are entering into an amended and restated employment agreement, which is amending and restating the Cohen IFMI Employment Agreement and terminating the Cohen PrinceRidge Employment Agreement (each as defined below), in the form attached hereto as Exhibit F (the “ Amended and Restated Cohen Employment Agreement ”);

WHEREAS, on or prior to the Effective Date, each member of IFMI, LLC and the board of managers of IFMI, LLC shall have approved, pursuant to written consents provided to Buyer, the amendment to the IFMI LLC Agreement (as defined below) attached hereto as Exhibit G (“ LLC Agreement Amendment ”); and

WHEREAS, on or prior to the Effective Date, the Company and the Voting Agreement Signatories (as defined below), have entered into and delivered to the Mead Park Buyer voting agreements, each attached hereto as Exhibit H (collectively, the “ Voting Agreements ”).

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereinafter expressed and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

ARTICLE I

RECITALS, EXHIBITS, SCHEDULES

The foregoing Recitals are true and correct and, such Recitals, together with the Schedules and Exhibits referred to therein and referred to hereafter, are hereby incorporated into this Agreement by this reference.

ARTICLE II

DEFINITIONS

Capitalized terms used in this Agreement but otherwise not defined herein shall have the following meanings:

2.1      “ Affiliate ” means, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made. For purposes of this definition, the terms “ control ,” “ controlling ,” “ controlled ” and words of similar import, when used in this context, mean, with respect to any Person, the possession, directly or indirectly, of the power to direct, or cause the direction of, management policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

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2.2      “ Assets ” means all of the properties and assets of the Company or of the Subsidiaries, whether real, personal or mixed, tangible or intangible, wherever located, whether now owned or hereafter acquired.

2.3      “ Board of Directors ” means the Board of Directors of the Company.

2.4      “ Buyer Fundamental Representations ” means, collectively, the representations and warranties of Buyer contained in Sections 4.1 (Organization; Authority), 4.3 (Investment Purpose), 4.4 (Accredited Buyer Status; Experience of Buyer) and 4.9 (Brokers and Finders).

2.5      “ CCFL ” means Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD) a wholly-owned Subsidiary organized under the laws of the United Kingdom.

2.6      “ Claims ” means any threatened or actual Proceeding, Judgment, settlement, and/or assessment of any nature or kind.

2.7      “ Cohen IFMI Employment Agreement ” means the Employment Agreement, dated February 18, 2010, by and among the Company, IFMI, LLC, and Daniel G. Cohen, as amended by Amendment No. 1, dated December 18, 2012.

2.8      “ Cohen PrinceRidge Employment Agreement ”  means the Executive Agreement, dated May 31, 2011, by and among PrinceRidge, the Company, IFMI, LLC and Daniel G. Cohen and, solely for purposes of Sections 5.5 and 5.6 thereof, C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC).

2.9      “ Company Fundamental Representations ”    means, collectively, the representations and warranties of the Company contained in Sections 5.1 (Organization and Qualification), 5.2 (Authorization; Enforcement; Validity), 5.3 (Capitalization), 5.5 (No Conflicts; Consents and Approvals), 5.6 (Issuance of Securities), 5.8 (Absence of Certain Changes), 5.11 (Compliance with Laws), 5.15 (Acknowledgement Regarding Buyer’s Purchase of the Securities) and 5.16 (Brokerage Fees).

2.10      “ Consent ” means any consent, approval, order or authorization of, or any declaration, qualification, filing or registration with, or any application or report to, or any waiver by, or any other action (whether similar or dissimilar to any of the foregoing) of, by or with, any Person, which is necessary in order to take a specified action or actions, in a specified manner and/or to achieve a specific result.

2.11      “ Contract ” means any written or oral contract, agreement, order or commitment of any nature whatsoever, including any sales order, purchase order, lease, sublease, license agreement, services agreement, loan agreement, mortgage, security agreement, guarantee, management contract, employment agreement, consulting agreement, partnership agreement, stockholders agreement, buy-sell agreement, option, warrant, debenture, subscription, call or put.

 

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2.12    “ Conversion Shares ”  means the shares of Common Stock issuable upon conversion of the Note.

2.13     Convertible IFMI LLC Units   means units of membership interest in IFMI, LLC that are redeemable for shares of Common Stock or cash, at the option of the Company, pursuant to the IFMI LLC Agreement (other than any units of membership interest held by the Company).

2.14    “ Current Independent Directors ” means the members of the Board of Directors as of the Effective Date who are considered to be independent directors (as determined in accordance with Section 803 of the NYSE MKT’s Company Guide).

2.15    “ Director ” means a member of the Board of Directors.

2.16    “ DRS ” means the Direct Registration System maintained by the transfer agent for the Common Stock.

2.17    “ Encumbrance ” means any lien, security interest, pledge, mortgage, easement, leasehold, assessment, tax, covenant, reservation, conditional sale, prior assignment, or any other encumbrance, claim, burden or charge of any nature whatsoever.

2.18    “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

2.19    “ Family Group ” means, with respect to any Person, such Person, such Person’s sole member, and such Person’s or such sole member’s spouse, parent, sibling and descendants (whether natural or adopted) and any estate, trust, family limited partnership, limited liability company or other entity wholly owned, directly or indirectly, by such Person or such sole member or such Person’s or sole member’s spouse, parent, sibling and/or descendant that is and remains solely for the benefit of such Person, such sole member and/or such Person’s or such sole member’s spouse, parent, sibling and/or descendants and any self-directed retirement plan for such individual.

2.20    “ GAAP ” means generally accepted accounting principles in the United States of America as in effect from time to time.

2.21    “ Governmental Authority ”  means any foreign, federal, state or local government, or any political subdivision thereof, or any court, agency or other body, organization, group, stock market or exchange exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government.

2.22    “ IFMI, LLC ” means IFMI, LLC, a Delaware limited liability company and a majority owned Subsidiary.

2.23    “ IFMI LLC Agreement ” means the Amended and Restated Limited Liability Company Agreement of IFMI, LLC, dated as of December 16, 2009 by and among the Company and the Members (as defined therein) that are signatories thereto, as amended.

 

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2.24    “ Judgment ” means any order, ruling, writ, injunction, fine, citation, award, decree, or any other judgment of any nature whatsoever of any Governmental Authority.

2.25    “ Knowledge of the Company ” or words to that effect means the actual knowledge of any of the following Persons: Joseph W. Pooler, Jr., Douglas Listman, Rachael Fink, Stephan Burklin and James J. McEntee, III; provided, that for purposes of this definition such Persons shall be deemed to have actual knowledge of facts that would be reasonably expected to come to the attention of such Person in performing his or her duties in accordance with the Company’s or any relevant Subsidiary’s ordinary management practices.

2.26    “ Law ” means any provision of any law, statute, ordinance, code, constitution, charter, treaty, rule or regulation of any Governmental Authority.

2.27    “ Material Adverse Effect ”  means any circumstance, event, change, development, effect or occurrence that, individually or in the aggregate, (i) is or would reasonably be expected to be materially adverse to the Company’s financial position, results of operations, business, condition (financial or otherwise) or Assets of the Company and its Subsidiaries, taken as a whole or (ii) would materially impair the ability of the Company to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummations of the transactions contemplated herein; provided, however, that in the case of clause (i) only, any circumstance, event, change, development, effect or occurrence that results from any of the following shall be disregarded in determining whether there has been or would be a “Material Adverse Effect” on the Company (except to the extent that such circumstance, event, change, development, effect or occurrence has a disproportionate adverse effect on the Company and the Subsidiaries relative to other companies engaged in a similar business as the Company): (A) changes, after the Effective Date, in GAAP; (B) changes, after the Effective Date, in Laws or interpretations thereof applicable to the Company or the Subsidiaries by any Governmental Authority; (C) general changes in the national or world economy or securities markets generally; (D) changes in the price or trading volume of the Common Stock on the Trading Market (but not the underlying causes of such changes); or (E) the outbreak or escalation of war or hostilities, any occurrence or threats of terrorist acts or any armed hostilities associated therewith or any national or international calamity, disaster or emergency or escalation thereof.

2.28    “ Mead Park Conversion Shares ” means the shares of Common Stock into which the Mead Park Note may be converted.

2.29    “ Meeting ” means any meeting of the stockholders of the Company at which the election of Directors is to be voted upon, however called (and including any postponement or adjournment of any such meeting) and any written consent of the stockholders of the Company with respect to the election of Directors.

2.30    “ Obligation ” means any debt, liability or obligation of any nature whatsoever, whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown or obligations under executory Contracts.

 

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2.31    “ Permit ” means any license, permit, approval, waiver, order or authorization granted, issued or approved by any Governmental Authority.

2.32    “ Person ” means any individual, sole proprietorship, joint venture, partnership, company, corporation, association, cooperation, trust, estate, Governmental Authority, or any other entity of any nature whatsoever.

2.33    “ PrinceRidge ” means C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP), an indirect Subsidiary.

2.34     Principal of any Person means, at the time of determination, each principal, partner or member of such Person, any spouse or child of each principal, partner or member, and any trust for the benefit of each principal, partner or member or each such principal’s, partner’s or member’s spouse or lineal descendants.

2.35    “ Proceeding ” means any demand, claim, suit, action, litigation, investigation, audit, study, arbitration, administrative hearing, or any other proceeding of any nature whatsoever.

2.36    “ Sandler O’Neill ” means Sandler O’Neill & Partners, L.P., the independent financial advisor to the Special Committee.

2.37    “ Securities ” means, together, the Common Shares and the Note.

2.38    “ Shell Company ” means an issuer that meets the description of a shell company as defined under Rule 144.

2.39     Significant Subsidiary means each of the significant subsidiaries (as such term is defined in Rule 1-02(w) of Regulation S-X) of the Company, as set forth in the Company’s SEC Documents.

2.40    “ Special Committee ” means the special committee of independent directors of the Board of Directors formed in connection with the transactions contemplated by this Agreement and the Transaction Documents.

2.41    “ Subsidiary ” means each subsidiary of the Company.

2.42    “ Tax ” means (i) any foreign, federal, state or local income, profits, gross receipts, franchise, sales, use, occupancy, general property, real property, personal property, intangible property, transfer, excise, accumulated earnings, unemployment compensation, social security, withholding taxes, payroll taxes, or any other tax of any nature whatsoever, (ii) any foreign, federal, state or local organization fee, qualification fee, annual report fee, filing fee, occupation fee, or assessment, or (iii) any deficiency, interest or penalty imposed with respect to any of the foregoing.

2.43    “ Tax Return ” means any tax return, filing, declaration, information statement or other form or document required to be filed in connection with or with respect to any Tax.

 

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2.44    “ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

2.45    “ Transaction Documents ” means (i) any documents or instruments to be executed by the Company, Buyer, Mead Park Holdings, LP, the Mead Park Buyer, and IFMI, LLC in connection with this Agreement, including the Note, and the Registration Rights Agreement; and (ii) the Voting Agreements, together, in each case, with all modifications, amendments, extensions, future advances, renewals, and substitutions thereof and thereto.

2.46    “ Voting Agreement Signatories ” means, collectively, Daniel G. Cohen, Christopher Ricciardi, Stephanie Ricciardi, The Ricciardi Family Foundation, James J. McEntee, III, Joseph W. Pooler, Jr., Doug Listman, Rachael Fink, Walter Beach, Rodney E. Bennett, Thomas P. Costello, G. Steven Dawson, Joseph M. Donovan, Jack Haraburda, Lance Ullom, Charles W. Wolcott and Neil S. Subin.

In addition, the following terms shall have the respective meanings ascribed to them in the corresponding Sections:

 

Term      Section
2013 Annual Meeting of Stockholders   

 Section 6.7

8-K Filing   

 Section 6.5

Agreement   

 Preamble

Amended and Restated Cohen Employment Agreement   

 Recitals

Articles of Incorporation   

 Section 5.1

Benefit Plan   

 Section 5.18

Buyer   

 Preamble

Buyer Indemnified Parties   

 Section 9.1

Bylaws   

 Section 5.1

Closing   

 Section 3.2

Closing Date   

 Section 3.2

Code   

 Recitals

Common Share(s)   

Recitals

Common Stock   

 Recitals

Common Stock Purchase Price   

 Recitals

Company   

 Preamble

Company Indemnified Parties   

 Section 9.2

Company Proxy Statement   

 Section 6.7

Effective Date   

 Preamble

Employees   

 Section 5.18

ERISA   

 Section 5.18

ERISA Plans   

 Section 5.18

Exchange Agreement   

 Recitals

Investment Company Act   

 Section 5.17

Financial Statements   

 Section 5.7

 

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Term      Section

LLC Agreement Amendment

    

Recitals

Listing Application

    

Section 6.6

Mead Park Buyer

    

Preamble

Mead Park Note

    

Recitals

Mead Park Purchase Agreement

    

Recitals

Mead Park Shares

    

Recitals

Minority Board Representative

    

Section 6.8(a)

New Security

    

Section 6.9(a)

Note

    

Recitals

Note Purchase Price

    

Recitals

Pension Plan

    

Section 5.18

Registration Rights Agreement

    

Recitals

Rule 144

    

Section 5.21

Rule 144 Certificate

    

Section 6.2(b)ii

SEC

    

Recitals

SEC Documents

    

Section 5.7

Securities Act

    

Recitals

Securities Being Sold

    

Section 6.2(b)ii

Share Reserve

    

Section 6.4

Shareholder Rights Plan

    

Recitals

Stockholder Proposal

    

Section 6.7

Transaction Deadline

    

Section 10.1(b)ii

Voting Agreements

    

Recitals

ARTICLE III

PURCHASE AND SALE OF SECURITIES

3.1       Purchase and Sale of Securities .  Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, on the Closing Date, (i) Buyer agrees to purchase the Securities; and (ii) the Company agrees to sell and to issue to Buyer the Securities for the aggregate amount of the Common Stock Purchase Price and the Note Purchase Price.

3.2       Closing .    The closing (the “ Closing ”) of the transactions contemplated hereby will occur at the offices of Duane Morris LLP, 30 South 17 th Street, Philadelphia, Pennsylvania, commencing at 9:00 a.m. local time on the second (2 nd ) business day after the satisfaction or waiver of all conditions in Article VII and Article VIII (other than conditions with respect to actions that the respective parties hereto will take at the Closing), or at such other location and on such other date as the parties mutually determine (the “ Closing Date ”).

3.3       Form of Payment; Delivery of Securities .  Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, on the Closing Date, (i) Buyer shall deliver to the Company the Common Stock Purchase Price and the Note Purchase Price, in the form of wire transfers of immediately available U.S. funds; and (ii) the Company shall deliver to Buyer the Securities, duly executed on behalf of the Company, together with any other documents required to be delivered pursuant to this Agreement.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to the Company that:

4.1       Organization; Authority . Buyer is duly organized, validly existing under the laws of the jurisdiction of its organization with the requisite limited liability company power and authority to enter into and to consummate the transactions contemplated by this Agreement and by each of the Transaction Documents to which Buyer is a party and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by Buyer of this Agreement and of each of the Transaction Documents to which Buyer is a party have been duly authorized by all necessary limited liability company action, on the part of Buyer. Each of this Agreement and the Transaction Documents to which Buyer is a party has been (or upon delivery will have been) duly executed by Buyer, and, when delivered by Buyer in accordance with the terms hereof and thereof, will constitute the valid and legally binding obligation of Buyer, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

4.2       No Conflicts .    The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which Buyer is a party and the consummation by Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any Contract, indenture or instrument to which Buyer is a party, or (iii) result in a violation of any Law, rule, regulation, order, judgment or decree (including federal and state securities Laws) applicable to Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations hereunder.

4.3       Investment Purpose .  Buyer understands that the Securities are not, and the Conversion Shares will not be, registered under the Securities Act or any applicable state securities Laws (subject to the Registration Rights Agreement). Buyer is acquiring the Securities and, upon exercise of the Note (if applicable), will acquire the Conversion Shares issuable upon exercise thereof, as principal for its own account for investment only and not with a view to or for the purpose of distributing or reselling such Securities or Conversion Shares (if applicable) or any part thereof in violation of the Securities Act or any applicable state securities Laws. Buyer does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Securities or the Conversion Shares (if applicable) (or any securities which are derivatives thereof) to or through any person or entity; Buyer is not a registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business that would require it to be so registered as a broker-dealer.

4.4       Accredited Buyer Status; Experience of Buyer . At the time Buyer was offered the Securities, it was, on each date on which it acquires Securities it will be, and on each date on which it exercises the Note (if applicable) it will be, an “accredited investor” as defined in Rule 501(a) under the Securities Act. Buyer, either alone or together with its representatives (if any), has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Buyer acknowledges that it can bear the economic risk and complete loss of its investment in the Securities.

 

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4.5       Residency . Buyer has its principal place of business in the State of New York.

4.6       Reliance on Exemptions . Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities Laws and that the Company is relying upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Securities.

4.7       Information .    Buyer and its advisors have been furnished with all materials relating to the business, finances and operations of the Company and information Buyer deemed material to making an informed investment decision regarding its purchase of the Securities, which have been requested by Buyer. Buyer and its advisors have been afforded with the opportunity to ask questions of the Company and its management. Buyer has sought such accounting, legal, tax and other professional advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

4.8       Restrictions on Transferability .  Buyer understands that because the Securities have not have been registered under the Securities Act, Buyer cannot dispose of any or all of the Securities unless such Securities are subsequently registered under the Securities Act or exemptions from registration are available. Buyer acknowledges and understands that, except as provided in the Registration Rights Agreement, it has no registration rights. By reason of these restrictions, Buyer understands that it may be required to hold the Securities for an indefinite period of time. Buyer understands that each certificate or other instrument representing the Securities and the Conversion Shares will bear appropriate legends reflecting the foregoing as well as state “blue sky” legends. In addition, appropriate transfer restrictions will be affixed to any notation in the DRS for any Securities or Conversion Shares.

4.9       Brokers and Finders .    Buyer has not employed any Person, or incurred any liability, for any financial advisory, brokerage or finder’s fee or commission, and no broker or finder has acted directly or indirectly for Buyer, in connection with the transactions contemplated by this Agreement and the Transactions Documents.

4.10     Independent Investment Decision .  Buyer has evaluated, independently of the Company, the merits of its decision to purchase the Securities pursuant to this Agreement and the Transaction Documents. Buyer understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Buyer in connection with the purchase of the Securities constitutes legal, tax or investment advice.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth and disclosed in the disclosure schedule attached to this Agreement and made a part hereof or as set forth in the SEC Documents (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other statements, in each case, that are predictive or forward-looking in nature), the Company hereby makes the following representations and warranties to Buyer:

5.1       Organization and Qualification .  The Company is an entity duly incorporated, validly existing and in good standing under the laws of the State of Maryland, with the requisite power and authority to own or lease and use its properties and Assets and to carry on its business as currently conducted and as currently proposed to be conducted. The Company is not in violation of any of the provisions of the Articles of Incorporation or the Bylaws. The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and no Proceeding has been instituted, is pending, or, to the Knowledge of the Company, is threatened in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. The Company has furnished or made available to Buyer true, complete and correct copies of: (A) the Company’s Articles of Incorporation, as amended and as in effect on the Effective Date (the “ Articles of Incorporation ”); and (B) the Company’s Bylaws, as in effect on the Effective Date (the “ Bylaws ”).

5.2       Authorization; Enforcement; Validity .  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by the Company of this Agreement and of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby (including, but not limited to, the issuance, sale and delivery of the Securities and the reservation for issuance and the subsequent issuance of the Conversion Shares upon exercise of the Note) have been duly authorized by all necessary corporate action on the part of the Company, and, other than the approval by the Company’s stockholders of the Stockholder Proposal, no further corporate action is required by the Company, the Board of Directors or its stockholders in connection herewith and therewith. Each of this Agreement and the Transaction Documents to which the Company is a party has been (or upon delivery will have been) duly and validly executed by the Company and is, or when delivered in accordance with the terms hereof will constitute, the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. The Board of Directors has resolved that the transactions contemplated by this Agreement and the Transaction Documents are in the best interests of stockholders of the Company.

 

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5.3       Capitalization .  The authorized capital stock of the Company consists of: (a) 100,000,000 shares of Common Stock, of which 12,237,104 shares of Common Stock are issued and outstanding as of the Effective Date; (b) 10,000,000 shares of Preferred Stock, par value $0.001 per share, all of which are designated as Series C Junior Participating Preferred Stock, none of which are issued or outstanding as of the Effective Date; and (c) 50,000,000 shares of Preferred Stock, par value $0.001 per share, of which 4,983,557 shares are designated as Series E Voting Non-Convertible Preferred Stock, all of which are issued and outstanding as of the Effective Date. All outstanding shares of Common Stock and Series E Voting Non-Convertible Preferred Stock have been duly authorized, validly issued and are fully paid and nonassessable. The Common Stock is currently quoted on the NYSE MKT under the trading symbol “IFMI,” and the Company has maintained all requirements on its part for the continuation of such quotation. No shares of Common Stock are subject to preemptive rights or any other similar rights. Except as contemplated hereby and as set forth on Schedule 5.3 hereto, as of the Effective Date: (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, or Contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company, or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company; (ii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other Contracts or instruments evidencing indebtedness of the Company, or by which the Company is or may become bound; (iii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act (except pursuant to the Registration Rights Agreement); (iv) there are no financing statements securing any obligations of the Company; (v) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein; and (vi) there are no outstanding securities or instruments of the Company which contain any redemption or similar provisions, and there are no Contracts by which the Company is or may become bound to redeem a security of the Company. Schedule 5.3 attached hereto contains a pro forma beneficial ownership table for the Company giving effect to the transactions contemplated by this Agreement and the other Transaction Documents.

5.4       Subsidiaries .  Except as set forth on Schedule 5.4 hereto, the Company has no other Subsidiaries and all shares of the outstanding capital stock of each Subsidiary are owned directly or indirectly by the Company. All of such shares so owned by the Company are duly authorized, validly issued and are fully paid and nonassessable, and are owned by it free and clear of any Encumbrance with respect thereto. Each Significant Subsidiary is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the requisite power and authority to own or lease and use its properties and Assets and to carry on its business as currently conducted and as currently proposed to be conducted, in each case except as would not reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth on Schedule 5.4 hereto, the Company does not own beneficially, directly or indirectly, more than five percent (5%) of any class of equity securities or similar interests of any organization, and is not, directly or indirectly, a partner in any partnership or party to any joint venture. Except as set forth on Schedule 5.4 hereto, no equity security of any Subsidiary is or may be required to be issued by reason of any option, warrant, scrip, right to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of such Subsidiary, and there are no Contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of its capital stock, or any option, warrant, scrip, right to subscribe to, call or commitment of any character whatsoever relating to, or securities or rights convertible into, any shares of its capital stock.

 

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5.5       No Conflicts; Consents and Approvals .  The execution, delivery and performance of this Agreement and the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, including the issuance, sale and delivery of any of the Securities and the Conversion Shares, and compliance by the Company with any provisions of the Transaction Documents will not: (i) constitute or result in a violation of or conflict with the Articles of Incorporation, Bylaws, or any other organizational or governing documents of Company or any Subsidiary; (ii) constitute or result in a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, or gives to any other Person any rights of termination, amendment, acceleration or cancellation of, any provision of any Contract, indenture or instrument to which Company or any Subsidiary is a party or by which it may be bound, or to which the Company or any Subsidiary or any of their Assets or properties may be bound (other than immaterial contracts relating to back office operations, systems and facilities or similar matters); (iii) constitute a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, any Judgment; (iv) assuming that, in connection with the transactions contemplated hereby, the parties hereto timely make all of the filings required by applicable state securities Laws and under the applicable rules and regulations of the Trading Market constitute a violation of, or conflict with, any Law, rule, regulation, order, judgment or decree (including federal and state securities Laws); or (v) result in the loss or adverse modification of, or the imposition of any fine, penalty or other Encumbrance with respect to, any Permit granted or issued to, or otherwise held by or for the use of, the Company or any Subsidiary or any of the their Assets or properties; except, in the case of clause (v), for such violations, defaults, breaches, conflicts, losses, modifications or impositions that have not had and would not reasonably be expected to have a Material Adverse Effect. The Company is not in default or breach (and no event has occurred which with notice or lapse of time or both could put the Company in default or breach) under, and the Company has not taken any action or failed to take any action that would give to any other Person any rights of termination, amendment, acceleration or cancellation of, any material Contract to which the Company is a party or by which any property or Assets of the Company are bound or affected. Except with respect to the SEC and the Trading Market and as specifically contemplated by this Agreement or the Transaction Documents, the Company is not required to obtain any Consent of, from, or with any Governmental Authority, or any other Person, and no expiration or termination of any statutory waiting period is necessary, in order for the Company to execute, deliver or perform any of its obligations under this Agreement and the Transaction Documents in accordance with the terms hereof or thereof, or to issue, sell and deliver the Securities and the Conversion Shares in accordance with the terms hereof and thereof. All Consents which the Company is required to obtain pursuant to the immediately preceding sentence have been obtained or effected on or prior to the Effective Date or will be obtained or effected on or prior to Closing or as otherwise required under the rules and regulations of the applicable Governmental Authority.

 

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5.6       Issuance of Securities .  The Securities to be issued pursuant to this Agreement have been duly authorized by all necessary corporate action of the Company and, upon issuance in accordance with the terms hereof, the Common Shares, the Note and the Conversion Shares, as applicable, shall be duly and validly issued, fully paid and non-assessable, and free from all Encumbrances with respect to the issue thereof, and, assuming the accuracy of the representations and warranties of Buyer set forth in Article IV above, will be issued in compliance with all applicable United States federal and state securities Laws.

5.7       Listing and Maintenance Requirements; SEC Documents; Financial Statements .  The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or that is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has filed all reports, schedules, forms, statements and other documents, together with any amendments thereto, required to be filed by it with the SEC under the Exchange Act (all of the foregoing filed within the two (2) years preceding the Effective Date and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “ SEC Documents ”). The Company is current with its filing obligations under the Exchange Act and there are no outstanding comments from the SEC with respect to any report, schedule, form, statement and other document required to be filed by it with the SEC under the Exchange Act. The Company represents and warrants that true and complete copies of the SEC Documents are available on the SEC’s website (www.sec.gov) at no charge. As of their respective dates, the SEC Documents complied in all material respects with the applicable requirements of the Exchange Act, and none of the SEC Documents, at the time they were filed with or furnished to the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002. To the Knowledge of the Company as of the Effective Date, there are no facts or circumstances that would prevent its current Chief Executive Officer and Chief Financial Officer from giving the certifications and attestations required pursuant to Rules 13a-14 and 15d-14 under the Exchange Act, without qualification, with respect to the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013. As of their respective dates, the financial statements of the Company included in the SEC Documents (collectively, the “ Financial Statements ”) (i) have been prepared from the books and records of the Company and the Subsidiaries, (ii) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (iii) have been prepared in accordance with GAAP, consistently applied during the periods involved and (iv) fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the consolidated results of its operations and comprehensive income/loss, changes in equity and cash flows for the periods then ended, subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments.

 

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5.8       Absence of Certain Changes .  Except as otherwise disclosed to Buyer in writing on or prior to the date hereof, since the date upon which the last of the SEC Documents was filed with the SEC, there has been no event or circumstance of any nature whatsoever that has resulted in, or would reasonably be expected to result in, a Material Adverse Effect.

5.9       Absence of Litigation; No Undisclosed Liabilities .  Except as otherwise disclosed to Buyer in writing on or prior to the date hereof or as would not reasonably be expected to have a Material Adverse Effect, (i) there is no Proceeding before or by any Governmental Authority or any other Person, pending, or to the Knowledge of the Company, threatened or contemplated by, against or affecting the Company or any Subsidiary, or their Assets; and (ii) there are no outstanding Judgments against or affecting the Company, any Subsidiary, or their Assets. There are no obligations that are not appropriately reflected or reserved against in the financial statements described in Section 5.7 to the extent required to be so reflected or reserved against in accordance with GAAP, except for (i) liabilities that have arisen since December 31, 2012 in the ordinary course of business consistent with past practice and (ii) liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect.

5.10     Title to Assets .  Except as set forth on Schedule 5.10 hereto, the Company or a Significant Subsidiary has good and marketable title to, or a valid leasehold interest in, all of its Assets which are material to the business and operations of the Company and the Significant Subsidiaries as presently conducted, free and clear of all Encumbrances or restrictions on the transfer or use of same. Except as would not have a Material Adverse Effect, the Company’s Assets are in good operating condition and repair, ordinary wear and tear excepted.

5.11     Compliance with Laws .  The Company and the Subsidiaries (i) are in material compliance with all applicable Laws and Judgments; (ii) to the Knowledge of the Company, have all material Permits and such Permits are in full force and effect and no material suspension or cancellation of any of them is threatened; and (iii) to the Knowledge of the Company, are not under investigation with respect to, and have not been threatened to be charged with or given notice of, any material violation of all applicable Laws and Judgments.

5.12     No Directed Selling Efforts or General Solicitation .  Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has conducted any “general solicitation” or “general advertising” (as those terms are used in Regulation D promulgated under the Securities Act) in connection with the offer or sale of any of the Securities.

 

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5.13     Tax Matters .  The Company and each of its Affiliates has made and timely filed all United States federal income Tax Returns and all foreign income Tax Returns and all other material Tax Returns required to be filed by it, and each such Tax Return has been prepared in material compliance with all applicable Laws, and all such Tax Returns are true and accurate in all material respects. Except and only to the extent that the Company or any of its Affiliates, as the case may be, has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported Taxes, the Company and each of its Affiliates has timely paid all Taxes shown or determined to be due on such Tax Returns, except those being contested in good faith, and the Company and each of its Affiliates has set aside on its books provision reasonably adequate for the payment of all Taxes for periods subsequent to the periods to which such Tax Returns apply. There are no unpaid Taxes of the Company or any of its Affiliates in any material amount claimed to be due by the taxing authority of any jurisdiction, and, to the Knowledge of the Company, no basis for any such claim. The Company and each of its Affiliates has withheld and paid all Taxes to the appropriate Governmental Authority required to have been withheld and paid in connection with amounts paid or owing to any Person. There is no Proceeding or Claim for refund now in progress, pending or threatened against or with respect to the Company or any of its Affiliates, in each case, regarding Taxes. Neither the Company nor any of its Affiliates has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, in each case, that is still in effect, or has pending a request for any such extension or waiver. Neither the Company nor any of its Affiliates has entered into any “listed transaction” within the meaning of Treasury Regulations section 1.6011-4(b)(2). Neither the Company nor any of its Affiliates has liability for the Taxes of any person other than the Company or any of its Affiliates under Treasury Regulations section 1.1502-6 (or any similar provision of state, local or foreign law). Neither the Company nor any of its Affiliates is party to, bound by or has any obligation under any Tax allocation, Tax sharing, Tax indemnity or similar agreement, arrangement or understanding (other than any agreement, arrangement or understanding solely among the Company and its Affiliates). Neither the Company nor any of its Affiliates is currently subject to a section 382 limitation, as defined in section 382 of the Code, with respect to any of its Tax attributes. The representation made in the previous sentence will be true immediately after the end of the Closing Date. The aggregate amount of the net operating loss carryovers for United States federal income tax purposes of the Company and its Affiliates as of December 31, 2011 equals or exceeds $88,830,601 and as of December 31, 2012, as currently estimated in good faith by the Company (but subject to future adjustment), equals or exceeds $86,051,682, and Schedule 5.13 attached hereto sets forth the dates on which such net operating loss carryforwards expire. The aggregate amount of the net capital loss carryovers for United States federal income tax purposes of the Company and its Affiliates as of December 31, 2011 equals or exceeds $41,251,297 and as of December 31, 2012, as currently estimated in good faith by the Company (but subject to future adjustment), equals or exceeds $58,892,311, and Schedule 5.13 attached hereto sets forth the dates on which such net capital loss carryforwards expire.

