EXECUTION COPY
 
INVESTMENT AGREEMENT
Dated as of May 14, 2007
between
FIRST ALBANY COMPANIES INC.
and
MATLINPATTERSON FA ACQUISITION LLC
 

 

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TABLE OF CONTENTS

         
ARTICLE I
       
DEFINITIONS AND INTERPRETATION
       
 
       
Section 1.1 Definitions
    4  
Section 1.2 Interpretation
    5  
 
       
ARTICLE II
       
PURCHASE AND SALE OF PURCHASED SHARES
       
 
       
Section 2.1 Purchase and Sale of Stock
    5  
Section 2.2 The Closing
    8  
Section 2.3 Purchaser Deliveries at the Closing
    9  
Section 2.4 Company Deliveries at the Closing
    9  
 
       
ARTICLE III
       
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
       
 
       
Section 3.1 Organization
    10  
Section 3.2 Capitalization
    10  
Section 3.3 Subsidiaries and Joint Ventures
    11  
Section 3.4 Authorization; Execution and Enforceability
    12  
Section 3.5 Validity of Purchased Shares
    12  
Section 3.6 No Conflicts; Consents and Approvals
    13  
Section 3.7 SEC Reports; Financial Statements
    13  
Section 3.8 Sarbanes-Oxley; Disclosure and Internal Controls
    14  
Section 3.9 Absence of Certain Changes
    15  
Section 3.10 No Undisclosed Liabilities
    15  
Section 3.11 Litigation
    15  
Section 3.12 Intellectual Property Rights
    16  
Section 3.13 Exchange Listing
    16  
Section 3.14 Tax Matters
    16  
Section 3.15 Tangible Assets
    18  
Section 3.16 Real Property
    18  
Section 3.17 Insurance
    19  
Section 3.18 Contracts
    19  
Section 3.19 Permits and Regulatory Matters
    19  
Section 3.20 Employees; Employee Benefits
    21  
Section 3.21 Compliance with Law
    21  
Section 3.22 Environmental Matters
    21  
Section 3.23 Transactions with Affiliates
    22  
Section 3.24 Investment Company
    22  
Section 3.25 Corrupt Practices
    22  
Section 3.26 Application of Takeover Protections
    22  
Section 3.27 Certain Information
    22  

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Section 3.28 Securities Law Compliance
    23  
Section 3.29 Brokers
    23  
 
       
ARTICLE IV
       
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
       
 
       
Section 4.1 Organization, Standing and Power
    23  
Section 4.2 Authorization; Execution and Enforceability
    23  
Section 4.3 No Conflict; Consents and Approvals
    24  
Section 4.4 Purchase Entirely for Own Account
    24  
Section 4.5 Investment Experience
    24  
Section 4.6 Disclosure of Information
    24  
Section 4.7 Restricted Securities
    25  
Section 4.8 Legends
    25  
Section 4.9 Accredited Investor
    25  
Section 4.10 No General Solicitation
    25  
Section 4.11 Availability of Funds
    26  
Section 4.12 Certain Information
    26  
Section 4.13 Brokers
    26  
Section 4.14 Tax Matters
    26  
 
       
ARTICLE V
       
COVENANTS OF THE COMPANY
       
 
       
Section 5.1 Access to Information; Reporting
    27  
Section 5.2 Preparation of Proxy Statement; Shareholder Meeting
    27  
Section 5.3 No Solicitation of Transactions
    29  
Section 5.4 Board Actions
    30  
Section 5.5 Changes in the Composition of the Board
    31  
Section 5.6 Strategic Plan
    31  
Section 5.7 Conduct of Business
    31  
Section 5.8 Listing
    34  
Section 5.9 Preserve Accuracy of Representations and Warranties; Fulfillment of
Conditions; Notification of Certain Matters
    35  
Section 5.10 Contractual Consents and Governmental Approvals
    35  
Section 5.11 Use of Proceeds
    36  
 
       
ARTICLE VI
       
CONDITIONS
       
 
       
Section 6.1 Conditions to the Company’s Obligations
    36  
Section 6.2 Conditions to the Purchasers’ Obligations
    37  
 
       
ARTICLE VII
       
INDEMNIFICATION
       
 
       
Section 7.1 Survival
    39  
Section 7.2 Indemnification
    39  

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Section 7.3 Damages Threshold
    39  
Section 7.4 Indemnification Procedures
    40  
Section 7.5 Third-Party Claims
    40  
Section 7.6 Special Tax Indemnity
    41  
Section 7.7 Tax Treatment of Indemnity Payments
    41  
 
       
ARTICLE VIII
       
FURTHER AGREEMENTS
       
 
       
Section 8.1 Public Announcements
    41  
Section 8.2 Fees and Expenses
    41  
 
       
ARTICLE IX
       
GENERAL
       
 
       
Section 9.1 Termination
    43  
Section 9.2 Notice
    44  
Section 9.3 Complete Agreement; No Third-Party Beneficiaries
    44  
Section 9.4 GOVERNING LAW
    45  
Section 9.5 No Assignment
    45  
Section 9.6 Headings
    45  
Section 9.7 Counterparts
    45  
Section 9.8 Remedies; Waiver
    45  
Section 9.9 Severability
    46  
Section 9.10 Amendment; Waiver
    46  
 
       
Exhibits
       
 
       
Exhibit A — Defined Terms
       
Exhibit B — Form of Opinion of Sidley Austin LLP
       
Exhibit C — List of Closing Deliveries
       
Exhibit D — Form of Opinion of Dewey Ballantine LLP
       
Exhibit E — Financing Commitment
       
Exhibit F — Form of Registration Rights Agreement
       

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INVESTMENT AGREEMENT
     INVESTMENT AGREEMENT (this “Agreement”), dated as of May 14, 2007, between
FIRST ALBANY COMPANIES INC., a New York corporation (the “Company”), and
MATLINPATTERSON FA ACQUISITION LLC, a Delaware limited liability company (the
“Investor”),
WITNESSETH:
     WHEREAS the Company wishes to issue and sell to the Investor (and any
Co-Investors designated by the Investor as provided below), and the Investor
(together with any such Co-Investors) wishes to purchase from the Company, the
Purchased Shares and related Rights (each as defined below, with such purchase
being sometimes hereinafter referred to as the “Investment”) upon the terms and
subject to the conditions set forth herein and in the Registration Rights
Agreement (as defined below);
     WHEREAS the Board of Directors of the Company (the “Board”), based on the
unanimous recommendation of a special committee of independent directors of the
Company (the “Special Committee”), has approved, and deems it advisable and in
the best interests of the shareholders of the Company, to consummate the
Investment and the related transactions contemplated herein (collectively, the
“Transactions”), upon the terms and subject to the conditions set forth herein;
     WHEREAS, concurrently with the consummation of the Investment, the Company
and the Investor wish to make certain changes to the Board, including making
certain changes to the composition and membership and the committees thereof;
     WHEREAS, the Investor has entered into certain voting agreements with
certain shareholders of the Company pursuant to which such shareholders have
agreed to vote the shares of Common Stock beneficially owned by them in favor of
approval of the Transactions (“Voting Agreements”), and may enter into
additional such Voting Agreements after the date hereof;
     NOW, THEREFORE, in consideration of these premises and the representations,
warranties, covenants and agreements herein set forth, the parties agree as
follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
     Section 1.1 Definitions. The capitalized terms that are defined in
Exhibit A are used herein with the meanings set forth therein.

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     Section 1.2 Interpretation.
     (a) Headings. The headings to the Articles, Sections and Subsections of
this Agreement or any Exhibit to this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
     (b) Usage. In this Agreement, unless the context requires otherwise:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender; (iii) the Exhibits to
this Agreement are hereby incorporated into, and shall be deemed to be a part
of, this Agreement; (iv) the terms “hereunder”, “hereof”, “hereto” and words of
similar import shall be deemed references to this Agreement as a whole and not
to any particular section or other provision hereof; (v) the words “include”,
“includes” and “including” shall be deemed to be followed by the words “without
limitation”; (vi) a reference to any Article, Section, Subsection or Exhibit
shall be deemed to refer to the corresponding Article, Section, Subsection, or
Exhibit of this Agreement and (vii)a reference to any Schedule shall be deemed
to refer to the corresponding Schedule to the Company Disclosure Letter.
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES
     Section 2.1 Purchase and Sale of Stock.
     (a) At the Closing, the Company shall issue and sell, and the Purchasers
shall purchase, the number of Purchased Shares determined pursuant to
Section 2.1(b) below, together with one Right attached to each such Purchased
Share, all on the terms set forth herein and free and clear of any Liens. At the
Closing, the Purchasers shall pay the Company, as consideration for the
Purchased Shares, an aggregate purchase price of $50,000,000 (the “Purchase
Price”) less any Reimbursable Expenses permitted to be deducted from the
Purchase Price pursuant to Section 8.2 below (the amount of the Purchase Price
remaining after the deduction of such Reimbursable Expenses being sometimes
hereinafter referred to as the “Net Purchase Price”).
     (b) The number of shares of Common Stock to be purchased by the Purchasers
hereunder (the “Purchased Shares”, which term shall also be deemed to refer to
the attached Rights unless the context requires otherwise) shall be 33,333,333,
subject to adjustment as provided in subsections (i) and (ii) below. The
Purchase Price will not be changed as a result of any such adjustment in the
number of Purchased Shares.
          (i) If the DEPFA Transaction has not been consummated prior to the
Closing Date, the number of Purchased Shares shall be equal to the product of
(x) 33,333,333 multiplied by (y) the Excess Compensation Dilution Factor. The
“Excess Compensation Dilution Factor” for such purpose shall be determined in
accordance with the following formula:

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  ECDF =   1 +   EC ÷ OS
 
          $1.50 

                  where:
 
           
 
  ECDF   =   The Excess Compensation Dilution Factor
 
  EC   =   The amount of Excess Compensation
 
  OS   =   The number of shares of Common Stock outstanding as of the Closing
Date (before giving effect to the Transactions)

“Excess Compensation” shall mean the sum of (1) any Excess Cash Compensation and
(2) any Excess Imputed Stock Based Compensation. “Excess Cash Compensation”
shall mean the incremental amount of cash compensation paid or payable, directly
or indirectly, by the Company or any Subsidiary to or in respect of any MCMG
Employees as a result of the Closing taking place prior to the closing of the
DEPFA Transaction. Such Excess Cash Compensation shall include any cash bonuses
or other amounts paid or payable by the Company or any Subsidiary to any such
MCMG Employee (or payable to DEPFA in respect of such MCMG Employee pursuant to
Section 2.1(h) of the DEPFA Purchase Agreement) that would not have been so paid
or payable if the DEPFA Transaction had been consummated immediately prior to
the Closing Date and assuming that all the MCMG Employees would have become
employees of DEPFA as part of the DEPFA Transaction. “Excess Imputed Stock Based
Compensation” shall mean the sum of (i) the product of (A) the number of shares
of Common Stock subject to Restricted Stock Awards granted to MCMG Employees
that become vested as a result of the Closing taking place that would not have
become vested if the DEPFA Transaction had been consummated immediately prior to
the Closing Date and assuming that all the MCMG Employees would have become
employees of DEPFA as part of the DEPFA Transaction multiplied by (B) $1.50 per
share and (ii) the product of (x) the number of shares of Common Stock subject
to Employee Stock Options granted to MCMG Employees that become vested as a
result of the Closing taking place that would not have become vested if the
DEPFA Transaction had been consummated immediately prior to the Closing Date and
assuming that all the MCMG Employees would have become employees of DEPFA as
part of the DEPFA Transaction, but only to the extent that the exercise price
with respect to any such Employee Stock Option is less than $1.50 per share,
multiplied by (y) with respect to each such Employee Stock Option, the excess of
$1.50 per share over the applicable exercise price.
          (ii) (A) If the Net Tangible Book Value Per Share as of the Closing
Date as shown in the Closing Net Tangible Book Value Report is less than $1.60,
the number of Purchased Shares shall be equal to (x) the number of Purchased
Shares after giving effect to any adjustment required pursuant to subsection
(i) above multiplied by (y) the NTBV Adjustment Factor. The “NTBV Adjustment
Factor” for such purpose shall be determined in accordance with the following
formula:

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  NTBVAF   =   1 + $1.50 — .8886NTBV
 
                              $1.50 
 
           
 
  where:        
 
           
 
  NTBVAF   =   The NTBV Adjustment Factor, which shall not be less than 1.
 
  NTBV   =   The Net Tangible Book Value Per Share as of the Closing Date (or,
for the purpose of Subsection (B) below, as of the Measurement Date)

               (B) Not less than three (3) Business Days prior to the Closing
Date, the Company shall deliver to the Investor a report (the “Preliminary Net
Tangible Book Value Report”), certified by the Chief Financial Officer of the
Company in a manner reasonably satisfactory to the Investor, which shall
contain: (a) an unaudited consolidated balance sheet of the Company and its
consolidated subsidiaries (the “Measurement Date Balance Sheet”) as of the end
of the most recent month that has ended not less than five (5) Business Days
prior to the Closing Date (the “Measurement Date”), prepared in accordance with
GAAP consistently applied (except that such balance sheet need not include
footnotes or provide for adjustments that normally would be made at year end
consistent with the Company’s past accounting practices), (b) if the DEPFA
Transaction has been consummated on or prior to such Measurement Date, a pro
forma consolidated balance sheet (the “Measurement Date Pro Forma Balance
Sheet”) based on the Measurement Date Balance Sheet but adjusted to eliminate
any gain, loss or other accounting effects of the DEPFA Transaction, (c) a
detailed calculation, based on the Measurement Date Balance Sheet or, if one is
required to be included in the Preliminary Net Tangible Book Value Report, the
Measurement Date Pro Forma Balance Sheet, showing the Net Tangible Book Value
Per Share as of the Measurement Date (the “Preliminary Net Tangible Book Value
Per Share”), (c) a detailed calculation of the NTBV Adjustment Factor based on
such Preliminary Net Tangible Book Value Per Share (the “Prelim NTBV Adjustment
Factor”), and (d) a detailed calculation of the number of Purchased Shares after
giving effect to such Preliminary NTBV Adjustment Factor and, to the extent
applicable, the Excess Compensation Adjustment Factor. At the Closing, the
number of Purchased Shares issued to the Purchasers shall be based on the
Preliminary NTBV Adjustment Factor, but the final number of Purchased Shares
shall be subject to adjustment after the Closing as provided in Subsection
2.1(b)(ii)(C) below.
               (C) As soon as practicable, but in no event later than sixty
(60) days after the Closing Date (unless such deadline is extended by mutual
agreement of the Company and the Investor), the Company shall deliver to the
Investor a report (the “Final Net Tangible Book Value Report”), certified by the
Chief Financial Officer of the Company in a manner reasonably satisfactory to
the Investor, which shall contain: (a) an unaudited consolidated balance sheet
of the Company and its consolidated subsidiaries (the “Closing Date Balance
Sheet”) as of the Closing Date, prepared in accordance with GAAP consistently
applied (except that such balance sheet need not include footnotes or provide
for adjustments that normally would be made at year end consistent with the
Company’s past accounting practices), accompanied by a review report of the
Company’s auditors, (b) a pro forma consolidated balance sheet (the “Closing
Date Pro Forma Balance Sheet”) based on the Closing Date Balance Sheet but
adjusted to eliminate (x) any gain, loss or other accounting effects of the
DEPFA Transaction (if the DEPFA Transaction has been consummated prior to such
Closing Date) or (y) the effects of any Excess

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Compensation resulting from the consummation of the Transactions (if the DEPFA
Transaction has not been consummated prior to the Closing Date), (c) a detailed
calculation, based on the Closing Date Pro Forma Balance Sheet, showing the Net
Tangible Book Value Per Share as of the Closing Date (the “Final Net Tangible
Book Value Per Share”), and (c) a detailed calculation of the NTBV Adjustment
Factor based on such Preliminary Net Tangible Book Value Per Share (the “Final
NTBV Adjustment Factor”). If the number of Purchased Shares determined based on
the Final NTBV Adjustment Factor is greater than the number of Purchased Shares
determined based on the Preliminary NTBV Adjustment Factor, the Company shall
promptly issue to the Purchasers, pro rata based on the numbers of Purchased
Shares issued to them at the Closing, a number of additional shares of Common
Stock (together with the related Rights) equal to such excess. If the number of
Purchased Shares determined based on the Preliminary NTBV Adjustment Factor is
greater than the number of Purchased Shares determined based on the Final NTBV
Adjustment Factor, the Purchasers shall promptly surrender to the Company, pro
rata based on the numbers of Purchased Shares issued to them at the Closing, a
number of the Purchased Shares (together with the related Rights) issued to them
at the Closing equal to such excess, provided that the final number of Purchased
Shares shall in no event be less than 33,333,333.
     (c) By written notice given to the Company not less than five (5) Business
Days prior to the Closing Date (the “Designation Notice”), the Investor may
designate one or more other Persons (each a “Co-Investor” and collectively,
together with the Investor, the “Purchasers”) to purchase a portion of the
Purchased Shares in the place of the Investor, with the name of each Co-Investor
and the number of Purchased Shares to be purchased by it being set forth in the
Designation Notice, provided that the number of Purchased Shares to be purchased
by the Investor shall not be less than 29,000,000. It shall be a condition
precedent to the effectiveness of the designation of any Co-Investor that such
Co-Investor execute and deliver to the Company and the Investor a Joinder
Agreement (a “Co-Investor Joinder Agreement”) in a form reasonably satisfactory
to the Company and the Investor pursuant to which (i) such Co-Investor agrees to
become a party to this Agreement as a “Purchaser” hereunder, (ii) such
Co-Investor makes representations and warranties comparable to those being made
by the Investor in Article IV (with such modifications as are necessary to
reflect any difference in the legal nature of such Co-Investor and the source of
its funds for making its investment compared to the Investor), (iii) such
Co-Investor sets forth its notice address(es) for the purposes of Section 9.2
hereof and (iv) such Co-Investor agrees to be bound by the Investor
Confidentiality Agreement as if it were a party thereto.
     Section 2.2 The Closing.
     The closing of the Investment (the “Closing”) and all actions contemplated
by this Agreement and the Registration Rights Agreement to occur at the Closing
shall take place in the offices of Sidley Austin LLP, 787 Seventh Ave., New
York, New York, at 9:30 a.m. local time, on a date to be specified by the
parties, which shall be no later than the second Business Day following the day
on which the last of the conditions set forth in Article IV (other than those
conditions required to be fulfilled at the Closing) shall have been fulfilled or
waived, or at such other time and place as the Company and the Investor may
agree. At the Closing, the Purchasers and the Company shall make certain
deliveries, as specified in Sections 2.3 and 2.4, respectively, and all such
deliveries, regardless of chronological sequence, shall be deemed to occur

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contemporaneously and simultaneously on the occurrence of the last delivery and
none of such deliveries shall be effective until the last of the same has
occurred.
     Section 2.3 Purchaser Deliveries at the Closing. At the Closing, the
Purchasers shall deliver to the Company:
     (a) an amount in same-day funds equal to the Net Purchase Price by wire
transfer to a bank account designated in writing by the Company at least two
Business Days prior to the Closing;
     (b) one or more invoices itemizing the Reimbursable Expenses;
     (c) the Registration Rights Agreement duly executed by the Purchasers;
     (d) an opinion, dated the Closing Date, of Sidley Austin LLP substantially
to the effect set forth in Exhibit B; and
     (e) each of the other certificates and documents listed in Part I of
Exhibit C.
     Section 2.4 Company Deliveries at the Closing. At the Closing, the Company
shall deliver to the Purchasers:
     (a) a certificate or certificates (in denominations specified by the
Investor) representing the Purchased Shares, registered in the names of the
Purchasers;
     (b) the Registration Rights Agreement duly executed by the Purchasers;
     (c) an opinion, dated the Closing, Date, of Dewey Ballantine LLP
substantially to the effect set forth in Exhibit D;
     (d) each of the additional certificates and documents listed in Part II of
Exhibit C.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
     The Company hereby represents and warrants to the Purchasers, except in
each case as specifically set forth in (i) the Company Disclosure Letter,
(ii) the SEC Reports (excluding any disclosure therein that constitutes a “risk
factor” or a “forward looking statement” under the heading “Forward Looking
Statements” in any such SEC Report (provided that the exclusion of any such
“risk factor” or “forward looking statement” shall not supersede or otherwise
limit any of the exceptions set forth in clauses (a) through (m) in the
definition of “Company Material Adverse Effect” or the effectiveness of any
disclosure set forth in the Company Disclosure Letter) or (iii) the DEPFA
Purchase Agreement and the Disclosure Letter Schedule relating thereto (each of
which have been provided to the Purchasers prior to the date of this Agreement),
as follows:

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     Section 3.1 Organization.
     The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. True and correct copies of the
certificate of incorporation and by-laws of the Company, as amended through the
date hereof, have been filed as exhibits to the SEC Reports. The Company has all
requisite corporate power and authority to carry on the businesses in which it
is engaged (and as described in the SEC Reports) and to own or lease its
properties. The Company is duly qualified to conduct business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the nature of its businesses or the ownership or leasing of its properties
requires such qualification, other than where the failure to be so qualified
would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect. The Company is not in default under or in
violation of any provision of its certificate of incorporation or by-laws, and
no such defaults or violations have occurred in the past which would reasonably
be expected, individually or in the aggregate, to have a Company Material
Adverse Effect.
     Section 3.2 Capitalization.
     (a) As of the date hereof, the authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 500,000 shares of Preferred
Stock. As of the Closing Date, upon the effectiveness of the Charter Amendment,
the authorized capital stock of the Company will consist of 100,000,000 shares
of Common Stock and 1,500,000 shares of Preferred Stock. No shares of Preferred
Stock are currently outstanding and, other than the Company’s Series A Junior
Participating Preferred Stock referred to in the Rights Agreement, no series of
Preferred Stock has been designated or reserved for issuance. Of the shares of
Common Stock currently authorized: (i) 1,074,510 shares of Restricted Stock are
currently outstanding, (ii) 278,433 shares are currently held in a rabbi trust
to hedge certain deferred compensation obligations, (iii) 436,625 shares are
reserved for issuance upon the exercise of the Lender Warrants, (iv) 1,846,590
shares are reserved for issuance upon the exercise of Employee Stock Options,
(v) 1,596,842 additional shares are reserved issuance pursuant to the Employee
Stock Incentive Plans in respect of future awards under such plans and (vi) no
other shares are reserved for issuance for any purpose.
     (b) Schedule 3.2(a) sets forth a list of (i) all Employee Stock Options
currently outstanding and (ii) all Restricted Stock Awards currently outstanding
and indicating which Employee Stock Options and awards of Restricted Stock
Awards are expected to lapse upon the consummation of the DEPFA Transaction.
     (c) Except as set forth in Schedule 3.2(b), there are no outstanding
Convertible Securities. Except as disclosed on Schedule 3.2(b), the issuance of
the Purchased Shares as contemplated herein will not cause the number of shares
of Common Stock issuable pursuant to any outstanding Convertible Securities to
increase as a result of any antidilution provisions relating thereto.
     (d) Other than the Employee Stock Options listed on Schedule 3.2(a) and the
Lender Warrants, there are no (i) outstanding options, warrants or other rights
exercisable for the purchase of any shares of Capital Stock or Convertible
Securities (“Stock Purchase Rights”), (ii)

