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ASSET PURCHASE AGREEMENT
Dated as of March 6, 2007
Among
DEPFA BANK PLC,
FIRST ALBANY CAPITAL INC.
and
FIRST ALBANY COMPANIES INC
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS AND
INTERPRETATIONS
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1
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1.1. Definitions
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1
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1.2. Interpretation
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10
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ARTICLE II PURCHASE AND SALE
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11
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2.1. Purchased
Assets
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11
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2.2. Excluded
Assets
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12
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2.3. Assumed
Liabilities
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12
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2.4. Excluded
Liabilities
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13
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2.5. Audit of the Accrued
Bonuses
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13
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2.6. Excluded Remarketing
Agreements
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14
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ARTICLE III PURCHASE PRICE
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14
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3.1. Purchase
Price
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14
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3.2. Delivery of Estimated
Municipal Bond Purchase Price; Excluded
Municipal
Bonds
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14
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3.3. Purchase of Municipal
Bonds and Final Settlement
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16
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3.4. Post-Closing Purchase
Price Adjustment
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17
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3.5. Allocation of
Purchase Price
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20
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ATRICLE IV CLOSING
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21
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4.1. Closing
Date
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21
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4.2. Payment on the
Closing Date
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21
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4.3. Buyer’s
Additional Deliveries
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20
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4.4. Seller’s
Deliveries
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22
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ATRICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND SELLER
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24
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5.1. Organization of
Parent and Seller
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24
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5.2. Authority of Parent
and Seller
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24
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5.3. Financial
Statements
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25
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5.4. Absence of Certain
Changes or Events
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26
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5.5. [Reserved]
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26
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5.6. Taxes
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26
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5.7. Assets Necessary to
Carry on the Business
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27
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5.8. Governmental Permits;
Compliance with Laws
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27
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5.9. Real
Property
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28
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5.10. Personal Property
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29
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5.11. Intellectual Property;
Software
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29
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5.12. Title to Property
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31
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5.13. Employees and Related
Agreements; ERISA
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32
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5.14. Employee Relations
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32
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5.15. Status of Assumed
Contracts
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33
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5.16. No Violation or Litigation;
Municipal Bonds
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33
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5.17. Environmental Matters
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35
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5.18. Not a Sale of All or
Substantially All of the Assets
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35
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5.19. No Finder
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35
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ATRICLE VI REPRESENTATIONS AND WARRANTIES OF
BUYER
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36
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6.1. Organization of
Buyer
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36
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6.2. Authority of
Buyer
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36
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6.3. No Finder
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37
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6.4. Sufficiency of
Funds
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37
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6.5. Litigation
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37
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ATRICLE VII ACTION PRIOR TO THE CLOSING
DATE
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37
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7.1. Investigation by
Buyer
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37
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7.2. Preserve Accuracy of
Representations and Warranties; Notification of
Certain
Matters
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7.3. Consents of Third
Parties; Governmental Approvals
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38
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7.4. Operations Prior to
the Closing Date
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39
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7.5. Acquisition
Proposals
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40
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7.6. Insurance
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40
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7.7. Additional Purchased
Assets
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41
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7.8. Assumption or Sublet
of Leased Real Property
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41
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7.9. Hedging Arrangements
for the Municipal Bonds
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42
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7.10. Payoff of Leased Personal
Property
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42
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7.11. Transfer of Intellectual
Property Contracts
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42
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7.12. Relocation of
Employees
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42
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7.13. Transitions Services
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43
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ARTICLE VIII ADDITIONAL AGREEMENTS
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43
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8.1. Covenant Not to
Compete to Solicit Business
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43
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8.2. Change in Corporate
Name
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44
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8.3. Taxes
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45
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8.4. Employees
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46
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8.5. Release from
Non-Compete
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47
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8.6. First Albany
Websites
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47
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ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF
BUYER
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47
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9.1. No Misrepresentation
or Breach of Covenants and Warranties
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47
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9.2. No
Illegality
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47
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9.3. No Restraint or
Litigation
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47
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9.4. Broker-Dealer and
NASD approvals
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47
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9.5. Necessary Government
Approvals
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48
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9.6. Charter
Amendment
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48
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9.7. Employment
Arrangements
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48
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9.8. Change in Corporate
Name
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48
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9.9. No Insolvency
Event
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48
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9.10. New York Office
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48
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ATRICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER
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48
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10.1. No Misrepresentations or Breach
of Covenants and Warranties
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48
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10.2. No Illegality
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49
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10.3. No Restraint or
Litigation
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49
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10.4. NYSE Approval
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49
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10.5. Necessary Government
Approvals
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49
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ATRICLE XI INDEMNIFICATION
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49
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11.1. Indemnification by Seller and
Parent
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49
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11.2. Indemnification by
Buyer
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51
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11.3. Notice of Claims
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52
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11.4. Third Person Claims
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53
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11.5. Adjustment to Purchase
Price
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54
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11.6. Exclusive Remedies
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54
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11.7. Survival of
Obligations
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54
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ATRICLE XII TERMINATION
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54
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12.1. Termination
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54
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12.2. Notice of Termination
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55
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12.3. Termination Fee
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55
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12.4. Effect of Termination
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55
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ARTICLE XIII GENERAL PROVISIONS
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55
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13.1. Confidential Nature of
Information
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55
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13.2. No Public
Announcement
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56
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13.3. Notices
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57
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13.4. Successors and
Assigns
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58
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13.5. Access to Records after
Closing
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58
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13.6. Entire Agreement:
Amendments
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59
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13.7. Partial Invalidity
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59
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13.8. Waivers
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59
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13.9. Expenses
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59
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13.10. Execution in
Counterparts
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59
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13.11. Further Assurances
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59
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13.12. Governing Law
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60
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13.13. Submission to Jurisdiction;
Waiver of Jury Trial
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60
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ASSET PURCHASE
AGREEMENT
This ASSET PURCHASE AGREEMENT (this " Agreement "), dated as of March 6, 2007,
among DEPFA BANK plc, an Irish public limited company ("
Buyer "), First Albany Capital Inc., a New York corporation
(" Seller "), and First Albany Companies Inc., a New York
corporation (" Parent ").
WHEREAS , Seller is the
wholly-owned Subsidiary of Parent;
WHEREAS , Seller is, among other
things, engaged through its Municipal Capital Markets Group (the "
Division ") in the business of underwriting, advisory
services, sales and trading of U.S. municipal bonds, and other
similar instruments and securities (the " Business
");
WHEREAS ,
Parent owns or leases
certain real and personal property used by Seller in connection
with the operation of the Business; and
WHEREAS , Parent and Seller
desire to sell to Buyer, and Buyer desires to purchase from Parent
and Seller, the Purchased Assets (as defined herein), and Parent
and Seller desire to transfer to Buyer, and Buyer desires to assume
from Parent and Seller, the Assumed Liabilities (as defined
herein), all on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE , in
consideration of the mutual covenants and agreements hereinafter
set forth, the parties to this Agreement agree as
follows:
ARTICLE I
DEFINITIONS AND
INTERPRETATIONS
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1.1.
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Definitions . In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1
and shall be equally applicable to both the singular and plural
forms.
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Accrued Bonuses " shall
be the amount of cash accrued for bonuses for Employees calculated
in accordance with the following formula:
Net Revenues
(base salaries)
(salesman compensation)
(severance costs incurred from January 1, 2007 until the date
hereof, including
such costs for those individuals set forth in Disclosure
Letter Schedule 1.1(B) )
(restricted stock amortization expense)
(deferred compensation amortization expense)
(note amortization expense)
(employee benefits related expenses)
(all other non-compensation related expenses directly related to
the Division)
(Pre-Tax Contribution)___________________
Accrued Bonuses
With the exception of Pre-Tax Contribution, which
shall be calculated in accordance with the terms of this Agreement,
each of the line items set forth above shall be equal to the
corresponding amounts set forth in the statements of income for the
Division calculated in accordance with GAAP for the period from
January 1, 2007 until the Closing Date.
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" Adjustment Escrow
Account " means the escrow account of
Escrow Agent into which the Adjustment Escrow Amount shall be
deposited by Buyer at Closing.
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" Adjustment Escrow
Amount " means an amount equal to 5% of
the Estimated Municipal Bond Purchase Price.
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" Affiliate
" means, with respect to any Person, any other
Person which, at the time of determination, directly or indirectly
through one or more intermediaries Controls, is Controlled
by
or is under Common Control with such Person.
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" Agreed
Adjustments " has the meaning specified
in Section 3.4(c) .
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" Agreement
" has the meaning specified in the first paragraph
of this Agreement.
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" Allocation
Schedule " has the meaning specified in
Section 3.5(a) .
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" Assumed
Contracts " means the Contracts
included in the Purchased Assets.
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" Assumed
Liabilities " has the meaning specified
in Section 2.3 .
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" Business
" has the meaning specified in the second recital of
this Agreement.
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" Business Day
" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
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" Buyer
" has the meaning specified in the first paragraph
of this Agreement.
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" Buyer Ancillary
Agreements " means all agreements,
instruments and documents being or to be executed and delivered by
Buyer under this Agreement or in connection herewith.