5.14     Internal Accounting Controls .    The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to Assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for Assets is compared with the existing Assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company (A) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer of the Company by others within those entities, and (B) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors (x) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. Since December 31, 2010, (i) neither the Company nor any Subsidiary nor, to the Knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any Subsidiary has received, or otherwise had or obtained knowledge of, any complaint, allegation, assertion or claim that the Company or any Subsidiary has engaged in questionable accounting or auditing practices, and (ii) no attorney representing the Company or any Subsidiary, whether or not employed by the Company or any Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company.

 

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5.15     Acknowledgment Regarding Buyer’s Purchase of the Securities . The Company acknowledges and agrees that Buyer is acting solely in the capacity of an “arm’s length” purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by Buyer or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to Buyer’s purchase of the Securities. The Company further represents to Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.

5.16     Brokerage Fees .  There is no Person acting on behalf of the Company as placement agent in connection with the transactions contemplated hereby, and, other than the Special Committee’s retention of Sandler O’Neill, there is no Person acting on behalf of the Company who is entitled to or has any claim for any financial advisory, brokerage or finder’s fee or commission in connection with the execution of this Agreement or the transactions contemplated hereby.

5.17     Investment Company .    The Company is not an “investment company” as defined under the Investment Company Act of 1940, as amended (the “ Investment Company Act ”), and the Company does not sponsor any person that is such an investment company.

 

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5.18     Employee Matters .    All benefit and compensation plans, contracts, policies, programs or arrangements covering current or former employees, Directors and consultants of the Company and its Subsidiaries (the “ Employees ”), including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and employment, consulting, retirement, pension, severance, termination, change in control, vacation, deferred compensation, stock option, stock purchase, stock appreciation rights, equity based, incentive, bonus, profit sharing, insurance, medical, welfare, fringe or other benefit plans, contracts, policies, programs or arrangements (the “ Benefit Plans ”) are listed in this Schedule 5.18 attached hereto, and each Benefit Plan which has received a favorable opinion letter from the Internal Revenue Service National Office, including any master or prototype plan, has been separately identified. All Benefit Plans are in substantial compliance with ERISA, the Code and other applicable laws. Each Benefit Plan which is subject to ERISA (the “ ERISA Plans ”) that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (“ Pension Plan ”) and that is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service and, to the Knowledge of the Company, there are no circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Pension Plan under Section 401(a) of the Code. Neither the Company nor any Subsidiary has engaged in a transaction with respect to any ERISA Plan that, assuming the taxable period of such transaction expired as of the Effective Date, could subject the Company or any Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. Neither the Company nor any of the Subsidiaries has incurred or reasonably expects to incur a material tax or penalty imposed by Section 4980F of the Code or Section 502 of ERISA. Neither the Company, any Subsidiary nor any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (x) maintains or contributes to or has within the past six years maintained or contributed to a Pension Plan that is subject to Subtitles C or D of Title IV of ERISA or (y) maintains or has an obligation to contribute to or has within the past six years maintained or had an obligation to contribute to a multiemployer plan, as defined in Section 3(37) of ERISA. All contributions required to be made under each Benefit Plan, as of the Effective Date, have been timely made and all obligations in respect of each Benefit Plan have been properly accrued and reflected in the Financial Statements. As of the Effective Date, there is no material pending or, to the Knowledge of the Company threatened, litigation relating to the Benefit Plans. Neither the Company nor any Subsidiary has any obligations for retiree health and life benefits under any Benefit Plan or collective bargaining agreement. The Company or its Subsidiaries may amend or terminate any such retiree health and life plan at any time without incurring any liability thereunder other than in respect of claims incurred prior to such amendment or termination. There has been no amendment to, announcement by the Company or any Subsidiary relating to, or change in participation or coverage under, any Benefit Plan which would increase materially the expense of maintaining such plan above the level of the expense incurred therefor for the most recent fiscal year. None of the transactions contemplated by this Agreement or the other Transaction Documents, individually or in the aggregate, (i) constitute a “change in control” or “change of control” (or phrases of similar import) within the meaning of any Benefit Plan, (ii) result in any payment or benefit (including severance, unemployment compensation, “excess parachute payment” (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any Employee, the Directors or any consultant of the Company or any Subsidiary under any Benefit Plan, (iii) result in payments under any of the Benefit Plans which would not be deductible under Section 162(m) of the Code, (iv) increase any compensation or benefits otherwise payable under any Benefit Plan, (v) result in any acceleration of the time of payment or vesting of any such benefits, (vi) require the funding or increase in the funding of any such benefits, or (vii) result in any limitation on the right of the Company or any Subsidiary to amend, merge, terminate or receive a reversion of assets from any Benefit Plan or related trust.

5.19     Risk Management; Derivatives .  The Company and the Significant Subsidiaries have in place risk management policies and procedures designed to protect against material risks of the type and in amounts reasonably expected to be incurred by Persons of similar size and in similar lines of business as the Company and the Significant Subsidiaries.

 

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5.20       Foreign Corrupt Practices and International Trade Sanctions.   To the Knowledge of the Company, neither the Company nor any Subsidiary, nor any of their respective directors, officers, agents, employees or any other persons acting on their behalf (i) has violated the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1 et seq., as amended, or any other similar applicable foreign, federal, or state legal requirement; (ii) has made or provided, or caused to be made or provided, directly or indirectly, any payment or thing of value to a foreign official, foreign political party, candidate for office or any other person knowing that the person shall pay or offer to pay the foreign official, party or candidate, for the purpose of influencing a decision, inducing an official to violate their lawful duty, securing any improper advantage, or inducing a foreign official to use their influence to affect a governmental decision; (iii) has paid, accepted or received any unlawful contributions, payments, expenditures or gifts; (iv) has violated or operated in noncompliance with any export restrictions, money laundering law, anti-terrorism law or regulation, anti-boycott regulations or embargo regulations; or (v) is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department.

5.21       Rule 144 .    With a view to making available to Buyer the benefits of Rule 144 promulgated under the Securities Act (“ Rule 144 ”), or any similar rule or regulation of the SEC that may at any time permit Buyer to sell any of the Securities to the public without registration, the Company represents and warrants that: (i) the Company is, and has been for a period of at least ninety (90) days immediately preceding the Effective Date, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (ii) the Company has filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12) months preceding the Closing Date (or for such shorter period that the Company was required to file such reports); and (iii) the Company is not and has not been an issuer defined as a Shell Company.

Buyer acknowledges and agrees that the Company makes no representations or warranties whatsoever, express or implied, except for those specifically set forth in this Article V, in any certificate delivered hereto or in any other Transaction Document.

ARTICLE VI

COVENANTS

6.1         Use of Proceeds .  The proceeds from the purchase and sale of the Securities shall be used by the Company for general corporate purposes.

6.2         Affirmative Covenants of the Company .  Following the Closing, for so long as Buyer, Daniel G. Cohen and its or their controlled Affiliates, Principals and Family Group members collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock), unless waived in writing by Buyer:

(a)       Reporting Status; Listing .  The Company shall (i) file all reports required to be filed under the Securities Act, under the Exchange Act, under any federal or state securities Laws and regulations applicable to the Company, and under the rules and regulations of the Trading Market; and (ii) comply in all material respects with the Company’s required reporting, filing and other obligations under the Bylaws or rules of the Trading Market.

 

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(b)       Rule 144 .  The Company shall:

  i.           use its reasonable best efforts to make, keep and ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144, is publicly available;

 ii.          furnish to Buyer, promptly upon reasonable request, such statements, reports, documents or other information as may be reasonably requested by Buyer to permit Buyer to sell any of the Securities or Conversion Shares pursuant to Rule 144 without limitation or restriction;

iii.         promptly, at the request of Buyer, give the Company’s transfer agent instructions to the effect that, upon the transfer agent’s receipt from Buyer of a certificate (a “ Rule 144 Certificate ”) certifying the eligibility for sale under Rule 144 of any portion of the Securities or Conversion Shares which Buyer proposes to sell (the “ Securities Being Sold ”), and receipt by the transfer agent of a “Rule 144 Opinion” from the Company or its counsel (or from Buyer and its counsel), the transfer agent is to effect the transfer of the Securities Being Sold and issue to such transferee(s) thereof the transferred Securities Being Sold. If the transfer agent requires any additional documentation in connection with any proposed transfer by Buyer of any Securities Being Sold, then the Company shall promptly deliver or cause to be delivered to the transfer agent or to any other Person, all such additional documentation as may be necessary to effectuate the transfer of the Securities Being Sold and the issuance of an unlegended certificate to any transferee thereof, all at the Company’s expense; and

iv.         take such further action as Buyer may reasonably request, all to the extent required from time to time to enable Buyer to sell the Securities or the Conversion Shares without registration under the Securities Act.

(c)       Access to Books and Records .  The Company shall afford to Buyer and its representatives (including officers and employees of Buyer, and counsel, accountants and other professionals retained by Buyer), during normal business hours and upon reasonable notice to the Company, such access to the Company’s books, records, properties and personnel and to such other information as Buyer (if Buyer is not Daniel G. Cohen) may reasonably request; provided, however, that the Company may withhold such access to Buyer (if Buyer is not Daniel G. Cohen) or any such representative in the event that Buyer or such representative shall fail to execute a confidentiality agreement in a form reasonably satisfactory to the Company.

(d)       Efforts .  The Company shall use reasonable best efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary Consents or Permits, or any exemption by, all third parties and Governmental Authorities, and expiration or termination of any applicable waiting periods, necessary or advisable to consummate the transactions contemplated by this Agreement and the other Transaction Documents and to perform covenants contemplated by this Agreement and the other Transaction Documents.

6.3         Fees and Expenses .  Each party shall bear its own expenses in connection with the transactions contemplated by this Agreement and the Transaction Documents; provided, however, that in the event that Buyer terminates this Agreement under Section 10.1(b)i or Section 10.1(e)(i) or the Company terminates this Agreement under Section 10.1(f)(ii), the Company will reimburse Buyer for all out-of-pocket expenses incurred by Buyer and its Affiliates in connection with due diligence, the negotiation and preparation of this Agreement, the Transaction Documents and the undertaking of the transactions contemplated herein and therein (including fees and expenses of counsel), up to an aggregate maximum amount of Three Hundred Thousand Dollars ($300,000).

 

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6.4       Reservation of Shares .  The Company shall, at all times, have authorized and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary for the issuance of all of the Conversion Shares upon conversion of the Note (collectively, the “ Share Reserve ”). If at any time the Share Reserve is insufficient, then the Company shall, as soon as reasonably practicable, take all required measures to implement an increase of the Share Reserve accordingly. If the Company does not have sufficient authorized and unissued shares of Common Stock available to increase the Share Reserve, then the Company shall call and hold a special meeting of the stockholders of the Company within ninety (90) business days of such occurrence, for the purpose of increasing the number of shares of Common Stock authorized, and, at any such special meeting, the Company’s management shall recommend to the stockholders to vote in favor of increasing the number of shares of Common Stock authorized.

6.5       Disclosure of Transactions and Other Material Information .  The Company shall, on or before 8:30 a.m., New York City time, on the first (1 st ) trading day after the date of this Agreement, issue a press release disclosing the material terms of the transactions contemplated by this Agreement and the Transaction Documents. On or before 5:30 p.m., New York City time, on the second (2 nd ) business day after the date of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by this Agreement and by the Transaction Documents in the form required by the Exchange Act (the “ 8-K Filing ”). None of the Company, its Subsidiaries, or Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated by this Agreement or by the Transaction Documents without the express written consent of all of the other parties to this Agreement (such consent not to be unreasonably withheld or delayed); provided, however, that the Company shall be entitled, without the prior approval of Buyer, to file the 8-K Filing or other public disclosure as is required by applicable Law and regulations, subject to providing Buyer with reasonable opportunity to comment thereon. Notwithstanding the foregoing, the Company shall not publicly disclose the name of Buyer or any of its Affiliates, or include the name of Buyer or any of its Affiliates in any filing with the SEC or any regulatory agency or Trading Market, without the prior consent of Buyer (such consent not to be unreasonably withheld or delayed), except: (a) as required by federal securities Laws in connection with (x) the 8-K Filing, (y) any registration statement contemplated by the Registration Rights Agreement, or (z) the filing of this Agreement and the final Transaction Documents with the SEC; and (b) to the extent that such disclosure is required by Law or Trading Market rules and regulations, in which case the Company shall provide Buyer with prior notice of such disclosure permitted under this clause (b).

6.6       NYSE MKT Listing Application .  Following the Effective Date and prior to the Closing, the Company shall prepare and file with the NYSE MKT an Additional Listing Application (the “ Listing Application ”) relating to the Common Shares and the Conversion Shares.

 

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6.7         Stockholder Meeting and Company Proxy Statement . As promptly as reasonably possible following the Effective Date, but in any event within forty-five (45) days of the Effective Date, the Company shall call a meeting of its stockholders (the “ 2013 Annual Meeting of Stockholders ”) to vote on, among other things, proposals (collectively, the “ Stockholder Proposal ”) regarding the issuance of the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares for purposes of Sections 711 and 713 of the NYSE MKT’s Company Guide, as applicable. The Board of Directors shall recommend to the Company’s stockholders that such stockholders approve the Stockholder Proposal, and shall not modify or withdraw such resolution. In connection with the 2013 Annual Meeting of Stockholders, the Company shall promptly prepare and file with the SEC a Definitive Proxy Statement on Schedule 14A pursuant to Section 14(a) of the Exchange Act (the “ Company Proxy Statement ”), shall use its reasonable best efforts to solicit proxies for such stockholder approval and shall use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause a definitive proxy statement related the 2013 Annual Meeting of Stockholders to be mailed to the Company’s stockholders promptly after clearance by the SEC. The Company shall notify Buyer promptly of the receipt of any comments from the SEC or its staff with respect to the Company Proxy Statement and of any request by the SEC or its staff for amendments or supplements to such proxy statement or for additional information and shall supply Buyer with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to such proxy statement. If at any time prior to the 2013 Annual Meeting of Stockholders there shall occur any event that is required to be set forth in an amendment or supplement to the Company Proxy Statement, the Company shall promptly prepare and mail to its stockholders such an amendment or supplement. The Company agrees promptly to correct any information provided by it or on its behalf for use in the Company Proxy Statement if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall promptly prepare and mail to its stockholders an amendment or supplement to correct such information to the extent required by applicable Laws. The Company shall consult with Buyer prior to mailing the Company Proxy Statement, or any amendment or supplement thereto, and provide Buyer with reasonable opportunity to comment thereon. The Board of Directors’ recommendation described in this Section 6.7 shall be included in the Company Proxy Statement.

6.8         Board Representatives .

(a)       Minority Board Representative .  Following the Closing, if Buyer, Daniel G. Cohen and its or their controlled Affiliates, Principals and Family Group members collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock) as of the record date of a Meeting, then:

i.          Buyer shall be entitled to designate one (1) individual (the “ Minority Board Representative ”) to stand for election to the Board of Directors at such Meeting; provided, however, that such Minority Board Representative shall have satisfied all of the requirements applicable to the Directors under applicable Law, the Articles of Incorporation, the Bylaws and any customary director qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing; and

 

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ii.          the Board of Directors shall (i) nominate such Minority Board Representative for election to the Board of Directors at such Meeting; (ii) recommend to the Company’s stockholders the election of the Minority Board Representative at such Meeting; and (iii) solicit proxies for such Minority Board Representative in connection with such Meeting to the same extent as it does for any of its other nominees to the Board of Directors.

(b)      Upon any Minority Board Representative’s death, resignation, retirement, disqualification or removal from office as a Director (including by failure to elect or re-elect), if there is a vacancy on the Board of Directors as a result of such occurrence, then:

 i.          Buyer shall have the right to designate the successor for such Minority Board Representative; provided, however, that such successor shall have satisfied all of the requirements applicable to the Directors under applicable Law, the Articles of Incorporation, the Bylaws and any customary director qualification standards in effect as of the Effective Date and disclosed to Buyer or adopted by the Board of Directors after the Closing; and

ii.          the Board of Directors take all necessary actions to fill the vacancy resulting therefrom with such successor.

(c)       Removal of Board Representatives .  Notwithstanding any other provision of this Agreement, if Buyer, Daniel G. Cohen and its or their controlled Affiliates, Principals and Family Group members collectively own less than ten percent (10%), then (A) the terms and conditions set forth in Section 6.9(a) and Section 6.9(b) shall be null and void; and (B) if so requested by the Board of Directors (in its sole discretion), Buyer shall cause the Minority Board Representative or any of its successors designated by Buyer pursuant to Section 6.9(a) and Section 6.9(b), to resign from his or her position as Director.

6.9         Gross-Up Rights .

(a)       Sale of New Securities . After the Closing, for so long as Buyer, Daniel G. Cohen and its or their controlled Affiliates, Principals and Family Group members collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock) (before giving effect to any issuances triggering provisions of this Section 6.9), at any time that the Company or IFMI, LLC makes any public or nonpublic offering or sale of any equity (including the Common Stock, or any preferred stock or restricted stock), or any securities, options or debt that is convertible or exchangeable into equity (including Convertible IFMI LLC Units) or that includes an equity component (such as, an “equity” kicker) (including any hybrid security) (any such security, a “ New Security ”) other than (i) pursuant to the granting or exercise of employee stock options or other stock incentives pursuant to the Company’s stock incentive plans approved by the Board of Directors (so long as the authorized awards under the Company’s stock incentive plans represent less than ten percent (10%) of the outstanding shares of the Company’s capital stock) or the issuance of capital stock pursuant to any employee stock purchase plan of the Company approved by the Board of Directors or similar plan where stock is being issued or offered to a trust, other entity or otherwise, for the benefit of any employees, officers or directors of the Company, in each case, in the ordinary course of providing incentive compensation, (ii) issuances of capital stock as full or partial consideration for a merger, acquisition, joint venture, strategic alliance, license agreement or other similar nonfinancing transaction, (iii) issuances of shares of the Common Stock upon the conversion or exercise of any convertible preferred stock or notes outstanding as of the Effective Date or issued pursuant to the Transaction Documents, in each case, in accordance with the terms thereof as of the Effective Date); (iv) issuances of rights, stock or other property pursuant to the Shareholder Rights Plan; or (v) issuances of Convertible IFMI LLC Units pursuant to Section 6.10(x) or (y) of the IFMI LLC Agreement, Buyer shall be afforded the opportunity to acquire from the Company and/or IFMI, LLC for the same price (net of any underwriting discounts or sales commissions) and on the same terms as New Securities are proposed to be offered to others, up to the amount of New Securities in the aggregate required to enable it to maintain its proportionate equivalent interest in the Company immediately prior to any such issuance of New Securities (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock).

 

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(b)       Notice .  In the event the Company and/or IFMI, LLC proposes to offer or sell New Securities that are subject to Buyer’s rights under Section 6.9(a), the Company and/or IFMI, LLC (as applicable) shall give Buyer written notice of its intention, describing the price (or range of prices), anticipated amount of securities, timing and other terms upon which the Company and/or IFMI, LLC proposes to offer the same (including, in the case of a registered public offering and to the extent possible, a copy of the prospectus included in the registration statement filed with respect to such offering), no later than five (5) business days, as the case may be, after the initial filing of a registration statement with the SEC with respect to an underwritten public offering, after the commencement of marketing with respect to a Rule 144A offering or after the Company and/or IFMI, LLC proposes to pursue any other offering. Buyer shall then have ten (10) business days from the date of receipt of such a notice to notify the Company and/or IFMI, LLC (as applicable) in writing that it intends to exercise its rights provided in this Section 6.9 and as to the amount of New Securities Buyer desires to purchase, up to the maximum amount calculated pursuant to Section 6.9(a). Such notice shall constitute a nonbinding indication of interest of Buyer to purchase the amount of New Securities so specified at the price and other terms set forth in the Company’s and/or IFMI, LLC’s notice to it. The failure of Buyer to respond within such ten (10) business day period shall be deemed to be a waiver of Buyer’s rights under this Section 6.9 only with respect to the offering described in the applicable notice. The Company shall cause IFMI, LLC to comply with this Section 6.9.

6.10     Redemption Transactions .  Following the Closing, for so long as Buyer, Daniel G. Cohen and its or their controlled Affiliates, Principals and Family Group members collectively own ten percent (10%) or more of the outstanding shares of the Common Stock (counting for such purposes all Conversion Shares and Convertible IFMI LLC Units as outstanding shares of the Common Stock), the Company shall not redeem, recapitalize or repurchase any shares of capital stock of the Company, or rights, options or warrants to purchase shares of capital stock of the Company, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for capital stock of the Company (except with respect to the Conversion Shares) unless Buyer is given the right to participate in such redemption, recapitalization, or repurchase in a pro rata manner.

 

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6.11       Additional Covenants Prior to Closing .  Prior to the earlier of the Closing Date and the termination of this Agreement pursuant to Section 10.1, except as expressly provided in this Agreement or as otherwise consented to in writing in advance by Buyer:

(a)      The Company shall promptly provide Buyer with written notice of the occurrence of any circumstance, event, change, development or effect occurring after the date hereof and relating to the Company or any Subsidiary of which the Company has Knowledge and which constitutes a Material Adverse Effect or otherwise causes or renders any of the representations and warranties of the Company or any Subsidiary, as applicable, set forth in this Agreement to be inaccurate.

(b)      The Company shall not agree to any amendment, waiver or modification of the Transaction Documents to which Buyer is not a party.

(c)      The Company will not modify, in any manner, the limited liability company agreement of IFMI, LLC, other than by the effectiveness of the LLC Agreement Amendment, which amendment shall not be modified in any manner.

(d)      The Company shall and shall cause the Subsidiaries to take all actions necessary to ensure that none of the transactions contemplated by this Agreement or the other Transaction Documents, individually or in the aggregate, shall give rise to a “change in control” or “change of control,” the acceleration of any right, or result in any additional rights, under any Benefit Plan.

(e)      The Company shall, and shall cause each Subsidiary to conduct its and their businesses only in the ordinary course of business consistent with past practice and shall use reasonable best efforts to maintain and preserve its and each Subsidiary’s business (including its business organization, Assets, goodwill and insurance coverage) and preserve business relationships with customers, strategic partners and others having business dealings with it.

(f)      Except as required pursuant to any existing written, binding agreements in effect prior to the date of this Agreement, the Company shall not, and shall cause each Subsidiary to not, take any of the following actions:

 i.          other than in the ordinary course of business, incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person or incur any indebtedness of the Company that would be senior in right of payment or any other respect to the Note;

ii.          (A) adjust, split, combine or reclassify any capital stock of the Company; (B) make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of capital stock or any securities or obligations convertible into or exchangeable for any shares of the capital stock (except dividends paid by any Subsidiary to the Company or any of the Company’s other wholly-owned Subsidiaries and regular quarterly dividends in an amount not to exceed $0.02 per share); (C) grant any stock options, stock appreciation rights, performance shares, restricted stock units, restricted shares or other equity-based awards or interests, or grant any Person any right to acquire any shares of capital stock; or (D) issue, sell or otherwise permit to become outstanding any additional shares of capital stock or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock or any options, warrants, or other rights of any kind to acquire any shares of capital stock, except pursuant to the exercise of stock options or the settlement of equity compensation awards outstanding as of the Effective Date in accordance with their terms or as otherwise permitted by this Agreement;

 

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iii.          sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or Assets to any Person other than a wholly-owned Subsidiary, or cancel, release or assign any indebtedness to any such Person or any Claims held by any such Person, in each case other than in the ordinary course of business or pursuant to contracts or agreements in force at the date of this Agreement;

iv.          except for transactions in the ordinary course of business or pursuant to Contracts or agreements in force at the date of this Agreement or permitted by this Agreement, make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or non-investment assets of any other Person other than a wholly-owned Subsidiary or make any capital expenditure in excess of Two Hundred Thousand Dollars ($200,000);

 v.          except for transactions in the ordinary course of business, terminate, materially amend, or waive any material provision of, any material Contract, as the case may be, or make any change in any instrument or agreement governing the terms of any of its securities, or material Contract, other than normal renewals of Contracts without material adverse changes of terms, or enter into any material Contract;

vi.          except as required under applicable law or the terms of any Benefit Plan existing as of the Effective Date, as applicable, (A) enter into, adopt or terminate any employee benefit or compensation plan, program, policy or arrangement for the benefit or welfare of any current or former employee, officer, director or consultant, (B) amend (whether in writing or through the interpretation of) any employee benefit or compensation plan, program, policy or arrangement for the benefit or welfare of any current or former employee, officer, director or consultant, (C) materially increase the compensation or benefits payable to any current or former employee, officer, director or consultant (other than in connection with a promotion or change in responsibilities), (D) pay or award, or commit to pay or award, any bonuses or incentive compensation other than in the ordinary course consistent with past practice, (E) grant or accelerate the vesting of any equity-based awards or other compensation, (F) enter into any new, or amend any existing, employment, severance, change in control, retention, bonus guarantee, collective bargaining agreement or similar agreement or arrangement, (G) fund any rabbi trust or similar arrangement, (H) terminate the employment or services of any officer or any employee whose target annual compensation is greater than One Hundred Thousand Dollars ($100,000), other than for cause, or (I) hire any officer, employee, independent contractor or consultant who has target annual compensation (excluding targeted annual compensation based on commission) greater than One Hundred Thousand Dollars ($100,000);

 

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 vii.          settle any material Claim, except in the ordinary course of business or for settlement of a Claim that is settled in an amount and for consideration not in excess of Five Hundred Thousand Dollars ($500,000) and that would not impose any material restriction on the business of the Company or any Subsidiary;

viii.          amend its organizational documents or its bylaws or comparable governing documents;

  ix.          other than in prior consultation with Buyer, materially restructure or materially change its investment securities or derivatives portfolio or its interest rate exposure, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported or purchase any security rated below investment grade other than in the ordinary course of business within the capital limits currently in use by the Company;

   x.          enter into any new line of business;

  xi.          take any action that, or fail to take any action the failure of which to be taken, could reasonably be expected to prevent or materially delay the consummation of the transactions contemplated in this Agreement and the Transaction Documents; or

 xii.          take, offer, propose or authorize any of, or commit or agree to take any of, the foregoing.

6.12     Efforts .  Each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to consummate and make effective as promptly as practicable the transactions contemplated hereby and under the other Transaction Documents and to cooperate with the other parties in connection with the foregoing. Without limiting the generality of the foregoing, the Company shall use its reasonable best efforts to (i) obtain any required approvals or consents as promptly as practicable, (ii) to lift or rescind as promptly as practicable any injunction or restraining order or other order adversely affecting the ability of the parties hereto to consummate the transactions contemplated hereby, (iii) to effect all necessary registrations and filings, if any, and (iv) to fulfill all of the conditions to the obligations of the parties to consummate the transactions contemplated by this Agreement set forth in Article VIII. Without limiting the generality of the foregoing, Buyer shall use its reasonable best efforts to fulfill all of the conditions to the obligations of the parties to consummate the transactions contemplated by this Agreement set forth in Sections 7.1 and 7.4.

ARTICLE VII

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL

The obligation of the Company hereunder to issue and to sell the Securities to Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

7.1       Buyer’s Execution of Transaction Documents .  Buyer shall have executed the Transaction Documents that require Buyer’s execution, and delivered such Transaction Documents to the Company.

 

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7.2       NYSE MKT Approval of the Listing of the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares .  Pursuant to the Listing Application, the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares shall have been approved for listing on the NYSE MKT by the NYSE MKT.

7.3       Company Stockholder Approval of Contemplated Transactions .  In connection with the Company Proxy Statement, the Company’s stockholders shall have approved the issuance of the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares.

7.4       Accuracy of Buyer’s Representations; Compliance with Covenants .    The representations and warranties of Buyer other than the Buyer Fundamental Representations shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article IV above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), the Buyer Fundamental Representations shall be true and correct in all respects (except for de minimis failures) and Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer at or prior to the Closing Date.

ARTICLE VIII

CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS TO PURCHASE

The obligation of Buyer hereunder to purchase the Securities at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions (which conditions shall be deemed satisfied upon the occurrence of the Closing), provided that these conditions are for Buyer’s sole benefit and may be waived by Buyer at any time in its sole discretion:

8.1       Company Execution of the Transaction Documents .  The Company shall have executed and delivered the Transaction Documents that require the Company’s execution and delivered such Transaction Documents to Buyer and all such Transaction Documents shall have been fully executed by all other parties thereto (other than Buyer) and remain in full force and effect.

8.2       NYSE MKT Approval of the Listing of the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares .  Pursuant to the Listing Application, the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares shall have been approved for listing on the NYSE MKT by the NYSE MKT.

 

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8.3       Company Stockholder Approval of Contemplated Transactions .  In connection with the Company Proxy Statement, the Company’s stockholders shall have approved the issuance of the Common Shares, the Conversion Shares, the Mead Park Shares and the Mead Park Conversion Shares.

8.4       Composition of the Board of Directors .  The Board of Directors shall consist of Daniel G. Cohen, Jack DiMaio, Christopher Ricciardi, and five (5) of the Current Independent Directors. In addition, Jack DiMaio shall be Chairman of the Board of Directors, and Daniel G. Cohen shall be Vice-Chairman of the Board of Directors and President of the Company’s European operations, including the President of CCFL.

8.5       Employment Agreements .  The Cohen IFMI Employment Agreement shall have been amended and restated and the Cohen PrinceRidge Employment Agreement shall have been terminated, in each case, as provided in the Amended and Restated Cohen Employment Agreement, which shall be in full force and effect as of the Closing.

8.6       Mead Park Purchase Agreement .  The Mead Park Purchase Agreement shall remain in effect and, simultaneous with the Closing, Mr. Cohen shall purchase from the Company and the Company shall sell to Mr. Cohen (i) the Mead Park Shares, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334); and (ii) the Mead Park Note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501), pursuant to the Mead Park Purchase Agreement.

