April 11, 1997

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: The Sherwood Group, Inc.
      Report on Form 10-Q for the Nine Months Ended February 28, 1997

Gentlemen:

Enclosed please find the following material submitted on behalf of The Sherwood
 Group, Inc. ("Company"):

         One  complete  copy of the  Company's  report on Form 10-Q for the nine
months ended February 28, 1997 including financial statements and exhibits.

Thank you for your attention to this matter.

Very truly yours,

/s/ Denise Isaac
Denise Isaac
Chief Financial Officer and
Principal Accounting Officer







                                                     CONFORMED


                                    FORM 10-Q
                         SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                             For Quarter Ended February 28, 1997
                                       OR
              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                For the transition period from                    to

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

                         Commission file number       1-9480

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


                            The Sherwood Group, Inc.

----------------------------------------------------------------------
            (Exact name of Registrant as specified in its charter)


           Delaware                                      22-2394480

----------------------------------------------------------------------
  (State or other jurisdiction  of                (I.R.S.Employer 
   incorporation or organization)                Identification No.)


          10 Exchange Place Centre, Jersey City, New Jersey     07302

----------------------------------------------------------------------------
  Address of  principal executive offices)                 (Zip code)



--------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)


             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 the number of shares outstanding of each of the issuer's
     classes of common stock,  as of the latest practicable date.

   12,750,443  shares of Common Stock,  par value $.01 per share, were 
                       outstanding on March 31, 1997.



<TABLE>


                            THE SHERWOOD GROUP, INC.
                                AND SUBSIDIARIES


                                     INDEX

<CAPTION>

                                                                          PAGE

                                                                        --------
<S>                                                                      <C>    

Part I - Financial Information

Item 1. - Financial Statements

  Consolidated Statements of Financial Condition -
         February 28, 1997 (Unaudited)and May 31, 1996                     3

  Consolidated Statements of Operations (Unaudited) -
         Three Months and Nine Months Ended February 28, 1997
         and  February 29, 1996                                            4

  Consolidated Statements of Cash Flows (Unaudited) -
         Nine Months Ended February 28, 1997 and February 29, 1996       5 - 6

  Notes to Consolidated Financial Statements (Unaudited) -
         February 28,1997                                                7 - 8



Item 2. - Management's Discussion and Analysis of
          Financial Condition and Results of Operations                  9 - 14


Part II - Other Information

Item 1. - Legal Proceedings                                                14

Item 6. - Exhibits and Reports on Form 8-K                                 14

Signatures                                                                 15
</TABLE>

<TABLE>

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
                                    THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>

                                                                 February 28,
                                                                     1997              May 31,
              ASSETS                                             (Unaudited)            1996
                                                            -------------------  ------------------
<S>                                                                <C>                 <C>

Cash                                                        $        1,042,843   $         470,313
Receivables:
  Brokers and dealers                                               58,166,334          78,628,199
  Other                                                                274,642             519,631
Securities owned, at market value                                   47,308,703          32,181,980
Investment securities not readily marketable, at fair value            501,320             401,320
Investment in partnerships                                              12,984             261,286
Notes receivable                                                       832,845             697,258
Furniture, fixtures and equipment, and leasehold improvements - at
  cost, net of accumulated depreciation and amortization of $6,473,155
  at February 28, 1997 and $8,132,165 at May 31, 1996               19,176,505          12,955,614
Computer software - at cost, net of accumulated amortization of
  $805,071 at February 28, 1997 and $493,936 at May 31, 1996           781,623             766,256
Identified intangible assets, net of accumulated amortization of
   $1,667,741 at February 28, 1997 and $1,245,176 at May 31, 1996    2,709,319           2,943,104
Exchange memberships (market value $3,318,750 at February 28,
  1997 and $2,827,500 at May 31, 1996)                               2,616,496           1,166,496
US Treasury Obligations, held as collateral                          7,870,777           7,782,514
Subordinated notes receivable                                        3,500,000           3,250,000
Deferred tax asset (net of valuation allowance)                      4,447,435                -
Other assets                                                         2,886,761           1,260,822
                                                            -------------------  ------------------
                                                            $      152,128,587   $     143,284,793
                                                            ===================  ==================
      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased, at market value       $       17,847,934   $      18,827,302
  Accounts payable and accrued expenses, including
    compensation payable to officers and employees of
    $8,554,106 at February 28, 1997 and $15,583,055
    at May 31, 1996                                                 33,326,807          24,242,102
  Secured demand notes payable                                       3,000,000           3,250,000
  Income taxes payable                                               1,048,635           5,338,326
  Minority interest in Equitrade                                     6,523,929           5,057,508
                                                            -------------------  ------------------
          Total liabilities                                         61,747,305          56,715,238
                                                            -------------------  ------------------

Commitments and contingencies (Note 4)

Stockholders' equity (Note 5):
  Preferred stock - $.01 par value;
    authorized 1,000,000 shares; none issued                              -                   -
  Class A common stock - $.01 par value;
    authorized 50,000,000 shares; none issued                             -                   -
  Common stock - $.01 par value; authorized
    50,000,000 shares; issued 14,343,201 shares                        143,432             143,432
  Additional paid-in capital                                        57,189,985          56,958,790
  Retained earnings                                                 43,992,114          37,936,140
                                                            -------------------  ------------------
                                                                   101,325,531          95,038,362
  Less: Treasury stock - at cost, 1,526,936 shares at
    February 28, 1997 and 1,313,469 shares at May 31, 1996         (10,944,249)         (8,468,807)
                                                            -------------------  ------------------
          Total stockholders' equity                                90,381,282          86,569,555
                                                            -------------------  ------------------
                                                            $      152,128,587   $     143,284,793
                                                            ===================  ==================

</TABLE>
                The accompanying notes are an integral part of these statements.
<TABLE>
                                                                                                                   (3)


                                       THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                                      (Unaudited)
<CAPTION>

                                                                     Three Months Ended                    Nine Months Ended
                                                            ------------------------------------------------------------------------
                                                            February 28, 1997 February 29, 1996  February 28, 1997 February 29, 1996
                                                            ------------------------------------------------------------------------
<S>                                                                 <C>                 <C>                <C>          <C>   

Revenues:
  Firm securities transactions - net                        $       35,930,363   $      34,197,630    $     92,368,915 $ 87,136,730
  Commission income                                                  9,271,776           7,855,709          25,024,168   20,856,454
  Floor brokerage income                                             3,946,786           3,112,314          10,320,924    8,177,832
  Equity income (loss) in partnerships                                 (10,844)             26,697             (26,176)      40,309
  Interest income                                                    1,981,003           1,448,607           5,899,232    4,276,140
  Fee income                                                           759,668             341,926           1,848,266      961,531
  Other revenues                                                       136,184             213,566             624,490      614,128
                                                            -------------------  ------------------   ----------------- ------------
                                                                    52,014,936          47,196,449         136,059,819   22,063,124
                                                            -------------------  ------------------   ----------------- ------------

Expenses:
  Compensation and benefits                                         15,200,418          15,249,586          43,677,551   37,939,862
  Clearing and related charges                                      15,643,471          14,522,707          43,589,723   42,053,430
  Communications                                                     2,823,138           2,599,538           8,330,942    7,670,908
  Litigation settlement                                              9,187,500            -                  9,187,500       -
  Depreciation and amortization                                      1,276,153           1,224,549           3,300,386    2,407,068
  Occupancy costs and equipment rental                                 638,146             655,268           2,039,686    2,060,238
  Other expenses                                                     4,696,176           3,622,190          10,909,901    8,398,820
  Interest expense                                                     140,274             125,634             273,872      201,923
                                                            -------------------  ------------------   ----------------- ------------
                                                                    49,605,276          37,999,472         121,309,561  100,732,249
                                                            -------------------  ------------------   ----------------- ------------

   Income before minority interest and income taxes                  2,409,660           9,196,977          14,750,258   21,330,875

   Income of Equitrade allocated to
    minority partners                                               (2,113,802)           (994,821)         (2,866,762)  (2,282,213)
                                                            -------------------  ------------------   ----------------- ------------

   Income before income taxes                                          295,858           8,202,156          11,883,496   19,048,662
                                                            -------------------  ------------------   ----------------- ------------

   Income taxes:
        Federal, currently payable                                   3,259,257           1,922,687           6,838,384    4,084,163
        State and local, currently payable                           1,726,388           1,138,843           3,436,573    2,182,622
                                                            -------------------  ------------------   ----------------- ------------
                  Total current income tax expense                   4,985,645           3,061,530          10,274,957    6,266,785
                                                            -------------------  ------------------   ----------------- ------------

        Federal, deferred                                           (3,107,540)           -                 (3,107,540)       -
        State and local, deferred                                   (1,339,895)           -                 (1,339,895)       -
                                                            -------------------  ------------------   ----------------- ------------
                  Total deferred income tax expense                 (4,447,435)           -                 (4,447,435)       -
                                                            -------------------  ------------------   ----------------- ------------

           Total income taxes                                          538,210           3,061,530           5,827,522    6,266,785
                                                            -------------------  ------------------   ----------------- ------------

   Net (loss) income                                        $         (242,352)  $       5,140,626    $      6,055,974  $12,781,877
                                                            ===================  ==================   ================= ============

   Net (loss) income per common and common equivalent share (a)<F1>(b)<F2>:
        Net (loss) income                                   $            (0.02) $             0.39    $           0.47  $      0.97
                                                            ===================  ==================   ================= ============

Weighted average common shares outstanding                          12,883,718          13,227,253          12,988,146   13,238,583
                                                            ===================  ==================   ================= ============
<FN>

<F1>(a) For presentation purposes, primary and fully diluted are identical.
<F2>(b) The sum of the  individual  quarters'  earnings  per common share does not
      equal the total  amount for the nine  months  ended  February  28, 1997 or
      February 29, 1996 due to the effect of  averaging  the number of shares of
      common stock and common stock equivalents throughout the year.
</FN>
</TABLE>

                The accompanying notes are an integral part of these statements.

<TABLE>
                                                                                                                  (4)
                                  THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                                                   (Unaudited)

                                                                         Nine Months Ended
                                                            ---------------------------------------
                                                                February 28, 1997  February 29, 1996   
                                                            ------------------------------------------
 <S>                                                                <C>                 <C>   
 
 Cash flows from operating activities:

  Net income                                                $        6,055,974   $      12,781,877

 Non-cash items included in net income:
  Equity (income) loss in partnerships                                  26,176             (40,309)
  Depreciation and amortization                                      3,300,386           2,407,068
  Income of Equitrade allocated to minority partners                 2,866,762           2,282,213
  Provision for deferred taxes                                      (4,447,435)           -
  Loss on sale of subsidiary                                           123,006            -

 (Increase) decrease in operating assets:
  Receivables:
    Brokers and dealers                                             20,803,603          (4,475,890)
    Other                                                              (66,918)           (197,896)
  Securities owned, at market value                                (14,888,440)          5,069,923
  US Treasury Obligations, held as collateral                          (88,263)             (6,883)
  Other assets (net of deposits made on furniture, fixtures
     and equipment, and leasehold improvements)                        337,284             492,826

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at market value                 (979,368)         (9,636,824)
  Accounts payable and accrued expenses                              8,529,299           3,323,491
  Income taxes payable                                              (4,241,744)          1,543,325
                                                            -------------------  ------------------
     Net cash provided by operating activities                      17,330,322          13,542,921
                                                            -------------------  ------------------

 Cash flows from investing activities:

