Exhibit 10.3

EXECUTION VERSION

EXECUTIVE AGREEMENT

THIS EXECUTIVE AGREEMENT (this “Agreement”) is dated as of May 31, 2011, by and
among PrinceRidge Holdings LP (the “Company”), an indirect subsidiary of
Institutional Financial Markets, Inc. (the “Parent”), Parent, John Costas (the
“Executive”) and, solely with respect to Section 3.5(a), IFMI, LLC, a
majority-owned subsidiary of Parent (“IFMI”) (each a “Party” and, collectively,
the “Parties”).

WHEREAS, IFMI, the Company and PrinceRidge Partners LLC entered into a
Contribution Agreement dated as of April 19, 2011 (the “Contribution
Agreement”);

WHEREAS, the Company wishes that the Executive act as its Chairman, and the
Executive wishes to provide such services, on the terms set forth below,
effective as of the Interim Closing Date (as defined in the Contribution
Agreement) (such date the “Effective Date”);

NOW THEREFORE, the parties hereto agree as follows:

1. Term. Subject to the terms and conditions set forth herein, the Executive
hereby agrees to provide services to the Company and the Company agrees to
compensate the Executive for an initial term commencing as of the Effective Date
and continuing through December 31, 2013, unless sooner terminated in accordance
with the provisions of Section 4 or Section 5, with such arrangement to continue
for successive one-year periods in accordance with the terms of this Agreement
(subject to termination as aforesaid) unless either party notifies the other
party of non-renewal in writing prior to three (3) months before the expiration
of the initial term and each annual renewal, as applicable. (The period during
which the Executive provides services hereunder being hereinafter referred to as
the “Term.”) This Agreement shall be binding on the Parties as of the date
hereof; provided, however, that in the event that the Interim Closing (as
defined in the Contribution Agreement) does not occur or the Contribution
Agreement is terminated, this Agreement shall terminate without any further
obligation of the Parties and shall be null and void.

2. Duties. During the Term, the Executive shall serve as the Company’s Chairman,
reporting directly to the Board of Managers of PrinceRidge Partners LLC (the
“General Partner”). The Executive shall faithfully perform for the Company the
duties customarily attendant to Executive’s position of said office and shall
perform such other duties of an executive, managerial or administrative nature
as shall be reasonably specified and reasonably designated from time to time by
the Board of Managers of the General Partner (the “Board”). The Executive’s main
duties shall include (i) acting as the most senior member of the Board,
(ii) having direct charge of, and providing authority over, all of the
day-to-day business and affairs of the Company, and (iii) delegating
responsibilities to other senior managers or executives of the Company as he
deems necessary or appropriate. In addition, Executive shall (i) give periodic
reports to the Board of Directors of the Parent, (ii) make himself available, as
reasonably requested from time to time, to attend (either in person or by
teleconference) the meetings of the Board of Directors of the Parent and
investor presentations and calls of Parent, and (iii) provide

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

services, as may be reasonably requested from time to time by IFMI and agreed to
by Executive, to IFMI’s other capital markets businesses, and perform any other
duties for the Parent, or its affiliates and subsidiaries, as may be mutually
agreed to from time to time by the Executive and either the CEO or the Board of
Directors of the Parent (collectively, the “IFMI Duties”).

3. Compensation.

3.1 Guaranteed Payment. The Company shall pay the Executive a guaranteed payment
at the rate of $200,000.00 per annum for the period beginning on the Effective
Date through December 31, 2011 (the “Guaranteed Payment”), payable in equal
monthly installments. For each year thereafter, the Executive’s Guaranteed
Payment shall equal the sum of: (a) $200,000 and (b) the amount of the Initial
Annual Allocation (as herein determined), if any, for the immediately preceding
calendar year. (Any such amount shall constitute the “Guaranteed Payment” as of
the time of the calculation.) For United States federal, state and local tax
purposes, each Guaranteed Payment shall be treated and reported by the Company
and the Partners as a “guaranteed payment” within the meaning of Section 707(c)
of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury
Regulations promulgated thereunder.

3.2 Initial Annual Allocation. The Executive shall be entitled to an annual
allocation from the Company equal to 20% of Adjusted Profit, up to a maximum of
$800,000 (the “Initial Annual Allocation”). For purposes hereof, (a) for each
fiscal year beginning after December 31, 2011, “Adjusted Profit” means an amount
equal to (i) net profit of the Company in such fiscal year as determined in
accordance with generally accepted accounting principles in the United States,
less (ii) an amount (the “Retained Earnings Amount”) equal to the Retained
Earnings Percentage multiplied by $62,801,000, plus (iii) equity compensation
expense relating to awards under the Amended and Restated Cohen Brothers, LLC
2009 Equity Award Plan (the “2009 Plan”) included in the determination of net
profit under clause (a)(i) above, and (b) for the fiscal year ending
December 31, 2011, “Adjusted Profit” means an amount equal to (i) net profit of
the Company for the period from the Effective Date to and including December 31,
2011 as determined in accordance with generally accepted accounting principles
in the United States, less (ii) the Retained Earnings Amount multiplied by a
fraction, (x) the numerator of which is the number of days from the Effective
Date to and including December 31, 2011, and (y) the denominator of which is
365, plus (iii) equity compensation expense relating to awards under the 2009
Plan included in the determination of net profit under clause (b)(i) above. For
purposes hereof, the “Retained Earnings Percentage” means the percentage equal
to 5% plus the 3-month LIBOR rate, expressed as a percentage, as published in
the Wall Street Journal (or, if such rate is not published in the Wall Street
Journal, then such rate as determined by the Company in good faith based upon
another reputable source) as of the last business day of such fiscal year. The
Initial Annual Allocation shall be payable in cash within 75 days after the end
of such fiscal year (the “Initial Annual Allocation Payment Date”). For a period
of sixty (60) days following the Initial Annual Allocation Payment Date, the
Executive shall have the opportunity to purchase additional units (the value of
which shall not exceed the Initial Annual Allocation) representing a partnership
interest of the Company (“Units”) at a price equal to the then-current book
value of the Company; provided, however, that if the ownership interest of
Parent and its affiliates in the Company is below 51% or if the purchase of
Units in connection with the Initial Annual

 

2

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

Allocation and the Supplemental Annual Allocation (defined below) will dilute
the ownership interest of Parent and its affiliates in the Company below 51%,
the purchase of the additional Units shall require the advance written approval
of (1) Parent, if there are three IFMI Managers on the Board, or (2) the Board,
if there are less than three IFMI Managers on the Board at such time.