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" Buyer Employees
" means employees of Buyer and its
Affiliates.
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" Buyer Group
Member " means (i) Buyer and its
Affiliates, (ii) the directors, officers and employees of each of
Buyer and its Affiliates and (iii) the respective successors and
assigns of
each of the foregoing.
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" Buyer’s Credit
Requirements " means, as at anytime,
Buyer’s current credit requirements for the purchase of
bonds.
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" Charter
Amendment " has the meaning specified
in Section 8.2 .
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" Claim Notice
" has the meaning specified in
Section 11.3(a) .
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" Closing
" means the closing of the transactions contemplated
by this Agreement.
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" Closing Date
" has the meaning specified in
Section 4.1 .
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" Closing Disputed Bond
Amount " has the meaning set forth in
Section 3.4(a) .
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" COBRA
" has the meaning specified in
Section 8.4(c) .
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" Code " means the Internal Revenue Code of 1986.
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" Company Sale
" means any of the following involving Parent or
Seller: the sale of a majority of its outstanding capital stock,
merger, share exchange, business combination or
other
similar transaction.
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" Confidentiality
Agreement " means the Confidentiality
Agreement dated October 11, 2006 between Buyer and
Parent.
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" Contracts
" means all written contracts, agreements, leases,
subleases, licenses, sublicenses, permits, evidences of
indebtedness, mortgages, indentures, notes, bonds,
concessions,
franchises, security agreements, joint settlement
agreements, commitments, indemnities, assignments, understandings
and arrangements.
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" Control
" means, as to any Person, the power to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by
Contract or otherwise. The terms "Controlled
by," "under Common Control with" and "Controlling" shall have
correlative meanings.
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" Copyrights
" means United States and non-U.S. copyrights and
mask works (as defined in 17 U.S.C. §901), whether registered
or unregistered, and pending applications to register
the
same.
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" Court Order
" means any judgment, order, award or decree of any
United States federal, state or local, or any supra-national or
non-U.S., court or tribunal and any award in any
arbitration proceeding.
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" Disputed Bond
" has the meaning specified in
Section 3.4(a) .
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" Division
" has the meaning specified in the second recital to
this Agreement.
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" Downward Purchase Price
Adjustment " has the meaning specified
in Section 3.4(e) .
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" Employees
" means employees of the Division as of the date
hereof.
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" Encumbrance
" means any lien (statutory or other), claim,
charge, security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, conditional sale or other title
retention
agreement, preference, priority or other security
agreement or preferential arrangement of any kind, and, with
respect to any Leased Real Property included in the Purchased
Assets (if
any), any easement, encroachment, covenant, restriction,
right of way, defect in title or other encumbrance of any kind.
of 1974.
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" ERISA "
means the Employee Retirement Income Security Act of
1974.
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" Escrow Agent
" means JPMorgan Chase Bank, N.A., or such other
bank or financial institution mutually acceptable to Buyer and
Seller.
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" Escrow Agreement
" means an escrow agreement or agreements to be
entered into among Escrow Agent and the parties hereto on the
Closing Date on terms and conditions
reasonably acceptable to Buyer and Seller
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" Estimated Final Municipal
Bond Purchase Price " has the meaning
specified in Section 3.4(a) .
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" Estimated Municipal Bond
Purchase Price " means the sum of the
Estimated Settled Municipal Bond Purchase Price and the Estimated
Unsettled Municipal Bond Purchase
Price
." Estimated Settled Municipal
Bond Purchase Price " means the
Preliminary Estimated Settled Municipal Bond Purchase Price as
adjusted by the deduction of the portion thereof
allocable to Excluded Municipal Bonds.
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" Estimated Unsettled Municipal
Bond Purchase Price " means the
Preliminary Estimated Unsettled Municipal Bond Purchase Price as
adjusted by the deduction of the portion thereof
allocable to Excluded Municipal Bonds.
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" Estimated Valuation
Certificate " has the meaning set forth
in Section 3.2(b) .
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" Evaluation
Material " has the meaning specified in
the Confidentiality Agreement.
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" Exchange Act
" means the Securities Exchange Act of 1934 and the
rules and regulations of the SEC thereunder.
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" Excluded Assets
" has the meaning specified in
Section 2.2 .
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" Excluded
Liabilities " has the meaning specified
in Section 2.4 .
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" Excluded Municipal
Bonds " has the meaning set forth in
Section 3.2(c) .
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" Excluded Remarketing
Agreement " has the meaning specified
in Section 3.4(a) .
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" Expenses
" means any and all documented out-of-pocket
expenses incurred in connection with investigating, defending or
asserting any claim, action, suit or proceeding incident
to
any matter indemnified against hereunder (including court
filing fees, court costs, arbitration fees or costs, witness fees,
and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants
and other professionals).
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" Final Municipal Bond Purchase
Price " means the purchase price for
the Municipal Bonds as finally determined in accordance with
Section 3.4 .
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" Force Majeure
Event " means acts of nature (including
fire, flood, earthquake, storm, hurricane or other natural
disaster), war, invasion, act of foreign enemies, hostilities
(whether war
is declared or not), civil war, rebellion, revolution,
insurrection, military or usurped power or confiscation, terrorist
activities, nationalization, government sanction, blockage,
embargo,
labor dispute, strike or lockout.
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" GAAP " means United States generally accepted accounting
principles.
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" Governmental
Body " means any United States federal,
state or local, or any supra-national or non-U.S., government,
political subdivision, governmental, regulatory or
administrative
authority, instrumentality, agency body or
commission, self-regulatory organization, court, tribunal or
judicial or arbitral body.
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" Governmental
Permits " has the meaning specified in
Section 5.8 .
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" Indemnified
Party " has the meaning specified in
Section 11.3(a)
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" Indemnitor
" has the meaning specified in
Section 11.3(a) .
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" Independent Accounting
Firm " means an independent public
accounting firm of nationally-recognized standing, mutually
agreeable to the parties.
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" Independent
Expert " has the meaning specified in
Section 3.4(d) .
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" Insolvency Event
" means, with respect to any Person, (i) any
dissolution of such Person, (ii) the institution against such
Person of a proceeding seeking a judgment of insolvency
or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors’
rights, or the presentment of a petition for such Person’s
winding-up or
liquidation, (iii) such Person shall have passed a
resolution for its winding-up or liquidation, (iv) such Person
has sought or become subject to the appointment of an
administrator,
provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all its assets or (v) any general assignment of
all or substantially
all the assets of such Person with or for the benefit of
such Person’s creditors.
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" Instrument of
Assignment " means the Instrument of
Assignment substantially in the form of Exhibit A
.
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" Instrument of
Assumption " means the Instrument of
Assumption substantially in the form of Exhibit B
.
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" Intellectual
Property " means Copyrights, Patent
Rights, Trademarks and Trade Secrets.
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" IRS " means the United States Internal Revenue Service.
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" Knowledge of
Seller " means the collective actual
knowledge, after reasonable due inquiry, of the Persons listed in
Disclosure Letter Schedule 1.1(A) .
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" Leased Real
Property " means the real property
owned by any third Person which Parent or Seller is lessee or
sublessee of, or holds or operates, in the locations set forth in
Disclosure
Letter Schedule 5.9(B) .
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" Liabilities
" has the meaning specified in
Section 2.3 .
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" Losses
" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines,
penalties, damages, deficiencies or other charges (excluding,
except
with respect to employee matters, incidental, special and
consequential damages, including lost profits) suffered or incurred
by an Indemnified Party in respect of any claim for which
such Indemnified Party is entitled to indemnification
pursuant to Article XI hereto.
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" Master Equipment
Lease " means the Master Equipment
Lease Agreement, dated September 25, 1996, between Parent and
KeyCorp Leasing Ltd.
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" Material Adverse
Effect " means (a) an event, change or
occurrence which is materially adverse to the Purchased Assets or
the Business, taken as a whole, but shall not include (i)
any
adverse effect due to changes, after the date of this
Agreement, in conditions generally affecting (x) the industry of
the Business or (y) the United States economy as a whole, or
(ii)
any change or adverse effect caused by, or resulting
from, the announcement of this Agreement and the transactions
contemplated hereby or (b) any material adverse effect on the
ability of Seller or Parent to perform its obligations
under this Agreement. Notwithstanding the foregoing, any
Force Majeure Event materially adverse to the Purchased Assets,
the
Business, taken as a whole, or the industry of the
Business shall be a Material Adverse Effect.
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" MSRB " means the Municipal Securities Rulemaking Board.
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" Municipal Bonds
" means all municipal bonds, derivatives and other
securities included in the inventory of the Division.
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" NASD " means the National Association of Securities Dealers, Inc.
and its wholly-owned subsidiary, NASD Regulation, Inc.
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" Net Revenues
" means the net revenues reflected in the statements
of income for the Division for the period commencing on January 1,
2007 up to and including the Closing Date and
included in Parent’s consolidated income statement
for such period, prepared in conformity with GAAP.
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" NSCC " means the National Securities Clearing
Corporation.
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" Notice Period
" has the meaning specified in
Section 11.3(a) .
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" NYSE " means the New York Stock Exchange, Inc.
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" Owned Software
" has the meaning specified in
Section 5.11(g) .
