17. REDEEMABLE FINANCIAL INSTRUMENTS

Redeemable Financial Instrument – DGC Family Fintech Trust/CBF

On September 29, 2017, (the “Effective Date”), the Operating LLC, entered into investment agreements (the “2017 Investment Agreements”) with each of CBF and the DGC Family Fintech Trust, a trust established by Daniel G. Cohen (together, the “2017 Investors”). Daniel G. Cohen, the chairman of the Company’s board of directors and the Operating LLC’s board of managers is the sole member of CBF.

Pursuant to the 2017 Investment Agreements, the 2017 Investors agreed to invest an aggregate of $10,000 (the “Investment Amount”) into the Operating LLC (the “Investment”), all of which was paid to the Operating LLC on the Effective Date. In exchange for the Investment, the Operating LLC agreed to pay to the 2017 Investors, in arrears following each calendar month during the term of the 2017 Investment Agreements, an amount equal to the aggregate investment return for such calendar month, as calculated in accordance with the terms of the 2017 Investment Agreements. The investment return (“2017 Investment Return”) is defined as an annual return, in the aggregate, equal to:

for any 365-day period beginning on September 29, 2017 or any anniversary of September 29, 2017 (each an “Annual Period”) and ending on or before the third anniversary of September 29, 2017, 3.2% of the Investment Amount, plus (x) 15% of the revenue of the GCF repo business (the “Revenue of the Business”) of JVB, for any Annual Period in which the Revenue of the Business is greater than zero but less than or equal to $5,333, (y) $800 for any Annual Period in which the Revenue of the Business is greater than $5,333 but less than or equal to $8,000, or (z) 10% of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than $8,000; or

for any Annual Period following the third anniversary of September 29, 2017, (x) for any Annual Period in which the Revenue of the Business is greater than zero, the greater of 20% of the Investment Amount or 20% of the Revenue of the Business, or (y) for any Annual Period in which the Revenue of the Business is zero or less than zero, 3.2% of the Investment Amount.

The Investment Return is recorded monthly as interest expense and the related accrued interest is included in accounts payable and other liabilities. See notes 14 and 18.

The term of the 2017 Investment Agreements commenced on September 29, 2017 and will continue until the 2017 Investment Agreements are terminated (see below).

Prior to the third anniversary of the Effective Date, the Operating LLC may terminate the 2017 Investment Agreements upon 90 days’ prior written notice to the 2017 Investors. At any time following the third anniversary of the Effective Date, the 2017 Investors or the Operating LLC may, upon 60 days’ notice to the other party, cause the Operating LLC to pay to the 2017 Investors an amount equal to the “Investment Balance” (as defined in the 2017 Investment Agreements) plus an amount equal to any accrued but unpaid Investment Return.

If the 2017 Investment Agreements are terminated by Company within three years of the Effective Date then upon termination of the 2017 Investment Agreements, the Operating LLC will, within 30 days following such termination pay to the 2017 Investors an amount in cash equal to the greater of the sum of:

the Investment Amount plus (a) all accrued and unpaid Investment Return monthly payments as of the date of termination plus (b) an amount equal to an annualized 15% return on the Investment Amount from the Effective Date through the date of termination, minus (c) the aggregate amount of all Investment Return payments previously paid by the Operating LLC to the 2017 Investors; and

The Investment Amount plus all accrued and unpaid Investment Return monthly payments as of the date of termination. See note 29.

Redeemable Financial Instrument – JKD Capital Partners I LTD

On October 3, 2016, the Operating LLC entered into an investment agreement (the “JKD Investment Agreement”), by and between Operating LLC and JKD Capital Partners I LTD (the “JKD Investor”), pursuant to which the JKD Investor agreed to invest up to $12,000 in the Operating LLC (the “JKD Investment”), $6,000 of which was invested upon the execution of the JKD Investment Agreement and an additional $1,000 was invested in January 2017. The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and the vice chairman of the Operating LLC’s board of managers and his spouse. See note 29.

In exchange for the JKD Investment, the Operating LLC agreed to pay to JKD Investor during the term of the JKD Investment Agreement an amount (“JKD Investment Return”) equal to 50% of the difference between (i) the revenues generated during a quarter by the activities of the Institutional Corporate Trading Business of JVB and (ii) certain expenses incurred by such Institutional Corporate Trading Business (the “Institutional Corporate Trading Business Net Revenue”). This JKD Investment Return is recorded monthly as interest expense or (interest income) with the related accrued interest recorded in accounts payable and other accrued liabilities. If the return is negative on an individual quarter, it will reduce the balance of the JKD Investment. Payments of the JKD Investment Return are made on a quarterly basis. The term of the JKD Investment Agreement commenced on October 3, 2016 and will continue until a redemption (defined below) occurs, unless the JKD Investment Agreement is earlier terminated.