  Purchase of investment securities not readily marketable            (100,000)           -
  Distributions from partnerships, net                                   5,150              31,000
  Issuance of notes receivable                                        (105,740)           (502,948)
  Principal collected on notes receivable                              102,340             548,573
  Purchases of furniture, fixtures and
    equipment, and leasehold improvements                           (9,007,891)        (11,309,345)
  Deposits made on furniture, fixtures and equipment,
    and leasehold improvements                                      (1,569,347)           -
  Purchases of computer software                                      (326,502)           (105,468)
  Payment for purchase of non-compete agreement                       (188,780)           -
  Purchase of exchange membership                                   (1,450,000)           -
  Issuance of subordinated note                                       (500,000)           -
                                                            -------------------  ------------------
     Net cash used in investing activities                         (13,140,770)        (11,338,188)
                                                            -------------------  ------------------










                                                                                                         (Continued)

                                                                                                                  (5)
                                      THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                   (Unaudited)
                                                                                                                   (Continued)

                                Nine Months Ended
                                                            ---------------------------------------
                                                                February 28, 1997  February 29, 1996
                                                            ------------------------------------------
 Cash flows from financing activities:

  Purchase of treasury stock                                        (2,239,421)         (1,115,771)
  Proceeds from exercise of options                                   -                    400,000
  Capital contributions by minority interest                           135,659              29,575
  Capital withdrawals by minority interest                          (1,536,000)         (1,298,167)
                                                            -------------------  ------------------
     Net cash used in financing activities                          (3,639,762)         (1,984,363)
                                                            -------------------  ------------------

 Net increase in cash                                                  549,790             220,370

 Cash acquired due to consolidation of Anvil                            22,740            -

 Cash at beginning of period                                           470,313             593,473
                                                            -------------------  ------------------
 Cash at end of period                                      $        1,042,843   $         813,843
                                                            ===================  ==================

Supplemental disclosure of non-cash financing activities:

  As a result of the sale of its subsidiary,  Stock Market Index,  Inc.,  during
  December  1996,  the  Company  wrote off the  remaining  book value of certain
  computer software and intangible assets aggregating  $255,193. In addition, as
  part of the sale,  the Company  received a note in the face amount of $132,187
  from the buyer, resulting in a net loss of $123,006.

  On January 24, 1997, the Company acquired, from its joint venture partner, the
  remaining  51% of Anvil  Institutional  Services  Company  (the  "Anvil  Joint
  Venture") that it did not previously own. The Company,  therefore,  became the
  100% owner of Anvil  Institutional  Services Inc.  ("Anvil"),  a broker-dealer
  previously  owned  by  the  Anvil  Joint  Venture.  Accordingly,  the  assets,
  liabilities  and  stockholder's  equity of Anvil have been  consolidated  with
  those of the Company as of the acquisition date. The increases or decreases in
  operating assets and liabilities  reflected in the  consolidated  statement of
  cash flows for the nine months ended February 28, 1997 exclude amounts for the
  assets and liabilites of Anvil which were assumed as part of the acquisition.

  During  February  1997, an executive of the Company  exercised an aggregate of
  94,027 options for the purchase of 94,027 shares of the Company's common stock
  with exercise  prices ranging from $7.9375 per share to $9.1875 per share.  In
  order to pay for the exercise  price  ($838,324)  and to reimburse the Company
  for  the  personal   income  taxes  ($54,569)  on  the  gain  related  to  the
  transaction,  the  executive  remitted  to the  Company  88,187  shares of the
  Company's common stock with a market value of $892,893.


















              The accompanying notes are an integral part of these statements.
</TABLE>

                                            (6)



















                                     THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                    (Unaudited)

                                                 February 28, 1997

Note 1 - Business and organization

     The Sherwood Group, Inc. and its subsidiaries (the "Company") are primarily
engaged in the securities  business and in providing related financial services.
The Company has a principal  registered  broker-dealer  wholly owned subsidiary,
Sherwood  Securities Corp.  ("Sherwood  Securities").  National Discount Brokers
("NDB"), another registered broker-dealer, is a division of the Company's wholly
owned  subsidiary,  Triak Services  Corp. The Company has a 60% special  limited
partnership interest in Equitrade Partners ("Equitrade"),  which is a specialist
for  securities  listed  on The  New  York  Stock  Exchange  ("NYSE").  Sherwood
Securities  is also a specialist  for  securities  listed on the American  Stock
Exchange.  During May 1996,  the Company  commenced  operations  of a new wholly
owned subsidiary,  MXNet Inc. ("MXNet"),  formerly Market Distribution  Concepts
Inc. MXNet delivers comprehensive  technical solutions to trading organizations.
As of December 31, 1996, the Company  divested itself of its investment in Stock
Market Index, Inc., a wholly owned subsidiary. Finally, on January 24, 1997, the
Company  acquired,  from its joint venture  partner,  the remaining 51% of Anvil
Institutional  Services  Company  (the "Anvil  Joint  Venture")  that it did not
previously  own.  The  Company,  therefore,  became  the  100%  owner  of  Anvil
Institutional Services Inc. ("Anvil"),  a broker-dealer  previously owned by the
Anvil Joint Venture.

Note 2 - Basis of presentation

     The accompanying unaudited consolidated financial statements do not include
all of the  information  and notes  required by  generally  accepted  accounting
principles for complete  consolidated  financial  statements.  In the opinion of
management,  all  adjustments  considered  necessary for a fair  presentation of
consolidated  financial  condition  and  results of  operations  for the periods
presented  have been  included.  All  adjustments  are of a normal and recurring
nature. It is suggested that these consolidated  financial statements be read in
conjunction  with the  consolidated  financial  statements and the related notes
included in the Company's  1996 Annual  Report on Form 10-K.  Certain prior year
amounts have been  reclassified  to conform with the three and nine months ended
February 28, 1997 presentations.

Note 3 - Net income per common share

     Net income per common share is computed  using the weighted  average number
of shares of common stock and common stock equivalents outstanding. Common stock
equivalents  include stock  issuable  under stock  options.  The treasury  stock
method of accounting was used in computing the common stock  equivalents for the
computation of earnings per common share.

Note 4 - Commitments and contingencies

     Certain significant legal proceedings and matters were previously disclosed
in the  Company's  1996  Annual  Report  on Form  10-K  incorporated  herein  by
reference. The Company's subsidiaries,  and in some cases the Company, have been
named as  defendants  in lawsuits  that allege  violations  of Federal and state
securities  and  related  laws.  Sherwood  Securities  has  received  additional
subpoenas in connection  with the SEC's ongoing  investigation  In the Matter of
Certain  Market Making  Activities on NASDAQ,  HO-2974.  Sherwood  Securities is
continuing to cooperate with the SEC's  investigation.  Although there can be no
assurance  that such lawsuits and  investigations  involving the Company are not
likely to have a material,  adverse  effect on the results of  operations of the
Company in any future period,  depending in part on the results for such period,
based on information  currently  available,  management of the Company  believes
that any such  lawsuits  and  investigations  are not  likely to have a material
adverse effect on the consolidated financial condition and results of operations
or liquidity of the Company in future periods.

     See Item 2,  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations  Subsequent  Events"  regarding the  settlement of the
matter entitled In Re: NASDAQ Market-Makers Antitrust Litigation .







                                                        (7)


<PAGE>



Note 5 - Net capital requirements

     As registered broker-dealers, Sherwood Securities, NDB, Equitrade and Anvil
are subject to the Securities and Exchange  Commission  Uniform Net Capital Rule
15c3-1  (the  "Rule").  As of  February  28,  1997,  the net capital of Sherwood
Securities,  NDB,  Equitrade and Anvil  exceeded  their  required net capital by
$25,461,000, $1,878,000, $23,086,000 and $353,000, respectively.

     The Rule also  provides  that equity  capital may not be  withdrawn or cash
dividends be paid if the resulting net capital of a broker-dealer  would be less
than the amount required under the Rule. Accordingly,  at February 28, 1997, the
payment of dividends  and advances to the Company by Sherwood  Securities,  NDB,
Equitrade  and Anvil is  limited to  $25,261,000,  $1,806,000,  $23,036,000  and
$343,000,  respectively,  under the most restrictive of these requirements.  The
Securities  and  Exchange  Commission  ("SEC")  may,  by  order,   restrict  the
withdrawal  of equity  capital  on a net basis if the SEC  determines  that such
withdrawal would be detrimental to the financial  integrity of the broker-dealer
or the financial community.














































                                                        (8)
Item - 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS


Results of Operations

     The results of The Sherwood Group,  Inc. and  subsidiaries  (the "Company")
for the three months and nine months ended  February 28, 1997 reflect  primarily
the activities of Sherwood Securities Corp.  ("Sherwood  Securities"),  National
Discount Brokers ("NDB"), a division of the Company's subsidiary, Triak Services
Corp.  ("Triak") and Equitrade Partners  ("Equitrade").  Sherwood  Securities is
primarily  engaged in the  securities  business as a wholesale  market  maker in
NASDAQ National Market System and Small-Cap  securities.  NDB is a deep discount
brokerage firm  specializing in trade  execution for individual  investors while
Equitrade is a registered  specialist in equity securities on The New York Stock
Exchange  ("NYSE").  During May 1996, the Company commenced  operations of a new
wholly owned  subsidiary,  MXNet Inc.  ("MXNet"),  formerly Market  Distribution
Concepts  Inc.  MXNet  delivers  comprehensive  technical  solutions  to trading
organizations.  As of December  31,  1996,  the Company  divested  itself of its
investment in Stock Market Index, Inc., a wholly owned subsidiary.  Finally,  on
January 24, 1997,  the Company  acquired,  from its joint venture  partner,  the
remaining  51%  of  Anvil  Institutional  Services  Company  (the  "Anvil  Joint
Venture") that it did not  previously  own. The Company,  therefore,  became the
100% owner of Anvil  Institutional  Services  Inc.  ("Anvil"),  a  broker-dealer
previously owned by the Anvil Joint Venture.


     The Company's consolidated net loss for the three months ended February 28,
1997 was  $(242,000)  compared to net income of $5,141,000  for the three months
ended  February 29,  1996.  Subsequent  to February  28, 1997,  but prior to the
issuance  of its  third  quarter  consolidated  financial  statements,  Sherwood
Securities  entered  into a  Settlement  Agreement  dated  April  9,  1997  with
Plaintiffs'  Co-lead  counsel  on behalf of the class in the case In Re:  NASDAQ
Market-Makers  Antitrust Litigation,  94 Civ. 3996(RWS) currently pending in the
United States District Court for the Southern District of New York. Accordingly,
the Company has adjusted its consolidated  financial  statements at February 28,
1997 by  recognizing  a  charge  to  operations  amounting  to  $9,187,500  (see
"Subsequent  Events").  For the quarter ended  February 28, 1997,  the principal
subsidiaries,  Sherwood Securities and Triak, had a net loss of $(1,893,000) and
net income of $327,000,  respectively,  compared to net income of $4,010,000 and
$831,000 for the quarter ended February 29, 1996, respectively.  Equitrade had a
net profit of $4,653,000  for the three months ended February 28, 1997 (of which
the Company's  share was  $2,539,000)  as compared to a net profit of $2,636,000
for the three months ended  February 29, 1996 (of which the Company's  share was
$1,641,000).  The  Company's  consolidated  net income for the nine months ended
February 28, 1997 was  $6,056,000  compared to  $12,782,000  for the nine months
ended  February 29,  1996.  For the nine months  ended  February  28, 1997,  the
principal  subsidiaries,  Sherwood  Securities  and  Triak  had  net  income  of
$3,237,000 and $559,000, respectively,  compared to net income of $8,376,000 and
$2,108,000 for the nine months ended February 29, 1996, respectively.  Equitrade
had a net profit of $7,286,000  for the nine months ended  February 28, 1997 (of
which the  Company's  share  was  $4,420,000)  as  compared  to a net  profit of
$6,183,000  for the nine months ended  February 29, 1996 (of which the Company's
share was $3,901,000).

