-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NJ2xC5MwUkvHhBHZLvFvQl23EnekfDoGL/iE2iusbYMYx6plGy6l0egtF28nrtFt v9Z62tpv+NOnwnPfQLoSrw== 0000782842-95-000012.txt : 19951226 0000782842-95-000012.hdr.sgml : 19951226 ACCESSION NUMBER: 0000782842-95-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950929 FILED AS OF DATE: 19951222 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST ALBANY COMPANIES INC CENTRAL INDEX KEY: 0000782842 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 222655804 STATE OF INCORPORATION: NY FISCAL YEAR END: 0924 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14140 FILM NUMBER: 95603802 BUSINESS ADDRESS: STREET 1: 41 STATE ST CITY: ALBANY STATE: NY ZIP: 12207 BUSINESS PHONE: 5184478500 MAIL ADDRESS: STREET 1: 41 STATE ST CITY: ALBANY STATE: NY ZIP: 12207 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended September 29, 1995 Commission file number 014140 F I R S T A L B A N Y C O M P A N I E S I N C . (Exact name of registrant as specified in its charter) New York 22-2655804 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 41 State Street, Albany, New York 12207 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (518) 447-8500 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered none none Securities registered pursuant to Section 12(g) of the Act: Common stock par value $.01 per share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] As of December 14, 1995, 4,530,378 shares, par value $.01 per share, were outstanding. The aggregate market value of the shares of common stock of the Registrant held by non-affiliates (based upon the closing price of Registrant's shares as reported on the NASDAQ system on December 14, 1995, which was $10.25) was approximately $28,434,848. DOCUMENTS INCORPORATED BY REFERENCE The Exhibit index is included on pages 37 through 39. Portions of the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission are incorporated by reference into Part III. Total number of pages in this document - 41. Part I Item 1. Business First Albany Companies Inc. (the Company), through its wholly owned subsidiary First Albany Corporation (First Albany), conducts an investment banking business with brokerage activity centered in New York and New England. The primary business includes securities brokerage for individual and institutional customers, and market-making and trading of corporate, government, and municipal securities. In addition, First Albany underwrites and distributes municipal and corporate securities, provides securities clearance activities for other brokerage firms, and offers financial advisory services to its customers. Another of the Company's subsidiaries is First Albany Asset Management Corporation ("Asset Management"). Under management agreements, Asset Management serves as investment manager to individual and institutional customers. Asset Management also serves as a sub-advisor under contract to the Victory Fund for Income, a mutual fund registered under the Investment Company Act of 1940. Asset Management directs the investment of the customer and mutual fund assets by making investment decisions, placing purchase and sales orders, and providing research, statistical analysis, and continuous supervision of the portfolios. Brokerage services to retail and institutional customers are provided through First Albany's salesforce of Investment Executives and Institutional Salespeople. First Albany believes that Investment Executives and Institutional Salespeople are a key factor to the success of its business. Over the last five years, the number of full-time Investment Executives and Institutional Salespeople has grown from approximately 221 to 291, many of whom joined First Albany after previous associations with national brokerage firms. First Albany has organized its business to focus on and serve the needs and financial/capital requirements of institutions, individuals, corporations, and municipalities. As investment bankers, First Albany is positioned to advise, manage, and conduct a variety of activities as requested including underwritings, initial and secondary offerings, advisory services, mergers and acquisitions, and private placements. As a brokerage firm, First Albany offers customers a full array of investment opportunities. First Albany operates a total of 29 Retail, Institutional, and Investment Banking offices in 9 states. First Albany's executive office and largest sales office are both located in Albany, New York. First Albany is a member of the New York Stock Exchange, Inc. ("NYSE"), the American Stock Exchange, Inc. ("ASE"), and the Boston Stock Exchange, Inc. ("BSE") and is registered as a broker-dealer with the Securities and Exchange Commission ("SEC"). First Albany is also a member of the National Association of Securities Dealers, Inc. ("NASD") and the Securities Investor Protection Corporation ("SIPC"), which insures customer funds and securities deposited with a broker-dealer up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances. First Albany has obtained additional coverage of $24,500,000 per account from National Union, a wholly owned subsidiary of American International Group (AIG), America's largest commercial insurer. Both companies are rated A+15 (highest rating) by A.M. Best. Sources of Revenues A breakdown of the amount and percentage of revenues from each principal source for the periods indicated follows: Years Ended - -------------------------------------------------------------------------------- September 29, 1995 September 30, 1994 September 24, 1993 - -------------------------------------------------------------------------------- Amount Percent Amount Percent Amount Percent - -------------------------------------------------------------------------------- (In thousands of dollars) Securities commissions: Listed $ 17,852 14.5% $ 14,201 13.2% $ 14,219 13.9% Over-the-counter 4,395 3.6 3,588 3.3 3,290 3.2 Options 1,240 1.0 911 0.8 851 0.8 Mutual funds 8,228 6.7 10,586 9.8 10,334 10.1 Other 174 0.1 267 0.3 190 0.2 - -------------------------------------------------------------------------------- Sub-total 31,889 25.9 29,553 27.4 28,884 28.2 Principal transactions 43,198 35.1 36,167 33.6 34,857 34.0 Investment banking 14,625 11.9 19,164 17.8 23,265 22.7 Clearing revenues 1,059 0.8 1,151 1.1 1,102 1.1 Fees and other 6,155 5.0 5,427 5.0 4,799 4.7 - -------------------------------------------------------------------------------- Total operating revenues 96,926 78.7 91,462 84.9 92,907 90.7 - -------------------------------------------------------------------------------- Interest income 26,173 21.3 16,222 15.1 9,483 9.3 - -------------------------------------------------------------------------------- Total revenues $123,099 100.0% $107,684 100.0% 102,390 100.0% ================================================================================
Securities Commissions In executing customers' orders to buy or sell listed securities and securities in which it does not make a market, First Albany generally acts as an agent and charges a commission. Principal Transactions First Albany buys and maintains inventories of municipal debt, corporate debt, and equity securities as a "market maker" for sale of those securities to other dealers and to customers. A staff of 46 traders, underwriters, and assistants manages First Albany's inventory of securities. First Albany Investment Executives work directly with these traders. As of September 29, 1995, First Albany made a market in 291 common stocks quoted on National Association of Securities Dealers Automated Quotation ("NASDAQ") and other less actively traded securities. First Albany also trades municipal bonds and taxable debt obligations, including U.S. Treasury bills, notes, and bonds, U.S. Government agency notes and bonds, bank certificates of deposit, mortgage- backed securities, and corporate obligations. Principal transactions have been a significant source of revenue and should continue to be so in the future. Continuation of these activities depends on the availability of sufficient capital and the services of highly skilled traders, Investment Executives, and Institutional Salespeople. The majority of revenues derived from principal transactions are on a "riskless" basis. In fiscal 1995, First Albany added an institutional municipal risk trading operation in which inventory positions are hedged by highly liquid future contracts. Most of the inventory positions are carried for the purpose of generating sales by the retail and institutional salesforce. First Albany's trading activities require the commitment of capital and may place First Albany's capital at risk. Profits and losses are dependent upon the skill of traders, price movement, trading activity, and the size of inventories. In executing customers' orders to buy or sell in the over-the-counter market in a security in which it makes a market, First Albany may sell to or purchase from its customers at a price which is substantially equal to the current interdealer market price, plus or minus a markup or markdown. Alternatively, First Albany may act as an agent, executing a customer's purchase or sale order with another broker-dealer, who acts as a market maker, at the best inter-dealer market price available and charging a commission. The following table sets forth the highest, lowest, and average month-end inventories (including the net of securities owned and securities sold, but not yet purchased) for fiscal 1995 by securities category where First Albany acted as principal. Highest Lowest Average Inventory Inventory Inventory - -------------------------------------------------------------------------------- (In thousands of dollars) State and municipal bonds $ 44,314 $ 7,945 $ 26,349 Corporate obligations 12,873 1,677 4,490 Corporate stocks 3,511 (2,421) 1,903 U.S. Government and federal agencies obligations 6,119 693 3,384 Underwriting and Investment Banking First Albany manages, co-manages, and participates in tax-exempt and corporate securities distributions. For the periods indicated, the table below highlights the number and dollar amount of corporate and tax-exempt securities offerings managed or co-managed by First Albany and the number and amount of First Albany's underwriting participations in syndicates, including those managed or co-managed by First Albany: Corporate Stock and Bond Offerings ---------------------------------- Managed or Co-Managed Syndicate Participations --------------------- ------------------------ Fiscal Number of Amount of Number of Amount of Year Issues Offering Participations Participation ------ --------- --------- -------------- ------------- (In thousands of dollars) 1995 13 $ 514,583 203 $ 227,170 1994 13 483,814 334 349,723 1993 3 158,300 344 366,314 1992 4 212,451 322 130,938 1991 1 7,650 159 51,677 Tax-Exempt Bond Offerings ------------------------- Managed or Co-Managed Syndicate Participations Fiscal Number of Dollar Number of Dollar Year Issues Amount Participations Amount ------ --------- ------ -------------- ------ (In thousands of dollars) 1995 113 $ 12,235,469 222 $ 1,362,845 1994 123 14,744,502 332 1,598,182 1993 171 18,379,821 349 1,741,206 1992 179 14,482,448 328 1,137,423 1991 89 14,933,761 332 886,069 Participation in an underwriting syndicate or selling group involves both economic and regulatory risks. An underwriter or selling group member may incur losses if it is forced to resell the securities it is committed to purchase at less than the agreed-upon purchase price. In addition, under the federal securities laws, other statutes, and court decisions with respect to underwriters' liabilities and limitations on indemnification of underwriters by issuers, an underwriter is subject to substantial potential liability for material misstatements or omissions in prospectuses and other communications with respect to underwritten offerings. Further, underwriting or selling commitments constitute a charge against net capital and First Albany's underwriting or selling commitments may be limited by the requirements that it must at all times be in compliance with the net capital rule. See "Net Capital Requirements." Interest First Albany derives interest income primarily from the financing of customer margin loans, securities lending activities, and securities owned. Customers' securities transactions are effected on either a cash or margin basis. In margin transactions, First Albany extends credit, which is collateralized by securities and cash in the customer's account, to the customer. In accordance with Federal Reserve Bank regulations, NYSE regulations, and internal policy, First Albany earns interest income as a result of charging customers at a rate of up to 2% over the brokers' call rate. During the past several years, cash balances in customers' accounts have been a source of funds to finance customers' margin account debit balances. SEC regulations restrict the use of customers' funds by broker-dealers by providing generally that free credit balances and funds derived from pledging and lending customers' securities are to be used only to finance customers' margin account debit balances, and, to the extent not so used, the funds must be deposited in a special reserve bank account for the exclusive benefit of customers. The regulations also require broker-dealers, within designated periods of time, to obtain physical possession or control of and to segregate customers' fully paid and excess margin securities. In connection with both its trading and brokerage activities, First Albany borrows securities to cover short sales and to complete transactions in which customers or other brokers have failed to deliver securities by the required settlement date. First Albany also lends securities to other brokers and dealers for similar purposes. This is a common occurrence for broker-dealers. When borrowing securities, First Albany is required to deposit cash or other collateral, or to post a letter of credit with the lender and receive a rebate (based on the amount of cash deposited) calculated to yield a negotiated rate of return. When lending securities, First Albany receives cash and generally pays a rebate (based on the amount of cash received) to the other party to the transaction. Securities borrow and loan transactions are executed pursuant to written agreements with counter-parties which provide that the securities borrowed or loaned be marked to market on a daily basis and that excess collateral be refunded or that additional collateral be furnished in the event of changes in the market value of the securities. Collateral adjustments are usually made on a daily basis through the facilities of various clearinghouses. Operations, Clearing, and Systems First Albany's operations include: execution of orders; processing of transactions; receipt, identification, and delivery of funds and securities; custody of customers' securities; internal financial control; and compliance with regulatory and legal requirements. The volume of transactions handled by the operations staff fluctuates substantially. The monthly number of purchase and sale transactions processed for the periods indicated were as follows: Number of Monthly Transactions ----------------- Fiscal Year High Low Average - ----------- ---- --- ------- 1995 71,407 44,409 54,254 1994 58,245 40,537 47,257 1993 51,745 37,276 43,409 1992 43,068 30,907 36,346 1991 38,744 20,800 31,434 First Albany has established internal controls and safeguards against securities theft, including use of depositories and periodic securities counts. As required by the NYSE and certain other authorities, First Albany carries fidelity bonds covering loss or theft of securities as well as embezzlement and forgery. First Albany clears its own securities transactions and posts its books and records daily. Periodic reviews of controls are conducted, and administrative and operations personnel meet frequently with management to review operating conditions. Operations personnel monitor compliance with applicable laws, rules, and regulations. In addition to processing its own customer transactions, First Albany processes, for a fee, the transactions of other brokerage firms whose customer accounts are carried on a fully disclosed basis with all security positions, margin accounts receivable, and credit balances reflected on the books and records of First Albany. Financial Services Customized financial services are available to customers at First Albany. The Financial Planning Department advises customers on a variety of interrelated financial matters, including investment portfolio review, tax management, insurance analysis, education and retirement planning, and estate analysis. For a fee, financial planners will prepare a detailed analysis with specific recommendations aimed at accumulating wealth and attaining financial goals. First Albany also offers a range of retirement plans, including IRAs, SEP Plans, profit sharing, 401K, and pension programs. Fixed and variable annuities are available as well as life, disability, and nursing home insurance programs, limited partnership interests in real estate, oil and gas drilling, and similar ventures. Research First Albany maintains a professional staff of equity analysts. Research is focused on six industry sectors: technology, health care, financial services, energy, utilities, and basic industry. First Albany employs 16 analysts and 12 research assistants who support First Albany's institutional and retail brokerage and corporate finance activities. In fiscal 1995, First Albany enlarged the scope ofits research in the technology sector by entering into a strategic alliance with the META Group, Inc. (META). META, an independent market assessment company, provides research and analysis of developments and trends in information technology (IT) including computer hardware, software, communications and related information technology industries to both IT users and IT vendors. The alliance with META enables First Albany to provide its investors with insights drawn from META's analysis of technology trends, user experience, and vendor pricing and negotiating tactics. Research services include review and analysis of the economy; general market conditions; technology trends, industries and specific companies via both fundamental and technical analyses; recommendations of specific action with regard to industries and specific companies; review