3.3 Supplemental Annual Allocation. In addition to any amounts payable under
Section 3.2, Executive shall be entitled to an annual allocation from the
Company equal to 8 1/3% of Post-Initial Allocation Profit (the “Supplemental
Annual Allocation”). For purposes hereof, “Post-Initial Allocation Profit” means
an amount, determined in accordance with generally accepted accounting
principles as in effect from time to time, equal to (a) net profit of the
Company in a fiscal year as determined in accordance with generally accepted
accounting principles in the United States, less (b) without duplication of
amounts netted in the foregoing clause (a), the aggregate amount of “Initial
Annual Allocations” paid to Executive under Section 3.2 hereof and paid to up to
two other executives of the Company (determined by the Board in its discretion)
in accordance with provisions of executive agreements or other arrangements that
are substantially the same as set forth in Section 3.2 hereof, plus (c) if
agreed by the Company, restructuring charges attributable to the transactions
contemplated by the Contribution Agreement, plus (d) equity compensation expense
relating to awards under the 2009 Plan included in the determination of net
profit under clause (a) above. The Supplemental Annual Allocation shall be
payable in cash within 75 days after the end of such fiscal year (the
“Supplemental Annual Allocation Payment Date”). For a period of sixty (60) days
following the Supplemental Annual Allocation Payment Date, the Executive shall
have the opportunity to purchase additional Units (the value of which shall not
exceed the Supplemental Annual Allocation) at a price equal to the then-current
book value of the Company; provided, however, that if the ownership interest of
Parent and its affiliates in the Company is below 51% or if the purchase of
Units in connection with the Initial Annual Allocation and the Supplemental
Annual Allocation will dilute the ownership interest of Parent and its
affiliates in the Company below 51%, the purchase of the additional Units shall
require the advance written approval of (1) Parent, if there are three IFMI
Managers on the Board, or (2) the Board, if there are less than three IFMI
Managers on the Board at such time.

3.4 Discretionary IFMI Performance Bonus. In connection with any IFMI Duties
that may be mutually agreed to from time to time, the Board of Directors of the
Parent may, in its sole discretion, award Executive an annual bonus in an amount
and on such terms to be determined by the Board (“IFMI Performance Bonus”). Any
IFMI Performance Bonus to be awarded to Executive shall be approved by the
Compensation Committee of the Board of Directors of the Parent.

3.5 Equity Incentive Compensation.

(a) Effective as of the date hereof, Executive shall receive 424,371 shares of
restricted common stock of the Parent (the “Restricted Common Stock”) under the
Parent’s equity compensation plan (the “Parent Equity Plan”), which shall be
issued as set forth in an award document pursuant to the Parent Equity Plan. The
Restricted Common Stock shall vest as follows: 60% on December 31, 2012, and 40%
on December 31, 2013. Except as otherwise specifically provided in this
Agreement, all unvested Restricted Common Stock shall be forfeited

 

3

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

by the Executive if the Executive is not providing services to the Company or
its affiliates at any time on or prior to December 31, 2013; provided, however,
that if Executive’s services with the Company ends pursuant to Section 5.2(b)
hereof prior to January 1, 2013, the unvested Restricted Common Stock shall be
immediately forfeited and IFMI shall issue to Executive the number of units in
IFMI equal to the number of shares of Restricted Common Stock at such time (the
“IFMI Units”); provided, further, that if Executive’s services arrangement with
the Company hereunder ends pursuant to Section 5.2(b) hereof on or after
January 1, 2013, any remaining unvested Restricted Common Stock shall be
immediately vested. Notwithstanding anything to the contrary herein or in IFMI’s
Amended and Restated Limited Liability Company Agreement, as may be amended from
time to time (the “Operating Agreement”), Executive shall not, prior to
January 1, 2013, exercise his right pursuant to Section 12.2(a) of the Operating
Agreement to require IFMI to redeem all or a portion of the IFMI Units (the
“Redemption Right”). As of the date hereof, the Exchange Ratio (as defined in
the Operating Agreement) for determining the number of shares of Parent common
stock that Executive may receive in exchange for the IFMI Units in connection
with an exercise of the Redemption Right is 1.0. The Exchange Ratio is subject
to adjustment upon the occurrence of certain events as set forth in the
Operating Agreement. IFMI and Parent shall not amend the Operating Agreement to
alter the Exchange Ratio or amend Section 12.2 of the Operating Agreement, in
each case in a manner that has an adverse effect on Executive. Executive shall
not make an election under Section 83(b) of the Internal Revenue Code of 1986,
as amended (the “Code”), with respect to the unvested Restricted Common Stock;
in the event that Executive does make such election, the unvested Restricted
Common Stock shall be forfeited immediately and the award in Section 3.5(a)
shall be deemed null and void ab initio.

(b) Effective as of the date hereof, Executive shall receive a number of
restricted profit and equity units of the Company that will equal 2.5% of the
outstanding Units (the “Restricted Units”) under the Company’s equity
compensation plan (the “Company Equity Plan”), which shall be issued as set
forth in an award document pursuant to the Company Equity Plan. The Restricted
Units shall vest 40% on December 31, 2012, 20% on December 31, 2013, 20% on
December 31, 2014 and 20% on December 31, 2015. Except as otherwise specifically
provided in this Agreement, all unvested Restricted Units shall be forfeited by
the Executive if the Executive is not providing services to the Company or its
affiliates pursuant to this Agreement at any time on or prior to December 31,
2015; provided, however, that if Executive’s services with the Company end
pursuant to Section 5.2(b) hereof, any remaining unvested Restricted Units shall
be immediately vested.

3.6 Benefits-In General. The Executive shall be permitted during the Term to
participate in any group life, hospitalization or disability insurance plans,
health programs, retirement plans, fringe benefit programs and other benefits
that may be available to other senior executives of the Company generally, in
each case to the extent that the Executive is eligible under the terms of such
plans or programs.

3.7 Vacation. The Executive shall be entitled to vacation of no less than 20
business days per year, to be credited in accordance with ordinary Company
policies.

 

4

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

3.8 Expenses-In General. The Company shall pay or reimburse the Executive for
all ordinary and reasonable out-of-pocket expenses actually incurred (and, in
the case of reimbursement, paid) by the Executive during the Term in the
performance of the Executive’s services under this Agreement, in accordance with
the Company’s policies regarding such reimbursements.