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stock appreciation rights, performance stock awards or other employee incentive
awards the value of which is determined by reference to the value of the Common
Stock or (iii) other agreements or commitments obligating the Company to issue,
sell, repurchase, redeem or otherwise acquire any shares of Capital Stock,
Convertible Securities or Stock Purchase Rights. Except as set forth in
Schedule 3.2(c), the issuance of the Purchased Shares as contemplated herein
will not cause the number of shares of Common Stock issuable pursuant to the
Employee Stock Options or the Lender Warrants to increase as a result of any
antidilution provisions relating thereto.
     (e) There are no authorized or outstanding bonds, debentures, notes or
other obligations of the Company the holders of which have the right to vote
with the holders of Common Stock on any matter. Except as disclosed on
Schedule 3.2(d), the Company does not have in effect any dividend reinvestment
plans or employee stock purchase plans.
     (f) All outstanding shares of Capital Stock (including any outstanding
Restricted Stock) have been duly authorized and validly issued and are
fully-paid and nonassessable and have been offered and issued without violation
of any preemptive rights of any Person or any applicable securities laws. All
outstanding Employee Stock Options and Lender Warrants have been issued without
violation of any applicable securities laws, and all shares of Common Stock
issued upon exercise thereof will have been, upon such issuance, duly authorized
and validly issued without violation of any preemptive rights of any Person and
will be fully-paid and nonassessable.
     (g) There are no voting trusts, proxies or other agreements to which the
Company is a party or by which it is bound with respect to the voting of any
shares of Capital Stock affecting the voting of any shares of Capital Stock.
     Section 3.3 Subsidiaries and Joint Ventures.
     (a) Each Subsidiary is a Business Entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation. A true and
correct copy of each Organizational Document of each “significant subsidiary” of
the Company (within the meaning of Rule 1-02 of Regulation S-X under the
Exchange Act), as amended through the date hereof, has either been filed as an
exhibit to the SEC Reports or otherwise made available to the Investor. Each
Subsidiary has all requisite power and authority to carry on the businesses in
which it is engaged (and as described in the SEC Reports) and to own or lease
its properties. Each Subsidiary is duly qualified to conduct business as a
foreign Business Entity and is in good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification, other than where the failure to
be so qualified would reasonably be expected, individually or in the aggregate,
to have a Company Material Adverse Effect. No Subsidiary is in default under or
in violation of any provision of any of its Organizational Documents, and no
such defaults or violations have occurred in the past which would reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
     (b) Except as disclosed in Schedule 3.3(b), all the outstanding shares of
capital stock or equity interests in each of the Subsidiaries are beneficially
owned by the

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Company, directly or indirectly, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act or other applicable securities
laws), have been duly authorized and validly issued and are fully-paid and
nonassessable, and there are no outstanding options, warrants or other rights to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, or any securities or obligations convertible into or exercisable or
exchangeable for, or any contracts or commitments to issue or sell, shares of
capital stock of any Subsidiary or any such options, warrants, rights,
convertible or exchangeable or exercisable securities.
     (c) Neither the Company nor any Subsidiary has any equity investments or
interests in any Person other than (i) the Subsidiaries, (ii) the interests of
the Company and the Subsidiaries in the JV Entities and (iii) securities
positions maintained by the Company’s broker-dealer Subsidiaries in the ordinary
course of their securities businesses.
     (d) The Company has heretofore made available to the Investor true and
correct copies of each agreement, instrument or document governing the
organization, operation or management of the FATV JV Entities.
     Section 3.4 Authorization; Execution and Enforceability.
     (a) Subject to the Charter Amendment becoming effective, the Company has
all requisite corporate power and authority to execute, deliver and perform this
Agreement and the Registration Rights Agreement and to consummate the
Transactions. The Board has determined, based on the unanimous recommendation of
the Special Committee, that the consummation of the Transactions is deemed
advisable and in the best interests of the shareholders of the Company. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement and the consummation of the Transactions has been duly
authorized by the Board and, other than the Shareholder Approvals, no further
corporate action on the part of the Company is required in connection therewith.
     (b) This Agreement has been duly executed and delivered by the Company and
constitutes, and, upon execution and delivery thereof as contemplated herein,
the Registration Rights Agreement will have been duly executed and delivered by
the Company and will constitute, a legal, valid and binding obligation of the
Company enforceable against it in accordance with its terms.
     Section 3.5 Validity of Purchased Shares.
     Upon issuance to the Purchasers as contemplated herein, the Purchased
Shares (including the attached Rights) will have been duly authorized and
validly issued without violation of the preemptive rights of any Person and will
be fully-paid and nonassessable, free and clear of any Liens.

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     Section 3.6 No Conflicts; Consents and Approvals.
     (a) Subject to obtaining Shareholder Approvals and the filing of the
Charter Amendment, and except as disclosed in Schedule 3.6, neither the
execution, delivery or performance of this Agreement or the Registration Rights
Agreement by the Company nor the consummation of any of the Transactions will
(a) conflict with or violate any provision of the certificate of incorporation
or by-laws of the Company or any Organizational Document of any of the
Subsidiaries; (b) result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of, create
in any party any right to accelerate, terminate, modify or cancel, or require
any notice, consent or waiver under, any Contractual Obligation or any
Requirement of Law applicable to the Company or any of the Subsidiaries or any
of their respective properties and assets, other than such breaches, defaults,
accelerations, terminations, modifications, cancellations, notices, consents or
waivers as would not reasonably be expected, individually or in the aggregate,
to have a Company Material Adverse Effect; (c) result in the imposition of any
Lien upon any material properties or assets of the Company or any of the
Subsidiaries, which Lien would materially detract from the value or materially
interfere with the use of such properties or assets, (d) result in the Company
or any Subsidiary being required to redeem, repurchase or otherwise acquire any
outstanding equity or debt interests, securities or obligations in the Company
or any of the Subsidiaries or any options or other rights exercisable for any of
same or (e) cause the accelerated vesting of any Employee Stock Options or
Restricted Stock Awards.
     (b) Except as set forth in Schedule 3.6, neither the Company nor any of the
Subsidiaries is required to obtain any consent, authorization or approval of, or
make any filing, notification or registration with, any Governmental Authority
or any self regulatory organization in order for the Company to execute, deliver
and perform this Agreement and the Registration Rights Agreement and to
consummate the Transactions (“Company Approvals”), other than filing the Proxy
Statement with the SEC. The Company has no reason to believe that any of the
consents, authorizations or approvals listed on Schedule 3.6 will not be
received or will be received with conditions, limitations or restrictions that
would reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect.
     (c) Except as set forth in Schedule 3.6, no Contractual Consents are
required to be obtained under any Contractual Obligation applicable to the
Company or any Subsidiary or, to the Knowledge of the Company, any Associated
Person thereof in connection with the execution, delivery or performance of this
Agreement or the Registration Rights Agreement or the consummation of any of the
Transactions which if not obtained would reasonably be expected, individually or
in the aggregate to have a Company Material Adverse Effect (“Company Contractual
Consents”).
     Section 3.7 SEC Reports; Financial Statements.
     (a) Except as set forth in Schedule 3.7, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it since December 31, 2005 with the SEC pursuant to the reporting
requirements of the Exchange Act (all the foregoing filed prior to the date
hereof and all exhibits included or incorporated by reference therein and
financial statements and schedules thereto and documents included or

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incorporated by reference therein being sometimes hereinafter collectively
referred to as the “SEC Reports”). As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Exchange Act
applicable to the SEC Reports, and none of the SEC Reports, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
     (b) As of their respective dates, except as set forth therein or in the
notes thereto, the financial statements contained in the SEC Reports and the
related notes (the “Financial Statements”) complied as to form in all material
respects with all applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. The Financial Statements: (i) were
prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”), consistently applied during the periods involved (except
(i) as may be otherwise indicated in the notes thereto or (ii) in the case of
unaudited interim statements, to the extent that they may not include footnotes,
may be condensed or summary statements or may conform to the SEC’s rules and
instructions for Reports on Form 10-Q), (ii) fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments) and
(iii) are in all material respects in accordance with the books of account and
records of the Company and its consolidated subsidiaries (except as may be
otherwise noted therein).
          Section 3.8 Sarbanes-Oxley; Disclosure and Internal Controls.
     (a) The Company is in compliance in all material respects with all of the
provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) that are
applicable to it or any of the Subsidiaries.
     (b) The Company has established and maintains disclosure controls and
procedures as defined in Rule 13a-15 under the Exchange Act. Such disclosure
controls and procedures are designed to ensure that material information
relating to the Company and the Subsidiaries is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required to be filed under the Exchange Act are being prepared. Such disclosure
controls and procedures are effective in all material respects to timely alert
the Company’s principal executive officer and principal financial officer to
material information required to be included in the Company’s reports required
to be filed under Exchange Act.
     (c) The Company and its consolidated subsidiaries have established and
maintained a system of internal control over financial reporting (within the
meaning of Rule 13a-15 under the Exchange Act) (“internal controls”). Such
internal controls are sufficient to provide reasonable assurance regarding the
reliability of the Company’s financial reporting and the preparation of the
Company’s financial statements for external purposes in accordance with GAAP.
The Company’s certifying officers have evaluated the effectiveness of the
Company’s internal controls as of the end of the period covered by the most
recently filed quarterly or annual

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periodic report under the Exchange Act (the “Evaluation Date”). The Company
presented in its most recently filed quarterly or annual periodic report under
the Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls over financial
reporting (as defined in Item 307(b) of Regulation S-K under the Exchange Act)
or, to the Knowledge of the Company, in other factors that could significantly
affect such internal controls.
     Section 3.9 Absence of Certain Changes.
     Since December 31, 2006, (a) there has not been any Company Material
Adverse Effect or any changes, events or developments that would reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect, and (b) the Company and the Subsidiaries have conducted their respective
businesses only in the ordinary course and in conformity with past practice.
     Section 3.10 No Undisclosed Liabilities.
     Neither the Company nor any of the Subsidiaries has any liability (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due), except for the following:
(a) liabilities reflected in or reserved for in the December Balance Sheet,
(b) liabilities that have arisen since December 31, 2006 in the ordinary course
of the businesses of the Company and the Subsidiaries consistent with past
practice, (c) liabilities incurred in the ordinary course of the businesses of
the Company and the Subsidiaries consistent with past practice that would not
required under GAAP to be reflected in an audited consolidated balance sheet of
the Company and its consolidated subsidiaries and that are not in the aggregate
material, (d) liabilities that would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect, (e) liabilities
incurred in connection with the Transactions or (f) liabilities discharged in
the ordinary course of the businesses of the Company and the Subsidiaries
consistent with past practice prior to the date of this Agreement.
     Section 3.11 Litigation.
     There is no Action or Proceeding to which the Company or any of the
Subsidiaries is a party (either as a plaintiff or defendant) pending or, to the
Knowledge of the Company, threatened before any Governmental Authority or
self-regulatory organization (i) that challenges the validity or propriety of
any of the Transactions or (ii) if determined adversely to the Company or any
Subsidiary would reasonably be expected, individually or in the aggregate, to
have a Company Material Adverse Effect. Except as would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect, neither the Company nor any of the Subsidiaries, nor, to the Knowledge
of the Company, any of their respective officers, directors, employees or
Associated Persons, is or has been the subject of any Action or Proceeding
involving a claim of violation or liability under federal, state or foreign
securities or insurance laws or the rules, by-laws, or constitution of any
self-regulatory organization, or a claim of breach of fiduciary duty relating to
the Company or any of the Subsidiaries or has been permanently or temporarily
enjoined by any order, judgment or decree of any Governmental Authority or
self-regulatory organization from engaging in or continuing to

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conduct any of the businesses of the Company or any Subsidiary. Except as would
not reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect, there has not been, and to the Knowledge of the
Company, there is not pending or contemplated, any investigation by any
Governmental Authority or self-regulatory organization involving the Company or
any of the Subsidiaries or any officer, director, employee or Associated Person
thereof. The Company has not received a stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the
Exchange Act or the Securities Act and, to the Knowledge of the Company, the SEC
has not issued any such order. No order, judgment or decree of any Governmental
Authority or self-regulatory organization has been issued in any Action or
Proceeding to which the Company or any of the Subsidiaries is or was a party or,
to the Knowledge of the Company, in any other Action or Proceeding except as
would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect.
     Section 3.12 Intellectual Property Rights.
     Except as would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect, the Company and the
Subsidiaries own or possess, or will be able to obtain on reasonable terms,
licenses or sufficient rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights necessary to enable
them to conduct their businesses as currently conducted (“Intellectual
Property”). Neither the Company nor any of the Subsidiaries has infringed the
intellectual property rights of third parties, and no third party, to the
Knowledge of the Company, is infringing the Intellectual Property, in each case,
where such infringement would reasonably be expected, individually or in the
aggregate, to result in a Company Material Adverse Effect. Other than the DEPFA
Purchase Agreement, there are no material options or licenses relating to the
Intellectual Property, nor is the Company or any of the Subsidiaries bound by or
a party to any material options or licenses relating to the patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
of any other Person. There is no material claim or proceeding pending or, to the
Knowledge of the Company, threatened that challenges the right of the Company or
any of the Subsidiaries with respect to any of the Intellectual Property.
     Section 3.13 Exchange Listing.
     The Common Stock is listed on the NASDAQ Global Market and, to the
Knowledge of the Company, there are no proceedings to revoke or suspend such
listing. The Company is in compliance with the requirements of the NASDAQ Global
Market for continued listing of the Common Stock thereon and any other NASDAQ
Global Market listing and maintenance requirements. Trading in the Common Stock
has not been suspended by the SEC or the NASDAQ Global Market.
     Section 3.14 Tax Matters.
     (a) Except as otherwise set forth in Schedule 3.14, (i) the Company and
each of its Subsidiaries have filed all material Tax Returns required to be
filed, and such Tax Returns

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are true and correct in all material respects, and the Company and its
Subsidiaries are not in default in the payment of any Taxes (whether or not
shown on such Tax Returns), other than those being contested in good faith and
for which adequate reserves have been provided or those currently payable
without interest which were payable pursuant to said Tax Returns or any
assessments with respect thereto, (ii) neither the Company nor any of its
material Subsidiaries is currently the beneficiary of any extension of time
within which to file any material Tax Return or has waived any statute of
limitations in respect of any material Taxes which waiver is currently in
effect, (iii) all Tax Returns referred to in clause (i) have been examined by
the relevant Taxing Authority or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired,
(iv) there is no material audit, assessment or proceeding pending or threatened
in writing with respect to Taxes of the Company or any of the Subsidiaries,
(v) the December Balance Sheet reflects an adequate reserve for all Taxes
payable by the Company and its consolidated subsidiaries for all taxable periods
and portions thereof through December 31, 2006, and (vi) each of the Company and
its material Subsidiaries has filed Tax Returns related to income, franchise or
other similar taxes in each state and local jurisdiction in which it is required
to do so.
     (b) Except for any group, the members of which consist solely of the
Company and the Subsidiaries as of the Closing Date, neither the Company nor any
of the Subsidiaries has been a member of any group of corporations filing a
consolidated return for United States federal income tax purposes, and neither
the Company nor any of the Subsidiaries has any liability for Taxes of any
Person (other than the Company and the Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise.
     (c) Neither the Company nor any Subsidiary has ever been or is currently
“United States real property holding corporation” within the meaning of
Section 897(c)(2) of the Code.
     (d) Neither the Company nor any of the Subsidiaries have been a party to
any “reportable transaction” within the meaning of Treasury
Regulation Section 1.6011-4(b)(1).
     (e) Neither the Company nor any of the Subsidiaries has constituted either
a “distributing corporation” or a “controlled corporation” in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement or (ii) in a distribution which
could otherwise constitute part of a “plan” or “series of related transactions”
(within the meaning of Section 355(e) of the Code) in conjunction with the
Investment.
     (f) No payment or other benefit, and no acceleration of the vesting of any
options, payments or other benefits, will, as a direct or indirect result of the
Transactions, be (or under Section 280G of the Code or the related Treasury
Regulations be presumed to be) an “excess parachute payment” to a “disqualified
individual” as those terms are defined in Section 280G of the Code and the
Treasury Regulations, without regard to whether such payment or acceleration is
reasonable compensation for personal services performed or to be performed in
the future or any amount that will not be deductible as a result of Section
162(m) of the Code (or any corresponding provision of state, local or foreign
law).

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     (g) Neither the Company’s net operating loss carryforwards for federal
income tax purposes nor the Company’s net operating loss carryforwards for state
income tax purposes are subject to any limitations (other than as a result of
the consummation of the Transactions) on their utilization (including under
Section 382 of the Code, similar states or local Tax provisions, and the rules
applicable to “separate return limitation years”) under applicable Tax law.
     (h) Except as disclosed in Schedule 3.14, during the three-year period
ending on the date hereof there have not been, and during the three-year period
ending on the Closing Date there will not have been (other than as a result of
the consummation of the Transactions), any “ownership shifts involving a
5-percent shareholder” (within the meaning of such term for the purposes of
Section 382(g) of the Code), or any “equity structure shifts” (within the
meaning of Section 382(g) of the Code) with respect to the Company.
     (i) Neither the Company nor any of the Subsidiaries is a party to or is
bound by any Tax allocation, sharing or similar agreement with any other Person.
     (j) Except as disclosed in Schedule 3.14, neither the Company nor any of
the Subsidiaries will be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (A) change in method
of accounting for a taxable period ending on or prior to the Closing Date, (B)
“closing agreement” as described in Section 7121 of the Code (or any similar
provision of state, local or foreign law) executed on or prior to the Closing
Date, (C) material installment sale or material open transaction disposition
made on or prior to the Closing Date or (D) material prepaid amount received on
or prior to Closing.
     (k) Since December 31, 2006, neither the Company nor any Subsidiary has
engaged in any transaction, or taken any other action, other than in the
ordinary course of business consistent with past practice, that would give rise
to any material Tax liability of the Company or any Subsidiary.
     Section 3.15 Tangible Assets.
     The Company and each of the Subsidiaries has good and marketable title to,
or has valid rights to lease or otherwise use, all items of real and tangible
personal property that are material to their respective businesses, free and
clear of all Liens other than Liens (i) that do not materially interfere with
the use of such property or (ii) would not reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect.
     Section 3.16 Real Property.
     (a) The Company does not own any real property.
     (b) Schedule 3.16 lists all material real property leased or subleased to
the Company or its Subsidiaries, indicating, in each case, the term of the lease
and any extension and expansion options and the rent payable under such lease
(“Material Leases”). A true and correct copy of each Material Lease has either
been filed as an exhibit to the SEC Reports or otherwise made available by the
Company to the Investor.

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     (c) With respect to each Material Lease: (i) the lease or sublease is
legal, valid, binding, enforceable and in full force and effect; (ii) neither
the Company nor any Subsidiary party to such lease or sublease, nor, to the
Knowledge of the Company, any other party to such lease or sublease, is in
material breach or default thereunder, and no event has occurred which, with
notice or lapse of time, would constitute a material breach or default by the
Company or any of such Subsidiaries or, to the Knowledge of the Company, by any
such other party, thereunder or permit termination, modification or acceleration
thereunder; (iii) to the Knowledge of the Company, there are no material
disputes, oral agreements or forbearance programs in effect as to the lease or
sublease; and (iv) neither the Company nor any of the Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold thereunder.
     Section 3.17 Insurance.
     The Company and each of the Subsidiaries is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as the Company believes are prudent and customary for a company in the
businesses and locations in which the Company or such Subsidiary, as the case
may be, operates. All such policies are in full force and effect, neither the
Company nor any of the Subsidiaries is in material default, whether as to the
payment of premium or otherwise, under any such policy. No notices of
cancellation or, to the Knowledge of the Company, indication of an intention to
cancel or not to renew any material insurance policy has been received by the
Company or any of the Subsidiaries. Since December 31, 2005, neither the Company
nor any of the Subsidiaries has been denied insurance, nor has any prospective
or actual carrier or underwriting board recommended or required material
expenditures by the Company or any of the Subsidiaries in order to obtain
insurance.
     Section 3.18 Contracts.
     (a) All agreements that are required to be filed as exhibits to the SEC
Reports under Item 601 of Regulation S-K have been so filed.
     (b) Except as would not reasonably be expected, individually or in the
aggregate, to result in a Company Material Adverse Effect: (i) each Company
Contract is in full force and effect and represents a valid, binding and
enforceable obligation of the Company and/or any Subsidiaries party thereto and,
to the Knowledge of the Company, of each other party thereto and (ii) neither
the Company nor any of the Subsidiaries nor, to the Knowledge of the Company,
any other party is in breach or default under any Company Contract, and no event
has occurred which with notice or lapse of time would constitute a breach or
default by the Company or any of the Subsidiaries or, to the Knowledge of the
Company, by any such other party, or permit termination, modification or
acceleration under any Company Contract.
     Section 3.19 Permits and Regulatory Matters.
     (a) The Company and its Subsidiaries and, to the Knowledge of the Company,
their respective officers, directors, employees, and Associated Persons hold all
licenses, permits, certificates, franchises, ordinances, registrations,
qualifications, or other rights, privileges, applications and authorizations
filed with, granted or issued by, or entered by any Governmental

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Authority or self-regulatory organization that are required for the conduct of
the businesses of the Company and the Subsidiaries as currently being conducted,
each as amended through the date hereof (collectively, the “Company Permits”),
other than such licenses, permits, certificates, franchises, ordinances,
registrations, qualifications, or other rights, privileges, applications and
authorizations the absence of which would not reasonably be expected,
individually or in the aggregate to have a Company Material Adverse Effect.
     (b) The Company Permits are in full force and effect and have not been
pledged or otherwise encumbered, assigned, suspended, modified, conditioned, or
restricted in any material adverse respect, canceled or revoked, and the Company
and each of the Subsidiaries, and, to the Knowledge of the Company, each of
their respective officers, directors, employees and Associated Persons thereof,
have operated, and are operating, in compliance with all terms thereof or any
renewals thereof applicable to them, and with all Requirements of Law which
apply to the conduct of the businesses thereof, and are in good standing in
respect of all such Company Permits, other than in any case where the failure to
so comply or operate or to be in good standing would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect. To
the Knowledge of the Company, no event has occurred, or notice received, with
respect to any of the Company Permits which allows or results in, or after
notice or lapse of time or both would result in, revocation, suspension, or
termination, modification, or the imposition of any condition or restriction,
thereof or would result in any other material impairment of the rights of the
holder of any such Company Permit other than as would not be reasonably
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
     (c) To the Knowledge of the Company, no Governmental Authority or
self-regulatory organization has initiated any proceeding, investigation, or
examination into the business or operations of the Company or any Subsidiary, or
any officer, director, employee or Associated Persons thereof, or has instituted
any proceeding seeking to revoke, cancel or limit any Company Permit, and
neither the Company or any Subsidiary, nor any officer, director, employee or
Associated Person thereof has received any notice of any unresolved material
violation or exception by any Governmental Authority or self-regulatory
organization with respect to any report or statement relating to any examination
of the Company or any Subsidiary, except in any case as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Without limiting the generality of the foregoing, neither the Company nor any
Subsidiary nor, to the Knowledge of the Company, any of their respective
officers, directors, employees, or Associated Persons or persons performing
similar duties has been enjoined, indicted, convicted or made the subject of a
disciplinary proceeding, censure, consent decree, cease and desist or
administrative order on account of any violation of the Exchange Act, the
Commodity Exchange Act, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, state securities law or applicable foreign law or
regulation.
     (d) Neither the Company or any Subsidiary, nor, to the Knowledge of the
Company, any officer, director, employee, or Associated Person thereof is a
party or subject to any agreement, consent, decree or order or other
understanding or arrangement with, or any directive of any Government Authority
or self-regulatory organization which imposes any material restrictions on or
otherwise affects in any material way the conduct of any of the businesses of
the Company and its Subsidiaries.