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" Parent
" has the meaning specified in the first paragraph
of this Agreement.
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" Patent Rights
" means United States and non-U.S. patents,
provisional patent applications, patent applications,
continuations, continuations-in-part, divisions, reissues,
patent
disclosures, industrial designs, inventions (whether or
not patentable or reduced to practice) and improvements
thereto.
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" Payoff Amount
" has the meaning specified in
Section 7.10 .
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" Permitted
Encumbrances " means (i) liens for
Taxes and other governmental charges and assessments which are not
yet due and payable or delinquent, (ii) liens of landlords and
liens
of carriers, warehousemen, mechanics and materialmen and
other similar liens imposed by law arising in the ordinary course
of business for sums not yet due and payable or
delinquent, (iii) other liens or imperfections on
property which do not adversely affect title to, detract from the
value of, or impair the existing use of, the property affected by
such lien
or imperfection and (iv) any lien on leased personal
property included in the Purchased Assets pursuant to the Master
Equipment Lease.
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" Person
" means any individual, corporation, partnership,
joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or
Governmental
Body.
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" Post-Closing Tax
Period " has the meaning specified in
Section 8.3(a) .
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" Pre-Closing Tax
Period " has the meaning specified in
Section 8.3(a) .
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" Preliminary Estimated
Municipal Bond Purchase Price " has the
meaning specified in Section 3.2(b) .
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" Preliminary Estimated Settled
Municipal Bond Purchase Price " has the
meaning specified in Section 3.2(b) .
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" Preliminary Estimated
Unsettled Municipal Bond Purchase Price " has the meaning specified in Section 3.2(b)
.
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" Pre-Tax
Contribution " shall be calculated in
accordance with the following, assuming a June 30, 2007 Closing
Date:
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(i)
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if the Net Revenues shall be less than or equal
to $18,000,000, then the Pre-Tax Contribution shall be equal to
$3,250,000; and
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(ii)
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if the Net Revenues shall be greater than
$18,000,000, then the Pre-Tax Contribution shall be equal to
$3,250,000 plus an amount equal to the product of 0.30 times
the
amount of Net Revenues in excess of $18,000,000, but in any
event, the Pre-Tax Contribution shall be no greater than
$4,000,000.
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If the Closing Date shall be different than June
30, 2007, the amount of the Net Revenues and the corresponding
Pre-Tax Contribution shall be adjusted from the foregoing amounts
on a pro rata basis, taking into account the number of days that
shall have actually elapsed from January 1, 2007 until the Closing
Date relative to the number of days in the period from January 1,
2007 to June 30, 2007.
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" Purchase Price
" has the meaning specified in
Section 3.1 .
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" Purchased Assets
" means all the assets set forth in
Section 2.1 .
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" Purchased Municipal
Bonds " means the Settled Municipal
Bonds and Unsettled Municipal Bonds in the inventory of the
Division immediately prior to Closing following the sale
by
Seller of all Excluded Municipal Bonds, if any.
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" Put Bond
" has
the meaning specified in Section 3.3(c) .
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" Put Bond Purchase
Price " has the meaning specified in
Section 3.3(c) .
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" Requirements of
Laws " means any United States federal,
state and local, and any non-U.S., laws, statutes, regulations,
rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body (including those
pertaining to electrical, building, zoning, environmental and
occupational safety and health requirements) or common law or
equity.
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" SEC " means the United States Securities and Exchange
Commission.
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" Seller
" has the meaning specified in the first paragraph
of this Agreement.
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" Seller Ancillary
Agreements " means all agreements,
instruments and documents being or to be executed and delivered by
Seller or Parent under this Agreement or in connection
herewith.
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" Seller Group
Member " means (i) Seller and its
Affiliates, (ii) the directors, officers and employees of each of
Seller and its Affiliates and (iii) the respective successors and
assigns of
each of the foregoing
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" Seller’s Compensation
Commitments " has the meaning specified
in Section 5.13(b) .
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" Seller’s
Plans " has the meaning specified in
Section 5.13(a) .
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" Settled Municipal
Bonds " means all cleared and settled
Municipal Bonds in the inventory of the Division.
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" Settlement Escrow
Account " means the escrow account of
Escrow Agent into which the Estimated Unsettled Municipal Bond
Purchase Price shall be deposited by Buyer at Closing.
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" Software
" means computer software programs and software
systems, including databases, compilations, tool sets, compilers,
higher level or "proprietary" languages and related
documentation and materials, whether in source code,
object code or human readable form.
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" Subsidiary
" means each corporation, partnership, limited
liability company, joint venture or other entity which is involved
in or relates to the Business (i) in which Seller, directly
or
indirectly, owns of record or beneficially 50% or more of
the outstanding voting securities or of which it is a general
partner, (ii) in which Seller, directly or indirectly, owns of
record or
beneficially any outstanding voting securities or other
equity interests or (iii) which is Controlled by Seller.
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" Tax " or " Taxes "
(and, with correlative meaning, " Taxable ") means:
(i) any United States federal, state, municipal or
local, or non-U.S., net income, gross income, gross
receipts,
windfall profit, severance, property, production, sales,
use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value-added,
transfer, stamp, or environmental (including taxes under
Code Section 59A) tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any Governmental
Body; and (ii) any liability for the payment of amounts
with
respect to payments of a type described in clause (i) as
a result of being a member of an affiliated, consolidated, combined
or unitary group, or as a result of any obligation under any
Tax Sharing Arrangement or Tax indemnity agreement.
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" Tax Return
" means any return, declaration, report or similar
statement or any other document required to be filed with respect
to any Taxes (including any attached schedules),
including any information return, claim for refund,
amended return or declaration of estimated Tax.
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" Tax Sharing
Arrangement " means any written or
unwritten agreement or arrangement for the allocation or payment of
Tax liabilities or payment for Tax benefits with respect to
a
consolidated, combined or unitary Tax Return which Tax
Return includes Parent or Seller.
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" Tentative Net
Capital " means, as of any given date,
tentative net capital as specified in Rule 15c3-1(c)(15) under the
Exchange Act.
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" Third Person
Claim " has the meaning specified in
Section 11.3(a) .
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" Trademarks
" means United States, state and non-U.S.
trademarks, service marks, trade names, Internet domain names,
designs, logos, slogans and general intangibles of like
nature,
whether registered or unregistered, and pending
registrations and applications to register the foregoing.
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" Trade Secrets
" means trade secrets and confidential ideas,
know-how, concepts, methods, processes, formulae, technology,
algorithms, models, reports, data, customer lists,
supplier
lists, mailing lists, business plans and other
proprietary information, all of which derive value, monetary or
otherwise, from being maintained in confidence.
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" Transfer Tax
" means any transfer, documentary, sales, bulk
sales, use, registration, value added or other similar Tax,
including any applicable real estate transfer Tax and any
real
property transfer gains Tax.
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" Transferred
Employees " means Employees who enter
into employment arrangements with Buyer or accept offers of
employment from Buyer or its Affiliates that are effective
at
Closing.
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" Transition Services
Agreement " means the Transition
Services Agreement substantially in the form of Exhibit C
.
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" Unsettled Municipal
Bonds " means all unsettled Municipal
Bonds in the inventory of the Division.
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" Upward Purchase Price
Adjustment " has the meaning specified
in Section 3.4(e) .
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" WARN " means the Workers’ Adjustment Retraining and
Notification Act.
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1.2.
Interpretation . For purposes of this Agreement, (i) the words
"include," "includes" and "including" shall be deemed to be
followed by the words "without limitation," (ii)
the word "or" is not exclusive and (iii)
the words "herein", "hereof", "hereby", "hereto" and "hereunder"
refer to this Agreement as a whole. Unless the context
otherwise
requires, references herein: (i)
to Articles, Sections, Exhibits and Schedules mean the Articles and
Sections of, and the Exhibits and Schedules attached to, this
Agreement;
(ii) to Disclosure Letter Schedules
means the Schedules set forth in the Disclosure Letters delivered
by Parent and Seller, on the one hand, and Buyer, on the other,
(iii) to an
agreement, instrument or other document
means such agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent
permitted by the provisions
thereof and by this Agreement; and (iv) to a statute means such
statute as amended from time to time and includes any successor
legislation
thereto and any regulations
promulgated thereunder. The Schedules, Exhibits and
Disclosure Letter Schedules referred to herein shall be construed
with and as an integral part
of this Agreement to the same extent as
if they were set forth verbatim herein. Titles to
Articles and headings of Sections are inserted for convenience of
reference only and
shall not be deemed a part of or
to affect the meaning or interpretation of this
Agreement. This Agreement, the Buyer Ancillary
Agreements and the Seller Ancillary
Agreements shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing
any
instrument to be
drafted.
ARTICLE II
PURCHASE AND SALE
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2.1.
