19. PERMANENT EQUITY

Stockholders’ Equity

Common Stock

The holders of the Company’s Common Stock are entitled to one vote per share. These holders are entitled to receive distributions on such stock when, as, and if authorized by the Company’s board of directors out of funds legally available and declared by the Company, and to share ratably in the assets legally available for distribution to the Company’s stockholders in the event of its liquidation, dissolution, or winding up after payment of or adequate provision for all of the Company’s known debts and liabilities, including the preferential rights on dissolution of any class or classes of preferred stock. The holders of the Company’s Common Stock have no preference, conversion, exchange, sinking fund, redemption, or, so long as the Company’s Common Stock remains listed on a national exchange, appraisal rights and have no preemptive rights to subscribe for any of the Company’s securities. Shares of the Company’s Common Stock have equal dividend, liquidation, and other rights.

Preferred Stock

Series C Junior Participating Preferred Stock: Series C Junior Participating Preferred Stock (“Series C Preferred Stock”) was authorized by the Company’s board of directors in connection with the Stockholder Rights Plan discussed below. The Series C Preferred Stock has a par value of $0.001 per share and 10,000 shares were authorized as of December 31, 2015 and 2014. The holders of Series C Preferred Stock are entitled to receive, when, as, and if declared by the Company’s 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 commencing on the first quarterly dividend payment date after the first issuance of a share or fraction of a share of Series C Preferred Stock. Dividends accrue and are cumulative. The holder of each share of Series C Junior Participating Preferred Stock is entitled to 10,000 votes on all matters submitted to a vote of the Company’s stockholders. Holders of Series C Preferred Stock are entitled to receive dividends, distributions or distributions upon liquidation, dissolution, or winding up of the Company in an amount equal to $100,000 per share of Series C Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions, whether or not declared, prior to payments made to holders of shares of stock ranking junior to the Series C Preferred Stock. The shares of Series C Preferred Stock are not redeemable. There were no shares of Series C Preferred Stock issued and outstanding as of December 31, 2015 and 2014.

Series E Voting Non-Convertible Preferred Stock: Each share of the Company’s Series E Voting Non-Convertible Preferred Stock (“Series E Preferred Stock”) has no economic rights but entitles Mr. Cohen, the Company’s vice chairman, to vote the Series E Preferred Stock on all matters presented to the Company’s stockholders. Each share of Series E Preferred Stock is entitled to one vote. The 4,983,557 shares of Series E Preferred Stock currently outstanding are equivalent to the amount of Operating LLC membership units held by Mr. Cohen as of December 31, 2013. See note 1. The Series E Preferred Stock effectively gives Mr. Cohen voting rights at the Company in the same proportion as his economic interest (as his membership units of the Operating LLC do not carry voting rights at the Company level). The Series E Preferred Stock effectively enables Mr. Cohen to exercise approximately 27.2% of the voting power of the Company’s total shares outstanding that were entitled to vote as of December 31, 2015 (in addition to the voting power he holds through his common share ownership). The terms of the Series E Preferred Stock provide that, if the Company causes the redemption of or otherwise acquires any of the Operating LLC units owned by Mr. Cohen as of May 9, 2013, then the Company will redeem an equal number of shares of Series E Preferred Stock. The Series E Preferred Stock is otherwise perpetual. As of December 31, 2015, there were 4,983,557 shares of Series E Preferred Stock issued and outstanding. See Non-Controlling Interest — Future Conversion / Redemption of Operating LLC Units below.

Stockholder Rights Plan

In connection with the investments by Mead Park Capital and EBC (see note 4), on May 9, 2013, the Company’s board of directors adopted the Section 382 Rights Agreement between the Company and Computershare Shareowner Services LLC (the “2013 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 deferred tax assets to reduce potential future federal income tax obligations. The Company’s board of directors authorized and declared a dividend distribution of one right for each share of the Company’s Common Stock outstanding at the close of business on May 20, 2013. Each right entitled the registered holder to purchase from the Company one ten-thousandth of a share of the Company’s Series C Junior Participating Preferred Stock at an exercise price of $100.00 per one ten-thousandth of a share of the Company’s Series C Junior Participating Preferred Stock, subject to adjustment.

The rights would have become exercisable following (i) the 10th day following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 4.95% or more of the Company’s Common Stock or (ii) the 10th business day following the commencement of a tender offer or exchange offer that would result in a person or group having ownership of 4.95% or more of the Company’s Common Stock.

