SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000
--------------------------------
Commission file number 0-14140
First Albany Companies Inc.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 22-2655804
--------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 South Pearl St., Albany, NY 12207
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(518) 447-8500
--------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X (1) No
------- ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
7,755,921 Shares of Common Stock were outstanding as of the close of business
- ------------------------------------------------------------------------------
on May 5, 2000.
- ---------------
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Financial
Condition at March 31, 2000 and
December 31, 1999........................ 3
Condensed Consolidated Statements of Operations
for the Three Months Ended
March 31, 2000 and March 31, 1999......... 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 2000 and March 31, 1999........... 5-6
Notes to Condensed Consolidated Financial
Statements............................... 7-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 16-23
Part II - Other Information
Item 1. Legal Proceedings............................ 24
Item 6. Exhibits and Reports on Form 8-K......... 25-27
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
March 31,
2000 December 31,
(In thousands of dollars) (Unaudited) 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Assets
Cash $ 3,142 $ 1,912
Securities purchased under agreement to resell 55,080 26,822
Securities borrowed 717,988 474,177
Receivables from:
Brokers, dealers and clearing agencies 8,415 8,193
Customers 286,691 251,374
Others 34,931 39,815
Securities owned 183,348 158,047
Investments 24,146 14,778
Office equipment and leasehold improvements,net 10,398 10,515
Other assets 24,328 22,501
- -----------------------------------------------------------------------------
Total assets $1,348,467 $1,008,134
=============================================================================
Liabilities and Stockholders' Equity
Liabilities
Short-term bank loans $192,229 $172,534
Securities loaned 884,783 596,340
Payables to:
Brokers, dealers and clearing agencies 9,191 9,452
Customers 62,409 59,957
Others 17,199 18,094
Securities sold but not yet purchased 62,572 37,521
Accounts payable 3,888 3,214
Accrued compensation 19,868 30,131
Accrued expenses 13,409 9,849
Income tax payable 1,839 29
Deferred tax liability 1,612
Notes payable 4,947 5,480
Obligations under capitalized leases 5,272 4,917
- -----------------------------------------------------------------------------
Total liabilities 1,279,218 947,518
- -----------------------------------------------------------------------------
Commitments and Contingencies
Subordinated debt 6,000 7,500
Stockholders' Equity
Common stock 79 76
Additional paid-in-capital 66,768 58,314
Deferred compensation 1,202 1,184
Unamortized value of restricted stock (3,127) (2,353)
Retained deficit (230) (2,920)
Less treasury stock at cost (1,443) (1,185)
- -----------------------------------------------------------------------------
Total stockholders' equity 63,249 53,116
- -----------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,348,467 $1,008,134
=============================================================================
</TABLE>
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
=============================================================================
Three Months Ended
(In thousands of dollars except for per March 31, March 31,
share and outstanding share amounts) 2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Revenues
Commissions $ 24,205 $ 18,658
Principal transactions 23,625 17,075
Investment banking 8,377 7,206
Investment gains (losses) 1,566 (3,555)
Interest income 20,261 11,741
Fees and other 5,685 3,933
- -----------------------------------------------------------------------------
Total revenues 83,719 55,058
Interest expense 17,313 9,335
- -----------------------------------------------------------------------------
Net revenues 66,406 45,723
- -----------------------------------------------------------------------------
Expenses (excluding interest)
Compensation and benefits 46,592 34,313
Clearing, settlement and brokerage costs 1,360 1,295
Communications and data processing 3,803 3,660
Occupancy and depreciation 3,342 3,190
Selling 3,024 2,108
Other 2,985 2,482
- -----------------------------------------------------------------------------
Total expenses (excluding interest) 61,106 47,048
- -----------------------------------------------------------------------------
Income (loss) before income taxes 5,300 (1,325)
- -----------------------------------------------------------------------------
Income tax expense (benefit) 2,237 (528)
- -----------------------------------------------------------------------------
Net income (loss) $3,063 $(797)
=============================================================================
Net income (loss) per Common Share:
Basic $ 0.39 $(0.10)
Dilutive $ 0.33 $(0.10)
- -----------------------------------------------------------------------------
Weighted average common
and common equivalent
shares outstanding:
Basic 7,855,875 7,635,043
Dilutive 9,284,349 7,635,043
=============================================================================
Dividend per common share
outstanding $0.05 $0.05
=============================================================================
</TABLE>
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended
March 31, March 31,
(In thousands of dollars) 2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $3,063 $ (797)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,120 1,134
Deferred compensation 18
Deferred income taxes (338) (1,791)
Undistributed loss of affiliate 596 544
Unrealized investment (gain) loss 169 3,011
Realized (gain) loss on sale of investments (2,331)
Loss on sales of fixed assets 120
Services provided in exchange for common stock 502 162
(Increase) decrease in operating assets:
Securities purchased under agreement to resell (28,258) (123)
Net receivables from customers (32,865) 12,335
Net receivables from others 4,523 14,398
Securities owned, net (250) 3,547
Other assets (3,663) 336
Increase (decrease) in operating liabilities:
Securities loaned, net 44,632 25,501
Net payables to brokers, dealers, and
clearing agencies (483) (2,475)
Accounts payable and accrued expenses (6,029) (13,171)
Income taxes payable 1,810
- -----------------------------------------------------------------------------
Net cash used in operating activities (17,784) 42,731
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of furniture, equipment, and leaseholds (118) (196)
Disbursements for purchase of investments (1,500)
Proceeds from sale of investments 2,637
- -----------------------------------------------------------------------------
Net cash used in investing activities 1,019 (196)
</TABLE>
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
Three Months Ended
March 31, March 31,
(In thousands of dollars) 2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds of short-term bank loans 19,695 (42,535)
Proceeds of notes payable 4,400
Payments on notes payable (533) (2,146)
Payments of obligations under capitalized leases (512) (311)
Payments for purchases of common for treasury (240)
Proceeds from issuance of common stock 491 111
Net decrease from borrowing under
line-of-credit agreements (534) (1,678)
Dividends paid (372) (330)
- -----------------------------------------------------------------------------
Net cash provided by financing activities 17,995 (42,489)
- -----------------------------------------------------------------------------
Increase in cash 1,230 46
Cash at beginning of the year 1,912 1,424
- -----------------------------------------------------------------------------
Cash at end of period $3,142 $1,470
=============================================================================
</TABLE>
In 2000, the Company entered into capital leases for office and computer
equipment totaling approximately $867,000.
In 2000, the Company increased its investment in MTI by $8,957,000 and
increased paid-in-capital by $5,171,000 and deferred income taxes by
$3,786,000 (See Note 3).
In 2000, the Company reduced its subordinated liability by $1,500,000 in
exchange for the Company's common shares (See Note 10).
See notes to the condensed consolidated financial statements
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal, recurring adjustments necessary
for a fair presentation of results for such periods. The results for any
interim period are not necessarily indicative of those for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
notes for the year ended December 31, 1999.
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 presentation.
2. Earnings Per Common Share
Basic earnings per share has been computed based upon the weighted average
number of common shares outstanding. Dilutive earnings per share has been
computed based upon the weighted average common shares outstanding for all
potentially dilutive common stock outstanding during the reporting period.
The weighted average number of common shares and dilutive common equivalent
shares were:
<TABLE>
=============================================================================
Three Months Ended
March 31, March 31,
(In thousands, except per share amounts) 2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Net income (loss) $3,063 $ (797)
- -----------------------------------------------------------------------------
Weighted average shares
for basic earnings per share 7,856 7,635
Effect of dilutive common
equivalent shares (stock options and stock
issuable under employee benefit plans) 1,428
- -----------------------------------------------------------------------------
Weighted average shares and
dilutive common equivalent shares
for dilutive earnings per share 9,284 7,635
=============================================================================
Basic earnings per share $ 0.39 $ (0.10)
Dilutive earnings per share $ 0.33 $ (0.10)
</TABLE>
For the quarter ended March 31, 1999, the Company excluded approximately
691 thousand common equivalent shares in its computation of dilutive earnings
per share because they were anti-dilutive.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Investments
First Albany Companies Inc, the Parent Company holds various investments in
its portfolio. Mechanical Technology Incorporated (MTI) and META Group, Inc
are the two major holdings.
At March 31, 2000 the Company owned approximately 3,917,000 common shares
(33% of the shares outstanding) of MTI. Shares of MTI are traded on the
NASDAQ National Market System under the symbol MKTY. The Company's
investment in MTI is recorded under the equity method and approximated $18.1
million, which included goodwill of approximately $55,000 which is being
amortized over 10 years. The Company's equity in MTI's net loss for the
three months ended December 31, 1999 recorded on a one-quarter delay basis,
was $.6 million.
On March 8, 2000, Mechanical Technology Inc. announced a 3 for 1 stock
split in the form of a stock dividend payable April 12, 2000 to shareholders
of record on March 8, 2000.
The following presents unaudited summarized financial information of MTI
at December 31, 1999 and for the three months then ended December 31, 1999:
<TABLE> -----------------------------------------------
(in thousands of dollars)
<S> <C>
===============================================
Assets $94,680
Liabilities 40,577
-----------------------------------------------
Shareholders' equity $54,103
===============================================
===============================================
Revenues $ 1,357
Operating loss (554)
Gain on sale of division/subsidiary 1,262
Equity in Joint Venture losses (2,991)
Other Expense (224)
Net loss $(1,773)
===============================================
</TABLE>
At March 31, 2000 the aggregate market value of the Company's shares of
MTI stock was $278.1 million. Under the equity method, the market value of
MTI's stock is not included in the calculation of the Company's investment.
Equity in joint venture losses for the three months ended December 31, 1999
are attributed to MTI's investments in Plug Power, Inc. The Company's equity
in MTI's net loss, recorded on a one-quarter delay basis, was a loss of $1.4
million for the three months ended March 31, 2000, which will be recorded by
the Company in the quarter ending June 30, 2000.
During the calendar quarter ended December 31, 1999, Plug Power, Inc
(formerly a joint venture between MTI and Edison Development Corp.) issued
common stock in an initial public offering. Plug Power's shareholder's
equity increased $178.8 million primarily due to cash investments by
individuals and corporate investors, including MTI and the public offering.
As a result, MTI recorded its proportionate share of this increase in Plug
Power's equity as investment in Plug Power and additional paid-in-capital,
net of deferred taxes. Accordingly, the Company has recorded through March 31,
2000 its proportionate
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
share ($8.9 million) of this increase in MTI's equity as an increase in its
investment in MTI. The Company also recorded an increase in additional paid-
in-capital of $5.2 million (net of deferred taxes) as a result of this
transaction.
At March 31, 2000, the Company owned 134,500 shares of META Group, Inc.
The fair market value of this investment was $3.5 million. During the
three months ended March 31, 2000, the Company has recorded unrealized
losses of $169,000 and realized gains of $2.3 million with respect to this
investment.
4. Receivables from Others
Amounts receivable from others as of:
<TABLE>
- -----------------------------------------------------------------------------
March 31, December 31,
(In thousands of dollars) 2000 1999
<S> <C> <C>
=============================================================================
Adjustment to record securities owned on
a trade date basis, net $21,250 $28,552
Others 13,681 11,263
- -----------------------------------------------------------------------------
Total $34,931 $39,815
=============================================================================
</TABLE>
Proprietary securities transactions are recorded on trade date, as if they
had settled. The related amounts receivable and payable for unsettled
securities transactions are recorded net in Receivables or Payables to Others
on the Statement of Financial Condition.
5. Securities Owned And Sold But Not Yet Purchased
Securities owned and sold but not yet purchased consisted of the
following as of:
<TABLE>
=============================================================================
(In thousands of dollars) March 31, December 31,
2000 1999
- -----------------------------------------------------------------------------
Sold, but Sold, but
not yet not yet
Owned Purchased Owned Purchased
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Marketable Securities
U.S. Government and federal
agency obligations $ 16,265 $54,005 $ 12,885 $26,131
State and municipal bonds 120,124 1,123 111,855 3,080
Corporate obligations 32,511 1,514 19,577 2,249
Corporate stocks 7,005 5,930 12,646 6,061
Not readily marketable
securities
Investment securities with
no publicly quoted marke 520 187
Investment securities subject
to restrictions 6,923 897
- -----------------------------------------------------------------------------
Total $183,348 $62,572 $ 158,047 $37,521
=============================================================================
</TABLE>
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
Securities not readily marketable include investment securities (a)
for which there is no market on a securities exchange or no independent
publicly quoted market, (b) that cannot be publicly offered or sold unless
registration has been effected under the Securities Act of 1933, or (c)
that cannot be offered or sold because of other arrangements, restrictions
or conditions applicable to the securities or to the Company.
6. Payables to Others
Amounts payable to others as of:
<TABLE>
- -----------------------------------------------------------------------------
March 31, December 31,
(In thousands of dollars) 2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Borrowing under line-of-credit agreements $15,268 $15,802
Others 1,931 2,292
- -----------------------------------------------------------------------------
Total $17,199 $18,094
=============================================================================
</TABLE>
7. Income Taxes
Under the asset and liability method, deferred income taxes are recognized
for the tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable for future years to differences between the
financial statement and tax basis of existing assets and liabilities. The
effect of tax rate changes on deferred taxes is recognized in the income
tax provision in the period that includes the enactment date.
The temporary differences that give rise to significant portions of
deferred tax assets and liabilities are as follows:
<TABLE>
=============================================================================
(In thousands of dollars) March 31, December 31,
2000 1999
<S> <C> <C>
- ------------------------------------------------------------------------------
Bad debt reserve $ 170 $ 132
Securities held for investment (5,518) (1,812)
Fixed assets 941 1,053
Deferred compensation 2,598 2,381
Other 197 82
- -----------------------------------------------------------------------------
Total deferred tax (liabilities) assets $ (1,612) $ 1,836
=============================================================================
</TABLE>
The Company has not recorded a valuation allowance for deferred tax assets
since it has determined that it is more likely than not that deferred tax
assets will be fully realized through a combination of future taxable income
and income available in carryback years.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
8. Notes Payable
Notes payable consists of a note for $1,354,167 which is collateralized by
fixed assets and is payable in monthly principal payments of $104,167 plus
interest. The interest rate is 2% over the 30-day London InterBank Offered
Rate ("LIBOR") (6.133% plus 2% on March 31, 2000). This note matures on
March 27, 2001.
Notes payable also consists of a note for $3,593,333 which is payable in
monthly principal payments of $73,333 plus interest. The interest rate is
1.5% over the 30-day London InterBank Offered Rate ("LIBOR"). This note
matures on April 1, 2004.
One of the more significant covenants of both notes requires First Albany
Corporation to maintain a minimum net capital (as defined by Rule 15c 3-1
of the Securities and Exchange Commission) equal to three times the required
minimum net capital. The required minimum net capital as of March 31, 2000
was $6.2 million. The amount of net capital as of March 31, 2000 was $20.3
million.
9. Obligations under Capitalized Leases
The following is a schedule of future minimum lease payments under capital
leases for office equipment together with the present value of the net
minimum lease payments as of March 31, 2000:
<TABLE> ===============================================
<S> <C>
(In thousands of dollars)
2000 $2,032
2001 2,284
2002 1,339
2003 148
2004 72
2005 5
-----------------------------------------------
Total Minimum Lease Payments 5,880
Less: Amount Representing Interest 608
-----------------------------------------------
Present Value of Minimum Lease Payments $5,272
===============================================
</TABLE>
10. Subordinated Debt
The Company has a subordinated debt of $2,000,000. This debt bears
interest at 8.75%. Interest is paid monthly with the principal amount due
at maturity on December 31, 2002.
The Company also has an additional subordinated debt of $4,000,000 that
bears interest at 9.25%. Interest is paid monthly with the principal
amount due at maturity on December 31, 2002.
In connection with the subordinated loans made by the Lender to the
Company, and as additional consideration, the Company granted the Lender
options to purchase shares of the Company's stock. During March 2000, the
Lender exercised their options to purchase the Company's common stock.
Pursuant to
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
this, the Company issued 139,895 shares of its common stock to the Lender
and the Lender discharged $500,000 and $1,000,000, respectively of the
subordinated debt owed to the Lender by the Company.
Both loan agreements include restrictive financial covenants. One of the
more significant covenants requires the Company to maintain a minimum net
capital (as defined by Rule 15c3-1 of the Securities and Exchange Commission)
equal to three times the required net capital. The amount of required net
capital as of March 31, 2000 was $6.2 million. The amount of net capital as
of March 31, 2000 was $20.3 million.
11. Commitments and Contingencies
In the normal course of business, the Company has been named a defendant,
or otherwise has possible exposure, in several claims. Certain of these
are class actions which seek unspecified damages which could be substantial.
Although there can be no assurance as to the eventual outcome of litigation
in which the Company has been named as a defendant or otherwise has possible
exposure, the Company has provided for those actions it believes are likely
to result in adverse dispositions. Although further losses are possible, the
opinion of management, based upon the advice of its attorneys and General
Counsel, is that such litigation will not, in the aggregate, have a material
adverse effect on the Company's liquidity or financial position, although it
could have a material effect on quarterly or annual operating results in the
period in which it is resolved.
12. Stockholders' Equity
In January 2000, the Board of Directors declared the regular quarterly
cash dividend of $0.05 per share payable on February 24, 2000, to
shareholders of record on February 10, 2000.
On March 31, 2000, the Board of Directors declared the regular quarterly
dividend of $0.05 per share for the first quarter, ended March 31, 2000,
along with a 5% stock dividend, payable on May 26, 2000 to shareholders of
record on May 12, 2000.
13. Net Capital Requirements
The Company's broker-dealer subsidiary, First Albany Corporation (the
"Corporation"), is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule which requires the maintenance of a minimum net
capital. The corporation has elected to use the alternative method
permitted by the rule, which requires that the corporation maintain a
minimum net capital of 2 percent of aggregate debit balances arising from
customer transactions as defined. As of March 31, 2000, the Corporation
had aggregate net capital, as defined, of $20.3 million which equaled 6.5%
of aggregate debit balances and $14.1 in excess of required minimum net
capital.
14. Derivative Financial Instruments
The Company does not engage in the proprietary trading of derivative
securities with the exception of highly liquid index futures contracts and
options. These index futures contracts and options are used to
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
hedge certain securities positions in the Company's inventory. Gains and
losses are included as revenues from principal transactions.