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Purchased Assets . Upon the terms and subject to the conditions of
this Agreement, on the Closing Date, Parent and Seller shall, and
Parent shall cause Seller to, sell, transfer, assign, convey and
deliver to Buyer, and Buyer shall purchase from Parent and Seller,
free and clear of all Encumbrances (except for Permitted
Encumbrances), all right, title and interest of Parent and Seller
in, to and under:
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(a)
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the Purchased Municipal Bonds;
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(b)
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the machinery, equipment, vehicles, furniture and
other personal property listed or referred to in Disclosure
Letter Schedule 5.10(A) ;
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(c)
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the Copyrights, Patent Rights and Trademarks
(including all names under which Seller is conducting the Business
or has within the previous five years conducted the Business), and
all goodwill associated therewith, listed in Disclosure Letter
Schedule 5.11(A) ;
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(d)
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all Trade Secrets and other proprietary or
confidential information primarily used in or relating to the
Business, including any policies and procedures relating to
compliance with any broker-dealer, SEC, NASD, NYSE, any other
Governmental Body rules and regulations or any clearing agency with
respect to the Business;
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(e)
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the Software listed in Disclosure Letter
Schedule 5.11(B) ;
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(f)
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the Contracts listed in Disclosure Letter
Schedules 2.1(F) and 5.11(C) ;
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(g)
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the promissory notes with respect to Employees
listed in Disclosure Letter Schedule 5.13(B) and all amounts
actually withheld for estimated Taxes with respect to such notes
equal to $218,000;
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(h)
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cash in an amount equal to the Accrued
Bonuses;
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(i)
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copies of
all books and records (including financial and
accounting records and all data and other information stored on
discs, tapes or other media) of Seller relating to the Purchased
Assets and the Division (excluding with relation to Employees),
including sales, advertising and marketing materials (but for
financial and accounting books and records, only to the extent
relating solely and exclusively to the Purchased Assets and the
Division); and
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(j)
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all client lists, customer lists, supplier lists,
mailing lists, do not call lists and other data owned, associated
with, used or employed in or by the Division, including service and
warranty records, operating guides and manuals, studies, and
correspondence of the Division.
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With respect to any unwritten remarketing
agreement or any remarketing agreement pursuant to which any
municipal bond or other security may be put to Buyer on or after
Closing that is referred to in Disclosure Letter Schedule
2.1(F) (or with respect to any similar Assumed Contracts
assigned to Buyer pursuant to Section 7.7 ), Buyer in its
sole discretion by written notice to Seller may exclude such
Assumed Contract from being assigned hereunder, if such agreement
does not satisfy Buyer’s Credit Requirements determined in
accordance with a reasonable application thereof, in good faith and
in consultation with Seller (such Contract, an " Excluded
Remarketing Agreement "). Buyer shall exercise such
right within fifteen (15) days of the date hereof with respect to
any such Contract referred to in Disclosure Letter Schedule
2.1(F) and within fifteen (15) days of notice of any such
Contract assigned to Buyer pursuant to Section 7.7
. Following delivery of such notice by Buyer, such
Excluded Remarketing Agreement shall not constitute a Purchased
Asset, and Buyer shall not acquire any rights or assume any
liabilities with respect thereto.
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2.2.
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Excluded Assets . Notwithstanding the provisions of
Section 2.1 , the Purchased Assets shall not include
the rights, properties and assets of Seller or Parent identified in
Disclosure Letter Schedule 2.2 (collectively, the "
Excluded Assets ").
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2.3.
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Assumed Liabilities . Upon the terms and subject to the conditions of
this Agreement, on the Closing Date, Buyer shall assume, pay,
perform and otherwise discharge any liabilities or obligations,
direct or indirect, known or unknown, absolute or contingent
(collectively, " Liabilities ") set forth below:
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(a)
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all Liabilities (other than Liabilities with
respect to Taxes) arising out of or relating to the conduct or
operation of the Business or the activities of Buyer or any
assignee of Buyer in connection with the Purchased Assets or the
Business or the ownership or use of the Purchased Assets, in all
events after the Closing Date;
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(b)
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all Liabilities after the Closing pursuant to the
terms of the Assumed Contracts (and relating to events that first
transpire after the Closing);
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(c)
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all Liabilities for Taxes for which Buyer is
liable pursuant to Section 8.3 ; and
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(d)
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all Liabilities for Taxes arising out of,
relating to or otherwise in respect of the Purchased Assets or the
operation or conduct of the Business by Buyer after the effective
time of the Closing, except for Taxes for which Seller or Parent is
liable pursuant to Section 8.3 .
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All of the foregoing Liabilities to be assumed by
Buyer hereunder (excluding any Excluded Liabilities) are referred
to herein as the " Assumed Liabilities ."
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2.4.
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Excluded Liabilities . Buyer shall not assume or be obligated to pay,
perform or otherwise discharge any Liabilities other than Assumed
Liabilities (all such Liabilities being herein called the "
Excluded Liabilities ") and, notwithstanding anything to the
contrary in Section 2.3 , none of the following shall
be Assumed Liabilities for purposes of this Agreement:
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(a)
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any Liabilities for Taxes of Parent or Seller
(including those for which Seller is liable pursuant to
Section 8.3 ), except those Taxes for which Buyer is
liable pursuant to Sections 2.3 or 8.3 ;
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(b)
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any payables and other Liabilities or obligations
of the Division to any other business unit of Parent, Seller or any
of Parent’s or Seller’s Affiliates;
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(c)
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any costs and expenses incurred by Seller
incident to its negotiation and preparation of this Agreement and
its performance and compliance with the agreements and conditions
contained herein;
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(d)
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any Liabilities or obligations in respect of any
Excluded Assets;
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(e)
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any Liabilities in respect of the lawsuits,
claims, suits, proceedings or investigations set forth in
Disclosure Letter Schedule 5.16 ;
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(f)
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any Liabilities or obligations arising out of or
resulting from non-compliance prior to the Closing with any
Requirements of Law by Parent, Seller or their
Affiliates;
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(g)
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any Liabilities for accounts payable by Parent or
Seller; and
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(h)
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any Liabilities for employment-related
obligations relating to the Division incurred prior to the Closing,
except for Liabilities with respect to the Employees for the
employment arrangements entered into with Buyer.
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2.5.
Audit of the Accrued Bonuses .
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(a)
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On the Business Day prior to the Closing Date,
Seller will deliver a certificate executed by an authorized officer
of Seller stating that there has been conducted a review of all
relevant information and data then available and setting forth
Seller’s calculation of the amount of the Accrued
Bonuses.
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(b)
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No later than five (5) Business Days following
the Closing, Buyer shall have the option to appoint the Independent
Accounting Firm to conduct a special audit of the Accrued Bonuses
as promptly as reasonably practicable (but not later than 60 days
after the Closing Date) and, upon completion of such audit (but not
later than 60 days after the Closing Date), to deliver written
notice to each of Buyer and Seller setting forth its calculation of
the amount of the Accrued Bonuses.
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(c)
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The calculation by the Independent Accounting
Firm shall be final and binding as the Accrued Bonuses, for
purposes of this Agreement. Seller shall make available
to the Independent Accounting Firm, such books, records and other
information (including work papers) as may be reasonably requested
in order to audit or review the Accrued Bonuses. If the
Independent Accounting Firm’s calculation of the amount of
the Accrued Bonuses is at least 5% or greater than Seller’s
calculation of the amount of the Accrued Bonuses, then the fees and
expenses of the Independent Accounting Firm shall be paid by
Seller. If the Independent Accounting Firm’s
calculation of the amount of the Accrued Bonuses is not at least 5%
or greater than Seller’s calculation of the amount of the
Accrued Bonuses, then the fees and expenses of the Independent
Accounting Firm shall be paid by Buyer.
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(d)
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Within five (5) Business Days following delivery
of the Independent Accounting Firm’s calculation of the
amount of the Accrued Bonuses, Seller shall pay to Buyer in
immediately available funds an amount equal to the excess (if any)
of the Independent Accounting Firm’s calculation of the
amount of the Accrued Bonuses over Seller’s calculation of
the amount of the Accrued Bonuses.
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2.6.
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Excluded Remarketing Agreements
. Notwithstanding the terms hereof,
Seller shall have the right, exercisable no later than fifteen (15)
days following notice of the election by Buyer pursuant to
Section 2.1 to exclude any Excluded Remarketing Agreement,
to exercise its right to terminate such Excluded Remarketing
Agreement.
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ARTICLE III
PURCHASE PRICE
3.1.
Purchase Price . The purchase price for the Purchased Assets (the "
Purchase Price ") shall be equal to:
(i)
the Estimated Municipal Bond Purchase Price, as adjusted in
accordance with Section 3.4 , plus
(ii)
$12,000,000, plus
(iii) the
amounts payable by Buyer pursuant to Sections 7.10 ,
7.11 and 7.12 (if any), minus
(iv) any
reduction for non-transferring Employees pursuant to
Section 9.7 .
3.2.
Delivery of Estimated Municipal Bond Purchase Price;
Excluded Municipal Bonds .
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(a)
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No less than ten (10) days prior to the Closing
Date, Seller will provide to Buyer a list of all Settled Municipal
Bonds and Unsettled Municipal Bonds in the inventory of the
Division as of such date, together with Seller’s estimate of
the fair market value of each such Municipal Bond. Buyer
shall promptly (but not later than two (2) Business Days following
delivery of such list) advise which Municipal Bonds, if any, do not
satisfy Buyer’s Credit Requirements determined in accordance
with a reasonable application thereof, in good faith and in
consultation with Seller. Seller will undertake
commercially reasonable efforts to settle any Unsettled Municipal
Bonds and any short positions in the inventory of Municipal Bonds
prior to Closing.