On August 28, 2015, the Company’s board of directors approved the redemption of all of the rights outstanding under the 2013 Rights Agreement. The redemption immediately terminated all rights to exercise the rights and effectively terminated the Rights Agreement. Pursuant to the redemption, the Company paid to the holders of the rights a redemption price equal to $0.001 per Right, in cash, on September 8, 2015, for an aggregate amount of $15.

Net Share Settlement of Restricted Stock

The Company may, from time to time, net share settle equity-based awards for the payment of employees’ tax obligations to taxing authorities related to the vesting of such equity-based awards. The total shares withheld and retired are based on the value of the restricted award on the applicable vesting date as determined by the Company’s closing stock price. These net share settlements reduced the number of shares that would have otherwise been issued as a result of the vesting and do not represent an expense to the Company.

Repurchases of Shares and Retirement of Treasury Stock

During the third quarter of 2014, the Company repurchased 100,000 shares of the Company’s Common Stock from the Company’s vice chairman, Daniel G. Cohen. The Company retired these shares.

During the fourth quarter of 2014, the Company repurchased 100,000 shares of the Company’s Common Stock from the Company’s vice chairman, Daniel G. Cohen. The Company retired these shares.

During the fourth quarter of 2015, the Company repurchased 2,000,000 shares of the Company’s Common Stock in connection with the Termination Agreement. See note 4. The Company retired these shares.

Dividends and Distributions

During 2015, 2014, and 2013, the Company paid cash dividends on its outstanding Common Stock in the amount of $1,193, $1,278, and $1,066, respectively. Pro-rata distributions were made to the other members of the Operating LLC upon the payment of dividends to the Company’s stockholders. During 2015, 2014, and 2013, the Company paid cash distributions of $427, $419, and $431, respectively, to the holders of the non-controlling interest (that is, the members of the Operating LLC other than IFMI).

Certain subsidiaries of the Operating LLC have restrictions on the withdrawal of capital and otherwise in making distributions and loans. JVB is subject to net capital restrictions imposed by the SEC and FINRA, which require certain minimum levels of net capital to remain in this subsidiary. In addition, these restrictions could potentially impose notice requirements or limit the Company’s ability to withdraw capital above the required minimum amounts (excess capital) whether through distribution or loan. CCFL is regulated by the FCA and must maintain certain minimum levels of capital but will allow withdrawal of excess capital without restriction. See note 23.

Shares Outstanding of Stockholders’ Equity of the Company

The following table summarizes the share transactions that occurred in stockholders’ equity during the years ended December 31, 2015, 2014, and 2013.



ROLLFORWARD OF SHARES OUTSTANDING OF
INSTITUTIONAL FINANCIAL MARKETS, INC.


	Common Stock	Restricted Stock	Treasury Stock	Total
December 31, 2012	10,794,725	757,826	-	11,552,551
Issuance of shares	2,935,506	-	-	2,935,506
Issuance as equity-based compensation	-	408,079	-	408,079
Vesting of shares / restricted units (1)	739,931	(649,796)	-	90,135
Shares withheld for employee taxes	(71,583)	-	-	(71,583)
Forfeiture / cancellation of restricted stock (2)	-	(104,983)	-	(104,983)
December 31, 2013	14,398,579	411,126	-	14,809,705
Issuance of shares	186,342	-	-	186,342
Issuance as equity-based compensation	-	158,438	-	158,438
Vesting of shares / restricted units (1)	511,318	(378,868)	-	132,450
Shares withheld for employee taxes	(37,458)	-	-	(37,458)
Forfeiture / cancellation of restricted stock	-	(32,258)	-	(32,258)
Repurchase and retirement of common stock	(200,000)			(200,000)
December 31, 2014 (2)	14,858,781	158,438	-	15,017,219
Issuance of shares		212,121	-	212,121
Issuance as equity-based compensation	-	153,471	-	153,471
Vesting of shares	176,338	(176,338)	-	-
Forfeiture / cancellation of restricted stock	-	(32,258)	-	(32,258)
Repurchase and retirement of common stock	(2,000,000)		-	(2,000,000)
December 31, 2015(2)	13,035,119	315,434	-	13,350,553

(1)Vesting includes 132,450 and 90,135 of previously unvested restricted units of IFMI Common Stock for the years ended December 31, 2014 and 2013, respectively. See note 20.