     Total revenue for the Company  increased by  approximately  $4,818,000,  or
10%, for the three months ended February 28, 1997, and $13,997,000,  or 11%, for
the nine months ended  February 28, 1997, as compared  with the previous  year's
respective  periods.  The reasons for the  increases  in revenues  are set forth
below.

     Revenue from firm securities transactions increased $1,733,000,  or 5%, and
$5,232,000, or 6%, for the three and nine month periods ended February 28, 1997,
respectively,  as compared with the previous year. Revenues from firm securities
transactions at Sherwood Securities increased approximately $544,000, or 2%, and
$6,455,000, or 8%, for the three and nine month periods ended February 28, 1997,
respectively,  when  compared  to the prior  year,  while  Sherwood  Securities'
overall trading volume  increased  approximately 8% and 4% for the same periods.
This increase in trading  volume along with an increase in the average number of
shares per ticket led to an increase in opportunities  which resulted in trading
profits.  For the three months ended February 28, 1997, revenues from securities
transactions at Equitrade increased by approximately $1,190,000. The increase in
revenues from firm securities  transactions at Sherwood  Securities for the nine
months ended  February 28, 1997 was partially  offset by a decline of $1,222,000
in revenues from firm  securities  transactions at Equitrade which was primarily
due to trading losses sustained.

     The Company's  commission income,  primarily generated by NDB, increased by
$1,416,000,  or 18%, and $4,168,000, or 20%, for the three and nine months ended
February  28,  1997,  respectively,  when  compared  with the  prior  year.  The
increases  are due largely to the fact that NDB's  average  daily  ticket  count
increased from approximately 4,700 to 5,400 tickets per day, an increase of 15%,
for the three months ended February 28, 1997 and from 4,100 to 4,800 tickets per
day, an increase of 17%, for the nine month period ended  February 28, 1997 when
compared with the

                                                        (9)
previous year.

     Floor brokerage  income increased by  approximately  $834,000,  or 27%, and
$2,143,000,  or 26%,  for the three and nine months  ended  February  28,  1997,
respectively,  when compared to the prior year. The increases,  which arose from
the  activities of Equitrade,  resulted from an increase in the number of stocks
in which Equitrade is a specialist, from 82 stocks at May 31, 1995 to 100 stocks
at February 28, 1997.

     The principal  portion of equity loss in  partnerships  is equity loss from
the Company's 49% limited partnership  interest it held in Anvil through January
24,  1997.  Subsequently,  Anvil's  results are  consolidated  with those of the
Company.

     Interest  income   increased  by  approximately   $532,000,   or  37%,  and
$1,623,000,  or 38%,  for the three and nine months  ended  February  28,  1997,
respectively,  as  compared  to the  previous  year.  The  increase  is due to a
significant  rise in NDB's  customer  debit and  credit  balances  held with the
Company's  clearing  broker  and an  increase  in the  agreed  upon rate used to
compute  interest  earned on such customer  balances.  Also  contributing to the
increase was the availability of larger amounts of cash for investment.

     Fee income  increased by $418,000,  or 122%, and $887,000,  or 92%, for the
three and nine months ended February 28, 1997, respectively,  as compared to the
prior year. The increase is  principally  due to larger 12b-1 fees received from
mutual funds as NDB's  customers'  balances in those funds have increased  since
the prior year.

     Total  expenses  for the three months  ended  February  28, 1997  increased
approximately  $11,606,000,  or 31%, from  $37,999,000 in 1996 to $49,605,000 in
1997.  Total  expenses  for the nine months ended  February  28, 1997  increased
approximately $20,578,000,  or 20%, from $100,732,000 in 1996 to $121,310,000 in
1997. The reasons for the increase in expenses are set forth below.

     Compensation  and  benefits  decreased   $49,000,   or  1%,  and  increased
$5,738,000,  or 15%,  for the three and nine month  periods  ended  February 28,
1997,  respectively,  compared  with the prior  year.  The  differences  are due
primarily  to higher  commissions  paid to traders  and  salespeople  because of
higher  trading  profits at  Sherwood  Securities  and to an  increase in office
salaries and related  benefits due principally to an approximate 20% increase in
NDB's staff size offset by a reduction  in the CEO bonus plan bonus  accrual due
to the decline in income because of the litigation  settlement charge during the
quarter ended February 28, 1997.

     Clearing and related charges increased by approximately  $1,121,000, or 8%,
and  $1,536,000,  or 4%, for the three and nine month periods ended February 28,
1997,  respectively,  as  compared  to the prior year.  The  increases  were due
principally  to the  operations  of NDB  for  which  clearance  charges  rose by
approximately  $960,000  and  $1,792,000  during the three and nine months ended
February 28, 1997, respectively,  compared to the prior year due to the increase
in the volume of  transactions.  The increase for the nine months ended February
28,  1997 was  partially  offset  by a  decline  of  approximately  $416,000  in
clearance,  correspondent  and  execution  charges on Sherwood  Securities'  OTC
market making activities.

     Communications  expense  increased by  approximately  $224,000,  or 9%, and
$660,000,  or 9%,  for the  three  and nine  months  ended  February  28,  1997,
respectively,  as compared to the previous year. The increases are mainly due to
an increase in the  activities  of NDB,  primarily  the  expansion  of its 1-800
customer quotation service and increase in trading volume.

     Litigation  settlement,  for the three and nine months  ended  February 28,
1997,   represents  a  charge  in  connection   with  the  case  In  Re:  NASDAQ
Market-Makers Antitrust Litigation,  94 Civ. 3996(RWS) as discussed above and in
"Subsequent Events", below.

     Depreciation and amortization  increased by approximately  $52,000,  or 4%,
and  $893,000,  or 37%, for the three and nine months  ended  February 28, 1997,
respectively,  as compared to the prior year. This increase can be attributed to
capital  expenditures  incurred in connection  with the  relocation of NDB's and
SSC's headquarters, as well as the commencement of operations of MXNet.

     Occupancy and  equipment  rental  expenses  decreased  $17,000,  or 3%, and
$21,000,  or 1%, for the three and nine month periods  ended  February 28, 1997,
respectively, as compared to the prior year. The decreases are due to a decrease
for Sherwood Securities which, last year, incurred rent concurrently on two main
office  locations  as they  awaited  their  move  from New  York to New  Jersey.
Offsetting this decrease were higher occupancy rates incurred as a result of the
signing of a new lease for the relocation of NDB's main offices.

                                                       (10)

     Other  expenses  increased  by  approximately   $1,074,000,   or  30%,  and
$2,511,000,  or 30%,  for the three and nine months  ended  February  28,  1997,
respectively,  as  compared  to the prior year.  During the three  months  ended
February  28,  1997,  the  Company  incurred  approximately  $535,000  in legal,
accounting  and  investment  banker  fees and  expenses,  financial  institution
commitment  fees and  out-of-pocket  expenses in  connection  with the Company's
review of a possible  acquisition  which was not  consummated.  The Company also
incurred  additional  legal fees in connection  with the  litigation  settlement
negotiations.  These fees, coupled with an increase in advertising expenses, led
to the increases in other expenses.

     Interest expense increased by approximately  $15,000,  or 12%, and $72,000,
or 36%, for the three and nine months ended February 28, 1997, respectively,  as
compared to the  previous  year due to the  operations  of  Equitrade.  Interest
expense on the capital of  Equitrade's  minority  partners has  increased as the
level of such capital rose since a year earlier.

     Income of Equitrade  allocated to minority partners represents the share of
Equitrade's net income  allocated to the minority  partners during the three and
nine months ended February 28, 1997 and February 29, 1996, respectively.

     The Company's  effective tax rate increased from  approximately 37% for the
three months ended February 29, 1996 to approximately  182% for the three months
ended February 28, 1997. The effective tax rate increased from approximately 33%
for the nine months ended  February 29, 1996 to  approximately  49% for the nine
months  ended  February  28,  1997.  The  difference  in rates is due to several
factors.  The first  reason  relates to the lower  taxable  income  basis in the
current  year periods as a result of the  litigation  settlement  charge.  Other
factors include the Company's  relocation of its  headquarters  from New York to
New Jersey  during  November  1995 which led to a  retroactive  reduction in the
Company's  effective  tax rate during the quarter  ended  February 29, 1996.  In
addition,  during the quarter ended  February 29, 1996,  the Company  recognized
certain tax benefits  primarily  related to employee  compensation  arrangements
which were not available  during the quarter ended February 28, 1997.  Moreover,
as a result  of  significant  capital  additions  in New York  City  during  the
quarter,  the Company's  consolidated  state tax rate  increased.  Finally,  the
timing of Equitrade's  earnings  affects the amount of  unincorporated  business
taxes accrued when compared to prior periods.

     During the three months ended  February 28, 1997, the expense for the class
action  settlement that the Company has recorded as a subsequent event is deemed
to be nondeductible for current income tax purposes as the economic  performance
rules have not been met.  The Company  has,  therefore,  recorded a deferred tax
benefit for the future tax  consequences  of events that have been recognized in
the financial statements or tax returns,  based upon enacted tax laws and rates,
subject to management's  judgment that  realization is more likely than not. For
the three and nine months ended February 28, 1997,  deferred  taxes  principally
relate  to the  future  deductibility  of  the  expense  for  the  class  action
settlement  that the Company has recorded  and which is expected to be paid.  In
conjunction  with the deferred tax asset the Company has  recorded,  the Company
has booked a valuation  allowance of  approximately  $61,000 due to management's
judgment of the likelihood of realization.


Liquidity

     The Company's tangible assets are highly liquid with more than 72% of these
tangible assets consisting of cash or assets readily  convertible into cash. The
Company's operations have generally been financed by internally generated funds.
In addition,  at February 28, 1997,  margin account  borrowings of approximately
$175,000,000 were available to the Company from its clearing brokers.

     The Company's broker-dealer entities,  Sherwood Securities,  NDB, Equitrade
and Anvil,  are subject to the minimum net capital  requirement of the SEC which
is  designed  to measure  the  general  financial  soundness  and  liquidity  of
broker-dealers. As of February 28, 1997, Sherwood Securities, NDB, Equitrade and
Anvil had  approximately  $25,261,000,  $1,878,000,  $23,086,000  and  $353,000,
respectively,  in excess of the required  minimum net  capital.  The net capital
rule  imposes   financial   restrictions  upon  Sherwood   Securities',   NDB's,
Equitrade's and Anvil's  businesses  which are more severe than those imposed on
most other businesses.

     Cash  flows from  operations  will vary on a daily  basis as the  Company's
portfolio of marketable  securities  changes.  The Company's  ability to convert
marketable  securities  owned into cash is determined by the depth of the market
and the size of the Company's  security positions in relation to the market as a
whole.  The  portfolio  mix also  affects the  regulatory  capital  requirements
imposed on Sherwood  Securities,  NDB and Equitrade  which directly  affects the
amount of funds available for operating, investing and financing activities.

                                                          (11)

     In connection  with the relocation of NDB's  headquarters  during  December
1996,  the Company made  deposits of  approximately  $1,569,000 on various fixed
assets and  computer  software,  accounting  for the  increase  in other  assets
reflected  on the  statement  of  financial  condition  as of February 28, 1997.
Additionally,  fixed assets and computer  software of  approximately  $7,100,000
were  purchased  and placed  into  service by NDB during the nine  months  ended
February  28, 1997.  The Company  anticipates  that it will spend an  additional
$2,200,000 over the next 3 months for the ongoing upgrade of NDB's technological
infrastructure  and intends to finance this upgrade out of internally  generated
funds.

     In connection  with the  commencement  of operations of MXNet,  the Company
expended  approximately  $2,200,000  for operating  costs and purchases of fixed
assets during the nine months ended February 28, 1997.  Such funds were provided
from internally  generated sources. No further capital  expenditures are planned
at this time.

     The operations of the Company's  American Stock  Exchange  Specialist  book
continue to be funded by the income generated by the book.

     Cash flows from the Company's investment activities are directly related to
market conditions.