3.9 Priority Allocations Of Company Income and Gain In Respect of Initial Annual
Allocations and Supplemental Annual Allocations. Notwithstanding anything in the
LP Agreement to the contrary and prior to the allocation to any Partner
(including the Executive in his capacity as a Partner) of any Net Income, Net
Loss, Capital Net Income, Capital Net Loss and/or, otherwise, any income (gross
or net), gain, loss and/or deduction of the Company for any fiscal year (or
other period) of the Company under the LP Agreement (and/or applicable law):
(a) the Executive shall be specially allocated, and the Company shall specially
allocate to the Executive, an amount of Company gross income and/or gain for
such fiscal year (or other period) (“Company Income”) equal to the sum of the
Executive’s Initial Annual Allocation (if any) for such fiscal year (or other
period), the Executive’s Supplemental Annual Allocation (if any) for such fiscal
year (or other period) and any Unallocated Amount for such fiscal year (or other
period) (such sum, the “Special Allocation Amount” for such fiscal year (or
other period)); and (b) if the Special Allocation Amount for such fiscal year
(or other period) exceeds the Company’s Company Income for such fiscal year (or
other period), then any such excess shall constitute the “Unallocated Amount”
for the immediately succeeding fiscal year (or other period) (including for
purposes of this Section 3.9). Notwithstanding anything in the LP Agreement to
the contrary, the Company’s Net Income, Net Loss, Capital Net Income, Capital
Net Loss and/or, otherwise, any income (gross or net), gain, loss and/or
deduction of the Company for any fiscal year (or other period) of the Company
allocable (or to be allocated) to the Partners (including the Executive in his
capacity as a Partner) pursuant to the LP Agreement (and/or applicable law) for
such fiscal year (or other period) shall be computed without regard to any
Company Income so specially allocated to the Executive pursuant to this
Section 3.9. All capitalized terms referred to in this Section 3.9 shall have
the meaning set forth in the LP Agreement.

4. Termination upon Death or Disability. If the Executive dies during the Term,
the Term shall terminate as of the date of death, and the obligations of the
Company to or with respect to the Executive shall terminate in their entirety
upon such date except as otherwise provided under this Section 4. If the
Executive is unable to perform substantially and continuously the duties
assigned to him due to a disability as defined for purposes of the Company’s
long-term disability plan then in effect, or, if no such plan is in effect, by
virtue of ill health or other disability for more than 180 consecutive or
non-consecutive days out of any consecutive 12-month period, the Company shall
have the right, to the extent permitted by law, to terminate the services
arrangement hereunder upon notice in writing to the Executive. Upon termination
of the services arrangement hereunder due to death or disability, (i) the
Executive (or the Executive’s estate or beneficiaries in the case of the death
of the Executive) shall be entitled to receive any Guaranteed Payment and other
benefits (including any allocations for a fiscal year completed before
termination of this Agreement and the services arrangement hereunder but not yet
paid (the “Prior Year Allocations”)) earned and accrued under this Agreement
prior to the date of termination, as well as any allocations (the “Partial Year
Allocations”) under Sections 3.2

 

5

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

and 3.3 of this Agreement for any portion of a fiscal year completed before
termination and earned and accrued but not yet paid under this Agreement prior
to the termination of the services arrangement hereunder (and reimbursement
under this Agreement for expenses actually incurred prior to the termination of
this Agreement and the services arrangement hereunder); (ii) the Executive (or
the Executive’s estate or beneficiaries in the case of the death of the
Executive) shall be entitled to receive a single-sum payment equal to the
Guaranteed Payments that would have been paid to him for the remainder of the
year in which the termination occurs; (iii) the Executive (or the Executive’s
estate or beneficiaries in the case of the death of the Executive) shall receive
a single-sum payment equal to the sum of (x) the Initial Annual Allocation and
(y) the Supplemental Annual Allocation earned by the Executive, if any, in the
fiscal year preceding the date of termination (which amount shall be annualized
to the extent the termination occurs prior to the completion of a full fiscal
year) multiplied by a fraction (x) the numerator of which is the number of days
in the fiscal year preceding the termination and (y) the denominator of which is
365 and (iv) the Executive (or the Executive’s estate or beneficiaries in the
case of the death of the Executive) shall have no further rights to any other
compensation or benefits hereunder, or any other rights hereunder (but, for the
avoidance of doubt, shall receive such disability and death benefits as may be
provided under the Company’s plans and arrangements in accordance with their
terms). Unless the payment is required to be delayed pursuant to Section 7.15(b)
below, the cash amounts payable pursuant to clauses (i), (ii) and (iii) above
shall be paid to the Executive (or the Executive’s estate or beneficiaries in
the case of the death of the Executive) within 60 days following the date of his
termination of the services arrangement hereunder on account of death or
disability. Other than the Partial Year Allocations and Prior Year Allocations,
all payments under this Section 4 shall be considered a guaranteed payment from
the Company.

5. Certain Terminations of the Services Arrangement; Certain Benefits.

 

  5.1 Termination by the Company for Cause; Termination by the Executive without
Good Reason.

(a) For purposes of this Agreement, “Cause” shall mean the Executive’s:

(i) commission of, and indictment (that is not quashed within 90 days) for or
formal admission to any crime of moral turpitude, dishonesty, breach of trust or
unethical business conduct, or any crime involving the Company (other than
routine traffic violations); provided that such crime has a material adverse
effect on the business or reputation of the Company;

(ii) indictment (that is not quashed within 90 days) for or formal admission to
a felony, except for a felony under state law that is (A) solely related to the
operation of a motor vehicle or boat, and (B) of the lowest class or degree of
felony in a state that so classifies felonies (for purposes of clarification,
the exception set forth in this clause shall not apply with respect to a felony
for which Executive is indicted in a state that does not classify felonies);

(iii) engagement in fraud, misappropriation or embezzlement that has a material
adverse effect on the business or reputation of the Company;

 

6

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

(iv) continued failure to materially adhere to written policies and practices of
the Company and/or the General Partner; or

(v) material breach of any of the provisions of Section 6;

provided, that the Company shall not be permitted to terminate this Agreement
and the services arrangement hereunder for Cause except (x) on written notice of
the Company’s intent to terminate for Cause (which shall include reasonable
detail of the specific event constituting Cause) given to the Executive at any
time not more than 60 calendar days following the occurrence of any of the
events described in clause (iii) through (v) above (or, if later, the Company’s
knowledge thereof), and (y) if the Executive has been provided with an
opportunity (with counsel of his choice) to contest the proposed reason(s) of
Cause set forth in the notice at meeting of the Board. Notwithstanding the
foregoing, in the event that the Company provides written notice to the
Executive that Cause exists as a result of the occurrence of the events
described in clause (iv) or (v), the Executive shall have 30 calendar days from
the date of such notice to cure any such event that is reasonably curable and,
if the Executive does so to the reasonable satisfaction of the Company, such
event shall not constitute Cause hereunder.