The contractual or notional amounts reflected in these financial
instruments reflect the volume and activity and do not reflect the amounts
at risk. The amounts at risk are generally limited to the unrealized
market valuation gains or losses on the instruments and will vary based on
changes in market value. Futures contracts are executed on an exchange,
and cash settlement is made on a daily basis for market movements. Open
equity in the futures contracts are recorded as receivables from clearing
organizations. The settlement of these transactions is not expected to
have a material adverse effect on the financial condition of the Company.
15. Segment Analysis
The Company's reportable operating segments are: Private Client Group,
Institutional Sales and Trading ("Institutional"), Other and Investments.
The financial policies of the Company's segments are the same as those
described in the "Summary of Significant Accounting Policies." The Private
Client Group provides securities brokerage services to individual investors.
Revenues are generated through customer purchase and sale of various
securities: equity, taxable and non-taxable fixed income, mutual funds and
various other investment products and services. The Institutional segment
generates revenues from securities transactions (equities and fixed-income
securities) with institutional clients along with investment banking
activities, which includes managing, co-managing of tax-exempt and corporate
securities underwritings and financial advisory services. This segment also
includes trading activity in which the Company buys and maintains inventories
of fixed-income products and equities securities (as a "market maker") for
sale to other dealers and to institutional and individual clients. The Other
segment revenues are derived from a variety of sources which include, net
interest revenues relating to securities lending transactions and revenues from
correspondent services. The Investment segment includes gains and losses
associated with the investment portfolio held at First Albany Companies
Inc., the holding company.
The Company's Investment segment includes revenue relating to the
Company's investment in Mechanical Technology Incorporated (MTI) which is
recorded under the equity method (see Note 3 - "Investments"). Pre-tax net
(loss) relating to MTI was $(596,000) and $(544,000) for the quarters ended
March 2000 and 1999, respectively. The Company records its other
investments at fair market value.
Intersegment revenues and expenses are eliminated between segments.
Interest revenues and interest expenses are reviewed primarily on a net
basis (Net Interest Revenues) and are shown as such. The Company evaluates
the performance of its segments and allocates resources to them based upon
long-term operating margin opportunities which are consistent with the growth
strategy of the Company. Included in the Other segment are operations,
administrative functions and other support costs. Asset information by
reportable segments is not reported since the Company does not produce such
information internally for the reportable segments. All assets are located
in the United States.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
<TABLE>
=============================================================================
Three Months Ended
(In thousands of dollars) March 31, March 31,
2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Revenues (excluding interest):
Private Client Group $ 33,824 $ 23,979
Institutional 25,975 21,370
Other 2,093 1,540
Investments 1,566 (3,572)
- -----------------------------------------------------------------------------
Total $ 63,458 $ 43,317
=============================================================================
Net Interest Revenues:
Private Client Group $ 1,039 $ 893
Institutional (203) (82)
Other 2,112 1,595
- -----------------------------------------------------------------------------
Total $2,948 $ 2,406
=============================================================================
Net Revenues:
Private Client Group $ 34,863 $ 24,872
Institutional 25,772 21,288
Other 4,205 3,135
Investments 1,566 (3,572)
- -----------------------------------------------------------------------------
Total $ 66,406 $ 45,723
=============================================================================
Pre-Tax Income:
Private Client Group $ 9,063 $ 4,838
Institutional 1,411 815
Other (6,740) (3,406)
Investments 1,566 (3,572)
- -----------------------------------------------------------------------------
Total $ 5,300 $ (1,325)
=============================================================================
</TABLE>
16. New Accounting Standards
In June 1999, the Financial Accounting Standards Board issued SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities, an amendment
of SFAS 133," which extended the effective date of SFAS 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet
at their fair value. The Company will adopt SFAS 133 in its 2001 fiscal
year, as required, and has not determined whether its implementation will
have a material impact on the Company's financial condition, results of
operations or cash flows.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
17. Subsequent Events
On May 9, 2000, the Company announced that is has signed an agreement for the
sale of the assets of its Private Client Group, its retail brokerage branch
network, to First Union Securities, a subsidiary of First Union Corp. for net
assets plus $100 million. The transaction is expected to close in August.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
=============================================================================
2000 vs.
Three Months Ended 1999 Percentage
March 31, March 31, Increase Increase
(In thousands of dollars) 2000 1999 (Decrease) (Decrease)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Revenues
Commissions $24,205 $18,658 $ 5,547 30%
Principal transactions 23,625 17,075 6,550 38%
Investment banking 8,377 7,206 1,171 16%
Investment gain (loss) 1,566 (3,555) 5,121 144%
Interest income 20,261 11,741 8,520 73%
Fees and others 5,685 3,933 1,752 45%
- -----------------------------------------------------------------------------
Total revenues 83,719 55,058 28,661 52%
Interest expense 17,313 9,335 7,978 85%
- -----------------------------------------------------------------------------
Net revenues 66,406 45,723 20,683 45%
- -----------------------------------------------------------------------------
Expenses (excluding interest)
Compensation and benefits 46,592 34,313 12,279 36%
Clearing, settlement and
brokerage costs 1,360 1,295 65 5%
Communications and
data processing 3,803 3,660 143 4%
Occupancy and depreciation 3,342 3,190 152 5%
Selling 3,024 2,108 916 43%
Other 2,985 2,482 503 20%
- -----------------------------------------------------------------------------
Total expenses (excluding interest) 61,106 47,048 14,058 30%
- -----------------------------------------------------------------------------
Income (Loss) before income taxes 5,300 (1,325) 6,625 500%
- -----------------------------------------------------------------------------
Income tax expense (benefit) 2,237 (528) 2,765 524%
- -----------------------------------------------------------------------------
Net income (loss) $ 3,063 $ (797) $ 3,860 484%
=============================================================================
Net interest income
Interest income $20,261 $11,741 $ 8,520 73%
Interest expense 17,313 9,335 7,978 85%
- -----------------------------------------------------------------------------
Net interest income $ 2,948 $ 2,406 $ 542 23%
=============================================================================
</TABLE>
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position
and results of operations during the periods included in the accompanying
condensed consolidated financial statements.
Business Environment
- --------------------
First Albany Corporation (First Albany), a wholly owned subsidiary of
First Albany Companies Inc. (the Company), is a full service investment
banking and brokerage firm. Its primary business includes the underwriting,
distribution, and trading of fixed income and equity securities. The
investment banking and brokerage businesses earn revenues in direct
correlation with the general level of trading activity in the stock and bond
markets. This level of activity cannot be controlled by the Company;
however, many of the Company's costs are fixed. Therefore, the Company's
earnings, like those of others in the industry, reflect the activity in the
markets and can fluctuate accordingly.
On May 9, 2000, the Company announced that is has signed an agreement for the
sale of the assets of its Private Client Group, its retail brokerage branch
network, to First Union Securities, a subsidiary of First Union Corp. for net
assets plus $100 million. The transaction is expected to close in August.
The Company anticipates a gain relating to this transaction which will be
recognized upon completion of the transaction.
The proceeds from this sale will be used to expAnd the Company's investment
banking, equity and fixed income capital marktes, and venture capital
operations, as well as to reduce outstanding bank debt.
Results of Operations
- ---------------------
Three Month Periods Ended March 31, 2000 and March 31, 1999
- ------------------------------------------------------------
Net Income
- ----------
Net income (loss) for the quarter ended March 31, 2000 was $3.1 million
or $0.39 basic earnings per share ($0.33 dilutive earnings per share),
compared to ($0.8) million or ($0.10) basic loss per share (($0.10) dilutive
loss per share) in the comparable 1999 period. For the quarter the net revenue
growth in the Firm's Private Client Group was 40%, while the net revenue growth
in the Firm's Institutional business was 21%.
Commissions
- -----------
Commission revenues for this year's first quarter increased $5.5 million
or 30% compared to the comparable 1999 period, reflecting active trading in
all major markets. Revenues from listed stocks and over-the-counter agency
stock commissions increased $4.0 million or 31% while revenues from mutual
funds, options and other increased $1.5 million.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
(Continued)
Principal Transactions
- ----------------------
Principal transactions for this year's first quarter increased $6.6
million or 38% compared to the comparable 1999 period. This amount was
comprised of an increase in equity securities of $2.9 million, and an
increase in corporate fixed income of $2.3 million and a decrease in
municipal bonds of $1.4 million.
Investment Banking
- ------------------
Investment banking revenues for this year's first quarter increased $1.2
million or 16% compared to the comparable 1999 period. Revenues from
corporate underwriting increased $2.1 million while municipal underwriting
revenues decreased $0.9 million.
Investment gains/(losses)
- -------------------------
Investment gains (losses) for this year's first quarter increased $5.1
million compared to the comparable 1999 period. The increase was due
primarily to an increase in the book value of the investment portfolio held
at First Albany Companies Inc, the Parent Company. (See Note 3)
Fees and Others
- ---------------
Fees and other revenues for this year's first quarter increased $1.8
million or 45% compared to the same period of 1999, primarily reflecting
increased revenues from the firm's focus to increase fee-based revenues.
Compensation and Benefits
- -------------------------
Compensation and benefits for this year's first quarter increased $12.3
million or 36% compared to the same period of 1999, due primarily to an
increase in net revenues at First Albany Corporation.
Selling
- -------
Selling expenses for this year's first quarter increased $0.9 million or
43% compared to the same period of 1999, mainly due to an increase in loss
in errors and promotional-related expenses.
Income Taxes
- ------------
Income taxes for this year's first quarter increased $2.8 million due to
a increase in pre-tax earning.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
A substantial portion of the Company's assets, similar to other brokerage
and investment banking firms, is liquid, consisting of cash and assets
readily convertible into cash. These assets are financed primarily by the
Company's interest-bearing and non-interest-bearing payables to customers,
payables to brokers and dealers secured by loaned securities, and bank
lines-of-credit. Securities borrowed and securities loaned along with
receivables from customers and payable to customers will fluctuate primarily
due to the current level of business activity in these areas. Securities
owned will fluctuate as a result of the changes in the level of positions
held to facilitate customer transactions and changes in market conditions.
Short-term bank loans and securities loaned, net, are a source of financing
for the Company and will fluctuate accordingly. Receivables from others and
payables to others will fluctuate primarily due to the change in the
adjustment to record securities owned on a trade date basis.
At March 31, 2000, First Albany Corporation, a registered broker-dealer
subsidiary of First Albany Companies Inc., was in compliance with the net
capital requirements of the Securities and Exchange Commission and had
capital in excess of the minimum required.
Management believes that funds provided by operations and a variety of
bank lines-of-credit-totaling $295 million of which approximately $103
million were unused as of March 31, 2000-will provide sufficient resources
to meet present and reasonably foreseeable short-term financing needs.
In January 2000, the Board of Directors declared the regular quarterly
cash dividend of $0.05 per share payable on February 24, 2000, to
shareholders of record on February 10, 2000.
On March 31, 2000 the Board of Directors declared the regular quarterly
dividend of $0.05 per share for the first quarter, ended March 31, 2000,
along with a 5% stock dividend, payable on May 26, 2000 to shareholders of
record on May 12, 2000.
The Company believes that funds provided by operations will be sufficient
to fund the acquisition of office equipment, leasehold improvements,
current long-term loan repayment requirements, and other long-term
requirements.
Year 2000
- ---------
The Year 2000 Issue (Y2K) concerns the potential impact of historic
computer software code that only utilizes two digits to represent the
calendar year (e.g., "98" for "1998"). Software so developed and not
corrected could produce inaccurate or unpredictable results commencing
January 1, 2000, when current and future dates present a lower two-digit
year number than dates in the prior century. The Company, similar to most
firms in the securities industry, is significantly subject to the potential
impact of the Y2K due to the nature of the industry. Potential impacts to
the Company may arise from software, computer hardware, and other equipment
both within the Company's direct control and outside the Company's ownership,
yet with which the Company interfaces either electronically or operationally.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Project
- -----------
In 1997, the Company initiated a comprehensive project to prepare its
internally and externally dependent computer and peripheral systems for the
Year 2000, and had completed changes to critical systems in 1999. The
Company's Year 2000 plan involved many phases:
Inventory and assessment
Planning, analysis and design
Remediation
Testing
Implementation
Post implementation monitoring
Project Results
- ---------------
The Company successfully completed its Year 2000 rollover without any
mission-critical information system disruptions. The Company is not aware
of any Year 2000 related problems with third-party vendors of mission-
critical systems or services. However, the Company will continue to
monitor its systems carefully and maintain contingency plans with respect
to its third-party vendor relationships.
The Costs to Address the Company's Y2K Issues
- ---------------------------------------------
The Company estimates that the total cost of the Company's Year 2000
efforts will not exceed $1.2 million. Most of this amount, being hardware
purchases, was capitalized, however, independent-verification testing of
its internal applications was expensed when incurred. These costs were
funded through operating cash flow. All internal remediation was accomplished
by utilizing existing Company personnel. The Company's Y2K budget did not
reflect the costs of the extensive resource allocation and management from
internal sources.
The Risks of the Company's Y2K Issues
- -------------------------------------
Although the Year 2000 transition has passed, there can be no assurance
that the Company will not experience any problems related to the Year 2000.
If Year 2000 issues are not adequately monitored, the Company could face,
among other things, business disruption, operational problems, financial
losses, legal liability and similar risks, and the Company's business,
results of operations and financial position could be materially adversely
affected.
New Accounting Standards
- ------------------------
In June 1999, the Financial Accounting Standards Board issued SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities, an amendment
of SFAS 133," which extended the effective date of SFAS 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet
at their fair value. The Company will adopt SFAS 133 in its 2001 fiscal
year, as required, and has not determined whether its implementation will
have a material impact on the Company's financial condition, results of
operations or cash flows.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- ------ ----------------------------------------------------------
MARKET RISK
- -----------
Market risk generally represents the risk of loss that may result from
the potential change in the value of a financial instrument as a result of
fluctuations in interest rates, bond prices and equity prices, changes in
the implied volatility of interest rate and equity prices and also changes
in the credit ratings of either the issuer or its related country of origin.
Market risk is inherent to both derivative and non-derivative financial
instruments, and accordingly, the scope of the Company's market risk
management procedures extends beyond derivatives to include all market risk
sensitive financial instruments. The Company's exposure to market risk is
directly related to its role as a financial intermediary in customer-related
transactions and to its proprietary trading.
The Company trades municipal bonds and taxable debt obligations, including
U.S. Treasury bills, notes, and bonds; U.S. Government agency notes and
bonds; bank certificates of deposit; mortgage-backed securities, and
corporate obligations. The Company is also an active market-maker in over-
the-counter equity markets and trades certain listed equities as well. In
connection with these activities, the Company may be required to maintain
inventories in order to ensure availability and to facilitate customer
transactions. In connection with some of these activities, the Company
attempts to mitigate its exposure to such market risk by entering into
hedging transactions, which may include highly liquid future contracts,
options and U.S. Government securities.
Following is a discussion of the Company's primary market risk exposures
as of March 31, 2000, including a discussion of how those exposures are
currently managed.
Interest Rate and Bond Price Risk
Interest rate risk is a consequence of maintaining inventory positions
and trading in interest-rate-sensitive financial instruments. In connection
with trading activities, the Company exposes itself to interest rate risk,
arising from changes in the level or volatility of interest rates or the
shape and slope of the yield curve. The Company's fixed income activities
also expose it to the risk of loss related to changes in credit spreads. The
Company attempts to hedge its exposure to interest rate risk primarily
through the use of U.S. government securities, highly liquid futures and
options designed to reduce the Company's risk profile.
A sensitivity analysis has been prepared to estimate the Company's
exposure to interest rate risk of its inventory position. The fair market
value of these securities included in the Company's inventory at March 31,
2000 was $114 million. Interest rate risk is estimated as the potential
loss in fair value resulting from a hypothetical one-half percent decrease
in interest rates. At March 31, 2000, the potential change in fair value,
assuming this hypothetical decrease, was $5.5 million. The actual risks
and results of such adverse effects may differ substantially.
Equity Price Risk
The Company is exposed to equity price risk as a consequence of making
markets in equity securities. Equity price risk results from changes in
the level or volatility of equity prices, which affect the value of equity
securities or instruments that derive their value from a particular stock.
The Company attempts to reduce the risk of loss inherent in its inventory
of equity securities by monitoring those security positions daily.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Marketable equity securities included in the Company's inventory at March
31, 2000, which were recorded at a fair value of $7 million, have exposure
to equity price risk. This risk is estimated as the potential loss in fair
value resulting from a hypothetical 10% adverse change in prices quoted by
stock exchanges and amounts to $.7 million. The actual risks and results
of such adverse effects may differ substantially. The Company's investment
portfolio, excluding its investment in MTI, at March 31, 2000 had a fair
market value of $6 million. (See Note 3). This equity price risk is also
estimated as the potential loss in fair value resulting from a hypothetical
10% adverse change in prices quoted by stock exchanges and amounts to $.6
million. Actual results may differ.
CREDIT RISK
The Company is engaged in various trading and brokerage activities whose
counterparties primarily include broker-dealers, banks, and other financial
institutions. In the event counterparties do not fulfill their obligations,
the Company may be exposed to risk. The risk of default depends on the
credit worthiness of the counterparty or issuer of the instrument. The
Company seeks to control credit risk by following an established credit
approval process, monitoring credit limits, and requiring collateral where
appropriate.
The Company purchases debt securities and may have significant positions
in its inventory subject to market and credit risk. In order to control
these risks, security positions are monitored on at least a daily basis.
Should the Company find it necessary to sell such a security, it may not be
able to realize the full carrying value of the security due to the
significance of the position sold. The Company attempts to reduce its
exposure to changes in securities valuation with the use of highly liquid
municipal bond index futures contracts.
OPERATING RISK
Operating risk is the potential for loss arising from limitations in the
Company's financial systems and controls, deficiencies in legal documentation
and the execution of legal and fiduciary responsibilities, deficiencies in
technology and the risk of loss attributable to operational problems. These
risks are less direct than credit and market risk, but managing them is
critical, particularly in a rapidly changing environment with increasing
transaction volumes. In order to reduce or mitigate these risks, the Company
has established and maintains an effective internal control environment which
incorporates various control mechanisms at different levels throughout the
organization and within such departments as Finance and Accounting,
Operations, Legal, Compliance and Internal Audit. These control mechanisms
attempt to ensure that operational policies and procedures are being followed
and that the Company's various businesses are operating with established
corporate policies and limits.