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          Section 3.20 Employees; Employee Benefits.
     (a) There are no collective bargaining agreements to which the Company or
any of the Subsidiaries is a party. Except as would not be reasonably expected,
individually or in the aggregate, to have a Company Material Adverse Effect, the
Company and each Subsidiary are in compliance with all Requirements of Law
respecting employment and employment practices, terms and conditions of
employment and wages and hours.
     (b) Schedule 3.20 contains a true and complete list of all “pension plans”
and “welfare plans” as defined in Section 3(2) and 3(1), respectively, of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in each
case applied without regard to the exceptions from coverage contained in
Sections 4(b)(4) or 4(b)(5) thereof, maintained, or contributed to, by the
Company or any of the Subsidiaries or any ERISA Affiliate of the Company or any
Subsidiary (“Employee Benefit Plans”). Each Employee Benefit Plan has been
administered in accordance with its terms in all material respects, and the
Company and each of the Subsidiaries and their respective ERISA Affiliates has
in all material respects met its obligations (if any) with respect to each
Employee Benefit Plan and has made all required contributions (if any) thereto.
The Company and the Subsidiaries and all Employee Benefit Plans are in
compliance in all material respects with the currently applicable provisions (if
any) of ERISA, the Code and other applicable federal, state and foreign laws and
the regulations thereunder. None of the Company, the Subsidiaries or their
respective ERISA Affiliates has ever maintained a Employee Benefit Plan subject
to Section 412 of the Code, Part 3 of Subtitle B of Title I of ERISA or Title IV
of ERISA. At no time has the Company or any of the Subsidiaries or, to the
Knowledge of the Company, any of their respective ERISA Affiliates been
obligated to contribute to any “multiemployer plan” (as defined in
Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
     Section 3.21 Compliance with Law.
     The Company and each of its Subsidiaries and the conduct and operation of
their respective businesses is and has been in material compliance with each
Requirement of Law that (a) affects or relates to this Agreement or the
Registration Rights Agreement or any of the Transactions or (b) is applicable to
the Company or its Subsidiaries or their respective businesses, other than where
the failure to be or to have been in compliance would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
     Section 3.22 Environmental Matters.
     To the Knowledge of the Company, neither the Company nor any Subsidiary,
nor any properties operated by the Company or any Subsidiary is in violation of,
or liable under or in connection with, any Environmental Law that would
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect. There are no actions, suits or proceedings, or demands
(including demand letters or requests for information from any environmental
agency) of, to the Knowledge of the Company, investigations or claims instituted
or pending, or to the Knowledge of the Company, threatened, relating to the
liability of the

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Company or any Subsidiary under any Environmental Law that would reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
     Section 3.23 Transactions with Affiliates.
     No transactions, or series of related transactions, are currently proposed
to which the Company or any of the Subsidiaries would be a party that would be
required to be disclosed under Item 404 of Regulation S-K promulgated under the
Securities Act.
Section 3.24 Investment Company
     The Company is not, and after giving effect to the Transactions will not
be, an “investment company” as such term is defined in the Investment Company
Act of 1940, as amended.
     Section 3.25 Corrupt Practices.
     Neither the Company nor any Subsidiary, nor to the Knowledge of the Company
any director, officer, employee, agent or other Person acting on behalf of the
Company or any Subsidiary has, in the course of his or its actions for, or on
behalf of the Company or any of the Subsidiaries (i) used any corporate funds
for any unlawful contribution gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employees from
corporate funds; (iii) violated or is in violation of in any material respect
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
     Section 3.26 Application of Takeover Protections.
     (a) The Board has taken all action necessary pursuant to Section 912 of the
NYBCL to approve for purposes of Section 912 the purchase of the Purchased
Shares by the Purchasers prior to the date hereof. Other than Section 912 of the
NYBCL, no state or foreign takeover or similar statute or regulation in any
jurisdiction in which the Company does business applies or purports to apply to
this Agreement or any of the Transactions.
     (b) The Company has taken all actions necessary under the Rights Agreement
to cause the Rights Agreement to be rendered inapplicable to this Agreement and
the Transactions and for the Purchasers to be deemed not to be “Acquiring
Persons” (as defined in the Rights Agreement).
     Section 3.27 Certain Information.
     None of the information supplied by the Company or its Subsidiaries for
inclusion or incorporation by reference in any document to be filed with the SEC
or any other Governmental Authority in connection with the Transactions, at the
respective times filed with the SEC or any other Governmental Authority, will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

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     Section 3.28 Securities Law Compliance.
     Assuming the accuracy of the Investor’s representations and warranties
contained in Article IV (any the corresponding representations made by any
Co-Investors in the applicable Co-Investor Joinder Agreements), the offer, sale
and issuance of the Purchased Shares hereunder is in compliance with
Section 4(2) of the Securities Act and is exempt from the registration and
prospectus delivery requirements of the Securities Act and all applicable state
securities laws. Neither the Company nor any agent of the Company has offered
the Purchased Shares by any form of general solicitation or general advertising,
including any advertisement, article, notice or other communication published in
any newspaper, magazine or similar media or broadcast over television or radio
or any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
     Section 3.29 Brokers.
     Except as heretofore disclosed by the Company to the Investor, no broker,
investment banker or other Person is entitled to any broker’s, finder’s or other
similar fee or commission in connection with the execution an delivery of this
Agreement or the Registration Rights Agreement or the consummation of any of the
Transactions based upon arrangements made by or on behalf of the Company, and
the Company shall indemnify and hold the Purchasers harmless against any claim
for any such fee or commission based on any such arrangements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
     The Investor hereby represents and warrants to the Company, except in each
case as specifically set forth in the Investor Disclosure Letter, as follows:
     Section 4.1 Organization, Standing and Power.
     The Investor is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Investor has the necessary power and authority to execute, deliver and perform
this Agreement and the Registration Rights Agreement.
     Section 4.2 Authorization; Execution and Enforceability.
     The execution, delivery and performance by the Investor of this Agreement
and the Registration Rights Agreement have been duly and validly authorized by
all necessary limited liability company action on the part of the Investor and
do not require any further authorization or consent of the Investor. This
Agreement has been duly executed and delivered by the Investor and the
Registration Rights Agreement, when executed and delivered as contemplated
herein, will have been duly executed and delivered by the Investor, and this
Agreement constitutes, and the Registration Rights Agreement upon execution and
delivery

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thereof by the Investor will constitute, the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
their respective terms.
     Section 4.3 No Conflict; Consents and Approvals.
     (a) Neither the execution, delivery or performance of this Agreement or the
Registration Rights Agreement by the Investor nor the consummation of any of the
Transactions will (i) conflict with or violate any provision of any
Organizational Document of the Investor or (ii) result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any Contractual Obligation or any Requirement of Law applicable to
the Investor or any of its properties or assets other than a breach, default,
acceleration, right, notice, consent or waiver that is not material.
     (b) The Investor is not required to obtain any consent, authorization or
approval of, or make any filing or registration with, any Governmental Authority
or any self regulatory organization in order for the Investor to execute,
deliver and perform this Agreement and the Registration Rights Agreement and to
consummate the Transactions (“Investor Approvals”).
     (c) No material Contractual Consents are required to be obtained under any
Contractual Obligation applicable to the Investor in connection with the
execution, delivery or performance of this Agreement or the Registration Rights
Agreement or the consummation of any of the Transactions.
     Section 4.4 Purchase Entirely for Own Account.
     The Purchased Shares to be acquired by the Investor hereunder will be
acquired for the Investor’s own account, not as nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the
Securities Act, and the Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act. The Investor does not have any agreement or understanding,
whether or not legally binding, direct or indirect, with any other Person to
sell or otherwise distribute the Purchased Shares.
     Section 4.5 Investment Experience.
     The Investor acknowledges that it can bear the economic risk and complete
loss of its investment in the Purchased Shares and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby. The Investor understands
that the purchase of the Purchased Shares involves substantial risk.
     Section 4.6 Disclosure of Information.
     The Investor has undertaken substantial due diligence with respect to the
Company and has had access to copies of the SEC Reports. Without limiting the
rights of the Investor under Section 5.1, the Investor has received such
information from the Company, and

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has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed decision to execute and deliver this Agreement.
     Section 4.7 Restricted Securities.
     The Investor understands that the Purchased Shares will be characterized as
“restricted securities” under the United States federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only in
certain limited circumstances. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Purchased Shares or
the fairness or suitability of the investment in the Purchased Shares.
     Section 4.8 Legends.
     The Investor understands that, except as provided below and until such time
as the resale of the Purchased Shares has been registered under the Securities
Act as contemplated by the Registration Rights Agreement, certificates
evidencing the Purchased Shares shall bear the following legends:
     (a) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OFFERED FOR
SALE, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION FROM
COUNSEL IN A FORM ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL STATING THAT
SUCH REGISTRATION IS NOT REQUIRED.”
     (b) If required by the authorities of any state in connection with the
issuance or sale of the Purchased Shares, the legend required by such state
authority.
     Section 4.9 Accredited Investor.
     The Investor is an “accredited investor” as defined in Rule 501(a) of
Regulation D, as amended, under the Securities Act. The Investor’s principal
place of business is in New York, New York.
     Section 4.10 No General Solicitation.
     The Investor did not learn of the opportunity to purchase the Purchased
Shares by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature,
including (i) any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media, or broadcast over
television or radio, or (ii) any seminar or meeting to which the Investor was
invited by any of the foregoing means of communications.

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     Section 4.11 Availability of Funds.
     The Investor has delivered to the Company a true and complete copy of the
commitment letter of even date herewith between the Investor and MatlinPatterson
Global Opportunities Partners II, L.P and MatlinPatterson Global Opportunities
Partners (Cayman) II, L.P. (the “Financing Commitment”), attached hereto as
Exhibit E, pursuant to which MatlinPatterson Global Opportunities Partners II,
L.P and MatlinPatterson Global Opportunities Partners (Cayman) II, L.P. have
respectively agreed to contribute or lend the amounts described therein to the
Investor (the “Financings”). The Financing Commitment has not been amended or
modified and the respective commitments contained in the Financing Commitments
have not been withdrawn or rescinded in any respect. The Financing Commitment is
in full force and effect. There are no conditions precedent or other
contingencies related to the funding of the full amounts of the Financings,
other than the satisfaction of the conditions set forth in this Agreement to the
obligations of the Purchasers to consummate the Transactions. The aggregate
proceeds to be disbursed pursuant to the Financing Commitment will be sufficient
for the Investor to pay the Net Purchase Price on the Closing Date. Subject to
satisfaction of the conditions set forth in this Agreement to the conditions of
the Purchasers to consummate the Transactions, as of the date of this Agreement,
the Investor does not have any reason to believe that the Financings will not be
available to the Investor on the Closing Date.
     Section 4.12 Certain Information.
     None of the information supplied by the Investor for inclusion or
incorporation by reference in any document to be filed with the SEC or any other
Governmental Authority in connection with the Transactions, at the respective
times filed with the SEC or any other Governmental Authority, will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
     Section 4.13 Brokers.
     Except as heretofore been disclosed to the Company by the Investor, no
broker, investment banker or other Person is entitled to any broker’s, finder’s
or other similar fee or commission in connection with the execution an delivery
of this Agreement or the Registration Rights Agreement or the consummation of
any of the Transactions based upon arrangements made by or on behalf of the
Investor, and the Investor shall indemnify and hold the Company harmless against
any claim for any such fee or commission based on any such arrangements.
     Section 4.14 Tax Matters.
     With respect to tax considerations involved in this investment, other than
the representations and warranties of the Company set forth in Section 3.14, the
Investor is not relying on the Company (or any agent or representative of the
Company). The Investor has carefully considered and has, to the extent the
Investor believes such discussion necessary, discussed with the Investor’s tax
advisers the suitability of an investment in the Purchased Shares for the
Investor’s particular tax situation.

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ARTICLE V
COVENANTS OF THE COMPANY
     Section 5.1 Access to Information; Reporting.
     (a) Between the date hereof and the Closing Date, the Company shall afford
the officers, employees and authorized representatives of the Purchasers
(including independent public accountants and attorneys) reasonable access
during normal business hours to the offices, properties, employees and business
and financial records (including computer files, retrieval programs and similar
documentation) of the Company and the Subsidiaries, all to the extent reasonably
requested by the Purchasers. The Purchasers agree that such investigation shall
be conducted in such a manner as not to interfere unreasonably with the
operations of the Company and the Subsidiaries. No investigation made by the
Purchasers or their representatives hereunder shall affect the representations
and warranties of the Company hereunder.
     (b) Without limiting the generality of Section 5.1(a) above, within a
reasonable time after the end of each month ending between the date of this
Agreement and the Closing Date, the Company shall furnish to the Investor a
report setting forth such financial and operating information with respect to
the Company and the Subsidiaries for such month as the Investor may reasonably
request.
     Section 5.2 Preparation of Proxy Statement; Shareholder Meeting.
     (a) As soon as practicable after the date hereof, the Company shall prepare
and shall file with the SEC a proxy statement (the “Proxy Statement”) in
preliminary form or such other form, statement or report as may be required
under the federal securities laws relating to the special meeting of the holders
of Common Stock (the “Shareholder Meeting”) to be held in connection with the
Transactions to obtain (i) the affirmative vote of a majority of the votes
entitled to be cast by the holders of Common Stock (the “Common Shareholders”)
at the Shareholder Meeting (to the extent not already approved by the Common
Shareholders at the annual meeting of the Company contemplated to be held
between the date of this Agreement and the date of the Shareholder Meeting) in
favor of an amendment (the “Charter Amendment”) of the Company’s certificate of
incorporation (A) to increase the number of authorized shares of Common Stock
from 50,000,000 to 100,000,000 and to increase the number of authorized shares
of Preferred Stock from 500,000 to 1,500,000, (B) to change the name of the
Company to such name as the Investor shall designate and (C) to limit the
liability of the directors of the Company to the extent permitted under Section
402(b) of the NYBCL, all in accordance with applicable law and the rules and
regulations of the NASDAQ Global Market (the “Amendment Approval”), and (ii) the
affirmative vote of a majority of the votes cast by the Common Shareholders at
the Shareholder Meeting in favor of (x) the Company’s issuance of the Purchased
Shares as described herein and the resulting change in control of the Company,
all in accordance with applicable law and the rules and regulations of the
NASDAQ Global Market and (y) any other matter that must be submitted to the
Common Shareholders for approval in order to consummate the Transactions under
applicable Requirements of Law, (the “Transactions Approval” and collectively
with the Amendment Approval, the “Shareholder Approvals”). The Company and the
Purchasers shall reasonably cooperate with each other in the preparation of the
Proxy Statement and shall use commercially reasonable efforts to have the Proxy
Statement cleared by

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the SEC as promptly as practicable after such filing. The Company shall notify
the Purchasers promptly following the receipt of any comments from the SEC and
of any request by the SEC for amendments or supplements to the Proxy Statement
or for additional information and will supply the Purchasers with copies of all
correspondence with the SEC with respect to the Proxy Statement, and will
consult with the Purchasers and its counsel prior to making any response to the
SEC with respect thereto. The Proxy Statement and any supplement or amendment
thereto shall comply in all material respects with all applicable Requirements
of Law. If an event occurs that is required to be set forth in an amendment or
supplement to the Proxy Statement, (A) the Company or the Purchasers, as the
case may be, shall promptly inform the other of such event, (B) the Company
shall prepare and file with the SEC any such amendment or supplement to the
Proxy Statement and (C) the Company shall use commercially reasonable efforts to
have any such amendment or supplement cleared as promptly as practicable after
such filing. The Company agrees that none of the information supplied by it or
any of the Subsidiaries for inclusion or incorporation by reference in the Proxy
Statement will, at the time of mailing of the Proxy Statement to the Common
Shareholders or at the time of the Shareholder Meeting, contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the agreement contained in this sentence shall not be applicable
to any statements made or incorporated by reference in the Proxy Statement based
on information supplied by or on behalf of the Purchasers for inclusion or
incorporation by reference therein. Each Purchaser agrees that none of the
information supplied by it for inclusion or incorporation by reference in the
Proxy Statement will, at the date of mailing of the Proxy Statement to the
Common Shareholders or at the time of the Shareholder Meeting, contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
     (b) The Company shall as soon as practicable after the Proxy Statement is
cleared by the SEC mail the Proxy Statement to the Common Shareholders and duly
call, give notice of, convene and hold the Shareholder Meeting for the purpose
of obtaining the Shareholder Approvals. Except as provided in the next sentence,
the Company shall use its reasonable best efforts to obtain the Shareholder
Approvals (which reasonable best efforts shall include, without limitation, the
requirement to hire a reputable proxy solicitor) and the Board shall recommend
to its stockholders that they approve the Amendment and the Transactions,
including the issuance of the Purchased Shares in connection therewith (the
“Company Recommendation”), and the Proxy Statement shall include the Company
Recommendation. Notwithstanding anything to the contrary in this Agreement, the
Board shall be permitted to (i) not recommend to the Common Shareholders that
they vote in favor of the Shareholder Approvals, (ii) withdraw or modify in a
manner adverse to the Purchasers its recommendation to the Common Shareholders
that they vote in favor of the Shareholder Approvals or (iii) recommend any
Superior Competing Transaction (each, a “Change in Recommendation”) if, in the
case of (i), (ii) or (iii), a majority of the disinterested members of the Board
determines, in their good faith judgment and after consultation with outside
legal counsel and independent financial advisors, that the failure of the Board
to effect such Change in Recommendation would reasonably likely be inconsistent
with the directors’ fiduciary duties under applicable Requirements of Law.
Notwithstanding anything to the contrary contained in this Agreement,

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the Company shall not be required to hold the Shareholder Meeting if this
Agreement is terminated.
     (c) If on the date of the Shareholder Meeting or any subsequent adjournment
thereof, the Company has not received proxies representing a sufficient number
of shares of Common Stock to pass the Shareholder Approvals, the Company may
adjourn the Shareholder Meeting.
     (d) Except as permitted in paragraph (b) above or as may be required by
applicable Requirements of Law or under the Company’s certificate of
incorporation or by-laws, the Company shall not, either prior to or at the
Shareholder Meeting, put forth any matter to the Common Shareholders for their
approval other than the Shareholder Approvals, except with the prior written
consent of the Investor.
     Section 5.3 No Solicitation of Transactions.
     (a) Subject to Section 5.4, from and after the date of this Agreement until
the earlier of the Closing or the termination of this Agreement in accordance
with its terms, the Company shall not authorize or permit any of its officers,
trustees, directors, employees, agents or representatives (including investment
bankers, financial or other advisors, attorneys, brokers, finders or other
agents) (such officers, trustees, directors, employees, agents and
representatives, collectively, “Representatives”) to, directly or indirectly,
(i) initiate, solicit or knowingly encourage or facilitate (including by way of
furnishing nonpublic information) any inquiries or the making of any proposal or
offer that constitutes, or would reasonably be expected to result in, a
Competing Transaction or (ii) enter into discussions or negotiations with, or
provide any confidential information or data to, any Person relating to a
Competing Transaction.
     (b) Subject to Section 5.4, from and after the date of this Agreement until
the earlier of the Closing or the termination of this Agreement in accordance
with its terms, the Company shall take all actions reasonably necessary to cause
its Representatives to immediately cease any discussions or negotiations with
any Person other than the Purchasers and its Representatives with respect to, or
that would reasonably be expected to lead to, a Competing Transaction.
     (c) From and after the date of this Agreement until the earlier of the
Closing or the termination of this Agreement in accordance with its terms, the
Company shall notify the Purchasers, orally and in writing, immediately
following receipt, of material terms and conditions of any written or oral
proposal (including the identity of the parties) which the Company or any of its
Representatives may receive after the date hereof relating to a Competing
Transaction and shall keep the Purchasers informed in all material respects and
on a timely basis as to the status of and any material developments regarding
any such proposal.
     (d) For purposes of this Agreement, a “Competing Transaction” means any of
the following (other than the transactions expressly provided for in and to be
effected pursuant to this Agreement): (i) any merger, reorganization,
consolidation, share exchange, business combination, liquidation, dissolution,
recapitalization or similar transaction involving the Company; (ii) any direct
or indirect acquisition or purchase, in a single transaction or series of