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(b)
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At the close of business on the Business Day
prior to the Closing Date, Seller will deliver an updated list of
all Settled Municipal Bonds and Unsettled Municipal Bonds in the
inventory of the Division at such time, together with a certificate
(the " Estimated Valuation Certificate ") jointly executed
on behalf of Seller by an Employee designated by Buyer and an
employee of Seller or Parent designated by Seller, each experienced
in the trading of municipal bond securities, stating that there has
been conducted a review of all relevant information and data then
available (including bid information) and setting forth
Seller’s best estimate of the fair market value, as
determined under GAAP consistent with past practice of Seller, of
each (i) Settled Municipal Bond as of the close of business on such
date (such aggregate estimated amount for all such Municipal Bonds,
the " Preliminary Estimated Settled Municipal Bond Purchase
Price ") and (ii) Unsettled Municipal Bond as of the close of
business on such date (such aggregate estimated amount for all such
Municipal Bonds, the " PreliminaryEstimated Unsettled Municipal
Bond Purchase Price " and, together with the Preliminary
Estimated Settled Municipal Bond Purchase Price, collectively, the
" Preliminary Estimated Municipal Bond Purchase Price
").
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(c)
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Buyer shall inform Seller no later than
8:30 A.M., New York time, on the Closing Date which, if any,
Municipal Bonds do not satisfy Buyer’s Credit Requirements
determined in accordance with a reasonable application thereof, in
good faith and in consultation with Seller, as of such date and
which, if any, of such Municipal Bonds Buyer elects not to purchase
on the Closing Date. Following such election by Buyer,
if the Preliminary Estimated Municipal Bond Purchase Price (as
reduced by Municipal Bonds excluded in accordance with the
immediately preceding sentence) is in excess of $200,000,000, Buyer
shall advise Seller which Unsettled Municipal Bonds (if any), it
elects not to purchase to the extent necessary so that the
Preliminary Estimated Municipal Bond Purchase Price (as reduced by
Municipal Bonds excluded in accordance with the immediately
preceding sentence) shall be less than $200,000,000. If,
following the exclusion of Unsettled Municipal Bonds in accordance
with the immediately preceding sentence, the Preliminary Estimated
Municipal Bond Purchase Price (as reduced by Municipal Bonds
excluded in accordance with the immediately preceding two
sentences) thereafter remains in excess of $200,000,000, Buyer
shall advise Seller which Settled Municipal Bonds (if any) that
Buyer elects not to purchase to the extent necessary so that the
Preliminary Estimated Municipal Bond Purchase Price (as reduced by
Municipal Bonds excluded in accordance with the immediately
preceding two sentences) shall be less than
$200,000,000. Any Municipal Bonds that Buyer elects not
to purchase in accordance with this Section 3.2(c) shall be
referred to collectively as " Excluded Municipal Bonds
". Seller shall be allowed upon the open of business on
the Closing Date a reasonable amount of time to sell any Excluded
Municipal Bonds prior to Closing.
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3.3.
Purchase of Municipal Bonds and Final
Settlement .
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(a)
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The parties hereto agree that on the Closing Date
Buyer shall purchase directly from Seller for cash the Settled
Municipal Bonds included in the Purchased Municipal
Bonds. In connection therewith, Buyer shall (i) pay to
Seller at the Closing the Estimated Settled Municipal Bond Purchase
Price less the Adjustment Escrow Amount and (ii) deposit in the
Adjustment Escrow Account the Adjustment Escrow
Amount. The parties hereto agree that Buyer shall take
possession of the Unsettled Municipal Bonds which are included in
the Purchased Municipal Bonds only upon the final clearance and
settlement of each such Unsettled Municipal Bond. In
connection therewith, Buyer shall deposit in the Settlement Escrow
Account at the Closing the Estimated Unsettled Municipal Bond
Purchase Price, and following the Closing Date Buyer shall
reasonably cooperate with, and provide assistance to, Seller in
connection with the clearing and settlement of each of the
Unsettled Municipal Bonds included in the Purchased Municipal
Bonds.
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(b)
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Upon the final clearing and settlement of each
Unsettled Municipal Bond included in the Purchased Municipal Bonds,
the parties hereto shall deliver joint written instructions to the
Escrow Agent instructing the Escrow Agent to pay to Seller in
immediately available funds from the Settlement Escrow Account an
amount equal to the portion of the Estimated Unsettled Municipal
Bond Purchase Price attributable to such Unsettled Municipal
Bond. If any of the Unsettled Municipal Bonds included
in the Purchased Municipal Bonds fails to clear within twenty (20)
Business Days of the Closing Date, the parties hereto shall deliver
joint written instructions to the Escrow Agent instructing the
Escrow Agent to pay to Buyer in immediately available funds from
the Settlement Escrow Account an amount equal to that portion of
the Estimated Unsettled Municipal Bond Purchase Price attributable
to such Unsettled Municipal Bonds (plus interest accrued thereon
pursuant to the Escrow Agreement).
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(c)
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If any municipal bond or other security traded in
the ordinary course of business of the Division that is subject to
a remarketing agreement that is transferred to Buyer from Seller at
Closing as an Assumed Contract is put back to Seller following the
Closing (a " Put Bond "), Buyer shall cooperate with, and
provide assistance to, Seller in connection with the transfer of
such Put Bond from Seller to Buyer. Buyer and Seller
agree that the purchase price for any Put Bond shall be the price
paid by Seller for such Put Bond (the " Put Bond Purchase
Price "). Buyer shall pay to Seller by wire transfer
of immediately available funds the Put Bond Purchase Price as soon
as reasonably practicable following the date of transfer of such
Put Bond (but not later than one Business Day following notice
thereof from Seller).
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(d)
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Except as with respect to payment from the
Adjustment Escrow Account, all deliveries and payments of Purchased
Municipal Bonds and Put Bonds shall be effected through NSCC or as
otherwise required, and all calculations, deliveries and payments
of the Purchased Municipal Bonds and Put Bonds shall be effected
according to the rules of the MSRB and the NASD.
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(e)
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Seller will take no action inconsistent with, and
will be estopped from challenging, Buyer’s ownership interest
of the Purchased Municipal Bonds and Put Bonds. All
sales of Municipal Bonds and Put Bonds pursuant to this Agreement
are without recourse to Seller, except as expressly provided in
this Agreement (including Article XI ).
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3.4.
Post-Closing Purchase Price Adjustment
.
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(a)
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As promptly as practicable following the Closing
Date (but not later than five (5) Business Days after the Closing
Date), Buyer shall cause Interactive Data to deliver a statement
(together with all supporting data on a CUSIP by CUSIP level)
listing each Purchased Municipal Bond with a valuation price as of
the close of business on the Business Day prior to Closing that
varies from the price of such Purchased Municipal Bond in the
Estimated Valuation Certificate by at least (i) three percent (3%)
or (ii) $3,000, whichever is less (each such Purchased Municipal
Bond, a " Disputed Bond "). Unless otherwise
agreed to by Buyer and Seller, the parties shall engage JJ Kenny to
determine the value of each Disputed Bond as of the close of
business on the Business Day prior to Closing, such determination
to be delivered in writing (together with all supporting data on a
CUSIP by CUSIP level) as promptly as practicable but not later than
ten (10) Business Days following the Closing Date. The "
Closing Disputed Bond Amount " for any Disputed Bond shall
be the average of the prices of such Disputed Bond determined by
(i) Seller in the Estimated Valuation Certificate, (ii) Interactive
Data and (iii) JJ Kenny. If for any reason the price for
any Purchased Municipal Bond is not available from Interactive Data
or JJ Kenny, the parties shall mutually agree on a reasonably
acceptable independent expert experienced in the valuation of
municipal bond securities to determine such price. The "
Estimated Final Municipal Bond Purchase Price " shall mean
the aggregate of (i) the portion of the Estimated Municipal Bond
Purchase Price allocable to all Purchased Municipal Bonds other
than Disputed Bonds and (ii) the aggregate of the Closing Disputed
Bond Amounts.
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(b)
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If neither party objects within five (5)
Business Days following determination of the Closing Disputed Bond
Amounts, the Estimated Final Municipal Bond Purchase Price shall be
final and binding as the Final Municipal Bond Purchase Price for
purposes of this Agreement.
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(c)
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If either party objects to any Closing Disputed
Bond Amount within such five (5) Business Days’ period
pursuant to Section 3.4(b) , Seller and Buyer shall use
their reasonable efforts to resolve by written agreement (the "
Agreed Adjustments ") any differences as to the value of
such Disputed Bond and, if Seller and Buyer so resolve any such
differences, the Estimated Final Municipal Bond Purchase Price as
adjusted by the Agreed Adjustments shall be final and binding as
the Final Municipal Bond Purchase Price for purposes of this
Agreement.