OTHER RISKS
Other risks encountered by the Company include political, regulatory and
tax risks. These risks reflect the potential impact that changes in local
laws, regulatory requirements or tax statutes have on the economics and
viability of current or future transactions. In an effort to mitigate
these risks, the Company seeks to continuously review new and pending
regulations and legislation and their potential impact on its business.
</PAGE>
<PAGE>
Part II-Other Information
Item 1. Legal Proceedings
In the normal course of business, the Company has been named a defendant,
or otherwise has possible exposure, in several claims. Certain of these
are class actions which seek unspecified damages that could be substantial.
Although there can be no assurance as to the eventual outcome of litigation
in which the Company has been named as a defendant or otherwise has possible
exposure, the Company has provided for those actions most likely to result in
adverse dispositions. Although further losses are possible, the opinion of
management, based upon the advice of its attorneys and general counsel, is
that such litigation will not, in the aggregate, have a material adverse
effect on the Company's liquidity or financial position, although it could
have a material effect on quarterly or annual operating results in the period
in which it is resolved.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
Item No. Item
-------- ----
(10.26) Agreement to Sell First Albany Corporation's Retail Branch
Network and Correspondent Clearing Business dated May 8, 2000
between First Albany Companies Inc., First Albany Corporation
and First Union Securities, Inc. (filed herewith)
(11) Statement Re: Computation of Per Share Earnings (filed
herewith)
(27) Selected Financial Data Schedule BD (filed herewith)
(b) Reports on Form 8-K
-------------------
No Form 8K was filed during the quarter ended March 31, 2000.
--------------
</PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
First Albany Companies Inc.
----------------------------------------
(Registrant)
/s/ALAN P GOLDBERG
Date: 5/11/00 -------------------------------------
Alan P. Goldberg
President/Co-Chief Executive Officer
/s/STEVEN JENKINS
Date: 5/11/00 --------------------------------------
Steven Jenkins
Chief Financial Officer
(Principal Accounting Officer)
</PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of May 8, 2000
by and among
FIRST UNION SECURITIES, INC.,
FIRST ALBANY COMPANIES INC.
and
FIRST ALBANY CORPORATION
with respect to the business of
FIRST ALBANY CORPORATION'S RETAIL BRANCH NETWORK
AND CORRESPONDENT CLEARING BUSINESS
TABLE OF CONTENTS
-----------------
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
Page
No.
ARTICLE I SALE OF ASSETS AND CLOSING 1
1.01 Assets 1
1.02 Liabilities 4
1.03 Purchase Price; Allocation 6
1.04 Initial Payment; Final Payment 6
1.05 Purchase Price Adjustment 8
1.06 Closing 8
1.07 Prorations 8
1.08 Further Assurances; Post-Closing Cooperation 8
1.09 Asset Transfers Requiring Consent 10
1.10 Conversion 10
1.11 Transfer Annex 11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS 11
2.01 Corporate Existence of Sellers 11
2.02 Authority 11
2.03 No Conflicts 11
2.04 Governmental Approvals and Filings 12
2.05 Financial Statements, Undisclosed Liabilities
and Absence of Certain Changes 12
2.06 Legal Proceedings 13
2.07 Compliance With Laws and Orders 13
2.08 Benefit Plans; ERISA 15
2.09 Real Property 15
2.10 Tangible Personal Property 15
2.11 Contracts 15
2.12 Brokers 17
2.13 Assets 17
2.14 Labor Matters 17
2.15 Taxes 17
2.16 Accounting Controls 18
2.17 No Knowledge 18
2.18 Customer-Related Assets 18
2.19 Trading Commissions 18
</PAGE>
<PAGE>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER 18
3.01 Corporate Existence 18
3.02 Authority 19
3.03 No Conflicts 19
3.04 Governmental Approvals and Filings 19
3.05 Legal Proceedings 19
3.06 Brokers 20
3.07 Financing 20
ARTICLE IV COVENANTS OF SELLERS 20
4.01 Regulatory and Other Approvals 20
4.02 HSR Filings 21
4.03 Access by Purchaser 21
4.04 No Solicitations 21
4.05 Conduct of Business 21
4.06 Delivery of Assets 23
4.07 Noncompetition 23
4.08 Fulfillment of Conditions 24
4.09 Current Information 24
4.10 Annual Bonuses 24
4.11 Telecommunications Equipment 25
ARTICLE V COVENANTS OF PURCHASER 25
5.01 Regulatory and Other Approvals 25
5.02 HSR Filings 26
5.03 Fulfillment of Conditions 26
5.04 Additional Commitment 26
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER 27
6.01 Representations and Warranties 27
6.02 Performance 27
6.03 Officers' Certificates 27
6.04 Orders and Laws 27
6.05 Regulatory Consents and Approvals 27
6.06 Third Party Consents 28
6.07 Deliveries 28
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLERS 28
7.01 Representations and Warranties 28
7.02 Performance 28
7.03 Officers' Certificates 28
7.04 Orders and Laws 28
</PAGE>
<PAGE>
7.05 Regulatory Consents and Approvals 28
7.06 Deliveries 29
ARTICLE VIIIA EMPLOYEE BENEFITS MATTERS 29
8.01A Offer of Employment; Employment Agreements 29
8.02A Welfare Plans -- Claims Incurred;
Pre-Existing Conditions 29
8.03A Vacation 29
8.04A Service Credit 29
8.05A (a) Retention Pool 29
ARTICLE VIIIB REAL PROPERTY 29
8.01B Assignment of Transferred Branch Offices 29
8.02B Subleases 29
8.03B Reimbursement for Reimbursed Expenses 29
ARTICLE IX SURVIVAL; NO OTHER REPRESENTATIONS 29
9.01 Survival of Representations, Warranties,
Covenants and Agreements 29
9.02 No Other Representations 29
ARTICLE X INDEMNIFICATION 29
10.01 Indemnification 29
10.02 Method of Asserting Claims 29
10.03 Exclusivity 29
ARTICLE XI TERMINATION 29
11.01 Termination 29
11.02 Effect of Termination 29
ARTICLE XII DEFINITIONS 29
12.01 Definitions 29
ARTICLE XIII MISCELLANEOUS 29
13.01 Notices. 29
13.02 Entire Agreement 29
13.03 Expenses 29
13.04 Sales and Transfer Taxes 29
13.05 Public Announcements 29
13.06 Confidentiality 29
13.07 Waiver; Amendment 29
13.08 No Third Party Beneficiary 29
</PAGE>
<PAGE>
13.09 No Assignment; Binding Effect 29
13.10 Headings 29
13.11 Invalid Provisions 29
13.12 Governing Law 29
13.13 Counterparts 29
EXHIBITS
Exhibit B Officer's Certificate of Sellers
Exhibit C Secretary's Certificate of Sellers
Exhibit D Officer's Certificate of Purchaser
Exhibit E Secretary's Certificate of Purchaser
Exhibit F Gross Production Schedule
</PAGE>
<PAGE>
This ASSET PURCHASE AGREEMENT dated as of May 8, 2000 is made and
entered into by and between First Union Securities, Inc., a Delaware
corporation ("Purchaser"), First Albany Companies Inc., a New York
corporation ("FACT"), and First Albany Corporation, a New York corporation
and a wholly-owned subsidiary of FACT ("First Albany" and, together with
FACT, "Sellers"). Capitalized terms not otherwise defined herein have the
meanings set forth in Section 12.01.
WHEREAS, through the Branch Network operating group of its Private
Client Group, First Albany is engaged in the retail brokerage business of
providing investment products to individuals and corporate customers through
a network of financial consultants compensated on a commission basis (the
"Branch Network"); and
WHEREAS, First Albany also is engaged in the fully-disclosed
correspondent clearing business of processing, for a fee, the transactions
of other brokerage firms (the "FDC Business" and, together with the Branch
Network, the "Business"); and
WHEREAS, Sellers desire to sell, transfer and assign to Purchaser,
and Purchaser desires to purchase and acquire from Sellers, certain of the
assets of Sellers relating to the operation of the Business, and in
connection therewith, Purchaser has agreed to assume certain of the
liabilities of Sellers relating to the Business, all on the terms set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 Assets. (a) Assets Transferred. On the terms and subject to
the conditions set forth in this Agreement, Sellers will sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser will purchase and pay
for, at the Closing, free and clear of all Liens other than Permitted Liens,
all of Sellers' right, title and interest in, to and under the following
Assets and Properties of Sellers used in connection with the Business, except as
otherwise provided in Section 1.01(b), as the same shall exist on the Closing
Date (collectively, the "Assets");
(i) Real Property Leases. The leases and subleases of real
property for each of the Transferred Branch Offices, together with any
leasehold improvements thereon, and all other rights, subleases,
licenses, permits, deposits and profits appurtenant to or related to
such leases and subleases (the "Real Property Leases");
(ii) intentionally omitted;
</PAGE>
<PAGE>
(iii) Tangible Personal Property. All furniture, fixtures,
equipment (including data processing equipment), machinery and other
tangible personal property (collectively, "Tangible Personal Property")
owned by Sellers and located at the Branch Offices;
(iv) Personal Property Leases. The leases or subleases of
Tangible Personal Property located at the Branch Offices as to which
either Seller is the lessee or sublessee (the "Personal Property Leases");
(v) Business Contracts. All Contracts (other than the Real
Property Leases, Subleases and the Personal Property Leases) to which
either Seller is a party and which are utilized primarily in the conduct
of the Business, including Contracts relating to customer accounts,
Transferred Employees, purchase orders, marketing arrangements and
including all Customer Contracts, all confidentiality agreements entered
into with other bidders in connection with the sale of the Business, and
all Contracts which are listed in Section 2.11(a) of the Disclosure
Schedule (the "Business Contracts");
(vi) Security Deposits. All security deposits deposited by or on
behalf of either Seller as lessee or sublessee under the Real Property
Leases (the "Tenant Security Deposits");
(vii) Books and Records. All of the Books and Records used in the
conduct of the Business relating to any Customer accounts which are
contained in the database of Beta Systems Inc., all statements of
Customers, all employee files for Transferred Employees, all other Books
and Records historically located at the Branch Offices and such other
Book and Records as shall be reasonably sufficient to permit the
administration of the Assets and Assumed Liabilities after the Closing
(the "Business Books and Records");
(viii) Promissory Notes. The promissory notes evidencing loans made
by either Seller to certain financial consultants of the Business,
descriptions of which are listed in Section 1.01(a)(viii) of the
Disclosure Schedule;
(ix) Customer-Related Assets. All Customer-Related Assets (the
transfer of the Customer-Related Assets shall be effectuated in accordance
with the Transfer Annex);
(x) Margin and Other Debit Balances. All margin and other
Customer debit balances of the Sellers related to the Business to the
extent reflected on the Final Balance Sheet;
(xi) Bank Account Assets. All cash of Customers held in Customer
segregated bank accounts (which are being transferred to Purchaser
pursuant to the Transfer Annex);
(xii) Rights. All rights, claims, credits, causes of action, rights
of recovery and rights of set-off of any kind relating to the Assets,
including any unliquidated rights under manufacturers' and vendors'
warranties;
</PAGE>
<PAGE>
(xiii) Deferred Plan Assets. Cash and/or assets held by Sellers with
the intention of satisfying liabilities under the Financial Consultants
Deferred Compensation Plan ("Plan Assets") that are equal in value to
vested account balances of all participants in such plan and the
unvested account balances of the Transferred Employees that are
participants ("Account Balances") in the Financial Consultant Deferred
Compensation Plan on the Closing Date; provided, that, if the Account
Balances reflected on the Closing Balance Sheet were incorrectly
calculated and the correct Account Balances are less than the Account
Balances reflected on the Closing Balance Sheet, Purchaser will return
the difference in cash and if the correct Account Balances are greater
than the Account Balances reflected on the Closing Balance Sheet, Seller
will to the extent the liabilities in connection therewith are not
retained liabilities return the difference in cash.
(xiv) Certain Telecommunications Equipment. All right, title and
interest of the Sellers in the following located (A) in the Transferred
Branch Offices: (i) telephone instruments, (ii) North American Numbering
Plan numbers, (iii) electronic ingress and egress to the phone system,
including to trunks supplied by local exchange and inter-exchange
providers and (iv) inside wiring, switches, channel services units,
relays, instruments and related common equipment and (B) in the
Subleased Branch Offices: telephone instruments ((A) and (B),
collectively the "Telecommunications Equipment"); and
(xv) Certain Software. The software listed on Section 1.01(a)
(xv) of the Disclosure Schedule (the "Software");
provided that the Assets will include the rights of Purchaser under the
sublease for each of the Subleased Branch Offices (collectively the
"Subleases") but will not include the Excluded Assets.
To the extent that any Business Contract or Personal Property
Lease is utilized by or are for the benefit of any of Sellers' businesses
other than the Business, Purchaser and the Sellers shall use commercially
reasonable efforts to allocate in writing the rights and obligations under
such Contract or Personal Property Lease in a fair and equitable manner that
is reasonably satisfactory to the parties prior to the Closing Date.
(b) Excluded Assets. The Assets shall not include any assets
other than assets specifically contemplated in Section 1.01(a), and without
limiting the foregoing, shall expressly exclude the following (collectively,
the "Excluded Assets"):
(i) Cash. Cash other than the cash of Customers described in
Section 1.01(a)(x);
(ii) Insurance. Except for any policies included in Section 1.01(a)
(xiii), life insurance policies of officers and other employees of Sellers
and all other insurance policies relating to the operation of the Business;
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(iii) Employee Benefit Plans. All assets owned or held by the
Benefit Plans, other than the assets described in Section 1.01(a)(xiii);
(iv) Tax Refunds. All refunds or credits, if any, of any Taxes
that are not Assumed Liabilities, other than refunds or credits imposed on
or with respect to the Assets for any taxable year or other period
beginning and ending after the Closing Date;
(v) Phone System. The phone system, switches, relays, trunks and
related equipment used in the Branch Offices of the Business other than
the Telecommunications Equipment described in Section 1.01(a)(xiv);
(vi) Corporate and Other Records. The minute books, stock transfer
books, corporate seal, supplemental data files and optical images of
Sellers and all of the Books and Records of the Business other than the
Books and Records described in Sections 1.01(a)(i), (iv), (v), (vii),
(viii), (xii), and (xv);
(vii) Tradename and Logo. All of Sellers' right, title and interest
in, to and under the name "First Albany" and the First Albany logo or any
derivative thereof;
(viii) Retained Customer Accounts. All accounts (individual or
trustee) of non-Offered Employees and members of their immediate families
(including spouse, parents, brothers, sisters and children) and any
Customer whose financial consultant is a non-Offered Employee
(collectively, "Retained Customer Accounts"); and
(ix) Sellers' rights under this Agreement.
1.02 Liabilities. (a) Assumed Liabilities. In connection with
the sale, transfer, conveyance, assignment and delivery of the Assets pursuant
to this Agreement, on the terms and subject to the conditions set forth in this
Agreement, at the Closing, Purchaser will assume and agree to pay, perform
and discharge when due the following obligations (the "Assumed Liabilities"),
and no others:
(i) Free credit and other balances. All free credit and other
Customer balances of the Sellers related to the Business (other than with
respect to Retained Customers Accounts) to the extent such free credit
and other balances are reflected on the Final Balance Sheet;
(ii) Real Property Lease Obligations. All obligations of Sellers
under the Real Property Leases to the extent not related to any Pre-
Closing Matter;
(iii) Sublease Obligations. All obligations of Purchaser under the
Subleases;
(iv) Personal Property Lease Obligations. All obligations of
Sellers under the Personal Property Leases to the extent not related to any
Pre-Closing Matter;
(v) Obligations under Contracts. All obligations of Sellers under
the Business Contracts to the extent not related to any Pre Closing Matter;
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(vi) Taxes. All liabilities for any Taxes imposed on or with
respect to the Assets, other than Taxes for any taxable year or other
taxable period ending prior to the Closing Date and other than any Taxes
for any Pre-Closing Matter;
(vii) Financial Consultants Deferred Compensation Plan. All
obligations and liabilities of Sellers under First Albany's Financial
Consultants Deferred Compensation Plan and any award agreements thereunder
(including any length of service awards), other than liabilities retained
pursuant to Section 1.02(b)(vi);
(viii) Employee Obligations. All obligations that Purchaser has
agreed to assume pursuant to any provision of Article VIIIA; and
(ix) Deferred Bonus. All obligations and liabilities under the
First Albany Deferred Bonus Program relating to Transferred Employees (the
"Deferred Bonus").
(b) Retained Liabilities. Notwithstanding anything to the
contrary contained herein, Purchaser shall not assume any of the following
Liabilities (collectively, the "Retained Liabilities"):
(i) Pre-Closing Matters. Except as otherwise contemplated under
the Transfer Annex and other than the Assumed Liabilities, any liability,
duty or obligation of the Sellers related to any PreClosing Matter,
including (A) any liability to customers or third parties with respect to
services performed, engagements completed, and trading activities conducted
by the Sellers prior to the Closing Date (or the failure to do any of the
foregoing) and (B) any liability related to any pending, threatened or
unasserted Action or Proceeding, as well as any claim or liability arising
from or attributable to the Business prior to the Closing Date;
(ii) Taxes. Any liability, obligation or duty for Taxes (A)imposed
on any Seller for any Tax period and (B) imposed on the Assets for any Tax
period (or portion thereof) ending prior to the Closing Date and any
income taxes imposed on Seller as a result of the transactions contemplated
by this Agreement;
(iii) Employees. Other than the Assumed Liabilities, any liability,
obligation or duty arising out of the employment relationship between the
Sellers and any of their respective Employees or former Employees existing
at any time, whether before or after the Closing, including all
liabilities relating to any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, sponsored or maintained by the Sellers or to
which the Sellers have made contributions (to the extent not included in
Section 1.02(a)(v) or (viii));
(iv) Excluded Assets. Any liability, obligation or duty related
to any Excluded Asset, including any of the Sellers' obligations under
this Agreement or incurred in connection with the negotiation or
performance of it;
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(v) Defective Account Condition. Any "out of balance", "out of
proof" or similar condition (in each case as adjusted for reconciliation)
with respect to any account maintained by the Sellers on behalf of any
Customer; and
(vi) Certain Deferred Plan Liabilities. Any liabilities under the
Financial Consultants Deferred Compensation Plan in excess of the value of
the Account Balances which liabilities result from the Sellers' failure to
operate such plan in substantial compliance with its terms and all
applicable laws prior to the Closing Date; provided, however, that any
liabilities resulting from the amendments described in Section 8.06A shall
not be retained hereunder; and
(vii) Non-Assumed Liabilities. Any liability, obligation or duty
that is not an Assumed Liability.