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related transactions, of (x) 20% or more of the consolidated gross assets of the
Company and the Subsidiaries, taken as a whole, (y) 20% or more of any class of
voting securities of the Company or any Subsidiary (or any debt or equity
securities convertible into or exercisable or exchangeable for such amount of
voting securities) or (z) 15% or more of any class of voting securities of the
Company or any Subsidiary (or any debt or equity securities convertible into or
exercisable or exchangeable for such amount of voting securities) if such
securities carry the right, contractually or otherwise, to appoint or designate
any member or members of the Board; or (iii) any tender offer or exchange offer
that, if consummated, would result in any Person or “group” (within the meaning
of Section 13(d)(3) of the Exchange Act) beneficially owning 20% or more of any
class of voting securities of the Company.
     (e) For purposes of this Agreement, a “Superior Competing Transaction”
means a bona fide proposal for a Competing Transaction, which proposal was not,
directly or indirectly, the result of a breach of this Section 5.3, made by a
third party (x) on terms that the Board determines in its good faith judgment
(based on the financial analysis and other advice of the Company’s financial
advisors and the advice of outside counsel, and after giving effect to the
payment of the Reimbursable Expenses pursuant to Section 9.1 and to the expected
timing of the closing of the proposed Competing Transaction) to be more
favorable to the shareholders of the Company than the Transactions (taking into
account any changes to the Transactions contemplated by Section 5.4(b)),
(y) which is reasonably likely to be consummated (taking into account, among
other things, all legal, financial, regulatory and other aspects of the
proposal, including any conditions, and the identity of the offeror) and (z) for
which financing, to the extent required, is then fully committed or which, in
the good faith judgment of the Board (based on the advice of the Company’s
financial advisers), is reasonably capable of being timely financed by such
third party.
     Section 5.4 Board Actions.
     (a) Notwithstanding Section 5.3 or any other provision of this Agreement to
the contrary, following the receipt after the date hereof by the Company of a
bona fide proposal from a Person for a Competing Transaction that the Board
believes in good faith (after consultation with outside counsel and with the
Company’s financial advisors) constitutes or may reasonably be expected to
result in a Superior Competing Transaction, and which proposal was not, directly
or indirectly, the result of a breach of Section 5.3, but only to the extent
required by the fiduciary obligations of the Board, the Board may, directly or
through any of its Representatives, (i) contact such Person and its
Representatives for the purpose of clarifying the proposal and any material
terms thereof and the capability of consummation, so as to determine whether the
proposal for a Competing Transaction is reasonably likely to lead to a Superior
Competing Transaction and (ii) if the Board determines in good faith following
consultation with its legal and financial advisors that such proposal for a
Competing Transaction is reasonably likely to lead to a Superior Competing
Transaction, the Board may (directly or through its Representatives) (A) furnish
non-public information with respect to the Company and the Company Subsidiaries
to the Person that made such proposal pursuant to an appropriate confidentiality
agreement (with confidentiality terms no less restrictive in the aggregate to
the Person making such proposal than the Investor Confidentiality Agreement)
with such Person, (B) participate in discussions and negotiations with such
Person regarding such proposal and (C) subject to Section 5.4(b), following
receipt of a proposal for a Competing Transaction that the

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Board determines in good faith constitutes a Superior Competing Transaction, but
prior to the Company Stockholder Approval, terminate this Agreement pursuant to,
and subject to compliance with, Sections 9.1(f) and 8.2(c). Nothing in this
Agreement shall prevent the Board from (1) complying with Rule 14d-9 or
Rule 14e-2(a) promulgated under the Exchange Act with respect to a Competing
Transaction, (2) issuing a “stop, look and listen” announcement, (3) complying
with its disclosure obligations under U.S. federal or state law regarding a
Competing Transaction or (4) taking any action that any court of competent
jurisdiction orders the Company to take.
     (b) The Board shall not effect any Change in Recommendation or take any
action referred to in Section 5.4(a)(ii)(C) unless the Board has (i) given the
Purchasers at least three (3) Business Days’ notice of its intent to take such
action and (ii) with respect to an action referred to in Section 5.4(a)(ii)(C)
with respect to a Superior Competing Transaction, negotiate with the Purchasers
in good faith any amendment to this Agreement proposed by the Purchasers and
taken into account any such amendment entered into or to which the Purchasers
irrevocably covenants to enter into and for which all internal approvals of the
Purchasers have been obtained since receipt of such notice, in each case, prior
to the end of such three-Business Day period, and such Superior Competing
Transaction thereafter remains a Superior Competing Transaction.
     Section 5.5 Changes in the Composition of the Board.
     (a) On or prior to the Closing Date, the Company shall cause the size of
the Board to be increased to nine members and shall procure the resignation from
the Board of each of the Non-Continuing Directors. On the Closing Date, the
remaining members of the Board shall appoint the Investor Designated Directors
to fill the resulting vacancies.
     (b) On or prior to the Closing Date, the Company shall cause each committee
of the Board to consist of such members of the Board (after giving effect to the
changes referred to in Subsection 5.5(a) above) as the Investor may direct.
     Section 5.6 Strategic Plan.
     As soon as practicable after the date hereof, the Company and the Investor
shall cooperate in developing a new strategic plan designed to restore the
Company to profitability and to provide a platform for future growth (the
“Strategic Plan”).
     Section 5.7 Conduct of Business.
     From the date of this Agreement through the Closing, except as otherwise
contemplated in this Agreement or the Strategic Plan or in connection with the
consummation of the DEPFA Transaction, the Company shall (and shall cause each
of the Subsidiaries to) maintain its existence and carry on its businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, shall use all
reasonable efforts to keep available the services of its current officers and
employees and preserve its relationships with its customers, suppliers,
licensors, lessors, third-party payors and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at the
time of the Closing. Except as otherwise expressly contemplated in this
Agreement or the Strategic Plan or in connection with the consummation of the
DEPFA

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Transaction, the Company shall not (nor shall it permit any of the Subsidiaries
to), without the prior written consent of the Investor:

  (i)   adopt any amendment to its certificate of incorporation or by-laws or
other Organizational Documents;     (ii)   issue, deliver, sell, pledge, dispose
of or otherwise encumber any shares of its Capital Stock, any other voting
securities or equity equivalents or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities,
equity equivalents or convertible securities, other than (x) the issuance of
shares of Common Stock upon exercise of the Lender Warrants in accordance with
their terms and (y) the issuance of shares of Common Stock upon the exercise of
Employee Stock Options outstanding as of the date hereof in accordance with
their terms;     (iii)   (A) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such, other than dividends and other distributions by Subsidiaries
to the Company or its Subsidiaries, (B) other than in the case of any
wholly-owned Subsidiary, split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or (C) purchase,
redeem or otherwise acquire any shares of its capital stock or the capital stock
of any of its non-wholly-owned Subsidiaries or any other debt or equity
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;     (iv)   (A) acquire or agree to acquire (1) by merging
or consolidating with, or by purchasing a substantial portion of the assets or
properties of or equity in, or by any other manner, any business or Business
Entity or division thereof for a price in excess of $250,000 or (2) any assets
or properties that are, individually or in the aggregate, material to the
Company and its Subsidiaries taken as a whole, other than in the ordinary course
of business consistent with past practice or (B) make any capital contributions
to, or other investments in, any Person that is not a Subsidiary of the Company
(other than additional capital contributions or investments not in excess of
$250,000 in the aggregate that are in respect of investments of the Company held
as of the date hereof);     (v)   sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its properties or
assets, other than in the ordinary course of business consistent with past
practice;     (vi)   other than drawings under demand lines of credit to finance
securities inventories and “day loans” to fund clearance and settlement of
securities, incur or assume any indebtedness for borrowed money, guarantee any

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      such indebtedness, issue or sell any debt securities in respect of which
the Company or any Subsidiary is an obligor or guarantor or warrants or other
rights to acquire any debt securities, guarantee or otherwise support any debt
securities or make any loans or advances to any other Person;     (vii)   alter
(through merger, liquidation, reorganization, restructuring or in any other
fashion) the corporate structure or ownership of the Company or any
non-wholly-owned Subsidiary;     (viii)   change or modify the accounting
methods, principles or practices used by it (other than changes or modifications
required to be made by changes in GAAP);     (ix)   make or agree to make any
capital expenditure, other than (x) maintenance capital expenditures in the
ordinary course of business consistent with past practice or (y) in an amount
not greater than $250,000 in the aggregate;     (x)   settle or compromise any
liability for Taxes or any suit, proceeding or claim or threatened suit,
proceeding or claim in an amount not covered by insurance in excess of $250,000
in the aggregate;     (xi)   prepare or file any Tax Return inconsistent with
past practice or, on any such Tax Return, take a position or make any election,
or adopt any method, that is inconsistent with positions taken, elections made
or methods used in preparing or fling similar Tax Returns in prior periods, or
make any material tax election increasing its liability for Taxes or which, in
the opinion of counsel, is not permitted to be made;     (xii)   take any action
prior to the Closing Date, other than in the ordinary course of business
consistent with past practice, that could give rise to any material Tax
liability or materially reduce any Tax asset of the Company or any Subsidiary;  
  (xiii)   make any material amendment to, or waive any material provision of,
any Company Contract, other than in the ordinary course of business consistent
with past practice or in connection with the transactions contemplated hereby;  
  (xiv)   violate or fail to perform any material obligation or duty imposed
upon it by any Requirement of Law;     (xv)   take or agree to take any action
that would reasonably be expected, individually or in the aggregate, to cause
any representation or warranty of the Company set forth in this Agreement not to
be true and correct in any material respect or result in any of the conditions
set forth in this Article VI not being satisfied as contemplated by this
Agreement;     (xvi)   terminate the employment of any Designated Key Employee;

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  (xvii)   increase in any manner the compensation of any of its Designated Key
Employees or enter into, establish, amend or terminate any employment,
consulting, retention, change in control, collective bargaining, bonus or other
incentive compensation, profit sharing, deferred compensation, pension,
retirement, vacation, stock option or other equity, health or other welfare, or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of shareholder, officer, key employee,
director, consultant or Affiliate other than (x) as contemplated in the Company
Disclosure Letter, (y) as required pursuant to the terms of agreements in effect
on the date hereof or as required by any Requirement of Law or (z) as are
otherwise in the ordinary course of business consistent with past practice and
are not in the aggregate material;     (xviii)   fail to use its commercially
reasonable efforts to comply in all material respects with any Requirement of
Law applicable to it or any of its properties or assets or to maintain in full
force and effect any Company Permit;     (xix)   engage in any conduct that
could be construed to constitute a “material change in business operations”
within the meaning of NASD Rule 1011(i); or     (xx)   authorize, recommend,
propose or announce an intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.

     Section 5.8 Listing.
     The Company shall use its reasonable best efforts to maintain the Common
Stock’s authorization for quotation on the NASDAQ Global Market and to cause the
Purchased Shares to be approved for listing thereon on or prior to the Closing
Date to the extent permitted under the rules of the NASDSAQ Global Market.
Neither the Company nor any of the Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the NASDAQ Global Market and shall take all action reasonably
necessary to maintain the listing of the Common Stock on the NASDAQ Global
Market, including without limitation, exhausting all available remedies, appeal
reviews and other similar mechanisms and procedures provided for under the rules
and regulations of the NASDAQ Global Market to permit the continued listing of
the Common Stock on the NASDAQ Global Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 5.8.

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     Section 5.9 Preserve Accuracy of Representations and Warranties;
Fulfillment of Conditions; Notification of Certain Matters.
     (a) The Company and the Purchasers shall each refrain from taking any
action which would render any representation or warranty contained in
Article III or IV inaccurate in any material respect as of the Closing Date.
Each party shall promptly notify the other of (i) any event or matter that would
reasonably be expected to cause any of its representations or warranties to be
untrue in any material respect or (ii) any action, suit or proceeding that shall
be instituted or threatened against such party to restrain, prohibit or
otherwise challenge the legality of any of the Transactions.
     (b) The Company and the Purchasers shall each use their respective
reasonable best efforts to cause each of the conditions precedent set forth in
Article VI to be satisfied as soon as practicable after the date hereof.
     (c) Between the date hereof and the Closing Date, the Company shall notify
the Purchasers of (i) the occurrence of any Company Material Adverse Effect,
(ii) any lawsuit, claim, proceeding or investigation that is threatened,
brought, asserted or commenced against the Company or any Subsidiary or any of
their respective officers, directors or employees which would have been required
to be disclosed in the Company Disclosure Letter with respect to the
representations and warranties of the Company set forth in Section 3.11 if such
lawsuit, claim, proceeding or investigation had arisen prior to the date hereof,
(iii) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
Transactions, (iv) any material default of which the Company becomes aware under
any Company Contract or any event which, with notice or lapse of time or both,
would become such a default on or prior to the Closing Date; and (v) any notice
from any Governmental Authority in connection with or relating to any of the
Transactions.
     (d) The Company and the Purchasers shall cooperate fully with each other
and assist each other in defending any lawsuits or other legal proceedings,
whether judicial or administrative, brought against either party challenging
this Agreement or the Registration Rights Agreement or the consummation of the
Transactions, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed.
     Section 5.10 Contractual Consents and Governmental Approvals.
     (a) The Company will act diligently and reasonably in attempting to obtain
before the Closing Date, and the Purchasers shall reasonably cooperate with the
Company in such efforts, all Company Contractual Consents in form and substance
reasonably satisfactory to the Investor, provided that neither the Company nor
the Purchasers shall have any obligation to offer or pay any consideration in
order to obtain any such Company Contractual Consents; and provided, further,
that the Company shall not make any agreement or understanding affecting the
Company or any of the Subsidiaries, or any of their respective businesses, as a
condition for obtaining any such Company Contractual Consents except with the
prior written consent of the Investor.

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     (b) Between the date hereof and the Closing Date, the Company and the
Purchasers shall act diligently and reasonably, and shall cooperate with each
other, in making any required filing, registration or notification with, and in
attempting to obtain any consent, authorization or approval required from, any
Governmental Authority, any self regulatory organization (including the NASD),
and stock exchange of which the Company or any Subsidiary is a member in
connection with the Transactions or to otherwise satisfy the conditions set
forth in Article VI; provided that the Company shall not make any agreement or
understanding affecting the Company or any of the Subsidiaries, or any of their
respective businesses, as a condition for obtaining any such consents or waivers
except with the prior written consent of the Purchasers; provided, further that
neither the Company nor the Purchasers shall be obligated to (A) execute
settlements, undertakings, consent decrees, stipulations or other agreements,
(B) sell, divest, hold separate or otherwise convey any particular assets or
categories of assets or businesses of the Company or the Purchasers or
(C) otherwise take or commit to take actions that after the Closing Date would
limit the freedom of action of the Purchasers or the Company or its Subsidiaries
with respect to, or its or their ability to retain, one or more of its or their
businesses, product lines or assets, in each case as may be required in order to
avoid the entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order in any suit or proceeding which would otherwise
have the effect of preventing or materially delaying the Closing
     Section 5.11 Use of Proceeds.
     The net proceeds received by the Company from the issuance of the Purchased
Shares shall be used in a manner consistent with the Strategic Plan.
ARTICLE VI
CONDITIONS
     Section 6.1 Conditions to the Company’s Obligations.
     The obligation of the Company to effect the Investment and the other
Transactions shall be subject to the fulfillment (or waiver by the Company) at
or prior to the Closing of each of the following conditions:
     (a) No Order. No court or other Governmental Authority having jurisdiction
over the Company or any of the Subsidiaries or the Purchasers shall have
instituted, enacted, issued, promulgated, enforced or entered any Requirement of
Law (whether temporary, preliminary or permanent) that is then in effect and
that (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or the Registration Rights Agreement or (ii) seeks to restrain,
prohibit or invalidate the consummation of any of the Transactions or to
invalidate any provision of this Agreement or the Registration Rights Agreement.
     (b) Shareholder Approvals. The Shareholder Approvals shall have been duly
adopted by the Common Shareholders.

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     (c) Governmental Approvals. Each Company Approval and Investor Approval
shall have been obtained or made and shall be in full force and effect to the
extent that the failure to obtain or make such Company Approval or Investor
Approval (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or the Registration Rights Agreement or (ii) could reasonably be
expected, individually or together with other Company Approvals that have not
been obtained or made, to have a Company Material Adverse Effect.
     (d) Performance of Obligations. The Purchasers shall have performed in all
material respects each of its respective covenants and agreements contained in
this Agreement or the Registration Rights Agreement and required to be performed
at or prior to the Closing.
     (e) Representations and Warranties. Each of the representations and
warranties of the Purchasers contained in this Agreement that is qualified as to
materiality shall be true and correct on and as of the Closing Date as if made
on and as of such date (other than representations and warranties which address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties of the Purchasers
that is not so qualified shall be true and correct in all material respects on
and as of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain
date).
     (f) Officer’s Certificate. A certificate executed on behalf of the Investor
by a senior executive of the Investor, to the effect that the conditions set
forth in paragraphs (d) and (e) above have been satisfied, shall have been
delivered to the Company.
     (g) DEPFA Transaction. In case of a Closing occurring on or prior to
July 31, 2007, the DEPFA Transaction shall have been consummated in accordance
with the terms of the DEPFA Purchase Agreement.
     Section 6.2 Conditions to the Purchasers’ Obligations.
     The obligation of the Purchasers to make the Investment and to effect the
other Transactions shall be subject to the fulfillment (or waiver by the
Purchasers) at or prior to the Closing of each of the following conditions:
     (a) No Order. No court or other Governmental Authority having jurisdiction
over the Company or any of the Subsidiaries or the Purchasers shall have
instituted, enacted, issued, promulgated, enforced or entered any Requirement of
Law (whether temporary, preliminary or permanent) that is then in effect and
that (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or the Registration Rights Agreement or result or would result in a
Company Material Adverse Effect or (ii) seeks to restrain, prohibit or
invalidate the consummation of any of the Transactions or to invalidate any
provision of this Agreement or the Registration Rights Agreement.

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     (b) Shareholder Approvals. The Shareholder Approvals shall have been duly
adopted by the Common Shareholders.
     (c) Governmental Approvals. Each Company Approval and Investor Approval
shall have been obtained or made and shall be in full force and effect to the
extent that the failure to obtain or make such Company Approval or Investor
Approval (i) has the effect of making illegal or otherwise prohibiting or
invalidating consummation of any of the Transactions or any provision of this
Agreement or the Registration Rights Agreement or (ii) would reasonably be
expected, individually or together with other Company Approvals or Investor
Approvals that have not been obtained or made, to have a Company Material
Adverse Effect.
     (d) Contractual Consents. Each Company Contractual Consent shall have been
obtained and shall be in full force and effect to the extent that the failure to
obtain such Company Contractual Consent would reasonably be expected,
individually or together with other Company Contractual Consents that have not
been obtained, to have a Company Material Adverse Effect.
     (e) Performance of Obligations. The Company shall have performed in all
material respects each of its respective covenants and agreements contained in
this Agreement or the Registration Rights Agreement and required to be performed
at or prior to the Closing.
     (f) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement that is qualified as to
materiality shall be true and correct on and as of the Closing Date as if made
on and as of such date (other than representations and warranties which address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties of the Company that
is not so qualified shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain
date).
     (g) Retention of Employees. At least 22 of the Designated Key Employees
(i) shall remain in the continuing employ of the Company and the Subsidiaries as
of the Closing Date, (ii) shall not have given notice or stated an intent to
terminate their employment after the Closing and (iii) shall have entered into
non-competition and non-solicitation covenants substantially in the form
heretofore delivered to the Company by the Investor. In addition, the number of
employees of the Company and the Subsidiaries not constituting Designated Key
Employees (other than those listed on Appendix A to the Company Disclosure
Letter) whose employment terminates between the date of this Agreement and the
Closing Date shall not have increased by more than 20% in comparison with the
employee turnover experience of the Company and the Subsidiaries over whichever
of the following periods represents the higher rate of turnover: (x) the
comparable period of 2006 or (y) the six-month period ending on the date hereof.
     (h) No Other Company Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any changes, events or developments
that have had, or

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would reasonably be expected, individually or in the aggregate, to have, a
Company Material Adverse Effect.
     (i) Officer’s Certificate. A certificate executed on behalf of the Company
by a senior executive officer of the Company to the effect that the conditions
set forth in paragraphs (d), (e), (f) and clause (ii) in the first sentence and
the entire second sentence of (g) above have been satisfied, shall have been
delivered to the Purchasers.
ARTICLE VII
INDEMNIFICATION
     Section 7.1 Survival.
     The respective representations, warranties, covenants and agreements of the
Company and the Purchasers set forth in this Agreement or the Registration
Rights Agreement or in any exhibit, schedule, certificate or instrument attached
or delivered pursuant hereto or thereto (except covenants and agreements which
are expressly required to be performed and are performed in full on or prior to
the Closing Date) shall survive the Closing Date and the consummation of the
Transactions until April 30, 2009, except that (i) the representations and
warranties set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.26 and 3.29 shall survive
indefinitely and (ii) the representations and warranties contained in
Section 3.14 (the representations and warranties referred to in clauses (i) and
(ii) being sometimes hereinafter collectively referred to as the “Surviving
Representations”) shall survive until the expiration of the applicable statute
of limitations set forth in the Code or other applicable Tax law.
     Section 7.2 Indemnification.
     Subject to the limitations set forth in this Article VII, the Company shall
indemnify, defend and hold harmless the Purchasers, its members, managers,
officers, employees and Affiliates (collectively, the “Purchaser Indemnified
Parties”) from and against any and all losses, costs, damages, liabilities,
obligations, impositions, inspections, assessments, fines, deficiencies and
expenses (collectively, “Damages”) resulting from, in connection with or arising
out of (i) any inaccuracy in any representation or warranty of the Company
contained in this Agreement or the Registration Rights Agreement or in any
exhibit, schedule, certificate or instrument attached or delivered pursuant
hereto or thereto or (ii) any breach of or default under any of the covenants or
agreements given or made by the Company in this Agreement or the Registration
Rights Agreement, or in any exhibit, schedule, certificate or instrument
attached or delivered pursuant hereto or thereto; provided, however, that any
claim by any Purchaser Indemnified Party under (i) or (ii) above shall be made
before April 30, 2009, except for a claim relating to a breach by the Company of
any of the Surviving Representations. In determining the amount of any Damages
for which a Purchaser Indemnified Party may seek indemnification under this
Section 7.2, any materiality standard contained in a representation, warranty or
covenant of the Company shall be disregarded.
     Section 7.3 Damages Threshold.
     With respect to any claim by a Purchaser Indemnified Party for
indemnification under this Article VII, such Purchaser Indemnified Party may not
seek indemnification with