of customer portfolios; preparation of research reports which are provided to retail and institutional customers; and responses to inquiries from customers and Investment Executives. In addition, First Albany purchases outside research services including economic reports, charts, data bases, company analyses, and technical analyses. Retail Business Revenues from First Albany's retail brokerage activities are a substantial portion of First Albany's business and are generated through customer purchases and sales of stocks, bonds, mutual funds, and other investment products. For the fiscal years 1995, 1994, and 1993, these revenues accounted for approximately 53%, 54%, and 49% of net revenues, respectively. Institutional Business Revenues generated from securities transactions with major institutions in fiscal 1995, 1994, and 1993 accounted for approximately 31%, 29%, and 30% of net revenues, respectively. Institutional revenues are derived from sales of taxexempt securities, taxable debt obligations, and equities, and are serviced by 83 Institutional Salespeople. First Albany Retail Investment Executives cover most of the regional institutions. Municipal Bond Business First Albany considers its expertise in municipal bonds to be one of its major strengths. The tax-exempt department consists of 49 professionals and offers a broad range of services, including primary market underwriting, secondary market trading, institutional sales, sales liaison with branches, portfolio analysis, credit analysis, investment banking services, and financial advisory services. Sales revenues from all secondary market tax-exempt products were $12.9 million in fiscal 1995, $8.95 million in fiscal 1994, and $7.5 million in fiscal 1993. Employees At September 29, 1995, the Company had 669 full-time employees, of which 193 were Retail Investment Executives, 98 were Institutional Salespeople and Institutional Traders, 129 were in branch sales support, 27 were in home office sales support, 60 were in other revenue producing positions, 60 were in operations, and 102 were in other support and administrative functions. New Investment Executives are required to take examinations given by the NASD and approved by the NYSE and all principal exchanges as well as state securities authorities in order to be registered. There is intense competition among securities firms for Investment Executives with proven sales production records. The Company considers its employee relations to be good and believes that its compensation and employee benefits are competitive with those offered by other securities firms. None of the Company's employees are covered by a collective bargaining agreement. Competition First Albany is engaged in a highly competitive business. Its competition includes, with respect to one or more aspects of its business, all of the member organizations of the NYSE and other registered securities exchanges, all members of the NASD, members of the various commodity exchanges, and commercial banks and thrift institutions. Many of these organizations are national firms and have substantially greater financial and human resources than First Albany. Discount brokerage firms seeking to expand their share of the retail market, including firms affiliated with commercial banks and thrift institutions, are devoting substantial funds to advertising and direct solicitation of customers. In many instances, First Albany is competing directly with such organizations. In addition, there is competition for investment funds from the real estate, insurance, banking, and savings and loan industries. The Company believes that the principal factors affecting competition for the securities industry are the quality and ability of professional personnel and relative prices of services and products offered. Regulation The securities industry in the United States is subject to extensive regulation under federal and state laws. The SEC is the federal agency charged with administration of the federal securities laws. Much of the regulation of brokerdealers, however, has been delegated to self-regulatory organizations, principally the NASD and the national securities exchanges. These self regulatory organizations adopt rules (subject to approval by the SEC) which govern the industry and conduct periodic examinations of member broker-dealers. Securities firms are also subject to regulation by state securities commissions in the states in which they are registered. First Albany is currently registered as a broker-dealer in 49 states and the District of Columbia. The regulations to which broker-dealers are subject cover all aspects of the securities business, including sales methods, trade practices among broker dealers, capital structure of securities firms, recordkeeping, and conduct of directors, officers, and employees. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory organizations, or changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers. The SEC, self regulatory organizations, and state security regulators may conduct administrative proceedings which can result in censure, fine, suspension, or expulsion of a broker-dealer, its officers, or employees. The principal purpose of regulation and discipline of broker-dealers is the protection of customers and the securities markets rather than protection of creditors and stockholders of broker-dealers. Net Capital Requirements As a broker-dealer and member of the NYSE, First Albany is subject to the Uniform Net Capital Rule promulgated by the SEC. The rule is designed to measure the general financial condition and liquidity of a broker-dealer; therefore, it imposes a minimum net capital requirement deemed necessary to meet the broker-dealer's continuing commitments to its customers. A broker-dealer may be required to reduce its business and to restrict withdrawal of subordinated capital if its net capital is less than 4% of aggregate debit balances; it may be prohibited from expanding its business and declaring cash dividends if its net capital is less than 5% of aggregate debit balances; and it will be subject to closer supervision by the NYSE if its net capital is less than 6% of aggregate debit balances. Compliance with the Net Capital Rule may limit those operations of a firm such as First Albany which require the use of its capital for purposes such as maintaining the inventory required for a firm trading in securities, underwriting securities, and financing customer margin account balances. Net capital and aggregate debit balances change from day to day and, at September 29, 1995, First Albany's net capital was $17,178,000 which was 18% of its aggregate debit balances (2% minimum requirement) and $15,303,000 in excess of required minimum net capital. Item 2. Properties The Company has a total of 29 Retail, Institutional, and Investment Banking offices in 9 states, all of which are leased or rented. The Company's executive offices are currently located at 41 State Street, Albany, New York. The order entry, trading, investment banking, research, data processing, operations, and accounting activities are centralized in the Albany office. During 1996, these offices will be relocated to 30 South Pearl Street, Albany, New York. The offices at 30 South Pearl Street will be operated under a lease which currently expires in the year 2002. All other offices are subject to lease or rental agreements which, in the opinion of management, are sufficient to meet the needs of the Company. Item 3. Legal Proceedings In the normal course of business, the Company has been named a defendant, or otherwise has possible exposure, in several claims. Certain of these are class actions which seek unspecified damages that could be substantial. Although there can be no assurance as to the eventual outcome of litigation in which the Company has been named as a defendant or otherwise has possible exposure, the Company has provided for those actions most likely to result in adverse dispositions. Although further losses are possible, the opinion of management, based upon the advice of its attorneys and general counsel, is that such litigation will not, in the aggregate, have a material adverse effect on the Company's liquidity or financial position, although it could have a material effect on quarterly or annual operating results in the period in which it is resolved. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Company's common stock has traded on the Nasdaq Stock Market under the symbol "FACT." As of December 14, 1995, there were approximately 875 holders of record of the Company's common stock. The following table sets forth the high and low bid quotations for the common stock as adjusted for subsequent stock dividends, along with cash dividends during each quarter for the fiscal years ended: September 29, 1995 Quarters Ended - ------------------ -------------- Stock Price Range Dec. 31 Mar. 31 June 30 Sept. 29 - ----------------- ------- ------- ------- -------- High $7 1/4 $7 5/8 $8 $8 3/4 Low $6 1/4 $6 1/2 $7 1/8 $7 1/8 Cash Dividend per Share $ .05 $ .05 $ .05 $ .05 September 30, 1994 Quarters Ended - ------------------ -------------- Stock Price Range Dec. 31 Mar. 25 June 24 Sept. 30 - ----------------- ------- ------- ------- -------- High $7 1/2 $7 1/2 $7 1/2 $6 7/8 Low $6 1/4 $6 3/4 $6 3/8 $5 3/4 Cash Dividend per Share $ .05 $ .05 $ .05 $ .05 The Board of Directors has from time to time authorized the Company to repurchase shares of its common stock either in the open market or otherwise. After the 5% common stock dividend declared on October 26, 1995, the total number of treasury shares was 365,739. When appropriate, the Company will consider making additional purchases. During fiscal 1995, the Company declared and paid four quarterly cash dividends totaling $.20 per share of common stock, along with declaring and issuing two 5% common stock dividends. During fiscal 1994, the Company also declared and paid four quarterly cash dividends totaling $.20 per share of common stock, along with declaring and issuing two 5% common stock dividends. On October 26, 1995, subsequent to the period reflected in this report, the Board of Directors declared the regular quarterly cash dividend of $0.05 per share along with a 5% common stock dividend, both payable on November 8, 1995, to shareholders of record on November 22, 1995. Item 6. Selected Financial Data The following selected financial data have been derived from the Consolidated Financial Statements of the Company. First Albany Companies Inc. FIVE YEAR FINANCIAL SUMMARY --------------------------- (In thousands of dollars except per share amounts) Sept. 29, Sept. 30, Sept. 24, Sept. 25, Sept. 27, For the years ended 1995 1994 1993 1992 1991 - ------------------- -------- -------- -------- -------- -------- Operating Results Revenues: Commissions $ 31,889 $ 29,553 $ 28,884 $ 24,569 $ 19,445 Principal transactions 43,198 36,167 34,857 31,405 28,443 Investment banking 14,625 19,164 23,265 16,065 8,051 Fees and other 7,214 6,578 5,901 4,782 4,593 - -------------------------------------------------------------------------------- Operating revenues 96,926 91,462 92,907 76,821 60,532 Interest income 26,173 16,222 9,483 8,999 12,047 - -------------------------------------------------------------------------------- Total revenues 123,099 107,684 102,390 85,820 72,579 Interest expense 19,904 10,467 5,257 5,078 8,697 - -------------------------------------------------------------------------------- Net revenues 103,195 97,217 97,133 80,742 63,882 - -------------------------------------------------------------------------------- Expenses Excluding Interest: Compensation and benefits 71,064 65,513 64,388 51,558 40,881 Clearing, settlement and brokerage costs 2,258 1,894 1,981 1,978 2,120 Communications and data processing 7,794 7,198 6,209 5,213 4,770 Occupancy and depreciation 6,660 5,710 5,395 5,130 5,130 Selling 4,817 4,779 4,152 3,410 2,565 Other 5,382 4,755 6,242 4,534 4,831 - -------------------------------------------------------------------------------- Total expenses excluding interest 97,975 89,849 88,367 71,823 60,297 - -------------------------------------------------------------------------------- Income before income taxes 5,220 7,368 8,766 8,919 3,585 Income tax expense 1,870 2,876 3,375 3,352 1,302 - -------------------------------------------------------------------------------- Net income $ 3,350 $ 4,492 $ 5,391 $ 5,567 $ 2,283 ================================================================================ Per Common Share: * Earnings-primary $ 0.71 $ .96 $ 1.14 $ 1.22 $ .52 Cash dividend 0.20 0.20 0.20 0.20 Book value 8.00 7.48 6.69 5.65 4.56 - -------------------------------------------------------------------------------- Financial Condition: Total assets $543,255 $482,749 $514,794 $203,877 $164,679 Long-term note payable 1,791 94 456 1,334 1,900 Subordinated debt 2,250 2,750 3,250 Stockholders' equity 36,192 33,230 30,088 25,272 19,989 - -------------------------------------------------------------------------------- * All per share figures have been restated for common stock dividends declared through October 26, 1995. First Albany Companies Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARISON 1995 VS. 1994 AND 1994 VS. 1993 (In thousands of dollars)
1995 1994 Fiscal Years Ended vs. 1994 vs. 1993 Sept. 29, Sept. 30, Sept. 24, Increase Increase 1995 1994 1993 (Decrease) (Decrease) --------- --------- --------- ---------- ---------- Operating Results Revenues: Commissions $ 31,889 $ 29,553 $ 28,884 $ 2,336 8% $ 669 2% Principal transactions 43,198 36,167 34,857 7,031 19% 1,310 4% Investment banking 14,625 19,164 23,265 (4,539) (24%) (4,101) (18%) Fees and other 7,214 6,578 5,901 636 10% 677 11% Operating revenues 96,926 91,462 92,907 5,464 6% (1,445) (2%) Interest income 26,173 16,222 9,483 9,951 61% 6,739 71% Total revenues 123,099 107,684 102,390 15,415 14% 5,294 5% Interest expense 19,904 10,467 5,257 9,437 90% 5,210 99% Net revenues 103,195 97,217 97,133 5,978 6% 84 0% Expenses Excluding Interest: Compensation and benefits 71,064 65,513 64,388 5,551 8% 1,125 2% Clearing, settlement and brokerage costs 2,258 1,894 1,981 364 19% (87) (4%) Communications and data processing 7,794 7,198 6,209 596 8% 989 16% Occupancy and depreciation 6,660 5,710 5,395 950 17% 315 6% Selling 4,817 4,779 4,152 38 1% 627 15% Other 5,382 4,755 6,242 627 13% (1,487) (24%) Total expenses excluding interest 97,975 89,849 88,367 8,126 9% 1,482 2% Income before income taxes 5,220 7,368 8,766 (2,148) (29%) (1,398) (16%) Income tax expense 1,870 2,876 3,375 (1,006) (35%) (499) (15%) Net income $ 3,350 $ 4,492 $ 5,391 $(1,142) (25%) $ (899) (17%) Net interest income: Interest income $ 26,173 $ 16,222 $ 9,483 $ 9,951 61% $ 6,739 71% Interest expense 19,904 10,467 5,257 9,437 90% 5,210 99% Net interest income $ 6,269 $ 5,755 $ 4,226 $ 514 9% $ 1,529 36%
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. BUSINESS ENVIRONMENT First Albany Corporation (First Albany), a wholly owned subsidiary of First Albany Companies Inc. (the Company), is a full service investment banking and brokerage firm. Its primary business includes the underwriting, distribution, and trading of fixed income and equity securities. The investment banking and brokerage business earns revenues in direct correlation with the general level of trading activity in the stock and bond markets. This level of activity cannot be controlled by the Company; however, many of the Company's costs are fixed. Therefore, the Company's earnings, like those of others in the industry, reflect the activity in the markets and can fluctuate accordingly. This is a highly competitive business. The competition includes not only full service national firms and discount houses, but also mutual funds that sell directly to the customer as well as banks that offer a variety of investment products. 