TRANSITION AGREEMENT
EXHIBIT
10.1
Execution
Copy
THIS
TRANSITION AGREEMENT (“Agreement”)
is entered into as of the 30th day of April, 2008 by and among (i)
BROADPOINT SECURITIES GROUP, INC. (f/k/a FIRST ALBANY COMPANIES INC.)
(“Broadpoint”), a New York corporation, (ii) FA TECHNOLOGY VENTURES
CORPORATION (“MgmtCo”), a Delaware corporation (iii) FA TECHNOLOGY
HOLDING, LLC (“NewCo”), a Delaware limited liability company, and (iv)
XXXXXX X. XxXXXXX, XXXXXXX X. XXXXXXX, XXXXXXX X. XXXXX, XXXX X. XXXXXX, XXXX
X.
XXXXXXXX and XXXXXX XXXXXXXXXX (collectively, the “FATV Principals”) with
regard to a proposed restructuring of the investment management arrangements
relating to FA Technology Ventures , L.P. (“Fund II”), an existing
venture capital fund managed by MgmtCo, and the formation of FA Technology
Ventures III, L.P. (together with any parallel investment vehicle, “Fund
III”), a new venture capital fund to be sponsored and managed by NewCo and
its subsidiaries (collectively, the “Transactions”).
1. Organization
of
NewCo. NewCo has been duly formed and is wholly-owned by certain
of the FATV Principals. Broadpoint will not have an ownership
interest in NewCo.
2. Structuring
Fund
III. NewCo has presented Broadpoint with a draft Confidential
Private Placement Memorandum of Fund III (the “PPM”), which PPM includes
the proposed terms of Fund III (including the amount of the management fee,
the
carried interest and related clawback obligations and certain other customary
rights and obligations of the investors in Fund III and other pertinent
details). Broadpoint has reviewed and approved the PPM. It
is contemplated that, although Fund III will in many respects be structured
in a
manner similar to Fund II, Broadpoint and its subsidiaries will not guarantee
any of the obligations of NewCo, the general partner of Fund III (“GP
III”) (except for its pro-rata share of any clawback obligation as set forth
in paragraph 7) or any of their affiliates under the Fund III
documents. There will also be no offset against the management fees
payable by Fund III to NewCo or its subsidiaries for any investment banking,
advisory, commitment, consulting, director or similar fees paid by Fund III
portfolio companies to Broadpoint or its subsidiaries or other restrictions
or
disincentives for such portfolio companies to engage Broadpoint and its
subsidiaries for investment banking or financial advisory services.
3. Broadpoint
Investment
Commitment. Subject to the execution and delivery of mutually
acceptable definitive agreements governing Fund III (the “Fund III
Agreements”) and definitive agreements of GP III (the “GP III
Agreements” and collectively with the Fund III Agreements, the
“Definitive Fund Agreements”), Broadpoint, as part of the Definitive Fund
Agreements, will make a capital commitment of $10 million to Fund III at the
first closing of Fund III (the “Broadpoint Commitment”), as long as the
total commitments to Fund III (excluding the Broadpoint Commitment) exceed
$50
million (the “Funding Threshold”) and if the Funding Threshold is not met at the
First Closing of Fund III then such $10 million commitment shall be made at
the
closing of Fund III at which the Funding Threshold is met; provided, however,
if
the Funding Threshold is not met by June 30, 2009, Broadpoint’s obligation to
make the Broadpoint Commitment shall terminate. Once the Definitive
Fund III Agreements have been executed by Broadpoint in respect of the
Broadpoint Commitment, NewCo and its subsidiaries may disclose such commitment
in their fundraising efforts for Fund III and, prior to such time (so long
as
Broadpoint’s obligations hereunder have not been terminated), NewCo and its
subsidiaries may also disclose to potential investors in Fund III that
Broadpoint and NewCo have entered into this Agreement contemplating such a
commitment. Broadpoint acknowledges that the terms of Fund III are
expected to be substantially similar to those set forth in the PPM and
Broadpoint acknowledges that such terms are acceptable. The parties
acknowledge that the terms of Fund III may be subject to negotiation with
investors and agree that (i) Broadpoint will be entitled to “most favored
nation” treatment with regard to its rights and obligations as an investor in
Fund III compared to other investors (subject to customary exclusions previously
approved by Broadpoint) and (ii) Broadpoint will have the right to terminate
its
obligation to make the Commitment if such negotiations result in changes to
the
terms of Fund III that Broadpoint determines in good faith to be materially
adverse to its interests.