(b) The Company may terminate this Agreement and the services arrangement
hereunder for Cause, and the Executive may terminate this Agreement and the
services arrangement hereunder on at least 30 days’ written notice given to the
Company. If the Company terminates this Agreement and the services arrangement
hereunder for Cause, or the Executive terminates this Agreement and the services
arrangement hereunder and the termination by the Executive is not for Good
Reason in accordance with Section 5.2, (i) the Executive shall receive the
Guaranteed Payment and other benefits (including any Prior Year Allocations), as
well as the Partial Year Allocations (and reimbursement under this Agreement for
expenses actually incurred prior to the termination of this Agreement and the
services arrangement hereunder); and (ii) the Executive shall have no further
rights to any other compensation, benefits or bonuses under this Agreement on or
after the termination the services arrangement hereunder. Unless the payment is
required to be delayed pursuant to Section 7.15(b) below, the cash amounts
payable to the Executive under this Section 5.1(b) shall be paid to the
Executive in a single-sum payment within 60 days following the date of the
termination of his service arrangement with the Company pursuant to this
Section 5.1(b).

Other than the Partial Year Allocations and Prior Year Allocations, all payments
under this Section 5.1 shall be considered guaranteed payments from the Company.

 

  5.2 Termination by the Company without Cause; Termination by the Executive for
Good Reason.

(a) For purposes of this Agreement, “Good Reason” shall mean, unless otherwise
consented to by the Executive,

(i) (a) the material reduction of the Executive’s title, authority, duties or
responsibilities (other than IFMI Duties), or (b) the assignment to the
Executive of duties materially inconsistent with the Executive’s position or
positions with the Company (including his role as a member of the Board);

 

7

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

(ii) a reduction in the annual Guaranteed Payment of the Executive below the
amount calculated in accordance with Section 3.1 of this Agreement or any
modification of the Guaranteed Payment formula, Initial Annual Allocation
formula or Supplemental Annual Allocation formula without Executive’s written
consent;

(iii) the Company’s material breach of this Agreement; or

(iv) Executive is required to relocate his office more than 30 miles outside of
the Borough of Manhattan, New York.

Notwithstanding the foregoing, (i) Good Reason shall not be deemed to exist
unless notice of termination on account thereof (specifying a termination date
no later than 30 days from the date of such notice) is given no later than 30
days after the time at which the event or condition purportedly giving rise to
Good Reason first occurs or arises and (ii) if there exists (without regard to
this clause (ii)) an event or condition that constitutes Good Reason, the
Company shall have 30 days from the date notice of such a termination is given
to cure such event or condition and, if the Company does so, such event or
condition shall not constitute Good Reason hereunder.

(b) The Company may terminate this Agreement and the services arrangement
hereunder and the Executive may terminate this Agreement and the services
arrangement hereunder at any time for any reason or no reason. If the Company
terminates the services arrangement hereunder and the termination is not covered
by Section 4 or 5.1 or the Executive terminates the services arrangement
hereunder for Good Reason:

(i) the Executive shall receive a single-sum payment equal to accrued but unpaid
Guaranteed Payments and other benefits (including any Prior Year Allocations),
as well as the Partial Year Allocations (and reimbursement under this Agreement
for expenses actually incurred prior to the termination of the services
arrangement hereunder);

(ii) the Executive shall receive a single-sum payment of an amount equal to 3.0
times (a) the average of the Guaranteed Payment amounts paid to Executive over
the three calendar years prior to the date of termination, (b) if less than
three years have elapsed between the date of this Agreement and the date of
termination, the highest Guaranteed Payment paid to Executive in any calendar
year prior to the date of Termination, or (c) if less than 12 months have
elapsed from the date of this Agreement to the date of termination, the highest
Guaranteed Payment received in any month times 12; and

(iii) the Executive shall receive a single-sum payment equal to the sum of
(x) the Initial Annual Allocation and (y) the Supplemental Annual Allocation
earned by the Executive, if any, in the fiscal year preceding the date of
termination (which amount shall be annualized to the extent the termination
occurs prior to the completion of a full fiscal year) multiplied by a fraction
(x) the numerator of which is the number of days in the fiscal year preceding
the termination and (y) the denominator of which is 365.

Unless the payment is required to be delayed pursuant to Section 7.15(b) below,
the cash amounts payable to the Executive under this Section 5.2(b) shall be
paid to the Executive within 60 days following the date of his termination his
services arrangement with the Company hereunder pursuant to this Section 5.2(b).

 

8

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

Other than the Partial Year Allocations and Prior Year Allocations, all payments
under this Section 5.2 shall be considered guaranteed payments from the Company.

5.3 Change of Control. Without duplication of the foregoing, upon a “Change of
Control” (as defined below) (a) while the Executive is providing services to the
Company or an affiliate pursuant to this Agreement, or (b) that occurs between
the period commencing on the date of the Contribution Agreement and ending on
the Interim Closing Date (but only if the Interim Closing occurs), all
outstanding unvested equity-based awards received or, in the case of a Change of
Control prior to the Interim Closing Date, to be received pursuant to Sections
3.5(a) and (b) of this Agreement, shall fully vest and shall become immediately
exercisable, as applicable. Only with respect to a Change of Control transaction
that is first announced after the nine-month anniversary of the date hereof,
there will be a transition period (“Transition Period”) which will begin on the
date of the Change of Control and end on the first anniversary of such Change of
Control. If the Executive terminates the services arrangement with the Company
hereunder within the six-month period following the Transition Period, such
termination shall be deemed a termination by the Executive for Good Reason
covered by Section 5.2.