1995 was an unusually good year for the financial markets in general and many securities firms in particular. Long term interest rates declined sharply and the economy and profits expanded. As a result, both bond prices and stock prices rose registering returns of 17.5% and 34.8% from December 31, 1994, through November 30, 1995 for the Lehman Brothers Government/Corporate Index and the S&P 500 Index respectively. These returns are unusual in the financial markets. The compound annual returns with all dividends and interest reinvested between 1926 and 1994 for corporate bonds was 5.5%, for government bonds 4.9%, and the return for equities 10.2%. Although First Albany remains optimistic about the outlook for equity prices in 1996, a pullback in prices could occur. If such a pullback was to occur, it would have a damaging effect on the secondary markets. Revenues from security trading, commission revenues, and underwriting fees and profits of First Albany Corporation would most likely suffer. In such an environment, it would be difficult for all securities firms to maintain growth and earnings comparable to the levels achieved in 1995. RESULTS OF OPERATIONS Fiscal Year 1995 Compared with Fiscal Year 1994 Net Income Net income for the 1995 fiscal year was $3.4 million or $0.71 per share compared to $4.5 million or $.96 per share earned in fiscal 1994. During fiscal 1995, both the Company's municipal and equity institutional businesses showed substantial growth, along with an ongoing solid contribution by the retail division. The Company continued to make investments in people and technology. These investments are critical for the firm's long-term success, but have negatively impacted short-term operating results. These investments will strengthen the Company's revenues and profitability in the future. Commissions Commission revenues increased $2.3 million or 8% in fiscal 1995, reflecting active trading in institutional equities. Revenues from listed and over-the counter stock commissions increased $4.6 or 25%, while mutual fund commission revenues decreased $2.3 million or 22%. Principal Transactions Principal transactions increased $7.0 million or 19% in fiscal 1995. This increase was comprised of an increase in equities of $2.1 million, an increase in municipal bonds of $7.8 million (primarily due to the addition in fiscal 1995 of an institutional municipal risk trading operation), a decrease in taxable fixed income securities of $2.1 million, and a decrease in investment income of $0.8 million. A primary reason for the decrease in investment income was the result of an unrealized gain of $1.4 million recorded in fiscal 1994 due to the Company's investment in a firm which completed an initial public offering in February 1994. Investment Banking Investment banking revenues decreased $4.5 million or 24% in fiscal 1995. Revenues from selling concessions decreased $3.4 million (equities decreased $2.4 million, while municipal bonds decreased $1.2 million and taxable fixed income increased $0.2 million), underwriting fees decreased $0.2 million, and investment banking fees decreased $0.9 million (corporate finance fees decreased $0.1 million, while municipal finance fees decreased $0.8 million). The result in investment banking revenues was largely dependent upon an industry-wide decline in underwriting activity. Compensation and Benefits Compensation and benefits increased $5.6 million or 8% in fiscal 1995. Salesrelated compensation was $0.9 million higher and salaries increased $3.8 million which impacted benefits (up $0.9 million). Occupancy and Depreciation Occupancy and depreciation expense increased $1 million or 17% in fiscal 1995 primarily as a result of our increased investment in new automated systems. Income Taxes Income taxes decreased $1.0 million or 35% in fiscal 1995 due to a decrease in pre-tax earnings. The Company's effective tax rate decreased to 36% from 39% as a result of an increased proportion of tax-exempt interest income to income before taxes. Fiscal Year 1994 Compared with Fiscal Year 1993 Net Income Net income for the 1994 fiscal year was $4.5 million or $.96 per share compared to $5.4 million or $1.14 per share earned in fiscal 1993. Revenues increased due to a solid contribution made by our retail brokerage business along with significant contributions by our institutional equity and corporate finance areas. However, net income decreased due to the effect of falling bond prices on fixed income sales, trading and underwritings, and because municipal bond refinancings declined significantly from last year. Principal Transactions Principal transactions increased $1.3 million or 4% in fiscal 1994. This increase was comprised of an increase in equities of $3.2 million, a decrease in taxable fixed income securities of $4.1 million, an increase in municipal bonds of $0.8 million and an unrealized gain of $1.4 million due to the Company's investment in a firm which completed an initial public offering in February 1994. Investment Banking Investment banking revenues decreased $4.1 million or 18% in fiscal 1994. Revenues from selling concessions decreased $0.2 million (equities increased $1.7 million, while municipal bonds decreased $1.8 million and taxable fixed income decreased $0.1 million), underwriting fees decreased $1.1 million (primarily municipal bonds), and investment banking fees decreased $2.8 million (corporate finance fees increased $1.6 million, while municipal finance fees decreased $4.4 million). The result in investment banking revenues was largely dependent upon declining municipal bond activity due to increasing interest rates and a significant decrease in municipal bond refinancings; however, these were partially offset by increasing revenues in equity corporate finance activities. Net Interest Income Net interest income increased $1.5 million or 36% in fiscal 1994 due primarily to increased revenues from customer margin balances, and increased stock borrowed and stock loaned activities. Compensation and Benefits Compensation and benefits increased $1.1 million or 2% in fiscal 1994. Salesrelated compensation decreased $1.3 million, salaries increased $1.8 million which impacted benefits (up $0.6 million). Communications and Data Processing Communications and data processing expense increased $1 million or 16% in fiscal 1994. Communication expense increased $0.8 million mainly as a result of the expansion of the institutional and research divisions. Data processing expense increased $0.2 million due primarily to an increased number of transactions. Other Expenses Other expenses decreased $1.5 million or 24% in fiscal 1994 due primarily to a decrease in litigation and to consulting costs. LIQUIDITY AND CAPITAL RESOURCES A substantial portion of the Company's assets, similar to other brokerage and investment banking firms, is liquid, consisting of cash and assets readily convertible into cash. These assets are financed primarily by the Company's interest-bearing and non-interest-bearing payables to customers, payables to brokers and dealers collateralized by loaned securities and bank lines-of credit. Securities borrowed and securities loaned will fluctuate due primarily to the current level of business activity in this area. Receivables from others decreased due primarily to a decrease in the adjustment to record securities owned on a trade date basis. Securities owned increased primarily due to the addition in fiscal 1995 of an institutional municipal risk trading operation. Net receivables from customers increased due to a decrease in customer free credits. Short-term bank loans increased due primarily to an increase in securities owned and an increase in net receivables from customers. At fiscal year-end 1995, both First Albany Corporation and Northeast Brokerage Services Corporation, subsidiaries of First Albany Companies Inc., were in compliance with the net capital requirements of the Securities and Exchange Commission and had capital in excess of the minimum required. Management believes that funds provided by operations and a variety of committed and uncommitted bank lines-of-credit_totaling $120,000,000 of which approximately $66,712,000 were unused as of September 29, 1995_will provide sufficient resources to meet present and reasonably foreseeable short-term financial needs. During fiscal 1995, the Company declared and paid four quarterly cash dividends totaling $ 0.20 per share of common stock, along with declaring and issuing two 5% common stock dividends. On October 26, 1995, subsequent to the period reflected in this report, the Board of Directors declared the regular quarterly cash dividend of $ 0.05 per share along with a 5% common stock dividend, both payable on November 8, 1995, to stockholders of record on November 22, 1995. The Company believes that funds provided by operations will be sufficient to fund the acquisition of office equipment and leasehold improvements, and other long-term requirements. Item 8. Financial Statements and Supplementary Data. Index to Financial Statements and Supplementary Data Page REPORT OF INDEPENDENT ACCOUNTANTS 18 FINANCIAL STATEMENTS: Consolidated Statements of Income, For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993 19 Consolidated Statements of Financial Condition, as of September 29, 1995, and September 30, 1994 20 Consolidated Statements of Changes in Stockholders' Equity, For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993 21 Consolidated Statements of Cash Flows, For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993 22 Notes to Consolidated Financial Statements 23-34 SUPPLEMENTARY DATA: Selected Quarterly Financial Data (Unaudited) 35 Report of Independent Accountants Board of Directors and Stockholders First Albany Companies Inc. We have audited the consolidated financial statements and the financial statement schedule of First Albany Companies Inc. listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Albany Companies Inc. as of September 29, 1995, and September 30, 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 29, 1995, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Albany, New York November 10, 1995 First Albany Companies Inc. CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars) --------------------------------- September 29, September 30, September 24, For the years ended 1995 1994 1993 - ------------------- ------------- ------------- ------------- Revenues Commissions $ 31,889 $ 29,553 $ 28,884 Principal transactions 43,198 36,167 34,857 Investment banking 14,625 19,164 23,265 Interest 26,173 16,222 9,483 Fees and other 7,214 6,578 5,901 Total revenues 123,099 107,684 102,390 Interest expense 19,904 10,467 5,257 Net revenues 103,195 97,217 97,133 Expenses excluding interest Compensation and benefits 71,064 65,513 64,388 Clearing, settlement and brokerage costs 2,258 1,894 1,981 Communications and data processing 7,794 7,198 6,209 Occupancy and depreciation 6,660 5,710 5,395 Selling 4,817 4,779 4,152 Other 5,382 4,755 6,242 Total expenses excluding interest 97,975 89,849 88,367 Income before income taxes 5,220 7,368 8,766 Income tax expense 1,870 2,876 3,375 Net income $ 3,350 $ 4,492 $ 5,391 Net income per common and common equivalent share Primary $ 0.71 $ .96 $ 1.14 Fully diluted $ 0.71 $ .96 $ 1.14 The accompanying notes are an integral part of the consolidated financial statements. First Albany Companies Inc. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands of dollars)
September 29, September 30, 1995 1994 ------------- ------------- Assets Cash and cash equivalents $ 3,253 $ 3,165 Securities borrowed 376,919 331,209 Receivables from Brokers, dealers and clearing agencies 1,889 1,511 Customers 88,610 96,830 Others 4,965 18,358 Securities owned 56,025 20,988 Office equipment and leasehold improvements, net 6,062 5,151 Other assets 5,532 5,537 Total Assets $543,255 $482,749 Liabilities and Stockholders' Equity Liabilities Short-term bank loans $ 53,288 $ 38,921 Securities loaned 388,523 329,478 Payables to Brokers, dealers and clearing agencies 3,104 5,077 Customers 38,335 56,949 Others 4,135 1,663 Securities sold but not yet purchased 3,892 3,724 Accounts payable 1,696 1,411 Accrued compensation 8,108 9,149 Accrued expenses 4,191 3,053 Notes payable 1,791 94 Total Liabilities 507,063 449,519 Commitments and Contingencies Stockholders' Equity Preferred stock; $1.00 par value; authorized 500,000 shares; none issued Common stock; $.01 par value; authorized 10,000,000 shares; issued 4,889,747 shares 1995 and 4,435,454 shares 1994 49 44 Additional paid-in capital 20,257 16,489 Retained earnings 17,822 19,099 Less treasury stock at cost (1,936) (2,402) Total Stockholders' Equity 36,192 33,230 Total Liabilities and Stockholders' Equity $543,255 $482,749
The accompanying notes are an integral part of the consolidated financial statements. First Albany Companies Inc. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993 (In thousands of dollars except for number of shares)
Common Stock Additional Issued Paid-In Retained Treasury Stock Shares Amount Capital Earnings Shares Amount ------ ------ ---------- -------- ------ ------ Balance, September 25, 1992 3,475,915 $35 $ 8,554 $18,610 (294,545) $(1,927) Issuance of restricted stock 14 (13) 2,050 13 Stock dividends declared 547,506 5 4,574 (4,580) (44,448) Cash dividends paid (671) Options exercised (18) 16,157 101 Net income 5,391 Balance September 24, 1993 4,023,421 40 13,142 18,719 (320,786) (1,813) Issuance of re- stricted stock 132 (104) 16,028 104 Stock dividends declared 412,033 4 3,215 (3,219) (37,973) Cash dividends paid (742) Options exercised (47) 64,281 379 Treasury stock purchase (130,000) (1,072) Net income 4,492 Balance September 30, 1994 4,435,454 44 16,489 19,099 (408,450) (2,402) Issuance of re- stricted stock 186 (155) 19,635 130 Stock dividends declared 454,293 5 3,582 (3,587) (35,175) Cash dividends paid (815) Options exercised (70) 58,251 336 Net income 3,350 Balance September 29, 1995 4,889,747 $49 $20,257 $17,822 (365,739) $(1,936)
The accompanying notes are an integral part of the consolidated financial statements. First Albany Companies Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars)
September 29, September 30, September 24, For the years ended 1995 1994 1993 - ------------------- ------------- ------------- ------------- Cash flows from operating activities: Net income $ 3,350 $ 4,492 $ 5,391 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,302 1,511 1,326 Deferred income taxes (1,278) 658 (246) (Increase) decrease in operating assets: Cash and securities segregated under federal regulations 250 36 Securities purchased under agreement to resell 2,806 (2,806) Securities borrowed, net (1,641) 883 Net receivable from customers (10,394) (12,364) (13,086) Net receivable from others 15,865 (16,584) 3,013 Securities owned, net (33,031) 2,355 (569) Other assets 1,283 (294) (991) Increase (decrease) in operating liabilities: Securities sold under agreement to repurchase (2,825) 2,825 Securities loaned, net 13,335 Net payable to brokers and dealers (2,351) (1,997) 7,457 Accounts payable and accrued expenses 382 (2,158) 3,401 Net cash (used in) provided by operating activities (10,537) (25,791) 6,634 Cash flows from investing activities: Purchase of furniture, equipment, and leaseholds (3,213) (3,043) (1,460) Purchase of long-term investments (1,838) Net cash used in investing activities (5,051) (3,043) (1,460) Cash flows from financing activities: Proceeds of short-term bank loans, net 14,367 28,990 1,100 Payments of subordinated debt (2,250) (500) Proceeds (payments) of notes payable, net 1,697 (362) (878) Payments for purchases of common stock for treasury (1,072) Proceeds from issuance of common stock from treasury 266 332 83 Proceeds from issuance of restricted stock 161 132 13 Dividends paid (815) (742) (671) Net cash provided by (used in) financing activities 15,676 25,028 (853) Increase (decrease) in cash 88 (3,806) 4,321 Cash at beginning of the year 3,165 6,971 2,650 Cash at the end of the period $ 3,253 $ 3,165 $ 6,971 Supplemental cash flow disclosures: Income tax payments $ 1,753 $ 2,660 $ 3,322 Interest payments $18,989 $ 10,108 $ 4,999
The accompanying notes are an integral part of the consolidated financial statements. First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. Significant Accounting Policies Organization and Nature of Business The consolidated financial statements include the accounts of First Albany Companies Inc. and its wholly owned subsidiaries (the Company). First Albany Corporation (the Corporation) is the Company's principal subsidiary and a registered broker-dealer. All significant intercompany balances and transactions have been eliminated. The Company's year-end is the last Friday in September and, therefore, the Company's fiscal year will contain 52 or 53 week periods. The years ended September 29, 1995, September 30, 1994, and September 24, 1993, contained 52 weeks, 53 weeks, and 52 weeks, respectively. Securities Transactions Proprietary securities transactions are recorded on trade date, as if they had settled. Profit and loss arising from all securities transactions entered for the account and risk of the Company are recorded on trade date. Customers' securities transactions are reported on a settlement date basis (normally the third business day following the transaction) with related commission income and expenses reported on a trade date basis. As a broker-dealer, the Corporation values marketable securities at market value and securities not readily marketable at fair value as determined by management. The resulting unrealized gains and losses are included as revenues from principal transactions. First Albany Companies Inc. also purchases securities not readily marketable for investments purposes and, as a non-broker-dealer values them at cost. Resale and Repurchase Agreements Transactions involving purchases of securities under agreements to resell or sales of securities under agreements to repurchase are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts plus accrued interest. It is the policy of the Company to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under resale agreements. Collateral is valued daily and the Company may require counterparties to deposit additional collateral or return collateral pledged when appropriate. At September 29, 1995, and September 30, 1994, the Company had not entered into any resale or repurchase agreements with counterparties. Securities-Lending Activities Securities borrowed and securities loaned are recorded at the amount of cash collateral advanced or received. Securities borrowed transactions require the Company to deposit cash or other collateral with the lender. With respect to securities loaned, the Company receives collateral in the form of cash or other collateral in an amount generally in excess of the market value of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary. Investment Banking Investment banking revenues include gains, losses, and fees, net of syndicate expenses, arising from securities offerings in which the Company acts as an underwriter or agent. Investment banking revenues also include fees earned from providing merger-and-acquisition and financial restructuring advisory services. Investment banking management fees are recorded on offering date, sales concessions on trade First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) date, and underwriting fees at the time the underwriting is completed and the income is reasonably determinable. Income Taxes The amount of current taxes payable is recognized as of the date of the financial statements, utilizing currently enacted tax laws and rates. Deferred income taxes are recognized for the future tax consequences attributable to differences between financial statement and tax basis of existing assets and liabilities. Office Equipment and Leasehold Improvements Office equipment and leasehold improvements are stated at cost less accumulated depreciation of $9,834,000 in 1995, and $7,570,000 in 1994, respectively. Depreciation is provided on a straight-line basis over the estimated useful life of the asset or the remaining life of the lease. Statement of Cash Flows For purposes of the statement of cash flows, the Company considers amounts in demand deposit accounts at various financial institutions, other than those segregated under federal regulations, to be cash equivalents. Earnings per Common Share Net income per common and common equivalent share have been computed based upon the weighted average number of common shares and dilutive common equivalent shares (stock options) outstanding. The weighted average number of common shares and dilutive common equivalent shares were: Fiscal Year 1995 Fiscal Year 1994 Fiscal Year 1993 ---------------- ---------------- ---------------- Primary 4,705,306 4,677,757 4,726,030 Fully diluted 4,737,101 4,677,757 4,741,455 All per share figures, as well as the weighted average