4. Fundraising. NewCo
and its subsidiaries will be permitted to use all performance information from
Fund II and venture capital investments made through Broadpoint prior to Fund
II
(the “FATV I Portfolio”) and due diligence materials and other books and
records associated with such investments (subject to any applicable
confidentiality restrictions) in preparing the PPM and other due diligence
and
offering materials for Fund III and any successor fund sponsored by
NewCo. It is also contemplated that Broadpoint will assist NewCo and
its subsidiaries in fundraising for Fund III. Contemporaneously
herewith, NewCo shall, and Broadpoint shall cause Broadpoint Capital, Inc.
or
another broker-dealer subsidiary of Broadpoint (the “Broadpoint B/D”) to,
execute and deliver a Placement Agent Agreement substantially in the form
attached as Exhibit A hereto (the “Placement Agent Agreement”)
pursuant to which, among other things, Broadpoint B/D will develop a target
list
of potential investors in Fund III with whom Broadpoint or its affiliates have
a
relationship (the “Target List”), which will be subject to NewCo’s
approval, and may otherwise assist NewCo in the fundraising for Fund
III. NewCo and its subsidiaries and representatives shall comply with
all applicable securities and other laws in the fundraising activities for
Fund
III and in the management and operation of Fund III, GP III and NewCo and
Broadpoint and Broadpoint B/D shall comply with all applicable securities and
other laws in their fundraising activities for Fund III.
5. Modifications
to
Certain Fund II Arrangements.
(a) Concurrent
with the
first closing of Fund III (the “Trigger Date”), MgmtCo will assign all of
its rights and interest in the Investment Advisory Agreement between it and
FATV
GP LLC in respect of Fund II (the “Fund II Investment Advisory
Agreement”) to NewCo and NewCo will assume all of MgmtCo’s obligations and
liabilities thereunder and will indemnify Broadpoint and its affiliates
(including MgmtCo) against all claims and liabilities relating to such agreement
arising in respect of matters occurring after the Trigger Date. Such
assignment and assumption will be effected by execution of the Consent,
Assignment and Assumption Agreement attached hereto as Exhibit B which
NewCo and MgmtCo agree to execute on the Trigger Date and which NewCo agrees
to
use its reasonable best efforts to cause FATV GP LLC to execute as soon as
practicable thereafter. Any management fees prepaid to Broadpoint
pursuant to the Fund II Investment Advisory Agreement will be pro-rated on
a
daily basis and any portion thereof relating to a period after the Trigger
Date
will be remitted to NewCo as soon as practicable after the Trigger
Date.
(b) NewCo
will use
reasonable efforts to terminate any existing restrictions or disincentives
on
portfolio companies of Fund II from engaging Broadpoint and its subsidiaries
in
a financial advisory or any other capacity. Broadpoint acknowledges
that there can be no assurance of success in terminating any such
restrictions.
6. Termination
of the
Employment of the FATV Principals. On the Trigger Date, each of
the FATV Principals will resign from MgmtCo and/or Broadpoint, as the case
may
be. Both (1) the FATV Principals and (2) MgmtCo and/or Broadpoint,
agree to mutually release one another from all further obligations or
liabilities and not to disparage one another to any other party; provided
that Broadpoint’s release of the FATV Principals shall not apply to (x) any
right of recourse that Broadpoint or its affiliates may have against such FATV
Principals in the event that a third party asserts a claim against Broadpoint
or
any affiliate based on any actions or inactions of such FATV Principals while
employed by Broadpoint or any affiliate or (y) the rights of Broadpoint and
its
affiliates under this Agreement and the agreements referred to herein;
provided, further, that the FATV Principals’ release of Broadpoint
and its affiliates shall not apply to any rights (A) under any employment
benefit or compensation plan of Broadpoint or MgmtCo, (B) under this Agreement
and the agreements referred to herein or (C) claims for
indemnification or insurance coverage for actions taken or not taken prior
to
the date such FATV Principals resign from MgmtCo and/or Broadpoint, as the
case
may be. Broadpoint confirms that each of the FATV Principals are
covered by the indemnification provisions set forth in MgmtCo’s corporate
by-laws for their actions or inactions as employees of MgmtCo to the extent
they
meet the standard of care required for such indemnification and that the
indemnification provisions set forth in such by-laws will not be amended in
a
manner that adversely affects the FATV Principals.