(2)Excludes remaining restricted units of IFMI Common Stock. See note 20.

Non-Controlling Interest

Future Conversion / Redemption of Operating LLC Units

Of the 5,324,090 Operating LLC membership units not held by the Company as of December 31, 2015 and 2014, Daniel G. Cohen, the Company’s vice chairman, through CBF, a single member LLC, held 4,983,557 Operating LLC membership units. Each Operating LLC membership unit is redeemable at the member’s option, at any time, for (i) cash in an amount equal to the average of the per share closing prices of the Company’s Common Stock for the ten consecutive trading days immediately preceding the date the Company receives the holder’s redemption notice, or (ii) at the Company’s option, one share of the Company’s Common Stock subject, in each case, to appropriate adjustment upon the occurrence of an issuance of additional shares of the Company’s Common Stock as a dividend or other distribution on the Company’s outstanding Common Stock, or a further subdivision or combination of the outstanding shares of the Company’s Common Stock.

In connection with the private placement investment made in September 2013 by Mead Park Capital and EBC, as assignee of CBF, in IFMI, the Operating LLC issued 2,749,167 Operating LLC membership units to IFMI.

In connection with the repurchase and retirement of 200,000 of the Company’s Common Stock during 2014, IFMI surrendered 200,000 Operating LLC membership units.

In connection with the repurchase and retirement of 2,000,000 of the Company’s Common Stock during 2015, IFMI surrendered 2,000,000 Operating LLC membership units

Unit Issuance and Surrender Agreement — Acquisition and Surrender of Additional Units of the Operating LLC, net

Effective January 1, 2011, IFMI and the Operating LLC entered into a Unit Issuance and Surrender Agreement (the “UIS Agreement”) that was approved by IFMI’s board of directors and the board of managers of the Operating LLC. In an effort to maintain a 1:1 ratio of Common Stock to the number of membership units IFMI holds in the Operating LLC, the UIS Agreement calls for the issuance of additional membership units of the Operating LLC to IFMI when IFMI issues its Common Stock to employees under existing equity compensation plans. In certain cases, the UIS Agreement calls for IFMI to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased.

The following table summarizes the transactions that resulted in changes in the unit ownership of the Operating LLC including unit issuances and forfeitures related to the UIS agreement.



ROLLFORWARD OF UNITS OUTSTANDING OF
THE OPERATING LLC

	Units Held by IFMI	Units Held by Daniel G. Cohen	Units Held by Others	Total
December 31, 2012	11,133,538	4,983,557	340,533	16,457,628
Issuance of Units under UIS, net	502,614	-	-	502,614
Issuance of Units for Mead/EBC Investment	2,749,167			2,749,167
Vesting of Units	-	-	186,339	186,339
Redemption of Operating LLC Units for IFMI Shares	186,339	-	(186,339)	-
December 31, 2013	14,571,658	4,983,557	340,533	19,895,748
Issuance of Units under UIS, net	459,219	-	-	459,219
Vesting of Units	-	-	186,342	186,342
Redemption of Operating LLC Units for IFMI Shares	186,342	-	(186,342)	-
Repurchase and retirement of Common Stock	(200,000)			(200,000)
December 31, 2014	15,017,219	4,983,557	340,533	20,341,309
Issuance of Units under UIS, net	212,121	-	-	212,121
Repurchase and retirement of Common Stock	(2,000,000)	-	-	(2,000,000)
December 31, 2015	13,229,340	4,983,557	340,533	18,553,430

The following schedule presents the impact to permanent equity from IFMI’s ownership interest in the Operating LLC for the years ended December 31, 2015, 2014, and 2013.



		For the Year Ended December 31, 2015		For the Year Ended December 31, 2014		For the Year Ended December 31, 2013
Net income / (loss) attributable to IFMI	$	(4,079)	$	(2,585)	$	(13,318)
Transfers (to) from the non-controlling interest:
Increase / (decrease) in IFMI's paid in capital for the acquisition / (surrender) of additional units in consolidated subsidiary, net		90		215		2,764
Changes from net income / loss) attributable to IFMI and transfers (to) from non-controlling interest	$	(3,989)	$	(2,370)	$	(10,554)