number of common and dilutive common equivalent shares, have been restated for stock dividends declared through October 26, 1995. Reclassifications Certain Amounts in the 1994 and 1993 financial statements have been reclassified to conform with the 1995 presentation. First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2. Receivables From and Payables To Brokers, Dealers, and Clearing Agencies Amounts receivable from and payable to brokers, dealers and clearing agencies other than correspondents, as of: (In thousands of dollars) September 29, September 30, 1995 1994 ------------- ------------- Securities failed to deliver $ 1,882 $ 1,511 Receivable from clearing agencies 7 Total receivables $ 1,889 $ 1,511 Securities failed to receive $ 3,060 $ 2,453 Payable to clearing agencies 44 2,624 Total payables $ 3,104 $ 5,077 NOTE 3. Receivables From and Payables To Customers Receivables from and payables to customers include amounts due on cash and margin transactions. Securities owned by customers are held as collateral for receivables. Such collateral is not reflected in the financial statements. Total unsecured and partly secured customer receivables are $125,000 and $204,000 for the fiscal years ended 1995 and 1994, respectively. An allowance for doubtful accounts, based upon an aging of accounts receivable and specific identification, has been recorded for $125,000 and $106,000 for the fiscal years ended 1995 and 1994, respectively. NOTE 4. Receivables From Others Amounts receivable from others as of: (In thousands of dollars) September 29, September 30, 1995 1994 ------------- ------------- Adjustment to record securities on a trade date basis, net $ $15,040 Others 4,965 3,318 Total $ 4,965 $18,358 For proprietary securities transactions, amounts receivable and payable for securities transactions that have not reached their contractual settlement date are recorded net on the statement of financial condition. First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 5. Securities Owned And Sold, But Not Yet Purchased Securities owned and sold, but not yet purchased consisted of the following as of: (In thousands of dollars) September 29, September 30, 1995 1994 ------------- ------------- Sold, but Sold, but not yet not yet Owned Purchased Owned Purchased ----- --------- ----- --------- Marketable U.S. government and federal agencies obligations $ 5,164 $ 1,045 $ 2,943 $ 1,220 State and municipal bonds 39,936 244 10,943 436 Corporate obligations 3,558 1,246 2,698 348 Corporate stocks 4,869 1,357 3,768 1,720 Options 100 Not readily marketable securities, fair value 560 636 Not readily marketable securities, cost 1,838 ------- ------- ------- ------- $56,025 $ 3,892 $20,988 $ 3,724 Securities not readily marketable include investment securities (a) for which there is no market on a securities exchange or no independent publicly quoted market, (b) that cannot be publicly offered or sold unless registration has been effected under the Securities Act of 1933, or (c) that cannot be offered or sold because of other arrangements, restrictions, or conditions applicable to the securities or to the Company. NOTE 6. Bank Loans Short-term bank loans are made under a variety of committed and uncommitted bank lines of credit which are limited to financing securities eligible for collateralization under these arrangements. This includes Company owned securities and certain customer owned securities purchased on margin, subject to certain regulatory formulae. These loans bear interest at fluctuating rates based primarily on the Federal Funds interest rate. The weighted average interest rate on these loans were 7.54% and 5.82% at September 29, 1995, and September 30, 1994, respectively. Short-term bank loans and unused lines of credit were collateralized by Company owned securities of $40,391,000 and customers' margin account securities of $44,719,000 at September 29, 1995. A note for $1,759,912, which is collateralized by fixed assets, is payable in monthly payments of principal and interest of $65,005. Interest is at the prime rate (8.75% at September 29, 1995) plus 1.5%. The note matures April 1, 1998. Future annual principal loan repayment requirements are as follows: (In thousands of dollars) 1996 $ 626 1997 693 1998 441 Total $1,760 First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) An unsecured note for $31,250 is payable in quarterly installments of $15,625 plus interest at the prime rate (8.75% at September 29, 1995) plus 0.5%. The note matures March 25, 1996. NOTE 7. Stockholders' Equity During fiscal 1995, the Company declared and paid four quarterly cash dividends totaling $0.20 per share of common stock, along with declaring and issuing two 5% common stock dividends. On October 26, 1995, subsequent to the period reflected in this report, the Board of Directors declared the regular quarterly cash dividend of $0.05 per share along with a 5% common stock dividend, both payable on November 8, 1995, to shareholders of record on November 22, 1995. Stockholders' Equity and all per share figures have been adjusted to reflect the common stock dividend. NOTE 8. Income Taxes Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable for future years to differences between financial statement and tax basis of existing assets and liabilities. The effect of tax rate changes on deferred taxes is recognized in the income tax provision in the period that includes the enactment date. The components of income taxes are: (In thousands of dollars) September 29, September 30, September 24, 1995 1994 1993 ------------- ------------- ------------- Federal Current $ 2,051 $ 1,463 $ 2,475 Deferred (904) 466 (165) State and local Current 1,097 755 1,146 Deferred (374) 192 (81) Total income taxes $ 1,870 $ 2,876 $ 3,375 The reasons for the difference between the expected income tax expense using the federal statutory rate and the income tax expense are as follows: (In thousands of dollars) September 29, September 30, September 24, 1995 1994 1993 ------------- ------------- ------------- Income taxes at federal statutory rate $ 1,775 $ 2,505 $ 2,984 State income taxes, net of federal income taxes 477 625 703 Tax-exempt interest income (514) (348) (357) Non-deductible expenses 132 94 45 Total income taxes $ 1,870 $ 2,876 $ 3,375 First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The temporary differences that give rise to significant portions of deferred tax assets are as follows: (In thousands of dollars) September 29, September 30, 1995 1994 ------------- ------------- Receivables $ 80 $ 45 Securities held for investment (345) (606) Fixed assets 267 340 Deferred compensation 2,057 824 Other 145 323 Total deferred tax asset $2,204 $ 926 The Company has not recorded a valuation allowance for deferred tax assets as income in the carryback period is sufficient to realize the benefit of future deductions. NOTE 9. Employee Benefit Plans The Company maintains a deferred profit sharing plan (Internal Revenue Code Section 401(k) Plan) which permits eligible employees to defer a percentage of their compensation. Company contributions to eligible participants may be made at the discretion of the Board of Directors. The Company contributed $140,000 in 1995, $56,000 in 1994, and $46,000 in 1993. The Company also participates in an Employee Stock Bonus Plan (Internal Revenue Code Section 401(a)) which permits eligible employees to contribute up to 8% of their compensation on an after-tax basis. The Company makes matching contributions equal to a percentage of each employee's contributions. Company contributions vest in accordance with the Plan and are tax-deferred until withdrawal. Employee and Company contributions are invested solely in the common stock of First Albany Companies Inc. The Company contributed $408,000 in 1995, $334,000 in 1994, and $244,000 in 1993. NOTE 10. Incentive Plans In 1982, the Company established a Stock Incentive Plan (the "1982 Plan") which, as amended by stockholders in 1987, authorized issuance of options to officers and key employees to purchase up to 800,000 shares of common stock. On February 27, 1989, stockholders approved adoption of the First Albany Companies Inc. 1989 Stock Incentive Plan (the "1989 Plan"). Coincident with the adoption of the 1989 Plan, the 1982 Plan was terminated. Options previously granted under the 1982 Plan remain valid in accordance with the terms of the grant of such options; however, the grant of new options under the 1982 Plan was ended. Both the 1982 Plan and 1989 Plan provide for incentive stock options (ISOs) which meet the requirements of Section 422A of the Internal Revenue Code of 1954, as amended, and nonqualified stock options (NSOs) which may be granted. ISOs are granted at prices not less than fair value at the date of the grant; NSOs may be issued at prices less than fair market value. In addition, under the 1989 Plan, stock appreciation rights (SARs) may be granted in tandem with ISOs or NSOs. SARs may be exercised only if the related options (or portions thereof) are surrendered and at such time as the fair market value of the shares underlying the option exceeds the option price for such shares. Upon exercise of SAR and surrender of the related option, an employee will be entitled to receive an amount equal to the excess of the fair market value of one share at the time of such surrender over the option price per share specified in such option times the number of such shares called for by the option, First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) or portion thereof, which is so surrendered. Payment may be made in cash, shares of common stock, or a combination thereof. SARs may not be exercised before six months from date of grant. Both ISOs and NSOs may not have a term of more than ten years. Under certain conditions, the Company is required to purchase shares issued under this Plan at prices ranging from the original exercise or award a price to the greater of the then book or market value. If NSOs are exercised, the difference between the option price and the selling price will be recognized as an expense in the income statement. Option transactions for the 3-year period ended September 29, 1995 under the 1982 Plan were as follows: (all are ISOs unless otherwise noted) Exercised Issued Or And Options Total Terminated Exercisable Issuable Authorized ---------- ----------- -------- ---------- September 25, 1992 797,000 3,000 0 800,000 Additional options authorized 3,950 3,950 Options expired adjustment (38,000) 38,000 Options exercised at $4.76 5,000 (5,000) September 24, 1993 764,000 39,950 0 803,950 Additional options authorized 3,280 3,280 Options exercised at $4.31 to $5.96 7,220 (7,220) Options forfeited (4,410) 4,410 Options terminated 4,410 (4,410) September 30, 1994 775,630 31,600 0 807,230 Additional options authorized 2,908 2,908 Options exercised at $4.70 to $5.00 11,605 (11,605) September 29, 1995 787,235 22,903 0 810,138 Issued and exercisable options are outstanding at $3.91 - $5.41 per share. During fiscal year 1995, the Company declared two 5% common stock dividends. These dividends resulted in an additional 2,908 options authorized. First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Option transactions during the 3-year period ended September 29, 1995 under the 1989 Plan were as follows: Issued Issued And But Not Options Options Total Exercisable Exercisable Issuable Exercised Authorized ----------- ----------- -------- --------- ---------- September 25, 1992 332,375 138,375 195,000 34,250 700,000 Additional options authorized 51,891 11,257 4,519 67,667 Options issued and exercisable: $6.12 - $7.50 340,000 (340,000) Options exercisable: $5.125 to $6.25 45,249 (45,249) Options issued but not exercisable: $6.12 15,000 (15,000) Options exercised: $4.93 - $5.22 (11,157) 11,157 Options terminated (376,733) (41,663) 418,396 September 24, 1993 381,625 77,720 262,915 45,407 767,667 Additional options authorized 43,914 6,057 283,687 333,658 Options issued and exercisable: $4.48 - $9.43 126,891 (126,891) Options exercisable: $4.48 to $6.59 37,026 (37,026) Options exercised: $5.65 - $6.48 (57,061) 57,061 Options terminated (8,770) (2,893) 11,663 September 30, 1994 523,625 43,858 431,374 102,468 1,101,325 Additional options authorized 53,309 8,395 38,353 100,057 Options issued but not exercisable: $7.62 to $8.23 137,750 (137,750) Options exercisable: $4.23 to $5.98 27,633 (27,633) Options exercised: $4.06 to $5.98 (46,646) 46,646 Options terminated (479) 479 September 29, 1995 557,442 162,370 332,456 149,114 1,201,382
Issued and exercisable options are outstanding at $4.23 - $8.23 per share During fiscal year 1995, the Company declared two 5% common stock dividends. These dividends resulted in an additional 100,057 options authorized. First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) In 1992, the Company established the First Albany Companies Inc. Restricted Stock Plan which authorized the issuance of up to 331,509 shares of common stock (adjusted for all stock dividends) to certain key employees of the Company. Awards under this plan expire over a four-year period after the award date and are subject to certain restrictions including continued employment. As of September 29, 1995, 36,880 shares have been awarded under this plan. The fair market value of the awards will be amortized over the period in which the restrictions are outstanding. The Company has various other incentive programs which are offered to eligible employees. These programs consist of cash incentives and deferred bonuses. Amounts awarded vest over periods ranging from three to five years. Costs are amortized over the vesting period and aggregated $1,343,000 in 1995, $1,828,000 in 1994, and $369,000 in 1993. NOTE 11. Commitments and Contingencies The Company's main and sales offices, and certain office and communication equipment are leased under noncancellable operating leases, which expire at various times through 2003. Future minimum annual rentals payable are as follows: (In thousands of dollars) 1996 $ 2,963 1997 2,379 1998 2,110 1999 1,720 2000 1,014 Thereafter 1,331 Total $11,517 Annual rental expense including utilities for 1995, 1994, and 1993 approximated $3,630,000, $3,955,000, and $3,932,000, respectively. In the normal course of business, the Company has been named a defendant, or otherwise has possible exposure, in several claims. Certain of these are class actions which seek unspecified damages which could be substantial. Although there can be no assurance as to the eventual outcome of litigation in which the Company has been named as a defendant or otherwise has possible exposure, the Company has provided for those actions most likely to result in adverse dispositions. Although further losses are possible, the opinion of management, based upon the advice of its attorneys and general counsel, is that such litigation will not, in the aggregate, have a material adverse effect on the Company's liquidity or financial position, although it could have a material effect on quarterly or annual operating results in the period in which it is resolved. The Company is contingently liable under bank stand-by letter of credit agreements, executed in connection with security clearing activities, totaling $3,710,000 at September 29, 1995. NOTE 12. Net Capital Requirements The Corporation is subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. The Corporation has elected to use the alternative method, permitted First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) by the Rule, which requires that the Corporation maintain a minimum net capital equal to 2 percent of aggregate debit balances arising from customer transactions, as defined. At September 29, 1995, the Corporation had net capital of $17,178,000 which was 18% of aggregate debit balances and $15,303,000 in excess of required minimum net capital. NOTE 13. Financial Instruments with Off-Balance-Sheet Risk In the normal course of business, the Company's customer and correspondent clearance activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose the Company to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss. The Company's customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to its customers, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the customers' accounts. In connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased, substantially all of which are transacted on a margin basis subject to individual exchange regulations. Such transactions may expose the Company to significant off- balance-sheet risk in the event margin requirements are not sufficient to fully cover losses that customers may incur. In the event the customer fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer's obligations. The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels daily and, pursuant to such guidelines, requires the customer to deposit additional collateral, or to reduce positions, when necessary. The Company's customer financing and securities settlement activities require the Company to pledge customer securities as collateral in support of various secured financing sources such as bank loans and securities loaned. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company controls this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposure. In addition, the Company establishes credit limits for such activities and monitors compliance on a daily basis. In addition, the Company has sold securities that it does not currently own and therefore will be obligated to purchase such securities at a future date. The Company has recorded these obligations in the financial statement at the September 29, 1995 market values of the related securities and will incur a loss if the market value of the securities increases subsequent to September 29, 1995. The Company acts as a manager and co-manager in underwriting security transactions. In this capacity, there is risk if the potential customer does not fulfill the obligation to purchase the securities. The Company controls this risk by dealing primarily with institutional investors. In most cases, no one institutional customer subscribes to the majority of the securities being sold, thereby spreading the risk for this type of loss among many established customers. The Company also maintains credit limits for these activities and monitors compliance with applicable limits and industry regulations on a daily basis. First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 14. Concentrations of Credit Risk The Company is engaged in various trading and brokerage activities whose counterparties primarily include broker-dealers, banks, and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the credit worthiness of the counterparty or issuer of the instrument. The Company seeks to control credit risk by following an established credit approval process, monitoring credit limits, and by requiring collateral where appropriate. The Company purchases debt securities and may have significant positions in its inventory subject to market and credit risk. In order to control these risks, security positions are monitored on at least a daily basis. Should the Company find it necessary to sell such a security, it may not be able to realize the full carrying value of the security due to the significance of the position sold. The Company reduces its exposure to changes in securities valuation with the use of municipal bond index futures contracts. (See Note 16.) If a single security position held in inventory represents a significant portion of net capital, referred to as "undue concentration" as defined by SEC Rule 15c3-1, the Company may not be able to realize the full carrying value of the security if the entire position was required to be sold. The total value of securities held in inventory at September 29, 1995, which met this criterion was $8,659,000. At September 30, 1994, the Company had no securities in inventory which met this criterion. NOTE 15. Market Value of Financial Instruments The financial instruments of the Company are reported on the Statement of Financial Condition at market or fair value or at carrying amounts that approximate fair value with the exception of First Albany Companies Inc.'s securities not readily marketable, which are recorded at cost. In December 1995, the value of such securities, as a result of an initial public offering was $5,400,000. The fair value of other financial assets and liabilities (consisting primarily of receivable from and payable to brokers dealers, clearing agencies, customers, securities borrowed and loaned, and bank loans payable) are considered to approximate the carrying value due to the short-term nature of the financial instruments. The Company also enters into transactions in financial instruments that are not recognized in the Statement of Financial Condition. The notional amounts of the open transactions at September 29, 1995, are disclosed in Note 16. NOTE 16. Derivative Financial Instruments The Company does not engage in the proprietary trading of derivative securities with the exception of highly liquid index future contracts and options. These index future contracts and options are used to hedge securities positions in the Company's inventory. Gains and losses on these financial instruments are included as revenues from principal transactions. Trading profits and losses relating to these financial instruments were as follows: (In thousands of dollars) Trading Profits-State and Municipal Bonds $ 5,068 Index Futures Hedging Losses (1,350) Trading Profits-Corporate Stocks 1,159 Options (206) Net Trading Revenues $ 4,671 First Albany Companies Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) As of September 29, 1995, the contractual or notional amounts related to these financial instruments were as follows: (In thousands of dollars) Average Notional or Year End Notional or Contract Market Value Contract Market Value --------------------- --------------------- Index Futures Contracts $(5,819) $(20,773) Options 121 100 The contractual or notional amounts related to these financial instruments reflect the volume and activity and do not reflect the amounts at risk. The amounts at risk are generally limited to the unrealized market valuation gains on the instruments and will vary based on changes in market value. Futures contracts are executed on an exchange and cash settlement is made on a daily basis for market movements. The settlement of the aforementioned transactions is not expected to have a material adverse effect on the financial condition of the Company. The market or fair value of the options are recorded in securities owned while the open equity in the future contracts are recorded as receivables from clearing organizations. FIRST ALBANY COMPANIES INC. SUPPLEMENTARY DATA SELECTED QUARTERLY FINANCIAL DATA (Unaudited) (In thousands of dollars, except per share data)
Quarters Ended 1995 Dec. 31 Mar. 31 June 30 Sept. 29 - ---- ------- ------- ------- -------- Total revenues $ 28,825 $ 27,884 $ 32,760 $ 33,630 Interest expense (4,551) (4,173) (5,681) (5,499) Net revenues 24,274 23,711 27,079 28,131 Total expenses excluding interest (22,995) (22,994) (25,494) (26,492) Income before income taxes 1,279 717 1,585 1,639 Income tax expense (436) (205) (592) (637) Net income $ 843 $ 512 $ 993 $ 1,002 Net income per common and common equivalent share: Primary $ .18 $ .11 $ .21 $ .21 Fully diluted $ .18 $ .11 $ .21 $ .21 Quarters Ended 1994 Dec. 31 Mar. 25 June 24 Sept. 30 - ---- ------- ------- ------- -------- Total revenues $ 29,749 $ 27,154 $ 24,590 $ 26,191 Interest expense (2,428) (2,133) (2,842) (3,064) Net revenues 27,321 25,021 21,748 23,127 Total expenses excluding interest (24,343) (22,993) (20,912) (21,601) Income before income taxes 2,978 2,028 836 1,526 Income tax expense (1,216) (820) (298) (542) Net income $ 1,762 $ 1,208 $ 538 $ 984 Net income per common and common equivalent share: Primary $ .37 $ .26 $ .12 $ .21 Fully diluted $ .37 $ .26 $ .12 $ .21
All per share figures have been restated for common stock dividends declared through October 1995. The sum of the quarters' earnings per share amount does not always equal the full fiscal year's amount due to the effect of averaging the number of shares of common stock and common stock equivalents throughout the year. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There has been no Form 8-K filed within 24 months prior to the date of the most recent consolidated financial statements reporting a change of accountants and/or reporting disagreements on any matter of accounting principle or financial statement disclosure. PART III Item 10. Directors and Executive Officers of the Registrant. Except as set forth below, the information required by this item will be contained under the caption "Election of Directors" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on or about April 2, 1996. Such information is incorporated herein by reference to the proxy statement. Information (not included in the Company's definitive proxy statement for the 1995 Annual Meeting of Stockholders) regarding certain executive officers of the Company is as follows: Edwin T. Brondo, age 48, Senior Vice President and Chief Administrative Officer, joined First Albany Corporation in 1993 and was elected Vice President of First Albany Companies Inc. in 1994. He previously held senior management positions at Bankers Trust, Goldman Sachs, and Morgan Stanley. David J. Cunningham, age 49, Senior Vice President and Chief Financial Officer, joined First Albany Corporation in 1975 and has served as Chief Financial Officer of First Albany Corporation since 1980 and First Albany Companies Inc. since fiscal 1986. Michael R. Lindburg, age 46, Senior Vice President, Secretary, and General Counsel, joined First Albany Corporation in 1986 and has served as Vice President, Secretary, and General Counsel of First Albany Companies Inc. since 1986. He previously served as Vice President and General Counsel of the Boston Stock Exchange. Item 11. Executive Compensation. The information required by this item will be contained under the caption "Compensation of Executive Officers and Directors" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on or about April 2, l996. Such information is incorporated herein by reference to the proxy statement. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this item will be contained under the caption "Stock Ownership of Principal Owners and Management" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on or about April 2, 1996. Such information is incorporated herein by reference to the proxy statement. Item 13. Certain Relationships and Related Transactions. The information required by this item will be contained under the caption "Certain Transactions" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on or about April 2, 1996. Such information is incorporated herein by reference to the proxy statement. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) (1) The following financial statements are included in Part II, Item 8: Report of Independent Accountants Financial Statements: Consolidated Statements of Income, For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993. Consolidated Statements of Financial Condition, as of September 29, 1995, and September 30, 1994. Consolidated Statements of Changes in Stockholders' Equity, For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993. Consolidated Statements of Cash Flows, For the Years Ended September 29, 1995, September 30, 1994, and September 24, 1993. Notes to Consolidated Financial Statements (2) The following financial statement schedule for the years 1995, 1994, and 1993 are submitted herewith: Schedule VII-Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) Exhibits included herein: Exhibit Number Description 3.1 Certificate of Incorporation of First Albany Companies Inc. (filed as Exhibit No. 3.1 to Registration Statement No. 33-1353). 3.2 By-laws of First Albany Companies Inc. (filed as Exhibit No. 3.2 to Registration Statement No.33-1353). 3.2a By-laws of First Albany Companies Inc., as amended (as filed as Exhibit No. 3.2a to Form 10-K for the fiscal year ended September 24, 1993). 4 Specimen Certificate of Common Stock, par value $.01 per share (filed as Exhibit No. 4 to Registration Statement No. 33-1353). 10.2 Lease dated February 9, 1978, between MacFarland Construction Company Inc. and First Albany Corporation for office facilities at 41 State Street, Albany, New York (filed as Exhibit No. 10.2 to Registration Statement No. 33-1353). 10.6 Deferred Profit Sharing Plan of First Albany Corporation effective October 1, 1982, as amended by shareholder vote, dated January 19, 1987 (filed as Exhibit 10.6 to Form 10-K for the fiscal year ended September 30, 1986). 10.7 Incentive Stock Option Plan of First Albany Corporation effective October 1, 1982, as amended by shareholder vote, dated January 19, 1987 (filed as Exhibit 10.7 to Form 10-K for the fiscal year ended September 30, 1987). 10.10 First Albany Companies Inc. Stock Bonus Plan effective July 8, 1987 (filed as Registration Statement No. 33-15220 (Form B) dated July 8, 1987). 10.10a First Albany Companies Inc. Stock Bonus Plan, as amended, effective June 25, 1990 (filed as Registration Statement No. 33-35166 (Form S-8) dated June 25, 1990). 10.10b First Albany Companies Inc. Stock Bonus Plan, as amended, effective February 4, 1994 (filed as Registration Statement 33-52153 (Form S-8) dated February 4, 1994). 10.10c First Albany Companies Inc. Stock Bonus Plan, as amended, effective June 2, 1995 (filed as Registration Statement 33-59855 (Form S-8) dated June 2, 1995). 10.12 First Albany Companies Inc. 1989 Stock Incentive Plan effective February 27, 1989, as approved by shareholder vote, dated February 27, 1989 (filed as Exhibit 10.12 to Form 10-K for the fiscal year ended September 30, 1989). 10.15 Lease dated June 12, 1992, between First Albany Companies Inc. and Olympia and York Limited Partnership for office space at 53 State Street, Boston, Massachusetts (filed as Exhibit 10.15 to Form 10-K for the fiscal year ended September 25, 1992). 10.16 The First Albany Companies Inc. Restricted Stock Plan as adopted by the Company on April 27, 1992 (filed as Exhibit 10.16 to Form 10-K for the fiscal year ended September 25, 1992). 10.17 Term Loan Agreement dated March 29, 1995 between First Albany Companies Inc. and The Hudson City Savings Institution. (3) Exhibits included herein: (continued) Exhibit Number Description 10.18 Sublease dated October 13, 1995 between First Albany Companies Inc. and Keycorp for office facilities at 30 South Pearl Street, Albany, New York. 11 Computation of per share earnings 22 List of Subsidiaries of First Albany Companies Inc. 24 Consent of experts (b) Reports on Form 8-K: No reports on Form 8-K have been filed by the Registrant during the last quarter of the period covered by this report. 27 Financial Data Schedule BD FIRST ALBANY COMPANIES INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND SEPTEMBER 24, 1993
COL. A COL. B COL. C COL. D COL. E Additions Balance at Charged to Balance Beginning Costs and at End of Description of Period Expenses Deductions Period Allowance for doubtful accounts -- deducted from receivables from customers: 1995 $ 106,000 $ 120,000 $ 101,000 $ 125,000 1994 $ 125,000 $ 120,000 $ 139,000 $ 106,000 1993 $ 189,000 $ 120,000 $ 184,000 $ 125,000
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST ALBANY COMPANIES INC. By: /s/ George C. McNamee ----------------------- George C. McNamee, Chairman of the Board Date: December 19, 1995. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date /s/ George C. McNamee Chairman of the Board December 19, 1995 - ------------------------- George C. McNamee /s/ Alan P. Goldberg President and Director December 19, 1995 - ------------------------- Alan P. Goldberg /s/ J. Anthony Boeckh Director December 19, 1995 - ------------------------- J. Anthony Boeckh /s/ Hon. Hugh L. Carey Director December 19, 1995 - ------------------------- Hon. Hugh L. Carey /s/ Edwin T. Brondo Vice President December 19, 1995 - ------------------------- Edwin T. Brondo /s/ David J. Cunningham Vice President and December 19, 1995 - ------------------------- Chief Financial Officer David J. Cunningham (Principal Accounting Officer) /s/ Hugh A. Johnson, Jr. Senior Vice President December 19, 1995 - ------------------------- and Director Hugh A. Johnson Jr. /s/ Michael R. Lindburg Vice President December 19, 1995 - ------------------------- General Counsel Michael R. Lindburg /s/ Daniel V. McNamee Director December 19, 1995 - ------------------------- Daniel V. McNamee /s/ Charles L. Schwager Director December 19, 1995 - ------------------------- Charles L. Schwager Director December 19, 1995 - ------------------------- Benaree P. Wiley EX-10.17 2 EXHIBIT 10.17 NOTE $2,000,000.00 Date: March 29, 1995 FIRST ALBANY COMPANIES, INC. Borrower 41 State Street, Albany, New York 12201 Borrower's Address 1. BORROWER'S PROMISE TO PAY FIRST ALBANY COMPANIES, INC. (the "Borrower" or the "Undersigned"), for value received, promises to pay to the order of THE HUDSON CITY SAVINGS INSTITUTION (the "Bank", "Lender" or "Note Holder") the sum of TWO MILLION AND 00/100 DOLLARS ($2,000,000.00) (the "Principal") at One Hudson City Centre, Hudson, New York 12534, which shall be paid at such rate and in accordance with such terms as indicated below. 2. RATE The interest rate that the Borrower shall pay shall be: A variable Interest Rate equal to one and one-half (1.50) percentage points per annum above the prime rate announced by the Lender from time to time, at its principal office, as its best lending rate. This interest rate will change as and when the prime rate changes. Such change will become effective immediately upon announcement by the Lender of the change in its prime rate. The Lender shall not be required to deliver any notice to the Borrower of a change in the Interest Rate. However, upon request, the Lender shall provide the Borrower with information regarding the dates and amounts of the change in its best lending rate. At the present time the prime rate is nine percent (9.00%) and the initial Interest Rate of this Note is ten and one-half percent (10.50%). There is no maximum limit on the amount the interest rate may change. 3. REPAYMENT TERMS The Borrower will repay this Note by making successive monthly payments of Principal and interest of $65,005.00 each commencing on May 1, 1995 and on the same date of each successive month thereafter until April 1, 1998, the end of the term, when the remaining unpaid Principal and interest shall be due and payable in full. Additionally, an interest only payment on the outstanding Principal balance on the amount loaned for the period of March 29, 1995 through March 31, 1995 shall be due on May 1, 1995. If the Interest Rate changes, the amount of the monthly payment will automatically change to such amount as is required to pay a Two Million and 00/100 Dollar ($2,000,000.00) loan over a period of three (3) years based upon the new interest rate. 4. BUSINESS LOAN The Borrower represents and warrants that this Note evidences a loan for business or commercial purposes and is not a consumer transaction. 5. APPLICATION OF PAYMENTS Each payment received on this Note shall be applied first to interest due and then to the outstanding principal balance. However, if there are any additional amounts due to the Bank hereunder, such as late charges, the Bank may elect to apply any monies received for payment of such additional amounts due, prior to applying same toward payment of the principal balance. 6. COLLECTION OR ENFORCEMENT COSTS If it is necessary for the Bank to bring any action or proceeding in order to collect any amounts due hereunder or as a result of a breach of any of the terms or conditions herein, including an action or proceeding pursuant to Article 9 of the Uniform Commercial Code, or if the Bank is made a party to a lawsuit by virtue of this agreement, the Borrower shall be responsible for paying all costs, expenses and reasonable attorneys' fees incurred by the Bank in such lawsuit, action or proceeding, and also for all costs, expenses and reasonable attorneys' fees incurred by the Bank incidental to the care, preservation, processing and sale of the Collateral, or in any way relating to the rights of the Bank hereunder. 7. BINDING AGREEMENT; GOVERNING LAW The Note shall be binding upon the heirs, successors and assigns of the Borrower and the Bank. It shall be interpreted and construed in accordance with the laws of New York State. 8. MORE THAN ONE SIGNER If more than one person or entity signs this Note as a Borrower, the obligations contained herein shall be deemed joint and several and all references to "Borrower" shall apply to all persons signing this agreement both individually and jointly. 