7. Broadpoint
Participation in Fund III Carried Interest. Subject to the
Broadpoint Commitment, the GP III Agreements will provide Broadpoint (or its
designated subsidiary) with an equity interest in GP III entitling it to a
minimum of 10% of the carried interest earned by GP III. Broadpoint
B/D will also have the right to receive an additional 1% of the carried interest
earned by GP III for each $5 million of capital commitments made (and accepted
by GP III) to Fund III from investors on the Target List up to a maximum of
an
additional 10% of the carried interest earned by GP III, it being contemplated
that Broadpoint B/D will assign such equity interest or the right to receive
such equity interest to Broadpoint (or its designated subsidiary). In
respect of any such equity interest, Broadpoint (or its applicable subsidiary)
will be responsible for its pro-rata share of any clawback obligations and
to
fund its pro rata share of GP III’s obligations to invest in Fund III, in each
case consistent with the obligations of the other partners or members of GP
III.
8. Funding
of
Expenses.
(a) MgmtCo
will continue to
operate consistent with current practice (operations, staffing and expenses)
for
the purpose of performing its obligations under the Fund II Investment Advisory
Agreement (and Broadpoint agrees to fund MgmtCo for such operations, subject
to
the provisions below) through the date (the “Cut-Off Date”) that is the
earlier to occur of the following dates (i) the Trigger Date and (ii) December
31, 2008. The parties expect that MgmtCo will operate consistent with
a budget agreed upon by the parties attached hereto as Exhibit C, and
NewCo will provide Broadpoint with monthly reports outlining actual results
as
compared to the budget as soon as practicable after the end of each
month. In addition, MgmtCo will provide NewCo with bridge funding for
reasonable out-of-pocket legal, travel and other expenses incurred by NewCo
prior to the Cut-Off Date in connection with the organization and marketing
of
Fund III (“Fund-Related Expenses”); consistent with the budget agreed
upon by the parties attached hereto as Exhibit D, and NewCo will provide
Broadpoint with monthly reports outlining actual results as compared to budget
as soon as practicable after the end of each month. It is
contemplated that the expenses to be borne by MgmtCo pursuant to this Paragraph
8(a) will principally be funded out of the management fees payable to Mgmt
Co
under the Fund II Investment Advisory Agreement.
(b) As
soon as practicable
following the Trigger Date, NewCo or Fund III shall reimburse MgmtCo for any
Fund-Related Expenses funded by MgmtCo, as well as for any operating losses
incurred by MgmtCo in respect of Fund II and Fund III after June 30,
2008.
9. Use
of FA Technology
Name/Trademark Assignment. Broadpoint hereby authorizes NewCo to
use the name “FA Technology” as part of its corporate name, subject to
Broadpoint’s right to terminate such right in the event of any breach by NewCo
of any of its obligations under this Agreement, provided, however,
that Broadpoint’s right to terminate NewCo’s right to use the name “FA
Technology” as part of its corporate name shall lapse as of the Trigger
Date. Broadpoint hereby conveys, assigns and transfers to
NewCo, effective on the Trigger Date without further action of the parties,
ownership of the name “FA Technology” and any derivation thereof (the “Name
Rights”, which include, without limitation, the rights to use “FA Technology
Ventures” and “FATV”) along with the goodwill appurtenant thereto, and all
rights Broadpoint has in the Name Rights shall automatically transfer to NewCo
on the Trigger Date, including the right to seek trademark registration for
“FA
Technology” and to xxx for past infringement, subject in each case to NewCo’s
grant to Broadpoint of a limited continuing right to use certain Name Rights
described below. Broadpoint agrees to execute upon request any lawful
documents and to perform any other lawful acts as may be reasonably requested
by
NewCo to secure fully or perfect the aforesaid assignment to NewCo, its
successors, assigns, and legal representatives at its or their
expense. After the Trigger Date, Broadpoint and its affiliates shall
not use the Name Rights except as follows: (i) Broadpoint and its
affiliates will continue to have the right to use the Name Rights in any
description of their businesses or operations relating to the period prior
to
the Trigger Date or otherwise relating to their former ownership of the Name
Rights and (ii) Broadpoint and its affiliates will have the right to use the
name “FA Technology Ventures” in marketing materials to represent that there is
a strategic relationship between Broadpoint and NewCo. Any additional
use of “FA Technology Ventures” by Broadpoint is subject to the prior written
approval of NewCo (which approval shall not be unreasonably
withheld).