     During July 1996,  Equitrade  purchased an additional  seat on the NYSE for
$1,450,000.

     On August 13, 1996, the Company purchased 100,000 restricted shares of 
Intra Serve Corp. for $100,000.

     On November 21, 1996,  Equitrade  loaned RSF  Partners,  a NYSE  specialist
firm,  $500,000 under a subordination  agreement with interest payable at 8% per
annum and a maturity date of November 30, 1997. As additional  consideration for
the loan, RSF Partners granted to Equitrade the exclusive right of first refusal
to acquire RSF Partners' specialist unit, subject to NYSE approval.


     On November  22,  1996,  the Company  loaned  $100,000 to Eurotech  Ltd. In
addition to a promissory note bearing interest at the rate of 12% per annum, the
Company received 50,000 shares of Eurotech Ltd. Common stock.

     As of December 31,  1996,  the Company  entered into an agreement  with the
president of its subsidiary, Stock Market Index, Inc. ("SMI"), pursuant to which
the Company sold all the shares of SMI to the president of SMI in exchange for a
personal note of the president in the amount of $132,187. The note is secured by
the shares of SMI. The Company  recognized a loss, after taxes, of approximately
$63,000 on this sale.

     On January 24, 1997,  the Company  purchased  from its partner in the Anvil
Joint Venture the partner's 51% joint venture interest for $188,780.  As part of
the agreement,  the partner signed a covenant not to compete for a period of one
year.

     During the quarter ended February 28, 1997, the Company made a loan to NDB,
in the form of a  subordination  agreement and also made an  additional  capital
contribution to Anvil, in the form of a U.S.  Treasury  obligation.  These funds
were expended in order for NDB and Anvil to maintain adequate regulatory capital
levels.  Additional  loans or  contributions  will be made by the Company to its
broker-dealer subsidiaries, as necessary, to ensure regulatory compliance.

     During the nine months ended  February 28,  1997,  the Company  repurchased
219,307  additional shares in connection with its December 1992 plan to buy back
up to 1,500,000  shares of the  Company's  common stock from time to time in the
open market or through  privately  negotiated  transactions.  As of February 28,
1997,  1,229,882 shares had been reacquired under this plan. The source of funds
for these purchases were internally generated.

     The Company has entered into a definitive agreement with Dresdner Bank A.G.
to acquire from it all the stock of Dresdner-NY  Incorporated  ("DNY") for cash.
The Company intends to finance this acquisition with internally  generated funds
(see "Subsequent Events").

Subsequent Events

     Subsequent  to February  28,  1997,  but prior to the issuance of its third
quarter consolidated  financial  statements,  Sherwood Securities entered into a
Settlement  Agreement  (the  "Settlement  Agreement")  dated  April 9, 1997 with
Plaintiffs' Co-lead counsel on behalf of the class plaintiffs in the case In Re:
NASDAQ Market-Makers  Antitrust Litigation,  94 Civ. 3996(RWS) currently pending
in the United States District Court for the Southern District of New

                                                        (12)

York ("the  Court").  This case is described in the Company's  Form 10-K for the
year  ended  May 31,  1996  under  Item 3,  Legal  Proceedings.  The  Settlement
Agreement,  recorded as of February 28, 1997 as a subsequent event, provides for
payment by Sherwood  Securities of $4,375,000 per percentage point of its market
share of the "Defendants' Market" which is defined as the 35 NASDAQ market-maker
defendants'  total  number  of  shares  traded  as  market-makers  in the  Class
Securities (a  designated  list of NASDAQ  securities)  during the period May 1,
1989 to May 27,  1994.  Sherwood  Securities'  market  share of the  Defendants'
Market is estimated in the Settlement Agreement to be 2.10% which estimate would
result in a total principal payment of $9,187,500.  Accordingly, the Company has
adjusted  its  consolidated   financial  statements  at  February  28,  1997  by
recognizing a charge to operations for the total estimated  principal payment of
$9,187,500.  The market share  estimate,  however,  is subject to a verification
procedure and adjustment set forth in the Settlement  Agreement.  The Settlement
Agreement  provides for the payment of the verified amount in two  installments,
50% ten days after the date of the Settlement Agreement, and the other 50%, plus
accrued interest,  365 days later. There are also non-monetary  covenants in the
Settlement  Agreement which do not become  effective unless and until 23 or more
future  settling  defendants  agree to the  entry  of a  stipulation  and  order
containing  the  same  covenants.  In  the  non-monetary   covenants,   Sherwood
Securities has agreed to refrain from engaging in certain types of activities in
connection  with its NASDAQ  market  making.  One or more of these  non-monetary
covenants  are  subject  to  being  voided  in  circumstances  set  forth in the
Settlement Agreement.  The Settlement Agreement provides for a release by "Class
Members" of "Released  Claims" against  Sherwood  Securities and certain related
persons and  affiliates as such terms are defined in the  Settlement  Agreement.
The Settlement  Agreement is subject to the approval of the Court.  There can be
no assurance that the Court will approve the  Settlement  Agreement as submitted
or that if the Court approves the Settlement Agreement the final judgment of the
Court will not be  appealed.  If appealed,  there can be no  assurance  that the
final judgment of the Court will be affirmed. If the Settlement Agreement is not
approved  by the Court  or, if  appealed,  if the  judgment  of the Court is not
affirmed on appeal,  the Settlement  Agreement will be terminated  except to the
extent  provided in the  Settlement  Agreement.  The  Settlement  Agreement also
provides that Sherwood  Securities  may  terminate the  Settlement  Agreement in
certain  other  circumstances.  The  foregoing  description  of  the  Settlement
Agreement  is a summary,  is not  complete  and is qualified by reference to the
Settlement  Agreement,  a copy of which has been filed as Exhibit  10(a) to this
Form 10-Q.

     The Company has entered into a definitive agreement with Dresdner Bank A.G.
to acquire  from it all the stock of DNY,  which is  engaged  in the  specialist
business  on the  NYSE,  for a  purchase  price of  $5,215,000  plus  the  total
stockholder's  equity of DNY which at  December  31, 1996 was  $12,187,753.  DNY
serves as a  specialist  in 54  securities  on the NYSE.  The  acquisition  will
include four seats on the NYSE and DNY's  receivable  for floor  brokerage.  The
assets  including  four seats on the NYSE (except cash) and  liabilities  of DNY
will be  transferred  by the Company to  Equitrade.  Two employees of DNY are to
retain a portion of the specialist  book of DNY and become  limited  partners of
Equitrade.  The balance of the specialist book will remain with  Equitrade,  and
the Company will be entitled to 38.4% of the "net profits" and "net losses" from
the specialist activities of this specialist book. The transaction is subject to
the  approval  of the NYSE and  review  under  the  Hart-Scott-Rodino  Antitrust
Improvement Act of 1976. While the Company believes it will receive the required
approvals  for this  acquisition,  there can be no  assurance  that the required
approvals for the DNY  acquisition  will be obtained.  Management of the Company
believes the acquisition will be completed prior to the end of May 1997.


Effects of Inflation

     The Company's assets are not  significantly  affected by inflation  because
they are primarily  monetary in nature.  Management  believes  that  replacement
costs of furniture,  equipment and leasehold  improvements  will not  materially
affect  operations.  However,  the  rate  of  inflation  affects  the  Company's
principal expenses such as employee compensation, rent and communication,  which
may not be readily recoverable from increased revenues. Because of market forces
and competitive  conditions in the securities  industry,  a broker-dealer may be
unable to  unilaterally  increase  spreads and  commissions  in order to recover
increased  costs  related to inflation.  Consequently,  the Company must rely on
increased  volume for this purpose.  However,  the Company has significant  cash
balances on deposit with its  principal  clearing  brokers on which  interest is
paid which,  in the event there are higher  interest rates which normally result
from inflation, would offset some of the costs.








                                                       (13)
New Accounting Pronouncement

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 128, "Earnings per Share" ("Statement 128"),
for periods ending after  December 15, 1997.  Statement 128 replaces the current
standard used to calculate  primary  earnings per share,  Accounting  Principles
Board Opinion No. 15 ("APB 15").  Statement 128 requires a calculation  of basic
earnings per share, as well as a dual presentation of basic and diluted earnings
per share on the face of the  statement  of  income.  Basic  earnings  per share
differs from primary earnings per share under APB 15 in that dilution for common
stock equivalents is excluded. Basic earnings per share under Statement 128, for
the three and nine months ended February 28, 1997 would not have been materially
different than primary earnings per share under APB 15.


Forward Looking Statements

     Statements regarding the Company's expectations as to its future operations
and financial  condition and certain  other  information  contained in this Form
10-Q or in documents incorporated herein by reference constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  Although  the  Company  believes  that  its  expectations  are  based  on
reasonable  assumptions  within the bounds of its  knowledge of its business and
operation,  there  can be no  assurance  that  actual  results  will not  differ
materially  from its  expectations.  Factors which could cause actual results to
differ from expectations  include a general downturn in the economy,  changes in
the level of activity of securities  markets in which the Company  participates,
changes  in  government  policy or  regulation  and  unforeseen  costs and other
effects  related to legal  proceedings or  investigations  of  governmental  and
self-regulatory organizations.



PART II - OTHER INFORMATION

Item 1 - LEGAL PROCEEDINGS

     In Part I, Item 3 "Legal  Proceedings" of its Form 10-K for the fiscal year
ended May 31, 1996, the Company reported upon a class action complaint  entitled
In re NASDAQ Market-Makers  Antitrust  Litigation,  94 Civ. 3996(RWS),  in which
Sherwood Securities is one of several defendants. The Honorable Robert W. Sweet,
U.S.D.J.,  by opinion issued on November 26, 1996,  granted in part  plaintiffs'
motion in this action for class  certification  pursuant to Rules  23(b)(2)  and
23(b)(3) of the Federal Rules of Civil Procedure.  Sherwood  Securities  entered
into a Settlement  Agreement with  Plaintiffs'  Co-lead counsel on behalf of the
class plaintiffs in this matter. The Settlement Agreement is described under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of  Operations - Subsequent  Events" and is filed as Exhibit  10(a) to this Form
10-Q and is incorporated herein by reference.



Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits:

                Exhibit 10(a) - Settlement Agreement

                Exhibit 10(b) - Stock Purchase Agreement dated as of 
                                April 11, 1997 between Dresdner Bank A.G. 
                                and The Sherwood Group, Inc.

                       Exhibit 11 - Computation of Earnings Per Share

                       Exhibit 27 - Financial Data Schedule

          (b) The Company  filed no reports on Form 8-K during the quarter ended
              February 28, 1997.






                                                       (14)


<PAGE>



                                                  SIGNATURES


Pursuant  to the  requirements  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.



                                                     The Sherwood Group, Inc.
                                                   ---------------------------

Date: April 11, 1997                                 By: Dennis Marino
     ----------------                              ---------------------------
                                                      Dennis Marino
                                                      Executive Vice President
                                                      and Chief Administrative
                                                      Officer

Date: April 11, 1997                                 By: Denise Isaac
      ---------------                                -------------------------
                                                      Denise Isaac
                                                      Chief Financial Officer 
                                                      and Principal Accounting
                                                      Officer



































                                                       (15)




                                                  - 55 -  
                                          UNITED STATES DISTRICT COURT
                                       FOR THE SOUTHERN DISTRICT OF NEW YORK

 ...........................................................

                                                            94 Civ. 3996 (RWS)
IN RE:

                                                            M.D.L. No. 1023
NASDAQ MARKET-MAKERS
ANTITRUST LITIGATION
                                                       This Document Relates To:
                                                       All Actions
 ...........................................................