The JKD Investor may terminate the JKD Investment Agreement (i) upon 90 days’ prior written notice to the Operating LLC if the Operating LLC or its affiliates modify any of their policies or procedures governing the operation of their businesses or change the way they operate their business and such modification has a material adverse effect on the amounts payable to the JKD Investor pursuant to the JKD Investment Agreement or (ii) upon 60 days’ prior written notice to the Operating LLC if the employment of Lester Brafman, the Company’s Chief Executive Officer, is terminated. The Operating LLC may terminate the JKD Investment Agreement upon 60 days’ prior written notice to the JKD Investor if Jack DiMaio, Jr. ceases to control the day-to-day operations of the JKD Investor.

Upon a termination of the JKD Investment Agreement, the Operating LLC will pay to the JKD Investor an amount equal to the “Investment Balance” (as such term is defined in the JKD Investment Agreement) as of the day prior to such termination.

At any time following October 3, 2019, the JKD Investor or the Operating LLC may, upon two months’ notice to the other party, cause the Operating LLC to pay redemption to the JKD Investor an amount equal to the Investment Balance (as such term is defined in the Investment Agreement) as of the day prior to such redemption.

If the Operating LLC or JVB sells JVB’s Institutional Corporate Trading Business to any unaffiliated third party, and such sale is not part of a larger sale of all or substantially all of the assets or equity securities of the Operating LLC or JVB, the Operating LLC will pay to the JKD Investor an amount equal to 25% of the net consideration paid to the Operating LLC in connection with such sale, after deducting certain amounts and certain expenses incurred by the Operating LLC or JVB in connection with such sale.

On March 6, 2019, the JKD Investor and the Operating LLC entered into an amendment to the JKD Investment Agreement. See note 31.

Via Nova Capital Group, LLC

On November 16, 2018 and effective as of November 19, 2018, the Operating LLC entered into an investment agreement (the “ViaNova Investment Agreement”), by and among Hancock Funding, LLC (“Hancock”), New Avenue Investments LLC (“New Avenue”), JVB, ViaNova and the Operating LLC. Pursuant to the ViaNova Investment Agreement, Hancock, New Avenue, the Operating LLC and JVB agreed to invest $500, $250, $500 and $2,750, respectively, into ViaNova (collectively, the “ViaNova Investment”). Pursuant to the ViaNova Investment Agreement, Hancock and the Operating LLC invested their respective portions (i.e., $500 each) of the ViaNova Investment into ViaNova prior to the effective time of the ViaNova Investment Agreement, New Avenue agreed to invest its portion of the ViaNova Investment (i.e., $250) into ViaNova by January 25, 2019, and JVB agreed to invest its portion of the ViaNova Investment (i.e., $2,750) into ViaNova in installments following the date of the ViaNova Investment Agreement in such amounts and at such times as the Operating LLC may request in writing.

Pursuant to the ViaNova Investment Agreement, in consideration of the ViaNova Investment, once the Operating LLC is repaid $693 from net revenue generated directly by the activities of ViaNova’s RTL business, each party to the ViaNova Investment Agreement is entitled to receive a quarterly payment equal to the net revenue (to the extent positive) generated directly by the activities of ViaNova’s RTL business during such quarter, multiplied by a fraction, the numerator of which is equal to such party’s portion of the Investment Amount, the denominator is equal to the entire Investment Amount.

Redeemable financial instruments consisted of the following in the periods shown.



REDEEMABLE FINANCIAL INSTRUMENTS
As of and For the Year Ended December 31, 2018
(Dollars in Thousands)

		Outstanding Balance		Accrued Interest
JKD Capital Partners I LTD	$	6,732	$	676
DGC Family Fintech Trust / CBF		10,000		38
ViaNova Capital Group, LLC		716		-
	$	17,448	$	714



REDEEMABLE FINANCIAL INSTRUMENTS
As of and For the Year Ended December 31, 2017
(Dollars in Thousands)

		Outstanding Balance		Accrued Interest
JKD Capital Partners I LTD	$	6,732	$	367
DGC Family Fintech Trust / CBF		10,000		31
	$	16,732	$	398

See note 18 for interest expense incurred on redeemable financial instruments.