(It is understood that each of Section 1.02(b)(i)-(vii) are cumulative and do
not limit each other.)
The Sellers shall remain solely and exclusively liable for the
Retained Liabilities.
1.03 Purchase Price; Allocation. (a) Purchase Price. The
aggregate purchase price for the Assets and for the covenant of Sellers
contained in Section 4.07 is an amount equal to the Net Assets plus
$100,000,000, subject to adjustment, if any, under Section 1.05 (the "Purchase
Price").
(b) Allocation of Purchase Price. The parties to this Agreement
agree to allocate prior to the Closing Date, the Purchase Price paid in
respect of the Assets in accordance with the rules under Section 1060 of the
Code (as hereinafter defined), and the regulations promulgated thereunder.
The parties recognize that the Purchase Price does not include Purchaser's
acquisition expenses and that Purchaser shall allocate such expenses
appropriately. The allocation of the Purchase Price shall be first to
tangible assets at their fair market value (which shall be their book value)
and the balance of the Purchase Price shall be allocated to goodwill and any
other categories agreed to by the parties. The parties agree to file their
federal income tax returns and their other tax returns (including any forms
or reports required to be filed pursuant to Section 1060 of the Code, the
regulations promulgated thereunder or any provisions of state and local law
("1060 Forms")), reflecting such allocation and take no position contrary
thereto unless required to do so pursuant to a determination (as defined in
Section 1313(a) of the Code). The parties further agree to cooperate in the
preparation of any 1060 Forms and to file such 1060 Forms in the manner
required by applicable law.
1.04 Initial Payment; Final Payment. (a) Three days before the
Closing Date, the Sellers will deliver to Purchaser a statement (the "Initial
Balance Sheet") setting forth their good faith estimate of the Closing
Assets, the Closing Liabilities and the Net Assets (as reflected in the
accounting books and records of the Sellers and in accordance with Sellers'
customary accounting practices, but including all Plan Assets, Account
Balances and the Deferred Bonus in accordance with the Financial Consultants
Deferred Compensation Plan and the Deferred Bonus, respectively) (such
estimate of the Net Assets, the "Estimated Net Assets"). At the Closing,
Purchaser will pay to Seller an amount equal to the Estimated Net Assets plus
$100,000,000 (subject to adjustment, if any, under Section 1.05), in the
manner provided in Section 1.06.
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(b) Within 30 days after the Closing Date, Sellers will deliver to
Purchaser a statement (the "Final Balance Sheet") setting forth the Closing
Assets, the Closing Liabilities and the Net Assets. The Final Balance Sheet
shall set forth the Closing Assets and Closing Liabilities as reflected in
the accounting books and records of Sellers and in accordance with Sellers'
customary accounting practices, but including all Plan Assets, Account
Balances and the Deferred Bonus in accordance with the Financial Consultants
Deferred Compensation Plan and the Deferred Bonus, respectively. Within 15
days after delivery of the Final Balance Sheet, Purchaser will either notify
Sellers in writing that the Final Balance Sheet is acceptable or will object
to the Final Balance Sheet in a writing setting forth a specific description
of Purchaser's objections and specifying Purchaser's calculation of the Net
Assets (it being agreed that the failure of Purchaser to deliver a written
notice to the Sellers within the 15 days will be acceptance by Purchaser of
the Final Balance Sheet). If Purchaser does not object in accordance with
this Section 1.04(b) or if any objections are resolved on a mutually
agreeable basis, the Final Balance Sheet (as it may be revised to reflect
such resolution) will be the "Final Net Assets". If Purchaser objects in
accordance with this Section 1.04(b) and the objections are not resolved on a
mutually agreeable basis within 30 days after delivery of the notice of
objection, the unresolved objections shall be promptly submitted to an
Unaffiliated Firm. The Unaffiliated Firm will resolve the objections within
30 days by determining which of Sellers' and the Purchaser's calculation is
closer to the Closing Assets and Closing Liabilities (as reflected in the
accounting books and records of the Sellers and in accordance with Sellers'
customary accounting practices, but including all Plan Assets, Account
Balances and the Deferred Bonus in accordance with the Financial Consultants
Deferred Compensation Plan and the Deferred Bonus, respectively) determined
by the Unaffiliated Firm and providing a written report setting out that
determination to the parties. In this case, the calculation of Sellers' or
Purchaser selected by the Unaffiliated Firm will be the Final Net Assets.
The decision of the Unaffiliated Firm will be final and binding upon the
parties, and no party will bring any action or proceeding in any forum
seeking to invalidate, challenge, modify or prevent the enforcement of the
decision. The fees, costs and expenses of the Unaffiliated Firm will be (1)
borne by Purchaser, if the Unaffiliated Firm selects Sellers' calculation and
(2) borne by Sellers, if the Unaffiliated Firm selects the Purchaser's
calculation.
(c) Within two Business Days following the determination of the
Final Net Assets pursuant to Section 1.04(b), (i) to the extent, if any, the
Final Net Assets exceeds the Estimated Net Assets, Purchaser shall remit to
Sellers such excess in immediately available United States funds to an account
designated by Sellers and (ii) to the extent, if any, the Estimated Net
Assets exceeds the Final Net Assets, Sellers shall remit to Purchaser such
excess in immediately available United States funds to an account designated
by Purchaser. Any cash payment made pursuant to this Section 1.04(c)
shall include an adjustment for, or be accompanied by the payment of,
interest at a rate per annum equal to the prime lending rate of First Union
National Bank from the Closing Date to and including the date such adjustment
or payment is made.
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1.05 Purchase Price Adjustment. If as of the Closing, Financial
Consultants that were employed by the Business on March 31, 2000 responsible
(based on the schedule of gross production by Financial Consultants attached
as Exhibit F) for less than 90% of the gross production of the Business for
the twelve months ended March 31, 2000 (the "Trading Commissions") shall be
Transferred Employees (for purposes of this Section 1.05, Transferred
Employee shall include any Financial Consultant (a) that shall have
terminated his or her employment because of death or disability, or (b) shall
have accepted an offer of employment, but is not a Transferred Employee
because of a delay in any Regulatory Approval), the $100,000,000 portion of
the Purchase Price shall be multiplied by a fraction the numerator of which
shall be the Trading Commissions of the Financial Consultants that are
Transferred Employees and the denominator of which shall be the total Trading
Commissions, provided that (i) such adjustment shall not reduce the
$100,000,000 portion of the Purchase Price to less than $65,000,000 and (ii)
no such adjustment shall be made if the parties shall not be able to effect
the Conversion on or before August 15 (other than as a result of Sellers not
using commercially reasonable efforts to cooperate with Purchaser in
effecting the Conversion).
1.06 Closing. The Closing will take place at the offices of
Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New
York 10005 or at such other place as Purchaser and Sellers mutually agree, at
10:00 A.M. local time, on (a) the second Business Day after the later of (i) the
day on which the last of the consents, approvals, actions, filings, notices or
waiting periods described in or related to the filings described in Sections
6.04, 6.05, 7.04 and 7.05 have been obtained, made or given or have expired, as
applicable, and (ii) the day on which the Conversion described in Section
1.08 becomes possible or (b) such other date as Purchaser and Sellers
mutually agree upon in writing. At the Closing, Purchaser will pay the
Purchase Price by wire transfer of immediately available funds to such
account as Sellers may reasonably direct by written notice delivered to
Purchaser by Sellers at least two (2) Business Days before the Closing Date.
Simultaneously, (a) Sellers will assign and transfer to Purchaser good and
valid title in and to the Assets (free and clear of all Liens, other than
Permitted Liens) by delivery of good and sufficient instruments of
conveyance, assignment and transfer, in form and substance reasonably
acceptable to Purchaser's counsel, as shall be effective to vest in Purchaser
good and valid title to the Assets (the "Assignment Instruments"), and (b)
Purchaser will assume from Sellers the due payment, performance and discharge
of the Assumed Liabilities by delivery of good and sufficient instruments of
assumption, in form and substance reasonably acceptable to Sellers' counsel,
as shall be effective to cause Purchaser to assume the Assumed Liabilities as
and to the extent provided in Section 1.02(a) (the "Assumption Instruments").
At the Closing, there shall also be delivered to Sellers and Purchaser the
certificates and other contracts, documents and instruments required to be
delivered under Articles VI and VII.
1.07 Prorations. To the extent the division of the Assets and the
Retained Assets or the Assumed Liabilities and the Retained Liabilities
require the proration of certain amounts previously paid or to be paid by
either the Sellers or Purchaser, except as otherwise agreed by the parties,
the net amount of all such prorations will be settled and paid on the Closing
Date.
1.08 Further Assurances; Post-Closing Cooperation. (a) At
Purchaser's sole discretion and request from time to time, First Albany Asset
Management Corp. ("FAAM") will
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continue to act as an outsider manager for customers of the financial
consultants engaged in the Business and in any other business owned by
Purchaser. Purchaser agrees that it will use its commercially reasonable
efforts to have FAAM included on its "approved list" of prospective asset
managers for registered representatives and financial consultants.
(b) Subject to the terms and conditions of this Agreement, at any
time or from time to time after the Closing, at Purchaser's request and
without further consideration, Sellers shall execute and deliver to Purchaser
such other instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take such other
actions as Purchaser may reasonably deem necessary or desirable in order more
effectively to transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of the Assets, and, to the full extent permitted by
Law, to put Purchaser in actual possession and operating control of the
Business and the Assets and to assist Purchaser in exercising all rights with
respect thereto, and otherwise to cause Sellers to fulfill their obligations
under this Agreement.
(c) Following the Closing, each party will afford the other party,
its counsel and its accountants, during normal business hours, reasonable
access to the books, records and other data relating to the Business in its
possession with respect to periods prior to the Closing and the right to make
copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of rights
and obligations under this Agreement, (iii) compliance with the requirements
of any Governmental or Regulatory Authority, (iv) the determination or
enforcement of the rights and obligations of any Indemnified Party or (v) in
connection with any actual or threatened Action or Proceeding. Further each
party agrees for a period extending six (6) years after the Closing Date not
to destroy or otherwise dispose of any such books, records and other data
unless such party shall first offer in writing to surrender such books,
records and other data to the other party and such other party shall not
agree in writing to take possession thereof during the ten (10) day period
after such offer is made.
(d) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
it is necessary that a party be furnished with additional information,
documents or records relating to the Business not referred to in paragraph (c)
above, and such information, documents or records are in the possession or
control of the other party, such other party shall use its commercially
reasonable efforts to furnish or make available such information, documents or
records (or copies thereof) at the recipient's request, cost and expense. Any
information obtained by such party in accordance with this paragraph shall be
held confidential by such party in accordance with Section 13.06.
(e) Unless otherwise agreed by Purchaser and Sellers in writing,
(i) Sellers will report to the applicable Tax authorities, Customers and
applicable vendors all reportable payments made or received in connection
with the Business (including without limitation amounts reportable on
Internal Revenue Service Form 1099) from January 1 of the year of the Closing
Date through and including the day before the Closing Date and, in connection
with any such payments, shall withhold and pay over to the applicable Tax
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authorities any amounts required to be so withheld and paid over and (ii)
Purchaser will report to the applicable Tax authorities and Customers all
reportable payments made or received in connection with the Business
(including without limitation amounts reportable on Internal Revenue Service
Form 1099) from and including the Closing Date through and including December
31 of the year of the Closing Date and, in connection with any such payments,
shall withhold and pay over to the applicable Tax authorities any amounts
required to be so withheld and paid over.
(f) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in
accordance with paragraph (c) and (d) of this Section shall be subject to
applicable rules relating to discovery.
1.09 Asset Transfers Requiring Consent. (a) The parties recognize
that the transfer of certain Assets to the Purchaser as contemplated hereby
cannot be effected without obtaining certain consents (each such consent, a
"Required Consent"). Sellers and Purchaser shall use commercially reasonable
efforts to obtain the Required Consents without any changes to the terms of
the Asset and/or Assumed Liability related thereto (other than, with respect
to the Real Property Leases, changes that will be included in the calculation
of Reimbursed Expenses). To the extent that any Required Consent with
respect to any Asset (other than Required Consents relating to the Real
Property Leases and Subleases) has not been obtained on or prior to the
Closing Date, such Asset (a "Delayed Asset") shall not be transferred as an
Asset hereunder, and any related liability that would, but for the absence of
such Required Consent, constitute an Assumed Liability (a "Delayed
Liability") shall not be assumed by the Purchaser as an Assumed Liability
hereunder, unless and until such Required Consent has been obtained.
Notwithstanding the foregoing, if any Required Consent is not obtained, the
Sellers shall, at the request of the Purchaser and at the expense of the
Sellers, implement any lawful arrangement designed to provide to the
Purchaser the benefits under or of the applicable Asset; provided, however,
that the Purchaser assumes and agrees to pay and perform all liabilities
relating to such Asset that would otherwise constitute Assumed Liabilities.
(b) At such time and on each occasion after the Closing Date that
a Required Consent shall be obtained with respect to any Delayed Asset, such
Delayed Asset shall forthwith be transferred and assigned to the Purchaser
hereunder, and all related Deferred Liabilities shall be simultaneously
assumed by the Purchaser hereunder, whereupon (i) such Delayed Asset shall
constitute an Asset for all purposes hereunder and (ii) such Deferred
Liabilities shall constitute Assumed Liabilities for all purposes hereunder.
(c) Purchaser agrees that the Sellers will not have any liability
to the Purchaser for failing to deliver any Real Property Lease, Personal
property Lease or Business Contract as a result of the failure to receive any
Required Consent; provided that this sentence will not relieve the Sellers
for liability for any breach of the remainder of this Section 1.09 and this
sentence will not limit Section 6.06 or Article VIIIB.
1.10 Conversion. From the date of this Agreement until the
Closing, the Sellers and the Purchaser will take all commercially reasonable
steps necessary or desirable, and proceed diligently and in good faith and use
all commercially reasonable efforts, as promptly as
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practicable to enable the conversion of all customer accounts of the Business
(that are Assets) to the systems of First Clearing Corporation effective as
of the Closing (the "Conversion").
1.11 Transfer Annex. Before the Closing Date, the parties agree to
negotiate (in good faith) the terms and conditions of the transfer of the
Customer Related Assets and cash of Customers pursuant to Section 1.01(a),
which will be in accordance with customary industry terms and conditions but
subject to the terms and conditions contained in this Agreement regarding the
assumption of the Assumed Liabilities and the retention of the Retained
Liabilities. Such terms will be set forth in an annex, which will form a
part of this Agreement (the "Transfer Annex").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Purchaser jointly and
severally as follows:
2.01 Corporate Existence of Sellers. Each Seller is a corporation
duly incorporated, validly existing and in good standing under the Laws of
the State of New York, and has full corporate power and authority to conduct
the Business as and to the extent now conducted and to own, use and lease its
Assets and is duly qualified to do business and is in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified, except where the failure to be
so qualified or to be in good standing would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Condition of the Business.
2.02 Authority. Each Seller has full corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby, including without
limitation to sell and transfer (pursuant to this Agreement) its Assets. The
execution and delivery by each Seller of this Agreement, and the performance
by each Seller of its obligations hereunder, have been duly and validly
authorized by the Board of Directors of such Seller, no other corporate
action on the part of such Seller or its shareholders being necessary. This
Agreement has been duly and validly executed and delivered by each Seller and
constitutes the legal, valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms.
2.03 No Conflicts. The execution and delivery by each Seller of
this Agreement do not, and the performance by each Seller of its obligations
under this Agreement and the consummation of the transactions contemplated
hereby will not (with or without notice or lapse of time or both):
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or bylaws
(or other comparable corporate charter documents) of such Seller;
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(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.04 of the
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to or License of such Seller
or any of its Assets and Properties (other than such conflicts, violations or
breaches (i) which could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on the Condition of the Business
or (ii) as would occur solely as a result of the legal or regulatory status
of Purchaser or any of its Affiliates); or
(c) except as disclosed in Section 2.03 of the Disclosure Schedule
or as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Condition of the Business, (i) conflict
with or result in a violation or breach of, (ii) constitute a default under
or permit the acceleration of the performance required by, (iii) require such
Seller to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, or (iv)
result in the creation or imposition of any Lien upon such Seller or any of
its Assets or Properties under, any Contract or License to which such Seller
is a party or by which any of its Assets and Properties is bound.
2.04 Governmental Approvals and Filings. Except as disclosed in
Section 2.04 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority or
Securities Regulatory Body on the part of either Seller is required in
connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby, except (i) where
the failure to obtain any such consent, approval or action, to make any such
filing or to give any such notice could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Condition of the Business, and (ii) those as would be required solely as a
result of the identity or the legal or regulatory status of Purchaser or any
of its Affiliates.
2.05 Financial Statements, Undisclosed Liabilities and Absence of
Certain Changes. (a) Prior to the execution of this Agreement, Sellers have
delivered to Purchaser a true and complete copy of the unaudited pro forma
profit and loss reports for the Branch Network and the FDC Business for the
fiscal year ended December 31, 1999 (the "Financial Statements"), a copy of
such report for the Branch Network is contained in that certain Confidential
Memorandum dated February 2000, prepared by Berkshire Capital Corporation
with respect to the Branch Network (the "Confidential Memorandum"). Except
as disclosed in Section 2.05(a) of the Disclosure Schedule, the Financial
Statements were prepared on a pro forma basis from the Books and Records of
Sellers and the Financial Statements fairly present in all material respects
the results of operations of the Branch Network and the FDC Business for the
periods covered thereby in accordance with GAAP (but without footnotes and
financial schedules), consistently applied.
(b) Except as disclosed in Section 2.05(b) of the Disclosure
Schedule, since December 31, 1999 there has not been any event, circumstance
or condition that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Condition of the Business.
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(c) Since December 31, 1999, except as disclosed in Section 2.05
(c) of the Disclosure Schedule or any other Section of the Disclosure Schedule,
Sellers have not incurred any Liabilities which in the aggregate are material
to the Condition of the Business, other than Liabilities incurred in the
ordinary course of business.