                                               SETTLEMENT AGREEMENT
         THIS SETTLEMENT AGREEMENT is made this 9th day of April, 1997, by
defendant Sherwood Securities Corp. (the "Settling Defendant") and plaintiffs, 
through Plaintiffs' Co-Lead Counsel in the In Re: Nasdaq Market-Makers Antitrust
Litigation, 94 Civ. 3996 (RWS), M.D.L. No. 1023, a multidistrict consolidated 
class action, acting on behalf of the Class defined herein (collectively, the
"Class" or "class plaintiffs").
         WHEREAS, plaintiffs have alleged, among other things, that the Settling
Defendant has acted unlawfully by, among other things,  engaging in a conspiracy
to inflate the bid-ask spread of certain  Nasdaq  securities in violation of the
Sherman Act, 15 U.S.C.  ss.1,  and  plaintiffs  contend that they have  suffered
damages,  including  damages  measured  by the  difference  between  the spreads
charged and the  spreads  that would have  prevailed  in a  competitive  market,
absent violations of the antitrust laws;
         WHEREAS, the Settling Defendant vigorously denies each and every one of
plaintiffs' allegations of unlawful conduct and has alleged a number of defenses
to plaintiffs' claims and disclaims any wrongdoing or liability whatsoever;
         WHEREAS,  plaintiffs and Settling  Defendant agree that this Settlement
Agreement shall not be deemed or construed to be an admission or evidence of any
violation of any statute or law or of any  liability or  wrongdoing  by Settling
Defendant  or of the truth of any of the  claims or  allegations  alleged in the
Class Action;
         WHEREAS, arm's length settlement  negotiations have taken place between
Plaintiffs'  Co-Lead  Counsel  and  Settling  Defendant,   and  this  Settlement
Agreement has been reached, subject to the final approval of the Court;
         WHEREAS,  Plaintiffs' Co-Lead Counsel have concluded, after substantial
discovery and  investigation  of the facts and after  carefully  considering the
circumstances  of the Class Action and the  applicable  law, that it would be in
the best interests of the Class to enter into this Settlement Agreement in order
to avoid the uncertainties of litigation,  particularly  complex litigation such
as this,  and to assure a benefit to the Class,  and further,  that  Plaintiff's
Co-Lead Counsel consider the settlement set forth herein to be fair, reasonable,
and adequate and in the best interests of  plaintiffs,  including all members of
the Class;
         WHEREAS, in determining the amount of monetary  compensation to be paid
by this Settling Defendant, Plaintiffs' Co-Lead Counsel have taken into account,
inter  alia,  (a)  the  Settling  Defendant's  position  as the  first  Settling
Defendant,  (b) the Settling  Defendant's net worth relative to the net worth of
Other  Defendants;   and  (c)  the  fact  that  Plaintiffs'  motion  to  include
institutional  investors in the class is undecided at the time of the entry into
this Settlement Agreement;
         WHEREAS,  Settling  Defendant  has  concluded,  despite  the  belief of
Settling  Defendant  that it is not liable for the claims  asserted and has good
defenses thereto, that it will enter into this Settlement Agreement to avoid the
further expense, inconvenience and burden of this protracted litigation, and the
distraction  and diversion of its personnel  and  resources,  and to put to rest
this controversy with valued business customers, and to avoid the risks inherent
in uncertain complex litigation,  and to avoid the expense and risks inherent in
any possible future litigation raising similar claims;
         NOW  THEREFORE,  it is  agreed  by the  undersigned,  on  behalf of the
Settling  Defendant  and the Class,  that the Class Action and all claims of the
class  plaintiffs be settled,  compromised  and dismissed on the merits and with
prejudice as to the Settling  Defendant,  and,  except as hereinafter  provided,
without costs as to plaintiffs or Settling Defendant, subject to the approval of
the Court, on the following terms and conditions:
         1.       Terms Used In This Agreement.
         The  words  and  terms  used in this  Settlement  Agreement  which  are
expressly  defined in Section 36  ("Definitions.")  of this Agreement shall have
the meaning ascribed to them in the said Section.
         2.       Class Definition.
         The      Class is defined for settlement  purposes  ("Settlement Class"
                  or "Class") as follows: All persons, firms, corporations,  and
                  other   entities   (excluding   Defendants  and  other  Nasdaq
                  market-makers,  and their respective affiliates) who purchased
                  or  sold  Class  Securities  on the  Nasdaq  National  Market,
                  trading  directly (or through  agents) with the  Defendants or
                  their  co-conspirators,  or with their respective  affiliates,
                  during  the  period  May 1,  1989  to  May  27,  1994  ("Class
                  Period"); and

                  A subclass consisting of those members of the class defined in
                  the immediately preceding clause, who at the time Class Notice
                  (as defined in the Refiled Consolidated Complaint) are current
                  brokerage  customers of defendants (or their  affiliates),  or
                  whose  brokerage  accounts are cleared by defendants (or their
                  affiliates), and to whom defendants (or their affiliates) send
                  periodic mailings.

         For  purposes of this  settlement,  all brokers are deemed  agents and,
therefore,  the Class  includes,  but is not  limited  to, all  persons,  firms,
corporations and other entities, as described above, who traded through brokers.
For purposes of this  settlement,  institutional  investors  (including  but not
limited to banks, savings and loan associations, insurance companies, registered
investment  companies,  investment  advisors and all private and public  mutual,
retirement,  pension,  profit  sharing  or other  types of  funds)  are  "firms,
corporations  and other entities"  included in the Class to the extent that they
purchased or sold Class Securities in the manner and during the period described
in the Class definition.  The inclusion of all such persons, firms, corporations
and  other  entities  who  traded  through  brokers  and all such  institutional
investors in the Court  approved  Settlement  Class is a condition  precedent to
this Settlement  Agreement  becoming final. The term "affiliates" as used in the
Class  definition  includes  parents,  subsidiaries  and other commonly owned or
commonly  controlled  affiliates.  If the definition of the Class or the list of
Class Securities is expanded,  by order of the Court for litigation purposes, or
in  connection  with any  Future  Settlement  (the  "Class  Redefinition"),  the
definition  of the  Class  or list of  Class  Securities  shall  be  identically
expanded  for  purposes  of this  settlement,  without  the need for  additional
consideration, as more specifically set forth as follows:
                  a.       If Class Redefinition  occurs prior to the mailing of
                           the Class  Notice and Notice of  Settlement  for this
                           settlement ("Sherwood  Settlement Notice"),  then the
                           corresponding  redefinition of the class for purposes
                           of this  settlement  shall occur at the time of Class
                           Redefinition,  and  the  Class  Notice  and  Sherwood
                           Settlement  Notice  shall be  given to the  redefined
                           class,  and  the  Sherwood  Settlement  Notice  shall
                           specifically  reflect  settlement  with the redefined
                           class.

                  b.       If the Class  Redefinition  occurs (i)  subsequent to
                           mailing  of  Class  Notice  and  Sherwood  Settlement
                           Notice,   but  (ii)  prior  to  the  time  that  this
                           settlement  becomes final in accordance  with Section
                           7(a)-(c), then the corresponding  redefinition of the
                           class for purposes of this settlement  shall occur at
                           the time of Class Redefinition, and if any subsequent
                           notice to the Class occurs, that notice shall include
                           notice of the  redefinition of the Class for purposes
                           of this  settlement,  without any additional  cost to
                           Sherwood.

                  c.       If Class Redefinition occurs subsequent to the time 
                           that this settlement becomes final in accordance 
                           with Section 7, then the parties agree that said
                           Class Redefinition shall constitute a reason 
                           justifying relief to Sherwood from the operation of 
                           the judgment within the meaning of Fed. R. Civ. 
                           P. 60(b)(6) to the extent necessary to effectuate the
                           corresponding redefinition of the class for purposes 
                           of this settlement.  The parties further agree that
                           they shall jointly ask the Court for such relief for 
                           Sherwood and for such further relief as is necessary 
                           to redefine the class for purposes of this 
                           settlement and for the provision of such notice to 
                           the redefined class, without additional cost to
                           Sherwood, as the Court deems necessary in light of
                           the Class Redefinition.  This subsection 2(c) shall
                           be severable and subject to separate Court approval.

         3.       Best Efforts to Effectuate This Settlement.
         Counsel for the Settling  Defendant  and  Plaintiffs'  Co-Lead  Counsel
agree to  recommend  approval of this  Settlement  Agreement by the Court and to
undertake  their best efforts,  including all steps and efforts  contemplated by
this Settlement  Agreement and any other steps and efforts that may be necessary
or  appropriate,  by order of the Court or otherwise,  to carry out the terms of
this Settlement Agreement.
         4.       Motion for Preliminary Approval.
         Within  thirty  (30)  business  days of the  date  hereof,  Plaintiffs'
Co-Lead Counsel shall submit to the Court a motion for  preliminary  approval of
the  settlement  and this  Settlement  Agreement.  A  proposed  form of order is
attached  hereto as Exhibit A.  Plaintiffs'  Co-Lead Counsel and counsel for the
Settling Defendant shall request that a decision be made promptly on the papers,
or that a hearing on the motion for  preliminary  approval of the  settlement be
held within 30 days of the date of such motion.
         5.       Combination of Class Notice and Settlement Notice.
         Counsel for the Settling Defendant and Plaintiffs' Co-Lead Counsel will
ask the Court to combine the notice of this  settlement with the class notice to
be given generally,  pursuant to Rule 23(c), (d) and (e) of the Federal Rules of
Civil Procedure.  Plaintiffs'  Co-Lead Counsel shall recommend to the Court, and
Settling  Defendant  shall  not  oppose,  a  program  and form of  notice to the
Settlement Class consistent with the goals of providing economical,  efficacious
and  expeditious  notice  consistent  with the  requirements  of Rule 23 and due
process.  After the Court  approves a program  and form of notice and finds that
the  program  and form of notice  satisfy  the  requirements  of Rule 23 and due
process,  up to one-half  of the  Settlement  Fund (as  adjusted  and  including
accrued  interest)  may be used to pay the costs of class  notice.  However,  if
prior to class notice Plaintiffs'  Co-Lead Counsel enter into Future Settlements
with one or more Future Settling Defendants, which are preliminarily approved by
the Court,  the amount of the Settlement  Fund that may be used to pay the costs
of class notice  shall not exceed the lesser of (a)  one-half of the  Settlement
Fund  or (b)  100% of the  costs  of  class  notice  divided  by the  number  of
defendants,  including the Settling Defendant,  who have settled,  regardless of
whether  or not the  Future  Settling  Defendants  are  required  by the  Future
Settlements  to  contribute  to the cost of class  notice.  (For  example,  if a
settlement with one Other Defendant is preliminarily approved, the amount of the
Settlement  Fund that may be used to pay the costs of class  notice shall be the
lesser of one-half of the Settlement Fund or 50% of the class notice costs,  and
if settlements with two Other Defendants are preliminarily  approved, the amount
of the  Settlement  Fund that may be used to pay the costs of class notice shall
be the lesser of one-half of the Settlement Fund or one-third of the total costs
of giving  notice.)  For  purposes of this  Settlement  Agreement,  the costs of
giving  notice  include  all costs and  expenses  associated  with notice to the
class,  including  but not  limited to the costs and  expenses  associated  with
identifying  class members,  providing mailed notice and published  notice,  and
providing any notice by means of the Internet,  toll-free  telephone  service or
otherwise.  The Settling  Defendant  shall provide all  information,  within its
possession, custody or control, relating to the identity of class members to the
same  extent  agreed  to by 19 or  more  defendants  or,  in the  absence  of an
agreement,  ordered by the Court. The Settling  Defendant will not object to the
inclusion of notice in its periodic  mailings to class  members,  if any, to the
extent  agreed to by 19 or more  defendants  or, in the absence of an agreement,
ordered by the Court.
         6.       Motion for Entry of Final Judgment.
         If,  after  notice to the Class,  the Court  approves  this  Settlement
Agreement,  then the parties  hereto  shall  jointly  seek entry of an order and
final judgment, in substantially the form attached hereto as Exhibit B,
                  a.       finally approving this settlement and its terms as
                           being a fair, reasonable and adequate settlement as 
                           to the Class within the meaning of Rule 23 of the 
                           Federal Rules of Civil Procedure, and directing its 
                           consummation pursuant to its terms;

                  b.       directing that, as to the Settling Defendant, the 
                           Class Action be dismissed with prejudice and, except 
                           as provided for herein, without costs in favor of the
                           Settling Defendant and against the members of the 
                           Class who did not timely request exclusion from the 
                           Class;

                  c.       permanently  barring and enjoining all members of the
                           Class (other than those members of the Class who have
                           filed a valid request for  exclusion  from the Class)
                           from the  institution,  maintenance,  prosecution  or
                           enforcement,  either  directly or indirectly,  of any
                           Released Claim against any Released Party;

                  d.       discharging and releasing each Released Party from 
                           the institution, maintenance, prosecution or 
                           enforcement, either directly or indirectly, of any 
                           Released Claim;

                  e.       determining pursuant to Fed.R.Civ.P. 54(b) that there
                           is no just reason for delay and directing that the
                           judgment of dismissal shall be final and appealable;

                  f.       reserving continuing and exclusive jurisdiction over
                           the settlement and this settlement agreement, 
                           including the administration and consummation of this
                           settlement; and

                  g.       directing that Plaintiffs' Co-Lead Counsel shall file
                           with the Clerk of the  Court a list of those  members
                           of the Class who have timely excluded themselves from
                           the Class and a copy of all  requests  for  exclusion
                           from the Class.