For purposes of this Agreement, “Change of Control” shall mean the occurrence of
any of the following on or after the date hereof:

(i) any “person,” including a “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), but excluding Executive, Daniel G. Cohen, any Family Member of Executive
or Daniel G. Cohen, the Company, IFMI, LLC, any entity or person controlling,
controlled by or under common control with Executive, Daniel G. Cohen, any
Family Member of Executive or Daniel G. Cohen, the Company, IFMI, LLC, any
employee benefit plan of the Company or any such entity, and any “group” (as
such term is used in Section 13(d)(3) of the Exchange Act) of which any of the
foregoing persons or entities is a member), is or becomes the “beneficial owner”
(as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of
securities of Parent representing 50% or more of either (A) the combined voting
power of Parent’s then outstanding securities or (B) the then outstanding Common
Stock of Parent (in either such case other than as a result of an acquisition of
securities directly from Parent, IFMI, LLC or the Company); provided, however,
that, in no event shall a Change of Control be deemed to have occurred upon a
public offering of the Common Stock under the Securities Act of 1933, as amended
(for purposes hereof, “Family Member” means (I) a person’s spouse, parent,
sibling and descendants (whether natural or adopted), (II) any family limited
partnership, limited liability company or other entity wholly owned, directly or
indirectly, by such person and/or such person’s spouse, parent, sibling and/or
descendants (whether natural or adopted), and (III) any estate or trust for the
benefit of such person and/or such person’s spouse, parent, sibling and/or
descendants (whether natural or adopted)); or

(ii) any consolidation or merger of Parent where the stockholders of Parent,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the

 

9

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

Exchange Act), directly or indirectly, shares representing in the aggregate 50%
or more of the combined voting power of the securities of the entity issuing
cash or securities in the consolidation or merger (or of its ultimate parent
entity, if any);

(iii) there shall occur (A) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of Parent, other than a
sale or disposition by Parent of all or substantially all of Parent’s assets to
an entity, at least 50% of the combined voting power of the voting securities of
which are owned by “persons” (as defined above) who beneficially hold shares of
Common Stock of Parent, as applicable, immediately prior to such sale or (B) the
approval by stockholders of Parent of any plan or proposal for the liquidation
or dissolution of Parent, as applicable; or

(iv) the members of the Board of Directors of Parent at the beginning of any
consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any
reason other than due to death to constitute at least a majority of the members
of the Board of Directors of Parent; provided that any director whose election,
or nomination for election by the Parent’s stockholders, was approved by a vote
of at least a majority of the members of the Board of Directors of Parent then
still in office who were members of the Board of Directors of Parent at the
beginning of such 24-calendar-month period, shall be deemed to be an Incumbent
Director; provided, however, that, following the Final Closing Date (as defined
in the Contribution Agreement), each of the foregoing shall constitute a Change
of Control for purposes hereof if and only if at the time of any such occurrence
the Company is directly or indirectly a subsidiary of Parent and the results of
operations of the Company are consolidated in Parent’s financial statements in
accordance with generally accepted accounting principles as in effect from time
to time.

5.4 Parachutes. If any amount payable to or other benefit receivable by the
Executive pursuant to this Agreement would be deemed to constitute a Parachute
Payment (as defined below), alone or when added to any other amount payable or
paid to or other benefit receivable or received by the Executive which is deemed
to constitute a Parachute Payment (whether or not under an existing plan,
arrangement or other agreement), and would result in the imposition on the
Executive of an excise tax under Section 4999 of the Code, then the Parachute
Payments shall be reduced (but not below zero) so that the maximum amount of the
Parachute Payments (after reduction) shall be one dollar ($1.00) less than the
amount which would cause the Parachute Payments to be subject to the excise tax
imposed by Section 4999 of the Code. Any such reduction shall be made by first
reducing severance benefits (if any). Notwithstanding the foregoing, if the
reduction of Parachute Payments under this Section 5.4 would be equal to or
greater than $50,000, then there shall be no such reduction and the full amount
of the Parachute Payment shall be payable. “Parachute Payment” shall mean a
“parachute payment” as defined in Section 280G of the Code. The calculation
under this Section 5.4 shall be as determined by the Company’s independent
accountants.

5.5 Execution of Release. The Executive acknowledges that, if required by the
Company prior to making the payments and benefits set forth in this Section 5
(other than accrued but unpaid Guaranteed Payments and other benefits), all such
payments and benefits are subject to his execution of a commercially reasonable
mutual release containing a release from

 

10

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

liability by (a) the Executive of the Released Parties, and (b) the Released
Parties of the Executive, his estate and his heirs. “Released Parties” shall
mean the Company, the General Partner, IFMI, the Parent, and their respective
affiliates, successors, subsidiaries, related entities, divisions, partnerships,
joint ventures predecessors or assigns, and each of their respective past and
present officers, directors, partners, executives, managers, owners, employees,
trustees, agents, attorneys, insurers, representatives, employee benefit plans
or programs (and the trustees, administrators, fiduciaries, sponsors and
insurers of such plans or programs), and each and all of their successors and
assigns and any other persons acting by, through, under or in concert with any
of the aforementioned persons or entities. If Executive fails to execute such
release, or such release does not become irrevocable within 60 days following
the date of the termination of the Executive’s services arrangement with the
Company hereunder, all such payments and benefits set forth in this Section 5
shall be forfeited.

5.6 Exculpation.

(a) The Executive shall not be liable to any Member or Partner or to the
Company, PrinceRidge Partners LLC (the “LLC”) or their Affiliates for any action
or inaction, unless such action or inaction arises out of, or is attributable
to, the gross negligence, willful misconduct or fraud of the Executive and such
action is materially injurious to the financial condition or business reputation
of the Business, nor shall the Executive be liable to any Member or Partner or
to the Company, the LLC or their Affiliates for any action or inaction of any
broker or agent of the Company, the LLC or their Affiliates selected by such
Executive; provided, that such broker or agent was selected, engaged or retained
by such Executive in accordance with reasonable care. Any Executive may consult
with counsel, accountants, investment bankers, financial advisers, appraisers
and other specialized, reputable, professional consultants or advisers in
respect of the affairs of the Company, the LLC or their Affiliates and be fully
protected and justified in any action or inaction which is taken in accordance
with the advice or opinion of such persons; provided, that such persons shall
have been selected in accordance with reasonable care. All capitalized terms
used but not defined in this Agreement shall have the meanings given to such
terms in the LP Agreement or the LLC Agreement (each as defined below), as
applicable.

(b) Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 5.6 shall not be construed so as to relieve (or attempt to relieve) the
Executive of any liability to the extent (but only to the extent) that such
liability may not be waived, modified or limited under applicable law, but the
provisions of this Section 5.6 shall be construed so as to effectuate the
provisions of this Section 5.6 to the fullest extent permitted by law.