(d) Since December 31, 1999, Sellers have conducted the Business
in the ordinary course, consistent with past practice, and there has not been
any event, circumstance or condition that could, individually or in the
aggregate, reasonably be expected to result in a violation of the covenants
set forth in Article IV of this Agreement had such events, circumstances or
conditions occurred after the date of this Agreement.
2.06 Legal Proceedings. Except as disclosed in Section 2.06 of the
Disclosure Schedule:
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Sellers, threatened against, relating to or affecting either
Seller with respect to the Business or any of its Assets and Properties which
could reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Condition of the Business;
(b) there are no Orders outstanding against either Seller which,
individually or in the aggregate, have had or could reasonably be expected to
have a Material Adverse Effect on the Condition of the Business; and
(c) None of Sellers, any Offered Employee or any of the Sellers'
Assets or Properties is a party to, or subject to, any Order of any
Securities Regulatory Body and relating to the Business (other than exemptive
Orders) and, to the Knowledge of Sellers as of the date hereof, no Securities
Regulatory Body has advised Sellers or any Offered Employee that it is
contemplating issuing or requesting (or considering the appropriateness of
issuing or requesting) any such Order.
2.07 Compliance With Laws and Orders. Except as disclosed in .
Section 2.07 of the Disclosure Schedule or as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Condition of the Business neither Seller nor, to the Knowledge of Sellers,
any Offered Employee:
(a) is in violation of or in default under any Law or Order;
(b) fails to have any License required to permit the conduct of
the Business or the ownership of the Assets in the ordinary course consistent
with past practice as presently conducted or owned; all such Licenses are in
full force and effect and current and, to Sellers' Knowledge, no suspension
or cancellation of any of them is threatened or reasonably likely;
(c) has received any notification or communication from any
Securities Regulatory Body (A) asserting that any of them is not in
compliance with any of the Laws which such Securities Regulatory Body
enforces, or has otherwise engaged in any unlawful business practice, (B)
threatening to revoke any License or (C) restricting or disqualifying the
activities of
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the Sellers with respect to the Business (except for restrictions generally
imposed by rule, regulation or administrative policy on broker-dealers
generally);
(d) is not, nor to the Sellers' Knowledge, is any "affiliated
person" (as defined in the Investment Company Act of 1940) with it, ineligible
pursuant to Section 9(a) or 9(b) of the Investment Company Act of 1940 to
serve as an investment advisor (or in any other capacity contemplated by the
Investment Company Act of 1940) to an Investment Company. Neither the
Seller, nor any "associated person" (as defined in the Investment Advisers
Act of 1940) thereof, is ineligible pursuant to Section 203 of the Investment
Advisers Act of 1940 to serve as an investment advisor or as an associated
person to a registered investment advisor;
(e) is not required to be registered as a commodity trading
advisor, commodity pool operator, futures commission merchant, introducing
broker, insurance agent, or transfer agent under any Law or Order;
(f) is not subject to regulation under the Investment Advisers Act
of 1940 or the Investment Company Act of 1940 and does not provide investment
management, investment advisory, sub-advisory, administration, distribution
or certain other services to persons registered or, to the Sellers'
Knowledge, required to be registered under the Investment Company Act of
1940; each of the Employees which are or who are required to be registered,
licensed or qualified as a broker-dealer, an investment advisor, a
registered representative, an insurance agent or a sales person (or in
similar capacity) with the SEC, the securities commission of any st ate or
foreign jurisdiction or any Securities Regulatory Body are duly registered,
licensed or qualified as such and such registrations are in full force and
effect; all federal, state, local and foreign registration requirements have
been complied with in all material respects and such registrations as
currently filed, and all periodic reports required to be filed with respect
thereto, are accurate and complete in all material respects;
(g) is subject to a "statutory disqualification" as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (as amended, the
"Exchange Act") or is subject to a disqualification that would be a basis for
censure, limitations on the activities, functions or operations of, or
suspension or revocation of the registration of any broker-dealer as broker-
dealer under Section 15, or municipal securities dealer, government
securities broker or government securities dealer under Section 15, Section
15B or Section 15C of the Exchange Act and, to the Sellers' Knowledge, there
is no current investigation, whether formal or informal, or whether
preliminary or otherwise, that could reasonably be expected to result in,
any such censure, limitations, suspension or revocation; and
(h) has for the five-year period to the date hereof, been
convicted of any crime or is or has been subject to disqualification that
would be a basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Investment Advisers Act or Rule
206(4) -4(b) thereunder or for disqualification as an investment adviser for
any Investment Company pursuant to Section 9(a) of the Investment Company Act
of 1940, and there is no reasonable basis for, or (to the Sellers' Knowledge)
proceeding or investigation, whether formal or informal, or whether
preliminary or otherwise, that could reasonably be expected to result in, any
such disqualification, denial, suspension or revocation.
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2.08 Benefit Plans; ERISA. (a) Section 2.08(a) of the Disclosure
Schedule contains a true and complete list of each material Benefit Plan.
True and complete copies of each material Benefit Plan, including, but not
limited to, any trust instruments and/or insurance contracts, if any, forming
a part thereof, and all amendments thereto have been supplied or made
available to Purchaser
(b) No Liens have arisen on any of the Assets pursuant to Section
302 of ERISA, Section 412 of the Code, or Title IV of ERISA.
(c) Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither of the Sellers has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(d) All of the participants in the Financial Consultants Deferred
Compensation Plan are, or would be if employed on the Closing Date, Offered
Employees (as defined in Section 8.01A).
2.09 Real Property. Section 2.09(a) of the Disclosure Schedule
contains a true and correct list of each Real Property Lease and each lease
to underlie a Sublease, true and complete copies of which have been provided
to the Purchaser prior to the date of this Agreement. Sellers have a valid
and subsisting leasehold estate in and the right to quiet enjoyment of the
real properties subject to such leases for the full term thereof. Each such
lease is a legal, valid and binding agreement, enforceable in accordance with
its terms, of Sellers and of each other Person that is a party thereto other
than where the failure to be so enforceable would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Condition of the Business, and except as set forth in Section 2.09(b) of the
Disclosure Schedule, to the Knowledge of Sellers there is no material default
(or any condition or event which, after notice or lapse of time or both, would
constitute a default) thereunder.
2.10 Tangible Personal Property. First Albany or FACT, as
applicable, is in possession of and has good title to, or has valid leasehold
interests in or valid rights under Contracts to use, all the Tangible
Personal Property used in and individually or in the aggregate with other
such property material to the Condition of the Business. All the Tangible
Personal Property is free and clear of all Liens, other than Permitted Liens
and Liens disclosed in Section 2.10 of the Disclosure Schedule, and is in
all material respects in good working order and condition, ordinary wear and
tear excepted.
2.11 Contracts. (a) Section 2.11(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below) contains a
true and complete list of each of the following Contracts to which either
Seller is a party or by which any of the Assets is bound:
(i) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term to, or otherwise relating to employment or the
termination of employment of, any Employee;
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(ii) any Business Contract (excluding Real Property Leases and
Personal Property Leases) for the purchase of materials, supplies, services,
equipment or other assets, in each case relating primarily to the Business,
providing for annual or aggregate remaining payments by the Sellers under any
such Business Contract of $100,000 or more;
(iii) other than Customer Contracts entered into in the ordinary
course and other than the Contracts described in Section 2.11(a)(vi), any
Business Contract for the sale by Sellers of services, in each case
relating primarily to the Business, providing for annual or aggregate
payments to Sellers of $100,000 or more;
(iv) any Business Contract of any Seller as borrower relating to
indebtedness for borrowed money or the deferred purchase price of property
(in either case, whether incurred, assumed, guaranteed or secured by any
asset), in either case relating primarily to the Business, except any such
agreement with an aggregate outstanding principal amount not exceeding
$100,000 which may be prepaid on not more than ten days' notice without
the payment of any penalty;
(v) any Business Contract entered into primarily in connection
with the Business that limits the freedom of any Seller to compete in any
line of business or with any Person or in any area or to own, operate,
sell, transfer, pledge or otherwise dispose of or encumber any Asset and
which would so limit the freedom of Purchaser after the Closing Date; and
(vi) any Contract between Sellers and the fully disclosed clearing
brokers relating to the FDC Business.
(b) Each Contract required to be disclosed in Section 2.11(a) of
the Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms, of
the Seller and of each other party thereto; and except as disclosed in
Section 2.11(b) of the Disclosure Schedule neither Seller nor, to the
Knowledge of Sellers, any other party to such Contract is in violation or
breach of or default under any such Contract (or with notice or lapse of
time or both, would be in violation or breach of or default under any such
Contract) the effect of which, individually or in the aggregate, could
reasonably be expected to have a Materially Adverse Effect on the Condition
of the Business.
(c) Attached to Section 2.11(c) of the Disclosure Schedule is a
current form of customer agreement used in connection with the Business.
Except for instances of noncompliance which would not be reasonably expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Condition of the Business:
(i) Each of the Sellers is in compliance with the terms of each
Customer Contract, and each such Customer Contract is in full force and
effect with respect to the applicable Customer;
(ii) Each extension of credit by Sellers to any Customer (i) is in
full compliance with Regulation T of the Federal Reserve Board or any
substantially similar
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regulation of any Regulatory Authority and (ii) Sellers have first
priority perfected security interests in the collateral securing such
extension; and
(iii) As of the Closing, the Sellers will have supplied or made
available all identification and basic background information in their
possession with respect to Customers, including any information describing
the person's source of wealth and line of business or regarding
references, referrals or potential "red-flags" or suspicious transactions.
2.12 Brokers. Except for Berkshire Capital Corporation, whose fees,
commissions and expenses are the sole responsibility of Sellers, all
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Sellers directly with Purchaser without the
intervention of any Person on behalf of Sellers in such manner as to give
rise to any valid claim by any Person against Purchaser for a finder's fee,
brokerage commission or similar payment.
2.13 Assets. Except for instances which would not be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
the Condition of the Business, the Sellers have good and marketable title to the
Assets, free and clear of all Liens other than Permitted Liens, and following
the Closing, Purchaser shall have good title to the Assets, free and clear of
all Liens other than Permitted Liens.
2.14 Labor Matters. With respect to the Offered Employees, the
Sellers are not parties to or bound by any collective bargaining agreement,
contract or other Contract or understanding with a labor union or labor
organization, nor are they the subject of a proceeding asserting that it has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel either of them to bargain with any labor
organization as to wages and conditions of employment, nor is there any
strike or other labor dispute involving the Offered Employees pending or, to
the Sellers' Knowledge, threatened, nor are either of them aware of any
activity involving the Offered Employees seeking to certify a collective
bargaining unit or engaging in any other organizational activity.
2.15 Taxes. (a) Tax Returns and Payments. Except as set forth in
Section 2.15 of the Disclosure Schedule or that could not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect
on the Condition of the Business, (1) all reports and returns with respect to
Taxes and Tax related information reporting requirements that are required to be
filed by the Sellers with respect to the Business (collectively, the
"Sellers Tax Returns"), have been duly filed (or requests for extensions
have been timely filed and have not expired and, if such Sellers Tax Returns
have not been filed on or prior to the Closing Date, will be duly filed
after the Closing Date), (2) such Sellers Tax Returns were (or will be when
filed) true, complete and accurate in all material respects, (3) all Taxes
shown to be due on Sellers Tax Returns have been paid in full or payment is
not yet due, (4) no issues have been raised by the relevant taxing authority
in connection with the examination of any of the Sellers Tax Returns, and
(5) the Business in not a party to any tax sharing, allocation or similar
agreement or understanding with respect to Taxes, and is not liable for any
Taxes under any such agreements or understandings.
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(b) Customer and Other Tax Information. Except for instances
which would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect on the Condition of the Business, each Seller has
complied with all applicable requirements regarding the collection of
taxpayer identification and other information from its Customers, creditors,
Employees and the like (including, without limitation, requirements with
respect to the collection of Internal Revenue Service Forms W-8 and W-9) in
relation to the Business.
2.16 Accounting Controls. The Sellers have devised and maintained
systems of internal accounting controls with respect to the Business
sufficient to provide reasonable assurances that (1) all transactions are
executed in accordance with management's general or specific authorization;
(2) all transactions are recorded as necessary to permit the preparation of
financial statements in conformity with the Code, and to maintain proper
accountability for items; (3) access to their property and assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for items is compared with
the actual levels at reasonable intervals and appropriate action is taken
with respect to any differences, except, in the case of each of clauses (1)
through (4), where the failure to be so sufficient would not reasonably be
likely to have a Material Adverse Effect on the Condition of the Business.
2.17 No Knowledge. To the Knowledge of the Sellers, there are no
reasons why the regulatory approvals referred to in Section 2.04 should not
be obtained without the imposition of any Onerous Condition.
2.18 Customer-Related Assets. The Customer-Related Assets assigned
at the Closing shall include all assets or rights owed by the Sellers to
Customers, other than those owed to Customers pursuant to Customer Contracts
that are Delayed Assets.
2.19 Trading Commissions. Exhibit F sets forth the Trading
Commissions by Financial Consultant and is true and complete in all material
respects.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
3.01 Corporate Existence. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the Laws of the
State of Delaware. Purchaser has full corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby and is duly qualified to do business and
is in good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified,
except where the failure to be so qualified or to be in good standing would
not have a material adverse effect upon the validity or enforceability of
this Agreement.
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3.02 Authority. The execution and delivery by Purchaser of this
Agreement and the performance by Purchaser of its obligations hereunder have
been duly and validly authorized by the Board of Directors of Purchaser, no
other corporate action on the part of Purchaser or its stockholders being
necessary. This Agreement has been duly and validly executed and delivered
by Purchaser and constitutes a legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the performance by Purchaser of its obligations under
this Agreement and the consummation of the transactions contemplated hereby
will not (with or without notice or lapse of time or both):
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or by-
laws (or other comparable corporate charter document) of Purchaser;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Schedule 3.04 hereto,
conflict with or result in a violation or breach of any term or provision of
any Law or Order applicable to or License of Purchaser or any of its Assets
and Properties (other than such conflicts, violations or breaches which
could not individually or in the aggregate reasonably be expected to have a
material adverse effect upon the validity or enforceability of this
Agreement); or
(c) except as disclosed in Schedule 3.03 hereto, or as could not,
individually or in the aggregate, reasonably be expected to materially
adversely affect the ability of Purchaser to consummate the transactions
contemplated hereby or to perform its obligations hereunder (i) conflict
with or result in a violation or breach of, (ii) constitute a default under
or permit the acceleration of the performance required by, (iii) require
Purchaser to obtain any consent, approval or action of, make any filing with
or give any notice to any Person as a result or under the terms of, or (iv)
result in the creation or imposition of any Lien upon Purchaser or any of
its Assets or Properties under, any Contract or License to which Purchaser
is a party or by which any of its Assets and Properties is bound.
3.04 Governmental Approvals and Filings. Except as disclosed in
Schedule 3.04 hereto, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby,
except where the failure to obtain any such consent, approval or action, to
make any such filing or to give any such notice could not reasonably be
expected to adversely affect the ability of Purchaser to consummate the
transactions contemplated by this Agreement or to perform its obligations
hereunder.
3.05 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which could
reasonably be expected to result in the issuance of an Order
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restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
3.06 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with Sellers without the intervention of any Person on behalf of Purchaser in
such manner as to give rise to any valid claim by any Person against Sellers
for a finder's fee, brokerage commission or similar payment.
3.07 Financing. Purchaser has sufficient cash to pay the Purchase
Price and to make all other necessary payments of fees and expenses in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF SELLERS
Each Seller jointly and severally covenants and agrees with Purchaser
that, at all times from and after the date hereof until the Closing and in
the case of Sections 4.07 and 4.11 for the period specified therein, such
Seller will comply with all covenants and provisions of this Article IV
applicable to it, except to the extent Purchaser may otherwise consent in
writing.
4.01 Regulatory and Other Approvals. Sellers will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently
and in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to Governmental or Regulatory
Authorities, Securities Regulatory Bodies or any other Person required of
Sellers to consummate the transactions contemplated hereby, including without
limitation those described in Sections 2.03 and 2.04 of the Disclosure
Schedule and the Real Estate Leases and Personal Property Leases, (b) provide
such other information and communications to such Governmental or Regulatory
Authorities, Securities Regulatory Bodies or other Persons as such
Governmental or Regulatory Authorities, Securities Regulatory Bodies or
other Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation to Purchaser in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to Governmental or
Regulatory Authorities, Securities Regulatory Bodies or other Persons
required of Purchaser to consummate the transactions contemplated hereby.
Sellers shall afford Purchaser the right to review in advance, subject to any
applicable laws relating to the exchange of information, all written
information submitted to any Governmental or Regulatory Authorities,
Securities Regulatory Bodies or other Persons in connection with the
transactions contemplated by this Agreement. Sellers will provide prompt
notification to Purchaser when any consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Purchaser of any communications (and, unless
precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority, Securities Regulatory
Bodies or other Person regarding any of the transactions contemplated by this
Agreement.
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4.02 HSR Filings. In addition to and not in limitation of Sellers'
covenants contained in Section 4.01, Sellers will (a) take promptly all
actions necessary to make the filings required of Sellers or their Affiliates
under the HSR Act, (b) comply at the earliest practicable date with any
request for additional information received by Sellers or their Affiliates
from the Federal Trade Commission or the Antitrust Division of the Department
of Justice pursuant to the HSR Act and (c) reasonably cooperate with
Purchaser in connection with Purchaser's filing under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice or
state attorneys general.
4.03 Access by Purchaser. Each Seller will (a) provide Purchaser
and its officers, employees, counsel, accountants, financial advisors,
consultants and other representatives (collectively, "Representatives") with
full access, upon reasonable prior notice and during normal business hours,
(i) to the Employees and such other officers, employees and agents of First
Albany who have any responsibility for the conduct of the Business, to First
Albany's accountants and to the Assets and Assumed Liabilities and (ii) in
order to install Purchaser's computer network and the InfoMax System and to
provide training to Offered Employees, but only to the extent that such
access does not unreasonably interfere with the Business and (b) furnish
Purchaser and such other Persons with all such information and data
(including without limitation copies of Business Contracts, Benefit Plans and
other Business Books and Records) concerning the Business, the Assets and the
Assumed Liabilities as Purchaser or any of such other Persons reasonably may
request in connection with such investigation, except to the extent that
furnishing any such information or data would violate any Law, Order,
Contract or License applicable to First Albany or by which any of its Assets
and Properties is bound.