8.7       Accuracy of Company’s Representations; Compliance with Covenants .  The representations and warranties of the Company other than the Company Fundamental Representations and the representations set forth in Section 5.13 (Tax Matters) shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article V above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, in which case they shall be true and correct in all material respects as of such specified date), the Company Fundamental Representations and the representations set forth in Section 5.13 (Tax Matters) shall be true and correct in all respects (except for de minimis failures) and, with respect to any matter disclosed to Buyer in writing in response to a representation set forth Article V, there shall have been no materially adverse developments that would reasonably be expected to result in a Material Adverse Effect in connection with any such matter. The Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

8.8       Closing Certificates .  The Company shall have executed and delivered to Buyer a closing certificate in substance and form reasonably required by Buyer, which closing certificate shall include and attach as exhibits: (i) a true copy of a certificate of good standing evidencing the formation and good standing of the Company, from the State of Maryland Department of Assessments and Taxation, as of a date within thirty (30) days of the Closing Date; (ii) the Articles of Incorporation; (iii) the Bylaws; and (iv) copies of the resolutions of the of the Company, consistent with Section 5.2, as adopted by the Board of Directors in a form reasonably acceptable to Buyer, and a senior executive officer of the Company shall have executed and delivered to Buyer a closing certificate, dated as of the Closing Date, certifying to the effect that the conditions set forth in Section 8.7 have been satisfied.

 

29


8.9         Opinion .  Buyer shall have received from outside counsel to the Company, a written opinion dated as of the Closing Date that addresses (i) the due incorporation of the Company, (ii) the due authorization and valid issuance of the Common Shares and (iii) the due authorization, execution and delivery of this Agreement and the Transaction Documents and shall also have received a 10b-5 letter in form and substance reasonably satisfactory to Buyer.

8.10       Tax Benefits .  Since the date of this Agreement, (i) there shall have been no material change to any rules under Sections 382, 383 or 384 of the Code that adversely affect the application of Sections 382, 383 or 384 of the Code to any net operating losses, unrealized built-in losses or other tax attributes of the Company and any Affiliate (if relevant) that exist on or after the Closing Date; and (ii) an Ownership Change (as defined by Section 382(g) of the Code), in Buyer’s reasonable judgment, has not occurred and will not occur as a result of the transactions contemplated herein. The Shareholder Rights Plan shall be in effect and shall have been in continuous effect since the Effective Date, with the distribution of preferred stock purchase rights occurring promptly thereafter.

8.11       Articles Supplementary; Designation and Issuance of Series E Voting Non-Convertible Preferred Stock .  Articles supplementary to the Company’s Articles of Incorporation that provide for the designation of the Series E Voting Non-Convertible Preferred Stock shall have been filed with the State of Maryland Department of Assessments and Taxation and shall be effective. In accordance with the terms and provisions of the Exchange Agreement, any and all outstanding shares of Series D Voting Non-Convertible Preferred Stock shall have been exchanged into outstanding shares of Series E Voting Non-Convertible Preferred Stock, which series shall be perpetual, and all such shares of Series E Voting Non-Convertible Preferred Stock shall have been duly authorized, validly issued and shall be fully paid and nonassessable.

8.12       Amendment to IFMI LLC Agreement .  The LLC Agreement Amendment shall be effective.

8.13       No Injunctions .  No provision of any applicable Law and no Judgment shall prohibit the Closing or shall prohibit or restrict Buyer or its Affiliates from owning, voting, converting or exercising any Securities or Conversion Shares in accordance with the terms thereof and no Proceeding shall have been commenced by a Governmental Authority seeking to effect any of the foregoing.

 

30


ARTICLE IX

INDEMNIFICATION

9.1       Company’s Obligation to Indemnify .  The Company hereby agrees to defend, indemnify and hold harmless Buyer and Buyer’s Affiliates and subsidiaries, and its respective directors, officers, partners, employees, agents and representatives, and any Person who controls Buyer, and the successors and assigns of each of the foregoing (collectively, the “ Buyer Indemnified Parties ”), to the fullest extent lawful, from and against any and all Claims made, brought or asserted against the Buyer Indemnified Parties, or any one of them, and the Company hereby agrees to pay or reimburse the Buyer Indemnified Parties for any and all amounts arising out of Claims payable by any of the Buyer Indemnified Parties to any Person, as well as reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and other similar costs, as a result of, or arising out of, or relating to: (i) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (ii) any breach of any covenant, agreement or Obligation of the Company contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Claims covered hereby, which is permissible under applicable Law. The Company will not be liable to Buyer under this indemnity: (x) for any settlement by Buyer in connection with any Claim effected without the Company’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; or (y) to the extent that a Claim is attributable to Buyer’s breach of any of the representations, warranties, covenants or agreements made by Buyer in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. Notwithstanding anything to the contrary contained in this Section 9.1 or anywhere else in this Agreement or in the Transaction Documents, the aggregate amount of indemnification which may be sought, claimed and/or recovered by the Buyer Indemnified Parties (collectively) from the Company pursuant to this Section 9.1 relating to a breach of a representation or warranty by the Company (other than a breach of the Company Fundamental Representations), excluding the representation and warranty of the Company set forth in clause (ii) of Section 5.5) shall not, under any circumstances, exceed Ten Million Dollars ($10,000,000).

9.2       Buyer’s Obligation to Indemnify .  Buyer agrees to defend, indemnify and hold harmless the Company and each of the Company’s Affiliates and Subsidiaries, and their respective directors, officers, partners, employees, agents and representatives, and the successors and assigns of each of the foregoing (collectively, the “ Company Indemnified Parties ”), to the fullest extent lawful, from and against any and all Claims made, brought or asserted against the Company Indemnified Parties, or any one of them, and Buyer hereby agrees to pay or reimburse the Company Indemnified Parties for any and all amounts arising out of Claims payable by any of the Company Indemnified Parties to any Person, as well as reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and other similar costs, as a result of, or arising out of, or relating to: (i) any misrepresentation or breach of any representation or warranty made by Buyer in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (ii) any breach of any covenant, agreement or Obligation of Buyer contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by Buyer may be unenforceable for any reason, Buyer shall make the maximum contribution to the payment and satisfaction of each of the Claims covered hereby, which is permissible under applicable Law. Buyer will not be liable to the Company under this indemnity: (x) for any settlement by the Company in connection with any Claim effected without Buyer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; or (y) to the extent that a Claim is attributable to the Company’s breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby. Notwithstanding anything to the contrary contained in this Section 9.2 or anywhere else in this Agreement or in the Transaction Documents, the aggregate amount of indemnification which may be sought, claimed and/or recovered by the Company Indemnified Parties (collectively) from Buyer pursuant to this Section 9.2 relating to a breach of representation or warranty made by Buyer (other than a breach of the Buyer Fundamental Representations) shall not, under any circumstances, exceed Three Hundred Thousand Dollars ($300,000).

 

31


ARTICLE X

TERMINATION

10.1        Termination Events .  This Agreement may be terminated at any time prior to the Closing:

 (a)      by the written consent of the Company and Buyer.

 (b)      by Buyer with written notice to the Company if:

 i.     a material breach of this Agreement has been committed by the Company and such material breach has not been (i) waived in writing by Buyer, or (ii) cured by the Company to the reasonable satisfaction of Buyer within fifteen (15) days following the Company’s receipt of written notice of such material breach from Buyer; or

ii.     the Closing shall not have occurred on or before September 30, 2013 (the “ Transaction Deadline ”), unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by Buyer prior to the Closing.

 (c)      by the Company with written notice to Buyer if:

 i.     a material breach of this Agreement has been committed by Buyer and such material breach has not been (i) waived in writing by the Company, or (ii) cured by Buyer to the reasonable satisfaction of the Company within fifteen (15) days following Buyer’s receipt of written notice of such material breach from the Company; or

ii.     the Closing shall not have occurred on or before the Transaction Deadline, unless such failure shall be due to the failure of the Company to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by the Company prior to the Closing.

 (d)      by Buyer or the Company in the event that there shall be (i) any Law that makes the consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited, or (ii) any Judgment restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement and such Judgment shall have become final and non-appealable.

 

32


(e)      (i) by Buyer, if any of the conditions to Closing set forth in Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.11, or 8.12 are not capable of being satisfied on or before the Transaction Deadline, provided, in each case, that Buyer is not the reason that such condition is not capable of being satisfied, or (ii) by Buyer, if any of the conditions to Closing set forth in Sections 8.10 or 8.13 are not capable of being satisfied on or before the Transaction Deadline, provided, in each case, that Buyer is not the reason that such condition is not capable of being satisfied.

(f)      (i) by the Company, if any of the conditions to Closing set forth in Article VII (other than Sections 7.2, 7.3 and 7.4) are not capable of being satisfied on or before the Transaction Deadline, or (ii) by the Company, if any of the conditions to Closing set forth in Sections 7.2 and 7.3 are not capable of being satisfied on or before the Transaction Deadline, provided, in each case, that the Company is not the reason that such condition is not capable of being satisfied.

10.2       Effect of Termination . If this Agreement is terminated pursuant to this Article X, then all further obligations of the parties under or pursuant to this Agreement and under or pursuant to the Transaction Documents (other than Section 6.3, if applicable) shall terminate without further liability of any party to the other parties; provided that nothing herein shall relieve any party from liability for willful breach of this Agreement of breach of this Agreement prior to any termination thereof.

ARTICLE XI

MISCELLANEOUS

11.1       Anti-Sandbag Provision .  Notwithstanding anything to the contrary contained in this Agreement, Buyer agrees that no representation or warranty of the Company in this Agreement shall be deemed to be untrue or incorrect, and the Company shall be deemed not to be in breach thereof, if Buyer or Daniel G. Cohen had knowledge on the Effective Date or the Closing Date, as applicable, that any such representation or warranty was untrue or incorrect.

11.2       Interpretation .  In this Agreement, unless the express context otherwise requires: (i) the words “herein,” “hereof” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (ii) references to the words “Article” or “Section” refer to the respective Articles and Sections of this Agreement, and references to “Exhibit” or “Schedule” refer to the respective Exhibits and Schedules annexed hereto; (iii) references to a “party” mean a party to this Agreement and include references to such party’s permitted successors and permitted assigns; (iv) references to a “third party” mean a Person not a party to this Agreement; (v) the terms “dollars” and “$” mean U.S. dollars; (vi) wherever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation.”

 

33


11.3     Notices .  All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

 

 If to the Company:

  

Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

Attn: Joseph W. Pooler, Jr.

Facsimile: (215) 701-8280

E-mail: jpooler@ifmi.com

 

and to:

  

Institutional Financial Markets, Inc.

1633 Broadway, 28th Floor

New York, New York 10019

Attn: Rachael Fink

Facsimile: (866) 543-2907

E-mail: rfink@ifmi.com

 With a copy to:

  

Duane Morris LLP

430 South 17th Street

Philadelphia, Pennsylvania 19103

Attn: Darrick M. Mix

Facsimile: (215) 239-4958

Email: dmix@duanemorris.com

 If to Buyer:

  

At the address on the books and records of the Company.

unless the address is changed by the party by like notice given to the other parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address above, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express (FedEx), the United Parcel Service (UPS), or another nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., New York City time, on a business day. Any notice hand delivered after 5:00 p.m. New York City time, shall be deemed delivered on the following business day. Notwithstanding the foregoing, notices, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

11.4     Entire Agreement .  This Agreement and (i) the Exhibits and Schedules attached hereto, and (ii) the documents delivered pursuant hereto, including the Transaction Documents, collectively, set forth all the promises, covenants, agreements, conditions and understandings between the parties hereto with respect to the subject matter hereof and thereof, and supersede all prior and contemporaneous agreements, understandings, inducements or conditions, expressed or implied, oral or written.

 

34


11.5       Assignment .  No party hereto may sell or assign this Agreement or any of the Transaction Documents, or any portion thereof or any rights thereunder, either voluntarily or by operation of law, nor delegate any of their respective duties or obligations hereunder or thereunder, without the prior written consent of all of the other parties to this Agreement, except that Buyer shall be permitted to assign its rights or obligations hereunder to its and Daniel G. Cohen’s controlled Affiliates, Principals and Family Group members (any such transferee shall be included in the term “Buyer”); provided, that no such assignment shall relieve Buyer of any of its obligations under this Agreement.

11.6       Binding Effect .  This Agreement shall be binding upon the parties hereto, their respective successors and permitted assigns.

11.7       Amendment .  The parties hereby irrevocably agree that no attempted amendment, modification, or change of this Agreement shall be valid and effective, unless the parties shall unanimously agree in writing to such amendment, modification or change.

11.8       No Waiver .  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver of any provision of this Agreement shall be effective, unless it is in writing and signed by the party against whom it is asserted, and any such written waiver shall only be applicable to the specific instance to which it relates and shall not be deemed to be a continuing or future waiver.

11.9       Gender and Use of Singular and Plural .  All pronouns shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the party or parties or their personal representatives, successors and assigns may require.

11.10     Execution .  This Agreement may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and the same Agreement, and the same shall become effective when counterparts have been signed by each party and each party has delivered its signed counterpart to the other party. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.

11.11     Headings .  The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of the Agreement.

11.12     Governing Law .  This Agreement shall be construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws that would result in the application of the laws of another jurisdiction. The parties further agree that any action between them shall be heard in New York City, New York, and expressly consent to the jurisdiction and venue of the state and federal courts sitting in New York City, New York, for the adjudication of any civil action asserted pursuant to this Agreement.

 

35


11.13     Further Assurances .    The parties hereto will execute and deliver such further instruments and do such further acts and things as may be reasonably required to carry out the intent and purposes of this Agreement and the other Transaction Documents.

11.14     Survival .  The covenants and agreements made by the Company and Buyer herein shall survive for the duration of any statutes of limitations applicable thereto or until, by their respective terms, they are no longer operative. The representations and warranties made by the Company and Buyer herein shall survive for a period of eighteen (18) months following the Closing Date, provided, however, that the Company Fundamental Representations and Buyer Fundamental Representations shall survive for a period of three (3) years following the Closing Date. Notwithstanding the foregoing in this Section 11.14, the representations and warranties contained in Section 5.13 (Tax Matters) shall survive until the expiration of the statute of limitation applicable thereto.

11.15     Time is of the Essence .  The parties hereby agree that time is of the essence with respect to performance of each of the parties’ obligations under this Agreement. The parties agree that in the event that any date on which performance is to occur falls on a Saturday, Sunday or state or national holiday, then the time for such performance shall be extended until the next business day thereafter occurring.

11.16     Joint Preparation .  The preparation of this Agreement has been a joint effort of the parties and the resulting documents shall not, solely as a matter of judicial construction, be construed more severely against one of the parties than the other.

11.17     Severability .  If any provision of this Agreement is held to be invalid or unenforceable in any respect, then the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

11.18     No Third Party Beneficiaries .    This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that the provisions of Article IX are intended for the benefit of the Persons referred to in that Article.

 

36


11.19     WAIVER OF JURY TRIAL .    EACH OF BUYER AND THE COMPANY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH BUYER AND THE COMPANY ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BUYER TO PURCHASE THE SECURITIES.

[SIGNATURES ON THE FOLLOWING PAGE]

 

37


IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be executed as of the date and year first set forth above.

 

 

COMPANY:

 
 

INSTITUTIONAL FINANCIAL MARKETS, INC.

  By:       /s/ Joseph W. Pooler, Jr.                    
  Name:   Joseph W. Pooler, Jr.  
  Title:  

Executive Vice President, Chief Financial

Officer and Treasurer

   

BUYER:

   
 

COHEN BROS. FINANCIAL, LLC

  By:       /s/ Daniel G. Cohen                          
  Name:   Daniel G. Cohen  
  Title:   Managing Member  

 

[Signature page to Securities Purchase Agreement]


DISCLOSURE SCHEDULES

TO

SECURITIES PURCHASE AGREEMENT

May 9, 2013

These Schedules relate to that certain Securities Purchase Agreement (the “ Securities Purchase Agreement ”), dated May 9, 2013 by and between Institutional Financial Markets, Inc., a Maryland corporation (“ IFMI, Inc. ” or the “ Company ”), and Cohen Bros. Financial, LLC (“ Buyer ”).

Section and subsection references in these Schedules are references to the corresponding sections and subsections of the Securities Purchase Agreement and are inserted solely for the sake of convenience. All capitalized terms not otherwise defined shall have the meanings ascribed to them in the Securities Purchase Agreement. Any matter disclosed in any section of these Schedules shall be deemed disclosed in all other sections of the Schedules to the extent that such disclosure is reasonably apparent to be applicable to such other sections, notwithstanding the reference to a particular section or subsection.

To the extent that any representation or warranty contained in the Securities Purchase Agreement is limited or qualified by the materiality of the matters to which the representation or warranty is given, the inclusion of any matter in these Schedules does not constitute a determination by Buyer or the Company that such matters are material. Nor in such cases where a representation or warranty is limited or qualified by the materiality of the matters to which the representation or warranty is given shall the disclosure of any matter in these Schedules imply that any other undisclosed matter having a greater value or significance is material.

The inclusion in these Schedules of any matter or document shall not constitute any representation, warranty or undertaking not expressly set forth in the Securities Purchase Agreement nor shall such disclosure be taken as extending the scope of any such representations or warranties. Nothing in these Schedules constitutes an admission of liability or obligation of Buyer or the Company to any third party, or any admission against Buyer or the Company or the interest of Buyer or the Company.

 

1


SCHEDULE 5.3

CAPITALIZATION

(i)

RESTRICTED IFMI, INC. COMMON STOCK

 

Recipient   

Vesting

Date

  

Amount of    

Shares or

Units

   Entity

Beach, Walter

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.        

 

Bennett, Rodney

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

Brahney, Tom

 

  

1/13/2014

 

  

22,523

 

  

IFMI, Inc.

 

Burklin, Stephan

 

  

1/13/2014

 

  

16,216

 

  

IFMI, Inc.

 

Caton, Cameron

 

  

1/13/2014

 

  

22,523

 

  

IFMI, Inc.

 

Cohen, Daniel G.   

100,000        -
12/31/2013;

100,000        -

12/31/2014

 

   200,000    IFMI, Inc.

Costello, Thomas

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

Curcio, Vincent

 

  

1/13/2014

 

  

22,523

 

  

IFMI, Inc.

 

Dawson, G. Steven

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

DiGennaro, Daniel

 

  

1/13/2014

 

  

6,757

 

  

IFMI, Inc.

 

Donovan, Joseph

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

Haraburda, Jack

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

Hatton, John

 

  

1/13/2014

 

  

45,045

 

  

IFMI, Inc.

 

House, David

 

  

1/13/2014

 

  

22,523

 

  

IFMI, Inc.

 

Jacobs, Michael

 

  

1/13/2014

 

  

17,568

 

  

IFMI, Inc.

 

Listman, Doug

 

  

09/30/2013

 

  

30,000

 

  

IFMI, Inc.

 

Lukas, JoAnn

 

  

1/13/2014

 

  

4,505

 

  

IFMI, Inc.

 

Pooler, Joseph   

32,500          -

12/31/2013;

17,500          -

12/31/2014

 

   50,000    IFMI, Inc.

Powell, James

 

  

6/30/2013

 

  

52,788

 

  

IFMI, Inc.

 

Quijano-Martinez,
Lizette

 

  

1/13/2014

 

  

33,784

 

  

IFMI, Inc.

 

 

2


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

 

Recipient   

Vesting

Date

  

Amount of

Shares or

Units

   Entity            

Subin, Neil

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.        

 

Tessar, John

 

  

12/31/2014    

 

  

32,258

 

  

IFMI, Inc.

 

Ullom, Lance

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

Wolcott, Charles

 

  

3/4/2014

 

  

19,231

 

  

IFMI, Inc.

 

     

 

  
TOTAL:         752,092             
     

 

  

 

RESTRICTED IFMI, LLC AND IFMI, INC. UNITS

 

Recipient   

Vesting

Date

  

Amount of

Shares or

Units

   Entity            

Burklin, Stephan

 

  

1/13/2014

 

  

9,938

 

  

IFMI, LLC

 

Butkevits, Vince

 

  

1/13/2014

 

  

74,536

 

  

IFMI, LLC

 

DiGennaro, Daniel

 

  

1/13/2014

 

  

9,938

 

  

IFMI, LLC

 

Ferry, James

 

  

1/13/2014

 

  

74,536

 

  

IFMI, LLC

 

Jacobs, Michael

 

  

1/13/2014      

 

  

5,591

 

  

IFMI, LLC

 

Lukas, JoAnn

 

  

1/13/2014

 

  

6,212

 

  

IFMI, LLC

 

Weaver, Daniel

 

  

1/13/2014

 

  

5,591

 

  

IFMI, LLC

 

Hohns, Andrew   

Variable;
based on
performance
thresholds

 

  

500,000

 

  

IFMI, Inc.

 

Vernhes, Paul

 

  

3/31/2014

 

  

132,450

 

  

IFMI, Inc.

 

     

 

  
TOTAL:         818,792             
     

 

  

 

3


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

VESTED IFMI, LLC UNITS

 

Recipient   

Vesting

Date

                

Amount of  

Shares or

Units

   Entity            

Cohen, Daniel G.

 

  

        N/A

 

            

  4,983,557  

 

  

IFMI, LLC

 

Koster, Linda

 

  

N/A

 

            

72,088  

 

  

IFMI, LLC

 

Ricciardi, Christopher

 

  

N/A

 

            

223,520  

 

  

IFMI, LLC

 

Ricciardi, Stephanie

 

  

N/A

 

            

44,925  

 

  

IFMI, LLC

 

           

 

  
TOTAL:                       5,324,090       
           

 

  

UNVESTED RESTRICTED PRINCERIDGE UNITS

 

Recipient   

Vesting

Date

  

Amount of

Shares or

Units

   Entity

Holmes, James

 

  

    2/28/2014  

 

  

            234    

 

  

PrinceRidge    

 

Pelletier, Renault

 

  

2/28/2014  

 

  

335    

 

  

PrinceRidge

 

Teng, Sophia

 

  

2/28/2014  

 

  

167    

 

  

PrinceRidge

 

     

 

  
TOTAL:         736         
     

 

  

Other Securities / Instruments with Redemptive Features

The PrinceRidge units not owned by IFMI, LLC; ($532,527 as of March 31, 2013) are subject to redemption by PrinceRidge upon the withdrawal of limited partners.

(ii)

Outstanding Debt Securities

 

  1. $28,125,000 of outstanding par value of junior subordinated notes - Alesco Capital Trust I;
  2. $20,000,000 of outstanding par value of junior subordinated notes - Sunset Financial Statutory Trust I; and
  3. $8,121,000 of outstanding par value of 10.50% Contingent Convertible Senior Notes Due 2027 (convertible into common shares at approximately $116.37 per share).

 

4


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

Pro Forma Beneficial Ownership Table

 

 

    IFMI, Inc. Common Stock                                                  
      Common Stock           Restricted    
Stock
        Total         Series E
Voting Non-
  Convertible  
Preferred
Stock
      Total Voting       Securities
Purchase
  Agreement  
      Pro Forma  
without
Converts
      Percentage           Convertible    
Debt (2)
        Pro Forma    
Assuming
Conversion
      Percentage    

 

Cohen, Daniel G.

    503,142        200,000        703,142        4,983,557        5,686,699        800,000        6,486,699        32.5%         800,000        7,286,699        32.1%    

 

Mead Park

                                       1,949,167        1,949,167        9.8%         1,949,167        3,898,334        17.2%    

 

Ricciardi, Christopher (1)

    1,472,175               1,472,175               1,472,175               1,472,175        7.4%                1,472,175        6.5%    

 

McEntee, Jay

    573,445               573,445               573,445               573,445        2.9%                573,445        2.5%    

 

Pooler, Joseph

    117,895        50,000        167,895               167,895               167,895        0.8%                167,895        0.7%    

 

Listman, Doug

    49,616        30,000        79,616               79,616               79,616        0.4%                79,616        0.4%    

 

Fink, Rachael

    18,392               18,392               18,392               18,392        0.1%                18,392        0.1%    

 

Beach, Walter

    105,731        19,231        124,962               124,962               124,962        0.6%                124,962        0.6%    

 

Bennett, Rodney

    61,412        19,231        80,643               80,643               80,643        0.4%                80,643        0.4%    

 

Costello, Thomas

    62,922        19,231        82,153               82,153               82,153        0.4%                82,153        0.4%    

 

Dawson, G. Steven

    76,931        19,231        96,162               96,162               96,162        0.5%                96,162        0.4%    

 

Donovan, Joseph

    57,578        19,231        76,809               76,809               76,809        0.4%                76,809        0.3%    

 

Haraburda, Jack

    62,722        19,231        81,953               81,953               81,953        0.4%                81,953        0.4%    

 

Ullom, Lance

    83,072        19,231        102,303               102,303               102,303        0.5%                102,303        0.5%    

 

Wolcott, Charles

    65,662        19,231        84,893               84,893               84,893        0.4%                84,893        0.4%    

 

Subin, Neil S.

    123,627        19,231        142,858               142,858               142,858        0.7%                142,858        0.6%    

 

Public and Other

    8,050,690        299,013        8,349,703               8,349,703               8,349,703        41.8%                8,349,703        36.8%    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

TOTAL:

    11,485,012        752,092        12,237,104        4,983,557        17,220,661        2,749,167        19,969,828        100.0%         2,749,167        22,718,995        100.0%    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

5


SCHEDULE 5.3

CAPITALIZATION CONT’D

 

Note: The pro forma beneficial ownership table in this Schedule 5.3 excludes the following securities, which do not have voting rights at the IFMI, Inc. level:

 

    

Vested

  IFMI, LLC  

Units (i)

  

Unvested
Restricted

  IFMI, LLC  

Units

  

Unvested
Restricted

Units of

   IFMI, Inc.   

  

Total

 

Koster, Linda

 

  

 

72,088 

 

  

 

– 

 

  

 

– 

 

  

 

72,088

 

Ricciardi, Christopher

 

  

223,520 

 

  

– 

 

  

– 

 

  

223,520

 

Ricciardi, Stephanie

 

  

44,925 

 

  

– 

 

  

– 

 

  

44,925

 

Burklin, Stephan

 

  

– 

 

  

9,938 

 

  

– 

 

  

9,938

 

Butkevits, Vince

 

  

– 

 

  

74,536 

 

  

– 

 

  

74,536

 

DiGennaro, Daniel

 

  

– 

 

  

9,938 

 

  

– 

 

  

9,938

 

Ferry, James

 

  

– 

 

  

74,536 

 

  

– 

 

  

74,536

 

Jacobs, Michael

 

  

– 

 

  

5,591 

 

  

– 

 

  

5,591

 

Lukas, JoAnn

 

  

– 

 

  

6,212 

 

  

– 

 

  

6,212

 

Weaver, Daniel

 

  

– 

 

  

5,591 

 

  

– 

 

  

5,591

 

Hohns, Andrew

 

  

– 

 

  

– 

 

  

500,000 

 

  

500,000

 

Vernhes, Paul    –     –     132,450     132,450
  

 

  

 

  

 

  

 

 

TOTAL:

         340,533           186,342             632,450          1,159,325
  

 

  

 

  

 

  

 

 

6


SCHEDULE 5.4

SUBSIDIARIES

Please see the attached organizational chart for a list of Subsidiaries and details regarding the Company’s ownership thereof.

C&Co/PrinceRidge Holdings LP Profit Units:

 

    

Vested

  

Unvested

  

Total

  

Percentage

Daniel G. Cohen    6       6    0.00%
Armand Pastine    440       440    0.16%
Leland Harrs    846       846    0.31%
John McNicholas    1,924       1,924    0.71%
Paul Pasqua    133       133    0.05%
IFMI, Inc.    268,283       268,283    98.50%
James Holmes       234    234    0.09%
Renault Pelletier       335    335    0.12%
Sophia Teng       167    167    0.06%
TOTAL:    271,632    736    272,368    100.00%

 

C&Co/PrinceRidge Holdings LP Equity Units:

 

    

Vested

  

Unvested

  

Total

  

Percentage

Daniel G. Cohen    6       6    0.00%
Armand Pastine    440       440    0.16%
Leland Harrs    846       846    0.31%
John McNicholas    1,924       1,924    0.71%
Paul Pasqua    133       133    0.05%
IFMI, Inc.    267,153       267,153    98.49%
James Holmes       234    234    0.09%
Renault Pelletier       335    335    0.12%
Sophia Teng       167    167    0.06%
TOTAL:    270,502    736    271,238    100.00%

 

7


SCHEDULE 5.10

TITLE TO ASSETS

 

Balance Sheet Category

 

 

Description

 

  1.   Receivables from brokers, dealers, and clearing agencies

 

The Company’s clearing arrangements may restrict its ability to transfer these receivables. These are not Encumbered, but may be restricted as to transfer.

 

  2.    Investments - trading

 

This serves as collateral for the Company’s margin loan with its clearing agent. Therefore, this would be considered Encumbered.

 

  3.    Receivables under resale agreements

 

The collateral the Company has for these loans is re-pledged to the Company’s counterparty under its repurchase agreement. Therefore, the collateral may be restricted as to transfer and may be considered Encumbered.

 

  4.    Other Assets - Equity Method Affiliations

 

In order to transfer the Company’s investment in Star Asia Japan Special Situations LP, the Company would need the consent of Star Asia Partners Ltd., the fund’s general partner, which cannot be unreasonably withheld. The Company owns approximately 33% of Star Asia Partners Ltd.

 

 

   

CIT Communications Finance Corporation has filed a UCC financing statement evidencing a security interest in certain assets of JVB Financial Group, L.L.C.

 

   

PrinceRidge has filed a UCC financing statement evidencing a security interest in all of IFMI, LLC’s interests in its capital accounts in, and units of, both PrinceRidge and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC).

 

8


SCHEDULE 5.13

TAX MATTERS

FEDERAL NOL ROLLFORWARD

            Loss        /
(Income)
          Loss        /
(Income)
            Loss        /
(Income)
          Loss        /
(Income)
            
  Year    12/31/2008      2009    12/31/2009      2010      12/31/2010      2011    12/31/2011      2012   12/31/2012      Expiration  
     ($)      ($)    ($)      ($)      ($)      ($)    ($)      ($)   ($)         

  2008

     44,593,542            44,593,542            44,593,542            44,593,542       (2,778,919)     41,814,623         2028   
  2009           6,999,151    6,999,151             6,999,151           6,999,151          6,999,151      2029  

  2010

           --         16,240,310         16,240,310            16,240,310           16,240,310         2030   
  2011                --             --      20,997,598    20,997,598          20,997,598      2031  

  2012

           --            --            --           --      
  TOTAL:    44,593,542      6,999,151    51,592,693      16,240,310      67,833,003      20,997,598    88,830,601      (2,778,919)   86,051,682         

Note: 2012 is currently estimated in good faith and is subject to future adjustment. The Company expects to file its return by September 15, 2013.

 

FEDERAL NCL ROLLFORWARD

            Loss        /
(Income)
          Loss        /
(Income)
            Loss        /
(Income)
          Loss        /
(Income)
               
  Year    12/31/2008      2009    12/31/2009      2010      12/31/2010      2011    12/31/2011      2012      12/31/2012      Expiration  
     ($)      ($)    ($)      ($)      ($)      ($)    ($)      ($)      ($)         

  2008

     --            --            --            --            --         2013   
  2009           34,819,158    34,819,158             34,819,158           34,819,158             34,819,158      2014  

  2010

           --         6,432,139         6,432,139            6,432,139            6,432,139         2015   
  2011                --             --           --             --      2016  

  2012

           --            --            --         17,641,014         17,641,014         2017   
  TOTAL:    --      34,819,158    34,819,158      6,432,139      41,251,297      --    41,251,297      17,641,014      58,892,311         

Note: 2012 is currently estimated in good faith and is subject to future adjustment. The Company expects to file its return by September 15, 2013.