5.7 Indemnification.

(a) To the fullest extent permitted by applicable law, as it presently exists or
may hereafter be amended, the Parent shall indemnify the Executive against any
actual or threatened action, suit or proceeding, whether civil or criminal,
administrative or investigative, against Executive or in which Executive is
otherwise involved in arising by reason of performing any IFMI Duties or acting
in any capacity on behalf of the Parent or any of its affiliates or subsidiaries
(other than the Company, the General Partner or any of their respective
subsidiaries), and shall pay the expenses, including reasonable attorneys’ fees,
incurred by

 

11

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

Executive in defending any such action, suit or proceeding in advance of its
final disposition. The provisions of this Section 5.7(a) shall in no way limit,
and shall be in addition to, Executive’s rights to indemnification and
advancement of expenses provided under the Company’s partnership documents. The
Executive will at all relevant times be covered under any contract of directors
and officers liability insurance of the Parent and the Parent shall at all times
during which Executive is performing any of the IFMI Duties maintain
commercially reasonable levels of directors and officers liability insurance.
The Executive’s right to indemnification shall apply as provided herein
notwithstanding the availability of any indemnification rights Executive may
have from other sources.

(b) The Executive shall, in accordance with this Section 5.7(b), be indemnified
and held harmless by the Company, the LLC and their controlled Affiliates from
and against any and all Indemnification Obligations (as defined below) arising
from any and all claims, demands, actions, suits or proceedings (civil,
criminal, administrative or investigative), actual or threatened, in which such
Executive may be involved, as a party or otherwise, by reason of such
Executive’s service to or on behalf of, or management of the affairs of, the
Company, the LLC and their Affiliates, or rendering of advice or consultation
with respect thereto, or which relate to the Company, the LLC or their
Affiliates or any of their properties, business or affairs; provided, that such
Indemnification Obligation resulted from the action or inaction of such
Executive that did not constitute gross negligence, willful misconduct or fraud
which, in each such case, was materially injurious to the financial condition or
business reputation of the Business and provided, further, that the Executive
shall not be entitled to indemnification hereunder for any acts, omissions or
transactions for which an officer or director of a Delaware corporation may not
be relieved of liability under the Delaware General Corporation Law. The
Company, the LLC and their controlled Affiliates shall also indemnify and hold
harmless the Executive from and against any Indemnification Obligation suffered
or sustained by the Executive by reason of any action or inaction of any broker
or agent of the Company selected by such Executive; provided, however, that such
broker or agent was selected, engaged or retained by such Executive in
accordance with reasonable care. The termination of a proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that such Indemnification
Obligation resulted from the gross negligence, willful misconduct or fraud, or
lack of reasonable care, of the Executive or that the act, omission or
transaction was one for which an officer or director of a Delaware corporation
may not be relieved of liability under the Delaware General Corporation Law.
Subject to Section 14.15 of the LLC Agreement and Section 14.15 of the LP
Agreement, expenses (including legal and other professional fees and
disbursements) incurred in connection with this Section 5.7(b) shall be paid by
the Company as and when incurred by the Executive. “Indemnification Obligations”
means costs, losses, claims, damages, liabilities, expenses (including
reasonable legal and other professional fees and disbursements), judgments,
fines, settlements and other amounts, collectively.

(c) The indemnification provided by this Section 5.7(b) (i) shall not be deemed
to be exclusive of any other rights to which the Executive may be entitled under
any agreement, or as a matter of law, or otherwise, both as to action in the
Executive’s official capacity and to action in another capacity, (ii) shall
continue after the Executive has ceased to have an official capacity with
respect to the Company, the LLC or their Affiliates for acts or omissions that

 

12

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

occurred during such official capacity or otherwise when acting at the request
of the Company, the LLC or their Affiliates, and (iii) shall inure to the
benefit of the heirs, successors and assigns of such Executive.

(d) Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 5.7(b) shall not be construed so as to provide for the indemnification
of the Executive for any liability to the extent (but only to the extent) that
such indemnification would be in violation of applicable law or that such
liability may not be waived, modified or limited under applicable law, but the
provisions of this Section 5.7(b) shall be construed so as to effectuate the
provisions of this Section 5.7(b) to the fullest extent permitted by law.

5.8 Termination of the Services Arrangement Pursuant to the Termination and
Separation Agreement. The Company, IFMI, and the General Partner have entered
into a Termination and Separation Agreement. Pursuant to the Termination and
Separation Agreement, in the event of a Termination and Separation Event (as
defined in the Termination and Separation Agreement), this Agreement, and
Executive’s services arrangement hereunder, shall terminate effective as of the
date hereof. In such instance, Executive shall be entitled only to the
Guaranteed Payments under Section 3.1 and Benefits under Section 3.6 from the
date hereof through the Termination Date (as defined in the Termination and
Separation Agreement) and Executive shall not be entitled to any other
compensation, benefits, bonuses, allocations or equity incentive compensation of
any kind. For the avoidance of doubt, Executive shall not be entitled to any
compensation, benefits, bonuses or allocations under Sections 3.2, 3.3, 3.4,
3.7, 4.0, 5.1(b), 5.2(b), 5.3, 5.4 and the covenants set forth Section 6.2 shall
not apply. In addition, Executive shall immediately forfeit any and all rights
to the Restricted Common Stock and Restricted Units pursuant to Section 3.5.

6. Covenants of the Executive.

6.1 Confidentiality. The Executive acknowledges that (i) the primary business of
the Company is currently its capital markets business (sales and trading of
securities as well as investment banking) and that the Company may engage in
additional or different areas of business during Executive’s services
arrangement with the Company hereunder (all of which are collectively referred
to as the “Business”); (ii) the Company is one of a limited number of persons
who have such a business; (iii) the Company’s Business is, in part, national and
international in scope; (iv) the Executive’s work for the Company has given and
will continue to give him access to the confidential affairs and proprietary
information of the Company; (v) the covenants and agreements of the Executive
contained in this Section 6 are essential to the business and goodwill of the
Company; and (vi) the Company would not have entered into this Agreement but for
the covenants and agreements set forth in this Section 6. Accordingly, the
Executive covenants and agrees during and after the period of the Executive’s
services arrangement with the Company and its affiliates, the Executive
(x) shall keep secret and retain in strictest confidence all confidential
matters relating to the Company’s Business and the business of any of its
affiliates and to the Company and any of its affiliates, learned by the
Executive heretofore or hereafter directly or indirectly from the Company or any
of its affiliates (the “Confidential Company Information”), and (y) shall not
disclose such Confidential Company Information to anyone outside of the Company
unless (i) the disclosure is done with the Company’s or such affiliate’s, as
applicable, express written consent, (ii) the Confidential