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respect to any claim for Damages (i) until the sum of all Damages for which all
Purchaser Indemnified Parties are entitled to indemnification under this
Article VII equals or exceeds $3,000,000, whereupon each Purchaser Indemnified
Party shall be entitled to seek indemnification with respect to all Damages
incurred by it and (ii) if the aggregate amount of Damages for which
indemnification has been provided under this Article VII, other than Damages
arising out of a breach of a Surviving Representation, equals or exceeds
$17,500,000.
     Section 7.4 Indemnification Procedures.
     In the event a Purchaser Indemnified Party has a claim against the Company
under this Article VII, such Purchaser Indemnified Party shall deliver notice of
such claim (which claim shall be described with reasonable specificity in such
notice) with reasonable promptness to the Company. The failure by such Purchaser
Indemnified Party to so notify the Company shall not relieve the Company from
any liability which it may have to such Purchaser Indemnified Party under this
Article VII, except to the extent that the Company demonstrates that it has been
actually prejudiced by such failure. Subject to Section 7.3, if the Company does
not notify such Purchaser Indemnified Party within thirty (30) calendar days
following delivery of such notice that the Company disputes its liability to
such Purchaser Indemnified Party under this Article VII, such claim specified by
such Purchaser Indemnified Party in such notice shall conclusively be deemed a
liability of the Company under this Article VII and the Company shall pay in
same-day funds the amount of such liability to such Purchaser Indemnified Party
on demand or, in the case of any notice in which the amount of the claim (or any
portion thereof) is estimated, on such later date when the amount of such claim
(or such portion thereof) becomes finally determined. If the Company has timely
disputed its liability with respect to such claim, as provided above, such
Purchaser Indemnified Party and the Company shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction subject to Section 9.4.
     Section 7.5 Third-Party Claims. In the event that a Purchaser Indemnified
Party becomes aware of a third-party claim which such Purchaser Indemnified
Party believes may result in a demand for indemnification pursuant to this
Article VII, such Purchaser Indemnified Party shall promptly notify the Company
of such claim (with a copy to the independent directors), and the Company shall
be entitled, at the Company’s sole expense, to assume the defense of such claim;
provided, however, that (i) the Company acknowledges in writing its obligation
to indemnify, defend and hold harmless all Purchaser Indemnified Parties against
such claim pursuant to this Article VII, (ii) such Purchaser Indemnified Party
shall be entitled to participate, at the Purchaser Indemnified Party’s sole
expense, in such defense and (iii) the Company shall not settle such claim
without the consent of such Indemnified Party (which consent shall not be
unreasonably withheld) unless such settlement entails no payment of any kind by
such Purchaser Indemnified Party and provides for the complete release from all
liabilities and claims of any kind of such Purchaser Indemnified Party from such
claim and the circumstances giving rise to such claim; provided, further,
however, that if the Company does not elect to assume the defense of such claim
pursuant to this sentence, then the Company may participate, at the Company’s
sole expense, in such defense. In the event that the Company has proposed any
such settlement, the Company shall not have any power or authority to object

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under any provision of this Article VII to the amount of any claim by the
Purchaser Indemnified Party for indemnity with respect to such settlement.
     Section 7.6 Special Tax Indemnity.
     Without limiting the indemnity set forth in Section 7.2, in the event that
any claim or assessment is asserted against the Company or any Subsidiary by any
Taxing Authority prior to the second anniversary of the Closing Date with
respect to any state or local income, franchise or similar Taxes required to be
paid in respect of any Tax period ending on or prior to the Closing Date that
exceeds the amount reserved for such Taxes in the Closing Date Balance Sheet,
upon demand of the Investor, the Company shall issue to the Purchasers pro rata
based on the respective numbers of Purchased Shares issued to them at the
Closing, a number of additional shares of Common Stock (the “Tax Indemnity
Shares”) equal to the amount of such Taxes divided by the Final Per Share
Purchase Price. The Tax Indemnity Shares shall be issued free and clear of all
Liens and, except where the context requires otherwise, shall be deemed to
constitute additional “Purchased Shares” for the purposes of this Agreement. No
claim for indemnification may be made pursuant to Section 7.2 with respect to
any Taxes for which Tax Indemnity Shares have been issued pursuant to this
Section 7.6.
     Section 7.7 Tax Treatment of Indemnity Payments.
     Any indemnity payments made hereunder by the Company to a Purchaser
Indemnified Party, and any issuance of Tax Indemnity Shares to the Purchasers,
shall be treated by the parties for all federal, state and local income tax
purposes as an adjustment to the Purchase Price paid by the Purchasers for the
Purchased Shares, and not as a dividend or other form of income payment from the
Company to the Purchasers or applicable Purchaser Indemnified Party.
ARTICLE VIII
FURTHER AGREEMENTS
     Section 8.1 Public Announcements.
     The Purchasers and the Company shall consult with each other before issuing
any press release or otherwise making any public statements with respect to the
execution and delivery of this Agreement or the Registration Rights Agreement or
any of the Transactions, and shall not issue any such press release or make any
such public statement prior to reaching mutual agreement on the language of such
press release or such public statement, except as may otherwise be required by
applicable Requirement of Law or stock exchange rule.
     Section 8.2 Fees and Expenses.
     (a) Except as otherwise specified in this Section 8.2 or agreed in writing
by the parties, all costs and expenses incurred in connection with this
Agreement, the Registration Rights Agreement and the Transactions shall be paid
by the party incurring such cost or expense.
     (b) The Company shall promptly reimburse the Purchasers upon presentation
of appropriate invoices and documentation therefor on or after the Closing Date
for all

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Reimbursable Expenses incurred by or on behalf of the Purchasers or any of its
Affiliates. Any such Reimbursable Expenses incurred on or prior to the Closing
Date may also be deducted by the Purchasers from the Purchase Price as
contemplated in Article II. For purposes of this Agreement, “Reimbursable
Expenses” shall mean all reasonable out-of-pocket fees and expenses incurred by
or on behalf of the Purchasers or any of its Affiliates at any time prior to any
termination of this Agreement (whether before or after the date hereof or before
or after the Closing Date) in connection with their due diligence investigation
of the Company, the preparation of this Agreement, the Registration Rights
Agreement and the Proxy Statement and consummation of the Transactions and
related preparations therefor, including all fees and expenses of counsel,
financial advisors (and their counsel), accountants, experts and consultants to
the Purchasers and their Affiliates.
     (c) If this Agreement is terminated by the Company pursuant to
Section 9.1(f), then, immediately prior to such termination, the Company shall
reimburse the Purchasers in same day funds for all Reimbursable Expenses
incurred through the date of such termination; provided that (i) if such
termination occurs on or prior to June 30, 2007, the Reimbursable Expenses
required to be paid by the Company hereunder shall not exceed $550,000 in the
aggregate and (ii) if such termination occurs after June 30, 2007, the
Reimbursable Expenses required to be paid by the Company hereunder shall not
exceed $750,000 in the aggregate.
     (d) If this Agreement is terminated by the Purchasers pursuant to
Section 9.1(g), the Company shall promptly upon demand reimburse the Purchasers
for all Reimbursable Expenses incurred through the date of termination, provided
that (i) if such a termination pursuant to Section 9.1(g) occurs on or prior to
June 30, 2007, the Reimbursable Expenses required to be paid by the Company
hereunder shall not exceed $550,000 in the aggregate and (ii) if such
termination occurs after June 30, 2007, the Reimbursable Expenses required to be
paid by the Company hereunder shall not exceed $750,000 in the aggregate.
     (e) If this Agreement is terminated by the Investor pursuant to Section 9.1
(b), without limiting any other remedies available to the Purchasers as a result
of the Company’s breach triggering such termination, the Company shall, promptly
following such termination, reimburse the Purchasers for all Reimbursable
Expenses incurred through the date of such termination.
     (f) The Company acknowledges that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Purchasers would not enter
into this Agreement. Accordingly, if the Company fails to pay promptly any
Reimbursable Expenses due to the Purchasers pursuant to this Section 8.2,
(i) interest shall accrue and immediately become payable on the overdue amount
from the due date thereof until the date of payment at the base rate of
Citibank, N.A. in effect from time to time and (ii) in the event that the
Purchasers commences a suit that results in a judgment against the Company for
any such overdue amount or interest, the Company shall also reimburse the
Purchasers for its costs and expenses (including attorney’s fees) incurred in
connection with such suit.

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ARTICLE IX
GENERAL
     Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
     (a) by mutual written consent of the Investor and the Company;
     (b) by the Investor if there has been (i) a material breach of any of the
representations or warranties of the Company set forth in this Agreement that
would give rise to the failure of the condition set forth in Section 6.2(f) or
(ii) a material breach of any of the covenants or agreements of the Company set
forth in this Agreement, which breach has not been cured within ten
(10) Business Days following receipt by the Company of notice of such breach
from the Investor; provided that the Purchasers are not then in material breach
of any representation or warranty under this Agreement.
     (c) by the Company if there has been (i) a material breach of any of the
representations or warranties of the Purchasers set forth in this Agreement that
would give rise to the failure of the condition set forth in Section 6.1(e) or
(ii) a material breach of any of the covenants or agreements of the Purchasers
set forth in this Agreement, which breach has not been cured within ten
(10) Business Days following receipt by the Purchasers of notice of such breach
from the Company; provided that the Company is not then in material breach of
any representation or warranty under this Agreement.
     (d) by either the Investor or the Company if any permanent order, decree,
ruling or other action of a court or other competent authority restraining,
enjoining or otherwise preventing the consummation of any of the Transactions
shall have become final and non-appealable;
     (e) by either the Investor or the Company if the Closing shall not have
occurred on or before September 30, 2007, unless the failure for the Closing to
occur is the result of a material breach of this Agreement by the party seeking
to terminate this Agreement;
     (f) by the Company (but only if the Company has paid the Reimbursable
Expenses to the Purchasers pursuant to Section 8.2(f)) if the Board shall
accept, approve or authorize a Superior Competing Transaction; provided that the
Company and the Board shall have acted in full compliance with Sections 5.3 and
5.4; or
     (g) by the Investor if the Board shall accept, approve or authorize a
Superior Competing Transaction.
     In the event of termination of this Agreement by either the Investor or the
Company, as provided in this Section 9.1, this Agreement shall forthwith become
void and there shall be no liability hereunder on the part of the Investor or
the Company, or their respective officers, directors, managers, members or
partners, except for Sections 8.2 and 9.1 and except that no such termination
shall relieve any party of liability for any breach of any other provision of
this Agreement occurring prior to such termination.

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     Section 9.2 Notice.
     Whenever any notice is required to be given hereunder, such notice shall be
deemed given only when such notice is in writing and is delivered by messenger
or courier or, if sent by fax, when received. All notices, requests and other
communications hereunder shall be delivered by courier or messenger or shall be
sent by facsimile to the following addresses:
     (i) If to the Investor, at the following address:
MatlinPatterson FA Acquisition LLC
c/o MatlinPatterson Global Advisers LLC
520 Madison Avenue, 35th Floor
New York, New York 10022
Attention: General Counsel
Fax: (212) 651-4011
with a copy by fax or messenger or courier to:
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
Facsimile: (212) 839-5599
Attention: Duncan N. Darrow and Michael H. Yanowitch
     (ii) If to the Company, at the following address:
First Albany Companies Inc.
677 Broadway
Albany, NY 12207
Facsimile: (518) 447-8606
Attention: General Counsel
with a copy by fax or messenger or courier to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Facsimile: (212) 259-6333
Attention: Donald J. Murray
                 Christopher P. Peterson
or to such other respective addresses as may be designated by notice given in
accordance with this Section 9.2.
     Section 9.3 Complete Agreement; No Third-Party Beneficiaries.
     This Agreement, the Registration Rights Agreement, the Investor
Confidentiality Agreement (which shall terminate and cease to have any force or
effect as of the Closing Date),

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the Company Disclosure Letter and the Investor Disclosure Letter constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersede all prior agreements and understandings of the parties in connection
therewith, including the Recapitalization Term Sheet dated April 27, 2007
between the Company and MatlinPatterson Global Opportunities Partners II, L.P.,
as amended, which shall be deemed terminated and of no further force or effect.
This Agreement, other than Article VII, is not intended to confer upon any
person other than the Company and the Purchasers any rights or remedies
hereunder.
     Section 9.4 GOVERNING LAW.
     THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS
OF LAWS THAT WOULD APPLY THE LAW OF ANY OTHER JURISDICTION. THE PURCHASERS AND
THE COMPANY HEREBY CONSENT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK AND THE FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN WITH RESPECT TO
ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT OR TO DETERMINE THE RIGHTS OF ANY PARTY HERETO.
     Section 9.5 No Assignment.
     Neither this Agreement nor any rights or obligations under it are
assignable by either party without the written consent of the other party.
     Section 9.6 Headings.
     The descriptive headings of the articles, sections and subsections of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
     Section 9.7 Counterparts.
     This Agreement may be executed in one or more counterparts and by different
parties in separate counterparts. All such counterparts shall constitute one and
the same agreement and shall become effective when one or more counterparts have
been signed by each party and delivered to the other party.
     Section 9.8 Remedies; Waiver.
     All rights and remedies existing under this Agreement are cumulative to,
and not exclusive of, any rights or remedies otherwise available. No failure on
the part of any party to exercise or delay in exercising any right hereunder
shall be deemed a waiver thereof, nor shall any single or partial exercise
preclude any further or other exercise of such or any other right.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that remedies at law would be inadequate in the case of any breach of the
covenants contained in this Agreement. The Company and the Purchasers shall be
entitled to equitable relief, including the

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remedy of specific performance, with respect to any breach or attempted breach
of such covenants by the other party.
     Section 9.9 Severability.
     Any invalidity, illegality or unenforceability of any provision of this
Agreement in any jurisdiction shall not invalidate or render illegal or
unenforceable the remaining provisions hereof in such jurisdiction and shall not
invalidate or render illegal or unenforceable such provisions in any other
jurisdiction. The Company and the Purchasers shall endeavor in good faith
negotiations to replace any invalid, illegal or unenforceable provision with a
valid, legal and enforceable provision, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provision.
     Section 9.10 Amendment; Waiver.
     This Agreement may be amended only by agreement in writing of both parties.
No waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the party to be
bound and then only to the specific purpose, extent and instance so provided.
[the next page is the signature page]

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     IN WITNESS WHEREOF, the Company and the Investor have caused this Agreement
to be executed by their respective offers thereunto duly authorized all as of
the date first written above.

              FIRST ALBANY COMPANIES INC
 
       
 
  By:   /s/ PETER J. MCNIERNEY
 
       
 
  Name:   Peter J. McNierney 
 
  Title:   President and Chief Executive Officer
 
            MATLINPATTERSON FA ACQUISITION LLC
 
       
 
  By:   /s/ ROBERT WEISS
 
       
 
  Name:   Robert Weiss 
 
  Title:   General Counsel 

 

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Exhibit A
to
Investment Agreement
Defined Terms.
     “Action or Proceeding” means any suit, action, proceeding (including any
compliance, enforcement or disciplinary proceeding), arbitration, formal or
informal inquiry, inspection, investigation or formal order of investigation of
complaint.
     “Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange Act
as in effect as on the date hereof.
     “Agreement” has the meaning set forth in the preamble.
     “Amendment Approval” has the meaning set forth in Section 5.2(a).
     “Associated Person” means an “associated persons” as defined in Article I,
section (dd) of the NASD’s By-laws.
     “Board” has the meaning set forth in the recitals.
     “Business Day” means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized by law or
executive order to close.
     “Business Entity” means any corporation, partnership, limited liability
company, joint venture, association, partnership, business trust or other
business entity.
     “Capital Stock” means the Common Stock and the Preferred Stock.
     “Change in Recommendation” has the meaning set forth in Section 5.2(b).
     “Charter Amendment” has the meaning set forth in Section 5.2(a).
     “Closing” has the meaning set forth in Section 2.2.
     “Closing Date Balance Sheet” has the meaning set forth in
Section 2.1(b)(ii)(C).
     “Closing Date” means the date on which the Closing takes place.
     “Closing Date Balance Sheet” has the meaning set forth in
Section 2.1(b)(ii)(C).
     “Closing Date Pro Forma Balance Sheet” has the meaning set forth in Section
2.1(b)(ii)(C).

 

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     “Code” means the U.S. Internal Revenue Code of 1986, as amended.
     “Co-Investor” has the meaning set forth in Section 2.1(c).
     “Co-Investor Joinder Agreement” has the meaning set forth in
Section 2.1(c).
     “Common Stock” means the common stock, par value $.01 per share, of the
Company.
     “Common Shareholders” has the meaning set forth in Section 5.2(a).
     “Company” has the meaning set forth in the preamble.
     “Company Approvals” has the meaning set forth in Section 3.6(b).
     “Company Contract” means any material indenture, mortgage, deed of trust,
lease, contract, agreement, instrument or other undertaking or legally binding
arrangement (whether written or oral) to which the Company or any Subsidiary is
a party or by the Company or any Subsidiary or any of their respective
properties or assets is bound.
     “Company Contractual Consents” has the meaning set forth in Section 3.6(c).
     “Company Disclosure Letter” means the letter dated the date hereof
delivered by the Company to the Investor, which letter relates to this Agreement
and is designated therein as the Company Disclosure Letter.
     “Company Material Adverse Effect” means a material adverse effect on
(i) the ability of the Company to consummate any of the Transactions or to
perform any of its obligations under this Agreement or the Registration Rights
Agreement or (ii) the businesses, assets (including licenses, franchises and
other intangible assets), liabilities, financial condition or operating income
of the Company and its Subsidiaries, taken as a whole, provided, however that in
no event shall any of the following, alone or in combination, be deemed to
constitute, nor shall any of the following be taken into account in determining
whether there has been, a Company Material Adverse Effect: (a) a change in the
market price or trading volume of Common Stock (but not any effect, event,
development or change underlying such decrease to the extent that such effect,
event, development or change would otherwise constitute a Material Adverse
Effect); (b) changes in conditions in the U.S. or global economy or capital or
financial markets generally, including changes in interest or exchange rates;
(c) changes in general legal, tax, regulatory, political or business conditions;
(d) changes that are the result of factors generally affecting the industry in
which the Company and the Subsidiaries operate; (e) changes in applicable law or
GAAP; (f) the negotiation, execution, announcement, pendency or performance of
this Agreement or the transactions contemplated hereby or the consummation of
the transactions contemplated by this Agreement, including the impact thereof on
relationships, contractual or otherwise, with customers, suppliers, vendors,
lenders, brokers, investors, venture partners or employees; (g) acts of war,
armed hostilities, sabotage or terrorism, or any escalation or worsening of any
such acts of war, armed hostilities, sabotage or terrorism threatened or

 

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underway as of the date of this Agreement; (h) earthquakes, hurricanes, floods,
or other natural disasters; (i) any action taken by the Company at the request
or with the prior written consent of the Investor; (j) the failure of the
Company to take any action as a result of any restrictions or prohibitions set
forth in Article V; (k) any adverse development in any litigation or regulatory
proceeding described in Schedule 3.11 or the commencement of any action or
proceeding based on a pre-litigation claim described in Schedule 3.11; (l) any
litigation or regulatory proceeding alleging claims arising under Section 10(b)
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder or
other laws to similar effect based on the existence, announcement or performance
of this Agreement or the Transactions contemplated hereby or (m) the departure,
or the announcement of an intent to depart in the near to immediate future, from
the Company of any of the employees listed in Appendix A to the Company
Disclosure Schedule.
     “Company Permits” has the meaning set forth in Section 3.19(a).
     “Company Recommendation” has the meaning set forth in Section 5.2(b).
     “Competing Transaction” has the meaning set forth in Section 5.3(d).
     “Contractual Consent” applicable to a specified Person in respect of a
specified matter means any consent required to be obtained by such Person from
any other Person party to any Contractual Obligation to which such first Person
is a party or by which it is bound in order for such matter to occur or exist
without resulting in the occurrence of a default or event of default or
termination, the creation of any lien, the triggering of any decrease in the
rights of such first Person, any increase in the obligations of such first
Person or any other consequence adverse to the interests of such first Person,
under any provision of such Contractual Obligation.
     “Contractual Obligation” means, as to any Person, any obligation arising
out of any indenture, mortgage, deed of trust, contract, agreement, insurance
policy, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound (including, without limitation, any
debt security issued by such Person).
     “Convertible Securities” means securities or obligations that are
convertible into or exchangeable for shares of Capital Stock.
     “Damages” has the meaning set forth in Section 7.2.
     “December Balance Sheet” means the consolidated balance sheet of the
Company and its consolidated subsidiaries as of December 31, 2006 that is
included in the Financial Statements.
     “DEPFA” means DEPFA Bank plc, an Irish bank.
     “DEPFA Purchase Agreement” means the Asset Purchase Agreement dated as of
March 6, 2007 among DEPFA, the Company and First Albany Capital Inc.

 

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     “DEPFA Transaction” means the sale of the Municipal Capital Markets Group
of the Company’s wholly-owned subsidiary, First Albany Capital Inc., to DEPFA
and the related purchase by DEPFA of the Company’s municipal bond inventory.
     “Designated Key Employees” means those employees of the Company and the
Subsidiaries as have been identified as “Designated Key Employees” in a letter
of even date herewith from Lee Fensterstock to Peter McNierney.
     “Designation Notice” has the meaning set forth in Section 2.1(c),
     “Employee Benefit Plan” has the meaning set forth in Section 3.20(b).
     “Employee Stock Incentive Plans” means the Company’s: (i) 1999 Long-Term
Incentive Plan (Amended and Restated Through April 27, 2004, as amended),
(ii) 2001 Long-Term Incentive Plan, as amended, (iii) 1989 Stock Incentive Plan,
as amended, (iv) Restricted Stock Inducement Plan for Descap Employees, as
amended, and (v) 2003 Directors’ Stock Plan, as amended.
     “Employee Stock Options” means any stock options granted pursuant to any
Employee Stock Incentive Plan.
     “Environmental Law” means any foreign, federal, state or local law,
statute, permits, orders, rule or regulation or the common or decisional law
relating to the environment or occupational health and safety, including,
without limitation, any statute, regulation or order pertaining to
(i) treatment, storage, disposal, generation and transportation of industrial,
toxic or hazardous substances or solid or hazardous waste; (ii) air, water and
noise pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
substances, or solid or hazardous waste, including, without limitation,
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wildlife, marine sanctuaries
and wetlands, including, without limitation, all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste.
     “ERISA” has the meaning set forth in Section 3.20(b).
     “ERISA Affiliate” means any member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code); (ii) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code);
or (iii) an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code).
     “Evaluation Date” has the meaning set forth in Section 3.8(c).
     “Excess Cash Compensation” has the meaning set forth in Section 2.1(b)(i),

 

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     “Excess Compensation” has the meaning set forth in Section 2.1(b)(i),
     “Excess Compensation Dilution Factor” has the meaning set forth in
Section 2.1(b)(i),
     “Excess Imputed Stock Based Compensation” has the meaning set forth in
Section 2.1(b)(i),
     “Exchange Act” means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
     “FATV JV Entities” means, collectively, FA Technology Ventures L.P., FATV
GP LLC..
     “Final Net Tangible Book Value Per Share” has the meaning set forth in
Section 2.1(b)(ii)(C).
     “Final Net Tangible Book Value Report” has the meaning set forth in Section
2.1(b)(ii)(C).
     “Final NTBV Adjustment Factor” has the meaning set forth in
Section 2.1(b)(ii)(C).
     “Final Per Share Purchase Price” as of the date of issuance of any Tax
Indemnity Shares means $50,000,000 divided by the final number of Purchased
Shares issued to the Purchasers pursuant to Section 2.1(b) (after giving effect
to any adjustments provided for in Sections 2.1(b)(ii)(B) and (C)), as father
adjusted to reflect any stock dividends, stock splits or other subdivisions,
combinations, recapitalizations or reorganizations affecting the Common Stock
between the Closing Date and such issuance date.
     “Financial Statements” has the meaning set forth in Section 3.7(b).
     “Financing” has the meaning set forth in Section 4.11.
     “Financing Commitment” has the meaning set forth in Section 4.11.
     “GAAP” has the meaning set forth in Section 3.7(b)
     “Governmental Authority” means any government or political subdivision or
department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local, foreign or
supranational.
     “Intellectual Property” has the meaning set forth in Section 3.12.