 

9


SCHEDULE 5.18

EMPLOYEE MATTERS

 

1. In addition to the Benefit Plans set forth in the SEC Documents, the Company and its Subsidiaries have the following other such plans, contracts, policies, programs or arrangements:

 

   

401(k) Plan

   

General vacation policy

   

Health insurance plans

   

Dental insurance plan

   

Short & long-term disability plan

   

NY short-term disability plan

   

Expat medical, dental, life & long-term disability plans

   

Supplemental life, STD, LTD, cancer, accident insurance

   

Flex spending accounts (medical, dependent care, transit, parking)

   

COBRA benefits

   

Life & Accidental Death & Dismemberment

   

NY Disability Benefits Law

   

Malakoff Mederic Disability

Employment & Compensation Agreements

Current Employees – European Capital Markets :

 

Arif, Saleem

  

Broker Dealer, Sales & Trading

 

Caselunghe, Sara

  

Broker Dealer, Sales

 

Estaun, Sarah

  

Broker Dealer, Sales

 

Genovart, Jaime

  

Broker Dealer, Sales

 

Khan, Sherjeel

  

Broker Dealer, Real Estate Finance

 

Koster, Linda

  

Broker Dealer, Sales

 

Noonan, Gareth

  

Broker Dealer, Sales

 

Woergaard, Henrik

  

Broker Dealer, Sales

 

Thaker, Rajiv

  

Broker Dealer, Support

 

Cahill, Edward

  

Broker Dealer, Sales/Trading & Investment Banking

Scarlat, Viorel

 

  

Broker Dealer, Investment Banking

 

Current Employees – JVB :

 

Jim Ferry

  

CMO Trader

 

Vince Butkevits

  

CMO Trader

 

Mike Jacobs

  

CMO Trader

 

J.P. Lauria

  

CMO Trader

 

Chris Glacken

  

Pass Through (MBS) Trader

 

Jim Powell

  

Head Agency Trader

 

 

10


David Epstein

  

Agency Trader

 

Kelly Stapleton

  

Assistant Agency Trader

 

Omelio Armas

  

Municipal Trader

 

John Hatton

  

Municipal Trader, Head

 

David Cooper

  

Municipal Trader

 

Dan Digennaro

  

Corporate Trader, Head

 

Cameron Caton

  

Corporate Trader

 

Keith Cronin

  

Corporate Trader, US Credit & International Trading

Dan Weaver

  

Primary CD Trader

 

Michael Hughes

  

Managing Director, Head of CD Department

Zachary Morris

  

Assistant CD Trader

 

Tom Brahney

  

Secondary CD Trader

 

Chris Palmer

  

Secondary CD Trader,

 

Gordon Kiernan

  

Treasury Trader, Yield Curve Arbitrage & Hedging

Rocco Capoccia

  

Treasury Trader

 

John Tessar

  

Structured Products Trader, Head of Structured Products

Scott Greenwood

  

Structured Products Trader

 

David House

  

Sales Manager

 

James Coulter

  

Dealer Sales

 

John Borris

  

Dealer Sales

 

Debbie McNulty

  

Dealer Sales

 

Vinnie Curcio

  

Dealer Sales

 

Bill Wetmore

  

Dealer Sales

 

Jim Rafferty

  

Dealer Sales

 

Scott Swanson

  

Dealer Sales

 

Suzanne O’Connell

  

Dealer Sales

 

Daniel Menscher

  

Dealer Sales

 

Adam Kerstetter

  

Advisor Sales

 

Charles Johnson

  

Advisor Sales

 

Matt Johnson

  

Advisor Sales

 

Mark McKeever

  

Advisor Sales

 

Justin Plante

  

Advisor Sales

 

Harry Fleck

  

CMBS Trader

 

Lizette Quijano - Martinez

  

CMBS Trader

 

Brad Cimo

  

CMO Derivatives Trader

 

Brett Murray

  

Treasury Trader

 

Jason Jenkins

  

Treasury Trader

 

Gregg Desort

  

Treasury Trader

 

Geoff Nash

  

Institutional Sales

 

Sean Rich

  

Institutional Sales

 

Joseph Ryan

  

Institutional Sales

 

Andrew Ahn

  

Institutional Sales

 

Cary Appel

  

Institutional Sales / Trader, Fixed Income Arbitrage

 

11


Carmen Marino

  

Institutional Sales / Manager

 

William Seery

  

Institutional Sales

 

Stephan Burklin

  

Chief Operating Officer

 

Katharine Vacca (Katie)

  

Compliance

 

Joann Lukas

  

Compliance Officer/HR Manager

 

Jim Barreto

  

Accounting

 

Joseph Stincic

  

Accounting

 

Aileen Colucci

  

Administrative Assistant, Boca Raton

 

Rob Castro

  

IT

 

Aron Green

  

IT

 

Giovanny Rozo

  

IT

 

Jaime Hogan

  

Marketing

 

Shawn Chen

  

Risk Management

 

Staci Paul

  

Operations

 

Staci Raymond

  

Operations

 

Sandra Brewer

  

Operations

 

Current Employees – PrinceRidge :

 

Castelluccio, Joseph

  

Middle Markets – Management

 

Pastine, Armand

  

Middle Markets & Rates Group - Management

Filipski, Marianne

  

Middle Markets - Sales

 

Rasel, Jayson

  

Middle Markets - Sales

 

Wieske, Joe

  

Middle Markets - Sales

 

Warley, Theodore

  

Middle Markets - Sales

 

Dillon, Justin

  

Middle Markets - High Grade Corps - Trading

Karlic, Michael

  

Middle Markets - High Grade Corps - Trading

Kinnear, Michael

  

Middle Markets - High Grade Corps - Trading

Korb, David

  

Middle Markets - High Grade Corps - Trading

Books, Aaron

  

Middle Markets - High Grade Corps - Trading

Utter, David

  

Middle Markets - High Grade Corps - Trading

Moogan, Richard

  

Middle Markets - High Grade Corps - Trading

Ford, John

  

Middle Markets - Municipals - Trading

 

Meehan, James

  

Middle Markets - Municipals - Trading

 

Lundvall, Mark

  

Middle Markets - Municipals - Trading

 

Marlin, Dennis

  

Middle Markets - Municipals - Trading

 

Marlin, Derek

  

Middle Markets - Municipals - Trading

 

Communiello, Michael

  

Middle Markets - Preferred - Trading

 

Zawacki, Joseph

  

Middle Markets - Preferred - Trading

 

Cocco, Stephen

  

Middle Markets - Structured Notes - Trading

Rosciano, Anthony

  

Middle Markets - Structured Notes - Trading

Hansraj, Manie

  

Middle Markets - Operations Specialist

 

McHugh, Thomas

  

Rates Group - Repo/Funding - Trading

 

Kelly, Jake

  

Rates Group - Repo/Funding - Support

 

Anderson, Brian

  

Rates Group - RMBS Trading - Structured Products - Sales

 

12


Amadeo, Brian

  

Rates Group - RMBS Trading - Structured Products - Sales

Hanlon, Mark

  

Rates Group - RMBS Trading - Structured Products - Sales

Santoro, Lawrence

  

Rates Group - RMBS Trading - Structured Products - Sales

Harvey, Bob

  

Rates Group - RMBS Trading - Structured Products - MBS Trader

Lupin, Michael

  

Rates Group - RMBS Trading - Structured Products - Agency & MBS

Plinio, Anthony

  

Rates Group - RMBS Trading - Structured Products - Trader

Sias, William

  

Rates Group - RMBS Trading - TBA Sales

Fuchs, Robert

  

Rates Group - RMBS Trading - TBA Sales

Perschetz, Kenny

  

Rates Group - RMBS Trading - Agency - Trading

Kissane, Brendan

  

Rates Group - RMBS Trading - TBA Trading

McGovern, Michael

  

Corporate Credit - Head of Dept.

 

Hurwitz, Steven

  

Corporate Credit - Research

 

Ziets, Kevin

  

Corporate Credit - Research

 

Dodd, Stephen

  

Corporate Credit - Sales

 

Hindenach, James

  

Corporate Credit - Sales

 

Levine, Peter

  

Corporate Credit - Sales

 

Marvin, Bradford

  

Corporate Credit - Sales

 

Schmidt, Stephen

  

Corporate Credit - Sales

 

Silverman, Jeffrey

  

Corporate Credit - Sales

 

Vandersnow, Scott

  

Corporate Credit - Sales

 

Pannuzzo, Brian

  

Corporate Credit - Trading

 

Connors, Thomas

  

Structured Products - Sales

 

Pasqua, Paul

  

CDO / CLO - Trading

 

Bertoni, Jeffrey

  

CDO / CLO - Sales

 

Kim, Jason

  

Non-Agency - RMBS Sales & Trading

 

Roth, Lance

  

Asset-Backed Securities Desk - Origination

Soltesz, James

  

Asset Backed Securities Desk - Trading

 

Videla, Alejandro

  

Asset Backed Securities Desk - Sales & Structuring

Mitrikov, Plamen

  

Asset Backed Securities Desk - Management

D’Agostino, Steve

  

Asset Backed Securities Desk - Management

Dyer, James

  

Equities - Sales & Trading

 

Parchment, Gerry

  

Equities - Sales & Trading

 

Gatlin, Brandi

  

Equities - Sales & Trading

 

Appel, Jeffrey

  

Equities - Sales & Trading

 

Stamler, Joseph

  

Equities - Sales & Trading

 

Wald, Ari

  

Equities - Sales & Trading

 

Harrs, Lee

  

Corporate Finance - Banking

 

McNicholas, John

  

Corporate Finance - Banking

 

Stock, Keith

  

Corporate Finance - Banking

 

Saalwachter, Ric

  

Corporate Finance - Banking

 

Fischer, Ryan

  

Corporate Finance - Banking

 

Grady, Michael

  

Corporate Finance - Banking

 

Farha, Red

  

Corporate Finance - Banking

 

 

13


Holmes, James

  

Corporate Finance - Support

Pelletier, Renaud

  

Corporate Finance - Support

Teng, Sophia

  

Corporate Finance - Support

Park, Daniel

  

Corporate Finance - Support

Holman, Bryce

  

Corporate Finance - Support

Brennan, Kevin

  

Corporate Finance - Support

Brining, Ryan

  

Corporate Finance - Support

Fecowicz, Jonathan

  

Corporate Finance - Support

Kerr, Michelle

  

Corporate Finance - Admin

Batalion, David

  

Equity Capital Markets - Banking

Bacchus, Michael

  

Compliance

McCann, Joseph

  

Executive

Tissen, Jayne

  

HR

Cenuser, Vanessa

  

HR

Karayannis, Amy

  

Legal

Silberman, Jeffrey

  

Legal

Cianci, Joseph

  

Operations

Tarnovsky, Jane

  

Operations

Current Employees – Other IFMI :

 

Addei, Peter

  

Asset Management, Alesco

Creighton, Amy

  

Asset Management, Alesco

Masuyama, Taro

  

Asset Management, Cohen Asia

Poljevka, Frank

  

Asset Management, Cohen Asia

Talton, Brian

  

Asset Management, Cohen Asia

Conreur, Xavier

  

Asset Management, Paris

Ebensperger, Uli

  

Asset Management, Paris

Ghnassia, Nathalie

  

Asset Management, Paris

de Clermont-Tonnerre, Amedee

  

Asset Management, Paris

Vernhes, Paul

  

Asset Management, Paris

Carocci, Massimo

  

Asset Management, Spain

Grasso, Sergio

  

Asset Management, Spain

Kuhnel Torma, Marta

  

Asset Management, Spain

Jimenez Lucas, Gustavo

  

Asset Management, Spain

De Rotaeche Amade, Ana

  

Asset Management, Spain

Ignacio Perea, Jose

  

Asset Management, Spain

Garcia Bartolome, Andres

  

Asset Management, Spain

Rodriguez, Luis

  

Asset Management, Spain

Pasan, Carlos

  

Asset Management, Spain

Rey Herzog, Patricia

  

Asset Management, Spain

Sapone, Domenico

  

Asset Management, Paris

Cohen, Daniel

  

Management

McEntee, Jay

  

Management

Pooler, Joe

  

Management

 

14


Fink, Rachael

  

Management/Legal

Dobie, Bob

  

Finance

Forrestel, Sean

  

Finance

Listman, Doug

  

Finance

Livewell, Megan

  

Finance

O’Rourke, John

  

Finance

Patel, Manish

  

Finance

Verros, Sophia

  

Finance

Cashman, Milly

  

Administrative

Cuddahy, Jonnell

  

Administrative

DiArenzo, Rich

  

Operations

Noel, Ron

  

Administrative

Weisback, Regina

  

Administrative

Pendlebury, Alan

  

IT

Coger, Theresa

  

Legal

Former Employees (still being paid) :

 

Berkeley, Barry

  

PrinceRidge, Broker Dealer, Sales & Trading

  

Sussman, Shelly

  

European Capital Markets, Broker Dealer, Management

  

 

2. In addition to the foregoing Benefit Plans, the Company and its Subsidiaries, upon hiring employees, generally sets forth certain terms of employment in an offer letter, as may have been amended from time to time.

 

3. Each of the following Benefit Plans has received a favorable opinion letter from the Internal Revenue Service National Office:

IFMI, Inc. 401(k) Plan (Tradition and Roth Contribution) – favorable determination letter was received May 15, 2012.

 

15


EXHIBIT A

NEITHER THIS NOTE NOR THE SHARES ISSUABLE UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. BY ACQUIRING THIS NOTE, THE HOLDER REPRESENTS THAT THE HOLDER WILL NOT SELL OR OTHERWISE DISPOSE OF THIS NOTE OR THE SHARES ISSUABLE UPON CONVERSION HEREOF WITHOUT REGISTRATION OR EXEMPTION THEREFROM.

CONVERTIBLE SENIOR PROMISSORY NOTE

 

$2,400,000

   [               ], 2013

For value received, Institutional Financial Markets, Inc., a Maryland corporation, (together with its successors and assigns, the “ Company ”) promises to pay to Cohen Bros. Financial, LLC, a Delaware limited liability company of which Daniel G. Cohen is the sole member (the “ Holder ”), the principal amount of $2,400,000, together with all accrued and unpaid interest thereon (the “ Outstanding Amount ”). This convertible senior promissory note (the “ Note ”) has been issued pursuant to that certain Securities Purchase Agreement dated as of May [        ], 2013 by and between the Company and the Holder (the “ Purchase Agreement ”). This Note is subject to the following terms and conditions:

 

1. Note .

(a)       Maturity .  The Outstanding Amount shall be due and payable in full on [              ], 2018 (the “ Maturity Date ”), unless this Note shall have been earlier converted in accordance with Section 2. 1

(b)      Interest.  Interest shall accrue from the date of this Note on the unpaid principal amount at a rate equal to eight percent (8%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days from the date of this Note until the principal amount and all interest accrued thereon are paid (or converted, as provided in Section 2). Interest shall be payable in cash quarterly on each January 1, April 1, July 1, and September 1 (each, an “ Interest Payment Date ”) until the Maturity Date, commencing on the first Interest Payment Date to occur after the Closing under the Purchase Agreement; provided, however, that if no Event of Default has occurred, (i) in the event that dividends of less than Two Cents ($0.02) per share are paid on the Common Stock in the fiscal quarter prior to any Interest Payment Date, then the Company shall have the option, in its sole discretion, to pay one-half of the interest payable on such Interest Payment Date in cash, in which event the remaining one-half of the interest otherwise payable on such Interest Payment Date shall accrue and be added to the Outstanding Amount as of such Interest Payment Date; and (ii) in the event that no dividends are paid on the Common Stock in the fiscal quarter prior to such Interest Payment Date, then the Company shall have the option, in its sole discretion, to make no payment in cash of the interest payable on such Interest Payment Date, in which event all of the interest otherwise payable on such Interest Payment Date shall accrue and be added to the Outstanding Amount as of such Interest Payment Date; provided, further, that if the Company takes an action permitted under clause (i) or (ii) above, it will provide written notice to the Holder at least ten (10) days prior to the relevant Interest Payment Date. Such notice shall set forth the amount of interest in cash not paid, as well as the revised Outstanding Amount. Upon the occurrence of any Event of Default and after any applicable cure period as described in Section 7 and for so long as such Event of Default continues, all principal, interest and other amounts payable under this Note shall bear interest at a rate equal to nine percent (9%) per annum (the “ Default Rate ”).

 

 

1   Maturity Date to be five years from the date of issuance of this Note.

 

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(c)       No Prepayment Without Consent .  This Note shall not be prepaid in whole or in part prior to the Maturity Date without the prior written consent of the Holder (which may be granted or withheld in its sole discretion).

2.         Conversion .  At any time following the date hereof (including, for the avoidance of the doubt, at any time prior to 5:00 p.m. (ET) on the business day prior to the Maturity Date), the Holder shall have the right, in the Holder’s sole discretion, to convert all or any part of the Outstanding Amount of this Note (the “ Conversion ”), without the payment of any additional consideration therefor, into the number of fully paid and nonassessable shares of the Company’s Common Stock that is determined by dividing (i) the then applicable Outstanding Amount by (ii) $3.00 (the “ Conversion Price ”). The Conversion Price is subject to adjustment if the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of this Note), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company or (v) takes any similar action or any action designed to have a similar effect, then in each case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon Conversion shall be proportionately adjusted such that the aggregate Conversion Price of this Note shall remain unchanged. Any adjustment made pursuant to this Section 2 shall become effective immediately after the record date for the determination of stockholders entitled to participate in such event described in clauses (i) through (v) and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification or similar action. Whenever the Conversion Price is adjusted pursuant to this Section 2, the Company shall promptly notify the Holder, in accordance with the Purchase Agreement, of the Conversion Price after such adjustment, any resulting adjustment to the number of shares of Common Stock issuable upon Conversion and a brief statement of the facts requiring such adjustment.

3.         Mechanics and Effect of Conversion .

(a)      If the Holder wishes to exercise its right to effect a Conversion, the Holder shall provide the Company with a written notice of its election.

 

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(b)      No fractional shares will be issued upon conversion of this Note. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall pay to the Holder in cash the unconverted amount that would otherwise be converted into such fractional share.

(c)      In the event that all of this Note is converted pursuant to Section 2, promptly after such Conversion, the Holder shall surrender this Note, duly endorsed, to the Company and the Note shall thereupon be canceled. At its expense, the Company shall as promptly as practicable (but in no event more than five (5) days after the Conversion of this Note) issue and deliver to the Holder the number of shares of the Company’s Common Stock to which the Holder is entitled upon such Conversion, together with (i) any accrued interest from the Interest Payment Date immediately prior to Conversion through the date of Conversion and (ii) if applicable, a check payable to the Holder for any cash amounts payable as described in Section 3(b).

(d)      Upon issuance of shares of Common Stock in respect of Conversion of the entire Outstanding Amount in accordance with Section 2, all rights with respect to this Note shall terminate, whether or not this Note has been surrendered for cancellation. The Holder shall be treated for all purposes as the record holder of Common Stock issued upon Conversion.

4.         Covenants of the Company .  The Company covenants to the Holder that, from the date hereof until all principal, interest and other amounts payable under this Note have been paid in full, the Company shall, except as otherwise agreed in writing by the Holder:

(a)      take such corporate action as may be necessary from time to time to (i) at all times maintain an authorized number of shares of Common Stock as is sufficient for issuance of shares of Common Stock upon Conversion of this Note pursuant to Section 2 and (ii) cause the shares of Common Stock issued upon Conversion to be duly authorized, validly issued, fully paid and non-assessable;

(b)      punctually pay the principal and interest payable on this Note, and any other amount due and payable under this Note in the manner specified in this Note;

(c)      give written notice promptly to the Holder of any condition or event that constitutes, or is reasonably expected to constitute, an Event of Default;

(d)      not avoid or seek to avoid the observance or performance of any of the terms of this Note through any reorganization, recapitalization, transfer of assets or other voluntary action; and

(e)      not create or incur any Encumbrance in or on its property or Assets, whether now owned or hereinafter acquired, or upon any income or revenues or rights therefrom, except:

 

    (i) Encumbrances existing on the date hereof and previously disclosed to the Holder;

 

    (ii) Encumbrances for property taxes and assessments or other governmental charges or levies and liens that are not overdue for more than 90 days; or

 

    (iii) Encumbrances of or resulting from any Judgment, the time for appeal or petition for rehearing of which shall not have expired or in respect of which the Company shall in good faith be prosecuting an appeal or other Proceeding for a review and in respect of which a stay of execution pending such appeal or Proceeding shall have been secured.

 

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5.         Form of Payment .  Except as otherwise set forth herein, all payments due hereunder shall be made in lawful money of the United States of America to such account or at such place as may be designated in writing by the Holder from time to time. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.

6.         Priorities .  The indebtedness evidenced by this Note and the payment of all principal, interest and any other amounts payable hereunder is a senior obligation of the Company and shall: (i) be Senior (as hereinafter defined) to, and have priority in right of payment over, all Indebtedness (as hereinafter defined) of the Company incurred following the date hereof and any subordinated or junior subordinated Indebtedness outstanding as of the date hereof, and (ii) rank pari passu to the notes issued pursuant to the Mead Park Purchase Agreement (as defined in the Purchase Agreement) and any other senior obligations of the Company outstanding as of the date hereof. “Senior” means that, in the event of any default in the payment of the obligations represented by this Note or of any liquidation, insolvency, bankruptcy, reorganization or similar proceedings relating to the Company, all amounts payable under this Note shall first be paid in full before any payment is made upon any other Indebtedness hereinafter incurred (including any Indebtedness guaranteed by the Company) or any subordinated or junior subordinated Indebtedness outstanding as of the date hereof, and, in any such event, any payment or distribution of any character which shall be made in respect of any other Indebtedness of Company shall be paid to the Holder for application to the payment hereof, unless and until the obligations under this Note shall have been paid and satisfied in full. “Indebtedness” means, with respect to a specified Person: (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than current accounts payable and accrued expenses incurred in the ordinary course of business irrespective of when paid); (c) all obligations of such Person evidenced by bonds, debentures, notes, loan agreements, credit agreements or other similar instruments; (d) all obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreements with respect to property used and/or acquired by such Person; (e) all capitalized lease obligations of such Person; (f) all aggregate mark-to-market exposure of such Person under hedging agreements; (g) all obligations in respect of letters of credit (whether drawn or supporting obligations that constitute Indebtedness) and bankers’ acceptances; (h) all obligations referred to in clauses (a) through (g) of this definition of another Person guaranteed by the specified Person or secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) an Encumbrance upon property owned by the specified Person, whether or not the specified Person has assumed or become liable for the payment of such Indebtedness.

7.         Events of Default .    An “ Event of Default ” shall be deemed to have occurred if:

(a)      subject to the accrual of interest as provided in Section 1(b) hereof, the Company shall fail to pay as and when due any principal or interest hereunder and such nonpayment shall continue uncured for a period of five (5) business days;

 

A-4


(b)      except for an event described in Section 7(a), the Company fails to perform any covenant or agreement hereunder, and such failure continues or is not cured within five (5) business days after written notice by the Holder to the Company;

(c)      the Company or any significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) (a “ Significant Subsidiary ”) applies for or consents to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) makes a general assignment for the benefit of itself or any of its creditors, or (iii) commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect;

(d)      proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or any Significant Subsidiary, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or any Significant Subsidiary, or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect are commenced and an order for relief entered or such proceeding is not dismissed or discharged within ninety (90) days of commencement;

(e)      there is entered against the Company or any Subsidiary a final Judgment for the payment of money in an aggregate amount exceeding $300,000 and such Judgment shall remain unsatisfied or without a stay in respect thereof for a period of thirty (30) days;

(f)      the Company or any Subsidiary shall fail to pay when due any obligation, whether direct or contingent, for Indebtedness exceeding $300,000, or shall breach or default with respect to any term of any loan agreement, mortgage, indenture or other agreement pursuant to which such obligation for Indebtedness was created or securing such obligation if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

(g)      a Change in Control shall have occurred. For purposes of this Note, the term “ Change in Control ” shall mean any one of the following events: (i) any Person or group (other than the Holder, Daniel G. Cohen and its or their controlled Affiliates and Principals and members of Daniel G. Cohen’s Family Group (as defined in the Purchase Agreement)) is or becomes a beneficial owner, directly or indirectly, of more than 50% of the aggregate voting power represented by all issued and outstanding capital stock of the Company, (ii) individuals who, on the date hereof, constitute the Board of Directors (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board of Directors; provided that any person becoming a director subsequent to the date hereof whose election or nomination for election was approved by a majority of the Incumbent Directors then on the Board of Directors (either by a specific vote or by approval of the proxy statement of the relevant party in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director (except that no individuals who were not directors at the time any contested election is reached shall be treated as Incumbent Directors); (iii) the stockholders of the Company approve a plan of liquidation or dissolution of the Company or a sale of all or substantially all of the Company’s assets; or (iv) the Company has entered into a definitive agreement, the consummation of which would result in the occurrence of any of the events described in clauses (i) through (iii) of this definition above.

 

A-5


Upon the occurrence or existence of any Event of Default described in Section 6(a), Section 6(b), Section 6(e), Section 6(f) or Section 6(g) and at any time thereafter during the continuance of such Event of Default, the Holder may, by written notice to the Company, declare the entire unpaid principal amount outstanding and all interest accrued and unpaid on the Note to be immediately due and payable without presentment, demand, protest or any other notice or demand of any kind. Upon the occurrence or existence of any Event of Default described in Section 6(c) or Section 6(d), immediately and without notice, the entire unpaid principal amount outstanding and all interest accrued and unpaid on the Note shall automatically become immediately due and payable, without presentment, demand, protest or any other notice or demand of any kind. Upon the occurrence of any Event of Default and after any applicable cure period as described herein and for so long as such Event of Default continues, all principal, interest and other amounts payable under this Note shall bear interest at the Default Rate. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right power or remedy granted to it by this Note or the Purchase Agreement or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

 

8. Miscellaneous .

(a)      This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York without regard to its conflicts of law principles or the conflicts of law principles of any other state in either case that would result in the application of the laws of any other state.

(b)      Any notice or other communication required or permitted to be given hereunder shall be in writing and given as provided in the Purchase Agreement.

(c)      In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

(d)      Amendments to any provision of this Note may be made or compliance with any term, covenant, agreement, condition or provision set forth in this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) only upon written consent of the Company and the Holder. Any amendment or waiver effected in accordance herewith shall apply to and be binding upon the Holder, upon each future holder of this Note and upon the Company, whether or not this Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon.

 

A-6


(e)      This Note may not be assigned by any holder (except that the Holder shall be permitted to assign this Note to Holder’s controlled Affiliates and Principals and members of Daniel G. Cohen’s Family Group (as defined in the Purchase Agreement) without the prior written approval of the Company.

(f)      The Company hereby waives diligence, presentment, protest and demand, notice of protest, notice of dishonor, notice of nonpayment and any and all other notices and demands in connection with the delivery, acceptance, performance, default or enforcement of this Note. The Company further waives, to the full extent permitted by Law, the right to plead any and all statutes of limitations as a defense to any demand on this Note.

(g)      The Company agrees to pay all reasonable costs and expenses actually incurred by the Holder in connection with an Event of Default, including without limitation the fees and disbursements of counsel, advisors, consultants, examiners and appraisers for the Holder, in connection with (i) any enforcement (whether through negotiations, legal process or otherwise) of this Note in connection with such Event of Default, (ii) any workout or restructuring of this Note during the pendency of such Event of Default and (iii) any bankruptcy case or proceeding of the Company or any appeal thereof.

(h)      The section and other headings contained in this Note are for reference purposes only and shall not affect the meaning or interpretation of this Note.

(i)       Capitalized terms used herein and not otherwise defined, shall have the meanings ascribed to them in the Purchase Agreement.

Signature page follows

 

A-7


IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and delivered by its authorized officer, as of the date first above written.

 

    INSTITUTIONAL FINANCIAL MARKETS, INC.
    By:  

 

Name:  

 

Title:  

 

 

AGREED AND ACKNOWLEDGED:   
Cohen Bros. Financial, LLC   
By:  

 

  
Name:   Daniel G. Cohen   
Title:   Managing Member   

 

A-8


EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

[See Exhibit 10.3 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT C

SHAREHOLDER RIGHTS PLAN

[See Exhibit 4.1 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT D

FORM OF MEAD PARK PURCHASE AGREEMENT

[See Exhibit 10.1 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT E

FORM OF EXCHANGE AGREEMENT

[See Exhibit 10.4 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT F

FORM OF AMENDED AND RESTATED COHEN EMPLOYMENT AGREEMENT

[See Exhibit 10.6 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT G

LLC AGREEMENT AMENDMENT

[See Exhibit 10.5 to Institutional Financial Markets, Inc.’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on May 13, 2013.]


EXHIBIT H

VOTING AGREEMENT

THIS VOTING AGREEMENT, dated as of May 9, 2013 (this “ Agreement ”), is made by                                                           (the “ Shareholder ”) for the benefit of Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”), pursuant to the Securities Purchase Agreement (the “ Securities Purchase Agreement ”), dated of even date herewith, by and among the Company, Mead Park Holdings, LP, and Mead Park Capital Partners LLC (the “ Buyer ”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Securities Purchase Agreement.

W I T N E S S E T H:

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company is entering into the Securities Purchase Agreement, pursuant to which the Company has agreed to sell to Buyer and Buyer has agreed to purchase from the Company (i) an aggregate of One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167) newly issued shares (collectively, the “ Buyer Common Shares ”) of the Company’s Common Stock, par value $.001 per share (“ Common Stock ”), for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334); and (ii) a convertible senior promissory note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501) (the “ Buyer Note ”);

WHEREAS, the Buyer Note is convertible into the “Conversion Shares” as defined in the Securities Agreement (the “ Buyer Conversion Shares ”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and Daniel G. Cohen are executing and delivering a securities purchase agreement (the “ Cohen Purchase Agreement ”), pursuant to which the Company has agreed to sell to Mr. Cohen and Mr. Cohen has agreed to purchase from the Company (i) an aggregate of Eight Hundred Thousand (800,000) newly issued shares (collectively, the “ Cohen Common Shares ” and, together with the Buyer Common Shares, the “ Transaction Shares ”) of the Common Stock, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000); and (ii) a convertible senior promissory note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000) (the “ Cohen Note ” and, together with the Buyer Note, the “ Notes ”);

WHEREAS, the Cohen Note is convertible into the “Conversion Shares” as defined in the Cohen Purchase Agreement (the “ Cohen Conversion Shares ”);

WHEREAS, in connection with the transactions contemplated by the Securities Purchase Agreement and the Cohen Securities Agreement, the issuance of the Transaction Shares, the Buyer Conversion Shares and the Cohen Conversion Shares, and the election of certain directors to the Board of Directors of the Company (the “ Board of Directors ”) will be submitted to the Company’s shareholders for approval at the Company’s 2013 annual meeting of shareholders (the “ Annual Meeting ”), which is anticipated to be held on or about July 25, 2013;

WHEREAS, as an inducement to Buyer to enter into the Securities Purchase Agreement, the Shareholder is entering into this Agreement;

 

H-1


WHEREAS, as of the date hereof, the Shareholder owns of record, or has the power to vote, certain of the outstanding voting equity securities of the Company (the “ Voting Securities ”); and

WHEREAS, with this Agreement, the Shareholder wishes to undertake certain obligations with respect to the Voting Securities of which the Shareholder is the owner of record, or with respect to which the Shareholder has the power to vote, on the Record Date (as defined below) (such Voting Securities as of such date, the “ Total Voting Securities ”).