4.04 No Solicitations. Subject to the duties imposed by applicable
Law, Sellers will not take, nor will they permit any Affiliate of such Seller
(or authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of Sellers
or any such Affiliate) to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate any offer or
inquiry from any Person concerning the acquisition of the Business other
than (i) Purchaser or its Affiliates or (ii) any other Person who has
proposed any merger or other business combination or purchase of equity
interests or assets to which either Seller or any Affiliate of such Seller
is a party and which indirectly involves the Business, provided that the
Person making the proposal expressly recognizes and acknowledges the rights
of Purchaser hereunder in a written instrument reasonably satisfactory to
Purchaser.
4.05 Conduct of Business. (a) Except as disclosed in Section 4.05
of the Disclosure Schedule, First Albany will operate the Business only in the
ordinary course consistent with past practice. Without limiting the
generality of the foregoing, First Albany will use commercially reasonable
efforts to (i) preserve intact the present business organization and
reputation of the Business in all material respects, (ii) keep available
(subject to dismissals and retirements in the ordinary course of business)
the services of key Employees, (iii) maintain the Assets in good working
order and condition, ordinary wear and tear excepted and (iv) maintain
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the good will of Customers and other Persons with whom First Albany otherwise
has business relationships in connection with the Business.
(b) Without limiting Section 4.05(a), the Sellers will not:
(1) in a single transaction or a series of related transactions,
sell (including any sale-leaseback), lease, pledge, transfer or otherwise
dispose of (including through a dividend or distribution to any Person
other than the other Seller) any Assets that are material to the Business,
other than Customer-Related Assets in the ordinary course of Business;
(2) terminate, amend, modify or waive any material right under any
Real Property Lease or material Business Contract or Personal Property
Lease or enter into any Real Property Lease or material Business Contract
or Personal Property Lease (other than renewals of existing Real Property
Leases or material Business Contracts or Personal Property Leases on
commercially reasonable terms) other than in the ordinary course of
business consistent with past practice;
(3) grant any increase in the compensation or benefits of any
Offered Employee (excluding any increase specifically provided for in the
terms of, or legally required by, any bonus, pension, profit sharing or
other plan or commitment) or any increase in the compensation or benefits
payable, or to become payable, to any Offered Employee, except for (A)
increases in the usual and ordinary course of business to Offered Employees
consistent with past practice in terms of proportion and timing, (B) other
changes that are required by applicable Law, (C) grants of awards to newly
hired officers and employees consistent with past practice and (D) the
payment of onetime special bonuses to Offered Employees in connection with
the transactions contemplated hereby with such terms and conditions as
Sellers deem appropriate (Sellers will inform Purchaser of any such
special bonuses);
(4) adopt, enter into or amend (except in accordance with Section
8.06A), or become obligated under, any employment, severance, bonus,
profit sharing, compensation, equity interest, option, pension,
retirement, deferred compensation, health care, employment or other
employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any Offered Employee (including any new employee of
the Business) or retiree which was formerly an Offered Employee, except as
required to comply with changes in applicable Law or in the ordinary
course of business consistent with past practice;
(5) knowingly take any action that (or knowingly omit to take any
action not otherwise prohibited by the terms of this Agreement the
omission of which) would, or is or reasonably likely to, (A) result in any
of a Seller's representations and warranties set forth in this Agreement
or any certificate delivered in connection with the Closing being or
becoming untrue in any material respect at any time at or prior to the
Closing Date, (B) result in any of the conditions to the consummation of
the transactions contemplated
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hereby set forth in Article VI or VII hereof not being satisfied on or
prior to August 1, 2000 or (C) breach any provision of this Agreement; and
(6) authorize, commit or enter into any Contract to take any of the
actions referred to in this Section 4.05(b).
(c) Notwithstanding the foregoing, Sellers may hire new employees
who will be Offered Employees on the Closing Date, and enter into employment
arrangements with such new employees, including extending loans evidenced by
Promissory Notes to be transferred in accordance with Section 1.01(a)(viii);
provided that all such hiring, entering and/or extending will be in the
ordinary course of business consistent with past practice and subject to the
prior approval of Purchaser (not to be unreasonably withheld or delayed).
4.06 Delivery of Assets. On the Closing Date, each Seller will
take all commercially reasonable steps to deliver or make available to
Purchaser at the locations at which the Business is conducted any Assets as
are in such Seller's possession at other locations, and if at any time after
the Closing such Seller discovers in its possession or under its control any
other Assets, it will forthwith deliver such other Assets to Purchaser.
4.07 Noncompetition. (a) Sellers and their subsidiaries will,
for a period of two (2) years from the Closing Date, refrain from and cause
each Affiliate of either Seller (that is not a subsidiary) currently engaged in
financial services to refrain from:
(i) employing, engaging or seeking to employ or engage any
Person who on the Closing Date is, or within the prior six months from
the Closing Date had been, an Offered Employee (other than with Purchaser's
written consent);
(ii) disclosing (unless compelled by judicial or administrative
process) or using any confidential or secret information relating to
the Business or any client, customer or supplier of the Business;
(iii) participating or engaging in (other than through the
ownership of 5% or less of any class of securities registered under the
Securities Exchange Act of 1934, as amended), the Branch Network and
the FDC Business (the "Restricted Business"); or
(iv) without limiting the generality of Section 4.07(a)(iii),
soliciting or accepting as a customer with respect to the Restricted
Business any Person that is on the Closing Date, or within the prior
six months from the Closing Date had been, a Customer.
(b) The parties hereto recognize that the Laws and public
policies of the various states of the United States may differ as to the
validity and enforceability of covenants similar to those set forth in this
Section. It is the intention of the parties that the provisions of this
Section be enforced to the fullest extent permissible under the Laws and
policies of each jurisdiction in which enforcement may be sought, and that
the unenforceability (or the modification to conform to such Laws or
policies) of any provisions of this Section shall not render unenforceable,
or impair, the remainder of the provisions of this Section. Accordingly, if
any provision of this Section shall be determined to be invalid or
unenforceable, such invalidity
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or unenforceability shall be deemed to apply only with respect to the
operation of such provision in the particular jurisdiction in which such
determination is made and not with respect to any other provision or
jurisdiction.
(c) Notwithstanding the foregoing, nothing in Section 4.07(a)(iii)
shall be deemed to prohibit Sellers from (i) leasing, renting,
selling or otherwise disposing of any Excluded Assets; (ii) engaging in the
business conducted by Sellers' Corporate Services Group substantially
consistent with such conduct as of the date of this Agreement, including the
provision of retail brokerage services (including on-line trading) that are
incidental to its institutional brokerage business; (iii) engaging in the
business conducted by FAAM substantially consistent with such conduct as of
the date of this Agreement, including the provision of investment advisory
and asset management services; (iv) engaging in the investment banking
business; (v) engaging in the institutional trading business; or (vi)
acquiring an interest in, or entering into a merger or other business
combination with any Person, provided that not more than 25% of the
consolidated revenues of such Person (for the immediately preceding fiscal
year) shall be derived from the Restricted Business; provided further that
(x) in the case of the business to be conducted pursuant to Section
4.07(c)(ii) or (iii), such business is not being conducted by Sellers'
Corporate Service Group or FAAM for the purpose of avoiding the provisions
of Section 4.07(a)(iii), and (y) in the case of any acquisition, merger or
combination pursuant to Section 4.07(c)(vi), such acquisition, merger or
combination is bona fide. In addition, upon (A) any acquisition (for cash)
of either Seller by any other Person (that is not Affiliated with either
Seller), or (B) a merger or acquisition for stock involving either Seller
and any other Person (that is not Affiliated with either Seller) under which
the shareholders of the Sellers shall not own a majority of the equity
interests of the surviving corporation, the provisions of Section
4.07(a)(iii) shall terminate with respect to the Seller acquired or merged.
4.08 Fulfillment of Conditions. Sellers will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good
faith to satisfy each other condition to the obligations of Purchaser
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
4.09 Current Information. The Sellers shall promptly notify the
Purchaser, of:
(1) any notice or other communication from any Person alleging
that the consent of such Person (other than any such consent which, if
not obtained, would not be materially adverse to Purchaser, and other
than any Person whose consent is required as set forth in a Disclosure
Schedule) is or may be required as a condition to the consummation of
the transactions contemplated by the Agreement; or
(2) any written notice or other material communication from any
Governmental or Regulatory Authorities or Securities Regulatory Body
in connection with the transactions contemplated by this Agreement.
4.10 Annual Bonuses. On the next regular payroll payment date of
First Albany after the Closing Date, Sellers shall pay each Transferred
Employee who is eligible for a
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discretionary bonus a pro rata portion of the bonus as of the Closing Date
(as determined by Sellers) that such employee would have received if such
employee remained an employee of Sellers throughout the 2000 calendar year.
4.11 Telecommunications Equipment. (a) Sellers shall provide
Purchaser's personnel reasonable access to the Transferred Branch Offices'
telecommunications equipment for the purpose of making such changes as may be
necessary to transfer such equipment from Sellers to Purchaser, provided that
such access will be granted only upon reasonable notice by Purchaser to
Sellers and that Purchaser's personnel shall be accompanied by an employee of
either Seller during the period such access is granted.
(b) First Albany agrees that it will negotiate in good faith to
provide access to the telecommunications equipment in the Subleased Branch
Offices.
(c) First Albany agrees that during the period commencing on the
Closing Date and ending on the first anniversary thereof, it will not reuse
the numbers in its North American Number Plan and will (as requested by
Purchaser) either directly forward or answer and forward all calls to prior
numbers of financial consultants.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Sellers that, at all times
from and after the date hereof until the Closing, Purchaser will comply with
all covenants and provisions of this Article V, except to the extent Sellers
may otherwise consent in writing.
5.01 Regulatory and Other Approvals. Purchaser will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently
and in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to Governmental or Regulatory
Authorities, Securities Regulatory Bodies or any other Person required of
Purchaser to consummate the transactions contemplated hereby, including
without limitation those described in Schedules 3.03 and 3.04 hereto, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or Regulatory
Authorities, Securities Regulatory Bodies or other Persons may reasonably
request in connection therewith and (c) provide reasonable cooperation to
Sellers in obtaining all consents, approvals or actions of, making all
filings with and giving all notices to Governmental or Regulatory
Authorities, Securities Regulatory Bodies or other Persons required of
Sellers to consummate the transactions contemplated hereby. Purchaser shall
afford Sellers the right to review in advance, subject to any applicable laws
relating to the exchange of information, all written information submitted to
any Governmental or Regulatory Authorities, Securities Regulatory Bodies or
other Persons in connection with the transactions contemplated by this
Agreement. Purchaser will provide prompt notification to Sellers when any
consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as
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applicable, and will advise Sellers of any communications (and, unless
precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority, Securities Regulatory
Bodies or other Person regarding any of the transactions contemplated by this
Agreement.
5.02 HSR Filings. In addition to and without limiting
Purchaser's covenants contained in Section 5.01, Purchaser will (i) take
promptly all actions necessary to make the filings required of Purchaser or
its Affiliates under the HSR Act, (ii) comply at the earliest practicable
date with any request for additional information received by Purchaser or its
Affiliates from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (iii) reasonably cooperate
with Sellers in connection with Sellers' filing under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice or
state attorneys general.
5.03 Fulfillment of Conditions. Purchaser will take all
commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each other condition to the obligations of
Sellers contained in this Agreement and will not take or fail to take any
action that could reasonably be expected to result in the nonfulfillment of
any such condition.
5.04 Additional Commitment. (a) Purchaser agrees to undertake,
on behalf and for the account of the Sellers the defense of customer
arbitrations arising in connection with the operation of the Business that
are Retained Liabilities of the Sellers, subject to the following limitations
(the "Defended Arbitrations"): no more than 12 such arbitrations for each
calendar year 2001, calendar year 2002 and calendar year 2003.
(b) Sellers shall provide Purchaser with prompt notice of any
customer complaint or other suit that Sellers elect to be defended by the
Purchaser as a Defended Arbitration. The Purchaser undertakes to vigorously
and diligently prosecute the Defended Arbitrations to a final conclusion or
a settlement that will be at the discretion of Sellers. Sellers will be
obliged, and hereby agree, to reimburse the Purchaser for its reasonable out-
of-pocket expenses incurred in relation to the Defended Arbitration (but
specifically excluding such fees and expenses payable to any outside
counsel). Sellers will remain liable for any judgment, damages, award,
settlement or any other monetary or non-monetary obligation arising out of a
Defended Arbitration.
(c) In no event shall the Purchaser be obliged to defend any
customer arbitration under this Section 5.04 where the amount claimed is in
excess of $200,000.
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ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Assets and
to assume and pay, perform and discharge the Assumed Liabilities are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by
Purchaser in its sole discretion):
6.01 Representations and Warranties. The representations and
warranties made by Sellers in this Agreement shall be true and correct, in
all material respects as of the date of this Agreement and on and as of the
Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties expressly made as of a specified date earlier
than the Closing Date, on and as of such earlier date.
6.02 Performance. Each Seller shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
(including those contained in Article VIIIB) required by this Agreement to be
so performed or complied with by Sellers at or before the Closing, it being
agreed that, with respect to Article VIIIB, Sellers shall be deemed to have
satisfied the condition set forth in this Section 6.02 if Sellers shall have
assigned to Purchaser (either directly or by sublease) leasehold interests
in Transferred Branch Offices (or Substantially Equivalent Spaces) and
entered into Subleases with Purchaser for Subleased Branch Offices (or
Substantially Equivalent Spaces), which in the aggregate provided 90% or
more of the Trading Commissions.
6.03 Officers' Certificates. Each Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and executed by the Chairman
of the Board, the President or any Vice President of such Seller,
substantially in the form and to the effect of Exhibit B hereto, and a
certificate, dated the Closing Date and executed by the Secretary or any
Assistant Secretary of such Seller, substantially in the form and to the
effect of Exhibit C hereto.
6.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions contemplated by
this Agreement.
6.05 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority, or Securities Regulatory Body necessary to permit Purchaser and
Sellers to perform their respective obligations under this Agreement and to
consummate the transactions contemplated hereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority, or Securities Regulatory Body necessary for the
consummation of the transactions contemplated by this Agreement, including
under the HSR Act, shall have occurred; provided, that no such consents,
approvals and actions shall be deemed received or obtained hereunder if they
shall be subject to an Onerous Condition.
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6.06 Third Party Consents. All consents or approvals of all
Persons (other than consents or approvals (I) of Governmental or Regulatory
Authorities and Securities Regulatory Bodies or (ii) related to the clearing
Contracts, Personal Property Leases, Real Property Leases or any investment
advisory Contracts) required for or in connection with the execution,
delivery and performance of this Agreement (including the consummation of the
purchase and sale of the Assets) shall have been obtained and shall be in
full force and effect, unless the failure to obtain any such consent or
approval could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Condition of the Business.
6.07 Deliveries. Sellers shall have delivered to Purchaser the
Assignment Instruments in a form reasonably acceptable to Purchaser.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder to sell and transfer the
Assets are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in
part by Sellers in their sole discretion):
7.01 Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and on and as of the
Closing Date as though made on and as of the Closing Date.
7.02 Performance. Purchaser shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Purchaser
at or before the Closing.
7.03 Officers' Certificates. Purchaser shall have delivered to
Sellers a certificate, dated the Closing Date and executed by the Chairman of
the Board, the President or any Vice President of Purchaser, substantially in
the form and to the effect of Exhibit D hereto, and a certificate, dated the
Closing Date and executed by the Secretary or any Assistant Secretary of
Purchaser, substantially in the form and to the effect of Exhibit E hereto.
7.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions contemplated by
this Agreement.
7.05 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority, or Securities Regulatory Body necessary to permit Sellers and
Purchaser to perform their respective obligations under this Agreement and to
consummate the transactions contemplated hereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority, or Securities Regulatory Body necessary for the
consummation of the transactions contemplated by this Agreement and the
Transition Services Agreement, including under the HSR Act, shall have
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occurred; provided, that no such consents, approvals and actions shall be
deemed received or obtained hereunder if they shall be subject to an Onerous
Condition.
7.06 Deliveries. Purchaser shall have delivered to Sellers the
Assumption Instruments in a form reasonably acceptable to Seller.
ARTICLE VIIIA
EMPLOYEE BENEFITS MATTERS
8.01A Offer of Employment; Employment Agreements. The parties
hereto intend that there shall be continuity of employment with respect to
all of the Employees who are financial consultants (the "Financial
Consultants") and all other Employees who are employed at the Branch Offices
(the "Branch Employees", together with the Financial Consultants, being
hereinafter referred to as the "Offered Employees"); Section 8.01 of the
Disclosure Schedule lists the Offered Employees as of May 5, 2000 (the "List
Date"). Purchaser shall offer employment, commencing on the Closing Date, to
all Offered Employees, including those Offered Employees hired on or after
the List Date and those on vacation, leave of absence or disability, on
substantially equivalent terms (including the same salary, job responsibility
and location) as those provided to such employees by Sellers immediately
prior to the Closing. Those Offered Employees who accept Purchaser's offer
of employment and commence working with Purchaser on the Closing Date shall
hereinafter be referred to as "Transferred Employees."
8.02A Welfare Plans -- Claims Incurred; Pre-Existing Conditions.
(a) Sellers shall retain responsibility for and continue to pay all medical,
life insurance, disability and other welfare plan expenses and benefits for
each Transferred Employee with respect to claims incurred by such Transferred
Employees or their covered dependents prior to the Closing, subject to the
terms of Sellers' plans. Expenses and benefits with respect to such claims
incurred by Transferred Employees or their covered dependents on or after the
Closing shall be the responsibility of Purchaser, subject to the terms of
Purchaser's plans. For purposes of this paragraph, a claim is deemed
incurred when the services that are the subject of the claim are performed;
in the case of life insurance, when the death occurs, and, in the case of
long-term disability benefits, when the disability occurs. Notwithstanding
any provision herein, Transferred Employees coverage under Sellers' plans
shall terminate at the time of the Closing.