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(d)
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If any objection raised by either party with
respect to any Disputed Bond Amount is not resolved by Agreed
Adjustments within five (5) Business Days after such objection
shall have been raised, then either party may request that the fair
market value of such Disputed Bond as of the close of business on
the Business Day prior to the Closing Date be determined by a
nationally-recognized, mutually acceptable independent accounting
firm (or such other independent expert experienced in the valuation
of the securities similar to the Purchased Municipal Bonds
reasonably acceptable to Buyer and Seller) (the " Independent
Expert "). The Independent Expert shall resolve such
disputed valuation as promptly as practicable but no later than
fifteen (15) Business Days following submission of such matter to
the Independent Expert. The Estimated Municipal Bond
Purchase Price, after giving effect to any Agreed Adjustments and
to the resolution of disputed valuations by the Independent Expert,
shall be final and binding as the Final Municipal Bond Purchase
Price for purposes of this Agreement.
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(e)
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In the event the Estimated Municipal Bond
Purchase Price is greater than the Final Municipal Bond Purchase
Price as finally determined pursuant to this
Section 3.4 , the Purchase Price shall be adjusted
downward, dollar-for-dollar, by the extent to which the Estimated
Municipal Bond Purchase Price exceeds the Final Municipal Bond
Purchase Price (the " Downward Purchase Price Adjustment
"). In the event the Estimated Municipal Bond Purchase
Price is less than the Final Municipal Bond Purchase Price as
finally determined pursuant to this Section 3.4 , the
Purchase Price shall be adjusted upward, dollar-for-dollar, by the
extent to which the Final Municipal Bond Purchase Price exceeds the
Estimated Municipal Bond Purchase Price (the " Upward Purchase
Price Adjustment ").
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(f)
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In satisfaction of the post-Closing Purchase
Price adjustment:
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(i)
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In the event the Downward Purchase Price
Adjustment, if any, exceeds the Adjustment Escrow
Amount, within three (3) Business Days of the date in which the
Final Municipal Bond Purchase Price is determined pursuant to this
Section 3.4 , the parties hereto shall deliver joint
written instructions to the Escrow Agent instructing the Escrow
Agent to pay to Buyer in immediately available funds from the
Adjustment Escrow Account the Adjustment Escrow Amount and Seller
shall pay to Buyer in immediately available funds an amount equal
to (x) the Downward Purchase Price Adjustment minus (y) the
Adjustment Escrow Amount.
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(ii)
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In the event the Downward Purchase Price
Adjustment, if any, does not exceed the Adjustment Escrow Amount,
within three (3) Business Days of the date in which the Final
Municipal Bond Purchase Price is determined pursuant to this
Section 3.4 , the parties hereto shall deliver joint
written instructions to the Escrow Agent instructing the Escrow
Agent to pay to (x) Buyer in immediately available funds from the
Adjustment Escrow Account an amount equal to the Downward Purchase
Price Adjustment ( plus interest accrued thereon under the
Escrow Agreement) and (y) Seller the amount remaining in the
Adjustment Escrow Account after such distribution to
Buyer.
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(iii)
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In the event of an Upward Purchase Price
Adjustment, if any, within three (3) Business Days of the date in
which the Final Municipal Bond Purchase Price is determined
pursuant to this Section 3.4 , the parties hereto shall
deliver joint written instructions to the Escrow Agent instructing
the Escrow Agent to pay to Seller in immediately available funds
from the Adjustment Escrow Account the Adjustment Escrow Amount and
Buyer shall pay to Seller in immediately available funds an amount
equal to (x) the Upward Purchase Price Adjustment minus (y) the
Adjustment Escrow Amount.
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(iv)
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In the event there is neither a Downward Purchase
Price Adjustment nor Upward Purchase Price Adjustment, within three
(3) Business Days of the date in which the Final Municipal Bond
Purchase Price is determined pursuant to this
Section 3.4 , the parties hereto shall deliver joint
written instructions to the Escrow Agent instructing the Escrow
Agent to pay to Seller in immediately available funds from the
Adjustment Escrow Account the Adjustment Escrow Amount.
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(g)
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Seller and Buyer shall each make available to the
other and, if applicable, to the Independent Expert, such
information as may be in their possession or reasonably available
to them that may be relevant to any matter contemplated by this
Section 3.4 . The fees and expenses of the
Escrow Agent, JJ Kenny and Interactive Data (and any
substitute therefor as agreed to by the parties) shall be paid 50%
by Buyer and 50% by Seller. The fees and expenses of the
Independent Expert shall be paid by the party requesting
appointment of the Independent Expert.
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3.5.
Allocation of Purchase Price .
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(a)
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Within 15 days after the determination of the
Final Municipal Bond Purchase Price, or 60 days after the Closing,
whichever is earlier, Parent and Seller shall deliver to Buyer a
schedule (the " Allocation Schedule ") allocating the
Purchase Price (and any other items treated as consideration for
United States federal income Tax purposes paid to Parent and Seller
including the Assumed Liabilities) among the Purchased Assets and
the covenants of Parent and Seller set forth in this Agreement,
including Section 8.1 , Section 8.2 and
Section 8.6 . The Allocation Schedule shall
be reasonable and shall be prepared in accordance with
Section 1060 of the Code and the regulations thereunder and
any applicable provision of state, local or foreign
law. Such allocation shall be deemed final unless Buyer
has notified Parent and Seller in writing of any disagreement with
the Allocation Schedule within 20 Business Days after submission
thereof by Parent and Seller. In the event of such
disagreement, the parties hereto shall use reasonable efforts to
reach agreement on a reasonable allocation of consideration among
the Purchased Assets. In the event that the parties
hereto do not agree to a Purchase Price allocation in accordance
with this Section 3.5 , the parties hereto shall submit
their dispute, in writing, to the Independent Accounting Firm, the
cost of which shall be shared equally by Buyer and
Seller. The Independent Accounting Firm shall make a
determination as to each disputed item which shall be binding upon
the parties. Each of the parties hereto agrees to file
Internal Revenue Service Form 8594, and all United States federal,
state, local and non-U.S. Tax Returns, in accordance with the
Allocation Schedule as finally determined by the parties or the
Independent Accounting Firm, as the case may be. Each of
the parties hereto agrees to provide the other promptly upon
written request with any other information required to complete
Internal Revenue Service Form 8594. The parties shall
together revise such allocation to properly reflect any payments
after the Closing (including any indemnity payment under Article
XI ).
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(b)
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Parent and Seller (and each of their Affiliates)
and Buyer (and its Affiliates) agree to file all Tax Returns
consistent with the allocation described in this
Section 3.5 and to use their commercially reasonable
efforts to sustain such allocation in any subsequent Tax audit or
related administrative proceeding.
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ARTICLE IV
CLOSING
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4.1.
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Closing Date . The Closing shall be consummated at 11:00 A.M.,
New York time, on the third Business Day following satisfaction or
waiver of all the conditions set forth in Articles IX and
X , at the offices of Sidley Austin LLP, or at such other
place or at such other date and time as shall be agreed upon by
Buyer and Seller. The Closing shall be deemed to have
become effective as of 12:01 A.M., New York time, on the date on
which the Closing is actually held, and such time and date are
sometimes referred to herein as the " Closing Date
." Notwithstanding the foregoing, the Closing Date may
be delayed for the time period (up to 90 days) following the
election of Seller to terminate any Excluded Remarketing Agreement
in accordance with Section 2.6 in order to permit the
termination notice period applicable to such Excluded Remarketing
Agreement to be satisfied.
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4.2.
Payment on the Closing Date . Subject to fulfillment or waiver of the conditions
set forth in Article IX , at Closing Buyer shall:
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(a)
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pay to Seller by wire transfer of immediately
available funds in U.S. Dollars to a bank account specified by
Seller:
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(i)
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an amount equal to the Estimated Settled
Municipal Bond Purchase Price minus the Adjustment Escrow
Amount and;
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(ii)
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$12,000,000, plus the amounts payable by
Buyer pursuant to Sections 7.10 , 7.11 and
7.12 , minus any reduction for non-transferring
Employees pursuant to Section 9.7 ; and
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(b)
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pay to the Escrow Agent by wire transfer of
immediately available funds in U.S. Dollars to a bank account
specified by the Escrow Agent the Adjustment Escrow Amount to be
held in the Adjustment Escrow Account; and
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(c)
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pay to the Escrow Agent by wire transfer of
immediately available funds in U.S. Dollars to a bank account
specified by the Escrow Agent the Estimated Unsettled Municipal
Bond Purchase Price to be held in the Settlement Escrow
Account.
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Seller shall notify Buyer of Seller’s wire
transfer account information in writing at least two (2) Business
Days prior to the Closing.
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4.3.
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Buyer’s Additional Deliveries
. Subject to fulfillment or waiver of the
conditions set forth in Article IX , at Closing Buyer shall
deliver to Seller all the following:
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(a)
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a certificate of the secretary or an assistant
secretary of Buyer, dated the Closing Date, in form and substance
reasonably satisfactory to Seller, as to (i) no amendments to the
constituent documents of Buyer since a specified date; (ii) the
constituent documents of Buyer; (iii) the resolutions of the Board
of Directors of Buyer authorizing the execution, delivery and
performance of this Agreement and the Buyer Ancillary Agreements
and the transactions contemplated hereby and thereby; and (iv)
incumbency and signatures of the officers of Buyer executing this
Agreement and any Buyer Ancillary Agreement;
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(b)
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the certificate of Buyer contemplated by
Section 10.1 , duly executed by an authorized officer
of Buyer;
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(c)
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the Instrument of Assumption duly executed by
Buyer;
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(d)
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the Transition Services Agreement, duly executed
by Buyer; and
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(e)
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the Escrow Agreement, duly executed by
Buyer.