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Shareholder hereby agrees as follows:

ARTICLE I

VOTING

1.1     Agreement to Vote .  Except as otherwise provided in this Agreement and except as prohibited by applicable Law, the Shareholder agrees that, from and after the date hereof and until the date on which this Agreement is terminated pursuant to Section 3.2, at the Annual Meeting or any other meeting of the shareholders of the Company at which any of the Transaction Matters (as defined below) are to be voted upon, however called (and including any postponement or adjournment of any such meeting), or in connection with any written consent of the shareholders of the Company with respect to any of the Transaction Matters, the Shareholder shall:

(a)      appear at each such meeting (in person or by proxy) or otherwise cause all Total Voting Securities owned of record by the Shareholder, or with respect to which the Shareholder has the power to vote, in each case as of the record date used for determining the holders of voting securities of the Company entitled to vote at such meeting or to deliver such consent (the “ Record Date ”), to be counted as present thereat for purposes of calculating a quorum; and

(b)      vote or cause to be voted (in person or by proxy) or deliver a written consent (or cause a consent to be delivered) covering all Total Voting Securities owned of record by the Shareholder or as to which the Shareholder has the power to vote, in each case as of the Record Date, in favor of: (i) the issuance by the Company of the Buyer Common Shares and the Buyer Conversion Shares to Buyer; (ii) the issuance by the Company of the Cohen Common Shares and the Cohen Conversion Shares to Daniel G. Cohen; and (iii) the election to the Board of Directors of the nominees for Director nominated by the Board of Directors in accordance with Section 8.4 of the Securities Purchase Agreement (clauses (i) through (iii) collectively, the “ Transaction Matters ”).

1.2     No Inconsistent Agreements .  The Shareholder hereby covenants and agrees that, except as set forth in this Agreement and except for actions taken in furtherance of this Agreement, the Shareholder has not granted, and shall not grant at any time while this Agreement remains in effect, any proxy, consent or power of attorney with respect to the Total Voting Securities that would conflict with the provisions of Section 1.1.

 

H-2


1.3     No Other Restrictions .  Except as set forth in Section 1.1, the Shareholder shall not be restricted from voting in favor of, against or abstaining with respect to any matter presented to the shareholders of the Company.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1     Representations and Warranties of the Shareholder .  Except as set forth on the signature page hereof, the Shareholder hereby represents and warrants as follows as of the date hereof:

(a)        Authorization; Validity of Agreement; Necessary Action .  This Agreement has been duly executed and delivered by the Shareholder and constitutes a valid and binding obligation of the Shareholder, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and general equitable principles).

(b)       Ownership .  The Voting Securities set forth below the Shareholder’s name on the signature page hereto are owned of record by the Shareholder or the Shareholder has the power to vote such Voting Securities, in each case as of the date hereof (such Voting Securities, the “ Existing Voting Securities ”). The Shareholder’s Existing Voting Securities constitute all voting equity securities of the Company held of record by the Shareholder or for which voting power is held by the Shareholder as of the date hereof. The Shareholder has sole power to issue instructions with respect to the matters set forth in Article I hereof, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shareholder’s Existing Voting Securities, with no limitations, qualifications or restrictions on such rights, subject to applicable federal and state securities laws and the terms of this Agreement. The Shareholder has good title to the Shareholder’s Existing Voting Securities, free and clear of any Encumbrances.

(c)       No Consents; Conflicts and Violations .  Except for any applicable requirements of the Securities Exchange Act of 1934, as amended, the execution and delivery of this Agreement by the Shareholder does not, and the performance by the Shareholder of its obligations under this Agreement will not, (i) require any consent, approval, authorization of or other order of, action by, filing with, or notification to any Governmental Authority; (ii) violate or conflict with or result in the breach of any provision of the organizational documents of the Shareholder; (iii) cause a violation by the Shareholder of any Law, ordinance or regulation of any Governmental Authority applicable to the Shareholder or by which any of the Existing Voting Securities is bound; or (iv) conflict with, result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of any Encumbrance on the properties or assets of the Shareholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Shareholder is a party or by which any of the Existing Voting Securities is bound, except, in the case of clauses (i), (iii) and (iv), as could not reasonably be expected, either individually or in the aggregate, to materially impair the ability of the Shareholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

 

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ARTICLE III

MISCELLANEOUS

3.1     Limitation on Liability .  Notwithstanding anything in this Agreement to the contrary, no party to this Agreement shall have any liability for damages to any other party for any breach or violation of this Agreement unless such breach or violation was willful or intentional.

3.2     Termination .  This Agreement shall terminate upon the earliest to occur of (i) the date and time of termination of the Securities Purchase Agreement; (ii) the Closing and (iii) the written agreement of the parties hereto and Buyer to terminate this Agreement. Upon such termination, no party hereto shall have any further obligations or liabilities hereunder; provided, however, that such termination shall not relieve any party from liability for any willful or intentional breach or violation of this Agreement prior to such termination.

3.3     Further Assurances .  From time to time, at the other party’s request and without further consideration, each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate the transactions contemplated by this Agreement.

3.4     No Ownership Interest .  Nothing contained in this Agreement shall be deemed to vest in the Company or Buyer any direct or indirect ownership or incident of ownership of or with respect to any Total Voting Securities. All rights, ownership and economic benefits of and relating to the Total Voting Securities shall remain vested in and belong to the Shareholder.

3.5    Notices. All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

 

(a)

    

if to the Company, to:

    

 

Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

Attn: Joseph W. Pooler, Jr.

Facsimile: (215) 701-8280

E-mail: jpooler@ifmi.com

 

With a copy to:

 

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attn: Darrick M. Mix

Facsimile: (215) 239-4958

Email: dmix@duanemorris.com

 

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(b)      if to the Shareholder, to the address listed next to the Shareholder’s name on the Shareholder’s signature page hereto,

unless the address is changed by the party by like notice given to the other parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address above, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if sent by Federal Express (FedEx), the United Parcel Service (UPS), or another nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same with, or in a regularly maintained receptacle of, such overnight courier on or prior to 5:00 p.m., New York City time, on a business day; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., New York City time, on a business day. Any notice hand delivered after 5:00 p.m. New York City time, shall be deemed delivered on the following business day. Notwithstanding the foregoing, notices, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

3.6     Interpretation .  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

3.7     Entire Agreement .  This Agreement (including any exhibits hereto) and the Transaction Documents (as defined in the Securities Purchase Agreement) collectively constitute the entire agreement, and supersede all other prior agreements, understandings, and representations and warranties, both written and oral with respect to the subject matter hereof.

3.8     Governing Law and Jurisdiction .  This Agreement shall be construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws. The parties further agree that any action between them shall be heard in New York City, New York, and expressly consent to the jurisdiction and venue of the state and federal courts sitting in New York City, New York, for the adjudication of any civil action asserted pursuant to this Agreement.

 

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3.9       Consent to Jurisdiction .  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR ANY NEW YORK STATE COURT IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN); PROVIDED , HOWEVER , THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE PURPOSE REFERRED TO IN THIS SECTION 3.9 AND SHALL NOT BE DEEMED TO BE A GENERAL SUBMISSION TO THE JURISDICTION OF SAID COURTS OR IN THE STATE OF NEW YORK OTHER THAN FOR SUCH PURPOSE.

3.10     Enforcement .  The Shareholder agrees that in the event that the Shareholder fails to perform any of the Shareholder’s obligations under this Agreement in accordance with their specific terms, the Company and Buyer will be irreparably harmed and there will be no adequate remedy at Law. It is accordingly agreed that the Company and Buyer shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at Law or in equity.

3.11     Amendment .  The parties hereby irrevocably agree that no attempted amendment, modification, or change of this Agreement shall be valid and effective, unless the parties and Buyer shall unanimously agree in writing to such amendment, modification or change.

3.12     Severability .  If any provision of this Agreement is held to be invalid or unenforceable in any respect, then the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

3.13     Assignment; Third Party Beneficiaries .  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Company and its successors and permitted assigns. This Agreement is not intended to confer any rights or remedies hereunder upon any Person other than the Company pursuant to the terms and conditions of the Securities Purchase Agreement, except that Buyer is an express third party beneficiary with full rights to enforce this Agreement, including Section 3.10, as if it were the Company.

 

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3.14     Shareholder Capacity .  By executing and delivering this Agreement, the Shareholder makes no agreement or understanding herein in the Shareholder’s capacity or with respect to the Shareholder’s actions as a manager, director, officer or employee of the Company or any of its Subsidiaries. The Shareholder is signing and entering into this Agreement solely in the Shareholder’s capacity as the record owner of the Shareholder’s Total Voting Securities or in the Shareholder’s capacity as the individual with voting power with respect to certain Total Voting Securities, and nothing herein shall limit or affect in any way any actions that may be hereafter taken by the Shareholder in the Shareholder’s capacity as an employee, director, officer or manager of the Company or any of its Subsidiaries or in any other capacity and no such actions shall be deemed to be a breach of this Agreement. Nothing contained in this Agreement shall restrict, limit, prohibit or preclude the Shareholder from exercising or discharging the Shareholder’s fiduciary duties as a director, officer or manager of the Company or any of its Subsidiaries under applicable Law. Any trustee executing this Agreement is executing this Agreement solely in his or her fiduciary capacity and shall have no personal liability or obligation under this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Shareholder has signed this Voting Agreement as of the date first written above.

 

  SHAREHOLDER:      
 

 

 
  Name:      
  [Title:]      
 

 

Total Voting Securities owned by the Shareholder as of the date hereof:

 

 

Number of Shares:

 

 

 

   
   

 

   

 

 

Address for Notices:  

 

   
   

 

   
   

 

   

 

Exceptions to Shareholder’s representations and warranties set forth in ARTICLE II hereof, if any (please describe in the space provided below):

 

 

[Signature Page to Voting Agreement]

 

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  AGREED TO AND ACCEPTED BY:  
  INSTITUTIONAL FINANCIAL MARKETS, INC.
 

By:                                                                           

 
 

Name:

 
 

Title:

 

 

 

 

 

 

 

[Signature Page to Voting Agreement]

 

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Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of this 9th day of May, 2013, by and among Institutional Financial Markets, Inc., a Maryland corporation (the “ Company ”), and the Investors (as defined below). Capitalized terms used herein but otherwise not defined shall have the meanings ascribed to such terms in the Securities Purchase Agreement (as defined below).

RECITALS :

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and Mead Park Capital Partners LLC, a Delaware limited liability company (“ Buyer ”) are executing and delivering a Securities Purchase Agreement (the “ Securities Purchase Agreement ”), pursuant to which the Company has agreed to sell to Buyer and Buyer has agreed to purchase from the Company (i) an aggregate of One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167) newly issued shares (each, a “ Buyer Common Share ” and, collectively, the “ Buyer Common Shares ”) of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), for a purchase price of Two Dollars ($2.00) per Buyer Common Share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334); and (ii) a convertible promissory note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501) (the “ Buyer Note ”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and Daniel G. Cohen are executing and delivering a Securities Purchase Agreement (the “ Cohen Purchase Agreement ”), pursuant to which the Company has agreed to sell to the Mr. Cohen and Mr. Cohen has agreed to purchase from the Company (i) an aggregate of Eight Hundred Thousand (800,000) newly issued shares (each, a “ Cohen Common Share ” and, collectively, the “ Cohen Common Shares ”) of the Common Stock, for a purchase price of Two Dollars ($2.00) per Cohen Common Share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000); and (ii) a convertible promissory note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000) (together with the Buyer Note, the “ Notes ”);

WHEREAS, the parties hereto are entering into this Agreement pursuant to the Securities Purchase Agreement and pursuant to the Cohen Purchase Agreement; and

WHEREAS, with this Agreement, the Company desires to provide certain registration rights to the Investors under the Securities Act of 1933, as amended (the “ Securities Act ”) and under applicable state securities Laws.


NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereinafter expressed and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

1. Certain Definitions . As used in this Agreement, the following terms shall have the following meanings:

Common Shares ” means the Buyer Common Shares and the Cohen Common Shares.

Conversion Shares ” means the shares of Common Stock issuable upon conversion of the Notes.

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

Investors ” means Cohen Bros. Financial, LLC and Buyer.

Losses ” means actions, suits, claims, proceedings, costs, losses, liabilities, damages, expenses (including reasonable attorneys’ fees and disbursements), amounts paid in settlements and other costs.

Prospectus ” means (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 promulgated under the Securities Act.

Register ,” “ registered ” and “ registration ” mean a registration made by preparing and filing a Registration Statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement or document by the SEC.

Registrable Securities ” means (i) the Common Shares and the Conversion Shares; and (ii) any other securities issued or issuable directly or indirectly with respect to the Common Shares and the Conversion Shares, whether by conversion, exchange or in connection with a combination, reclassification, merger, charter amendment or otherwise; provided, however, that a Common Share or Conversion Share or any other such security shall cease to be a “Registrable Security” hereunder upon (A) the sale of such security pursuant to an effective Registration Statement or pursuant to Rule 144, or (B) such security becoming eligible for sale without restriction by an Investor pursuant to Rule 144 and, at such time, the aggregate number of the Common Shares, the Conversion Shares and any other such securities held by such Investor constitutes less than two percent of the issued and outstanding Common Stock of the Company.

Registration Statement ” means any registration statement of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such registration statement (including post-effective amendments), and all exhibits and all materials incorporated by reference into such registration statement.

Rule 144 ” means Rule 144 promulgated under the Securities Act.

SEC ” means the U.S. Securities and Exchange Commission.

 

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In addition, the following terms shall have the respective meanings ascribed to them in the corresponding Sections:

 

Term

  

Section

Agreement    Preamble
Blue Sky Application    Section 8(a)
Buyer    Recitals
Buyer Common Share(s)    Recitals
Buyer Note    Recitals
Cohen Common Share(s)    Recitals
Cohen Note    Recitals
Cohen Purchase Agreement    Recitals
Common Stock    Recitals
Company    Preamble
Company Indemnified Party    Section 8(b)
Cut Back Shares    Section 3(c)(iii)
Demand    Section 3(e)(i)
Demand Notice    Section 3(e)(i)
Effectiveness Period    Section 4(a)
Filing Deadline    Section 3(a)
Information Recipient    Section 5
Investor Indemnified Party    Section 8(a)
Investors    Preamble
Non-Underwritten Shelf Takedown        Section 3(e)(ii)
Notes    Recitals
Piggyback Registration    Section 3(d)(i)
Requesting Party    Section 5
Rule 172    Section 4(j)
Rule 415    Section 3(c)(iii)
Rule 424    Section 4(j)
Securities Act    Recitals
Securities Purchase Agreement    Recitals
Special Registration    Section 3(d)(i)
Suspension    Section 3(c)(ii)
Underwritten Shelf Takedown    Section 3(e)(i)

2. Effective Date . This Agreement shall become effective only upon the Closing. In the event that the Securities Purchase Agreement is terminated for any reason, this Agreement shall immediately terminate and be of no further force or effect without any further action on the part of any party.

3. Registration .

(a) Registration Statements . The Company, as promptly as practicable after the Closing Date and, in any event, on or prior to the thirtieth (30th) day following the Closing Date (and if such day falls on a Saturday, a Sunday or a national holiday, then the next business day thereafter) (the “ Filing Deadline ”), shall prepare and file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of all of the Registrable Securities on a continuous basis by means of a shelf registration), covering the resale of all of the Registrable Securities; provided, however, that if the Filing Deadline shall fall during a period that the Company may not file a Registration Statement until such time as it files with the SEC its updated financial statements, then the Filing Deadline shall be no later than twenty (20) days after the filing date of such updated financial statements with the SEC. In the event of any stock split, stock dividend or transaction with respect to the Registrable Securities that increases the number of Registrable Securities, if a then-effective Registration Statement does not cover the resale of such additional number of Registrable Securities, the Company shall amend or supplement any Registration Statement to cover such additional number of Registrable Securities.

 

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(b) Expenses . Except as set forth below, the Company will pay all of the following expenses incurred in connection with complying with this Agreement (whether or not any Registration Statement or Prospectus becomes final or effective), including, without limitation: all registration, filing and printing fees, the Company’s counsel and accounting fees and expenses, costs and expenses associated with clearing the Registrable Securities for sale under applicable state securities Laws (including, without limitation, fees, charges and disbursements of counsel in connection with such clearance), all listing fees, expenses incurred by the Company in connection with any “road show” and reasonable fees, charges and disbursements of counsel to the Investors. The Company shall not be required to pay or reimburse the Investors for any underwriting discounts or commissions and fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold. All underwriting discounts, commissions and fees shall be borne by the Investors of the securities so registered pro rata on the basis of the aggregate offering price or sale price of the securities so registered.

(c) Effectiveness .

(i) The Company shall use its reasonable best efforts to cause the Registration Statement to be declared effective or become effective as soon as practicable following the filing thereof with the SEC. The Company shall notify the Investors by facsimile or e-mail, in accordance with Section 8(b), promptly after any Registration Statement is declared effective.

 

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(ii) The Company may suspend the use of any Registration Statement or Prospectus (a “ Suspension ”) by any Investor if the Company determines in good faith that such Suspension is necessary to (A) delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time, in the good faith opinion of the Board of Directors, would be materially detrimental to the Company or its stockholders for a registration to be effected at such time, provided that such a right to delay shall be exercised by the Company only if the Company generally exercises similar rights against all Investors; (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein; or (C) amend or supplement the affected Registration Statement or Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, in each case of clauses (A) through (C), that the Company shall (a) promptly notify each Investor in writing of such Suspension and the reasons therefor, but shall not disclose to such Investor any material non-public information giving rise to a Suspension under clause (A); (b) advise the Investors in writing to cease all sales under the Registration Statement or Prospectus until the end of the Suspension; and (c) use its reasonable best efforts to terminate such Suspension as promptly as practicable. The Company may not exercise its rights pursuant to this Section 3(c)(ii) for more than 90 days in the aggregate in any twelve month period.

(iii) Rule 415; Cutback . Any registration pursuant to Section 3(a) of this Agreement shall be effected by means of a shelf registration on a delayed or continuous basis in accordance with the provisions of Rule 415 promulgated under the Securities Act (“ Rule 415 ”). If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under Rule 415, or requires any Investor to be named as an “underwriter” in such Registration Statement, if the Company believes, in its sole discretion and upon the advice of counsel, that the Registrable Securities are eligible for registration under Rule 415 or that such Investor is not an “underwriter” for the purposes of the Securities Act and the registration, as applicable, then the Company shall use its reasonable best efforts to persuade the SEC that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering by or on behalf of the Company ( i.e. , the issuer) for the purposes of Rule 415, and/or that such Investor is not an “underwriter,” as applicable, in which event such Investor shall provide to the Company, in writing, all information reasonably requested by the Company to support such Investor’s contention that it is not an “underwriter.” Such Investor shall have the right to participate or have its counsel participate in any meetings or discussions with the SEC regarding the SEC’s position (unless in the reasonable opinion of the Company or its counsel, such participation will be to the detriment to the Company in that it may cause undue delays in the registration process or for other reasons) and to comment or have their counsel comment on any written submission made to the SEC with respect thereto. No such written submission regarding the foregoing specifying an Investor shall be made to the SEC to which the Investors’ counsel reasonably objects. The Company shall not agree to name any Investor as an “underwriter” in such Registration Statement without the prior written consent of such Investor. In the event that, despite the Company’s reasonable best efforts and compliance with the terms of this Section 3(c)(iii), the SEC refuses to alter its position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415, or requires any Investor to be named as an “underwriter” in such Registration Statement, then the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “ Cut Back Shares ”); and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities, in each case as the SEC may require to assure the Company’s compliance with the requirements of Rule 415. Upon the SEC’s initial declaration that the Registration Statement is effective, the Company shall no longer have any obligations under this Agreement to register the Cut Back Shares.

 

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(d) Piggyback Registration .

(i) Whenever the Company proposes to register any of its Common Stock in connection with an underwritten public offering (whether an offering of Common Stock by the Company, stockholders of the Company, or both, but other than in connection with a Special Registration (as defined below)), the Company will give prompt written notice to the Investors of its intention to effect such a registration (but in no event less than ten (10) days prior to the anticipated filing date) and (subject to clause (ii) below) will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) business days after the date of the Company’s notice (a “ Piggyback Registration ”). Any Investor that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth (5 th ) business day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 3(d)(i) prior to the effectiveness of such registration, whether or not any Investor has elected to include Registrable Securities in such registration. “ Special Registration ” means the registration of equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form).

(ii) The right of the Investors to participate in a registration referred to in Section 3(d)(i) will be conditioned upon such persons’ participation in such underwriting and the inclusion of such persons’ Registrable Securities in the underwriting, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If any participating person disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company. If the managing underwriters advise the Company in writing that, in their reasonable opinion, the number of shares of Common Stock requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company shall include in such Registration Statement or Prospectus only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which shares shall be so included in the following order of priority: (A) first, the shares the Company proposes to sell and (B) second, shares of the participating stockholders pro rata on the basis of the aggregate number of such shares owned by each participating stockholder.

(e) Requests and Demands .

(i) Each Investor may request to sell all or any portion of their Registrable Securities in an underwritten offering that is registered pursuant to a Registration Statement (each, an “ Underwritten Shelf Takedown ”). Any request (a “ Demand ”) for an Underwritten Shelf Takedowns shall be made by an Investor by giving written notice to the Company (the “ Demand Notice ”). Each Demand Notice shall specify the approximate number of Registrable Securities to be sold by the Investor in the Underwritten Shelf Takedown and the expected price range (net of underwriting discounts and commissions) of such Underwritten Shelf Takedown. Within two (2) business days after receipt of any Demand Notice, the Company shall send written notice of such requested Underwritten Shelf Takedown to the non-requesting Investor and shall include in such Underwritten Shelf Takedown all Registrable Securities with respect to which the Company has received written requests for inclusion therein within five (5) business days after sending such notice (except that the non-requesting Investor shall have two (2) business days after receipt of such notice to request inclusion of Registrable Securities in the Underwritten Shelf Takedown in the case of a “bought deal”, “registered direct offering” or “overnight transaction” where no preliminary prospectus is used).

 

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(ii) If an Investor desires to initiate an offering or sale of all or part of such Investor’s Registrable Securities that does not constitute an Underwritten Shelf Takedown (a “ Non-Underwritten Shelf Takedown ”), such Investor shall so indicate in a written request delivered to the Company no later than two (2) business days (or in the event any amendment or supplement to the Registration Statement or Prospectus is necessary, no later than five (5) business days) prior to the expected date of such Non-Underwritten Shelf Takedown, which request shall include (A) the total number of Registrable Securities expected to be offered and sold in such Non-Underwritten Shelf Takedown, (B) the expected plan of distribution of such Non-Underwritten Shelf Takedown and (C) the action or actions required (including the timing thereof) in connection with such Non-Underwritten Shelf Takedown, and, to the extent necessary, the Company shall file and effect an amendment or supplement to its Registration Statement or Prospectus for such purpose as soon as practicable. For the avoidance of doubt, unless otherwise agreed to by the requesting Investor, the non-requesting Investor shall not have the right to participate in a Non-Underwritten Shelf Takedown.

(iii) The underwriters in any Underwritten Shelf Takedown shall be selected by the Investor that requested the offering.

4. Company Obligations . The Company will use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the terms hereof and the sale of such Registrable Securities as soon as reasonably practicable in accordance with the intended method of disposition thereof, and the Company will:

(a) use its reasonable best efforts to cause the Registration Statement to remain continuously effective and in compliance with the Securities Act and usable for resale of the Registrable Securities for a period (the “ Effectiveness Period ”) of three years from the date of its initial effectiveness (or, if earlier, until such time as there are no Registrable Securities remaining), following which time, or following the expiration of the initial Registration Statement, the Company shall promptly refile a Registration Statement or file a new Registration Statement with respect to the Registrable Securities if any Investor so requests and use its reasonable best efforts to cause such Registration Statement to remain continuously effective and in compliance with the Securities Act and usable for resale of the Registrable Securities for a period of three years from the date of its initial effectiveness (or, if earlier, until such time as there are no Registrable Securities remaining) (such period being deemed a continuation of the Effectiveness Period), it being understood that an Investor can request the filing of a Registration Statement at any time which (i) Registrable Securities are outstanding and (ii) no Registration is that time effective;

 

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(b) as expeditiously as practicable, prepare and file with the SEC such amendments, post-effective amendments and supplements to any Registration Statement and any Prospectus as may be necessary to keep the Registration Statement effective or the Prospectus current for the Effectiveness Period and to comply with the provisions of the Securities Act with respect to the distribution of all of the Registrable Securities covered thereby;

(c) provide copies to and permit counsel designated by the Investors to review each Registration Statement and Prospectus and all amendments and supplements thereto prior to the filing thereof with the SEC;

(d) furnish to the Investors and their legal counsel such number of copies of each Registration Statement and Prospectus, including a preliminary Prospectus, and all amendments and supplements thereto (including exhibits) and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor that are covered by the related Registration Statement or Prospectus;

(e) use its reasonable best efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal or lifting of any such order at the earliest practicable time;

(f) use its reasonable best efforts to register and qualify, and cooperate with the Investors and their counsel in connection with the registration or qualification of, the Registrable Securities for offer and sale under the securities or “Blue Sky” laws of such jurisdictions reasonably requested by the Investors or any underwriter, to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and do any and all other reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 4(f), or (iii) file a general consent to service of process in any such jurisdiction;

(g) promptly notify the Investors, at any time prior to the end of the Effectiveness Period, (i) upon discovery that, or upon the happening of any event as a result of which, the Registration Statement, Prospectus or any document incorporated by reference therein includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to the Investors a supplement to or an amendment of such Registration Statement, Prospectus or other document as may be necessary so that such Registration Statement, Prospectus or other document shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, provided that any suspension of the use of any Registration Statement or Prospectus in connection with the happening of any such event must comply with the terms and conditions of Section 3(c)(ii), including, for the avoidance of doubt, the total number of days that any suspension may be in effect in any period, (ii) if the Company becomes aware of any request by the SEC or any federal or state governmental agency or authority for amendments or supplements to a Registration Statement or Prospectus covering Registrable Securities or for additional information relating thereto, (iii) if the Company becomes aware of the issuance or threatened issuance by SEC of any stop order or other suspension of effectiveness with respect to a Registration Statement covering the Registrable Securities, (iv) upon the receipt by the Company of any notification with respect to the suspension of the registration or qualification of, or exemption from such registration or qualification of, any Registrable Security for offer and sale in any jurisdiction reasonably requested by the Investors or any underwriter, or the initiation or threatening of any proceeding for such purpose, and (v) when any Registration Statement or Prospectus or any amendment or supplement thereto has been filed with the SEC and when any of the foregoing has become effective;

 

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(h) if an Underwritten Shelf Takedown is requested, enter into an underwriting agreement in customary form, scope and substance;

(i) use its commercially reasonable efforts to cause all such Registrable Securities (A) if the Registrable Securities are then listed on a securities exchange, to continue to be so listed, (B) if the Registrable Securities are not then listed on a securities exchange, to, as promptly as practicable, be listed on the NYSE MKT, the New York Stock Exchange or NASDAQ (or any other national securities exchange), and (C) to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Investors or their permitted assignees to sell the Registrable Securities;

(j) if an Underwritten Shelf Takedown is requested or an underwritten public offering is conducted by the Company in accordance with Section 3(d), (A) use its reasonable best efforts to obtain customary “comfort” letters from the independent registered public accounting firm of the Company (to the extent deliverable in accordance with their professional standards) addressed to such Investor and the managing underwriter, if any, in customary form and covering matters of the type customarily covered in “comfort” letters in connection with underwritten offerings; (B) use its reasonable best efforts to obtain opinions of external counsel to the Company (such counsel being reasonably satisfactory to the managing underwriter, if any) and updates thereof covering matters customarily covered in opinions of counsel in connection with underwritten offerings, addressed to each participating Investor and the managing underwriter, if any, provided , that the delivery of any “10b-5 statement” may be conditioned on the prior or concurrent delivery of a “comfort” letter pursuant to subsection (A) above; and (C) provide officers’ certificates and other customary closing documents customarily delivered in connection with underwritten offerings and reasonably requested by the managing underwriter;

(k) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act (including, without limitation, Rule 172 promulgated under the Securities Act (“ Rule 172 ”)), file any final Prospectus (including any supplement or amendment thereof) with the SEC pursuant to Rule 424 promulgated under the Securities Act (“ Rule 424 ”), promptly inform the Investors in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act (including Rule 158 promulgated thereunder). For the purpose of this Section 4(i), “Availability Date” means the forty-fifth (45th) day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the ninetieth (90th) day after the end of such fourth fiscal quarter. If the Company is required to file a Prospectus pursuant to Rule 424 at the time the Registration Statement is declared effective by the SEC, the Company shall file such Prospectus by 8:30 a.m., New York City time, on the next day on which the SEC’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR) accepts documents for filing; and

(l) use its reasonable best efforts to take all other actions necessary or customarily taken by issuers to effect the registration of, and its commercially reasonable efforts to take all other actions necessary to effect the sale of, the Registrable Securities contemplated hereby.

 

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5. Due Diligence Review; Information . Upon written request to the Company from a representative of any Investor or any underwriter (and/or any attorney or accountant retained by either of the foregoing) participating in a disposition of Registrable Securities pursuant to a Registration Statement (each a “ Requesting Party ”), the Company shall make available to such Requesting Party, for inspection and review during normal business hours, all of the Company’s financial records, SEC filings, and other corporate documents and properties as may be reasonably necessary to enable such Requesting Party to exercise their due diligence in connection with such disposition of such Registrable Securities, and the Company shall cause its officers, directors and employees to supply all such information reasonably requested by such Requesting Party in connection with such due diligence within a reasonable time period following the Company’s receipt of such request. As a condition to such inspection and review, the Company may require the Investors to enter into confidentiality agreements (in a form reasonably satisfactory to the Company). Notwithstanding the foregoing, the Company shall not disclose material nonpublic information to the Investors, to any Requesting Party, or to any advisors or representatives thereof (each a “ Information Recipient ”), unless, prior to disclosure of such material nonpublic information, (i) the Company identifies such information to the Information Recipient as being material nonpublic information; (ii) the Company provides the Information Recipient with the opportunity to accept or refuse to accept such information prior to its receipt thereof; and (iii) the Information Recipient enters into an appropriate confidentiality agreement (in a form reasonably satisfactory to the Company) with the Company with respect to such information.