9. DEFAULT The total unpaid balance of this Note shall become due and payable without notice or demand upon the occurrence of any one of the following "Events of Default"; (a) default in any payment of principal or interest when due under this Note and the continuance thereof for twenty (20) days after the due date, except that the twenty-day period shall not apply for any payment due at the end of the term or upon demand, which shall be due immediately upon such date; (b) default in any payment of late charges when due under this Note and the continuance thereof for ten (10) days after the due date; (a) failure to fulfill or perform any other term of this Note or to keep any promises made in this Note or related Term Loan Agreement, mortgage, building loan agreement or security agreement, if any, and such failure continues for a period of ten (10) days after giving of notice except that no such notice shall be required upon a default pursuant to paragraph 20 herein; (d) a false or incomplete statement in any information submitted to the Bank in connection with this Note; (e) entry of a judgment against the Borrower; (f) a significant decline in the value of any real or personal property securing payment of this Note; (g) business failure or dissolution of any Borrower; (h) commencement of any bankruptcy, receivership or similar proceeding involving any Borrower as debtor; (i) transfer of any interest in the Collateral pledged or granted to the Bank as a security interest, or any other breach by the Borrower with regard to the terms and conditions of the security instrument given by the Borrower to the Lender; (j) transfer of any interest which the Borrower has in its wholly owned subsidiary, First Albany Corporation, the transfer of any of the stock of First Albany Corporation to any other party or entity or the sale or transfer of any of the assets of First Albany Corporation to any other entity, other than in the regular course of business of said corporation. 10. WAIVER The Borrower and all endorsers, sureties and guarantors hereof hereby jointly and severally waive presentment for payment, demand, notice of non- payment, notice of protest and/or notice of dishonor, and protest of this Note. 11. EXCESS INTEREST At no time shall the Interest Rate exceed the highest rate allowed by law for this type of loan. Should this occur or should the Lender ever erroneously collect interest at a rate which exceeds the applicable legal limit, such excess will be credited to principal. However, this shall not be grounds for voiding the Borrower's obligations hereunder and in such event, the Borrower's obligations shall be deemed to be automatically modified to conform with any such applicable legal limit. 12. GIVING OF NOTICES OR DEMANDS Any notice or demand by the Bank to the Borrower shall be deemed to have been made and completed at such time as the Bank shall mail by first class mail said notice or demand to the Borrower at the address indicated in the introductory paragraph, or at a different address if written notice of a change is given by the Borrower to the Bank and upon receipt or refusal of delivery. Any notice that must be given to the Bank undo this Note shall be given by mailing it by first class mail to the Bank at its address stated in the introductory paragraph which shall be deemed to be made and completed upon receipt or refusal of delivery. In the alternative any notice or demand given either by the Borrower or by the Lender shall be deemed sufficiently given if delivered by any one of the following methods: (i) personal delivery which, in case of notice to the Lender, shall be to an officer or principal thereof; (ii) certified or registered mail, return receipt requested, postage prepaid and properly addressed as set forth in the introductory paragraph; or (iii) Federal Express or other nationally recognized courier services providing written evidence of delivery. 13. RIGHT TO TRANSFER The Bank may transfer or assign this Note and deliver all or any of its rights in the Collateral held as security therefore to another party or entity which shall thereupon become vested of all of the powers and rights given to the Bank herein, and the Bank shall thereafter be forever relieved and fully discharged of any liability or responsibility to the Borrower. 14. RIGHT OF SETOFF The Bank, in addition to any right available to it under applicable law, shall have the right, immediately and without notice or further action by it, to set off against this Note and/or other liabilities of the Borrower hereof, all money owed by the Bank to the Borrower in any capacity, whether by savings account, checking account, Certificate of Deposit or otherwise; and the Bank shall be deemed to have exercised such right of set off and to have made charge against any such money immediately upon the occurrence of default, even though such charge is made or entered on the books of the Bank subsequent thereto. 15. LATE CHARGES In addition to any other payment required herein, the Borrower shall also be obligated to pay a late charge of five percent (5%) for any payment due hereunder which is received by the Bank more than ten (10) days after such payment is due. This payment shall automatically be payable by the Borrower to the Bank, without demand, and the failure to pay same shall constitute a default in accordance with paragraph "9" of this Note. 16. ALL MODIFICATIONS IN WRITING No modification or waiver of any of the provisions of this Note shall be effective unless in writing, signed by an officer of the Bank and only to the extent therein set forth, nor shall any such waiver be applicable, except in the specific instance for which given. 17. WAIVER OF JURY TRIAL AND SETOFFS The Borrower hereby waives trial by jury and the right to interpose any setoffs of any kind in any litigation commenced by the Bank relating to this Note or any Collateral security for this Note. 18. STRICT PERFORMANCE The failure of the Bank to immediately act with respect to any of its rights herein shall not be deemed to be a waiver on its part with respect to any such rights, and the Bank shall have the right to so act with respect to any of its rights herein at any time thereafter. 19. SECURED NOTE In addition to the protections given to the Lender under this Note, the Borrower has also given the Lender a Mortgage and/or Security Agreement covering certain real and/or personal property (the "Security Instrument") dated the same date as this Note, which provides the Lender with certain rights as set forth herein and also sets forth certain obligations on the part of the Borrower. A default in any of the provisions of the Security Instrument shall constitute a default with respect to this Note. 20. SALE OR TRANSFER OF PROPERTY OR- INTEREST THEREIN IS PROHIBITED The Borrower may not sell or otherwise transfer all or any part of any property pledged as collateral pursuant to any Security Instrument executed by the Borrower in connection with this transaction except in the ordinary course of business. In addition, if the Borrower is not a natural person, no beneficial interest in the Borrower, corporation, partnership or other entity may be sold or otherwise transferred to any other party without the express written consent of the Lender. If all or any part of the property or any interest in the property referred to herein is sold or otherwise transferred or if the beneficial interest in the Borrower, corporation, partnership or other entity is sold or otherwise transferred where the Borrower is not a natural person, the entire indebtedness under the Note and underlying Security Instruments shall become immediately due and payable. If the Borrower fails to pay these sums, the Lender may bring a lawsuit for foreclosure and sale or invoke any remedies permitted pursuant to this Note or any of the Security Instruments, without further notice or demand on the Borrower. 21. BORROWER'S RIGHT TO PREPAY The Borrower shall have the right to make a full prepayment or partial prepayment of the principal due hereunder at any time, without penalty. When the Borrower makes a prepayment, the Borrower will tell the Lender, in writing, that it is doing so. If the Borrower makes a partial prepayment, there will be no change in the due dates or in the amount of the monthly payments unless otherwise agreed to in writing by the Lender. IN WITNESS WHEREOF, this Note has been signed by the Borrower at Albany, New York on March 29, 1995. FIRST ALBANY COMPANIES, INC., Borrower By: /s/ David Cunningham --------------------- David Cunningham Chief Financial Officer STATE OF NEW YORK: ss.: COUNTY OF ALBANY: On this 29th day of March, 1995, before me personally came David J. Cunningham, to me known, who, being by me duly sworn, did depose and say that he resides in Albany, New York; that he is the Chief Financial Officer of First Albany Companies, Inc., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the Board of Directors of said corporation. /s/ Theodore Guterman II ------------------------- Notary Public THEODORE GUTERMAN II Notary Public, State of New York Qualified in Columbia County Commission Expires 2/28/97 EX-10.18 3 EXHIBIT 10.18 CONSENT PS ASSOCIATES, a New York limited partnership, having an office at 54 State Street, Albany, New York 12207 ("Landlord"), hereby consents to the subletting by KEYCORP, an Ohio corporation, having an office at One KeyCorp Plaza, Albany, New York 12207 ("Tenant"), to, FIRST ALBANY COMPANIES INC., a New York corporation, having a place of business at 41 State Street, Albany, New York 12207 ("Subtenant"), pursuant to an agreement of sublease, dated October 13, 1995 (the "Sublease"), a copy of which is annexed hereto as Exhibit "A" for certain space (the "Sublease Space"), as more particularly described in the Sublease, which Sublease Space is a portion of the premises (the "Premises") presently leased and demised by Landlord to Tenant under a lease, dated as of January 31, 1986, as amended by First Lease Amendment dated as of December 28, 1992, a Second Lease Amendment dated as of March 31, 1993 and a Third Lease Amendment dated as of September 14, 1993 (as amended, the "Lease"), such consent is subject to, and in reliance upon, the representations, warranties, covenants, terms and conditions contained herein. All capitalized terms contained herein shall have the meaning ascribed to them in the Lease unless otherwise indicated herein. 1. Sublease Subordinate to Lease. Except as otherwise specifically provided herein, the Sublease shall be subject and subordinate at all times to the Lease and to all of the provisions, covenants, agreements, terms and conditions of the Lease and this Consent, and Subtenant shall not do or permit anything to be done in connection with Subtenant's use and occupancy of the Sublease Space which would violate any of said provisions, covenants, agreements, terms and conditions. Any breach or violation of any provision of the Lease or this Consent by Subtenant shall be deemed to be, and shall constitute a default by Tenant in fulfilling such provision. During the term of the Sublease or any extensions thereof, Subtenant shall duly observe and comply with all of the terms, covenants, agreements, provisions, obligations and conditions on the part of Subtenant to be performed or observed under the Sublease and under the Lease (as modified by this Consent), provided, however, Subtenant shall be under no obligation to name Landlord as an additional insured on any comprehensive general liability policy carried by Subtenant. 2. Representations and Warranties. Tenant represents and warrants that no rent or other consideration is being paid or is payable to Tenant by Subtenant for the right to use or occupy the Sublease Space and no profit or gain is being realized by Tenant from such subletting and Tenant and Subtenant represent and warrant that the Sublease is the complete and true agreement between the parties. 3. Amendment of Sublease. Waiver. Tenant and Subtenant agree that they shall not change, modify or amend, the Sublease or enter into any additional agreements relating to or affecting the use or occupancy of the Sublease Space or any other portion of the Premises or the use, sale or rental of Tenant's fixtures, leasehold improvements, equipment, furniture or other personal property, without first obtaining Landlord's prior written consent thereto. Neither this Consent, the Sublease, or the Lease, nor any acceptance of rent or other consideration from the Subtenant by Landlord or Landlord's agent shall operate to waive, modify, impair, release or in any manner affect Tenant's liability under the Lease or Subtenant's liability under the Sublease, nor shall the foregoing operate to waive any breach or violation of any provision of the Lease or any rights of Landlord against any person, firm, association, corporation or other entity liable or responsible for the performance of any of the provisions, covenants, agreements, terms or conditions contained in the Lease, nor shall the foregoing enlarge or increase Landlord's obligations or Tenant's rights or diminish Landlord's rights or Tenant's obligations under the Lease or otherwise; and all provisions, covenants, agreements, terms and conditions of the Lease are hereby declared by Tenant to be in full force and effect. Except as otherwise set forth herein, no assignment of the Lease or Sublease or further sublease of all or any part of the Premises or the Sublease Space shall be made by Tenant or Subtenant, except in accordance with the provisions of the Lease and this Consent and any further consent to a sublease or assignment shall not be nor shall it be deemed to be a waiver of any provision of the Lease. 4. Ratification of Sublease. Nothing contained herein shall be construed as a consent to, or approval of, or ratification by Landlord of any of the particular provisions of the Sublease (except as may be expressly provided herein) or as a representation or warranty by Landlord to Tenant, Subtenant or any other party or entity with respect to the subject matter thereto. Landlord has not, and shall not, review or pass upon any of the provisions of the Sublease and shall not be bound or estopped in any way by the provisions of the Sublease. 5. Remedies for Default. In the event of any default by Tenant or Subtenant in the full performance and observance of any of their respective obligations hereunder or in the event any representation or warranty of Tenant or Subtenant made herein shall prove to be false or misleading in any way, such event may, at Landlord's option, be deemed a default under the Lease, and Landlord shall have and may pursue all of the rights, powers and remedies provided for in the Lease or at law or in equity or by statute or otherwise with respect to defaults thereunder or hereunder. 6. Use. Subject to all of the provisions, covenants, agreements, terms and conditions of the Lease, the Sublease Space and each part thereof shall be used by Subtenant solely for general offices, including, but not limited to, the operation of an investment banking and securities brokerage business (provided the same shall not involve dealing with the general public on an off- the-street retail basis) and for no other purpose. 7. Termination; Attornment. A. If for any reason at any time prior to the expiration date of the Lease, the term of the Lease shall terminate or be terminated by operation of law or by any provision of the Lease, the Sublease and the term thereof shall terminate on the date of such termination, and Subtenant, at Subtenant's sole cost and expense, shall (i) quit and surrender the Sublease Space to Landlord, broom clean, in good order and condition, ordinary wear and tear and damage, maintenance, and repair work for which Subtenant is not responsible for under the terms of the Sublease excepted, (ii) remove from the Sublease Space and the Building all of Subtenant's personal property and all other property and effects of Subtenant and all persons claiming through or under Subtenant, and (iii) repair all damage to the Sublease Space and the Building occasioned by such removal to the Building standard original condition. Landlord shall have the right to retain any property and personal effects which shall remain in the Sublease Space or the Building, after the date of termination of the Sublease, without any obligation or liability to Tenant or Subtenant, and to retain any net proceeds realized from the sale thereof, without waiving Landlord's rights under the foregoing provisions of this paragraph and the provisions of the Lease. If Subtenant shall fail to vacate and surrender the Sublease Space in accordance with the provisions of this paragraph, Landlord shall be entitled to all of the rights and remedies under the Lease which are available to a landlord against a tenant holding over after the expiration of a term, and any such holding over shall be and be deemed to be a default under the Lease. B. The foregoing provisions of paragraph 7A notwithstanding, but subject to Subtenant's rights to terminate the Sublease in the event of a casualty or condemnation, and provided the term of the Lease shall not have been terminated by Tenant as a result of Landlord's default under the Lease, Landlord may, at its option, upon written notice to Tenant and Subtenant on or before the date of termination of the term of the Lease and without any additional or further agreement of any kind on the part of Tenant or Subtenant, elect to require Subtenant to attorn to Landlord and to continue the Sublease with the same force and effect as if Landlord, as lessor, and Subtenant, as lessee, had entered into a lease as of such termination date, for a term equal to the then unexpired term of the Sublease and containing the same provisions as those contained in the Sublease. In the event of such election by Landlord, (i) Subtenant agrees to so attorn to Landlord, and Landlord and Subtenant shall have the same rights, obligations and remedies as were had by Tenant and Subtenant, respectively, under the Sublease prior to such termination date, except that in no event shall Landlord be (a) liable for any act or omission by Tenant, (b) subject to any offsets or defenses which Subtenant had or might have against Tenant, (c) bound by any rent or additional rent or other payment paid by Subtenant to Tenant more than thirty (30) days in advance of the termination date, (d) bound by any covenant to undertake or complete any work to the Sublease Space or any part hereof, except for repair or replacement to the Sublease Space which is damaged by casualty, taken by eminent domain or otherwise required to be repaired or replaced by Landlord pursuant to the terms of the Sublease, or (e) bound by any pre-existing obligation to make any payment to Subtenant; (ii) Tenant shall deliver to Landlord any security deposit which Tenant is then holding under the Sublease; and (iii) Subtenant shall reimburse Landlord for any costs that may be incurred by Landlord in connection with such attornment, including, without limitation, reasonable legal fees and disbursements incurred in connection with any such attornment. The foregoing provisions of this paragraph 7B shall apply notwithstanding that, as a matter of law, the Sublease may terminate upon the expiration, termination or surrender of the Lease and shall be self-operative upon any such election by Landlord to require attornment; provided, however, that either party, upon demand of the other party agrees to execute and deliver such instrument or instruments as the requesting party may reasonably request to evidence and confirm the foregoing provisions of this paragraph 7B. However, in the event that Subtenant has the right to terminate the Sublease as a result of a casualty or condemnation pursuant to the terms of the Sublease, Landlord shall not be entitled to require that Subtenant attorn to Landlord hereunder. If Landlord elects to exercise its option under this paragraph 7B, then the foregoing provisions of paragraph 7A shall be of no force or effect. 