 

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     “Investment” has the meaning set forth in the recitals.
     “Investor” has the meaning set forth in the preamble.
     “Investor Approvals” has the meaning set forth in Section 4.3(b).
     “Investor Confidentiality Agreement” means the confidentiality letter
agreement dated March 20, 2007 between MatlinPatterson Global Opportunities
Partners II, L.P. and the Company.
     “Investor Designated Directors” means those individuals who shall have been
designated by the Investor as “Investor Designated Directors” by written notice
given to the Company not later than five (5) Business Days prior to the Closing
Date.
     “Investor Disclosure Letter” means the letter dated the date hereof
delivered by the Investor to the Company, which letter relates to this Agreement
and is designated therein as the Investor Disclosure Letter.
     “Investor Indemnified Party” has the meaning set forth in Section 7.2.
     “JV Entities” means, collectively, the FATV JV Entities, the NAFA Capital
JV Entities and each of the Company’s Employee Investment Funds.
     “Knowledge of the Company” means the actual knowledge of the officers of
the Company who have been designated in the Company Disclosure Letter as having
“Knowledge of the Company”, after reasonable inquiry of any business unit heads
or function heads who would reasonably be expected to have relevant knowledge in
respect of the matter in question.
     “Lender Warrants” mean the Common Stock purchase warrants issued to the
purchasers of the Senior Notes dated June 13, 2003, initially exercisable for
the purchase of 437,000 shares of Common Stock.
     “Liens” means security interests, liens, claims, pledges, mortgages,
options, rights of first refusal, agreements, limitations on voting rights,
charges, easements, servitudes, encumbrances and other restrictions of any
nature whatsoever.
     “Material Lease” has the meaning set forth in Section 3.16(b).
     “MCMG Employee” means any employee of the Company or the Subsidiaries who
was an employee of the Municipal Capital Markets Group of the Company’s
wholly-owned subsidiary, First Albany Capital Inc. as of the date of the DEPFA
Agreement.
     “Measurement Date” has the meaning set forth in Section 2.1(b)(ii)(B).
     “Measurement Date Balance Sheet” has the meaning set forth in
Section 2.1(b)(ii)(B).

 

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     “Measurement Date Pro Forma Balance Sheet” has the meaning set forth in
Section 2.1(b)(ii)(B).
     “NAFA Capital JV Entities” means NAFA Capital Markets [Inc.] or any
subsidiary.
     “NASD” means the National Association of Securities Dealers, Inc. and its
subsidiaries.
     “Net Purchase Price” has the meaning set forth in Section 2.1.
     “Net Tangible Book Value” as of the Measurement Date shall mean total
consolidated shareholders equity less intangible assets, all as shown on the
Measurement Date Balance Sheet.
     “Net Tangible Book Value Per Share” as of the Measurement Date shall mean
the Net Tangible Book Value as of the Measurement Date divided by the number of
shares of Common Stock outstanding as of the date of the Net Tangible Book Value
Report.
     “Non-Continuing Directors” means those current members of the Board as have
been identified as “Non-Continuing Directors” in the Investor Disclosure Letter.
     “NTBV Adjustment Factor” has the meaning set forth in
Section 2.1(b)(ii)(A).
     “NYBCL” means the New York Business Corporation Law.
     “Organizational Document” means, with respect to the Company or any
Subsidiary, any certificate or articles of incorporation, memorandum of
association, by-laws, partnership agreement, limited liability agreement,
operating agreement, trust agreement or other agreement, instrument or document
governing the affairs of the Company or such Subsidiary.
     “Person” means any individual, Business Entity, unincorporated association
or Governmental Authority.
     “Preferred Stock” means the preferred stock, par value $0.01 per share, of
the Company.
     “Preliminary Net Tangible Book Value Per Share” has the meaning set forth
in Section 2.1(b)(ii)(B).
     “Preliminary Net Tangible Book Value Report” has the meaning set forth in
Section 2.1(b)(ii)(B).
     “Preliminary NTBV Adjustment Factor” has the meaning set forth in Section
2.1(b)(ii)(B).

 

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     “Proxy Statement” has the meaning set forth in Section 5.2(a).
     “Purchased Shares” has the meaning set forth in Section 2.1(b), as modified
by Section 7.6.
     “Purchase Price” has the meaning set forth in Section 2.1(a).
     “Purchasers” has the meaning set forth in Section 2.1(c).
     “Registration Rights Agreement” means a Registration Rights Agreement
substantially in the form of Exhibit F.
     “Reimbursable Expenses” has the meaning set forth in Section 8.2(b).
     “Requirement of Law” means any judgment, order (whether temporary,
preliminary or permanent), writ, injunction, decree, statute, rule, regulation,
notice, law or ordinance and shall also include any regulations of any
applicable self regulatory organizations.
     “Representatives” has the meaning set forth in Section 5.3(a).
     “Restricted Stock” means any shares of Common Stock issued or issuable
pursuant to a Restricted Stock Award.
     “Restricted Stock Award” means any award granted under an Employee Stock
Incentive Plan of (i) shares of Restricted Stock or (ii) restricted stock units
or other rights to acquire shares of Restricted Stock.
     “Rights” has the meaning set forth in the Rights Agreement.
     “Rights Agreement” means the Rights Agreement dated as of March 30, 1998
between the Company and American Stock Transfer & Trust Company, as Rights
Agent, as amended.
     “Sarbanes-Oxley” has the meaning set forth in Section 3.8(a).
     “Schedules” means the Schedules to the Company Disclosure Letter.
     “SEC” means the Securities and Exchange Commission.
     “SEC Reports” has the meaning set forth in Section 3.7(a)
     “Securities Act” means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
     “Shareholder Approvals” has the meaning set forth in Section 5.2(a).

 

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     “Shareholder Meeting” has the meaning set forth in Section 5.2(a).
     “Special Committee” has the meaning set forth in the recitals.
     “Stock Purchase Rights” has the meaning set forth in Section 3.2(d).
     “Strategic Plan” has the meaning set forth in Section 5.6.
     “Subsidiary” means any Business Entity of which the Company (either alone
or through or together with one or more other Subsidiaries) (x) owns, directly
or indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such Business Entity, (y) is a general
partner, managing member, trustee or other Person performing similar functions
or (z) has control (as defined in Rule 405 under the Securities Act). For the
purposes of the representations and warranties of the Company made in
Sections 3.6, 3.9, 3.11, 3.12, 3.15, 3.17, 3.19, 3.21, 3.22 and 3.25, each of
the JV Entities shall be deemed to be a Subsidiary of the Company, provided that
the Company shall be deemed to make such representations and warranties with
respect to such JV Entities only (x) to the extent of the “Knowledge of the
Company” (which, for the purpose of this proviso shall be deemed to mean the
actual knowledge of George McNamee as well as of the designated individuals
referred to in the definition of such phrase, but without any obligation on the
part of any such individual to make due inquiry of any other Person) and (y) to
the extent that the inaccuracy of such representations and warranties would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
     “Superior Competing Transaction” has the meaning set forth in
Section 5.3(e).
     “Surviving Representations” has the meaning set forth in Section 7.1.
     “Tax Indemnity Shares” has the meaning set forth in Section 7.6.
     “Tax Return” means any return, report or similar statement (including the
attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
     “Tax” means any tax, governmental fee or other like assessment or charge of
any kind whatsoever (including any tax imposed under Subtitle A of the Code and
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sale, bulk sales, use, real property, personal property, ad valorem, value
added, transfer, franchise, profits, license, withholding tax on amounts paid,
withholding, payroll, employment, excise severance, stamp, capital stock,
occupation, property, environmental or windfall profits tax, premium, custom,
duty or other tax or assessment), together with any interest, penalty, addition
to tax or additional amount thereto, imposed by any Governmental Authority.
     “Taxing Authority” means any Governmental Authority (domestic or foreign)
responsible for the imposition of any Tax.

 

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     “Transactions” has the meaning set forth in the recitals.
     “Transactions Approval” has the meaning set forth in Section 5.2(a).
     “Treasury Regulations” means the final and temporary regulations
promulgated by the United States Treasury Department from time to time under the
Code.
     “Voting Agreements” has the meaning set forth in the recitals.

 

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Exhibit B
to
Investment Agreement
Form of Opinion of Sidley Austin LLP
[SIDLEY AUSTIN LLP LETTERHEAD]
[                    ]1, 2007
[                    ]2
677 Broadway
Albany, NY 12207
Attention: Peter McNierney
Re: First Albany Recapitalization
Ladies and Gentlemen:
          We have acted as counsel for MatlinPatterson FA Acquisition LLC, a
Delaware limited liability company (the “Investor”), in connection with the
issuance and sale by [                    ]3 (f/k/a First Albany Companies,
Inc.), a New York corporation (the “Company”) of certain “Purchased Shares”
consisting of shares of the Company’s common stock, $0.01 par value per share
(the “Common Stock”) pursuant to that certain Investment Agreement, dated as of
May 14, 2007 (the “Investment Agreement”), between the Company and the Investor.
This opinion is being rendered to you at the request of the Investor pursuant to
Section 2.3(d) of the Investment Agreement. Unless otherwise defined herein,
terms used herein which are defined in the Investment Agreement shall have the
respective meanings set forth in the Investment Agreement. Capitalized terms
used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Investment Agreement.
          We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and officers and other representatives of the
Investor, and such other agreements, instruments and documents as we have deemed
necessary or appropriate for purposes of rendering the opinions expressed below.
 

1   Insert Closing Date   2   Insert current name of the Company   3   Insert
current name of the Company

 

--------------------------------------------------------------------------------

 

          In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the competency of all individuals signing all
documents presented to us, the conformity to original documents of all documents
submitted to us as certified, facsimile or photostatic copies, or as retrieved
from the U.S. Securities and Exchange Commission’s EDGAR database, the
authenticity of the originals of such latter documents and the correctness of
all statements of fact in all documents examined by us. We have further assumed
(i) that all parties to the foregoing documents are validly existing and in good
standing under the laws of all jurisdictions where they are conducting their
businesses or are otherwise required to be so qualified (other than the
Investor, to the extent indicated below), and have full power and authority and
all necessary consents and approvals to execute, deliver and perform under such
documents (other than the Investor, to the extent indicated below), (ii) that
all such documents have been duly authorized by all necessary corporate or other
action on the part of the parties thereto, have been duly executed by such
parties and have been duly delivered by such parties (other than the Investor,
to the extent indicated below), (iii) that all such documents constitute the
legal, valid and binding obligations of each party thereto enforceable against
such party in accordance with its terms (other than the Investor, to the extent
indicated below) and (iv) the compliance with all covenants, contained in or
made pursuant to the agreements, instruments, records, certificates and other
documents we have reviewed (including, without limitation, the Investment
Agreement and the Registration Rights Agreement) as of their stated dates and as
of the date hereof. As to any facts material to the opinions expressed herein
which were not independently established or verified, we have, with your
consent, relied upon oral or written statements of the Investor and its officers
and representatives and public officials and sources believed to be reliable
(including, without limitation, the representations, covenants and agreements of
the Company and the Investor contained in the Investment Agreement). We have not
independently established the facts so relied upon.
          Based upon the foregoing and our examination of such questions of law
as we have deemed necessary or appropriate, and subject to the limitations and
qualifications set forth below, it is our opinion that:
     1. The Investor is a limited liability company validly existing and in good
standing under the laws of the State of Delaware.
     2. The Investor has the limited liability company power and authority to
execute, deliver and perform the Investment Agreement and the Registration
Rights Agreement and to consummate the transactions contemplated thereby.
     3. The Investment Agreement and the Registration Rights Agreement have each
been duly authorized, executed and delivered by the Investor and each
constitutes a legal, valid and binding agreement of the Investor enforceable
against it in accordance with its terms.
     4. The purchase by the Investor of Purchased Shares as contemplated by the
Investment Agreement will not, (a) conflict with or violate the certificate of
formation or limited liability company agreement of the Investor, (b) conflict
with or violate any judgment, order or decree of any court or governmental
authority which to our knowledge is applicable to the Investor or any of its
properties, (c) result in a material violation, or conflict with, the Delaware
Limited Liability Company Act or any U.S. federal or New York State statute,
rule or regulation,

 

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in any case known to us to be applicable to the Investor or (d) result in a
material default by the Investor under any material contract or agreement to
which the Investor is a party that is known to us.
     5. No consent, approval or authorization of or designation, declaration or
filing with, any U.S. federal or New York State Governmental Authority on the
part of the Investor is required in connection with the purchase of the
Purchased Shares, other than (a) such as have been made or obtained and
(b) compliance with the Blue Sky laws or federal securities laws applicable to
the sale of the Purchased Shares.
          Our opinions are subject to (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws of general
application now or hereafter in effect affecting the rights and remedies of
creditors; (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); (c) the
effect of judicial decisions which have held that certain provisions are
unenforceable when their enforcement would violate the implied covenant of good
faith and fair dealing, or would be commercially unreasonable, or where their
breach is not material; or (d) the discretion of the court before which any
proceeding therefor may be brought, and except as the right to indemnification
or contribution set forth in the Investment Agreement or Registration Rights
Agreement may be limited by public policy or applicable securities laws. In
addition, indemnities, rights of contribution, exculpatory provisions,
non-competition and non-solicitation restrictions and waivers may be limited on
public policy grounds.
          You should be aware that an opinion of counsel represents our best
legal judgment, which may be subject to challenge by any governmental agency and
is not binding on any governmental agency or the courts. Our opinion is based on
existing laws, judicial decisions and administrative regulations, rulings and
practice, all of which are subject to change at any time, prospectively and
retroactively. New developments in rulings of any agency, administrative
regulations, court decisions, legislative changes or changes in the facts or
other information upon which our opinion is based may have an adverse effect on
the legal consequences described herein. Any such change could be retroactive so
as to apply to any of the transactions contemplated by the Investment Agreement.
          Any opinion or statement herein which is expressed to be based on our
“knowledge” or is otherwise qualified by words of like import means that the
lawyers currently practicing law with Sidley Austin LLP who have had an active
involvement in negotiating or reviewing the Investment Agreement have no current
conscious awareness of any facts or information contrary to such opinion or
statement. With respect to such matters, such persons, with your express
permission and consent, have not undertaken any investigation or inquiry of
other lawyers practicing law with this firm, or any review of files maintained
by this firm, or any inquiry of officers or representatives of the Investor or
any of its affiliates. The reference to “conscious awareness” in this paragraph
has the meaning given that phrase in the Third-Party Legal Opinion Report,
Including the Legal Opinion Accord, of the Section of Business Law, American Bar
Association, 47 Bus. Law. 167, 192 (1991).
          The foregoing opinion is limited to the laws of the State of New York,
the federal laws of the United States and the Delaware Limited Liability Company
Act and we render no opinion with respect to the laws of any other jurisdiction.
This opinion letter is rendered as of

 

--------------------------------------------------------------------------------

 

the date hereof, and we assume no obligation to update such opinion letter to
reflect any facts or circumstances which may hereafter come to our attention or
any changes in the law which may hereafter occur.
          This letter is being delivered to you solely for your information in
connection with the transaction contemplated by the Investment Agreement. Our
opinions set forth in this letter may not be relied upon, used, circulated,
summarized, referred to or quoted by any other person, firm, corporation,
partnership or other entity, in whole or in part, without our prior written
consent.

            Very truly yours,
                       

 

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Exhibit C
to
Investment Agreement
List of Closing Deliveries
Part I. Deliveries by the Purchasers

1.   The officer’s certificate contemplated to be delivered by the Purchasers
pursuant to Section 6.1(f).   2.   A copy, certified by the Secretary of State
of the State of Delaware as of a date not more than three (3) Business Days
prior to the Closing Date, of the certificate of formation of the Investor, with
all amendments thereto.   3.   A certificate of good standing for the Investor
issued by the Secretary of State of the State of Delaware as of a date that is
not more than three (3) Business Days prior to the Closing Date.   4.   A
certificate of the Secretary or an Assistant Secretary of the Investor, dated
the Closing Date, in form and substance reasonably satisfactory to the Company,
as to (i) no amendments to the certificate of formation of the Investor since
the date of the certified copy thereof listed in item 2 above, (ii) the
operating agreement of the Investor, (iii) the resolutions of the board or
similar governing body or members authorizing the execution, delivery and
performance of this Agreement and the Registration Rights Agreement and
(iv) incumbency and signatures of the officers, members or managing member, as
applicable, of the Investor executing this Agreement, the Registration Rights
Agreement and any other certificates or documents executed and delivered by the
Investor in connection with the Transactions.

Part II. Deliveries by the Company

1.   The officer’s certificate contemplated to be delivered by the Company
pursuant to Section 6.2(i).   2.   A copy, certified by the Secretary of State
of the State of New York as of a date not more than three (3) Business Days
prior to the Closing Date, of the articles of incorporation of the Company, with
all amendments thereto (including the Charter Amendment).   3.   A certificate
of good standing for the Company issued by the Secretary of State of the State
of New York as of a date that is not more than three (3) Business Days prior to
the Closing Date.

 

--------------------------------------------------------------------------------

 

4.   A certificate of the Secretary or an Assistant Secretary of the Company,
dated the Closing Date, in form and substance reasonably satisfactory to the
Investor, as to (i) no amendments to the articles of incorporation of the
Company since the date of the certified copy thereof listed in item 2 above,
(ii) the by-laws of the Company, (iii) the resolutions of the Board authorizing
the execution, delivery and performance of this Agreement and the Registration
Rights Agreement and approving the Charter Amendment, (iv) the resolutions of
the Board increasing the size of the Board to nine directors, appointing the
Investor Designated Directors to serve as directors of the Company and changing
the composition of the Board committees consistent with Section 5.5(b),
(v) written evidence in form and substance reasonably satisfactory to the
Investor of the Company Shareholders approving the Shareholder Approvals and
(vi) incumbency and signatures of the officers of the Company executing this
Agreement, the Registration Rights Agreement and any other certificates or
documents executed and delivered by the Company in connection with the
Transactions.   5.   The resignation, in form and substance reasonably
satisfactory to the Investor, of each Non-Continuing Director from his or her
position as a director of the Company.   6.   A copy, certified by the Secretary
or an Assistant Secretary of the Company as of the Closing Date, of the
amendment to the Rights Agreement or other action taken under Section 3.26.

2

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Exhibit D
to
Investment Agreement
Form of Opinion of Dewey Ballantine LLP
[DEWEY BALLANTINE LETTERHEAD]
[___]1, 2007
To each of the Persons listed
on Appendix I hereto
c/o MatlinPatterson Global Advisers II LLC
520 Madison Avenue, 35th Floor
New York, New York 10022
Attention: General Counsel
Re: First Albany Recapitalization
Ladies and Gentlemen:
          We have acted as counsel for
[                                        ]2 (f/k/a First Albany Companies,
Inc.), a New York corporation (the “Company”), in connection with the issuance
and sale by the Company of certain “Purchased Shares” consisting of shares of
the Company’s common stock, $0.01 par value per share (the “Common Stock”)
pursuant to that certain Investment Agreement, dated as of May 14, 2007 (the
“Investment Agreement”), between the Company and MatlinPatterson FA Acquisition
LLC (the “Investor”). This opinion is being rendered to you at the request of
the Company pursuant to Section 2.4(d) of the Investment Agreement. Unless
otherwise defined herein, terms used herein which are defined in the Investment
Agreement shall have the respective meanings set forth in the Investment
Agreement. Capitalized terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Agreement.
          We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and officers and other representatives of the
Company, and such other agreements, instruments and documents as we have deemed
necessary or appropriate for purposes of rendering the opinions expressed below.
 