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4.4.
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Seller’s Deliveries . Subject to fulfillment or waiver of the conditions
set forth in Article X , at Closing Parent and Seller shall
deliver to Buyer all the following:
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(a)
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certificates of good standing of Parent and
Seller issued as of a recent date by the Secretary of State of the
State of New York;
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(b)
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certificates of the secretary or an assistant
secretary of Parent and Seller, dated the Closing Date, in form and
substance reasonably satisfactory to Buyer, as to (i) no amendments
to the Certificate of Incorporation of Seller or Parent since a
specified date; (ii) the by-laws of Seller and Parent; (iii) the
resolutions of the Board of Directors of Seller and Parent
authorizing the execution, delivery and performance of this
Agreement and the Seller Ancillary Agreements and the transactions
contemplated hereby and thereby; and (iv) incumbency and signatures
of the officers of Seller and Parent executing this Agreement and
any Seller Ancillary Agreement;
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(c)
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the certificates of Seller and Parent
contemplated by Section 2.5 and Section 9.1 ,
duly executed by an authorized officer of Seller and
Parent;
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(d)
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the Instrument of Assignment duly executed by
Parent and Seller;
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(e)
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the Transition Services Agreement, duly executed
by Seller;
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(f)
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the Escrow Agreement, duly executed by Parent and
Seller;
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(g)
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an opinion of counsel to Parent and Seller
reasonably acceptable to Buyer, substantially in the form provided
to Buyer as of the date hereof;
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(h)
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on a confidential basis, a copy of the opinion of
Freeman & Co. LLC, Parent’s financial advisor, to the
Board of Directors of Parent, to the effect that as of the date of
this Agreement, the Purchase Price for the Purchased Assets is fair
to Parent’s shareholders from a financial point of view, it
being understood and agreed that a copy of such opinion shall be
delivered solely for informational purposes, without recourse
against Parent, Seller or Freeman & Co. LLC and without any
reliance thereon by Buyer;
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(i)
(j)
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certificates of title or origin (or like
documents) with respect to any vehicles or other equipment included
in the Purchased Assets for which a certificate of title or origin
is required in order to transfer title;
all consents, waivers or approvals obtained by
Seller or Parent with respect to the Purchased Assets or the
consummation of the transactions contemplated by this
Agreement;
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(k)
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an assignment, in recordable form, with respect
to each of the leases of Leased Real Property included in the
Purchased Assets pursuant to Section 7.8 , duly
executed by Parent or Seller, as applicable, and in form and
substance reasonably satisfactory to Buyer;
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(l)
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an executed certificate of non-foreign status of
Parent and Seller complying with the provisions of United States
Treasury Regulation Section 1.1445-2(b);
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(m)
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assignments, in recordable form, with respect to
each of the registered Copyrights, issued Patent Rights, registered
Trademarks and pending applications for the registration or
issuance of any Copyrights, Patent Rights and Trademarks included
in the Purchased Assets, duly executed by Seller and in form and
substance reasonably satisfactory to Buyer;
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(n)
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a certificate of insurance with respect to
Parent’s employment practices liability insurance policy then
in effect; and
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(o)
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such other bills of sale, assignments and other
instruments of transfer or conveyance as Buyer may reasonably
request or as may be otherwise necessary to evidence and effect the
sale, assignment, transfer, conveyance and delivery of the
Purchased Assets to Buyer.
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In addition to the above deliveries, Seller shall
take all commercially reasonable steps and actions on or after the
Closing Date as Buyer may reasonably request or as may otherwise be
necessary to put Buyer in actual possession or control of the
Purchased Assets. Notwithstanding anything to the
contrary contained herein, to the extent any Purchased Assets
(excluding books and records) are located at an office of Seller
the lease for which is not included in the Purchased Assets or
otherwise used or sublet by Buyer pursuant to
Section 7.8 , Buyer shall be responsible for all costs
in connection with taking actual possession of such Purchased
Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND SELLER
As an inducement to Buyer to enter into this
Agreement and to consummate the transactions contemplated hereby,
Parent and Seller, jointly and severally, represent and warrant to
Buyer and agree as follows:
5.1.
Organization of Parent and Seller
.
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(a)
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Each of Parent and Seller is a corporation duly
organized and validly existing under the laws of the State of New
York and in good standing in all jurisdictions in which its failure
to qualify or be in good standing would have a Material Adverse
Effect. Each of Parent and Seller has full power and
authority to own or lease and to operate and use the Purchased
Assets and to carry on the Business as now conducted.
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(b)
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True and complete copies of the certificates of
incorporation and all amendments thereto and of the by-laws, as
amended to date, of each of Parent and Seller, if not publicly
available, have been made available to Buyer.
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(c)
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No equity or other ownership interests in any
Person are included in the Purchased Assets.
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5.2.
Authority of Parent and Seller .
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(a)
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Each of Parent and Seller has full power and
authority to execute, deliver and perform this Agreement and all of
the Seller Ancillary Agreements to which it is a party.
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The execution, delivery and performance of this
Agreement and the Seller Ancillary Agreements by each of Parent and
Seller have been duly authorized and approved by Parent’s and
Seller’s board of directors, as applicable, and do not
require any further authorization or consent of Seller, Parent or
Parent’s shareholders (except with respect to the approval of
Parent’s shareholders for the actions set forth in
Section 8.2 ). This Agreement has been duly
authorized, executed and delivered by each of Parent and Seller and
is the legal, valid and binding obligation of each of Parent and
Seller enforceable in accordance with its terms, and each of the
Seller Ancillary Agreements to which it is a party has been duly
authorized by each of Parent and Seller and upon execution and
delivery will be a legal, valid and binding obligation of each of
Parent and Seller enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditor’s rights and to general equity
principles.
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(b)
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Except as set forth in Disclosure Letter
Schedule 5.2 , neither the execution and delivery of this
Agreement or any of the Seller Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof will:
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(i)
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conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation
or imposition of any Encumbrance upon any of the Purchased Assets,
under (A) the charter or by-laws of Parent or Seller, (B) any
Assumed Contract, (C) any other material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Parent or
Seller is a party, (D) any Court Order to which Parent or Seller is
a party or any of the Purchased Assets is subject or by which
Parent or Seller is bound, or (E) any Requirements of Laws
affecting Parent or Seller, the Purchased Assets or the Business,
except, in the case of clauses (B), (C) or (E), the effect of which
would not be reasonably expected to have a Material Adverse Effect;
or
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(ii)
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require the approval, consent, authorization or
act of, or the making by Parent or Seller of any declaration,
filing or registration with, any Person, except pursuant to the
applicable provisions of United States federal and state laws
relating to the regulation of broker-dealers and the rules and
regulations of the SEC, applicable state securities commissions,
and the securities exchanges, boards of trade or other industry
self-regulatory organizations of which Seller or Parent is a
member, as set forth in Disclosure Letter Schedule 5.2
.
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5.3.
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Financial Statements . Disclosure Letter Schedule 5.3 contains
the unaudited pro forma balance sheet data of the Division
reflected in Parent’s consolidated balance sheet as of
December 31, 2006, December 31, 2005 and December 31, 2004,
and the related statements of income for each of the 12 months then
ended. Except as set forth therein or in the notes
thereto, such balance sheet data and statements of income have been
prepared in conformity with GAAP consistently applied, and such
balance sheet data and related statements of income present fairly
in all material respects the financial position and results of
operations of the Division as of their respective dates and for the
respective periods covered thereby.
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5.4.
Absence of Certain Changes or Events
.
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(a)
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Since December 31, 2006, there has
been:
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(i)
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no
Material Adverse Effect, and no fact or condition exists or is
contemplated or threatened which might reasonably be expected to
cause a Material
Adverse
Effect in the future; and
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(ii)
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no material damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other
taking adversely affecting any of the Purchased Assets, other than
in the ordinary course of business or due to normal wear and
tear.
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(b)
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Since December 31, 2006, Seller has
conducted the Business only in the ordinary course and in
conformity with past practice. Without limiting the
generality of the foregoing, since December 31, 2006, Seller
has not, in respect of the Business:
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(i)
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incurred any material adverse change in its
securities clearing, payment and settlement activities;
or
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(ii)
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prepared or filed any material Tax Return
inconsistent with past practice.
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5.5.
[Reserved] .
5.6.
Taxes . Except as
set forth in Disclosure Letter Schedule 5.6 , to the
Knowledge of Seller,
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(a)
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Parent or Seller has, in respect of the Division
and the Purchased Assets, filed all material Tax Returns and has
paid (or withheld and remitted to the appropriate Governmental
Body) all Taxes which are due and payable as shown on such filed
Tax Returns;
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(b)
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all such Tax Returns are complete and accurate in
all material respects;
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(c)
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there is no material action, suit, investigation,
audit, claim or assessment pending with respect to Taxes that
relate to the Division or the Purchased Assets; and
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(d)
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no extension or waiver of any statute of
limitations for the assessment or collection of any material Taxes
has been granted by any taxing authority in respect of material
Taxes that relate to the Division or the Purchased Assets and which
extension or waiver is still in effect.