6. Holdback . With respect to any underwritten offering of Registrable Securities by an Investor pursuant to this Agreement, the Company agrees not to effect (other than pursuant to such registration) any public sale or distribution, or to file any Registration Statement or Prospectus (other than with respect to such registration) covering any of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the period not to exceed ten (10) days prior and sixty (60) days following the effective date of such offering or such longer period up to ninety (90) days as may be requested by the managing underwriter. The Company also agrees to cause each of its directors and senior executive officers to execute and deliver customary lockup agreements in such form and for such time period up to ninety (90) days as may be requested by the managing underwriter.

 

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7. Obligations of the Investors .

(a) Each Investor shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities. At least five (5) business days prior to the first anticipated filing date of any Registration Statement or Prospectus, the Company shall notify each Investor of the information that the Company requires from such Investor if such Investor desires to have any of the Registrable Securities included in the Registration Statement or Prospectus. Any Investor who elects to have such Registrable Securities included in such Registration Statement or Prospectus shall provide such information to the Company at least two (2) business days prior to the first anticipated filing date of such Registration Statement or Prospectus.

(b) Each Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement or Prospectus hereunder; provided, however, that any Investor who notifies the Company in writing of its election to exclude all of its Registrable Securities from such Prospectus need not so cooperate with the Company.

(c) Each Investor agrees that, upon receipt of any notice from the Company of either (i) the suspension of the use of any Prospectus pursuant to Section 3(c)(ii) of this Agreement; or (ii) the happening of an event pursuant to Section 4(g) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor is advised by the Company that such dispositions may again be made.

 

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8. Indemnification .

(a) Indemnification by the Company . The Company agrees to indemnify and hold harmless, to the fullest extent permitted by Law, each Investor and if an Investor is a person other than an individual, its officers, directors, members, managers, employees and agents and each other person, if any, who controls such Investor within the meaning of the Section 15 of the Securities Act or Section 20 of the Exchange Act (each an “ Investor Indemnified Party ”), against any Losses, joint or several, to which such Investor Indemnified Party may become subject under the Securities Act or otherwise, insofar as such Losses arise out of or are based upon: (i) any untrue statement or alleged untrue statement contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof, or any documents incorporated by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared or authorized by the Company (or any amendment or supplement thereto); or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) any “Blue Sky” application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities Laws thereof (any such application, document or information herein called a “ Blue Sky Application ”); or (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be so liable, in any such case, if and to the extent that any such Loss arises out of or is based upon (A) an untrue statement or alleged untrue statement or omission or alleged omission so made in reliance upon and in conformity with information regarding such Investor Indemnified Party or its plan of distribution or ownership interests which was furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus; or (B) any offers or sales by or on behalf of any Investor Indemnified Party after delivery to the Investor Indemnified Party by the Company of a notice of suspension described in Section 3(c)(ii) hereof and before delivery of a notice by the Company to the Investor advising the Investor that dispositions may be made as provided by Section 7(c) hereof.

(b) Indemnification by the Investors . In connection with any registration in which an Investor is participating, each Investor agrees, to indemnify and hold harmless, to the fullest extent permitted by Law, the Company, its directors, officers, employees, agents and each person who controls the Company within the meaning of the Section 15 of the Securities Act or Section 20 of the Exchange Act (the “ Company Indemnified Party ”), against any Losses to which such Company Indemnified Party may become subject under the Securities Act or otherwise, insofar as such Losses arise out of or are based upon (i) any untrue statement or alleged untrue statement contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon information furnished in writing by or on behalf of such Investor to the Company specifically and expressly for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto, and (ii) any offers or sales by or on behalf of any Investor after delivery to such Investor by the Company of a notice of suspension described in Section 3(c)(ii) hereof and before delivery of a notice by the Company to such Investor advising such Investor that dispositions may be made as provided by Section 7(c) hereof. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 8 and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or alleged untrue statement or omission or alleged omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation. For the purposes of this Section 8(b), the indemnification obligations of Buyer to the Company Indemnified Party shall be joint and several.

 

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(c) Conduct of Indemnification Proceedings . Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification; and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed in writing to pay such fees or expenses; or (b) the indemnifying party shall have failed within a reasonable time after notice from the indemnified party to assume the defense of such claim and employ counsel reasonably satisfactory to the indemnified party, or (c) the named parties to such action (including any impleaded parties) include both the indemnified party and the indemnifying party and, in the reasonable judgment of the indemnified party, representation of both the indemnified party and the indemnifying party with respect to such claims by the same counsel would be inappropriate due to actual or potential differing interests between them (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the prior written consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent.

(d) Contribution . If, for any reason, the indemnification provided for in Sections 8(a) and 8(b) hereof is unavailable to an indemnified party or insufficient to hold it harmless, other than for the exceptions specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact has been made by, or relates to information supplied by, the indemnifying party or the indemnified party, and the parties’ relative intent, knowledge, and access to information. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 8 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

 

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9. Miscellaneous .

(a) Amendments and Waivers . This Agreement may be amended only by a writing signed by the Company and each of the Investors.

(b) Notices . All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

 

If to the Company:   

Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

Attn: Joseph W. Pooler, Jr.

Facsimile: (215) 701-8280

E-mail: jpooler@ifmi.com

 

and to:

  

 

Institutional Financial Markets, Inc.

1633 Broadway, 28th Floor

New York, New York 10019

Attn: Rachael Fink

Facsimile: (866) 543-2907

E-mail: rfink@ifmi.com

 

With a copy to:

  

 

Duane Morris LLP

30 South 17th Street

Philadelphia, Pennsylvania 19103

Attn: Darrick M. Mix

Facsimile: (215) 239-4958

Email: dmix@duanemorris.com

 

If to Cohen Bros. Financial LLC:

  

 

c/o Institutional Financial Markets, Inc.

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

Attn: Daniel G. Cohen

 

With a copy to:

  

 

Daniel G. Cohen at his principal address set forth the books and records of the Company.

 

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If to Buyer:   

Mead Park Capital Partners LLC

c/o Mead Park Holdings LP

126 East 56th Street, 19th Floor

New York, New York 10022

Attn: Christopher Ricciardi

Facsimile: (212) 432-4770

Email: cricciardi@meadpark.com

 

and to:

 

Mead Park Capital Partners LLC

c/o Mead Park Holdings LP

126 East 56th Street, 19th Floor

New York, New York 10022

Attn: Dennis J. Crilly

Facsimile: (212) 432-4770

Email: dcrilly@meadpark.com

 

With a copy to:

  

 

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10022

Attn: Mitchell Eitel

Facsimile: (212) 558-3588

Email: eitelm@sullcrom.com

unless the address is changed by the party by like notice given to the other parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address above, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express (FedEx), the United Parcel Service (UPS), or another nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., New York City time, on a business day. Any notice hand delivered after 5:00 p.m. New York City time, shall be deemed delivered on the following business day. Notwithstanding the foregoing, notices, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

(c) Assignments and Transfers by Investors . The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective permitted successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder, provided that such Investor complies with the requirements of the Securities Purchase Agreement or the Cohen Purchase Agreement, as applicable, and with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected and agrees in writing to be bound by the terms hereof.

 

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(d) Assignments and Transfers by the Company . This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of each of the Investors; provided, however, that the Company may assign this Agreement in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another Person and, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person and the term “Registrable Securities” shall be deemed to include the securities received by the Investors in connection with such transaction unless the resales of such securities are registered under the Securities Act and the securities are otherwise freely tradable by the Investors after giving effect to such transaction.

(e) Benefits of the Agreement . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(f) Execution . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile or e-mail delivery of a “.pdf.” or other similar format file, which shall be deemed an original.

(g) Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(h) Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable Law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

(i) Further Assurances . The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

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(j) Entire Agreement . This Agreement and the Securities Purchase Agreement and each of the other Transaction Documents, the Confidentiality Agreement, and the Exclusivity Agreement (each as defined in the Securities Purchase Agreement), collectively, set forth all the promises, covenants, agreements, conditions and understandings between the parties hereto with respect to the subject matter hereof and thereof, and supersede all prior and contemporaneous agreements, understandings, inducements or conditions, expressed or implied, oral or written. In the event that there shall be a conflict between the provisions of this Agreement and the provisions of the Securities Purchase Agreement, the provisions of the Securities Purchase Agreement shall control. In the event that there shall be a conflict between the provisions of this Agreement and the provisions of the Cohen Purchase Agreement, the provisions of the Cohen Purchase Agreement shall control.

(k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This Agreement shall be construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws that would result in the application of the laws of another jurisdiction. The parties further agree that any action between them shall be heard in New York City, New York, and expressly consent to the jurisdiction and venue of the state and federal courts sitting in New York City, New York, for the adjudication of any civil action asserted pursuant to this Agreement. EACH OF THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE INVESTORS AND THE COMPANY ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE INVESTORS TO ENTER INTO THIS AGREEMENT.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Registration Rights Agreement as of the date first above written.

 

THE COMPANY:
INSTITUTIONAL FINANCIAL MARKETS, INC.
By:  

/s/ Joseph W. Pooler, Jr.

Name:   Joseph W. Pooler, Jr.
Title:   Executive Vice President, Chief Financial Officer and Treasurer
INVESTORS:
COHEN BROS. FINANCIAL, LLC

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen
Title:   Managing Member
MEAD PARK CAPITAL PARTNERS LLC
By:   Mead Park Advisors LLC, its investment adviser
By:  

/s/ Christopher Ricciardi

Name:  

Christopher Ricciardi

Title:  

Authorized Person

[Signature page to Registration Rights Agreement]

Exhibit 10.4

PREFERRED STOCK EXCHANGE AGREEMENT

This Preferred Stock Exchange Agreement (this “ Agreement ”) is made as of May 9, 2013, by and among Institutional Financial Markets, Inc., a corporation organized under the laws of the State of Maryland (the “ Company ”), Cohen Bros. Financial, LLC (“ Cohen ”), and Daniel G. Cohen.

RECITALS :

WHEREAS, Cohen is the owner of an aggregate of Four Million Nine Hundred Eighty-Three Thousand Five Hundred Fifty-Seven (4,983,557) shares of Series D Voting Non-Convertible Preferred Stock of the Company (collectively, the “ Series D Shares ”);

WHEREAS, Cohen desires to exchange (the “ Exchange ”) the Series D Shares for an aggregate of Four Million Nine Hundred Eighty-Three Thousand Five Hundred Fifty-Seven (4,983,557) newly issued shares of Series E Voting Non-Convertible Preferred Stock of the Company (collectively, the “ Series E Shares ” and, together with the Series D Shares, the “ Shares ”);

WHEREAS, the Shares have substantially identical rights, preferences, privileges and restrictions other than with respect to the Company’s obligation to redeem the Shares, and accordingly, the terms of the Series E Shares effectively serve as an amendment of the terms of the Series D Shares solely with respect to when the Company has an obligation to redeem the Series D Shares; and

WHEREAS, pursuant to this Agreement, Cohen and the Company desire to, among other things, set forth the terms and conditions of the Exchange.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties to this Agreement, intending to be legally bound, hereby agree as follows:

1. The Exchange . Cohen hereby assigns and conveys to the Company the Series D Shares, free and clear of all liens, claims and encumbrances. On the date of this Agreement, Cohen shall deliver to the Company the stock certificate representing the Series D Shares. In exchange for the Series D Shares, the Company shall issue on the date of this Agreement the Series E Shares to Cohen and shall deliver to Cohen the stock certificate representing the Series E Shares. Cohen and the Company hereby acknowledge and agree that the Series E Shares shall have all of the rights, preferences, privileges and restrictions described in the Institutional Financial Markets, Inc. Articles Supplementary, Series E Voting Non-Convertible Preferred Stock, and as described in the Articles of Incorporation of the Company, as amended from time to time. Immediately upon execution and delivery of this Agreement, each of the Series D Shares shall be deemed cancelled in exchange for the Series E Shares.


2. Representations and Warranties .

2.1 Representations and Warranties of Cohen . To induce the Company to enter into the Exchange, Cohen hereby represents and warrants to the Company as follows:

(a) Cohen (i) is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Delaware, and (ii) has the limited liability company power and authority to own its property and assets and to transact the business in which it is engaged.

(b) Cohen has the limited liability company power to execute, deliver and carry out the terms and provisions of this Agreement.

(c) Cohen is the sole owner of the Series D Shares and has good and marketable title thereto, free and clear of all liens, claims and encumbrances whatsoever.

(d) This Agreement constitutes a legal, valid and binding obligation of Cohen, enforceable against Cohen in accordance with its terms.

2.2 Representations and Warranties of the Company . To induce Cohen to enter into the Exchange, the Company represents and warrants to Cohen as follows:

(a) The Company (i) is a corporation duly organized and validly existing and in good standing under the laws of the State of Maryland, and (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged.

(b) The Series E Shares that are being issued by the Company to Cohen hereunder have been duly authorized, and, upon the issuance of the Series E Shares to Cohen in accordance with the terms and provisions of this Agreement, the Series E Shares will be validly issued, fully paid and nonassessable.

(c) The Company has the corporate power to execute, deliver and carry out the terms and provisions of this Agreement and to issue the Series E Shares to Cohen hereunder, and the Company has taken all necessary corporate action to authorize the Company’s execution, delivery and performance of this Agreement.

(d) This Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

3. Miscellaneous .

3.1 Termination of December 28, 2012 Exchange Agreement . The parties hereto agree that the Preferred Stock Exchange Agreement, dated December 28, 2012, by and among the Company, Cohen and Daniel G. Cohen, is hereby terminated in its entirety.

3.2 Descriptive Headings . The descriptive headings herein are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

 

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3.3 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same agreement. Facsimile or electronically transmitted signature pages shall be deemed an original for purposes of this Agreement.

3.4 Entire Agreement . This Agreement constitutes the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

3.5 Interpretation . In the event of an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provisions of this Agreement.

3.6 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto.

3.7 Severability . If any provisions of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof.

3.8 Governing Law . The validity, interpretation and enforcement of this Agreement and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the laws of the State of New York, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the undersigned have executed this Preferred Stock Exchange Agreement on the day and year first above-written.

 

INSTITUTIONAL FINANCIAL MARKETS, INC.
By:  

/s/ Joseph W. Pooler, Jr.

Name:   Joseph W. Pooler, Jr.
Title:   Executive Vice President, Chief Financial Officer and Treasurer
COHEN BROS. FINANCIAL, LLC
By:  

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen
Title:   Managing Member

/s/ Daniel G. Cohen

Daniel G. Cohen

[Signature page to Preferred Stock Exchange Agreement]

Exhibit 10.5

IFMI, LLC

AMENDMENT NO. 2 TO

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of IFMI, LLC, dated as of May 9, 2013 (“Amendment No. 2”), is entered into by and among each of the Members set forth on the signature pages hereto.

Background

On December 16, 2009, the Members entered into the Amended and Restated Limited Liability Company Agreement of IFMI, LLC (formerly, Cohen Brothers, LLC) (the “Amended and Restated Agreement”). On June 20, 2011, the Members entered into Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of IFMI, LLC (together with the Amended and Restated Agreement, the “Agreement”).

Contemporaneously with the execution and delivery of this Amendment No. 2, Parent is entering into a securities purchase agreement (the “Securities Purchase Agreement”), dated of even date herewith, by and among Parent and Mead Park Capital Partners LLC (the “Buyer”), pursuant to which Parent has agreed to sell to Buyer and Buyer has agreed to purchase from Parent (i) an aggregate of One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167) newly issued Common Shares, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334); and (ii) a convertible senior promissory note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501);

Contemporaneously with the execution and delivery of this Amendment No. 2, Parent and Daniel G. Cohen are executing and delivering a securities purchase agreement (the “Cohen Purchase Agreement”), pursuant to which Parent has agreed to sell to Mr. Cohen and Mr. Cohen has agreed to purchase from Parent (i) an aggregate of Eight Hundred Thousand (800,000) newly issued Common Shares, for a purchase price of Two Dollars ($2.00) per share, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000); and (ii) a convertible senior promissory note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000);

Contemporaneously with the execution and delivery of this Amendment No. 2, the Company, Parent, Daniel G. Cohen, and, solely for purposes of Sections 6.4 and 7.5 thereof, C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP) and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC) are executing and delivering an amended and restated employment agreement (the “Cohen Executive Agreement”), pursuant to which Parent wishes Mr. Cohen to serve as its Vice Chairman, and the Company wishes that Mr. Cohen serve as its Vice Chairman, as President of Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD) and as President and Chief Executive of the European business of the Company.


Pursuant to Section 13.10 of the Agreement, the Members desire to amend certain provisions of the Agreement in connection with the transactions contemplated by the Securities Purchase Agreement, the Cohen Purchase Agreement and the Cohen Executive Agreement.

NOW, THEREFORE, intending to be bound hereby, the Members agree as follows:

1. Defined Terms . Terms that are used but not defined herein shall have the meaning ascribed to such terms in the Agreement.

 

  1.1 The definition set forth below is hereby added to Section 1.2 of the Agreement.

Cohen Executive Agreement ”: That Amended and Restated Employment Agreement, dated as of May 9, 2013, by and among the Company, Parent and Daniel G. Cohen and, solely for purposes of Sections 6.4 and 7.5 thereof, C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP) and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC), as modified, amended and/or replaced from time to time.

 

  1.2 The definition in Section 1.2 of the Agreement set forth below is hereby deleted and replaced in its entirety with the definition set forth below.

Contingent Convertible Notes ”: The 10.50% Contingent Convertible Senior Notes Due 2027 issued by Parent pursuant to that certain Indenture, dated as of May 15, 2007, by and between Parent and U.S. Bank National Association, and, if issued, the 8.00% Convertible Senior Promissory Notes to be issued by Parent pursuant to those certain securities purchase agreements, dated of May 9, 2013, entered into by and between Parent, Mead Park Capital Partners LLC and, for purposes of Section 6.3 thereof, Mead Park Holdings, LP, and by and between Parent and Cohen Bros. Financial, LLC, and in each case, any replacement, refinancing or additional issuance of such notes.

2. Special Allocations . Section 5.5 of the Agreement is hereby deleted and replaced in its entirety as follows:

Section 5.5 Special Allocations . Notwithstanding anything herein to the contrary, for so long as the Cohen Executive Agreement remains in effect, (a) the Company shall give full effect to the allocations and payments to be made to Daniel G. Cohen pursuant to, as well as the treatment and reporting thereof for United States federal, state and/or local income tax purposes as prescribed by and in accordance with, the Cohen Executive Agreement; and (b) the allocation of Profits, Losses and other items of Company income, gains, losses and deductions (and the amounts thereof so allocable) (and any resulting Capital Account adjustments resulting therefrom) shall take into account and apply the relevant and applicable provisions of the Cohen Executive Agreement.

3. Issuance of Securities by Parent . The first sentence of Section 6.10 of the Agreement is hereby amended by deleting “.” at the end of such Sentence and replacing it with “or Other Securities.”.

 

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4. Management and Control of Business; Authority of Board Members . Section 7.1 of the Agreement is hereby deleted and replaced in its entirety as follows:

Section 7.1 Management and Control of Business; Authority of Board Members . Management of the business and affairs of the Company and the Subsidiaries shall be vested in the Board of Managers, who may exercise all powers of the Company and perform or authorize the performance of all lawful acts which are not by the Act or this Agreement directed or required to be exercised or performed by the Members. The Board of Managers shall consist of the number of Managers equal to the number of directors on the Board of Directors of Parent. The Managers shall, at all times, be the same persons that are members of the Board of Directors of Parent and the Chairman and Vice Chairman (if any) of the Board of Managers shall, at all times, be the same persons that are the Chairman and Vice Chairman (if any) of the Board of Directors of Parent. Changes in composition of the Board of Directors of Parent shall automatically, without any further action on the part of the Members or any Person, be effective with respect to the Board of Managers.

Notwithstanding any other provision of this Agreement, until January 3, 2016, the Company shall not, without receiving advance approval by Parent and a Majority Vote of the Designated Non-Parent Members, if any, take or permit to be taken any of the following actions:

(a) enter into or suffer a transaction constituting a Company Change of Control;

(b) amend the Certificate, if such amendment adversely affects the Designated Non-Parent Members; or

(c) adopt any plan of liquidation or dissolution, or file a certificate of dissolution;

provided, however, in the case of actions set forth in clauses (a) and (c) above, approval by the Majority Vote of the Designated Non-Parent Members shall not be required if the gross cash proceeds received in connection with such action by the sole Designated Non-Parent Member as of May 9, 2013 equal or exceed Six Dollars ($6.00) per Unit or Common Share (as appropriately adjusted to reflect any dividend, split, reverse split, combination, reclassification, recapitalization or other similar change in the capital structure of the Company and/or Parent, or any distribution to holders of Units and/or Common Shares other than cash dividends (collectively, the “Adjustments”)) held by such Designated Non-Parent Member at the time of such action. By way of example, (1) assuming the Designated Non-Parent Member held an aggregate of 5,700,000 Units and Common Shares at May 9, 2013 and does not acquire or dispose of any Units and/or Common Shares from such date until the time of an action set forth in clauses (a) or (c) above, and (2) irrespective of any Adjustments, approval of the Designated Non-Parent Member would be required unless the Designated Non-Parent Member receives at least $34,200,000 in gross cash proceeds in connection with such action.

 

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5. Conditions of Transfer . Section 9.1 of the Agreement is hereby deleted and replaced in its entirety as follows:

Section 9.1 Conditions of Transfer . No Unit shall be Transferred without the approval of the Board of Managers.

6. Events Causing Dissolution . Section 11.1 of the Agreement is hereby deleted and replaced in its entirety as follows:

Section 11.1 Events Causing Dissolution . Subject to Section 7.1 hereof, the Company shall be dissolved and its affairs wound up upon the occurrence of any of the following events:

(a) the sale, exchange, or other disposition by the Company of all or substantially all of its assets; or

(b) the vote of Parent.

The Company shall not be dissolved by the death, resignation, withdrawal, bankruptcy or dissolution of a Member.

7. Action of Parent . Section 12.1 of the Agreement is hereby deleted and replaced in its entirety as follows:

Section 12.1 [Intentionally Omitted].

8. Effective Date . This Amendment No. 2 shall only become effective upon the Closing (as defined in the Securities Purchase Agreement). In the event that the Securities Purchase Agreement is terminated for any reason, this Amendment No. 2 shall immediately terminate and be of no further force or effect without any further action on the part of the Members.

9. Integration . The Agreement, as amended by this Amendment No. 2, sets forth all (and is intended by all parties hereto to be an integration of all) of the promises, agreements, conditions, understandings, warranties and representations among the parties hereto with respect to the Company, the Company business and the property of the Company, and there are no promises, agreements, conditions, understanding, warranties, or representations, oral or written, express or implied, among them other than as set forth herein or in the agreements noted above. Notwithstanding the foregoing, certain Members are or will be a party to a senior management agreement between the Company and such Member (e.g., the Cohen Executive Agreement). To the extent that any provisions of this Amendment No. 2 conflict with such Member’s senior management agreement (including, without limitation, terms relating to the transfer of Units and the allocations provided for therein), the terms of such Member’s senior management agreement shall control.

10. Governing Law . It is the intention of the parties that all questions with respect to the construction of this Amendment No. 2 and the rights and liabilities of the parties hereto shall be determined in accordance with the laws of the State of Delaware.

 

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11. Binding Effect . This Amendment No. 2 shall be binding upon, and inure to the benefit of, the parties hereto and their respective personal and legal representatives, successors and assigns.

12. Counterparts . This Amendment No. 2 may be executed in any number of counterparts and it shall not be necessary that each party to this Amendment No. 2 execute each counterpart. Each counterpart so executed (or, if all parties do not sign on the same counterpart, each group of counterparts signed by all parties) shall be deemed to be an original, but all such counterparts together shall constitute one and the same instrument. In making proof of this Amendment No. 2, it shall not be necessary to account for more than one counterpart or group of counterparts signed by all parties.

[Signatures on Following Page]

 

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IN WITNESS WHEREOF, the undersigned parties have caused this Amendment No. 2 to be executed as of the date and year first set forth above.

 

/s/ Linda Koster

Linda Koster

/s/ Christopher Ricciardi

Christopher Ricciardi

/s/ Stephanie Ricciardi

Stephanie Ricciardi

 

COHEN BROS. FINANCIAL, LLC
By:  

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen
Title:   Managing Member

 

INSTITUTIONAL FINANCIAL MARKETS, INC.
By:  

/s/ Joseph W. Pooler, Jr.

Name:   Joseph W. Pooler, Jr.
Title:   Executive Vice President and Chief Financial Officer

[Signature Page to Amendment No. 2 to Amended and Restated Limited Liability Agreement]

Exhibit 10.6

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Agreement ”) is dated as of May 9, 2013, by and among IFMI, LLC (the “ Company ”), a majority owned subsidiary of Institutional Financial Markets, Inc. (the “ Parent ”), the Parent, Daniel G. Cohen (the “ Executive ”), and, solely for purposes of Sections 6.4 and 7.5 hereof, C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP), a majority owned subsidiary of the Parent (“ PrinceRidge ”), and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC), an indirect subsidiary of the Parent (“ PrinceRidge Partners LLC ”). For purposes of this Agreement, the Company, the Parent, PrinceRidge and the Executive may each be referred to as a “ Party ” and collectively may be referred to as the “ Parties .”

WHEREAS, contemporaneously with the execution of this Agreement, the Parent is entering into a securities purchase agreement (the “ Securities Purchase Agreement ”) with Mead Park Capital Partners LLC, pursuant to which the Parent is selling to such entity (i) an aggregate of One Million Nine Hundred Forty-Nine Thousand One Hundred Sixty-Seven (1,949,167.00) newly issued shares of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), for an aggregate purchase price of Three Million Eight Hundred Ninety-Eight Thousand Three Hundred Thirty-Four Dollars ($3,898,334.00); and (ii) a convertible senior promissory note in the aggregate principal amount of Five Million Eight Hundred Forty-Seven Thousand Five Hundred and One Dollars ($5,847,501.00);

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Parent and Cohen Bros. Financial, LLC, a Delaware limited liability company of which the Executive is the sole member, are executing and delivering a securities purchase agreement (the “ Cohen Purchase Agreement ”), pursuant to which the Parent has agreed to sell to Cohen Bros. Financial, LLC and Cohen Bros. Financial, LLC has agreed to purchase from the Parent (i) an aggregate of Eight Hundred Thousand (800,000) newly issued shares of Common Stock, for a purchase price of Two Dollars ($2.00) per share of Common Stock, representing an aggregate purchase price of One Million Six Hundred Thousand Dollars ($1,600,000.00); and (ii) a convertible promissory note in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000.00);

WHEREAS, the parties hereto are entering into this Agreement pursuant to the Securities Purchase Agreement and the Cohen Purchase Agreement;

WHEREAS, effective as of the Effective Date (as defined in Section 1) and on the terms set forth below, (i) the Parent wishes the Executive to serve as its Vice Chairman, and (ii) the Company wishes that the Executive serve as its Vice Chairman and as President of Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD) and as President and Chief Executive of the European Business (as defined in Section 2 herein).

WHEREAS, the Company, the Parent and Executive are parties to the Employment Agreement, dated February 18, 2010, as amended by Amendment No. 1 to Employment Agreement, dated December 18, 2012 (as so amended, the “ IFMI Employment Agreement ”);


WHEREAS, the Company, the Parent, PrinceRidge and the Executive are parties to the Executive Agreement, dated May 31, 2011 (the “ PrinceRidge Employment Agreement ”); and

WHEREAS, with this Agreement, (i) the Company, the Parent and Executive desire to amend and restate the IFMI Employment Agreement in its entirety; (ii) the Company, the Parent, PrinceRidge and the Executive desire to terminate the PrinceRidge Employment Agreement; and (iii) the Parties hereto desire that PrinceRidge join as a party to this Agreement.

NOW THEREFORE, the Parties hereto agree as follows:

1. Term . Subject to the terms and conditions set forth herein, the Executive hereby agrees to provide services to the Company and the Company agrees to compensate the Executive for an initial term commencing as of the Effective Date (as defined below) and continuing through December 31, 2014, unless sooner terminated in accordance with the provisions of Section 4 or Section 5, with such arrangement to continue for successive one-year periods in accordance with the terms of this Agreement (subject to termination as aforesaid) unless any of Parent, Company or the Executive notifies the other Parties of non-renewal in writing prior to three (3) months before the expiration of the initial term and each annual renewal, as applicable. (The period during which the Executive provides services hereunder being hereinafter referred to as the “ Term .”) This Agreement shall be binding on the Parties as of the date hereof. This Agreement shall only become effective upon the earlier of (i) the date on which Parent hires a new Chief Executive Officer, and (ii) the date of closing under the Securities Purchase Agreement (such date shall be referred to as the “ Effective Date ”). In the event that the Securities Purchase Agreement is terminated for any reason prior to the Effective Date, this Agreement shall automatically, without any further action on the part of the Parties, terminate and be of no further force or effect.

2. Duties . During the Term, the Executive shall serve as Vice Chairman of the Board of Directors of the Parent (the “ Board of Directors ”), reporting directly to the Chairman of the Board of Directors, Vice Chairman of the Board of Managers of the Company (the “ Board of Managers ”), and President of Cohen & Company Financial Limited and President and Chief Executive of the European Business, reporting directly to the Chief Executive Officer of the Parent. The Executive shall faithfully perform for the Parent and the Company the duties customarily attendant to Executive’s position of said offices and shall perform such other duties of an executive, managerial or administrative nature related to the European Business as shall be reasonably specified and reasonably designated from time to time by the Board of Directors and/or the Board of Managers. Executive shall be required to perform such other duties of an executive, managerial or administrative nature related to the Company’s non-European Business reasonably specified and reasonably designated from time to time by the Board of Directors and/or the Board of Managers, provided that Executive consents to such other duties (such consent not to be unreasonably withheld or delayed). For purposes of this Agreement, the term “ European Business ” shall mean all of the business of the Company originating in, arising out of, or related to Europe, including, without limitation, the Company’s capital markets business (sales and trading of securities as well as investment banking), the Company’s asset management business (managing assets through listed and private companies, funds, managed accounts and collateralized debt obligations, including but not limited to Dekania Europe CDO I plc, Dekania Europe CDO II plc, Dekania Europe CDO III plc, and Munda CLO I BV), the Company’s principal investing business (investments in the investment vehicles, primarily those that the Company manages), and any other business in which the Company may engage.

 

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3. Compensation .

3.1 Guaranteed Payment . Commencing on the Effective Date, the Company shall pay the Executive a guaranteed payment at the rate of Six Hundred Thousand Dollars ($600,000.00) per annum (the “ Guaranteed Payment ”), payable in equal monthly installments. The Compensation Committee of the Board of Directors may provide for such increases to the Guaranteed Payment as it may, in its discretion, deem appropriate. (Any such amount shall constitute the “Guaranteed Payment” as of the time of the calculation.) For United States federal, state and local tax purposes, each Guaranteed Payment shall be treated and reported by the Company and the its members as a “guaranteed payment” (generally, a 707(c) Payment ”) within the meaning of Section 707(c) of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the Treasury Regulations promulgated thereunder.