1   Insert Closing Date   2   Insert current name of the Company

 

--------------------------------------------------------------------------------

 

          In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the competency of all individuals signing all
documents presented to us, the conformity to original documents of all documents
submitted to us as certified, facsimile or photostatic copies, or as retrieved
from the U.S. Securities and Exchange Commission’s EDGAR database, the
authenticity of the originals of such latter documents and the correctness of
all statements of fact in all documents examined by us. We have further assumed
(i) that all parties to the foregoing documents are validly existing and in good
standing under the laws of all jurisdictions where they are conducting their
businesses or are otherwise required to be so qualified (other than the Company,
to the extent indicated below), and have full power and authority and all
necessary consents and approvals to execute, deliver and perform under such
documents (other than the Company, to the extent indicated below), (ii) that all
such documents have been duly authorized by all necessary corporate or other
action on the part of the parties thereto, have been duly executed by such
parties and have been duly delivered by such parties (other than the Company, to
the extent indicated below), (iii) that all such documents constitute the legal,
valid and binding obligations of each party thereto enforceable against such
party in accordance with its terms (other than the Company, to the extent
indicated below) and (iv) the compliance with all covenants, contained in or
made pursuant to the agreements, instruments, records, certificates and other
documents we have reviewed (including, without limitation, the Investment
Agreement and the Registration Rights Agreement) as of their stated dates and as
of the date hereof. As to any facts material to the opinions expressed herein
which were not independently established or verified, we have, with your
consent, relied upon oral or written statements of the Company and its officers
and representatives and public officials and sources believed to be reliable
(including, without limitation, the representations, covenants and agreements of
the Company and the Investor contained in the Investment Agreement). We have not
independently established the facts so relied upon.
          We have further assumed for the purpose of this opinion that the
certificates representing the Purchased Shares being sold by the Company to the
Purchasers will conform as to form to the forms thereof examined by us, which
assumption we have not independently verified. In addition, we have assumed for
the purpose of this opinion that (i) neither the Company nor any Person acting
on its behalf has engaged in any general solicitation or general advertising
within the meaning of Rule 502(c) promulgated under the Securities Act with
respect to the offer and sale of the Purchased Shares and (ii) neither the
Company nor any other Person will, after the time of delivery of this opinion,
take or omit to take any action which would cause such offer and sale not to
constitute an exempt transaction under the Securities Act. Further, and without
limiting the generality of the foregoing assumptions, in rendering the opinion
expressed herein we have relied on the representation of each Purchaser
contained in the Investment Agreement or applicable Co-Investor Joinder
Agreement that such Purchaser qualifies as an “accredited investor” within the
meaning of Rule 501 promulgated under the Securities Act.

 

--------------------------------------------------------------------------------

 

          Based upon the foregoing and our examination of such questions of law
as we have deemed necessary or appropriate, and subject to the limitations and
qualifications set forth below, it is our opinion that:
     1. The Company is a corporation validly existing and in good standing under
the laws of the State of New York.
     2. The Company has the corporate power and authority to execute, deliver
and perform the Investment Agreement and the Registration Rights Agreement and
to consummate the transactions contemplated thereby.
     3. The Investment Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company and each constitutes a
legal, valid and binding agreement of the Investor enforceable against it in
accordance with its terms. When issued and delivered in accordance with the
terms of the Investment Agreement against payment of the purchase price
therefor, the Purchased Shares will be validly issued, full paid and
nonassessable. When issued to the Purchasers as contemplated by the Investment
Agreement, each Right associated with each Purchased Share will have been
validly issued in accordance with the terms of the Rights Agreement.
     4. The issuance and sale of the Purchased Shares as contemplated by the
Investment Agreement will not, (a) conflict with or violate the articles of
incorporation or bylaws of the Company, (b) conflict with or violate any
judgment, order or decree of any court or other U.S. federal or New York State
governmental authority which to our knowledge is applicable to the Company or
any of its properties, (c) result in a material violation, or conflict with, any
U.S. federal or New York State statute, rule or regulation, in any case known to
us to be applicable to the Company or (d) result in a material default by the
Company under any of the contracts or agreements filed as exhibits to the SEC
Reports.
     6. No consent, approval or authorization of or designation, declaration or
filing with, any U.S. federal or New York State governmental authority on the
part of the Company is required in connection with the issuance or sale of the
Purchased Shares, other than (a) such as have been made or obtained;
(b) compliance with the Blue Sky laws or federal securities laws applicable to
the issuance and sale of the Purchased Shares; and (c) the filing of a
registration statement in accordance with the requirements of the Registration
Rights Agreement.
     7. Assuming (i) the accuracy and completeness of the representations and
warranties of each Purchaser set forth in the Investment Agreement or applicable
Co-Investor Joinder Agreement and (ii) that neither the Company nor any other
Person has engaged in any activity that would be deemed a “general solicitation”
under the provisions of Regulation D under the Securities Act, the issuance and
sale of the Purchased Shares to the Purchasers in accordance with the Investment
Agreement constitutes a transaction exempt from the registration requirements of
Section 5 of the

 

--------------------------------------------------------------------------------

 

Securities Act (it being understood that we express no opinion as to any
subsequent resales of the Purchased Shares by any Purchaser).
     8. The issuance and sale of the Purchased Shares as contemplated in the
Investment Agreement will not cause any of the Purchasers to be deemed to be an
“Acquiring Person” as defined in the Rights Agreement.
          Our opinions are subject to (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws of general
application now or hereafter in effect affecting the rights and remedies of
creditors; (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); (c) the
effect of judicial decisions which have held that certain provisions are
unenforceable when their enforcement would violate the implied covenant of good
faith and fair dealing, or would be commercially unreasonable, or where their
breach is not material; or (d) the discretion of the court before which any
proceeding therefor may be brought, and except as the right to indemnification
or contribution set forth in the Investment Agreement or Registration Rights
Agreement may be limited by public policy or applicable securities laws. In
addition, indemnities, rights of contribution, exculpatory provisions,
non-competition and non-solicitation restrictions and waivers may be limited on
public policy grounds.
          You should be aware that an opinion of counsel represents our best
legal judgment, which may be subject to challenge by any governmental agency and
is not binding on any governmental agency or the courts. Our opinion is based on
existing laws, judicial decisions and administrative regulations, rulings and
practice, all of which are subject to change at any time, prospectively and
retroactively. New developments in rulings of any agency, administrative
regulations, court decisions, legislative changes or changes in the facts or
other information upon which our opinion is based may have an adverse effect on
the legal consequences described herein. Any such change could be retroactive so
as to apply to any of the transactions contemplated by the Investment Agreement.
          Any opinion or statement herein which is expressed to be based on our
“knowledge” or is otherwise qualified by words of like import means that the
lawyers currently practicing law with Dewey Ballantine LLP who have had an
active involvement in negotiating or reviewing the Investment Agreement have no
current conscious awareness of any facts or information contrary to such opinion
or statement. With respect to such matters, such persons, with your express
permission and consent, have not undertaken any investigation or inquiry of
other lawyers practicing law with this firm, or any review of files maintained
by this firm, or any inquiry of officers or representatives of the Company or
any of its affiliates. The reference to “conscious awareness” in this paragraph
has the meaning given that phrase in the Third-Party Legal Opinion Report,
Including the Legal Opinion Accord, of the Section of Business Law, American Bar
Association, 47 Bus. Law. 167, 192 (1991).

 

--------------------------------------------------------------------------------

 

          The foregoing opinion is limited to the laws of the State of New York
and the federal laws of the United States and we render no opinion with respect
to the laws of any other jurisdiction. This opinion letter is rendered as of the
date hereof, and we assume no obligation to update such opinion letter to
reflect any facts or circumstances which may hereafter come to our attention or
any changes in the law which may hereafter occur.
          This letter is being delivered to you solely for your information in
connection with the transaction contemplated by the Agreement. Our opinions set
forth in this letter may not be relied upon, used, circulated, summarized,
referred to or quoted by any other person, firm, corporation, partnership or
other entity, in whole or in part, without our prior written consent.
Very truly yours,

 

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Appendix I
to
Opinion of Dewey Ballantine LLP
Addressees
MatlinPatterson FA Acquisition LLC
[list each other Purchaser]

 

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Exhibit E
to
Investment Agreement
Form of Financing Commitment
MatlinPatterson Global Opportunities Partners II, L.P.
MatlinPatterson Global Opportunities Partners
(Cayman) II, L.P.
c/o MatlinPatterson Global Advisers LLC
520 Madison Avenue, 35th Floor
New York, New York 10022
May 14, 2007
MatlinPatterson FA Acquisition LLC
c/o MatlinPatterson Global Advisers LLC
520 Madison Avenue, 35th Floor
New York, New York 10022
Re: Financing Commitments
Gentlemen:
          MatlinPatterson FA Acquisition LLC (“MP Acquisition”) proposes to
enter into an Investment Agreement of even date herewith (the “Investment
Agreement”) with First Albany Companies Inc. (“First Albany”) pursuant to which
MP Acquisition and certain co-investors (collectively, together with MP
Acquisition, the “Purchasers”) are to acquire certain shares of Common Stock of
First Albany (the “Shares”) representing a majority of the outstanding Common
Stock for an aggregate Purchase Price (as defined in the Investment Agreement)
of $50 million.
          The undersigned MatlinPatterson Global Partners II, L.P. (“MP GOP II”)
and MatlinPatterson GOP II (Cayman) II, L.P. (“MP GOP II (Cayman)” and, together
with MP GOP II, the “MP Funds”) are pleased to advise you of their several
commitments (the “Commitments”) to provide financing to MP Acquisition (the
“Financing”) in an aggregate amount sufficient to enable MP Acquisition to pay
the Net Purchase Price required to be paid by it under the Investment Agreement
and to fund related transaction costs, provided that the amount of the
Commitment of each of the MP Funds will be reduced pro rata to the extent that
any Co-Investor (as defined in the Investment Agreement) actually purchases and
pays for a portion of the Shares. 73.6361% of the Financing will be provided by
MP GOP II and the remaining 26.3639% will be provided by MP GOP II (Cayman). The
Financing shall take the form of such loans or capital contributions to MP
Acquisition, or a combination thereof, as the parties shall agree upon. The
obligations of the MP Funds to provide the Financing shall be subject to the
satisfaction (or waiver, with the consent of the MP Funds) of each of the
conditions set forth in the Investment Agreement to the obligations of the
Purchasers to acquire the Shares.

 

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Page 2
The MP Funds may elect to provide all or part of the Financing through one or
more affiliated entities.
          Each of MP Acquisition and the MP Funds agree and acknowledge that
First Albany is an intended third party beneficiary of the Financing.
          By countersigning this letter, MP Acquisition hereby represents and
warrants to each of the MP Funds that MP Acquisition has delivered to the MP
Funds a fully signed copy of the Investment Agreement.
          This commitment letter and the commitment of the MP Funds hereunder
shall not be assignable by MP Acquisition to any other person without the prior
written consent of each of the MP Funds and First Albany, and any attempted
assignment without such consent shall be void. This commitment letter may not be
amended or any provision hereof waived or modified except by an instrument in
writing signed by each of the parties hereto. This commitment letter may be
executed in any number of counterparts, each of which shall be an original and
all of which, when taken together, shall constitute one agreement. Delivery of
an executed counterpart of a signature page of this commitment letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this commitment letter. This commitment letter sets forth the
entire understanding with respect to the subject matter hereof and supersedes
any prior understandings with respect thereto, written or oral. This commitment
letter is solely for the benefit of the parties hereto and is not intended to
confer any benefits upon, or create any rights in favor of, any person other
than the parties hereto. This commitment letter shall be governed by, and
construed in accordance with, the laws of the State of New York.

             
 
                Very truly yours,    
 
                MATLINPATTERSON FA ACQUISITION LLC    
 
           
 
  By:        
 
           
 
  Name:        
 
  Title:        

 

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Page 3
Accepted and agreed to as of
the date first above written:
MATLINPATTERSON GLOBAL OPPORTUNITIES II, L.P
By MatlinPatterson Global Opportunities II LLC, its general partner

             
 
           
 
  By:        
 
           
 
  Name:        
 
  Title:        

MATLINPATTERSON GLOBAL OPPORTUNITIES (CAYMAN) II, L.P
By MatlinPatterson Global Opportunities II LLC, its general partner

             
 
  By:        
 
           
 
  Name:        
 
  Title:        

FIRST ALBANY COMPANIES INC.
as intended third party beneficiary

         
 
       
By:
       
 
       
Name:
       
Title:
       

 

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Exhibit F
to
Investment Agreement
 
REGISTRATION RIGHTS AGREEMENT
dated as of [___]*, 2007
between
[___]†
and
MATLINPATTERSON FA ACQUISITION LLC
 
 

*   Insert Closing Date   †   Insert new name of the Company

 

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REGISTRATION RIGHTS AGREEMENT
     Registration Rights Agreement (this “Agreement”) dated as of [___]‡, 2007
by and among [___]§ (f/k/a First Albany Companies Inc.), a Delaware corporation
(the “Company”), MATLINPATTERSON FA ACQUISITION LLC, a Delaware limited
liability company (the “Principal Investor”), and the other Persons who have
executed this Agreement as “Other Investors” (the “Other Investors” and,
together with the Principal Investor, the “Investors”).
RECITALS
     WHEREAS, pursuant to that certain Investment Agreement dated as of May
[___], 2007, by and between the Company and the Principal Investor (the
“Investment Agreement”) and to which the Other Investors have become parties by
execution of joinder agreements, the Company has issued to the Investors shares
(the “Shares”) of the Common Stock (as defined below) and has agreed to enter
into this Agreement to provide the Investors with certain registration rights in
respect of such shares; and
     WHEREAS, the parties hereto hereby desire to set forth the Company’s
obligations to cause the registration of the Registrable Securities (as defined
below) pursuant to the Securities Act (as defined below) and applicable state
securities laws;
     NOW, THEREFORE, in consideration of the purchase by the Investors of the
Shares pursuant to the Investment Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
     Section 1. Definitions and Usage.
          As used in this Agreement:
          1.1. Definitions.
          “Agent” means the principal placement agent on an agented placement of
Registrable Securities.
          “Commission” shall mean the Securities and Exchange Commission.
          “Common Stock” shall mean (i) the common stock, par value $.01 per
share, of the Company, and (ii) shares of capital stock of the Company issued by
the Company in respect of or in exchange for shares of such common stock in
connection with any stock dividend or distribution, stock split-up,
recapitalization, recombination or exchange by the Company generally of shares
of such common stock.
 

‡   Insert Closing Date   §   Insert new name of the Company

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          “Continuously Effective”, with respect to a specified registration
statement, shall mean that it shall not cease to be effective and available for
Transfers of Registrable Securities thereunder for longer than either (i) any
thirty (30) consecutive business days, or (ii) an aggregate of sixty
(60) business days during any twelve (12) month period.
          “Demand Registration” shall have the meaning set forth in
Section 2.1(i).
          “Demanding Holders” shall have the meaning set forth in
Section 2.1(i).
          “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.
          “Holder” shall mean any Investor and any Transferee of any Registrable
Securities from a Holder, to the extent that such Transferee shall have been
assigned rights under this Agreement in accordance with Section 8, in each case
at such times as such Person shall own any Registrable Securities.
          “Initial Public Offering” means first offering of shares of Common
Stock registered pursuant to the Securities Act.
          “Initiating Substantial Holder” shall have the meaning set forth in
Section 2.2.
          “Investment Agreement” shall have the meaning set forth in the
Recitals.
          “Majority Selling Holders” means those Selling Holders whose
Registrable Securities included in such registration represent a majority of the
Registrable Securities of all Selling Holders included therein.
          “Person” shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
          “Piggyback Registration” shall have the meaning set forth in
Section 3.
          “Register”, “registered”, and “registration” shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering by the Commission of effectiveness of such registration statement or
document.
          “Registrable Securities” shall mean, subject to Section 8 and
Section 10.3: (i) the Shares owned by Holders on the date hereof, (ii) any
shares of Common Stock or other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange by the
Company generally for, or in replacement by the Company generally of, such
Shares (or other Registrable Securities); and (iii) any securities issued in
exchange for Shares (or other Registrable Securities) in any merger or
reorganization of the Company; provided, however, that Registrable Securities
shall not include any securities which have theretofore been registered and

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sold pursuant to the Securities Act or which have been sold to the public
pursuant to Rule 144 or any similar rule promulgated by the Commission pursuant
to the Securities Act, and, provided, further, the Company shall have no
obligation under Sections 2 and 3 to register any Registrable Securities of a
Holder if the Company shall deliver to such Holder requesting such registration
an opinion of counsel reasonably satisfactory to such Holder and its counsel to
the effect that the proposed sale or disposition of all of the Registrable
Securities for which registration was requested does not require registration
under the Securities Act for a sale or disposition in a single public sale, and
offers to remove any and all legends restricting transfer from the certificates
evidencing such Registrable Securities. For purposes of this Agreement, a Person
will be deemed to be a holder of Registrable Securities whenever such Person has
the then-existing right to acquire such Registrable Securities (by conversion,
purchase or otherwise), whether or not such acquisition has actually been
effected.
          “Registrable Securities then outstanding” shall mean, with respect to
a specified determination date, the Registrable Securities owned by all Holders
on such date.
          “Registration Expenses” shall have the meaning set forth in
Section 6.1.
          “Securities Act” shall mean the Securities Act of 1933, as amended.
          “Selling Holders” shall mean, with respect to a specified registration
pursuant to this Agreement, Holders whose Registrable Securities are included in
such registration.
          “Shares” shall have the meaning set forth in the Recitals.
          “Shelf Registration” shall have the meaning set forth in Section 2.2.
          “Substantial Holder” shall mean any Holder that owned on the date of
this Agreement 25% or more of the Registrable Securities then outstanding and
such Transferee, if any, to whom such Person Transfers Registrable Securities
and assigns such Substantial Holder’s rights as a Substantial Holder as
permitted by Section 8.
          “Transfer” shall mean and include the act of selling, giving,
transferring, creating a trust (voting or otherwise), assigning or otherwise
disposing of (other than pledging, hypothecating or otherwise transferring as
security) (and correlative words shall have correlative meanings); provided,
however, that any transfer or other disposition upon foreclosure or other
exercise of remedies of a secured creditor after an event of default under or
with respect to a pledge, hypothecation or other transfer as security shall
constitute a “Transfer”.
          “Underwriters’ Representative” shall mean the managing underwriter,
or, in the case of a co-managed underwriting, the managing underwriter
designated as the Underwriters’ Representative by the co-managers.
          “Violation” shall have the meaning set forth in Section 7.1.

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          1.2. Usage.
          (i) References to a Person are also references to its assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
          (ii) References to Registrable Securities “owned” or “held” by a
Holder shall include Registrable Securities beneficially owned by such Person
but which are held of record in the name of a nominee, trustee, custodian, or
other agent, but shall exclude shares of Common Stock held by a Holder in a
fiduciary capacity for customers of such Person.
          (iii) References to a document are to it as amended, waived and
otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
          (iv) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
          (v) The definitions set forth herein are equally applicable both to
the singular and plural forms and the feminine, masculine and neuter forms of
the terms defined.
          (vi) The term “including” and correlative terms shall be deemed to be
followed by “without limitation” whether or not followed by such words or words
of like import.
          (vii) The term “hereof” and similar terms refer to this Agreement as a
whole.
          (viii) The “date of” any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 13.
     Section 2. Demand Registration.
          2.1.
          (i) If one or more Holders that own an aggregate of 51% or more of the
Registrable Securities then outstanding (the “Demanding Holders”) shall at any
time make a written request to the Company, the Company shall cause there to be
filed with the Commission a registration statement meeting the requirements of
the Securities Act (a “Demand Registration”), and each Demanding Holder shall be
entitled to have included therein (subject to Section 2.7) all or such number of
such Demanding Holder’s Registered Shares, as the Demanding Holder shall report
in writing; provided, however, that no request may be made pursuant to this
Section 2.1 if within six (6) months prior to the date of such request a Demand
Registration Statement pursuant to this Section 2.1 shall have been declared
effective by the Commission. Any request made pursuant to this Section 2.1 shall
be addressed to the attention of the Secretary of the Company, and shall specify
the number of Registrable Securities to be registered, the intended methods of
disposition thereof and that the request is for a Demand Registration pursuant
to this Section 2.1(i).

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          (ii) The Company shall be entitled to postpone for up to one hundred
twenty (120) days the filing of any Demand Registration statement otherwise
required to be prepared and filed pursuant to this Section 2.1, if the Board
determines, in its good faith reasonable judgment (with the concurrence of the
managing underwriter, if any), that such registration and the Transfer or
Registrable Securities contemplated thereby would materially interfere with, or
require premature disclosure of, any financing, acquisition or reorganization
involving the Company or any of its wholly owned subsidiaries and the Company
promptly gives the Demanding Holders notice of such determination; provided,
however, that the Company shall not have postponed pursuant to this
Section 2.1(ii) the filing of any other Demand Registration statement otherwise
required to be prepared and filed pursuant to this Section 2.1 during the
24 month period ended on the date of the relevant request pursuant to
Section 2.1(i).
          (iii) Whenever the Company shall have received a demand pursuant to
Section 2.1(i) to effect the registration of any Registrable Shares, the Company
shall promptly give written notice of such proposed registration to all Holders.
Any such Holder may, within twenty (20) days after receipt of such notice,
request in writing that all of such Holder’s Registrable Shares, or any portion
thereof designated by such Holder, be included in the registration.
          2.2. On or after the date of this Agreement each Substantial Holder
that shall make a written request to the Company (the “Initiating Substantial
Holder”), shall be entitled to have all or any number of such Initiating
Substantial Holder’s Registrable Securities included in a registration with the
Commission in accordance with the Securities Act for an offering on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act (a “Shelf
Registration”). Any request made pursuant to this Section 2.2 shall be addressed
to the attention of the Secretary of the Company, and shall specify the number
of Registrable Securities to be registered, the intended methods of disposition
thereof and that the request is for a Shelf Registration pursuant to this
Section 2.2.
          2.3. Following receipt of a request for a Demand Registration or a
Shelf Registration, the Company shall:
          (i) File the registration statement with the Commission as promptly as
practicable, and shall use the Company’s best efforts to have the registration
declared effective under the Securities Act as soon as reasonably practicable,
in each instance giving due regard to the need to prepare current financial
statements, conduct due diligence and complete other actions that are reasonably
necessary to effect a registered public offering.
          (ii) Use the Company’s best efforts to keep the relevant registration
statement Continuously Effective (x) if a Demand Registration, for up to two
hundred seventy (270) days or until such earlier date as of which all the
Registrable Securities under the Demand Registration statement shall have been
disposed of in the manner described in the Registration Statement, and (y) if a
Shelf Registration, for three years. Notwithstanding the foregoing, if for any
reason the effectiveness of a registration pursuant to this Section 2 is
suspended or, in the case of a Demand Registration, postponed as permitted by
Section 2.1(ii), the foregoing period shall be extended by the aggregate number
of days of such suspension or postponement.