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5.7.
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Assets Necessary to Carry on the
Business . Except as set
forth in Disclosure Letter Schedule 5.7 , the Purchased
Assets constitute all the assets necessary to carry on the Business
as currently conducted (including all books, records, computers and
computer programs and data processing systems) and are in good
condition (subject to normal wear and tear) and serviceable
condition.
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5.8. Governmental
Permits; Compliance with Laws .
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(a)
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Parent or Seller owns, holds or possesses
all licenses, franchises, permits, privileges, approvals and other
authorizations from a Governmental Body which are necessary to
entitle it to own or lease, operate and use the Purchased Assets
and to carry on and conduct the Business substantially as currently
conducted collectively, the " Governmental Permits "),
except for such Governmental Permits as to which the failure to so
own, hold or possess would not have a Material
Adverse Effect. None of the Governmental Permits
are transferable from Parent or Seller to Buyer.
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(b)
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(i) Each of Parent or Seller has fulfilled and
performed in all material respects its obligations under each of
the Governmental Permits, and no event has occurred or condition or
state of facts exists which constitutes or, after notice or lapse
of time or both, would be reasonably likely to constitute a breach
or default under any such Governmental Permit or which permits or,
after notice or lapse of time or both, would permit revocation or
termination of any such Governmental Permit, or which might
adversely affect the rights of Seller under any such Governmental
Permit; (ii) no notice of cancellation, of default or of any
dispute concerning any Governmental Permit, or of any event,
condition or state of facts described in the preceding clause, has
been received by Parent or Seller, or to the Knowledge of Seller,
is known to Seller; and (iii) each of the Governmental Permits is
valid, subsisting and in full force and effect.
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(c)
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To the Knowledge of Seller, Seller has timely
filed all material registrations, declarations, reports, notices,
forms and other filings required to be filed by it with the SEC,
NASD, NYSE or any other Governmental Body, and all amendments or
supplements to any of the foregoing.
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(d)
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Seller has made available to Buyer a copy of the
currently effective Form BD as filed by Seller with the
SEC. Except as set forth in Disclosure Letter
Schedule 5.8(D) , the information contained in such form was
complete and accurate in all material respects as of the time of
filing thereof and, to the Knowledge of Seller, remains complete
and accurate in all material respects as of the date
hereof.
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(e)
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Except with respect to employees in training or
employees who have been employed by the Division for fewer than 90
days, to the Knowledge of Seller, all of the Employees who are
required to be licensed or registered to conduct the Business are
duly licensed or registered in each state and with each
Governmental Body in which or with which such licensing or
registration is so required.
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(f)
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Except as disclosed on Form BD or any Form U4
filed prior to the date of this Agreement, copies of which have
been made available to Buyer, neither Seller with respect to the
Division nor, to the Knowledge of Seller, any of its Employees or
"associated persons" (as defined in the Exchange Act) of the
Division has been the subject of any disciplinary proceedings or
orders of any Governmental Body arising under applicable laws which
would be required to be disclosed on Form BD or Form
U4. No such disciplinary proceeding or order is pending
or, to the Knowledge of Seller, threatened. Except as
disclosed on a Form BD or any Form U4 filed prior to the date of
this Agreement, neither Seller nor, to the Knowledge of Seller, any
of its Employees or associated persons of the Division has been
permanently enjoined by the order of any Governmental Body from
engaging or continuing any conduct or practice in connection with
any activity or in connection with the purchase or sale of any
security. Except as disclosed on Form BD or any Form U4
filed prior to the date of this Agreement, neither Seller nor, to
the Knowledge of Seller, any of its Employees or associated persons
of the Division is or has been ineligible to serve as a
broker-dealer or an associated person of a broker-dealer under
Section 15(b) of the Exchange Act (including being subject to
any "statutory disqualification" as defined in
Section 3(a)(39) of the Exchange Act).
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(g)
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As of the date of this Agreement, Seller
is, and at all times until Closing Seller shall be, in compliance
with Rules 15c3-1 and 15c3-3 under the Exchange Act and NASD Rule
3130, and as of the date of this Agreement, Seller has sufficient
net capital such that it is not be required to effect an early
warning notification pursuant to Rule 17a-11 under the Exchange
Act. As of the Closing, the haircut applicable to any
Municipal Bond sold to Buyer at Closing shall not exceed that
applicable to such Municipal Bond under Rule 15c3-1(c)(2) under the
Exchange Act.
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(h)
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To the Knowledge of Seller, the information
provided by Seller to the Central Registration Depository with
respect to the employees of the Division (including any Form BD or
Form U4) is true, accurate and complete in all material
respects.
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5.9. Real
Property .
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(a)
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Neither Parent nor Seller owns any real property
that is used in or relates to the Business and does not hold any
option to acquire any real property for use with respect to the
Business.
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(b)
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Disclosure Letter Schedule 5.9(B) sets
forth a list of each lease or similar agreement (showing the
parties thereto and the location of the real property covered by
such lease or other agreement) for each Leased Real
Property. Except as would not reasonably be expected to
have a Material Adverse Effect and except as set forth in such
Schedule, Parent or Seller, as applicable, has the right to quiet
enjoyment of all the Leased Real Property for the full term of the
lease, sublease or similar agreement (and any renewal
option related thereto) relating thereto, and the leasehold or
other interest of Parent or Seller in the Leased Real Property, as
applicable, is not subject or subordinate to any Encumbrance except
for Permitted Encumbrances. Complete and correct copies
of any leases in Parent’s or Seller’s possession with
respect to each parcel of Leased Real Property have heretofore been
made available by Seller to Buyer. To the Knowledge of
Seller, there is no material violation of a condition or agreement
contained in any covenant, easement or any similar agreement
affecting the Leased Real Property.
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(c)
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Neither the whole nor any part of the Leased Real
Property is subject to any pending suit for condemnation or other
taking by any Governmental Body, and, to the Knowledge of Seller,
no such condemnation or other taking is threatened or
contemplated.
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5.10.
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Personal Property . Disclosure Letter Schedule 5.10(A)
contains a list of all machinery, equipment, vehicles, furniture
and other tangible personal property owned by Parent or Seller or
leased by Parent under the Master Equipment Lease and included in
the Purchased Assets.
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5.11. Intellectual Property;
Software .
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(a)
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Disclosure Letter Schedule 5.11(A)
contains a list (showing in each case the registered or other
owner, registration or application date and registration or
application number, if any) of all (i) Copyrights (excluding books
and records), (ii) Patent Rights and (iii) registered and
unregistered Trademarks (including all assumed or fictitious names
under which Seller is conducting the Business or has within the
previous five years conducted the Business) owned and used by
Seller in connection with the conduct of the Business and included
in the Purchased Assets.
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(b)
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Disclosure Letter Schedule 5.11(B)
contains a list (showing in each case any owner, licensor or
licensee) of all Software owned by, licensed to or used by Seller
in the conduct of the Business and included in the Purchased
Assets.
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(c)
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Disclosure Letter Schedule 5.11(C)
contains a list of all material Contracts under which Seller is
licensor or licensee and is included in the Purchased Assets that
relate to: (i) any Copyrights, Patent Rights or
Trademarks; (ii) any Trade Secrets used by Seller
in connection with the conduct of the Business; and (iii) any
Software required to be identified in Disclosure Letter
Schedule 5.11(B) .
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(d)
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Seller either (i) owns the entire right, title
and interest in and to the Intellectual Property and Software
included in the Purchased Assets, free and clear of any Encumbrance
(other than Permitted Encumbrances) or (ii) has the right to use
the same.
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(e)
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To the Knowledge of Seller: (i) all
registrations for Copyrights, Patent Rights and Trademarks required
to be identified in Disclosure Letter Schedule 5.11(A) are
valid and in force, and all applications to register any
unregistered Copyrights, Patent Rights and Trademarks so identified
are pending and in good standing, all without challenge of any
kind; (ii) the material Intellectual Property (other than Trade
Secrets) owned by Seller and included in the Purchased Assets has
not been cancelled or abandoned and is valid and enforceable; (iii)
Seller has the sole and exclusive right to bring actions for
infringement, misappropriation, dilution, violation or unauthorized
use of the Intellectual Property and Software owned by Seller and
included in the Purchased Assets; (iv) Seller has taken all actions
commercially reasonable to protect the Intellectual Property owned
by Seller and included in the Purchased Assets; and (v) Seller
is not in material breach of any Contract relating to the
Intellectual Property used by Seller and included in the Purchased
Assets.
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(f)
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To the Knowledge of Seller: (i) no
infringement, misappropriation, violation or dilution of any
Intellectual Property, or any rights of publicity or privacy
relating to the use of names, likenesses, voices, signatures or
biographical information, of any other Person has occurred or
results in any way from the operations of the Business as conducted
on the date hereof by Seller; (ii) no material written claim of any
infringement,
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