 

13

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

Company Information is at the time of receipt or thereafter becomes publicly
known through no wrongful act of the Executive or is received from a third party
not under an obligation to keep such information confidential and without breach
of this Agreement, (iii) the disclosure is required to be made pursuant to an
order of any court or government agency, subpoena or legal process; (iv) the
disclosure is made to officers or directors of the Company or its affiliates
(and/or the officers and directors of such affiliates), and to auditors,
counsel, and other professional advisors to the Company or its affiliates, or
(v) the disclosure is made by a court or arbitrator in connection with any
litigation or dispute between the Company and the Executive. Unless prohibited
by law, regulation or order of a court or other governmental or regulatory body,
the Executive shall as promptly as reasonably practicable supply the Company
with a copy of any legal process delivered to the Executive requesting
Confidential Company Information. Prior to any disclosure of Confidential
Company Information, unless prohibited by law, regulation or order of a court or
other governmental or regulatory body, the Executive shall notify the Company
and shall cooperate and not object to the Company seeking an order protecting
the confidentiality of such information.

6.2 Noncompetition/Nonsolicitation.

(a) For a period of three months following the end of the Term (the
“Noncompetition Period”), in either case regardless of the reason the Term of
this Agreement and the services arrangement hereunder ends (including, but not
limited to, nonrenewal of this Agreement by either Executive or the Company),
Executive shall not, directly or indirectly, engage or participate in, or become
employed by, or affiliated with, or render advisory or any other services to,
any person or business entity or organization, of whatever form, that competes
with the Company or any of its affiliates in any country in which the Company or
any of its affiliates operates.

(b) For a period of 12 months following the end of the Term, regardless of the
reason the Term of this Agreement and the services arrangement hereunder ends
(including, but not limited to, nonrenewal of this Agreement by either Executive
or the Company), Executive shall not, directly or indirectly, (i) solicit,
induce, cause or otherwise attempt to solicit, induce or cause any person who is
employed or engaged by the Company, Parent or their respective affiliates or
subsidiaries (collectively, the “Company Affiliates”) to (A) end his or her
employment or engagement with any of the Company Affiliates, (B) accept
employment or other engagement with any person or entity other than any of the
Company Affiliates, or (C) in any manner interfere with the business of the
Company Affiliates, or (ii) hire any person who was an employee of any of the
Company Affiliates at the time of such termination or within the six-month
period prior to such termination (provided, that this clause (ii) shall not
apply to any employee who has been terminated by any of the Company Affiliates).

(c) During the Noncompetition Period, regardless of the reason the Term of this
Agreement and the services arrangement hereunder ends (including, but not
limited to, nonrenewal of this Agreement by either Executive or the Company),
Executive shall not, directly or indirectly, solicit, induce, direct or do any
act or thing which may interfere with or adversely affect the relationship of
any of the Company Affiliates with any person or entity who was a material
customer or client of such entities or with whom such entities were actively
seeking to form a business relationship either at the time of the termination of
Executive’s employment or

 

14

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

within the six-month period immediately preceding such termination, or otherwise
induce or attempt to induce any such person or entity to cease doing business,
reduce or otherwise limit its business with any of the Company Affiliates. For
purposes hereof, “material customer or client” means a customer or client that
is one of the 25 largest customers or clients of such entity.

Executive specifically acknowledges that the temporal and geographical
limitations hereof, in view of the nature of the Company’s Business (as defined
herein), are reasonable and necessary to protect the Company’s legitimate
business interests.

6.3 Rights and Remedies upon Breach. The Executive acknowledges and agrees that
any breach by him of any of the provisions of Sections 6.1 and 6.2 (the
“Restrictive Covenants”) would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if the Executive
breaches, or threatens to commit a breach of, any of the provisions of Sections
6.1 or 6.2, the Company and its affiliates, in addition to, and not in lieu of,
any other rights and remedies available to the Company and its affiliates under
law or in equity (including, without limitation, the recovery of damages), shall
have the right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, including, without limitation,
the right to an entry against the Executive of restraining orders and
injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not then continuing, of such
covenants.

6.4 Outside Activities. Section 13.09 of the Fourth Amended and Restated Limited
Partnership Agreement of the Company shall not apply to Executive.

7. Other Provisions.

7.1 Severability. The Executive acknowledges and agrees that (i) he has had an
opportunity to seek advice of counsel in connection with this Agreement and
(ii) the Restrictive Covenants are reasonable in geographical and temporal scope
and in all other respects. If it is determined that any of the provisions of
this Agreement, including, without limitation, any of the Restrictive Covenants,
or any part thereof, is invalid or unenforceable, the remainder of the
provisions of this Agreement shall not thereby be affected and shall be given
full effect, without regard to the invalid portions.

7.2 Duration and Scope of Covenants. If any court or other decision-maker of
competent jurisdiction determines that any of the Executive’s covenants
contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.

7.3 Enforceability; Jurisdiction; Arbitration. Any controversy or claim arising
out of or relating to this Agreement, the breach of this Agreement (other than a
controversy or claim arising under Section 6, to the extent necessary for the
Company (or its affiliates, where applicable) to avail itself of the rights and
remedies referred to in Section 6.3) and /or your services arrangement hereunder
with the Company in general that are not resolved by the

 

15

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

Executive and the Company (or its affiliates, where applicable) shall be
submitted to arbitration in New York, New York in accordance with the law of the
State of New York and the Employment Arbitration Rules and Mediation Procedures
of the American Arbitration Association or, if applicable, in accordance with
the rules and procedures of the Financial Industry Regulatory Authority. The
determination of the arbitrator(s) shall be conclusive and binding on the
Company (or its affiliates, where applicable) and the Executive and judgment may
be entered on the arbitrator(s)’ award in any court having jurisdiction.

7.4 Notices. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, five days after the date of deposit in the United States mails as
follows:

 

(i) If to the Company, to:

PrinceRidge Holdings LP

1633 Broadway, 28th Floor

New York, NY 10019

Attention: General Counsel

Or such other address that may be designated by the Company from time to time,

With copy to:

Institutional Financial Markets, Inc.

2929 Arch Street, 17th Floor

Philadelphia, PA 19104

Attention: General Counsel

 

(ii) If to the Parent, to:

Institutional Financial Markets, Inc.