3.2 Allocations .

(a) For the period beginning on the Effective Date through December 31, 2013 (the “ Initial Period ”), the Executive shall be entitled to each of the following allocations from the Company (the “ Initial Allocations ”), which shall be awards of qualified performance-based compensation (within the meaning of Code Section 162(m) and the Treasury Regulations thereunder) for purposes of the Company’s or Parent’s incentive compensation plan:

(i) a payment equal to 25% of the net income, if any, of the European Business during such period as determined in accordance with generally accepted accounting principles in the United States (the “ Initial European Business Allocation ”); and

(ii) a payment equal to 20% of the gross revenues generated on transactions that the Executive is responsible for generating for the Company’s non-European broker-dealers during such period as determined in accordance with generally accepted accounting principles in the United States. For the avoidance of doubt, the decision to pursue and/or enter into a transaction that would result in an allocation to Executive under this Section 3.2(a)(ii) or Section 3.2(b)(ii) below shall be made solely by the Company.

Each of the Initial Allocations, if any, shall be payable in cash within 30 days after the end of the Initial Period. In calculating net income and net loss determined in accordance with generally accepted accounting principles in the United States under this Section 3.2(a) and Section 3.2(b), expense allocations of corporate overhead, which shall be limited to allocations from the corporate finance, legal, information technology, human resource, and operations departments, shall be based on the Company’s allocation methodologies in effect as of the date hereof, or any other allocation methodology agreed to by the Executive.

 

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(b) Following the Initial Period, the Executive shall be entitled to each of the following allocations from the Company (the “ Standard Allocations ” and, together with the Initial Allocations, the “ Allocations ”), which shall be awards of qualified performance-based compensation (within the meaning of Code Section 162(m) and the Treasury Regulations thereunder) for purposes of the Company’s or Parent’s incentive compensation plan:

(i) with respect to each calendar year following the Initial Period (collectively, the “ Annual Periods ”), a payment equal to (each an “ Annual European Business Allocation ” and, collectively, the “ Annual European Business Allocations ”): (A) 25% of the aggregate net income, if any, of the European Business in the Initial Period and all completed Annual Periods as determined in accordance with generally accepted accounting principles in the United States, less (B) 25% of the aggregate net loss, if any, of the European Business in the Initial Period and all completed Annual Periods as determined in accordance with generally accepted accounting principles in the United States, less (C) the aggregate amount that would have been paid to the Executive but for the European Business Annual Allocation Cap (as defined below) as the Initial European Business Allocation, if any, for the Initial Period and as the Annual European Business Allocations, if any, for all other completed Annual Periods prior to the Annual Period for which the Annual European Business Allocation is being calculated; and

(ii) with respect to each semi-annual calendar period following the Initial Period (each a “ Semi-Annual Period ”), a payment equal to 20% of the gross revenues generated on transactions that the Executive is responsible for generating for the Company’s non-European broker-dealers during such Semi-Annual Period as determined in accordance with generally accepted accounting principles in the United States.

Each of the Standard Allocations, if any, under this Section 3.2(b) shall be payable in cash within 30 days after the end of the applicable Annual Periods and Semi-Annual Periods.

(c) Notwithstanding the foregoing, in the event that the Initial European Business Allocation or an Annual European Business Allocation, as the case may be, earned by the Executive would result in the Initial European Business Allocation or the Annual European Business Allocation, as the case may be, earned for that calendar year to exceed Five Million Dollars ($5,000,000.00) (the “ European Business Annual Allocation Cap ”), the Compensation Committee may, in its sole discretion and at any time prior to the payment of such Initial European Business Allocation or Annual European Business Allocation, as the case may be, reduce the amount of or totally eliminate any such allocation to the extent such allocation is in excess of the European Business Annual Allocation Cap.

3.3 Supplemental Allocations . During the Term, the Compensation Committee of the Board of Directors shall have the discretion to grant Executive allocations in such amounts and on such terms as it shall determine in its sole discretion (each a “ Supplemental Allocation ”). Nothing contained in the foregoing shall limit the Executive’s eligibility to receive any other bonus under any other bonus plan, stock option or equity–based plan, or other policy or program of the Parent or the Company.

3.4 Equity Incentive Compensation . The Executive shall be entitled to participate in any equity compensation plan of the Parent or the Company in which he is eligible to participate, and may, without limitation, be granted in accordance with any such plan options to purchase units representing a membership interest of the Company, shares of Common Stock, shares of restricted stock, and other equity awards in the discretion of the Compensation Committee of the Board of Directors.

 

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3.5 Benefits-In General . The Executive shall be permitted during the Term to participate in any group life, hospitalization or disability insurance plans, health programs, retirement plans, fringe benefit programs and other benefits that may be available to other senior executives of the Company generally, in each case to the extent that the Executive is eligible under the terms of such plans or programs.

3.6 Vacation . The Executive shall be entitled to vacation of no less than 25 business days per year, to be credited in accordance with the Company’s ordinary policies.

3.7 Expenses-In General . The Company shall pay or reimburse the Executive for all ordinary and reasonable out-of-pocket expenses actually incurred (and, in the case of reimbursement, paid) by the Executive during the Term in the performance of the Executive’s services under this Agreement, in accordance with the Company’s policies regarding such reimbursements.

3.8 Secretarial Support; Office Space . During the Term, the Company shall, at the Company’s expense, (i) employ a person selected by Executive, in his sole discretion, to provide executive assistant services solely to the Executive; and (ii) in addition to the Company’s and the Company Affiliates’ (as defined in Section 6.2(b)) other United States and European office space, provide an additional office space at a location selected by the Executive, in his sole discretion, provided that the annual rent for such additional office space shall not exceed Seventy-Two Thousand Dollars ($72,000).

3.9 Priority Allocations of the Company’s Profits, Income and Gain In Respect of Allocations and Supplemental Allocations . Notwithstanding anything in the LLC Agreement to the contrary and prior to the allocation to any Member (including the Executive in his capacity as a Member) of any Profits, Losses and/or, otherwise, any income (gross or net), gain, loss and/or deduction of the Company for any Fiscal Year of the Company under the LLC Agreement (as defined below) and/or applicable law: (a) the Executive shall be specially allocated, and the Company shall specially allocate to the Executive, an amount of the Company’s gross income and/or gain for such Fiscal Year (the “ Company Income ”) equal to the sum of the Executive’s Allocations (if and to the extent of any) for such Fiscal Year, the Executive’s Supplemental Allocation(s) (if any) for such Fiscal Year and any Unallocated Amount for such Fiscal Year (such sum, the “ Special Allocation Amount ” for such Fiscal Year); and (b) if the Special Allocation Amount for such Fiscal Year exceeds the Company Income for such Fiscal Year, then any such excess shall constitute the “ Unallocated Amount ” for the immediately succeeding Fiscal Year (including for purposes of this Section 3.9) and (y) any and all payments made to the Executive in respect of any such Allocations and Special Allocation Amounts for which such special allocations are made shall be treated and reported as distributions to such Member in his capacity as a Member under Section 731 of the Code (and, if and to the extent applicable, as a distribution described in Treasury Regulations Section 1.731-1(a)(1)(ii)). Notwithstanding anything in the LLC Agreement to the contrary, for purposes of the LLC Agreement (x) the Company’s Profits, Losses and/or, otherwise, any income (gross or net), gain, loss and/or deduction of the Company for any Fiscal Year of the Company allocable (or to be allocated) to the Members (including the Executive in his capacity as a Member) pursuant to the LLC Agreement (and/or applicable law) for such Fiscal Year shall be computed without regard to any of the Company Income so specially allocated to the Executive pursuant to this Section 3.9. All capitalized terms referred to in this Section 3.9 shall have the meaning set forth in the First Amended and Restated Limited Liability Company Agreement of Cohen Brothers, LLC, dated as of December 16, 2009, as amended by that Amendment No. 1 to Limited Liability Company Agreement of IFMI, LLC, dated as of June 20, 2011, and as may hereafter be further amended (the “ LLC Agreement ”). With regard to any Allocations (or portion thereof) or Supplemental Allocations (or portion thereof) (and, in either case, any corresponding payment in respect thereof), this Section 3.9 shall not apply to any such allocation (or portion thereof) and/or corresponding payment if and to the extent that the Company shall have determined (in its sole discretion, although in consultation with its tax advisor(s)) that such allocation (or portion thereof) and/or corresponding payment should be treated and reported as a 707(c) Payment for United States federal, state and/or local income tax purposes and, instead, such allocation (or portion thereof) and/or corresponding payment shall be treated and reported as a 707(c) Payment for United States federal, state and/or local income tax purposes.

 

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3.10 Treatment of Allocations and Payments, Generally . If, due to the United States federal, state and/or local tax treatment and/or reporting prescribed herein for any allocation or payment (or portion thereof) provided for herein, the Company’s tax return preparer is unable to sign and/or file any tax filing setting forth such treatment and/or reporting, then, and notwithstanding anything herein to the contrary, such allocation or payment (or portion thereof) shall instead be treated and reported in such manner as the Company’s tax return preparer determines to be proper under applicable tax law. Notwithstanding anything herein to the contrary, for the avoidance of doubt, the treatment of any allocation (or portion thereof) and/or payment (or portion thereof) to the Executive hereunder as a 707(c) Payment or an amount to which Section 707(a) of the Code applies shall not have any effect on the Capital Account balance of Executive.

3.11 Registered Representative Status . During the Term, the Company shall, or cause its subsidiaries to, include Executive as a registered representative of a broker-dealer subsidiary of the Company.

4. Termination upon Death or Disability . If the Executive dies during the Term, the Term shall terminate as of the date of death, and the obligations of the Company to or with respect to the Executive shall terminate in their entirety upon such date except as otherwise provided under this Section 4. If the Executive is unable to perform substantially and continuously the duties assigned to him due to a disability as defined for purposes of the Company’s long-term disability plan then in effect, or, if no such plan is in effect, by virtue of ill health or other disability for more than 180 consecutive or non-consecutive days out of any consecutive 12-month period, the Company shall have the right, to the extent permitted by law, to terminate the services arrangement hereunder upon notice in writing to the Executive. Upon termination of the services arrangement hereunder due to death or disability, (i) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall be entitled to receive any Guaranteed Payment and other benefits (including any allocations under Sections 3.2 and 3.3 for any period completed before termination of this Agreement and the services arrangement hereunder (the “ Prior Period Allocations ”)) earned and accrued under this Agreement, but not yet paid, prior to the date of termination (and reimbursement under this Agreement for expenses actually incurred prior to the termination of this Agreement and the services arrangement hereunder); (ii) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall be entitled to receive a single-sum payment equal to the Guaranteed Payments that would have been paid to him for the remainder of the year in which the termination occurs; (iii) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall receive a single-sum payment equal to (x) the Allocation and any Supplemental Allocations for the period in which the termination occurs to which the Executive would have been entitled if a termination had not occurred in such period, multiplied by (y) a fraction (1) the numerator of which is the number of days in such period preceding the termination and (2) the denominator of which is the total number of days in such period, (iv) all outstanding unvested equity based awards (including, without limitation, stock options and restricted stock) held by the Executive shall fully vest and become immediately exercisable, as applicable, subject to the terms of such awards, and (v) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder (but, for the avoidance of doubt, shall receive such disability and death benefits as may be provided under the Company’s plans and arrangements in accordance with their terms). Unless the payment is required to be delayed pursuant to Section 7.15(b) below or as otherwise provided in Section 5.5 below, (x) the cash amounts payable pursuant to clauses (i) and (ii) above shall be paid to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) within 60 days following the date of his termination of the services arrangement hereunder on account of death or disability, and (y) the cash amounts payable pursuant to clause (iii) above shall be paid in accordance with Section 3.2 at such time when the Allocation would otherwise be scheduled to be paid but for such termination under this Agreement. Other than the Prior Period Allocations (to which Section 3.9 shall apply), all payments under this Section 4 shall be treated and reported for United States federal income tax purposes as 707(c) Payments made by the Company to Executive (unless the Company, in consultation with its tax advisor(s), has otherwise determined, in which case such payments shall be treated and reported as so otherwise determined).

 

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5. Certain Terminations of the Services Arrangement; Certain Benefits .

5.1 Termination by the Company for Cause; Termination by the Executive without Good Reason .

(a) For purposes of this Agreement, “ Cause ” shall mean the Executive’s:

(i) commission of, and indictment (that is not quashed within 90 days) for or formal admission to any crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime involving the Company (other than routine traffic violations); provided that such crime has a material adverse effect on the business or reputation of the Company;

(ii) indictment (that is not quashed within 90 days) for or formal admission to a felony, except for a felony under state law that is (A) solely related to the operation of a motor vehicle or boat, and (B) of the lowest class or degree of felony in a state that so classifies felonies (for purposes of clarification, the exception set forth in this clause shall not apply with respect to a felony for which Executive is indicted in a state that does not classify felonies);

 

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(iii) engagement in fraud, misappropriation or embezzlement that has a material adverse effect on the business or reputation of the Company;

(iv) continued failure to materially adhere to firm-wide written policies of the Company, which have been made available or provided to the Executive; or

(v) material breach of any of the provisions of Section 6;

provided, that the Company shall not be permitted to terminate this Agreement and the services arrangement hereunder for Cause except (x) on written notice of the Company’s intent to terminate for Cause (which shall include reasonable detail of the specific event constituting Cause) given to the Executive at any time not more than 60 calendar days following the occurrence of any of the events described in clause (iii) through (v) above (or, if later, the Company’s knowledge thereof), and (y) if the Executive has been provided with an opportunity (with counsel of his choice) to contest the proposed reason(s) of Cause set forth in the notice at a meeting of the Board of Directors. Notwithstanding the foregoing, in the event that the Company provides written notice to the Executive that Cause exists as a result of the occurrence of the events described in clause (iv) or (v) above, the Executive shall have 30 calendar days from the date of such notice to cure any such event that is reasonably curable and, if the Executive does so to the reasonable satisfaction of the Company, such event shall not constitute Cause hereunder.

(b) The Company may terminate this Agreement and the services arrangement hereunder for Cause, and the Executive may terminate this Agreement and the services arrangement hereunder on at least 30 days’ written notice given to the Company. If the Company terminates this Agreement and the services arrangement hereunder for Cause, or the Executive terminates this Agreement and the services arrangement hereunder and the termination by the Executive is not for Good Reason in accordance with Section 5.2, (i) the Executive shall receive accrued but unpaid Guaranteed Payments and other benefits (including any Prior Period Allocations and reimbursement under this Agreement for expenses actually incurred prior to the termination of this Agreement and the services arrangement hereunder); and (ii) the Executive shall have no further rights to any other compensation, benefits or bonuses under this Agreement on or after the termination the services arrangement hereunder. Unless the payment is required to be delayed pursuant to Section 7.15(b) below, the cash amounts payable to the Executive under this Section 5.1(b) shall be paid to the Executive in a single-sum payment within 60 days following the date of the termination of his service arrangement with the Company pursuant to this Section 5.1(b).

Other than the Prior Period Allocations (to which Section 3.9 shall apply), all payments under this Section 5.1 shall be treated and reported for United States federal income tax purposes as 707(c) Payments made by the Company to Executive (unless the Company, in consultation with its tax advisor(s), has otherwise determined, in which case such payments shall be treated and reported as so otherwise determined).

 

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5.2 Termination by the Company without Cause; Termination by the Executive for Good Reason .

(a) For purposes of this Agreement, “ Good Reason ” shall mean, unless otherwise consented to by the Executive,

(i) (a) the material reduction of the Executive’s title, authority, duties or responsibilities, including, without limitation, (1) the Executive’s sole authority to manage all of the aspects of the European Business consistent with written firm-wide policies of the Company that are generally applicable to all of the Company’s business units or (2) restricting the Executive’s ability to determine the office locations of the European Business, or (b) the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Parent, the Company or their subsidiaries (including his role as a member of the Board of Directors and/or Board of Managers);

(ii) a reduction in the annual Guaranteed Payment of the Executive below the amount set forth in Section 3.1 of this Agreement or any modification of the Allocations formula without Executive’s written consent;

(iii) the Company’s material breach of this Agreement; or

(iv) Executive is required to relocate his office from the location for which the $72,000 expense is paid pursuant to Section 3.8.

Notwithstanding the foregoing, (i) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination date no later than 30 days from the date of such notice) is given no later than 30 days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises and (ii) if there exists (without regard to this clause (ii)) an event or condition that constitutes Good Reason, the Company shall have 30 days from the date notice of such a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute Good Reason hereunder.

(b) The Company may terminate this Agreement and the services arrangement hereunder and the Executive may terminate this Agreement and the services arrangement hereunder at any time for any reason or no reason. If the Company terminates the services arrangement hereunder and the termination is not covered by Section 4 or 5.1, the Executive terminates the services arrangement hereunder for Good Reason, or Parent or the Company terminates this Agreement and the services arrangement hereunder as a result of not renewing this Agreement pursuant to Section 1 (and such termination as a result of non-renewal is not by the Company for Cause):

(i) the Executive shall receive a single-sum payment equal to accrued but unpaid Guaranteed Payments and other benefits (including any Prior Period Allocations earned by the Executive and reimbursement under this Agreement for expenses actually incurred prior to the termination of the services arrangement hereunder);

 

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(ii) the Executive shall receive a single-sum payment of an amount equal to 3.0 times (a) the average of the Guaranteed Payment amounts paid to Executive over the three calendar years prior to the date of termination, (b) if less than three years have elapsed between the date of this Agreement and the date of termination, the highest Guaranteed Payment paid to Executive in any calendar year prior to the date of termination, or (c) if less than 12 months have elapsed from the date of this Agreement to the date of termination, the highest Guaranteed Payment received in any month times 12; provided, however, that in the event that the applicable calculation under either clause (a), (b) or (c), as applicable, of this Section 5.2(b)(ii) yields less than Three Million Dollars ($3,000,000.00), then Executive shall receive a single-sum payment of Three Million Dollars ($3,000,000.00) in lieu of such amount;

(iii) all outstanding unvested equity based awards (including, without limitation, stock options and restricted stock) held by the Executive shall fully vest and become immediately exercisable, as applicable, subject to the terms of such awards; and

(iv) the Executive shall receive a single-sum payment equal to the Allocation and any Supplemental Allocation(s) for the period in which the termination occurs to which the Executive would have been entitled if a termination had not occurred in such period, multiplied by a fraction (x) the numerator of which is the number of days in such period preceding the termination and (y) the denominator of which is the total number of days in such period.

Unless the payment is required to be delayed pursuant to Section 7.15(b) below or as otherwise provided in Section 5.5 below, (x) the cash amounts payable to the Executive under this Section 5.2(b)(i) and (ii) shall be paid to the Executive within 60 days following the date of his termination his services arrangement with the Company hereunder pursuant to this Section 5.2(b), and (y) the cash amounts payable pursuant to this Section 5.2(b)(iv) shall be paid in accordance with Section 3.2 at such time when the Allocation would otherwise be scheduled to be paid but for such termination under this Agreement. In the event that the 60 day period following the date of termination spans two calendar years, the amounts payable to the Executive under this Section 5.2(b) shall be paid in the latter calendar year.

Other than the Prior Period Allocations (to which Section 3.9 shall apply), all payments under this Section 5.2 shall be treated and reported as 707(c) Payments made by the Company to Executive (unless the Company, in consultation with its tax advisor(s), has otherwise determined, in which case such payments shall be treated and reported as so otherwise determined).

 

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5.3 Change of Control . Without duplication of the foregoing, upon a “Change of Control” (as defined below) while the Executive is providing services to the Company or an Affiliate (as defined below) pursuant to this Agreement, all outstanding unvested equity-based awards shall fully vest and shall become immediately exercisable, as applicable. After such Change of Control, there will be a transition period (“ Transition Period ”) which will begin on the date of the Change of Control and end on the first anniversary of such Change of Control. If the Executive terminates the services arrangement with the Company hereunder within the six-month period following the Transition Period, such termination shall be deemed a termination by the Executive for Good Reason covered by Section 5.2. For purposes of this Agreement, “ Change of Control ” shall mean the occurrence of any of the following on or after the date hereof:

(a) any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), but excluding Executive, any Family Member of Executive, the Company, any entity or person controlling, controlled by or under common control with Executive, any Family Member of Executive, the Company, any employee benefit plan of the Company or any such entity, and any “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of which any of the foregoing persons or entities is a member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Parent representing 50% or more of either (A) the combined voting power of the Parent’s then outstanding securities or (B) the then outstanding Common Stock (in either such case other than as a result of an acquisition of securities directly from the Parent or the Company); provided, however, that, in no event shall a Change of Control be deemed to have occurred upon a public offering of the Common Stock under the Securities Act of 1933, as amended (for purposes hereof, “ Family Member ” means (I) a person’s spouse, parent, sibling and descendants (whether natural or adopted), (II) any family limited partnership, limited liability company or other entity wholly owned, directly or indirectly, by such person and/or such person’s spouse, parent, sibling and/or descendants (whether natural or adopted), and (III) any estate or trust for the benefit of such person and/or such person’s spouse, parent, sibling and/or descendants (whether natural or adopted)); or

(b) any consolidation or merger of the Parent where the stockholders of the Parent, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the entity issuing cash or securities in the consolidation or merger (or of its ultimate parent entity, if any);

(c) there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Parent, other than a sale or disposition by the Parent of all or substantially all of the Parent’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by “persons” (as defined above) who beneficially hold shares of Common Stock immediately prior to such sale or (B) the approval by stockholders of the Parent of any plan or proposal for the liquidation or dissolution of the Parent, as applicable; or

(d) the members of the Board of Directors at the beginning of any consecutive 24-calendar-month period (the “ Incumbent Directors ”) cease for any reason other than due to death to constitute at least a majority of the members of the Board of Directors; provided that any director whose election, or nomination for election by the Parent’s stockholders, was approved by a vote of at least a majority of the members of the Board of Directors then still in office who were members of the Board of Directors at the beginning of such 24-calendar-month period, shall be deemed to be an Incumbent Director.

 

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For purposes of this Agreement, “ Affiliate ” shall mean, with respect to any individual or entity, any other individual or entity directly or indirectly controlling, controlled by, or under common control with, such individual or entity at any time during the period for which the determination of affiliation is being made and, for purposes of this definition, the terms “control,” “controlling,” “controlled” and words of similar import, when used in this context, mean, with respect to any individual or entity, the possession, directly or indirectly, of the power to direct, or cause the direction of, management policies of such individual or entity, whether through the ownership of voting securities, by contract or otherwise.

5.4 Parachutes . If any amount payable to or other benefit receivable by the Executive pursuant to this Agreement would be deemed to constitute a Parachute Payment (as defined below), alone or when added to any other amount payable or paid to or other benefit receivable or received by the Executive which is deemed to constitute a Parachute Payment (whether or not under an existing plan, arrangement or other agreement), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then the Parachute Payments shall be reduced (but not below zero) so that the maximum amount of the Parachute Payments (after reduction) shall be One Dollar ($1.00) less than the amount which would cause the Parachute Payments to be subject to the excise tax imposed by Section 4999 of the Code. Any such reduction shall be made by first reducing severance benefits (if any). Notwithstanding the foregoing, if the reduction of Parachute Payments under this Section 5.4 would be equal to or greater than Fifty Thousand Dollars ($50,000), then there shall be no such reduction and the full amount of the Parachute Payment shall be payable. “ Parachute Payment ” shall mean a “parachute payment” as defined in Section 280G of the Code. The calculation under this Section 5.4 shall be as determined by the Company’s independent accountants.

5.5 Execution of Release . The Executive acknowledges that, if required by the Company prior to making the payments and benefits set forth in this Section 5 (other than accrued but unpaid Guaranteed Payments and other benefits), all such payments and benefits are subject to his execution of the Release attached hereto as Exhibit A (the “ Release ”). If Executive fails to execute the Release, or the Release does not become irrevocable within 60 days following the date of the termination of the Executive’s services arrangement with the Company hereunder, all such payments and benefits set forth in this Section 5 shall be forfeited. Notwithstanding anything in this Agreement to the contrary, if the Executive is required to sign the Release within the 60 days following the date of termination, the cash amounts payable to the Executive under Section 4(i) and (ii) and Section 5.2(b)(i) and (ii), as applicable, shall be paid to the Executive on the 60th day following the date of his termination his services arrangement with the Company hereunder pursuant to Section 5.2(b), provided that the Release becomes irrevocable during such 60 day period.

5.6 Exculpation .

(a) The Executive shall not be liable to any member of the Company or to the Company or its Affiliates for any action or inaction, unless such action or inaction arises out of, or is attributable to, the gross negligence, willful misconduct or fraud of the Executive and such action is materially injurious to the financial condition or business reputation of the Business (as defined in Section 6.1 herein), nor shall the Executive be liable to any member of the Company or to the Company or its Affiliates for any action or inaction of any broker or agent of the Company or its Affiliates selected by such Executive; provided , that such broker or agent was selected, engaged or retained by such Executive in accordance with reasonable care. Any Executive may consult with counsel, accountants, investment bankers, financial advisers, appraisers and other specialized, reputable, professional consultants or advisers in respect of the affairs of the Company or its Affiliates and be fully protected and justified in any action or inaction which is taken in accordance with the advice or opinion of such persons; provided , that such persons shall have been selected in accordance with reasonable care.

(b) Notwithstanding any of the foregoing to the contrary, the provisions of this Section 5.6 shall not be construed so as to relieve (or attempt to relieve) the Executive of any liability to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law, but the provisions of this Section 5.6 shall be construed so as to effectuate the provisions of this Section 5.6 to the fullest extent permitted by law.

 

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5.7 Indemnification .

(a) The Executive shall, in accordance with this Section 5.7, be indemnified and held harmless by the Company and its controlled Affiliates from and against any and all Indemnification Obligations (as defined below) arising from any and all claims, demands, actions, suits or proceedings (civil, criminal, administrative or investigative), actual or threatened, in which such Executive may be involved, as a party or otherwise, by reason of such Executive’s service to or on behalf of, or management of the affairs of, the Company and/or its Affiliates, or rendering of advice or consultation with respect thereto, or which relate to the Company or its Affiliates or any of their properties, business or affairs; provided , that such Indemnification Obligation resulted from the action or inaction of such Executive that did not constitute gross negligence, willful misconduct or fraud which, in each such case, was materially injurious to the financial condition or business reputation of the Business and provided , further , that the Executive shall not be entitled to indemnification hereunder for any acts, omissions or transactions for which an officer or director of a Delaware corporation may not be relieved of liability under the Delaware General Corporation Law, as amended. The Company and its controlled Affiliates shall also indemnify and hold harmless the Executive from and against any Indemnification Obligation suffered or sustained by the Executive by reason of any action or inaction of any broker or agent of the Company selected by such Executive; provided , however , that such broker or agent was selected, engaged or retained by such Executive in accordance with reasonable care. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere , or its equivalent, shall not, of itself, create a presumption that such Indemnification Obligation resulted from the gross negligence, willful misconduct or fraud, or lack of reasonable care, of the Executive or that the act, omission or transaction was one for which an officer or director of a Delaware corporation may not be relieved of liability under the Delaware General Corporation Law, as amended. The Executive’s right to indemnification conferred in this Section 5.7 shall include the right to be paid or reimbursed by the Company for any expenses incurred by the Executive of the type which the Executive is entitled to be indemnified hereunder if the Executive was, is, or is threatened to be made a named defendant or respondent in a claim, demand, action, suit or proceeding in advance of the final disposition thereof and without any determination as to the Executive’s ultimate entitlement to indemnification. Upon a written request from the Executive, the Company shall pay such expenses incurred and to be incurred by the Executive in advance of the final disposition of a claim, demand, action, suit or proceeding, upon receipt of an undertaking by the Executive to repay all amounts so advanced if it shall ultimately be determined that the Executive is not entitled to be indemnified under this Section 5.7 or otherwise. “ Indemnification Obligations ” means costs, losses, claims, damages, liabilities, expenses (including reasonable legal and other professional fees and disbursements), judgments, fines, settlements and other amounts, collectively.

 

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(b) The indemnification provided by this Section 5.7, (i) shall not be deemed to be exclusive of any other rights to which the Executive may be entitled under any agreement, or as a matter of law, or otherwise, both as to action in the Executive’s official capacity and to action in another capacity, (ii) shall continue after the Executive has ceased to have an official capacity with respect to the Parent, the Company or their Affiliates for acts or omissions that occurred during such official capacity or otherwise when acting at the request of the Parent, the Company, or their Affiliates, and (iii) shall inure to the benefit of the heirs, successors and assigns of such Executive.

(c) Notwithstanding any of the foregoing to the contrary, the provisions of this Section 5.7 shall not be construed so as to provide for the indemnification of the Executive for any liability to the extent (but only to the extent) that such indemnification would be in violation of applicable law or that such liability may not be waived, modified or limited under applicable law, but the provisions of this Section 5.7 shall be construed so as to effectuate the provisions of this Section 5.7 to the fullest extent permitted by law.

6. Covenants of the Executive .

6.1 Confidentiality . The Executive acknowledges that (i) the primary business of the Company is currently its capital markets business (sales and trading of securities as well as investment banking), its asset management business (managing assets through listed and private companies, funds, managed accounts and collateralized debt obligations), and its principal investing business (investments in the investment vehicles, primarily those that the Company manages), and that the Company may engage in additional or different areas of business during Executive’s services arrangement with the Company hereunder (all of which are collectively referred to as the “ Business ”); (ii) the Company is one of a limited number of persons who have such a business; (iii) the Business is, in part, national and international in scope; (iv) the Executive’s work for the Company has given and will continue to give him access to the confidential affairs and proprietary information of the Company; (v) the covenants and agreements of the Executive contained in this Section 6 are essential to the business and goodwill of the Company; and (vi) the Company would not have entered into this Agreement but for the covenants and agreements set forth in this Section 6. Accordingly, the Executive covenants and agrees during and after the period of the Executive’s services arrangement with the Company and its Affiliates, the Executive (x) shall keep secret and retain in strictest confidence all confidential matters relating to the Business and the business of any of its Affiliates and to the Company and any of its Affiliates, learned by the Executive heretofore or hereafter directly or indirectly from the Company or any of its Affiliates (the “ Confidential Company Information ”), and (y) shall not disclose such Confidential Company Information to anyone outside of the Company unless (i) the disclosure is done with the Company’s or such Affiliate’s, as applicable, express written consent, (ii) the Confidential Company Information is at the time of receipt or thereafter becomes publicly known through no wrongful act of the Executive or is received from a third party not under an obligation to keep such information confidential and without breach of this Agreement, (iii) the disclosure is required to be made pursuant to an order of any court or government agency, subpoena or legal process; (iv) the disclosure is made to officers or directors of the Company or its Affiliates (and/or the officers and directors of such Affiliates), and to auditors, counsel, and other professional advisors to the Company or its Affiliates, or (v) the disclosure is made by a court or arbitrator in connection with any litigation or dispute between the Company and the Executive. Unless prohibited by law, regulation or order of a court or other governmental or regulatory body, the Executive shall as promptly as reasonably practicable supply the Company with a copy of any legal process delivered to the Executive requesting Confidential Company Information. Prior to any disclosure of Confidential Company Information, unless prohibited by law, regulation or order of a court or other governmental or regulatory body, the Executive shall notify the Company and shall cooperate and not object to the Company seeking an order protecting the confidentiality of such information.