(b) With respect to any welfare benefit plans (as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended) maintained by Purchaser for the benefit of Transferred Employees or
their covered dependents in the year in which the Closing Date occurs,
Purchaser shall give effect, in determining any deductible and maximum outof-
pocket limitations, to claims incurred and amounts paid by, and amounts
reimbursed to, such employees with respect to similar plans maintained by
Sellers for their benefit immediately prior to the Closing Date. In
addition, no Transferred Employee who elects coverage under a medical
insurance plan maintained by the Purchaser shall be excluded from coverage
under such plan (for such Transferred Employee or their covered dependents)
on the basis of a pre-existing condition that was not also excluded under
the Seller's medical insurance plans.
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8.03A Vacation. With respect to any accrued but unused vacation
time to which any Transferred Employee is entitled pursuant to the vacation
policy applicable to such employee immediately prior to the Closing Date (the
"Vacation Policy"), Purchaser shall allow such employee to use such accrued
vacation; provided, however, that if Purchaser deems it necessary to
disallow such employee from taking such accrued vacation, Purchaser shall be
liable for and pay in cash to each such employee an amount equal to such
vacation time in accordance with terms of the Vacation Policy.
8.04A Service Credit. Purchaser shall provide each Transferred
Employee with credit for all service with Sellers for the purpose of
determining eligibility to participate in Purchaser's employee benefit plans,
programs, or arrangements and the vesting of benefits under such plans (but
not for the accrual of benefits under such plans) in which such employee is
eligible to participate; provided, however, that in no event shall any
Transferred Employee be entitled to any credit to the extent that it would
result in a duplication of benefits with respect to the same period of service.
8.05A (a) Retention Pool. At the Closing Date, Purchaser will
establish a retention pool (the "Retention Pool"), equal to approximately $14
million, to be used to retain key Transferred Employees. The individuals
eligible for inclusion in the Retention Pool and the respective allocations
will be determined by Purchaser, in consultation with Sellers, prior to the
Closing Date. The payments in the Retention Pool shall vest, and shall be
made to the participants in the Retention Pool then eligible to receive such
payments, in the installments and pursuant to the terms and conditions set
forth in employment offer letters to the applicable Transferred Employees.
If a Transferred Employee who has been selected to participate in the Retention
Pool shall forfeit the right to receive payments thereunder, the Retention
Pool portion allocated to that individual shall be cancelled and shall not
be re-allocated. Material provisions of the Retention Pool are more fully
described in Schedule 8.05A to be provided to Sellers by Purchaser.
(b) Purchaser shall use its commercially reasonable best efforts
(consistent with the second sentence of Section 8.01A and with Section
8.05A(a)) to ensure that all of the Financial Consultants accept Purchaser's
offer of employment, and commence employment with the Purchaser on the
Closing Date. Sellers will cooperate with Purchaser in such efforts.
8.06A Amendment of Deferred Compensation Plan. To effect the
changes set forth on Section 8.06 of Seller's Disclosure Schedule, Sellers
shall cause the First Albany Companies, Inc. Financial Consultants Deferred
Compensation Plan to be amended to the reasonable satisfaction of the
Purchaser. At Purchaser's request Sellers shall reasonably cooperate with
Purchaser to communicate such amendments to the Transferred Employees.
Sellers and Purchaser intend that Deferred Bonuses be handled as described
in Section 8.06 of the Disclosure Schedule.
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ARTICLE VIIIB
REAL PROPERTY
8.01B Assignment of Transferred Branch Offices. (a) On the
Closing Date, Sellers shall assign (either directly or by sublease) its
leasehold interests in the Transferred Branch Offices to Purchaser; provided,
if consent from any party that is necessary to effect the assignment for any
space has not been obtained after using commercially reasonable efforts,
Sellers shall have the right to substitute Substantially Equivalent Space for
any such space. Purchaser agrees (i) to accept such Substantially Equivalent
Space, so long as the Real Property Lease related to such space contains
commercially reasonable terms and (ii) to cooperate reasonably as necessary
to obtain such Substantially Equivalent Space.
(b) Indemnification. Purchaser shall indemnify and hold Sellers
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements
(including reasonable legal fees and expenses) which may be imposed on,
incurred by or asserted against Sellers of any kind and nature whatsoever
that arise from or relate to the Transferred Branch Offices to the extent not
related to any Pre-Closing Matter.
(c) Notices. For any Real Property Lease for which any landlord
refuses to release Sellers in writing from all liability thereunder,
Purchaser agrees to notify Sellers of any default of which it becomes aware
under such Real Property Lease. In addition, Purchaser shall forward to
Sellers any notice it receives relating to any such Transferred Branch
Office. Such notice to Sellers shall be given as required in Section 13.01.
8.02B Subleases. On the Closing Date, Sellers and Purchaser shall
enter into subleases for the Subleased Branch Offices. Such subleases shall
be on substantially the same terms as are contained in the overlease for each
space, except that the Subleases with respect to the offices located in
Boston, Massachusetts and Albany, New York shall be for a term of up to
twelve months; provided, if consent from any party to the sublease that is
necessary in order to enter into such sublease has not been obtained after
using commercially reasonable efforts, Sellers shall have the right to
substitute Substantially Equivalent Space for any such space. Purchaser
agrees (i) to accept such Substantially Equivalent Space, so long as the
Sublease related to such space contains commercially reasonable terms and
(ii) to cooperate reasonably as necessary to obtain such Substantially
Equivalent Space. Prior to the Closing Date, Sellers shall have made such
modifications to the space that Sellers deem necessary to prepare such space
for occupancy by Purchaser on the Closing Date.
8.03B Reimbursement for Reimbursed Expenses. Sellers agree
jointly and severally to reimburse Purchaser for those Reimbursed Expenses
that exceed $100,000 in the aggregate in each Reimbursement Year. Subsequent
to the end of each Reimbursement Year, Purchaser shall deliver to Sellers, in
a form reasonably acceptable to Sellers, documentation substantiating any
claim for Reimbursed Expenses for such Reimbursement Year. To the extent
that Sellers dispute the amount of the Reimbursed Expenses, such dispute
shall be resolved pursuant to the arbitration procedures contained in Section
1.04(b).
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ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of
Sellers and Purchaser contained in this Agreement will survive the Closing
(a) indefinitely with respect to the representations and warranties
contained in Sections 2.02, 2.12, 2.13, 3.02 and 3.06 and the covenants and
agreements contained in Sections 1.06, 13.03 and 13.04, until expiration of
the applicable statute of limitations with respect to the representations
and warranties contained in Section 2.17 or (b) until the first anniversary
of the Closing Date in the case of each other representation and warranty,
covenant and agreement (other than the agreement of Sellers contained in
Section 4.07, which shall survive for one year after the termination of the
period specified therein), except that any representation, warranty,
covenant or agreement that would otherwise terminate in accordance with
clause (b) above will continue to survive if a Claim Notice or Indemnity
Notice (as applicable) shall have been timely given in good faith based on
facts reasonably expected to establish a valid claim under Article X on or
prior to such termination date, until the related claim for indemnification
has been satisfied or otherwise resolved as provided in Article X. This
Section shall not limit in any way the survival and enforceability of any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Closing Date, which shall survive for the respective
periods set forth herein, including Article VIIIB.
9.02 No Other Representations. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that Sellers are making no representation or warranty whatsoever,
express or implied, including but not limited to any implied representation
or warranty as to condition, merchantability or suitability as to any of the
Assets or other properties of the Business, except those representations and
warranties contained in Article II and in any certificate delivered pursuant
to Section 6.03. It is understood that, except to the extent otherwise
expressly provided herein, Purchaser takes the Assets "as is" and "where is".
In particular, Sellers make no representation or warranty to Purchaser with
respect to (i) the information set forth in the Confidential Memorandum or
(ii) any financial projection or forecast relating to the Condition of the
Business.
ARTICLE X
INDEMNIFICATION
10.01 Indemnification. (a) Subject to paragraph (c) of this
Section and the other Sections of this Article X, Sellers shall indemnify the
Purchaser Indemnified Parties in respect of, and hold each of them harmless
from and against, any and all Losses suffered, incurred or sustained by or
asserted against any of them or to which any of them becomes subject, whether
or not such Losses arise in connection with a claim by a third party
resulting from, arising out of or relating to (i) any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Sellers contained in this Agreement (determined, in
the case of representations or warranties, without giving effect to any
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"materiality" or "Material Adverse Effect on the Condition of the Business"
qualification set forth therein) or (ii) a Retained Liability including, for
this purpose, any amount of Transfer Taxes for which Sellers are responsible
under Section 13.04.
(b) Subject to paragraph (c) of this Section and the other
Sections of this Article X, Purchaser shall indemnify the Seller Indemnified
Parties in respect of, and hold each of them harmless from and against, any
and all Losses, net of any Tax benefit, suffered, incurred or sustained by
or asserted against any of them or to which any of them becomes subject
whether or not such Losses arise in connection with a claim by a third
party, resulting from, arising out of or relating to (i) any
misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of Purchaser contained in this
Agreement or (ii) an Assumed Liability including, for this purpose, any
amount of Transfer Tax for which Purchaser is responsible under Section
13.04.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no amounts of indemnity shall be payable as a result of any
claim in respect of a Loss arising under paragraph (a) or (b) of this
Section 10.01:
(i) in the case of a claim by a Purchaser Indemnified Party or a
Seller Indemnified Party, as the case may be, unless, until and then
only to the extent that the Purchaser Indemnified Parties or the Seller
Indemnified Parties, as applicable, have suffered, incurred, sustained
or become subject to Losses referred to in such paragraphs in excess of
$2,000,000 in the aggregate, in which case such Purchaser Indemnified
Party or Seller Indemnified Party shall be indemnified in full in
respect of such Losses arising under paragraph (a) or (b) of Section
10.01;
(ii) with respect to any claim for indemnification thereunder,
unless the Indemnified Party has given the Indemnifying Party a Claim
Notice or Indemnity Notice, as applicable, with respect to such claim,
setting forth in reasonable detail the specific facts and circumstances
pertaining thereto, (A) as soon as practical following the time at
which the Indemnified Party discovered such claim (except to the extent
the Indemnifying Party is not prejudiced by any delay in the delivery
of such notice) and (B) in any event prior to the applicable Cut-off
Date; provided that, no failure to include any specific information
relating to the claim or any reference to any provision of this
Agreement shall effect the obligation of the Indemnifying Party; or
(iii) with respect to any Loss, to the extent that the
Indemnified Party had a reasonable opportunity, but failed, in good
faith to mitigate the Loss, including but not limited to the failure to
use commercially reasonable efforts to recover under a policy of
insurance or under a contractual right of set-off or indemnity;
provided that the limitations contained in clauses (i) and (ii) shall not
apply to Losses to the Purchaser or the Seller, respectively, arising out of
or relating to a Retained Liability (including, for this purpose, Transfer
Taxes) or Assumed Liability (including, for this purpose, Transfer Taxes),
respectively.
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10.02 Method of Asserting Claims. All claims for indemnification
by any Indemnified Party under Section 10.01 will be asserted and resolved as
follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 10.01 is asserted
against or sought to be collected from such Indemnified Party by a Person
other than Sellers, Purchaser or any Affiliate of Sellers or Purchaser (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim Notice
with reasonable promptness to the Indemnifying Party. The Indemnifying
Party will notify the Indemnified Party as soon as practicable within the
Dispute Period whether the Indemnifying Party disputes its liability to the
Indemnified Party under Section 10.01 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party
against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to
this Section 10.02(a), then, provided that the Indemnifying Party
confirms in writing that it will indemnify the Indemnified Party
against the full amount of all claims for indemnification resulting
from or relating to such claim the Indemnifying Party will have the
right to defend, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings will be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party. The Indemnifying Party will have
full control of such defense and proceedings, provided that any
settlement thereof shall be with the consent of the Indemnified Party,
which consent shall not be unreasonably withheld; provided, further,
that the Indemnified Party may, at the sole cost and expense of the
Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this Section
10.02(a)(i), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party will,
at the sole cost and expense of the Indemnifying Party, reasonably
cooperate with the Indemnifying Party and its counsel in contesting any
Third Party Claim that the Indemnifying Party elects to contest, or, if
appropriate and related to the Third Party Claim in question, in making
any counterclaim against the Person asserting the Third Party Claim, or
any cross-complaint against any Person (other than the Indemnified Party
or any of its Affiliates) provided that any counterclaim shall be with
the consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the Indemnified
Party may at any time elect to participate in the proceedings,
negotiations, defense or prosecution of a Third Party Claim at its own
expense or take over the control of the defense or settlement of a Third
Party Claim at anytime if it irrevocably waives its right to indemnity
under Section 10.01 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 10.02(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying
Party fails
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to give any notice whatsoever within the Dispute Period or if the
Indemnified Party determines in good faith that there is a reasonable
possibility that a proceeding may affect it other than as a result of
monetary damages for which it would be entitled to indemnification
hereunder, then the Indemnified Party will have the right to defend, at
the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnified Party to a final
conclusion or will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnifying Party may elect to participate
in such proceedings, negotiations or defense at any time at its own
expense. The Indemnified Party will have full control of such defense and
proceedings, including (except as provided in the immediately preceding
sentence) any settlement thereof; provided, however, that if requested
by the Indemnified Party, the Indemnifying Party will, at the sole cost
and expense of the Indemnifying Party, reasonably cooperate with the
Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting, or, if appropriate and
related to the Third Party Claim in question, in making any
counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnified Party or
any of its Affiliates). Notwithstanding the foregoing provisions of
this Section 10.02(a)(ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect
to such Third Party Claim and if such dispute is resolved in favor of
the Indemnifying Party in the manner provided in clause (iii) below,
the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this Section
10.02(a)(ii) or of the Indemnifying Party's participation therein at
the Indemnified Party's request, and the Indemnified Party will
reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such
litigation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under Section 10.01 or fails to notify
the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes its liability to the Indemnified Party with respect to
such Third Party Claim, the Loss in the amount specified in the Claim
Notice will be conclusively deemed a liability of the Indemnifying Party
under Section 10.01 and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party on demand. If the Indemnifying Party
has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith
to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be
resolved by litigation in a court of competent jurisdiction.
(b) In the event any Indemnified Party should have a claim under
Section 10.01 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the
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Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 10.01 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute
shall be resolved by litigation in a court of competent jurisdiction.
(c) In the event of any Loss resulting from a misrepresentation,
breach of warranty or nonfulfillment or failure to be performed of any
covenant or agreement contained in this Agreement as to which an Indemnified
Party would be entitled to claim indemnity under Section 10.01 but for the
provisions of Section 10.01(c)(ii), such Indemnified Party may nevertheless
deliver a written notice to the Indemnifying Party containing the information
that would be required in a Claim Notice or an Indemnity Notice, as
applicable, with respect to such Loss. In the case of a Claim Notice, the
provisions of Section 10.02(a)(i) will be applicable. If the Indemnifying
Party notifies the Indemnified Party that it does not dispute the claim
described therein or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes the claim described in such
Claim Notice or Indemnity Notice, as the case may be, the Loss specified in
the notice will be conclusively deemed to have been incurred by the
Indemnified Party for purposes of making the determination set forth in
Section 10.01(c)(ii). If the Indemnifying Party has timely disputed the
claim described in such Claim Notice or Indemnity Notice, as the case may be,
the Indemnifying Party and the Indemnified Party will proceed in good faith
to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(d) In the event of any claim for indemnity under Section 10.01
(a), Purchaser agrees to give Sellers and their Representatives reasonable
access to the Business Books and Records and Transferred Employees in
connection with the matters for which indemnification is sought to the extent
Sellers reasonably deem necessary in connection with its rights and
obligations under this Article X.
10.03 Exclusivity. After the Closing, absent fraud and to the
extent permitted by Law, the indemnities set forth in this Article X shall be
the exclusive remedies of Purchaser and Sellers and their respective
officers, directors, employees, agents and Affiliates for any
misrepresentation, breach of warranty or nonfulfillment or failure to be
performed of any covenant or agreement contained in this Agreement that is to
be performed at or prior to the Closing Date, and the parties shall not be
entitled to a rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which
the parties hereto hereby waive provided that the provisions of this Section
10.03 shall not prevent the Purchaser or Sellers from seeking the remedies of
specific performance or injunctive relief in connection with a breach of a
covenant or agreement of any party contained herein.
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ARTICLE XI
TERMINATION
11.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement
of Sellers and Purchaser;
(b) at any time before the Closing, by Sellers or Purchaser, in
the event that any Order or Law becomes effective restraining, enjoining, or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement, upon notification of the non
terminating party by the terminating party;
(c) at any time after November 8, 2000 by Sellers or Purchaser
upon notification of the non-terminating party by the terminating party if
the Closing shall not have occurred on or before such date and such failure
to consummate is not caused by a breach of this Agreement by the terminating
party; or
(d) by Sellers or Purchaser, in the event of (A) a breach by the
other party of any representation or warranty contained herein, which breach
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach or (B) a breach by the
other party of any of the covenants or agreements contained herein, which
breach cannot be, or has not been cured within thirty (30) days after the
giving of written notice to the breaching party of such breach (provided
that a party may only terminate this Agreement pursuant to Section 11.01(d)
(A) or (B) only with respect to a breach or breaches that would permit such
party not to consummate the transactions contemplated herein under the
standards set forth in Section 6.01 or Section 7.01 as the case may be).
11.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.01, this Agreement will forthwith become
null and void, and there will be no liability or obligation on the part of
Sellers or Purchaser (or any of their respective officers, directors,
employees, agents or other representatives or Affiliates), except that the
provisions in Sections 13.03, 13.05 and Section 13.06 will continue to apply
following any such termination and except that termination will not relieve
any breaching party of any breach of this Agreement before termination, and
Sellers and Purchaser may seek such remedies, including damages and fees of
attorneys against the other with respect to any such breach as are provided
in this Agreement or as otherwise available at law or in equity.
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ARTICLE XII
DEFINITIONS
12.01 Definitions. (a) Defined Terms. As used in this
Agreement, the following defined terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning ten percent (10%) or more of the voting
securities of another Person shall be deemed to control that Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits,
the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with Sections 6.03 and 7.03, as the same shall be
amended from time to time.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person.
"Benefit Plan" means any Plan established by either Seller,
existing at the Closing Date, to which such Seller contributes or has
contributed on behalf of, or under which such Seller has any liability to,
any Employee, or under which any Employee, of such Seller or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and Assets and
Properties of such Person, including without limitation financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, Contracts, Licenses,
customer lists, computer files and programs, retrieval programs, operating
data and plans and environmental studies and plans.