         7.       Finality.
         This Settlement Agreement shall become final upon the occurrence of all
         of the following three events:
                           (a)      approval in all respects by the Court as 
                                    required by Rule 23(e) of the Federal
                                    Rules of Civil Procedure;

                           (b)      entry,  as provided for in Section 6 herein,
                                    is made of the  final  judgment  (Exhibit  B
                                    hereto) of  dismissal  with  prejudice as to
                                    the   Settling    Defendant    against   all
                                    plaintiffs and members of the Class who have
                                    not  timely  excluded  themselves  from  the
                                    Class; and

                           (c)      expiration  of the  time for  appeal  or the
                                    time to seek  permission  to appeal from the
                                    Court's    approval   of   this   Settlement
                                    Agreement  as  described  in (a)  hereof and
                                    entry of a final  judgment as  described  in
                                    (b) hereof or, if appealed, approval of this
                                    Settlement  Agreement and the final judgment
                                    have been affirmed in their  entirety by the
                                    court of last  resort to which  such  appeal
                                    has  been  taken  and  such  affirmance  has
                                    become no longer  subject to further  appeal
                                    or review.

It is  agreed  that  the  provisions  of Rule 60 of the  Federal  Rules of Civil
Procedure shall not be taken into account in determining the above-stated times.
Notwithstanding  the  foregoing,  nothing in this Section  shall  prejudice  the
ability of the  parties to make the joint  application  contemplated  by ss.2(c)
above nor relieve the parties of their obligation to do so.

         8.       Monetary Terms.
         Subject  to the  provisions  hereof,  and in full,  complete  and final
settlement of the Class Action,  the Settling Defendant agrees that it shall pay
$4,375,000.00  per  percentage  point for its  market  share of the  Defendants'
Market. For this purpose,  "Defendants' Market" is defined as the 35 defendants'
total number of shares traded as market makers in the class securities currently
set forth in, and within the time periods set forth in, Exhibit A to the Refiled
Consolidated  Complaint,  excluding  trades outside the Nasdaq  National  Market
(e.g., Instinet or Posit), excluding trades between market makers, and excluding
trades by non-defendant market makers. The Settling Defendant's volume of shares
traded  shall be  determined  in like manner and with like  exclusions;  and the
Settling  Defendant's  market shall be  determined  to the nearest  tenth of one
percent.
         The Settling  Defendant has agreed to pay this  consideration  with the
specific  contemplation  that it is adequate not only to compensate  the current
Class but also to compensate  potential  future additions to the Class by reason
of any Class Redefinition.  Plaintiffs' Co-Lead Counsel also consider the amount
of the  Settlement  Fund  together  with  the  other  terms  of this  Settlement
Agreement,  fair,  reasonable and adequate to  accommodate  the interests of any
such  potential  future  additions  to the Class.  Nonetheless,  the Class shall
retain the entire Settlement Fund, with no reversion to the Settling  Defendant,
even if no expansion of the Class ever occurs.
         The  Settling  Defendant  shall  pay the  first  half of its  principal
obligation,  within ten (10) business days after the date hereof, into an escrow
account to be  invested in  instruments  secured by the full faith and credit of
the United  States.  The escrow account shall be  established  and  administered
pursuant to an escrow agreement in a form satisfactory to the parties,  and held
and  administered by an escrow agent  satisfactory  to the parties.  Plaintiffs'
Co-Lead  Counsel and Counsel for the Settling  Defendant shall be joint trustees
of this escrow account.  It is intended that any taxes due as a result of income
earned by the  Settlement  Fund will be paid from the  Settlement  Fund.  In the
event federal  income tax liability is final,  assessed  against and paid by the
Settling Defendant as a result of income earned by the Settlement Fund, Settling
Defendant shall be entitled to reimbursement of such payment from the Settlement
Fund.  Settling Defendant will notify Plaintiffs'  Co-Lead Counsel of any notice
of  assessment  or  payment  and will use its best  efforts  to resist  any such
assessment or payment.
         For purposes of the Settling Defendant's initial payment of one-half of
its principal obligation,  the Settling Defendant's market share is estimated to
be 2.1%,  which would require total principal  payments of $9,187,500 under this
Settlement  Agreement.  However, this estimate shall be subject to verification,
as  follows:  within 30 days  after this  Settlement  Agreement  is signed,  the
Settling Defendant shall provide to Plaintiffs' Co-Lead Counsel a written report
by a  consultant  ("Settling  Defendant's  Consultant")  computing  the Settling
Defendant's share of the Defendants'  Market through the use of a methodology as
similar  as  practical  to  that  described  in  Exhibit  C to  this  Settlement
Agreement,  as well as all of the back-up data (in computerized form to the full
extent available) and programs actually used in performing the calculation.  The
report  of  the  Settling  Defendant's   Consultant  shall  include  a  thorough
explanation of sampling,  if any, and  methodology.  The Settling  Defendant and
Settling  Defendant's  Consultant shall cooperate fully with Plaintiffs' Co-Lead
Counsel and  plaintiffs'  consultants so that  Plaintiffs'  Co-Lead  Counsel and
plaintiffs'  consultants  can evaluate the  appropriateness  and accuracy of the
computation of the Settling Defendant's market share. Such cooperation shall not
include,  however,  the  taking  of formal  discovery  of  Settling  Defendant's
Consultant nor the provision by Settling Defendant's Consultant of any materials
that are the subject of any  privilege or work product  protection  belonging to
persons or entities that are not parties to this Agreement.
         Within 30 days after receipt of the Settling  Defendant's  Consultant's
Report,  Plaintiffs' Co-Lead Counsel shall either accept or challenge in writing
Settling  Defendant's  Consultant's  computation of market share.  Any challenge
shall be  accompanied,  within 30  additional  days,  by a written  report  from
plaintiffs'   consultant   calculating,   to  the  extent  practical,   Settling
Defendant's share of the Defendant's  Market through the use of a methodology as
similar as practical to that  described in Exhibit C,  together  with a thorough
explanation,  to the extent  practical,  of  methodology  and together  with any
additional data and programs.  In the absence of any such timely challenge,  the
Settling  Defendant's  Consultant's  Report  will be  deemed  accepted.  If this
computation is timely challenged for any reason by Plaintiffs'  Co-Lead Counsel,
then, in the absence of agreement or compromise, Settling Defendant's Consultant
and  plaintiffs'  consultants  shall  jointly  select a neutral  economist as an
arbitrator, and the computation shall be subject to binding arbitration, without
appeal,  subject  to the  rules of the  American  Arbitration  Association,  the
expense of which will be paid from or reimbursed  from the Settlement  Fund. Any
requests  for  additional  data or  information  by either  consultant  shall be
resolved voluntarily or by the arbitrator.
         It is the joint belief,  understanding and contemplation of the parties
that the  calculation of Settling  Defendant's  share of  Defendants'  Market as
described herein and in Exhibit C hereto is designed to be a pragmatic  approach
to reasonably estimate the Settling  Defendant's market share for the purpose of
arriving  at  one  appropriate  measure  of  monetary   consideration  for  this
settlement.  No calculation or method of calculation  would be perfect.  Neither
party believes that the fairness,  adequacy or reasonableness of this settlement
is a function of the precise accuracy of this calculation.  Instead, the parties
believe that the efficient procedure set forth herein and in Exhibit C hereto is
itself fair,  reasonable and adequate and will result in an appropriate  measure
-- not necessarily the only appropriate measure -- of this Settling  Defendant's
comparative share of the activity at issue in this Class Action.
         If  Settling  Defendant's  Consultant's  computation  of  the  Settling
Defendants' share of Defendant's  Market is greater than 2.1%, or if the parties
subsequently  agree  that  it  is  greater  than  2.1%,  or  if  the  arbitrator
subsequently decides that it is greater than 2.1%, then within 30 days after the
Settling  Defendant's  Consultant's  report or arbitrator's  decision,  Settling
Defendant shall pay half of the difference times  $4,375,000.00  into the escrow
account,  plus interest equaling the amount that would have been earned had this
half of the  difference  been  paid  at the  time of the  initial  payment.  The
remaining  half of the  difference  shall be included with interest (as computed
below) in the  Settling  Defendant's  second  payment.  If Settling  Defendant's
Consultant  or the  arbitrator  decide that the  Settling  Defendant's  share of
Defendants'  Market is less than 2.1%, then the difference  times  $4,375,000.00
shall be credited  against the Settling  Defendant's  second  payment  described
below.
         The  Settling  Defendant  shall pay the  second  half of its  principal
obligation 365 days after signing this Settlement Agreement into the same escrow
account set forth above,  to be invested in like manner (or, if applicable,  the
escrow  account  established  under  Section 11 of this  Settlement  Agreement).
Simple  interest  shall be earned over the 365 day period at the  Broker's  Call
Rate ("Call  Money") as published  in the Wall Street  Journal as of the date of
the  signing  of this  Settlement  Agreement,  which  is  7.25%.  If,  prior  to
distribution of the Settlement Fund, plaintiffs enter into any Future Settlement
in  which  a  Future  Settling  Defendant  is  permitted  to  defer  payment  of
consideration  and is charged an interest  rate below the Call Money rate on the
date of such Future  Settlement,  then the  interest  rate paid by the  Settling
Defendant  shall be reduced by an equal number of points,  or reduced to zero in
the  event the  Future  Settling  Defendant  is  charged  no  interest,  and the
Settlement Fund appropriately credited or refunded.
         Nothing contained in this Settlement Agreement shall limit the Settling
Defendant's  right to prepay the second half of its  principal  obligation  with
interest  through the date of actual payment,  and without  prepayment  penalty,
which  right,  if  exercised,  will  fulfill the  Settling  Defendant's  payment
obligation hereunder in full.
         If the Settling  Defendant  fails to pay in full the second half of its
principal  obligation (as adjusted  above) with interest (as computed above) 365
days after the date of signing of this Settlement  Agreement,  then  Plaintiffs'
Co-Lead  Counsel,  on 10 days written  notice to Settling  Defendant's  counsel,
during which 10-day period Settling Defendant shall have the opportunity to cure
the default  without  penalty,  may withdraw from this  Settlement  Agreement or
elect to enforce it, with the full expenses of any enforcement effort, including
legal fees, to be taxed against  Settling  Defendant.  The Settling  Defendant's
obligation to pay may be enforced by motion in this multidistrict litigation.
         9.       All Claims Satisfied by Settlement Fund.
         Plaintiffs and other members of the Class who have not timely  excluded
themselves  from  the  Class  shall  look  solely  to the  Settlement  Fund  for
settlement and  satisfaction  against the Settling  Defendant of all claims that
are released hereunder. Except as provided herein, or by subsequent order of the
Court,  no class member shall have any  interest in the  Settlement  Fund or any
portion thereof.
         10.      Expenses Paid From Settlement Fund.
         The Settling  Defendant  shall not be liable for any costs,  or fees or
expenses  of any of  plaintiffs'  respective  attorneys,  experts,  consultants,
agents and representatives, but all such costs, fees and expenses as approved by
the Court may be paid out of the Settlement Fund.
         11.      Establishment of Escrow Account.
         Ten  days  after  final  settlement   approval,   the  Settlement  Fund
(including the principal  obligation and interest)  shall be paid into a further
escrow account with  Plaintiffs'  Co-Lead  Counsel as sole  trustees.  Except as
provided in Section 5 herein,  no  distribution  of the Settlement Fund shall be
made until the conditions contained in Section 7 shall have been fulfilled.
         12.      Plan of Distribution.
         Plaintiffs' Co-Lead Counsel shall propose a plan of distribution to the
Court, either before or after final settlement approval.  The Settling Defendant
shall not directly or  indirectly  take any position with respect to any plan of
distribution  or  amount  of  distribution  to any  plaintiff  or class  member,
counsel,  expert or consultant,  or any other person  whatsoever,  except as set
forth in Section 27 hereof. In no event shall any portion of the Settlement Fund
(including  principal  or  interest)  be  distributed  or revert to the Settling
Defendant,  under any  circumstances,  after this Settlement  Agreement  becomes
final  pursuant to Section 7 herein.  After this  Settlement  Agreement  becomes
final pursuant to the provisions of Section 7 herein,  the Settlement Fund shall
be distributed as ordered by the Court.
         To facilitate  processing of claims and  distribution of the Settlement
Fund,  upon written  request by the Plaintiffs'  Co-Lead  Counsel,  the Settling
Defendant will, to the extent reasonably  available,  provide those computerized
records  which  reflect  trades  by class  members  and  which  are  within  its
possession,  custody or control to the Plaintiffs for the purposes of settlement
administration.
         Following final approval,  disbursements  for the costs and expenses of
administration   and  distribution  of  the  Settlement  Fund,  or  expenses  of
litigation, may be made from the Settlement Fund from time to time with approval
of the Court.  In no event shall the Settling  Defendant  have any  liability or
responsibility  with  respect  to the  distribution  and  administration  of the
Settlement Fund,  including,  but not limited to, the costs and expenses of such
distribution and administration.
         13.      Non-Monetary Relief.
         The Settling Defendant, as a further term of this Settlement Agreement,
conditionally  agrees to the following  non-monetary  relief.  The parties shall
jointly move for entry of the Stipulation and Order,  appended hereto as Exhibit
D, at the same  time  that  they  move for  final  approval  of this  Settlement
Agreement. However, the Stipulation and Order appended hereto as Exhibit D shall
not become final and shall not become  effective  unless and until,  and only to
the same extent that, 23 or more Future Settling  Defendants  (other than Kidder
Peabody which is no longer in business)  agree to the entry of a Stipulation and
Order, of the same or longer  duration,  containing the same Negative  Covenants
contained  in Exhibit D, which  Stipulations  and Orders have  become  final and
effective. In addition,  effective upon final approval of this Settlement and of
Future Settlements by at least 23 Future Settling  Defendants (other than Kidder
Peabody which is no longer in business)  containing a like  provision,  Settling
Defendant  agrees that if the United States  Department of Justice requests that
some or all of the resources Settling Defendant is required, by the terms of any
finally approved  resolution of United States of America v. Alex. Brown, et al.,
96 Civ. 5313(RWS), in the United States District Court for the Southern District
of New York (the "DOJ  Action"),  to dedicate to the monitoring and recording of
telephone  conversations  be diverted instead to the recording and monitoring of
other  media of  trader  communications  (such  as,  for  example,  Instinet  or
SelectNet),  Settling  Defendant  shall comply with that  request.  In no event,
however,  shall  Settling  Defendant be required by operation of this section to
agree to any such request  that would  increase  the  aggregate  time or expense
dedicated to monitoring trader communications.  Nothing in this section shall be
construed to require  Settling  Defendant to enter into any settlement at all of
the DOJ Action or to agree to any monitoring of trader communications as part of
such a settlement.
         No provision of the  Stipulation and Order appended hereto as Exhibit D
or of this Section 13 shall be enforceable  against the Settling  Defendant if a
State  of  Federal  government  agency  or  authority  commences  an  action  or
proceeding  in  which it  formally  asserts  that  such  provision,  alone or in
combination with other provisions,  is a Statutory  Disqualifier,  in which case
such provision or provisions shall be deemed null and void ab initio.  Moreover,
nothing in this  Settlement  Agreement  is  intended by the Parties to waive any
rights the Settling  Defendant may have in connection  with the DOJ Action or in
connection  with any  settlement of the DOJ Action;  nor is it intended to waive
any  objections  Plaintiffs'  Co-Lead  Counsel may have to any current or future
proposed settlement of the DOJ Action. In particular,  and without  limitations,
in the event, as contemplated by this section,  Settling Defendant agrees at the
request  of  the  DOJ  to  the  recording  or  monitoring  of  forms  of  trader
communications  other  than  telephone  calls,  any  such  recordings  or  other
evidentiary  by-product of such monitoring  shall not be discoverable by persons
other than the DOJ or  admissible  in  judicial  or  administrative  proceedings
unless,  and only to the extent that, tape recordings made pursuant to the terms
of any finally approved  settlement by Settling  Defendant of the DOJ Action are
discoverable  or  admissible.  Nothing in this section  shall be asserted by the
parties to be additional grounds for either approval or disapproval by the Court
of the currently  proposed  settlement of the DOJ Action, nor shall this section
operate as assent by the Class to be bound by the  judgment in the DOJ Action to
any greater extent than the Class would otherwise be bound.
         It is agreed and understood that if the  Non-Monetary  Relief set forth
herein and in Exhibit D hereto does not become effective by its terms or becomes
effective  but is  later  rendered  void  by its  terms,  then  this  Settlement
Agreement shall still be enforceable and effective in all other respects and the
parties  agree  that the  monetary  consideration  is itself  fair and  adequate
consideration for the settlement embodied in this Settlement Agreement.
         14.      Release.
         As set forth in the final  judgment  to be entered in  accordance  with
this Settlement  Agreement,  upon this Settlement  Agreement becoming final, the
Released  Parties  shall be released and forever  discharged  from all manner of
claims,  demands,  actions,  suits,  and causes of action relating to all Nasdaq
Securities (including securities that are not Class Securities),  whether class,
individual, or otherwise in nature, damages,  whenever incurred,  liabilities of
any nature whatsoever, including costs, expenses, penalties and attorneys' fees,
known or unknown,  suspected or  unsuspected,  in law or equity,  that any class
plaintiff or members of the Class who have not timely  excluded  themselves from
the Class Action (whether or not they make a claim