10. Nonsolicitation. In
consideration of the assistance contemplated to be given by Broadpoint in
connection with the organization and marketing of Fund III, each FATV Principal
hereby agrees: during the Non-Solicitation Restricted Period (as defined below)
not to directly or indirectly (through NewCo or otherwise) solicit for
employment or hire anyone who is an employee of Broadpoint or any subsidiary
(other than other FATV Principals and other than Xxxxx Mont and Xxxxx
XxXxxxx). For such purpose, “Non-Solicitation Restricted
Period” means the period beginning on the date hereof and ending eighteen
months after the Trigger Date; provided that the Non-Solicitation Period
shall automatically terminate if the employment of such FATV Principal with
Broadpoint and its subsidiaries is terminated without cause.
11. Governing
Law;
Jurisdiction. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York. If any action
or proceeding shall be brought by a party to this Agreement or to enforce any
right or remedy under this Agreement, each party hereto hereby consents and
will
submit to the jurisdiction of the courts of the State of New York or any Federal
court sitting in the County, City and State of New York. Any action
or proceeding brought by any party to this Agreement to enforce any right,
assert any claim or obtain any relief whatsoever in connection with this
Agreement shall be brought by such party exclusively in the courts of the State
of New York or any Federal court sitting in the County, City and State of New
York.
12. Counterpart
Signatures. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
13. Deemed
to be Prepared
by All Parties. In interpreting this Agreement, it shall be
deemed that it was prepared by all of the parties jointly and no ambiguity
shall
be resolved against any party on the premise that it or its attorneys was
responsible for having drafted this Agreement or the provision at
issue.
14. Severability. In
the event that any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
15. Termination. If
the initial closing of Fund III has not taken place on or prior to March 31,
2009, the parties’ rights and obligations under this Agreement shall
automatically terminate except as follows: (a) the non-solicitation obligations
of each FATV Principal shall continue until eighteen months following any
termination of such FATV Principal’s employment with MgmtCo or its subsidiaries
unless such employment was involuntarily terminated by MgmtCo or such
subsidiaries and in any case such non-solicitation obligations shall not apply
with respect to other FATV Principals, Xxxxx Mont or Xxxxx XxXxxxx and (b)
upon
the initial closing of any subsequent venture capital fund sponsored by NewCo
or
any 4 of the 6 FATV Principals prior to June 30, 2009, NewCo or such FATV
Principals shall cause NewCo or such subsequent fund to reimburse Broadpoint
for
any Fund-Related expenses funded by Broadpoint pursuant to Paragraph
8(a).
[the
next page is the
signature page]
IN
WITNESS
WHEREOF the undersigned have executed this Agreement as of the day and year
first above written.
BROADPOINT:
By:
/s/ Xxx Xxxxxxxxxxxx
Name:
Xxx Xxxxxxxxxxxx
Title: Chief
Executive Office
NEWCO:
FA
TECHNOLOGY HOLDING,
LLC
By:
/s/ Xxxxxxx X.
Xxxxxxx
Name:
Xxxxxxx X. Xxxxxxx
Title: Member
MGMTCO:
FA
TECHNOLOGY
VENTURESCORPORATION
By:
/s/ Xxx Xxxxxxxxxxxx
Name:
Xxx Xxxxxxxxxxxx
Title: Chief
Executive Office
FATV
PRINCIPALS:
/s/
Xxxxxx X. XxXxxxx
XXXXXX
X.
XXXXXXX (with respect to sections 6 and 10 only)
/s/
Xxxxxxx X. Xxxxxxx
XXXXXXX
X. XXXXXXX (with respect to sections 6 and 10 only)
/s/
Xxxxxxx X. Xxxxx
XXXXXXX
X. XXXXX (with respect to sections 6 and 10 only)
/s/
Xxxx
X. Xxxxxx
XXXX
X.
XXXXXX (with respect to sections 6 and 10 only)
/s/
Xxxx
X. Xxxxxxxx
XXXX
X.
XXXXXXXX (with respect to sections 6 and 10 only)
/s/
Xxxxxx Xxxxxxxxxx
XXXXXX
XXXXXXXXXX (with respect to sections 6 and 10 only)