"Branch Offices" means the Transferred Branch Offices and the
Subleased Branch Offices.
"Business Combination" means with respect to any Person, any
merger, consolidation or combination to which such Person is a party, any
sale, dividend, split or other
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disposition of capital stock or other equity interests of such Person or any
sale, dividend or other disposition of all or substantially all of the Assets
and Properties of such Person.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of New York are authorized or obligated
to close.
"Claim Notice" means written notification pursuant to Section
10.02(a) of a Third Party Claim as to which indemnity under Section 10.01 is
sought by an Indemnified Party, enclosing a copy of all papers served, if
any, and specifying the nature of and basis for such Third Party Claim and
for the Indemnified Party's claim against the Indemnifying Party under
Section 10.01, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim.
"Closing" means the closing of the purchase and sale of the Assets
and the assumption of the Assumed Liabilities.
"Closing Assets" means only margin and other Customer debit
balances, promissory notes from Financial Consultants, Telecommunications
Equipment, Tangible Personal Property, Software, Leasehold improvements,
prepaid expenses, Tenant Security Deposits, the Plan Assets and other Assets
used in the ordinary course of Business as of the Closing Date and
transferred to Purchaser under Section 1.01(a) or under the Transfer Annex
(including amounts due from broker-dealers).
"Closing Date" means the date and the time the Closing becomes
effective.
"Closing Liabilities" means only the free credit and other
Customer balances, Account Balances, Deferred Bonus and other liabilities
incurred in the ordinary course of Business as of the Closing Date and
assumed by Purchaser under Section 1.02(a) or under the Transfer Annex
(including amounts due to broker-dealers).
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Contract" means any agreement, lease, license, evidence of
indebtedness, mortgage, indenture, security agreement or other contract.
"Customer" shall mean, collectively as of any date, the customers
of the Business.
"Customer Contracts" means any Contract pursuant to which
services are provided to Customers in connection with the Business.
"Customer-Related Assets" shall mean any assets or rights
(including any funds or securities and any commodity positions) of Customers
that are held by Sellers under the possession and control provisions of
Section 15(c)3-3 of the Securities Exchange Act of 1934, as amended,
pursuant to any Customer Contract, including for distribution or payment or
as collateral (it being understood that "Customer-Related Assets" shall not
include any assets or
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rights that are held by Sellers pursuant to any Customer Contract that is not
assigned to the Purchaser as part of the transactions contemplated by this
Agreement).
"Cut-off Date" means, with respect to any representation,
warranty, covenant or agreement contained in this Agreement, the date on
which such representation, warranty, covenant or agreement ceases to survive
as provided in clause (b) or (c) of Section 9.01, as applicable.
"Disclosure Schedule" means the record delivered to Purchaser by
Sellers herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required
to be included therein by Sellers pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Employee" means each employee, officer or consultant of Sellers
engaged primarily in the conduct of the Business.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Estimated Net Assets" means the amount by which estimated Closing
Assets exceeds estimated Closing Liabilities.
"GAAP" means generally accepted accounting principles in the
United States, consistently applied throughout the relevant period.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States or any state, county, city or other political
subdivision.
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the
rules and regulations promulgated thereunder.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article X, including without limitation a Person
asserting a claim pursuant to Section 10.02(c).
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article X,
including without limitation a Person against whom a claim is asserted
pursuant to Section 10.02(c).
"Indemnity Notice" means written notification pursuant to
Section 10.02(b) of a claim for indemnity under Article X by an Indemnified
Party, specifying the nature of and basis
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for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Sellers" means the actual knowledge of the officers
and employees of either Seller listed in Section 12.01 of the Disclosure
Schedule.
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having similar effect of the United States or any
state, county, city or other political subdivision, of any Governmental or
Regulatory Authority or of any Securities Regulatory Body.
"Liabilities" means all indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority or of any
Securities Regulatory Body.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale Contract, title retention Contract or other Contract
to give any of the foregoing.
"Loss" means any and all liabilities, damages, fines, penalties,
deficiencies, losses, claims, charges, actions, suits, proceedings,
investigations, Taxes and expenses (including without limitation interest,
court costs, reasonable fees of attorneys, accountants and other experts or
other reasonable expenses of litigation or other proceedings or of any
claim, default or assessment).
"Material Adverse Effect on the Condition of the Business" means a
material adverse effect on the business, financial condition, results of
operations or Assets and Properties of the Business taken as a whole, other
than those occurring as a result of (i) general economic or financial
conditions or other developments which are not unique to the Business but
also affect (to a degree not substantially dissimilar) other Persons who
participate or are engaged in lines of business similar to the Business,
(ii) departures of Financial Consultants of the Business and (iii) the
announcement of this Agreement or the transactions contemplated hereunder.
By way of example, clause (i) is intended to exclude from the
definition of "Material Adverse Effect on the Condition of the Business" a
change in the NASDAQ composite index that results in a 55% reduction in the
revenues of the Business but a 50% reduction in the revenues of other
Persons who participate or are engaged in lines of business similar to the
Business but is not intended to exclude a change that results in a 80%
reduction in the revenues of the Business but a 50% reduction in the
revenues of such other Persons.
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<PAGE>
"Net Assets" means the difference between Closing Assets and
Closing Liabilities (it is understood that Net Assets may be negative).
"Onerous Condition" means any condition, restriction or requirement
imposed upon any party that could, in the reasonable judgment of such party,
(i) materially and adversely effect the benefit to be derived from this
Agreement by such party such that had such condition, restriction or
requirement been known as of the date hereof, such party would not have
entered into this Agreement or (ii) have a Material Adverse Effect on the
Condition of the Business following the Closing.
"Order" means any writ, judgment, decree, injunction or similar
order of, or memorandum of understanding or similar arrangement with, or
commitment letter or similar submission to, any Governmental or Regulatory
Authority or of any Securities Regulatory Body (in each such case whether
preliminary or final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP,
(ii) any statutory Lien arising in the ordinary course of business by
operation of Law with respect to a Liability that is not yet due or
delinquent and (iii) any minor imperfection of title or similar Lien, which
individually or in the aggregate could not reasonably be expected to
Materially Adversely Affect the Condition of the Business.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority or Self-Regulatory Body.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, restricted stock, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, accident, disability, workmen's
compensation or other insurance, severance, separation or other employee
benefit plan, practice, policy or arrangement of any kind, whether written
or oral, including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA and any employment or severance
contract.
"Pre-Closing Matter" means any event, circumstance or condition
existing immediately prior to the Closing Date.
"Purchaser Indemnified Parties" means Purchaser and its officers,
directors, employees, agents and Affiliates.
"Reimbursed Expenses" means the aggregate of those expenses that
Purchaser actually incurs and pays in each Reimbursement Year under all Real
Property Leases and Subleases that exceed those expenses that Sellers would
have incurred in the aggregate, on a pro rata basis where applicable, if it
had not assigned or sublet such space; provided, for expenses incurred in
connection with Real Property Leases or Subleases for Substantially
Equivalent
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Spaces, the excess shall be calculated against the expenses that would have
been incurred by Sellers under the leases for the spaces that the
Substantially Equivalent Spaces replace. Such Reimbursed Expenses include
only those expenses that become due during the current term of each Real
Property Lease or Sublease and not during any renewal term contained
therein. Such Reimbursed Expenses shall not include any expenses incurred
as a result of Purchaser's extension or any other modification of any such
Real Property Lease or Sublease or that result from any default by Purchaser
under any Real Property Lease or Sublease.
"Reimbursement Year" means each twelve (12) month period
commencing on the Closing Date or the anniversary of the Closing Date, until
such time that the current term of every Real Property Lease and Sublease
has expired and/or terminated.
"Resolution Period" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim
set forth in a Claim Notice or an Indemnity Notice.
"SEC" means the Securities and Exchange Commission.
"Securities Regulatory Body" means any Governmental or Regulatory
Authority and any commission, board, agency or body that is not a Government
or Regulatory Authority, in each case that is charged with the supervision
or regulation of broker-dealers, securities underwriting, trading or
investment, stock exchanges, commodities exchanges, investment companies,
investment advisers or insurance agents and brokers (including, without
limitation, the SEC, the Board of Governors of the Federal Reserve System,
the National Association of Securities Dealers and the Federal Trade
Commission) or the supervision or regulation of either of the Sellers.
"Seller Indemnified Parties" means each Seller and its officers,
directors, employees, agents and Affiliates.
"Subleased Branch Offices" means the branch offices of the
Business located in Boston, Massachusetts (but only with respect to the
portion of the offices occupied by Sellers' Private Client Group), Albany,
New York (but only with respect to floor P2 of the 30 Pearl Street
premises), and New York, New York (but only with respect to the offices
occupied by Sellers' Private Client Group on the 41st floor) or
Substantially Equivalent Space.
"Substantially Equivalent Space" means, for any Branch Office,
space of equivalent location and utility to that space covered by any Real
Property Lease or Sublease that cannot be transferred to Purchaser because
consent from a necessary party cannot be obtained using commercially
reasonable efforts.
"Tax Returns" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
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"Taxes" means any taxes, assessments, duties, fees, levies or
other governmental charges, including, without limitation, all federal,
state, local and foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, ad valorem, occupation,
property, excise, gross receipts, stamp, license, payroll, withholding,
alternative or minimum tax and other taxes, assessments, duties, fees,
levies or other governmental charges of any kind whatsoever, and all
estimated taxes, additions to tax, penalties, interest and additional
amounts attributable thereto.
"Transfer Taxes" means any Taxes imposed on (i) the sale,
transfer, conveyance, assignment or delivery of the Assets to the Purchaser,
(ii) the assumption or agreement to pay, perform or discharge the Assumed
Liabilities by Purchaser, or (iii) any instrument recording or reflecting
such actions, including any real property transfer taxes or sales and use
taxes.
"Transferred Branch Offices" means the branch offices of the
Business located in Fairfield and Hartford, Connecticut; Chicago, Illinois;
Pittsfield and Wellesley, Massachusetts; Manchester and Nashua, New
Hampshire; Morristown, New Jersey; Albany (but only with respect to the
offices located at 80 State Street), Binghamton, Buffalo, Elmira, Garden
City, Johnstown, Norwich, Oneonta and Syracuse, New York; and Burlington,
Vermont or Substantially Equivalent Space.
"Unaffiliated Firm" means a nationally recognized firm of
independent public accountants that is mutually satisfactory to the Sellers
and Purchaser. If the Sellers and Purchaser are unable to agree, then the
firm of Deloitte and Touche LLP or any successor thereto shall act as the
Unaffiliated Firm.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender
include each other gender; (ii) words using the singular or plural number
also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) the phrase "ordinary
course of business" refers to the business of Sellers in connection with the
Business; (vi) the words "include", "includes" or "including" shall be
deemed to be followed by the words "without limitation" and (vii) the term
"individually or in the aggregate" as used in Article II and Article III
includes all events, occurrences and circumstances described in any Section
or paragraph of such Article and is not linked to any specific section or
paragraph. Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP. Any representation or warranty contained
herein as to the enforceability of a Contract shall be subject to the effect
of any bankruptcy, insolvency, reorganization, moratorium or other similar
law affecting the enforcement of creditors' rights generally and to general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
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ARTICLE XIII
MISCELLANEOUS
13.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only
if delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
First Union Corporation
201 South College Street
Charlotte, NC 28288
Facsimile No.: (704) 374-2250
Attn: Thomas J. Wurtz, Senior Vice President and Treasurer
with a copy to:
First Union Corporation
301 South College Street Charlotte, NC 28288-0630
Facsimile No.: (704) 715-4496
Attn: Ross E. Jeffries, Jr., Senior Vice President and
Assistant General Counsel
If to either Seller, to:
First Albany Companies Inc.
30 South Pearl Street
P.O. Box 52
Albany, NY 12207-1599
Facsimile No.: (518) 447-8068
Attn: George McNamee
with a copy to:
First Albany Companies Inc.
30 South Pearl Street
P.O. Box 52
Albany, NY 12207-1599
Facsimile No.: (518) 447-8068
Attn: Steve Wink
General Counsel
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<PAGE>
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon receipt, and
(iii) if delivered by mail in the manner described above to the address as
provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received
by any other Person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such
change to the other party hereto.
13.02 Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof and thereof.
13.03 Expenses. Except as otherwise expressly provided in this
Agreement (including without limitation as provided in Section 11.02),
whether or not the transactions contemplated hereby are consummated, each
party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby; provided that all expenses related to the transfer of
the Assets to Purchaser hereunder shall be borne by Purchaser and that
Sellers shall not impose any charges, fees or similar expenses on Customers
or Purchaser for the transfer of Customer accounts to Purchaser.
13.04 Sales and Transfer Taxes. Purchaser and the Sellers shall
each be liable and responsible for fifty percent of all Transfer Taxes.
Sellers and Purchaser shall cooperate in timely making all filings, returns,
reports and forms as may be required to comply with the provisions of any tax
laws with respect to Transfer Taxes.
13.05 Public Announcements. Except as required by Law, at all
times at or before the Closing, Sellers and Purchaser will not issue or make
any reports, statements or releases to the public or generally to the
employees, customers or other Persons to whom Sellers provide services in
connection with the Business or with whom Sellers otherwise have significant
business relationships in connection with the Business with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other, which consent shall not be unreasonably withheld. Sellers and
Purchaser will also obtain the other party's prior approval, which approval
shall not be unreasonably withheld, of any press release announcing the
transactions contemplated by this Agreement.
13.06 Confidentiality. Each party hereto will hold, and will use
its reasonable best efforts to cause its Affiliates and their respective
Representatives to hold, in strict confidence from any Person (other than any
such Affiliate or Representative), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in
connection with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental or Regulatory Authorities)
or by other requirements of Law or (ii) disclosed in an Action or Proceeding
brought by a party hereto in pursuit of its rights or in the exercise of its
remedies hereunder, all documents and information concerning the other
</PAGE>
<PAGE>
party or any of its Affiliates furnished to it by the other party or such
other party's Representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such documents or
information can be shown to have been (a) previously known by the party
receiving such documents or information, (b) in the public domain (either
prior to or after the furnishing of such documents or information hereunder)
through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing
the foregoing restrictions will not apply to Purchaser's use of documents and
information concerning the Business, the Assets or the Assumed Liabilities
furnished by Sellers hereunder. In the event the transactions contemplated
hereby are not consummated, upon the request of the other party, each party
hereto will, and will cause its Affiliates and their respective
Representatives to, promptly (and in no event later than five (5) Business
Days after such request) redeliver or cause to be redelivered all copies of
confidential documents and information furnished by the other party in
connection with this Agreement or the transactions contemplated hereby and
destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by
the party furnished such documents and information or its Representatives.
13.07 Waiver; Amendment. (a) Any term or condition of this
Agreement may be waived at any time by the party that is entitled to the
benefit thereof, but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party waiving such
term or condition. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed
as a waiver of the same or any other term or condition of this Agreement on
any future occasion. All remedies, either under this Agreement or by Law or
otherwise afforded, will be cumulative and not alternative.
(b) This Agreement may be amended, supplemented or modified only
by a written instrument duly executed by or on behalf of each party hereto.
13.08 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other Person
other than any Person entitled to indemnity under Article X.
13.09 No Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party hereto and any
attempt to do so will be void, except(a) for assignments and transfers by
operation of Law and (b) that Purchaser may assign any or all of its rights,
interests and obligations hereunder to a wholly-owned subsidiary, provided
that any such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein, but no such assignment referred
to in clause (b) shall relieve Purchaser of its obligations hereunder.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
</PAGE>
<PAGE>
13.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
13.11 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement
will not be materially and adversely affected thereby, (a) such provision
will be fully severable, (b) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a
part hereof, (c) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
13.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to
a contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
13.13 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
</PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party as of the date first
above written.
FIRST UNION SECURITIES, INC.
By:
----------------------
Name:
Title:
FIRST ALBANY COMPANIES INC.
By:
------------------------
Name:
Title:
FIRST ALBANY CORPORATION
By:
------------------------
Name:
Title:
FIRST ALBANY COMPANIES INC. (Exhibit 11)
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
Three Months Ended
March 31, March 31,
(In thousands, except per share amounts) 2000 1999
<S> <C> <C>
- -----------------------------------------------------------------------------
Basic:
- -----------------------------------------------------------------------------
Net income (loss) $ 3,063 $ (797)
=============================================================================
Weighted average number of shares
outstanding during the period 7,856 7,635
=============================================================================
Net income (loss) per share $ 0.39 $ (0.10)
=============================================================================
Dilutive:
- -----------------------------------------------------------------------------
Net income (loss) $ 3,063 $ (797)
=============================================================================
Weighted average number of shares
outstanding during the period 7,856 7,635
Effective of dilutive common
equivalent shares 1,428
- -----------------------------------------------------------------------------
Weighted average shares and common
equivalent shares outstanding 9,284 7,635
=============================================================================
Net income (loss) per share $ 0.33 $ (0.10)
=============================================================================
</TABLE>
**Per share figures and shares outstanding have been restated for all
dividends declared.
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 3,142
<RECEIVABLES> 330,037
<SECURITIES-RESALE> 55,080
<SECURITIES-BORROWED> 717,988
<INSTRUMENTS-OWNED> 183,348
<PP&E> 10,398
<TOTAL-ASSETS> 1,348,467
<SHORT-TERM> 192,229
<PAYABLES> 88,799
<REPOS-SOLD> 0
<SECURITIES-LOANED> 884,783
<INSTRUMENTS-SOLD> 62,572
<LONG-TERM> 6,000
0
0
<COMMON> 79
<OTHER-SE> 63,170
<TOTAL-LIABILITY-AND-EQUITY> 1,348,467
<TRADING-REVENUE> 23,625
<INTEREST-DIVIDENDS> 20,261
<COMMISSIONS> 24,205
<INVESTMENT-BANKING-REVENUES> 8,377
<FEE-REVENUE> 5,685
<INTEREST-EXPENSE> 17,313
<COMPENSATION> 46,592
<INCOME-PRETAX> 5,300
<INCOME-PRE-EXTRAORDINARY> 3,063
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,063
<EPS-BASIC> .39
<EPS-DILUTED> .33
</TABLE>