8. Indemnity. Tenant and Subtenant hereby indemnify and hold harmless Landlord from and against all liabilities, claims, obligations, damages, penalties, costs and expenses (including, without limitation, attorneys' fees and disbursements) which Landlord may incur or suffer by reason of (i) any breach or default by Subtenant, its agents, contractors, employees, invitees, or licensees of any covenant, agreement, term, provision or condition of the Lease, the Sublease or this Consent, (ii) any work done in or to the Sublease Space by or on behalf of Subtenant, (iii) any act, omission or negligence of Subtenant, its agents, contractors, employees, invitees or licensees, or (iv) the conduct of Subtenant's business in, or Subtenant's use and occupancy of, the Sublease Space. In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant or Subtenant, upon written notice from Landlord, shall, at Tenant's or Subtenant's sole cost and expense, as the case may be, resist or defend such action or proceeding using counsel approved by Landlord, which approval shall not be unreasonably withheld or delayed. The provisions of this paragraph shall survive the expiration or earlier termination of the term of the Sublease. The indemnity and any rights granted to Landlord pursuant to this paragraph shall be in addition to, and not in limitation of, any of Landlord's rights under the Lease. 9. Conflict. If there shall be any conflict or inconsistency between the terms, covenants and conditions of this Consent or the Lease and the terms, covenants and condition of the Sublease, then the terms, covenants and conditions of this Consent and Lease shall prevail. In the event that there shall be any conflict or inconsistency between this Consent and the Lease, the terms and conditions of this Consent shall control. 10. Notices. Any bills, statements, notices, demands, requests, consents or other communications given or required to be given under this Consent shall be effective only if rendered or given in writing and delivered personally or sent by mail (registered or certified, return receipt requested), postage prepaid, delivered to the respective party at the address hereinabove set forth or at such other address for such purpose by notice in accordance with the provisions hereof, or, if addressed to Tenant or Subtenant at the Building (if to Subtenant, to the attention of Michael R. Lindburg); the same shall be deemed to have been rendered or given on the date delivered, if delivered personally, or after three (3) business days of the date mailed, if mailed. 11. Entire Agreement. This Consent contains the entire agreement of the parties with respect to the matters contained herein and may not be modified, amended or otherwise changed except by written instrument signed by the parties sought to be bound. Furthermore, Tenant and Subtenant each acknowledge and represent that, other than this Consent, the Lease and the Sublease, there are no other agreements between Tenant and Subtenant oral or otherwise, or representations or warranties of any kind or nature referring or related to, or in connection with and the Sublease or the use and occupancy of the Premises, the Sublease Space or any other portion of the Building. 12. Governing Law. This Consent shall for all purposes be construed in accordance with, and governed by, the laws of the State of New York. 13. Payments. Tenant and/or Subtenant has paid Landlord's attorneys' fees incurred in connection with this transaction to reimburse Landlord for the time expended in reviewing and processing the request for subletting the Sublease Space. 14. Miscellaneous. A. Each right and remedy of Landlord provided for in this Consent or in the Lease shall be cumulative and shall be in addition to every other right and remedy provided for herein and therein or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or commencing of the exercise by Landlord of any one or more of the rights or remedies so provided for or existing shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies so provided for or so existing. B. The terms and provisions of this Consent shall bind and inure to the benefit of the parties hereto and their respective successors and assigns except that no violation of the provisions of paragraph 3 shall operate to vest any rights in any successor or assignee of Tenant or Subtenant. C. If any one or more of the provisions contained in this Consent shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. D. The captions contained in this Consent are for convenience only and shall in no way define, limit or extend the scope of intent of this Consent, nor shall such captions affect the construction hereof. E. This Consent may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. F. Landlord, Tenant and Subtenant each represents and warrants that each has full right, power and authority to enter into this Consent and that the person or persons executing this Consent on behalf of Landlord, Tenant or Subtenant, as the case may be, are duly authorized to do so. G. It is expressly understood and agreed that this Consent shall not create or constitute, nor shall it be deemed to create or constitute, any landlord-tenant relationship, or occupancy or license agreement between Landlord and Subtenant. H. Neither Landlord, nor the partners comprising Landlord, nor the shareholders (nor any of the partners comprising same), partners, directors or officers of any of the foregoing (collectively, the "Parties"), shall be personally liable, in any manner, by reason of, or as a consequence of, the execution or delivery of this Consent. Tenant and Subtenant shall look solely to Landlord's estate and property in the building within which the Premises are located and the rents, profits and proceeds derived therefrom and any right of offset provided to Tenant under the Lease (if any) in enforcing any of the rights which Tenant or Subtenant may have against Landlord hereunder or by reason of any of the foregoing, and shall not seek any damages against any of the Parties. I. This Consent is offered for signature by Tenant and Subtenant and it is understood that this Consent shall not be binding upon Landlord unless and until Landlord shall have executed and delivered a copy of this Consent to both Tenant and Subtenant. IN WITNESS WHEREOF, Landlord, Tenant and Subtenant have respectively executed this consent as of the 3lst day of October, 1995. TENANT: KEYCORP Attest:______________________________ By: /s/ Thomas C. Nachod Name: Thomas C. Nachod Title: Vice President SUBTENANT: FIRST ALBANY COMPANIES INC. Attest:______________________________ By: /s/ Michael R. Lindburg Name: Michael R. Lindburg Title: Senior Vice President and General Counsel LANDLORD: PS ASSOCIATES, a New York limited partnership By: PS Pearl Corporation, General Partner Attest:______________________________ By: /s/ I. David Swawite Name: I. David Swawite Title: Vice President Exhibit "A" SUBLEASE AGREEMENT The Parties (defined below) agree as follows: Date of this Sublease: October 13, 1995 Parties to this Overtenant: KeyCorp Sublease: Address for notices: Undertenant: First Albany Companies Inc. Address for notices: Information from Overlease: Landlord: PS Associates Address for notices: 54 State Street, Albany, New York 12207 Overtenant: KeyCorp Address for notices: Date of Overlease: January 31, 1986 as amended by First lease Amendment dated December 28, 1992, Second Lease Amendment dated March 31, 1993 and Third Lease Amendment dated September 14, 1993 (collectively, the "Overlease"). Overlease Term: as provided in the Overlease. Definitions: 1. Unless otherwise defined herein, capitalized terms herein shall be defined as set forth in the Overlease. Sublease Term: 2. The Sublease Term shall commence on execution (the "Commencement Date") and end at 11:59 P.M. EST on the Expiration Date. Premises Leased Under this Sublease: 3. A basement mailroom, 10,021 square feet on Floor 6 (in the area shown on Exhibit "A" annexed hereto), all of Floor 12 and all of Floors Penthouse 1 and Penthouse 2 (the "Subpremises") which Subpremises contain in the aggregate 48,876 square feet and are located in a building commonly known as KeyCorp Tower which is located at 30 South Pearl Street, Albany, New York (the "Building"). Use of Subpremises: 4. The Subpremises may be used for general and executive offices with data processing support facilities in connection with Undertenant's business and that of its subsidiaries provided however that the Subpremises must be used for purposes consistent with the provisions of Article 2 of the Overlease. Allowances: 5. Overtenant shall pay to Undertenant an amount equal to Seven Hundred Thirty Three Thousand One Hundred Forty and no/100 ($733,140.00) Dollars as an allowance (the "Allowance") toward renovation, installation and fit-up of the Subpremises ("Undertenant's Work") to be undertaken in the Subpremises by Undertenant. Overtenant shall pay Undertenant an allowance of Nine Hundred Thousand ($900,000.00) Dollars to defray Undertenant's costs and expenses of relocation (the "Relocation Allowance"). Said Allowance and Relocation Allowance shall be paid to Undertenant in accordance with the following schedule: (a) During the period between January 15, 1996 and March 31, 1996, an amount equal to the lesser of $244,380.00 or the sum for which Undertenant has received invoices for payment of the Undertenant's Work. (b) On and after April 1, 1996, at such time as invoices for completed Undertenant's Work are submitted, such sums as are set forth in said invoices with the understanding that the sums advanced pursuant to subparagraph (a) and this subparagraph (b) shall in no event exceed the lesser of the Allowance or the sums actually spent by Undertenant to complete Undertenant's Work. (c) On January 15, 1996, an amount equal to one-third (1/3) of the Relocation Allowance and thereafter, at Overtenant's election but in no event later than April 15, 1996, the balance of the Relocation Allowance. Nothing in this Section should be construed as any undertaking on the part of the Overtenant to perform or contract for any of Undertenant's Work or to relieve the Undertenant from the obligation to comply with the Tenant's Changes provisions set forth in Article 13 of the Overlease. Rent: 6. The Rent reserved under this Sublease shall be: (a) Base rent in the amount of $33,602.25 on June 15, 1996 and thereafter in the amount of $67,204.50 per month payable in advance commencing on July 1, 1996 and continuing on the first day of each and every calendar month during the Term; and (b) (1) For the purposes of this subparagraph (b), the following terms shall have the following definitions: (i) "Base Year" shall mean the period commencing on July 1, 1995 and ending on June 30, 1996. (ii) "Base Year Operating Expenses" shall mean the Operating Expenses paid by Overtenant to Landlord during the Base Year, as adjusted pursuant to Section 5.03 (a) of the Overlease. (iii) "Undertenant's Percentage" shall mean Forty Seven and 47.4593%. (2) Commencing on July 1, 1996, and continuing on the 1st day of each month thereafter, additional rent equal to Undertenant's Percentage of the amount (if any) obtained by subtracting the amount obtained by dividing the sums paid by Overtenant pursuant to Section 5.03 (a) of the Overlease for the Base Year by twelve (12) from the sum which Overtenant has been billed by Landlord for Operating Expenses for the corresponding month during each successive year of the Sublease Term. For example, if Overtenant is billed by Landlord pursuant to Section 5.03(a) of the Overlease for the month of July, 1996 in the amount of $1,000.00 and the amount determined by dividing the sums paid for the Base Year pursuant to said Section by 12 was $500.00, Undertenant's liability for additional rent pursuant to this subparagraph would be determined by multiplying $500.00 by Undertenant's Percentage. Undertenant shall receive Undertenant's Percentage of any rebate or credit or pay Undertenant' s Percentage of any additional sums due as a result of Landlord's reconciliation of the sums paid by Overtenant as Tenant's Projected Share of Operating Expenses. Overtenant shall submit to Undertenant documentation it receives from Landlord in connection with sums billed by Landlord to Overtenant, including copies of invoices and expense statements showing monthly payment calculations and recalculations. (c) Undertenant shall also pay to Overtenant one hundred (100%) percent of the amount payable by Overtenant for Cleaning Services incurred during the Sublease Term which are attributable to the Subpremises to the extent said sums paid are in excess of sums payable for Cleaning Services by Overtenant under the Lease for calendar year 1993. Said sums shall be payable as and when paid by Overtenant. (d) All sums due hereunder shall be payable to Overtenant promptly as and when the same become due and payable, without demand therefor and without any abatement, deduction or setoff whatsoever. (e) There shall be no allowance to Undertenant for diminution of rental value and no liability on the part of Overtenant by reason of inconvenience, annoyance or injury to business arising from Landlord, Overtenant or others making any changes, alterations, additions, improvements, repairs or replacements in or to any portion of the Building or the Subpremises, or in or to fixtures, appurtenances or equipment thereof, and no liability upon Overtenant for failure of Landlord or others to make any changes, alterations, additions, improvements, repairs or replacements in or to any portion of the Building or the Subpremises, or in or to the fixtures, appurtenances or equipment thereof. (f) Any failure by Undertenant to pay any sums due hereunder shall render Undertenant responsible to pay as a late charge a sum equal to six (6%) percent of the amount of fixed rent or additional rent which Undertenant may have failed to pay hereunder. Agreement to Lease and Pay Rent: 7. Overtenant sublets the Subpremises to the Undertenant, for the Sublease Term. Undertenant agrees to pay the Rent as required in the Sublease and Overtenant agrees to discharge the rental obligations under the Overlease. Sublease Subject to: 8. The Sublease is subject to the OverLease. The Undertenant states that it has received and examined the Overlease. Except as specifically modified herein, all applicable terms and conditions of the Overlease are incorporated into and made a part of this Sublease as if Overtenant were Landlord thereunder and Undertenant the Tenant thereunder and the Subpremises the Demised Premises, but incorporating such provisions herein shall not obligate Overtenant or be construed as causing Overtenant to assume or agree to perform any obligations of the Landlord or to be responsible for any representations or warranties of Landlord under the Overlease. Overtenant's Warranty 9. Overtenant warrants and represents to Undertenant that the Overlease has not been amended or modified except as described herein, that it is in full force and effect and that Overtenant has received no notice of any claim by Landlord that Overtenant is in default or breach of any of the provisions of the Overlease and that, to the best of Overtenant's knowledge, Landlord is not in default thereunder. Undertenant's Duties: 10. The Subpremises will be separately metered for electricity and Undertenant shall be responsible for all utility charges to the Subpremises. Additional Space: 11. Upon the scheduled expiration of an existing sublease for the balance of Floor 6, Overtenant will not further sublease said premises unless it gives Undertenant sixty (60) days to enter into a sublease for said premises on terms and conditions mutually satisfactory to Overtenant and Undertenant. Parking: 12. Undertenant shall have the right to use five (5) parking spaces in the basement of the Building and Undertenant will reimburse Overtenant for said spaces in an amount equal to the sum paid by Overtenant to Landlord for said spaces. Undertenant's use of said spaces shall be subject to the provisions of Sections 18.05 and 18.06 of the Overlease. Insurance: 13. In addition to the general requirement that Undertenant comply with the provisions of the Overlease, Undertenant agrees that it will provide Overtenant and Landlord with a certificate of insurance or other evidence reasonably satisfactory to Landlord and Overtenant indicating Undertenant's compliance with the provisions of Section 11.06 of the Overlease and Undertenant will provide from time to time as required by either Landlord or Overtenant, additional coverages as may be required pursuant to said Section. Landlord Events of Default: 14. Undertenant shall provide Overtenant with