<PAGE>


         upon or  participate  in the  Settlement  Fund),  ever had,  now has or
hereafter can, shall or may have, arising from or relating in any way to (a) any
conduct complained of in the Refiled  Consolidated  Complaint or the constituent
actions  consolidated  therein, (b) any conduct involving any express or implied
or tacit joint or coordinated activity between Settling Defendant (including any
employee of Settling Defendant) and any other Nasdaq Market maker (including any
employee thereof) with respect to quotes, quote increments, movements of quotes,
prices, dealer spreads or inside spreads of any Nasdaq Security, (c) any conduct
relating  in any way to the  fixing,  stabilizing,  maintaining  or  widening of
bid-ask spreads (either dealer spreads or inside spreads or both) for any Nasdaq
Security,  (d) any conduct  relating in any way to the fixing of or movement (or
increments  of  movement)  of bid or ask  quotations  for  any  Nasdaq  Security
(including without limitation  movements of quotes at the request of or pursuant
to agreement with another Market maker),  (e) any conduct relating in any way to
the minimum or maximum  number of shares that Nasdaq  Market  makers,  or any of
them,  were willing to trade at their quoted bid or, quoted ask, (f) any conduct
relating in any way to the subject  matter of any of the negative  covenants set
forth in the  proposed  Stipulation  and  Order  annexed  hereto  as  Exhibit  C
(regardless  of  whether  said  Stipulation  and Order is ever  entered  or ever
becomes  effective or is rendered void ab initio),  (g) any conduct  relating in
any way to any boycott, harassment, refusal to deal or other behavior toward any
person or entity  relating  in any way to the conduct  described  in (a) through
(f); including,  without limitation, any such claims which have been asserted or
could have been asserted in this litigation  against the Released Parties or any
one of them,  or which arise under or relate to any federal or state  antitrust,
unfair competition,  unfair practices, price discrimination,  unitary pricing or
trade practice law,  securities law, or other law or regulation,  or common law,
including without limitation,  the Sherman Antitrust Act, 15 U.S.C. ss.1 et seq.
(hereinafter  and as  further  defined in Section  16, the  "Released  Claims");
provided,  however,  that this  release does not include a release of any claims
(i) for alleged  churning of  securities,  (ii) for  alleged  fraud  relating to
undisclosed payment for order flow, (iii) for alleged fraud relating to material
misstatements  or  omissions   bearing  on  the  underlying  value  of  specific
securities (and unrelated to market-making activities,  such as, but not limited
to, movement of quotes,  quote  increments,  dealer spreads,  inside spreads and
agreements or arrangements  between market makers relating to such market-making
activities), or (iv) enumerated in any Complaint which was filed and served upon
Settling  Defendant  prior to the date of this  Settlement  Agreement  (April 9,
1997) except for this Class  Action and except for any similar  State or Federal
action  which was  voluntarily  dismissed  prior to the date of this  Settlement
Agreement.  Nothing  herein shall be construed as indicating in any way that any
such claims enumerated in (i) through (iv) have any validity or could be or have
been validly asserted against the Settling Defendant or any Other Defendant.
         The scope of this release to the Settling  Defendant  shall be expanded
commensurately to the extent that a broader or more protective  release is given
to any Other  Defendant  in any Future  Settlement.  Nothing in this  Settlement
Agreement is intended to release any claims against any Other Defendants.
         15.      Waiver of Rights.
         Upon the Effective Date, as defined below, each Settlement Class Member
does hereby and by operation of the Final Judgment  shall,  expressly  waive and
relinquish, to the fullest extent permitted by law, the provisions,  rights, and
benefits of Section 1542 of the California Civil Code, which provides:
                  A general release does not extend to claims which the creditor
                  does not know or  suspect to exist in his favor at the time of
                  executing  the  release,  which  if  known  by him  must  have
                  materially affected his settlement with the debtor.

and any and all provisions,  rights and benefits of any similar state or federal
law, rule or regulation or the common law.
         16.      Joint and Several Liability.
         This  Settlement  Agreement  shall not settle,  limit or discharge  any
liability or financial  responsibility  of any Other  Defendants,  or of alleged
co-conspirators,  except to the minimum extent required by law. It is the mutual
understanding  of  class  plaintiffs  and  the  Settling   Defendant  that  this
Settlement  Agreement  therefore  will not reduce the alleged  joint and several
treble  damage  liability of the other 34 defendants by any more than the amount
of the settlement  itself.  The Settling Defendant hereby represents that it has
not, and covenants that it will not, enter into any agreement that would entitle
any Other  Defendant (or any other market maker) to reduce its own alleged joint
and several  liability by any greater  amount,  including but not limited to any
Settlement   Agreement   requiring  a  reduction   of   liability  or  financial
responsibility  related to the Settling  Defendant's  market share. The Settling
Defendant  hereby  releases  any and all  possible  claims for  contribution  or
indemnity  arising  out  of any  Released  Claim  against  any  Future  Settling
Defendant  whose Future  Settlement  contains a reciprocal  provision  similarly
releasing this Settling Defendant.