2929 Arch Street, 17th Floor

Philadelphia, PA 19104

Attention: General Counsel

Or such other address that may be designated by the Company from time to time,

 

(iii) If to IFMI, to:

IFMI, LLC

2929 Arch Street, 17th Floor

Philadelphia, PA 19104

Attention: General Counsel

 

16

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

Or such other address that may be designated by the Company from time to time,

 

(iv) If to the Executive, to:

John Costas

53 Lower Cross Road

Greenwich, CT 06831

Any such person may by notice given in accordance with this Section 7.4 to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.

7.5 Communications with the Press. Subject to Section 4.12 of the LP Agreement
(as defined herein), the Executive shall have the right to handle communications
with the press regarding the Company; provided that such communications are
truthful, accurate and consistent and protect the Company’s proprietary or
confidential information and honor the Company’s contractual obligations
prohibiting disclosure of certain information; provided further that the
Executive may not criticize, ridicule or make any statement that disparages or
is derogatory of the Company or any of its affiliates.

7.6 Entire Agreement. This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements, written or oral, with respect thereto.

7.7 Waivers and Amendments. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege nor any
single or partial exercise of any such right, power or privilege, preclude any
other or further exercise thereof or the exercise of any other such right, power
or privilege.

7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.

7.9 Assignment. This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors, heirs (in the case of the
Executive) and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company; provided,
however , that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law.

 

17

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

7.10 Withholding. The Parent shall be entitled to withhold from any payments or
deemed payments made by Parent any amount of tax withholding it determines to be
required by law.

7.11 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, permitted assigns,
heirs, executors and legal representatives.

7.12 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each signed by one
of the parties hereto.

7.13 Survival. Anything contained in this Agreement to the contrary
notwithstanding, the provisions of Sections 4, 5 and 6 and any other provisions
of this Agreement expressly imposing obligations that survive termination of
Executive’s services arrangement hereunder, and the other provisions of this
Section 7 to the extent necessary to effectuate the survival of such provisions,
shall survive termination of this Agreement and any termination of the
Executive’s services arrangement hereunder.

7.14 Existing Agreements. The Executive represents to the Company that he is not
subject or a party to any employment or consulting agreement, non-competition
covenant or other agreement, covenant or understanding which might prohibit him
from executing this Agreement or limit his ability to fulfill his
responsibilities hereunder.

7.15 Section 409A.

(a) Interpretation. Notwithstanding the other provisions hereof, this Agreement
is intended to comply with the requirements of section 409A of the Code, to the
extent applicable, and this Agreement shall be interpreted to avoid any penalty
sanctions under section 409A of the Code. Accordingly, all provisions herein, or
incorporated by reference, shall be construed and interpreted to comply with
section 409A. If any payment or benefit cannot be provided or made at the time
specified herein without incurring sanctions under section 409A of the Code,
then such benefit or payment shall be provided in full at the earliest time
thereafter when such sanctions will not be imposed. For purposes of section 409A
of the Code, each payment made under this Agreement shall be treated as a
separate payment. In no event may the Executive, directly or indirectly,
designate the calendar year of payment.

(b) Payment Delay. Notwithstanding any provision to the contrary in this
Agreement, if on the date of the termination of Executive’s services arrangement
hereunder, the Executive is a “specified employee” (as such term is defined in
section 409A(a)(2)(B)(i) of the Code and its corresponding regulations) as
determined by the Board (or its delegate) in its sole discretion in accordance
with its “specified employee” determination policy, then all cash severance
payments payable to the Executive under this Agreement that are deemed as
deferred compensation subject to the requirements of section 409A of the Code
shall be postponed for a period of six months following the Executive’s
“separation from service” with the Company (or any successor thereto). The
postponed amounts shall be paid to the Executive in a lump sum

 

18

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

within 30 days after the date that is 6 months following the Executive’s
“separation from service” with the Company (or any successor thereto). If the
Executive dies during such six-month period and prior to payment of the
postponed cash amounts hereunder, the amounts delayed on account of section 409A
of the Code shall be paid to the personal representative of the Executive’s
estate within 60 days after Executive’s death. If any of the cash payments
payable pursuant to this Agreement are delayed due to the requirements of
section 409A of the Code, there shall be added to such payments interest during
the deferral period at an annualized rate of interest equal to 5%.

(c) Reimbursements. All reimbursements provided under this Agreement shall be
made or provided in accordance with the requirements of section 409A, including,
where applicable, the requirement that (i) any reimbursement is for expenses
actually incurred during the Executive’s lifetime (or during a short period of
time specified in this Agreement), (ii) the amount of expenses eligible for
reimbursement during a calendar year may not affect the expenses eligible for
reimbursement in any other calendar year, (iii) the reimbursement of all
eligible expense will be made on or before the last day of the taxable year
following the year in which the expense is incurred, and (iv) the right to
reimbursement is not subject to the liquidation or exchange for another benefit.
Any tax gross up payments to be made hereunder shall be made not later than the
end of the Executive’s taxable year next following the Executive’s taxable year
in which the related taxes are remitted to the taxing authority.

7.16 Headings. The headings in this Agreement are for reference only and shall
not affect the interpretation of this Agreement.

7.17 Supplementary Agreement. For purposes of the Fourth Amended and Restated
Limited Liability Company Agreement of PrinceRidge Partners LLC (the “LLC
Agreement”) and the Fourth Amended and Restated Limited Partnership Agreement of
the Company (the “LP Agreement”), this Agreement shall be treated as a
Supplementary Agreement (as defined thereunder).

7.18 LP/LLC Agreements. For the avoidance of doubt, the amounts due to Executive
hereunder shall not be subject to reduction based on amounts to which Parent or
other partners or members of PrinceRidge Holdings LP or PrinceRidge Partners LLC
are entitled pursuant to the LP Agreement or the LLC Agreement or any other
agreement by, among or including the parties hereto.

[Signature page follows]

 

19

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

IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and
year first above written.

 

PRINCERIDGE HOLDINGS LP By:  

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen Title:   Vice Chairman

 

INSTITUTIONAL FINANCIAL MARKETS, INC. By:  

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen Title:   Chief Executive Officer and Chief Investment
Officer

 

IFMI, LLC (only with respect to Section 3.5(a)) By:  

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen Title:   Chief Executive Officer and Chief Investment
Officer

PRINCERIDGE PARTNERS LLC (only with respect to Sections 5.6 and 5.7)

By:  

/s/ Daniel G. Cohen

Name:   Daniel G. Cohen Title:   Vice Chairman

 

EXECUTIVE Signed:  

/s/ John P. Costas

Name:   John P. Costas

[Signature Page to John Costas Executive Agreement]