written notice of any default by Landlord under the Overlease. Liability and Indemnification: 15. Neither Overtenant nor any agent or employee of Overtenant shall be liable to Undertenant for any injury or damage to Undertenant or to any other person or for any damage to, or loss (by theft or otherwise) of, any property of Undertenant or any other person, irrespective of the cause of such injury, damage or loss, unless caused by or due to the negligence of Overtenant, its agents or employees, it being understood that no property, other than such as might normally be brought upon or kept in the Subpremises as an incident to the reasonable use of the Subpremises for the purposes herein permitted, will be brought upon or kept in the Subpremises. Undertenant shall indemnify and save harmless Overtenant and its agents against and from (a) any and all claims for bodily injury or property damage, (i) arising from (x) the conduct or management of the Subpremises or of any business therein, or(y) any work or thing whatsoever done, or any condition created (other than by Overtenant for Overtenant's or Undertenant's account) in or about the Subpremises during the term of this Sublease or during the period of time, if any, prior to the Commencement Date that Undertenant may have been given access to the Subpremises, or (ii) arising from any negligent or otherwise wrongful act or omission Undertenant or any of its employees, agents or contractors, and (b) all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon. In case any action or proceeding be brought against Overtenant by reason of any such claim, Undertenant upon notice from Overtenant, shall resist and defend such action or proceeding. Access: 16. Overtenant or Overtenant's agent shall have the right to enter and/or pass through the Subpremises or any part thereof, at reasonable times during reasonable hours upon reasonable notice. Destruction or Damage: 17. If the Building or the Subpremises shall be partially or totally damaged or destroyed by fire or other cause, Undertenant's obligations shall be the same as those set forth for "Tenant" under the Overlease provided however that Overtenant shall be the only party with authority to exercise the right of termination set forth in Section 22.03 of the Overlease. Condemnation: 18. If the Building or the Subpremises shall be partially or-totally condemned, Undertenant' obligations shall be the same as those set forth for "Tenant" under the Overlease provided however that Overtenant shall be the only party with authority to exercise the right of termination set forth in Section 23.01 of the Overlease. Default; Remedies: 19. This Sublease and the term and estate hereby granted are subject to the limitation that whenever Undertenant shall make an assignment of the property of Undertenant for the benefit of creditors or shall file a voluntary petition under any bankruptcy or insolvency law or any involuntary petition alleging an act of bankruptcy or insolvency shall be filed against Undertenant under any bankruptcy or insolvency law, or whenever a petition shall be filed by or against Undertenant under the reorganization provisions of the United States Bankruptcy Act or under the provisions of any law of like import, or whenever a petition shall be filed by Undertenant under the arrangement provisions of the United States Bankruptcy Act or under the provisions of any law of like import, or whenever a permanent receiver of Undertenant of or for the property of Undertenant shall be appointed, then, Overtenant may (a) at any time after receipt of notice of the occurrence of any such event, or (b) if such event occurs without the acquiescence of Undertenant, at any time after the event continues for thirty (30) days, give Undertenant a notice of intention to end the term of this Sublease at the expiration of five (5) days of service of such notice of intention and upon the expiration of said five (5) day period, this Sublease and the term and estate hereby granted, whether or not the term shall theretofore have commenced, terminate with the same effect as if that day were the Expiration Date but Undertenant shall remain liable for damages as provided herein. This Sublease and the term and estate hereby granted are subject to further limitation as follows: (a) whenever Undertenant shall default in the payment of any installment of base rent, or in the payment of any additional rent or any other charge payable by Undertenant to Overtenant, on any day upon which the same ought to be paid, and such default shall continue for five (5) days after Overtenant shall have given Undertenant a written notice specifying such default; or (b) whenever Undertenant shall do or permit anything to be done, whether by action or inaction, contrary to any of Undertenant's obligations hereunder, and if such situation shall continue and shall not be remedied by Undertenant within fifteen (15) days after Overtenant shall have given Undertenant a notice specifying the same, or, in the case of a happening or default which cannot with due diligence be cured within a period of fifteen (15) days if Undertenant shall not, (i) within said fifteen (15) day period advise Overtenant of Undertenant's intention to duly institute all steps necessary to remedy such situation, (ii) duly institute within said fifteen (15) day period, and thereafter diligently and continuously prosecute to completion all steps necessary to remedy the same and (iii) complete such remedy within such time after the date of the giving of said notice of Overtenant as shall reasonably be necessary, or (c) whenever any event shall occur or any contingency shall arise whereby this Sublease or the estate hereby granted or the unexpired balance of the term hereof would, by operation of law or otherwise, devolve upon or pass to any person, firm or corporation other than Undertenant; or (d) whenever Undertenant shall default in due keeping, observing or performance of any covenant, agreement, provision or condition of Section 4 hereof on the part of Undertenant to be kept, observed or performed and if such default shall continue and shall not be remedied by Undertenant within 24 hours after Overtenant shall have given to Undertenant a notice specifying the same. Overtenant may give to Undertenant a notice of intention to end the term of this Sublease at the expiration of three (3) days from the date of service of such notice of intention and upon the expiration of said three (3) days, this Sublease and the term and estate hereby granted, whether or not the term shall theretofore have commenced, shall terminate with the same effect as if that day were the Expiration Date, but Undertenant shall remain liable for damages as provided herein. If an order for relief is entered in any case which is commenced by or against Undertenant under the present or any future federal bankruptcy code, Overtenant shall be entitled to invoke any and all rights and remedies available to it under such bankruptcy code or this Sublease including, without limitation, such rights and remedies as may be necessary to protect adequately Overtenant's right, title and interest in and to the Subpremises or any part thereof. Adequate protection of Overtenant's right, title and interest in and to the Subpremises shall include, without limitation, invoking a requirement that: (a) Undertenant comply with all of its obligations under this Sublease; (b) Undertenant pay to Overtenant, on the first day of each month occurring subsequent to the entry of such order, a sum equal to the amount by which the Subpremises diminished in value during the immediately preceding monthly period, but, in no event, an amount which is less than the aggregate rents reserved under this Sublease for such monthly period; (c) Undertenant continue to use the Subpremises in the manner required by this Sublease; and (d) Overtenant be permitted to supervise the performance of Undertenant's obligations under this Sublease. Upon the occurrence of any of the foregoing events, Overtenant shall, in addition to the right of termination set forth herein, have the right to re-enter the Subpremises and shall also have the right to damages for the aggregate rental value set forth herein including all fixed rent and additional rent payable hereunder which would have been payable by Undertenant had this Sublease not been so terminated. A suit or suits for the recovery of such damages or any installments thereof may be brought by Overtenant from time to time at its election and nothing contained herein shall be deemed to require Overtenant to postpone suit until the date when the term of this Sublease would have expired had it not been so terminated under the provisions hereof or any provision of law or had Overtenant not re-entered the Subpremises. Nothing herein contained shall be construed to limit or preclude recovery by Overtenant against Undertenant for any sums or damages to which, in addition to the damages particularly provided above, Overtenant may be lawfully entitled by reason of any default hereunder on the part of Undertenant. If Overtenant shall relet the Subpremises, Overtenant shall credit Undertenant with the net rents received by Overtenant from such reletting which shall be equal to the gross rents as and when received by Overtenant from such reletting, less the expenses incurred or paid by Overtenant and terminating this Sublease or in re-entering the Subpremises and in securing possession thereof, as well as the expenses of reletting, including altering and preparing the Subpremises for new tenants, broker's commissions and all other expenses properly chargeable against the Subpremises and the rental thereof. Any such reletting may be for a period shorter or longer than the remaining term of this Sublease but in no event shall Undertenant be entitled to receive any excess of such net rents over the sums payable by Undertenant to Overtenant hereunder, or shall Undertenant be entitled in any suit for the collection of damages pursuant hereto to a credit in respect of any net rents from a reletting, except to the extent that such net rents are actually received by Overtenant. If the Subpremises or any part thereof should be relet in combination with other space, the rent received from such reletting and the expenses of reletting shall be apportioned on a square foot basis. If the Subpremises or any part thereof be relet by Overtenant for the unexpired portion of the term of this Sublease or any part thereof, before presentation of proof of damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall, prima facial, be the fair and reasonable rental value of the Subpremises, or part thereof, so relet during the term of the reletting. Waivers: 20. Overtenant and Undertenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either against the other on any matter whatsoever arising out of or in any way connected with this Sublease, the relationship of landlord and tenant, Undertenant's use or occupancy of the Subpremises or other statutory remedy with respect thereto. If Overtenant commences any summary proceeding, Undertenant agrees that Undertenant will not interpose any counterclaim of whatever nature or description in any such proceeding. Notices: 21. Except as otherwise provided in this Sublease, notice or communication shall be deemed sufficiently given or rendered if in writing, sent by registered or certified mail or nationally recognized courier service addressed to the addressee at the address set forth herein and shall be effective upon receipt. Either party hereto may change its mailing address by giving notice to the other pursuant to the provisions of this Section. Overtenant's Duties: 22. The Overlease describes the Landlord's duties. The Overtenant is not obligated to perform the Landlord's duties but agrees as an inducement to Undertenant to enter into this Sublease to enforce the compliance with the Overlease by Landlord. Overtenant covenants and agrees that it will fully and punctually pay all rent, additional rent and other charges, costs and expenses due and payable under the Overlease as and when the same shall be come due and payable and uphold each and every promise, covenant and obligation required of it under the Overlease. Adopting the Overlease and Exceptions: 23. The provisions of the Overlease are part of this Sublease. All provisions of the Overlease applying to the Overtenant are binding on the Undertenant, except as may be specifically agreed otherwise by Overtenant and Undertenant. Brokers: 24. Overtenant and Undertenant warrant and represent that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Sublease except for Robert Cohn Associates, Inc. (the "Named Broker") and that they know of no other real estate broker or agent who is or might be entitled to a commission in connection with this Sublease, except that Overtenant has retained The Centrum Group and will be solely responsible for paying such sums as are due The Centrum Group in connection with this Sublease which are independent of any compensation due the Named Broker. Overtenant agrees that it shall be responsible for a commission to the Named Broker pursuant to a separate agreement between Overtenant and the Named Broker. Overtenant and Undertenant each agree to indemnify, defend and hold the other party harmless from and against any and all liabilities for expenses, including attorneys' fees and costs arising out of or in connection with the breach of the representations contained in this Section. Quiet Enjoyment: 25. Overtenant covenants and agrees that Undertenant, so long as it shall not be in default hereunder beyond any applicable grace period, shall and may at all times during the Sublease Term, peaceably and quietly have, hold, occupy and enjoy the Subpremises pursuant to the terms of this Sublease provided however that Overtenant shall not be in breach of this covenant if Overtenant's rights to the Subpremises under the Lease are interfered with by Landlord. Defaults Under Overlease: 26. Overtenant will give Undertenant notice of any default under the Overlease and Undertenant shall have the right to cure any such default provided that a right to cure exists under the Overlease. Overtenant agrees to request that Landlord provide Undertenant with any notices of default delivered to Overtenant. Subordination and Non-Disturbance: 27. Overtenant agrees to request that Landlord obtain a subordination and non-disturbance agreement from any existing mortgagee of the Building. Communication Facilities: 28. To the extent that Overtenant has the right to place communication facilities on the roof of the Building pursuant to Section 18.07(b) of the Overlease, Undertenant shall have the right to use a portion of any area available to Overtenant determined by multiplying the total area available to tenant pursuant to said Section by Undertenant's percentage. Capitalized Terms: 29. All capitalized terms herein shall have the definitions set forth in the Overlease unless otherwise defined herein. No Authority: 30. The Undertenant has no authority to contact or make any agreement with the Landlord about the Subpremises or the Overlease. The Undertenant may not pay rent or other charges to the Landlord, but only to the Overtenant. Successors: 31. Unless otherwise stated, the Sublease is binding on all parties who lawfully succeed to the rights or take the place of the Overtenant or the Undertenant. Changes: 32. This Sublease can be changed only by an agreement in writing signed by the parties to the Sublease. OVERTENANT: KEYCORP By: /s/ James M. Gustafson Name: James M. Gustafson Title: Designated Signer UNDERTENANT FIRST ALBANY COMPANIES INC. By: /s/ Michael R. Lindburg Name: Michael R. Lindburg Title: General Counsel EX-11 4 EXHIBIT 11 FIRST ALBANY COMPANIES INC. AND SUBSIDIARIES Computation of Per Share Earnings * (In thousands, except per share amounts) (unaudited)
September 29, September 30, September 24, 1995 1994 1993 ------------- ------------- ------------- Primary: Net income $3,350 $4,492 $5,391 Weighted average number of shares outstanding during the period 4,494 4,464 4,496 Incremental shares under stock options computed under the treasury stock method using the average market price of the issuer's stock during the period 211 214 230 Weighted average shares and common equivalent shares outstanding 4,705 4,678 4,726 Net income per share $ 0.71 $ 0.96 $ 1.14 Fully diluted: Net income $3,350 $4,492 $5,391 Weighted average number of shares outstanding during the period 4,494 4,464 4,496 Incremental shares under stock options computed under the treasury stock method using the higher of the average or ending market price of the issuer's stock at the end of the period 243 214 245 Weighted average shares and common equivalent shares outstanding 4,737 4,678 4,741 Net income per share $ 0.71 $ 0.96 $ 1.14 - ----------------------------------------------------------------------------------------- * All per share figures have been restated for common stock dividends declared through October 1995.
EX-22 5 EXHIBIT 22 SUBSIDIARIES OF FIRST ALBANY COMPANIES INC. COMPANY NAME STATE OF INCORPORATION - ------------ ---------------------- FIRST ALBANY CORPORATION NEW YORK FIRST ALBANY ASSET MANAGEMENT CORPORATION NEW YORK NORTHEAST BROKERAGE SERVICES CORPORATION NEW YORK EX-24 6 EXHIBIT 24 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of First Albany Companies Inc. on Form S-8 related to the First Albany Companies Inc. Stock Bonus Plan (Registration No. 33-15220, Registration No. 33- 35166, and Registration No. 33-52153) of our report dated November 10, 1995, on our audits of the consolidated financial statements and financial statement schedule of First Albany Companies Inc. as of September 29, 1995 and September 30, 1994, and for the years ended September 29, 1995, September 30, 1994 and September 24, 1993, which report is included in this Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts." COOPERS & LYBRAND L. L. P. Albany, New York December 22, 1995 EX-27 7
BD EXHIBIT 27 Selected Financial Data Schedule BD -- Exhibit 27 (in thousands of dollars except per share amounts) (unaudited) 1,000 YEAR SEP-29-1995 SEP-29-1995 3,253 95,464 0 376,919 56,025 6,062 543,255 53,288 45,574 0 388,523 3,892 1,791 49 0 0 36,143 543,255 43,198 26,173 31,889 14,625 7,214 19,904 71,064 5,220 3,350 0 0 3,350 0.71 0.71
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