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          2.4. The Company shall be obligated to effect no more than three
Demand Registrations and such number of Shelf Registrations as may be necessary
to provide each and every Substantial Holder with the right to request one Shelf
Registration. For purposes of the preceding sentence, registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Selling Holders and such
interference is not thereafter eliminated, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection with
such registration are not satisfied or waived, other than by reason of a failure
on the part of the Selling Holders. If the Company shall have complied with its
obligations under this Agreement, a right to demand a registration pursuant to
this Section 2 shall be deemed to have been satisfied (i) if a Demand
Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the Registration Statement, and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of two hundred
seventy (270) days, and (ii) if a Shelf Registration, upon the effective date of
a Shelf Registration, provided no stop order or similar order, or proceedings
for such an order, is thereafter entered or initiated.
          2.5. A registration pursuant to this Section 2 shall be on Form S-3
and permit the disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the request pursuant to
Section 2.1(i) or Section 2.2, respectively. The Company agrees to file all
reports required to be filed by the Company with the Commission in a timely
manner so as to remain eligible or become eligible, as the case may be, and
thereafter to maintain its eligibility, for the use of Form S-3. If the Company
is not eligible at any time after the date hereof to use Form S-3, in order to
fulfill its obligations under Section 2(i) the Company shall file a Registration
Statement on Form S-1 or other appropriate form and not later than five
(5) business days after the Company first meets the registration eligibility and
transaction requirements for the use of Form S-3 for registration of the offer
and sale by the Investors, the Company shall file a Registration Statement on
Form S-3 with respect to the Registrable Securities covered by the Registration
Statement on Form S-1 or other form filed pursuant to Section 2(i) (and include
in such Registration Statement on Form S-3 the information required by Rule 429
under the Securities Act) or convert the Registration Statement on Form S-1 or
other form, whichever is applicable, filed pursuant to Section 2(i) to a Form
S-3 pursuant to Rule 429 under the Securities Act and cause such Registration
Statement (or such amendment) to be declared effective no later than ninety
(90) days after the date of filing of such Registration Statement (or
amendment). Notwithstanding the foregoing, the Company shall use its
commercially reasonable efforts to meet the requirements of Form S-3 for so long
as any Registrable Securities remain outstanding and under no circumstances
shall the Company be obligated to file a Registration State on any form other
than Form S-3 to fulfill ist obligations under Section 2.2.
          2.6. If any registration pursuant to Section 2 involves an
underwritten offering (whether on a “firm”, “best efforts” or “all reasonable
efforts” basis or otherwise), or an agented offering, the Majority Selling
Holders, or the Initiating Substantial Holder, as the case may be, shall have
the right to select the underwriter or underwriters and manager or managers to

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administer such underwritten offering or the placement agent or agents for such
agented offering; provided, however, that each Person so selected shall be
reasonably acceptable to the Company.
          2.7. Whenever the Company shall effect a registration pursuant to this
Section 2 in connection with an underwritten offering by one or more Selling
Holders of Registrable Securities: (i) if such Selling Holders have requested
the inclusion therein of more than one class of Registrable Securities, and the
Underwriters’ Representative or Agent advises each such Selling Holder in
writing that, in its opinion, the inclusion of more than one class of
Registrable Securities would adversely affect such offering, the Demanding
Holders holding at least a majority of the Registrable Securities proposed to be
sold therein by them, shall decide which class of Registrable Securities shall
be included therein in such offering and the related registration, and the other
class shall be excluded; and (ii) if the Underwriters’ Representative or Agent
advises each such Selling Holder in writing that, in its opinion, the amount of
securities requested to be included in such offering (whether by Selling Holders
or others) exceeds the amount which can be sold in such offering within a price
range acceptable to the Majority Selling Holders, securities shall be included
in such offering and the related registration, to the extent of the amount which
can be sold within such price range, and on a pro rata basis among all Selling
Holders.
     Section 3. Piggyback Registration.
          3.1. If at any time the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders of the
Company other than the Holders) securities under the Securities Act in
connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or
any replacement or successor forms), the Company shall promptly give each Holder
of Registrable Securities written notice of such registration (a “Piggyback
Registration”). Upon the written request of each Holder given within twenty
(20) days following the date of such notice, the Company shall cause to be
included in such registration statement and use its best efforts to be
registered under the Securities Act all the Registrable Securities that each
such Holder shall have requested to be registered. The Company shall have the
absolute right to withdraw or cease to prepare or file any registration
statement for any offering referred to in this Section 3 without any obligation
or liability to any Holder.
          3.2. If the Underwriters’ Representative or Agent shall advise the
Company in writing (with a copy to each Selling Holder) that, in its opinion,
the amount of Registrable Securities requested to be included in such
registration would materially adversely affect such offering, or the timing
thereof, then the Company will include in such registration, to the extent of
the amount and class which the Company is so advised can be sold without such
material adverse effect in such offering: First, all securities proposed to be
sold by the Company for its own account; second, the Registrable Securities
requested to be included in such registration by Holders pursuant to this
Section 3, and all other securities being registered pursuant to the exercise of
contractual rights comparable to the rights granted in this Section 3, pro rata
based on the estimated gross proceeds from the sale thereof; and third all other
securities requested to be included in such registration.

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          3.3. Except as set forth in Section 3.2, each Holder shall be entitled
to have its Registrable Securities included in an unlimited number of Piggyback
Registrations pursuant to this Section 3.
     Section 4. Registration Procedures. Whenever required under Section 2 or
Section 3 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as practicable:
          4.1. Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use the Company’s best efforts
to cause such registration statement to become effective; provided, however,
that before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the Company shall furnish to one firm of counsel for the Selling Holders
(selected by Majority Selling Holders or the Initiating Substantial Holder, as
the case may be) copies of all such documents in the form substantially as
proposed to be filed with the Commission at least four (4) business days prior
to filing for review and comment by such counsel.
          4.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 5.2.
Subject to Rule 415 under the Securities Act, if the registration statement is a
Shelf Registration, the Company shall amend the registration statement or
supplement the prospectus so that it will remain current and in compliance with
the requirements of the Securities Act for three years after its effective date,
and if during such period any event or development occurs as a result of which
the registration statement or prospectus contains a misstatement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the Company shall
promptly notify each Selling Holder, amend the registration statement or
supplement the prospectus so that each will thereafter comply with the
Securities Act and furnish to each Selling Holder of Registrable Shares such
amended or supplemented prospectus, which each such Holder shall thereafter use
in the Transfer of Registrable Shares covered by such registration statement.
Pending such amendment or supplement each such Holder shall cease making offers
or Transfers of Registrable Shares pursuant to the prior prospectus. In the
event that any Registrable Securities included in a registration statement
subject to, or required by, this Agreement remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of such registration statement, the Company may file a
post-effective amendment to the registration statement for the purpose of
removing such Securities from registered status.
          4.3. Furnish to each Selling Holder of Registrable Securities, without
charge, such numbers of copies of the registration statement, any pre-effective
or post-effective amendment thereto, the prospectus, including each preliminary
prospectus and any amendments

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or supplements thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents as any
such Selling Holder may reasonably request in order to facilitate the
disposition of Registrable Securities owned by such Selling Holder.
          4.4. Use the Company’s best efforts (i) to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or jurisdictions as shall be reasonably requested
by the Underwriters’ Representative or Agent (as applicable, or if inapplicable,
the Majority Selling Holders), and (ii) to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the offer
and transfer of any of the Registrable Securities in any jurisdiction, at the
earliest possible moment; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
          4.5. In the event of any underwritten or agented offering, enter into
and perform the Company’s obligations under an underwriting or agency agreement
(including indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall also cooperate
with the Majority Selling Holders or Initiating Substantial Holder, as the case
may be, and the Underwriters’ Representative or Agent for such offering in the
marketing of the Registrable Shares, including making available the Company’s
officers, accountants, counsel, premises, books and records for such purpose,
but the Company shall not be required to incur any material out-of-pocket
expense pursuant to this sentence.
          4.6. Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
          4.7. Make generally available to the Company’s security holders copies
of all periodic reports, proxy statements, and other information referred to in
Section 10.1 and an earnings statement satisfying the provisions of Section
11(a) of the Securities Act no later than ninety (90) days following the end of
the 12-month period beginning with the first month of the Company’s first fiscal
quarter commencing after the effective date of each registration statement filed
pursuant to this Agreement.
          4.8. Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and Underwriter (but not more than one firm of counsel to such
Selling Holders), all financial and other information as shall be reasonably
requested by them, and provide the Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and Underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified the
audited financial statements included in such registration statement, in each
case all as necessary to enable them to exercise their due diligence
responsibility under the Securities Act; provided, however, that information
that the Company determines, in good faith, to be confidential and which the

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Company advises such Person in writing, is confidential shall not be disclosed
unless such Person signs a confidentiality agreement reasonably satisfactory to
the Company or the related Selling Holder of Registrable Securities agrees to be
responsible for such Person’s breach of confidentiality on terms reasonably
satisfactory to the Company.
          4.9. Use the Company’s best efforts to obtain a so-called “comfort
letter” from its independent public accountants, and legal opinions of counsel
to the Company addressed to the Selling Holders, in customary form and covering
such matters of the type customarily covered by such letters, and in a form that
shall be reasonably satisfactory to Majority Selling Holders or the Initiating
Substantial Holder, as the case be. The Company shall furnish to each Selling
Holder a signed counterpart of any such comfort letter or legal opinion.
Delivery of any such opinion or comfort letter shall be subject to the recipient
furnishing such written representations or acknowledgements as are customarily
provided by selling shareholders who receive such comfort letters or opinions.
          4.10. Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement.
          4.11. Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then listed on
a securities exchange or included for quotation in a recognized trading market,
to continue to be so listed or included for a reasonable period of time after
the offering, and (ii) to be registered with or approved by such other United
States or state governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the Selling
Holders of Registrable Securities to consummate the disposition of such
Registrable Securities.
          4.12. Use the Company’s reasonable efforts to provide a CUSIP number
for the Registrable Securities prior to the effective date of the first
registration statement including Registrable Securities.
          4.13. Take such other actions as are reasonably requested in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
     Section 5. Holders’ Obligations. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any Selling Holder of Registrable
Securities that such Selling Holder shall:
          5.1. Furnish to the Company such information regarding such Selling
Holder, the number of the Registrable Securities owned by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Selling Holder’s Registrable Securities, and to cooperate
with the Company in preparing such registration;
          5.2. Agree to sell their Registrable Securities to the underwriters at
the same price and on substantially the same terms and conditions as the Company
or the other Persons on whose behalf the registration statement was being filed
have agreed to sell their

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securities, and to execute the underwriting agreement agreed to by the Majority
Selling Holders (in the case of a registration under Section 2) or the Company
and the Majority Selling Holders (in the case of a registration under
Section 3).
     Section 6. Expenses of Registration. Expenses in connection with
registrations pursuant to this Agreement shall be allocated and paid as follows:
          6.1. With respect to each Demand Registration and Shelf Registration,
the Company shall bear and pay all expenses incurred in connection with any
registration, filing, or qualification of Registrable Securities with respect to
such Demand Registrations for each Selling Holder (which right may be assigned
to any Person to whom Registrable Securities are Transferred as permitted by
Section 9), including all registration, filing and National Association of
Securities Dealers, Inc. fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the reasonable fees and disbursements
of counsel for the Company, and of the Company’s independent public accountants,
including the expenses of “cold comfort” letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of one
firm of counsel for the Selling Holders of Registrable Securities (selected by
Demanding Holders owning a majority of the Registrable Securities owned by
Demanding Holders to be included in a Demand Registration or by the Initiating
Substantial Holder, as the case may be) (the “Registration Expenses”), but
excluding underwriting discounts and commissions relating to Registrable
Securities (which shall be paid on a pro rata basis by the Selling Holders),
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 2 if the
registration is subsequently withdrawn at the request of the Majority Selling
Holders (in which case all Selling Holders shall bear such expense), unless
Holders whose Registrable Securities constitute a majority of the Registrable
Securities then outstanding agree that such withdrawn registration shall
constitute one of the demand registrations under Section 2 hereof.
          6.2. The Company shall bear and pay all Registration Expenses incurred
in connection with any Piggyback Registrations pursuant to Section 3 for each
Selling Holder (which right may be Transferred to any Person to whom Registrable
Securities are Transferred as permitted by Section 9), but excluding
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid on a pro rata basis by the Selling Holders of Registrable
Securities).
          6.3. Any failure of the Company to pay any Registration Expenses as
required by this Section 6 shall not relieve the Company of its obligations
under this Agreement.
     Section 7. Indemnification; Contribution. If any Registrable Securities are
included in a registration statement under this Agreement:
          7.1. To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and each
officer, director, partner, and employee of such Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and
expenses (joint or several), including attorneys’ fees and disbursements

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and expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may become subject under the Securities Act, the Exchange Act
or other federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the following
statements, omissions or violations (collectively a “Violation”):
          (i) Any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein, or any amendments or
supplements thereto; or
          (ii) The omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading;
provided, however, that the indemnification required by this Section 7.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or expense to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished to the Company by the indemnified party expressly for use in
connection with such registration; provided, further, that the indemnity
agreement contained in this Section 7 shall not apply to any underwriter to the
extent that any such loss is based on or arises out of an untrue statement or
alleged untrue statement of a material fact, or an omission or alleged omission
to state a material fact, contained in or omitted from any preliminary
prospectus if the final prospectus shall correct such untrue statement or
alleged untrue statement, or such omission or alleged omission, and a copy of
the final prospectus has not been sent or given to such person at or prior to
the confirmation of sale to such person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so. The Company
shall also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers, directors, agents and employees and each person who controls such
persons (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Selling Holders.
          7.2. To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who shall have signed the registration statement, each Person, if
any, who controls the Company within the meaning of the Securities Act, any
other Selling Holder, any controlling Person of any such other Selling Holder
and each officer, director, partner, and employee of such other Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys’ fees and
disbursements and expenses of investigation, incurred by such party pursuant to
any actual or threatened action, suit, proceeding or investigation, or to which
any of the foregoing Persons may otherwise become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Selling Holder expressly for use in connection with such

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registration; provided, however, that (x) the indemnification required by this
Section 7.2 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which consent
shall not be unreasonably withheld, and (y) in no event shall the amount of any
indemnity under this Section 7.2 exceed the gross proceeds from the applicable
offering received by such Selling Holder.
          7.3. Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 7, such indemnified party shall deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time following the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 7 but shall not relieve the indemnifying party of any liability that it
may have to any indemnified party otherwise than pursuant to this Section 7. Any
fees and expenses incurred by the indemnified party (including any fees and
expenses incurred in connection with investigating or preparing to defend such
action or proceeding) shall be paid to the indemnified party, as incurred,
within thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified party is
not entitled to indemnification hereunder). Any such indemnified party shall
have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any such action, claim
or proceeding (including any impleaded parties) include both such indemnified
party and the indemnifying party, and such indemnified party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or in addition to those available to the indemnifying
party and that the assertion of such defenses would create a conflict of
interest such that counsel employed by the indemnifying party could not
faithfully represent the indemnified party (in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action,
claim or proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the reasonable

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judgment of such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
action, claim or proceeding, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels).
No indemnifying party shall be liable to an indemnified party for any settlement
of any action, proceeding or claim without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld.
          7.4. If the indemnification required by this Section 7 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 7:
          (i) The indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any Violation has been committed by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7.1 and Section 7.2,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
          (ii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.4 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in Section 7.4(i). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
          7.5. If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4.
          7.6. The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 7 shall survive the completion of any
offering of Registrable Securities pursuant to a registration statement under
this Agreement, and otherwise.
     Section 8. Transfer of Registration Rights. Rights with respect to
Registrable Securities may be Transferred as follows: (i) the rights of a
Substantial Holder to require a Shelf Registration pursuant to Section 2.2 may
be Transferred to any Person in connection with the Transfer to such Person by
such Substantial Holder of a number of Registrable Securities equal to 25% or
more of the Registrable Securities outstanding on the date of this Agreement,
and (ii) all other rights of a Holder with respect to Registrable Securities
pursuant to this Agreement may

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be Transferred by such Holder to any of its Person in connection with the
Transfer of Registrable Securities to such Person, in all cases, if (x) any such
Transferee that is not a party to this Agreement shall have executed and
delivered to the Secretary of the Company a properly completed agreement
substantially in the form of Exhibit A, and (y) the Transferor shall have
delivered to the Secretary of the Company, no later than fifteen (15) days
following the date of the Transfer, written notification of such Transfer
setting forth the name of the Transferor, name and address of the Transferee,
and the number of Registrable Securities which shall have been so Transferred.
     Section 9. Holdback. Each Holder entitled pursuant to this Agreement to
have Registrable Securities included in a registration statement prepared
pursuant to this Agreement, if so requested by the Underwriters’ Representative
or Agent in connection with an offering of any Registrable Securities, shall not
effect any public sale or distribution of shares of Common Stock or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock, including a sale pursuant to Rule 144 under the Securities Act (except as
part of such underwritten or agented registration), during the fifteen (15) day
period prior to, and during the ninety (90) day period beginning on, the date
such registration statement is declared effective under the Securities Act by
the Commission, provided that such Holder is timely notified of such effective
date in writing by the Company or such Underwriters’ Representative or Agent. In
order to enforce the foregoing covenant, the Company shall be entitled to impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder until the end of such period.
     Section 10. Covenants of the Company. The Company hereby agrees and
covenants as follows:
          10.1. The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to the Exchange Act, upon the
request of any Holder of Registrable Securities, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of the
Securities Act, and take such further action as may be reasonably required from
time to time and as may be within the reasonable control of the Company, to
enable the Holders to Transfer Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act or any similar rule or regulation hereafter adopted by
the Commission.
          10.2.
          (i) The Company shall not, and shall permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock, during the five (5) business days prior to, and during
the ninety (90) day period beginning on, the commencement of a public
distribution of the Registrable Securities pursuant to any registration
statement prepared pursuant to this Agreement (other than by the Company
pursuant to such registration if the registration is on Form S-4, Form S-8 or
any successor forms to such forms or pursuant to Section 3 or such other
registration rights agreements as may be approved in writing by the Majority
Selling Holders or the Initiating Substantial Holder, as the case may be).

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          (ii) Any agreement entered into after the date of this Agreement
pursuant to which the Company or any of its majority owned subsidiaries issues
or agrees to issue any privately placed securities similar to any issue of the
Registrable Securities (other than (x) shares of Common Stock pursuant to a
stock incentive, stock option, stock bonus, stock purchase or other employee
benefit plan of the Company approved by its Board of Directors, and
(y) securities issued to Persons in exchange for ownership interests in any
Person in connection with a business combination in which the Company or any of
its majority owned subsidiaries is a party) shall contain a provision whereby
holders of such securities agree not to effect any public sale or distribution
of any such securities during the periods described in the first sentence of
Section 10.2(i), in each case including a sale pursuant to Rule 144 under the
Securities Act (unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
          10.3. The Company shall not grant to any Person (other than a Holder
of Registrable Securities) any registration rights with respect to securities of
the Company, or enter into any agreement, that would entitle the holder thereof
to have securities owned by it included in a Demand Registration or Shelf
Registration.
     Section 11. Amendment, Modification and Waivers; Further Assurances.
          (i) This Agreement may be amended with the consent of the Company and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent of Holders owning Registrable Securities possessing a
majority in number of the Registrable Securities then outstanding to such
amendment, action or omission to act.
          (ii) No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
          (iii) Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
     Section 12. Assignment; Benefit. This Agreement and all of the provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, assigns, executors, administrators or
successors; provided, however, that except as specifically provided herein with
respect to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by the Company
without the prior written consent of Holders owning Registrable Securities
possessing a majority in number of the Registrable Securities outstanding on the
date as of which such delegation or

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assignment is to become effective. A Holder may Transfer its rights hereunder to
a successor in interest to the Registrable Securities owned by such assignor
only as permitted by Section 8.
     Section 13. Miscellaneous.
          13.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING REGARD TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF.
          13.2. Notices. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day delivery to the relevant
address specified on Schedule 1 to this Agreement or in the relevant agreement
in the form of Exhibit A whereby such party became bound by the provisions of
this Agreement. Except as otherwise provided in this Agreement, the date of each
such notice and request shall be deemed to be, and the date on which each such
notice and request shall be deemed given shall be: at the time delivered, if
personally delivered or mailed; when receipt is acknowledged, if sent by
facsimile; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next business day delivery.
          13.3. Entire Agreement; Integration. This Agreement supersedes all
prior agreements between or among any of the parties hereto with respect to the
subject matter contained herein and therein, and such agreements embody the
entire understanding among the parties relating to such subject matter.
          13.4. Injunctive Relief. Each of the parties hereto acknowledges that
in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.
          13.5. Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.

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          13.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
          13.7. Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
          13.8. Filing. A copy of this Agreement and of all amendments thereto
shall be filed at the principal executive office of the Company with the
corporate recorder of the Company.
          13.9. Termination. This Agreement may be terminated at any time by a
written instrument signed by the parties hereto. Unless sooner terminated in
accordance with the preceding sentence, this Agreement (other than Section 7
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Securities outstanding, provided that any shares of Common Stock
previously subject to this Agreement shall not be Registrable Securities
following the sale of any such shares in an offering registered pursuant to this
Agreement.
          13.10. Attorneys’ Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys’ fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
          13.11. No Third Party Beneficiaries. Nothing herein expressed or
implied is intended to confer upon any person, other than the parties hereto or
their respective permitted assigns, successors, heirs and legal representatives,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
     IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first written above.

     
 
  The Company:
 
   
 
  [___]**
 
   
 
  By:                                        
 
  Name:
 
  Title:
 
   
 
  The Principal Investor:

 

**   Insert new name of the Company

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  MATLINPATTERSION FA ACQUISITION LLC
 
   
 
  By:                                                            
 
  Name:
 
  Title:
 
   
 
  The Other Investors:
 
   
 
  [insert signature blocks for any Co-Investors]

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EXHIBIT A
to
Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
     The undersigned, being the transferee of                      shares of the
common stock, $.01 par value per share [or describe other capital stock received
in exchange for such common stock] (the “Registrable Securities”), of [___]6, a
New York corporation (the “Company”), as a condition to the receipt of such
Registrable Securities, acknowledges that matters pertaining to the registration
of such Registrable Securities is governed by the Registration Rights Agreement
dated as of [___]7, 2007 initially among the Company and the Holders referred to
therein (the “Agreement”), and the undersigned hereby (1) acknowledges receipt
of a copy of the Agreement, and (2) agrees to be bound as a Holder by the terms
of the Agreement, as the same has been or may be amended from time to time.
     Agreed to this ___day of                     ,                     .
                                                            
                                                            *
                                                            *
 
* Include address for notices.

6   Insert new name of the Company.   7   Insert Closing Date

A-1

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SCHEDULE 1
to
Registration Rights Agreement
Address for Notices:
1. The Company.
First Albany Companies Inc.
677 Broadway
Albany, NY 12207
Attention: General Counsel
Facsimile: (518) 447-8606
2. The Principal Investor.
MatlinPatterson FA Acquisition LLC
c/o MatlinPatterson Global Advisers LLC
520 Madison Avenue, 35th Floor
New York, New York 10022
Attention: General Counsel
Fax: (212) 651-4011
[add notice addresses for any Other Investors]

A-2