 

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6.2 Nonsolicitation; Executive’s Affiliation with Competing Persons/Entities .

(a) For a period of 6 months following the end of the Term, in the event this Agreement and the services arrangement hereunder is terminated by the Company for Cause, by the Executive without Good Reason or by the Executive as a result of not renewing this Agreement pursuant to Section 1, the Executive shall not, directly or indirectly, engage or participate in, or become employed by, or affiliated with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that competes with the Company’s or any of its controlled Affiliates’ sales and trading of fixed income securities or investment banking activities in any European country in which the Company or any of its controlled Affiliates operates (each a “ Competing Business ”), provided, however, the Executive may serve as a member of the board of directors or equivalent position of any corporation or other company that is a Competing Business, provided, further, the Executive recuses himself from any discussion in such position if it raises a conflict of interest with respect to the Executive’s duties to the Company or adversely affects the Company.

(b) For a period of 6 months following the end of the Term, regardless of the reason the Term of this Agreement and the services arrangement hereunder ends (including, but not limited to, nonrenewal of this Agreement by either Executive or the Company), Executive shall not, directly or indirectly, (i) solicit, induce, cause or otherwise attempt to solicit, induce or cause any person who is employed or engaged by the Company or its subsidiaries (collectively, the “ Company Affiliates ”) to (A) end his or her employment or engagement with any of the Company Affiliates, (B) accept employment or other engagement with any person or entity other than any of the Company Affiliates, or (C) in any manner interfere with the business of the Company Affiliates, or (ii) hire any person who was an employee of any of the Company Affiliates at the time of such termination or within the six-month period prior to such termination (provided, that this clause (ii) shall not apply to any employee who has been terminated by any of the Company Affiliates).

(c) For a period of 6 months following the end of the Term, regardless of the reason the Term of this Agreement and the services arrangement hereunder ends (including, but not limited to, nonrenewal of this Agreement by either Executive or the Company), the Executive shall not, directly or indirectly, solicit, induce, direct or do any act or thing which may interfere with or adversely affect the relationship of any of the Company Affiliates with any person or entity who was a material customer or client of such entities or with whom such entities were actively seeking to form a business relationship either at the time of the termination of the Executive’s employment or within the 6-month period immediately preceding such termination, or otherwise induce or attempt to induce any such person or entity to cease doing business, reduce or otherwise limit its business with any of the Company Affiliates. For purposes hereof, “material customer or client” means a customer or client that is one of the 25 largest customers or clients of such entity.

 

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The Executive specifically acknowledges that the temporal and geographical limitations hereof, in view of the nature of the Business, are reasonable and necessary to protect the Company’s legitimate business interests.

6.3 Rights and Remedies upon Breach . The Executive acknowledges and agrees that any breach by him of any of the provisions of Sections 6.1 and 6.2 (the “ Restrictive Covenants ”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of Sections 6.1 or 6.2, the Company and its Affiliates, in addition to, and not in lieu of, any other rights and remedies available to the Company and its Affiliates under law or in equity (including, without limitation, the recovery of damages), shall have the right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants.

6.4 Outside Activities . Section 13.09 of the Fourth Amended and Restated Limited Partnership Agreement of PrinceRidge, dated May 31, 2011, and as may be amended from time to time, shall not apply to Executive.

7. Other Provisions .

7.1 Severability . The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If it is determined that any of the provisions of this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the provisions of this Agreement shall not thereby be affected and shall be given full effect, without regard to the invalid portions.

7.2 Duration and Scope of Covenants . If any court or other decision-maker of competent jurisdiction determines that any of the Executive’s covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.

 

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7.3 Enforceability; Jurisdiction; Arbitration . Any controversy or claim arising out of or relating to this Agreement, the breach of this Agreement (other than a controversy or claim arising under Section 6, to the extent necessary for the Company (or its Affiliates, where applicable) to avail itself of the rights and remedies referred to in Section 6.3) and/or your services arrangement hereunder with the Company in general that are not resolved by the Executive and the Company (or its Affiliates, where applicable) shall be submitted to arbitration in New York, New York in accordance with the law of the State of New York and the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association or, if applicable, in accordance with the rules and procedures of the Financial Industry Regulatory Authority. The determination of the arbitrator(s) shall be conclusive and binding on the Company (or its Affiliates, where applicable) and the Executive and judgment may be entered on the arbitrator(s)’ award in any court having jurisdiction.

7.4 Notices . Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, five days after the date of deposit in the United States mails as follows:

 

  (i) If to the Parent, to:

Institutional Financial Markets, Inc.

2929 Arch Street, 17th Floor

Philadelphia, PA 19104

Attention: General Counsel

Or such other address that may be designated by the Company from time to time,

 

  (ii) If to the Company, to:

IFMI, LLC

2929 Arch Street, 17th Floor

Philadelphia, PA 19104

Attention: General Counsel

 

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Or such other address that may be designated by the Company from time to time.

 

  (iii) If to the Executive, to:

Daniel G. Cohen at his principal address set forth the books and records of the Company.

 

  (iv) If to PrinceRidge or PrinceRidge Partners LLC, to:

C&Co/PrinceRidge Holdings LP

1633 Broadway, 28 th Floor

New York, New York 10019

Attention: General Counsel

With a copy to:

Institutional Financial Markets, Inc.

2929 Arch Street, 17th Floor

Philadelphia, PA 19104

Attention: General Counsel

Any such person may by notice given in accordance with this Section 7.4 to the other Parties hereto designate another address or person for receipt by such person of notices hereunder.

7.5 Amendment of IFMI Employment Agreement; Termination of PrinceRidge Employment Agreement; Amendment to Executive’s Supplemental Agreement . The Company, the Parent and the Executive agree that this Agreement amends and restates the IFMI Employment Agreement in its entirety as of the Effective Date. The Company, the Parent, PrinceRidge and the Executive agree that this Agreement terminates the PrinceRidge Employment Agreement in its entirety effective as of the Effective Date. Other than as set forth in this Agreement, the Executive hereby acknowledges and agrees that the Executive is not entitled to any severance payments or other benefits under the IFMI Employment Agreement or the PrinceRidge Employment Agreement as a result of, in the case of the IFMI Employment Agreement, the amendment and restatement thereof and, in the case of the PrinceRidge Employment Agreement, the termination thereof. The Executive, PrinceRidge and PrinceRidge Partners LLC agree that this Agreement amends the Supplementary Agreement, dated May 31, 2011, by and among the Executive, PrinceRidge and PrinceRidge Partners, such that all references to the “Executive Agreement” therein shall, as of the Effective Date, refer to this Agreement.

7.6 Entire Agreement . Other than the Indemnification Agreement, dated October 18, 2006, by and between the Parent and the Executive, this Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.

7.7 Waivers and Amendments . This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving

compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

 

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7.8 GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.

7.9 Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company; provided, however, that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law.

7.10 Withholding . The Parent and the Company shall be entitled to withhold from any payments or deemed payments made by the Parent and/or the Company any amount of tax withholding it determines to be required by law.

7.11 Binding Effect . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns, heirs, executors and legal representatives.

7.12 Counterparts . This Agreement may be executed by the Parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two or more copies hereof each signed by one of the Parties hereto.

7.13 Survival . Anything contained in this Agreement to the contrary notwithstanding, the provisions of Sections 4, 5 and 6 and any other provisions of this Agreement expressly imposing obligations that survive termination of Executive’s services arrangement hereunder, and the other provisions of this Section 7 to the extent necessary to effectuate the survival of such provisions, shall survive termination of this Agreement and any termination of the Executive’s services arrangement hereunder.

7.14 Existing Agreements . The Executive represents to the Company that he is not subject or a party to any employment or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing this Agreement or limit his ability to fulfill his responsibilities hereunder.

 

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7.15 Section 409A .

(a) Interpretation . Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of section 409A of the Code, to the extent applicable, and this Agreement shall be interpreted to avoid any penalty sanctions under section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with section 409A. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event may the Executive, directly or indirectly, designate the calendar year of payment.

(b) Payment Delay . Notwithstanding any provision to the contrary in this Agreement, if on the date of the termination of Executive’s services arrangement hereunder, the Executive is a “specified employee” (as such term is defined in section 409A(a)(2)(B)(i) of the Code and its corresponding regulations) as determined by the Board of Directors (or its delegate) in its sole discretion in accordance with its “specified employee” determination policy, then all cash severance payments payable to the Executive under this Agreement that are deemed as deferred compensation subject to the requirements of section 409A of the Code shall be postponed for a period of six months following the Executive’s “separation from service” with the Company (or any successor thereto). The postponed amounts shall be paid to the Executive in a lump sum within 30 days after the date that is 6 months following the Executive’s “separation from service” with the Company (or any successor thereto). If the Executive dies during such six-month period and prior to payment of the postponed cash amounts hereunder, the amounts delayed on account of section 409A of the Code shall be paid to the personal representative of the Executive’s estate within 60 days after Executive’s death. If any of the cash payments payable pursuant to this Agreement are delayed due to the requirements of section 409A of the Code, there shall be added to such payments interest during the deferral period at an annualized rate of interest equal to 5%.

(c) Reimbursements . All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses actually incurred during the Executive’s lifetime (or during a short period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of all eligible expense will be made on or before the last day of the taxable year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to the liquidation or exchange for another benefit. Any tax gross up payments to be made hereunder shall be made not later than the end of the Executive’s taxable year next following the Executive’s taxable year in which the related taxes are remitted to the taxing authority.

7.16 Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

20


7.17 Supplementary Agreement . For purposes of the Fourth Amended and Restated Limited Liability Company Agreement of PrinceRidge Partners LLC and the Fourth Amended and Restated Limited Partnership Agreement of PrinceRidge, each dated May 31, 2011, and each as may be amended from time to time, this Agreement shall be treated as a Supplementary Agreement (as defined thereunder).

[Signature page follows]

 

21


IN WITNESS WHEREOF, the Parties hereto have signed their names as of the day and year first above written.

 

INSTITUTIONAL FINANCIAL MARKETS, INC.
By:  

/s/ Joseph W. Pooler, Jr.

Name:  

Joseph W. Pooler, Jr.

Title:  

Chief Financial Officer

IFMI, LLC
By:  

/s/ Joseph W. Pooler, Jr.

Name:  

Joseph W. Pooler, Jr.

Title:  

Chief Financial Officer

C&CO/PRINCERIDGE HOLDINGS LP solely for purposes of Sections 6.4 and 7.5
By:  

/s/ Douglas Listman

Name:  

Douglas Listman

Title:  

Chief Financial Officer

EXECUTIVE
Signed:  

/s/ Daniel G. Cohen

Name:  

Daniel G. Cohen

C&CO/PRINCERIDGE PARTNERS LLC, solely for purposes of Sections 6.4 and 7.5
By:  

/s/ Douglas Listman

Name:  

Douglas Listman

Title:  

Chief Financial Officer

[Signature Page to Daniel G. Cohen Amended and Restated Employment Agreement]


EXHIBIT A

RELEASE AGREEMENT

This Release Agreement (this “ Agreement ”) is made and entered into as of the      day of             , 20     (the “ Effective Date ”) by and among IFMI, LLC, a Delaware limited liability company (the “ Company ”), Institutional Financial Markets, Inc., a Maryland corporation (“ Parent ”), and Daniel G. Cohen (“ Executive ”) (collectively referred to as the “Parties”).

RECITALS

WHEREAS, Executive has agreed to enter into this Agreement pursuant to Section 5.5 of the Amended and Restated Employment Agreement, dated May     , 2013, by and among the Company, Parent, Executive, and, solely for purposes of Sections 6.4 and 7.5 thereof, C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP) and C&Co/PrinceRidge Partners LLC (formerly known as PrinceRidge Partners LLC), a copy of which is attached hereto as Exhibit A (the “ Executive Agreement ”).

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Payment to Executive .

The Company shall, in accordance with the terms of the Executive Agreement, pay and/or provide to Executive the consideration provided for under Section 5 of the Executive Agreement.

2. Non-Disparagement . Executive agrees that he shall not engage in any activity or make any statement that may disparage or reflect negatively on Parent, the Company, any of their respective subsidiaries, or any officers, directors, managers, partners, members or employees of any of the foregoing. Each Parent and the Company agrees that it shall not, and it shall cause its executive officers, board members, any entity that is a Released Party (as defined in Section 3(d)), and the executive officers of any such Released Party not to, engage in any activity or make any statement that may disparage or reflect negatively on Executive. However, nothing in this Agreement is intended to or shall be interpreted: (i) to restrict or otherwise interfere with an obligation to testify truthfully in any legal, judicial or regulatory forum; or (ii) to restrict or otherwise interfere with any right and/or obligation to contact, cooperate with or provide information to any government agency or commission.

3. Release by Executive .

(a) General Release . For Executive and his respective heirs, administrators, executors, agents, beneficiaries and assigns, Executive hereby waives, releases and forever discharges to the maximum extent of the law the Released Parties (as defined in subsection (d) below) of and from any and all Claims (as defined in subsection (c) below) and any monetary or personal relief for such Claims. This General Release of Claims by Executive (“ Release ”) covers all Claims Executive has or may have against the Released Parties arising from the beginning of time up to and including the date Executive signs this Agreement.


(b) Exclusions . Notwithstanding any other provision of this Release, the following are not barred by the Release: (a) Claims relating to the validity of this Agreement; (b) Claims by either party to enforce this Agreement; (c) Claims relating to a breach of this Agreement; (d) Claims relating to rights under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); (e) Claims relating to employee benefit plans; (f) Claims relating to the exculpation or indemnification of Executive under any indemnification agreement Executive has with Parent, the Company and/or any Released Party, under the Director and Officer Liability Insurance of the Company or any Released Party or under the by-laws or other governing documents of the Company or any Released Party which apply to officers or directors; (g) Claims relating to fraud (to the extent material to Executive), embezzlement, theft or criminal misconduct by the Released Parties against Executive which were unknown to Executive on the Effective Date and which Executive should not have known on or prior to the Effective Date; and (h) Claims which legally may not be waived. In addition, this Release will not operate to limit or bar Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission (EEOC) and/or any other federal, state or local government agency or commission and to participate in an investigation by the EEOC and/or such other federal, state or local government agency or commission, although the Release does bar Executive’s right to recover any personal relief if Executive files a Claim or anyone files a Claim on Executive’s behalf. For the avoidance of doubt, nothing in this Agreement shall limit or restrict Executive’s rights under Sections 5.6 and 5.7 of the Executive Agreement.

The following provisions further explain this Release:

(c) Definition of Claims . Except as stated above, “ Claims ” includes, without limitation, all actions or demands of any kind that Executive now has or may have or claim to have in the future. More specifically, Claims include rights, causes of action, damages, penalties, losses, attorneys’ fees, costs, expenses, obligations, agreements, judgments and all other liabilities of any kind or description whatsoever, either in law or in equity, whether known or unknown, suspected or unsuspected, those that Executive may have already asserted or raised as well as those that Executive has never asserted or raised. By agreeing to this Release, and except as provided for in this Agreement, Executive is waiving, to the maximum extent permitted by law, any and all Claims which Executive has or may have against Released Parties arising out of or relating to any agreement, conduct, matter, event or omission existing or occurring before Executive signs this Agreement, including but not limited to the following:

 

   

any Claims having anything to do with Executive’s employment by or associations with Parent, the Company and any of the Released Parties;

 

   

any Claims having anything to do with the termination of Executive’s employment with Parent, the Company and any of the Released Parties;

 

   

any Claims under the Executive Agreement;

 

   

any Claims for severance, benefits, bonuses, fees, receivables, equity, equity awards, commissions, draws and/or other compensation or payments of any kind, in each case whether unpaid, withheld, undelivered or otherwise;

 

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any breach of contract Claims (whether express or implied, oral or written), including, without limitation, any Claims under the Executive Agreement;

 

   

any Claims for reimbursement of expenses of any kind;

 

   

any tort Claims, such as for defamation or emotional distress;

 

   

any Claims under federal, state and municipal laws, regulations, ordinance or court decisions of any kind;

 

   

any Claims of discrimination and/or harassment based on age, sex, pregnancy, race, religion, color, creed, disability, handicap, failure to accommodate, alienage, citizenship, marital and/or partnership status, national origin, ancestry, sexual orientation and/or preference, gender identity, genetic information, status as a victim of domestic violence, sex offenses or stalking and/or any other factor protected by Federal, State or Local law as enacted or amended (such as the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., Title VII of the Civil Rights Act of 1964, Section 1981 of the Civil Rights Act of 1866, the Americans with Disabilities Act, the Equal Pay Act, the Genetic Information Non-Discrimination Act, the Americans with Disabilities Act, the Equal Pay Act, the Genetic Information Non-Discrimination Act, the Pennsylvania Human Relations Act, the Philadelphia Fair Practices Ordinance, the New York Human Rights Law, the New York City Human Rights Law, the New York State Executive Law, the New York Labor Law, and the New York City Administrative Code) and any Claims for retaliation under any of the foregoing laws;

 

   

any Claims under the Occupational Safety and Health Act, and similar state and local laws;

 

   

any Claims under the New York State Workers Adjustment and Retraining Notification Act;

 

   

any Claims regarding leaves of absence, including under the Family and Medical Leave Act of 1993;

 

   

any Claims arising under the Immigration Reform and Control Act;

 

   

any Claims arising under the National Labor Relations Act;

 

   

any Claims arising under the Sarbanes-Oxley Act or the Dodd-Frank Act;

 

   

any Claims for violation of public policy;

 

   

any claims under the federal and/or New York constitutions;

 

   

any whistleblower or retaliation Claims;

 

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any Claims for emotional distress or pain and suffering;

 

   

any other statutory, regulatory, common law or other Claims of any kind, including, but not limited to, Claims for breach of contract, libel, slander, fraud, wrongful discharge, promissory estoppel, equitable estoppel and misrepresentation; and/or

 

   

any Claims for attorneys’ fees, including litigation expenses and all costs.

The foregoing list is intended to be illustrative and is not exhaustive.

(d) Definition of Released Parties . “ Released Parties ” includes without limitation Parent, the Company, each of their respective past, present and future parents, members, affiliates, subsidiaries, divisions, predecessors, successors, assigns, funds, employee benefit plans and trusts, and all past, present and future managers, directors, officers, partners, agents, employees, attorneys, representatives, consultants, associates, fiduciaries, plan sponsors, administrators and trustees of each of the foregoing and each of their respective successors and assigns.

(e) Acknowledgment of Scope of Release . Executive declares and agrees that any Claims Executive may have incurred or sustained may not be fully known to Executive and may be more numerous and more serious than Executive now believes or expects. Further, in making this Agreement, Executive relies wholly upon Executive’s own judgment of the future development, progress and result of any Claims, both known and unknown, and acknowledges that Executive has not been influenced to any extent whatsoever in the making of this Agreement by any representations or statements regarding any Claims made by individuals or entities who are within the definition of Released Parties in subsection (d).

(f) Adequacy of Consideration . Executive acknowledges and agrees that the consideration set forth herein:

 

   

constitutes adequate consideration to support the Release in subsection (a) above; and

 

   

fully compensates Executive for the Claims Executive is releasing.

Executive further acknowledges that he accepts the terms herein in full settlement and satisfaction of all such Claims.

(g) Age Discrimination Claims . If the Release is not enforceable with respect to any Claim based on any federal, state or local age discrimination laws, and a legal or other proceeding is initiated by Executive against Parent, the Company and/or a Released Party with respect to any such Claim, then the parties hereto agree that the non-prevailing party in such proceeding shall pay all of the costs and expenses (including, without limitation, all attorneys’ fees) incurred by the prevailing party in connection with such proceeding.

(h) Post-Employment Covenants . If applicable as of the date hereof, Executive agrees to abide by the confidentiality, noncompetition and nonsolicitation obligations set forth in Sections 6.1, 6.2 and 6.3 of the Executive Agreement, a copy of which is attached hereto. The Parties hereto acknowledge that all of Section 6 and Sections 5.6, 5.7, 7.1, 7.2, 7.8, 7.9 and 7.11 of the Executive Agreement survive its termination and are not modified by this Agreement.

 

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4. Release by Company et al . In consideration of Executive’s promises as stated herein, each of Parent, the Company and each of their subsidiaries hereby voluntarily, knowingly and irrevocably releases and discharges Executive, his successors, assigns, and agents (in their individual and representative capacities), from any and all claims, complaints, rights, action, causes of action, lawsuits, debts, contracts, controversies, agreements, promises, damages, judgments, demands, or obligations whatsoever that any such party now has or may have or claim in the future, of whatever kind or description, either in law or in equity, based on whatever legal theory, whether known or unknown, suspected or unsuspected, whether or not asserted and/or raised, arising from the beginning of time up to and including the Effective Date, and arising from or relating to, directly or indirectly, any conduct, matter, event or omission existing or occurring before the Effective Date (collectively, “ Company Claims ”), except for (a) any Company Claims relating to (1) fraud, to the extent material to the financial condition, net worth or results of operations of Parent and/or the Company, (2) embezzlement, (3) breach of fiduciary duty, (4) theft or (5) criminal misconduct, in each case by Executive against Parent, the Company or any of their subsidiaries and which were unknown to Parent or the Company on the Effective Date and which neither Parent nor the Company should have known prior to the Effective Date, and (b) Company Claims relating to the validity of this Agreement, the enforcement of this Agreement, or a breach of this Agreement. Nothing in this Agreement shall limit or restrict Executive’s rights under Sections 5.6 and 5.7 of the Executive Agreement.

5. Miscellaneous .

(a) Survival . The representations, warranties and covenants contained in this Agreement shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement.

(b) Termination; Amendment . This Agreement may be terminated only by the mutual written consent of the parties hereto. No supplement, modification, amendment or waiver of this Agreement shall be binding unless executed in writing by each of the parties to be bound thereby.

(c) Third Party Rights . Notwithstanding any other provision of this Agreement, except for the Released Parties, who shall be deemed to be third party beneficiaries of this Agreement, this Agreement shall not create benefits on behalf of any other person or entity not a party to this Agreement, and this Agreement shall be effective only as among the parties hereto, their successors and permitted assigns.

(d) Governing Law; Severability . This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely in such state, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. If any provision of this Agreement or the application thereof to any person or entity or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or entities or circumstances shall not be affected thereby, and that provision shall be enforced to the greatest extent permitted by law. This Agreement shall be construed as a whole according to its fair meaning. It shall not be construed strictly for or against Executive, Parent, the Company or any of the Released Parties. The parties acknowledge and agree that this Agreement has been negotiated at arm’s length and among parties equally sophisticated and knowledgeable in the matters dealt with in this Agreement. Accordingly, any rule of law or legal decision that would require interpretation of any ambiguities in this Agreement against the party that has drafted it is not applicable and is waived.

 

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(e) Counterparts . This Agreement may be executed in separate counterparts (including, without limitation, counterparts transmitted by facsimile or by other electronic means), each of which shall be an original and all of which when taken together shall constitute one and the same agreement.

(f) Entire Agreement . This Agreement (together with Exhibit A ) contains the entire agreement and understanding between the parties hereto as to the subject matter hereof and, other than as specifically provided herein, supersedes all prior and contemporaneous negotiations and agreements (whether written or oral) with respect thereto. This Agreement shall not constitute a Supplementary Agreement, as such term is defined in the Partnership Agreement.

(g) Further Assurances . Each party shall take such further actions and execute such further documents as may be reasonably requested by any other party in order to effectuate the purpose and intent of this Agreement.

(h) Assignment . Each of the parties hereto agrees that he or it may not assign his or its rights or obligations under this Agreement.

(i) Headings . The headings contained in this Agreement are not a part of the Agreement and are included solely for ease of reference.

(j) No Admission of Liability . Each party to this Agreement agrees that the payments made and other consideration received pursuant to this Agreement are not to be construed as an admission of legal liability by any party, or any of the Released Parties and that no person or entity shall utilize this Agreement or the consideration received pursuant to this Agreement as evidence of any admission of liability since each party and the Released Parties expressly deny liability. Each party agrees not to assert that this Agreement is an admission of guilt or wrongdoing and acknowledges that no party nor the Released Parties believe or admit that any of them has done anything wrong.

6. Representations . Executive hereby represents that:

 

   

he has read carefully the terms of this Agreement, including the Release;

 

   

he has had an opportunity to and has been encouraged to review this Agreement, including the Release, with an attorney;

 

   

he understands the meaning and effect of the terms of this Agreement, including the Release;

 

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he was given twenty-one (21) days receipt of this Agreement from the Company in accordance with Section 5.5 of the Executive Agreement to decide whether to sign this Agreement, including the General Release;

 

   

his decision to sign this Agreement, including the Release, is of his own free and voluntary act without compulsion of any kind;

 

   

no promise or inducement not expressed in this Agreement has been made to him;

 

   

he understands that he is waiving Claims as set forth in Section 3 above (subject to the limitations set forth therein), including, but not limited to, Claims for age discrimination under the Age Discrimination in Employment Act; and

 

   

he has adequate information to make a knowing and voluntary waiver of any and all Claims as set forth in Section 3 above.

7. Revocation Period . If Executive signs this Agreement, he shall retain the right to revoke it for seven (7) days (the “ Revocation Period ”). If Executive revokes this Agreement, he is indicating that he has changed his mind and does not want to be legally bound by this Agreement. To revoke this Agreement, Executive must send a revocation letter to              at the following address:                     . The letter must be post-marked within seven (7) days of his execution of this Agreement. If the seventh day is a Sunday or federal holiday, then the letter must be post-marked on the following business day. The Agreement shall not be effective until after the Revocation Period has expired without Executive having revoked it. If Executive revokes this Agreement on a timely basis, he shall not be entitled to the consideration set forth in Section 1.

8. Consideration Period . Executive shall have twenty-one (21) days following receipt of this Agreement from the Company in accordance with Section 5.5 of the Executive Agreement to decide whether to sign this Agreement. If Executive does not sign this Agreement within twenty-one (21) days following such receipt, then this offer shall expire and Executive shall not be entitled to the consideration provided for in Section 1.

[ Signature page follows ]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

 

IFMI, LLC
By:  

 

Name:  
Title:  
Institutional Financial Markets, Inc.
By:  

 

Name:  
Title:  

 

Executive:

 

Daniel G. Cohen

Exhibit 99.1

 

 

LOGO

 

IFMI ADOPTS STOCKHOLDER RIGHTS PLAN

Philadelphia and New York, May 10, 2013 – Institutional Financial Markets, Inc. (NYSE MKT: IFMI), a financial services firm specializing in credit-related fixed income investments, today announced that its Board of Directors has approved the adoption of a stockholder rights plan (the “Rights Plan”) to help preserve the value of the Company’s deferred tax assets, by reducing the risk of limitation of net operating loss and net capital loss carry forwards and certain other tax benefits under Section 382 of the Internal Revenue Code. The Company intends to seek stockholder approval of the Rights Plan at its next annual meeting. The terms of the Rights Plan are substantially the same as those of the Company’s prior stockholder rights plan, which expired in December 2012.

Under Section 382, the Company’s ability to realize the value of its deferred tax assets would be substantially limited if an “ownership change” occurred over a defined period of time. In general, an “ownership change” occurs where there is a greater than 50-percentage point change in ownership of a company’s stock by stockholders owning (or deemed to own under Section 382) 5% or more of such company’s stock.

In connection with the Rights Plan, IFMI has declared a dividend of one right for each share of common stock outstanding as of the close of business on May 20, 2013. After the Rights Plan takes effect today, any stockholder or group that acquires beneficial ownership of 4.95% or more of IFMI’s outstanding common stock (an “acquiring person”), without the approval of the Company’s Board of Directors, could be subject to significant dilution in its holdings through the exercise of the rights by stockholders other than the acquiring person. Under the Rights Plan, rights held by an acquiring person are not exercisable. Daniel G. Cohen, the Company’s Chairman and Chief Executive Officer, and existing stockholders holding 4.95% or more of the Company’s common stock will not be considered acquiring persons unless they acquire additional shares, subject to certain exceptions described in the Rights Plan. In addition, in its discretion, the Board of Directors may exempt certain transactions and certain persons whose acquisition of securities is determined by the Board of Directors not to jeopardize the Company’s deferred tax assets.

The rights will expire on October 1, 2016 or earlier if (i) the Board of Directors determines the Rights Plan is no longer needed to preserve the deferred tax assets due to the implementation of legislative changes, (ii) the Board of Directors determines, at the beginning of a specified period, that no tax benefits may be carried forward, or (iii) certain other events occur as described in the Rights Plan.

Additional information regarding the Board of Director’s actions will be provided in a Current Report on Form 8-K and in a Registration Statement on Form 8-A, which IFMI intends to file with the Securities and Exchange Commission (“SEC”). Those filings will be available on IFMI’s website, www.IFMI.com , and on the SEC’s website at www.sec.gov .

About IFMI

IFMI is a financial services company specializing in credit-related fixed income investments. IFMI was founded in 1999 as an investment firm focused on small-cap banking institutions, but has grown to provide an expanding range of asset management, capital markets, and investment banking solutions to institutional investors and corporations. IFMI’s primary operating segments are Capital Markets and Asset Management. The Capital Markets segment consists of credit-related fixed income sales, trading, and financing as well as new issue placements in corporate and securitized products and advisory services, operating primarily through IFMI’s subsidiaries, C&Co/PrinceRidge Holdings LP and JVB Financial Holdings, LLC in the United States, and Cohen & Company Financial Limited in Europe. The Asset Management segment manages assets through collateralized debt obligations, permanent capital vehicles, and managed accounts. As of March 31, 2013, IFMI managed approximately $6.2 billion in credit-related fixed income assets in a variety of asset classes including U.S. trust preferred securities, European hybrid capital securities, Asian commercial real estate debt, and mortgage- and asset-backed securities. For more information, please visit www.IFMI.com .


Forward-looking Statements

This communication contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are “forward-looking statements.” In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “seek” or “continue” or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this communication are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements including, but not limited to, those discussed under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition” in our filings with the SEC, which are available at the SEC’s website at www.sec.gov and our website at www.IFMI.com/sec-filings. Such factors include the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, (e) the possibility that the Rights Plan may fail to preserve the value of the Company’s deferred tax assets, whether as a result of the acquisition by a person of 5% of the Company’s common stock or otherwise, (f) the ability to attract and retain personnel, (g) litigation and regulatory issues, (h) competitive pressure, (i) an inability to generate incremental income from acquired businesses, (j) unanticipated market closures due to inclement weather or other disasters, (k) approval by the Company’s stockholders of the contemplated transactions, and (l) closing of the contemplated transactions. As a result, there can be no assurance that the forward-looking statements included in this communication will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this communication might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:

 

Investors:    Media:
Institutional Financial Markets, Inc.    Joele Frank, Wilkinson Brimmer Katcher
Joseph W. Pooler, Jr., 215-701-8952    James Golden, 212-355-4449
Executive Vice President and    jgolden@joelefrank.com

Chief Financial Officer

investorrelations@ifmi.com

  

 

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