<PAGE>


         17.      Discovery Limitation.
         Neither Plaintiffs' Co-Lead Counsel, nor the Class, nor counsel for any
named Plaintiff or for any Class Member who has not timely  requested  exclusion
from the Class shall be entitled to any further  discovery of any kind from this
Settling  Defendant or any Released Party hereunder,  except as specifically set
forth in this Settlement Agreement.
         18.      Confidentiality Protection.
         All  discovery  materials  provided by the  Settling  Defendant  or any
Released  Party  hereunder  either  before or after the date of this  Settlement
Agreement including Documents, Answers to Interrogatories,  Deposition Testimony
and Audio-Tape  Recordings  shall be governed by all  Confidentiality/Protective
Orders  in  force  as of the  date  of  this  Settlement  Agreement  and by such
additional Confidentiality/Protective Orders as may be in effect on the date the
discovery takes place.
         19.      Document Production.
         The  Parties  agree  that  beginning  on the  date of  this  Settlement
Agreement  there shall be a six (6) month  moratorium  of document  discovery by
plaintiffs  directed to the Settling  Defendant or any Released Party hereunder,
except  that the  Settling  Defendant  will  provide to  Plaintiffs  the limited
category of documents necessary to effectuate class certification notice, to the
same extent agreed to by 19 or more Other  Defendants,  or, in the absence of an
agreement,  ordered  by the Court,  and except  that  Settling  Defendant  shall
promptly after the date of this  Settlement  Agreement  produce any  transcripts
(and  exhibits)  in its  possession,  custody or control of  testimony  given by
Settling  Defendant's  current or former  employees to the Department of Justice
("DOJ"), as well as Settling  Defendant's Answers to Interrogatories  previously
posed by the DOJ. Furthermore:
                  a.       After the expiration of the six (6) month moratorium,
                           the Settling  Defendant  shall  produce to Plaintiffs
                           those categories of documents (but not including tape
                           recordings)  which the Court has  directed  the Other
                           Defendants to produce or that at least  nineteen (19)
                           of the Other  Defendants  have  consented to produce,
                           except that in no event shall the Settling  Defendant
                           be  required to produce any  document  not  currently
                           requested  in the  Plaintiffs'  outstanding  document
                           requests.

                  b.       After the expiration of the six (6) month moratorium,
                           the Settling Defendants shall produce all testimony 
                           transcripts within its possession, custody or control
                           and exhibits thereto within its possession, custody 
                           or control as of the date of this Settlement 
                           Agreement from those depositions of Settling
                           Defendant's current or former employees which were 
                           conducted by the Securities and Exchange Commission 
                           ("SEC") in connection with the investigation 
                           captioned In the Matter of Certain Market Making
                                     --------------------------------------
                           Activities on Nasdaq (the "SEC Investigation").
                           --------------------           
                           If the Settling Defendant gains possession, custody
                           or control of additional transcripts of testimony 
                           (or exhibits thereto) conducted in connection with 
                           the SEC Investigation after the date of this
                           Settlement Agreement, said transcripts (and exhibits 
                           thereto) shall be produced sixty (60) days after 
                           receipt of the transcripts (and exhibits thereto) by
                           the Settling Defendant's counsel.  The Settling 
                           Defendant further agrees that after the six (6) 
                           month moratorium, it shall produce all documents 
                           (other than audiotape) provided to the SEC in 
                           connection with the SEC Investigation.  Nothing 
                           herein shall be construed as indicating that the 
                           Settling Defendant has any SEC exhibits in its 
                           possession, custody or control.

                  c.       Nothing   contained  herein  shall  be  construed  as
                           affecting   any  right  of   reimbursement   Settling
                           Defendant  may have for the  reasonable  costs of any
                           such document  production,  nor as conceding that any
                           such right exists.

         20.      Answers to Interrogatories.
         The  Parties  agree  that  beginning  on the  date of  this  Settlement
Agreement there shall be a six (6) month  moratorium on any requirement that the
Settling  Defendant  provide  answers to the  plaintiffs'  interrogatories.  The
Parties  agree that after the  expiration of the six (6) month  moratorium,  the
Settling  Defendant  shall produce to plaintiffs  answers to the following three
(3) types of questions only:
                  (a)      Identification of the Settling Defendant's Personnel
                           during the Class Period and their positions.

                  (b)      Identification  of those employees and, to the extent
                           known,  former employees who have provided  testimony
                           to the Department of Justice.

                  (c)      Identification  of those employees and, to the extent
                           known,  former employees who have provided  testimony
                           to the SEC in connection with the SEC Investigation.

         21.      Deposition Discovery.
         The  Parties  agree  that  beginning  on the  date of  this  Settlement
Agreement  there shall be a nine (9) month  moratorium on  deposition  discovery
directed to the Settling Defendant or any Released Party hereunder.
                  a.       The Parties  agree that after the  expiration  of the
                           nine (9) month moratorium, plaintiffs shall use their
                           good  faith,   best   efforts  to  defer   deposition
                           discovery  directed at the Settling  Defendant  until
                           after completion of deposition  discovery directed at
                           the Other Defendants.

                  b.       The Parties  agree that after the  expiration  of the
                           nine (9) month  moratorium  the Settling  Defendant's
                           officers  and  employees   shall  remain  subject  to
                           deposition by notice; provided, however, that nothing
                           herein  shall be  construed  as a  limitation  on the
                           Settling  Defendant's  right to seek  (or  Plaintiffs
                           right to oppose)  any  appropriate  protective  order
                           limiting or preventing  such deposition in accordance
                           with the  Federal  Rules of  Civil  Procedure  or its
                           ability   to   advance   all   arguments    available
                           thereunder.



<PAGE>


         22.      Audiotape Production.
         Except as provided in subsection  (a) and (b) below,  the Parties agree
that beginning on the date of this  Settlement  Agreement  there shall be a nine
(9) month  moratorium on any  requirement  that the Settling  Defendant  provide
audiotape recordings of telephone conversations.
                  a.       The Settling  Defendant  agrees that thirty (30) days
                           after  preliminary  approval  of this  Settlement  it
                           shall make available for Plaintiffs' review copies of
                           all audiotape,  which was not previously  provided to
                           the Plaintiffs,  that was provided, prior to the date
                           of this  Settlement  Agreement,  to the Department of
                           Justice in connection  with its Nasdaq  investigation
                           or  to  the   SEC  in   connection   with   the   SEC
                           Investigation,  the total of which Settling Defendant
                           estimates  to be  approximately  30 Trader  Days (240
                           hours).

                  b.       The Parties agree that the Settling  Defendant  shall
                           make   available   to   Plaintiffs   for  review  any
                           additional   audiotape   provided   to  the   SEC  in
                           connection with the SEC Investigation  after the date
                           of this Settlement Agreement; provided, however, that
                           the  Settling  Defendant  is not required to make any
                           audiotape referred to in this subsection available to
                           Plaintiffs  until sixty (60) days after the date that
                           it is made available to the SEC.

                  c.       The Parties agree that after the expiration of the 
                           nine (9) month moratorium, the Settling Defendant 
                           shall make available for Plaintiffs' review no more
                           than twenty-five (25) additional Trader Days (a total
                           of approximately 200 hours) of audiotape to be 
                           selected by the Plaintiffs by way of an appropriate
                           letter demand.  For purposes of this provision, a 
                           "Trader Day" shall mean one complete eight-hour day 
                           of one trader's phone line.  Such trader days may be
                           selected by Plaintiffs' Co-Lead Counsel by
                           identification of the trader's name or by 
                           identification of the name of a security.  In the 
                           event that the identification is made by the name of
                           a security, the burden will be on the Settling 
                           Defendant to identify the trader for the given 
                           security to the extent reasonably ascertainable.

                  d.       The  procedure by which the Settling  Defendant  will
                           copy and make audiotape available to Plaintiffs shall
                           be governed by the procedure  that has been in effect
                           to  date  in  this   Class   Action   and   which  is
                           incorporated    in    the    Stipulation     executed
                           simultaneously    herewith   between   the   Settling
                           Defendant and the Plaintiffs' Co-Lead Counsel (a copy
                           of which is attached as Exhibit E).

         23.      Return of Discovery Materials.
         The plaintiffs and the Settling  Defendant  acknowledge  and agree that
within  sixty  (60)  days  after  entry  of a final  judgment  terminating  this
litigation  in its  entirety,  all  materials  (including  but  not  limited  to
confidential,  non-confidential  and highly confidential  documents,  answers to
interrogatories,  testimony  transcripts,  privilege logs, audiotape recordings)
produced by or  discovered  of the  Settling  Defendant or its current or former
employees  shall be returned to the Settling  Defendant  upon its request at its
expense or destroyed.  However,  Plaintiffs' Co-Lead Counsel may retain, subject
to the  Stipulated  Confidentiality  Order,  the file  copies of any  pleadings,
motions, briefs or affidavits that have been filed with the Court.
         24.      Reservation of Rights and Privileges.
         Nothing in this  Settlement  Agreement  is intended  to waive  Settling
Defendant's  right to assert that any  material is protected  from  discovery by
reason of any individual or joint defense  privilege or work product  protection
or intended to waive  plaintiffs'  right to contest  any claim of  privilege  or
work-product protection.
         25.      Effect of Disapproval.
         If the Court refuses to approve this  Settlement  Agreement or any part
hereof,  or if such approval is modified or set aside on appeal, or if the Court
for any reason does not enter the Final  Judgment  provided for in Section 6, or
if the Court enters the Final  Judgment and appellate  review is sought,  and on
such review, such Final Judgment is not affirmed, then this Settlement Agreement
shall be terminated, and shall become null and void, except for those provisions
that are expressly and  specifically  identified  herein as being  severable and
susceptible to later,  separate approval. In that event, any release or covenant
not to sue shall be of no force or effect.
         26.      This Settlement is Not an Admission.
         In the event that the  settlement  does not become final in  accordance
with the terms hereof, then this Settlement Agreement, and the release set forth
herein,  shall be of no force or  effect.  The  parties  hereto  agree that this
Settlement  Agreement,  including its  exhibits,  whether or not it shall become
final, and any and all negotiations,  documents and discussions  associated with
it, shall be without  prejudice to the rights of any party,  shall not be deemed
or construed  to be an admission or evidence of any  violation of any statute or
law or of any liability or wrongdoing by the Settling Defendant, or of the truth
of any of the claims or allegations, nor of the truth of any alleged defense, or
of any absence of wrongdoing or of limitation of damage or injury,  and evidence
thereof shall not be  discoverable  or used directly or indirectly,  in any way,
whether in the Class Action or in any other action or  proceeding.  The Settling
Defendant and plaintiffs expressly reserve all of their rights if the settlement
does not become final in accordance with the terms of this Settlement Agreement.
         27.      Return of Settlement Fund.
         If the Settlement does not become final,  then within 30 days after the
last date on which it could become final  (including  expiration  of all appeals
from any decision denying approval) the Settlement Fund, including the principal
amount paid and accrued interest,  shall be returned to the Settling  Defendant,
less all funds expended pursuant to Section 5 of this Settlement  Agreement with
respect to Class notice.  If the  Settlement  does not become  final,  the funds
actually expended pursuant to Section 5 with respect to Class notice (the "Class
Notice Funds") shall not be refunded, under any circumstances,  except that: (a)
if the Class subsequently  obtains by settlement or final judgment an aggregate,
gross  recovery  against the Other  Defendants  totaling at least $100  million,
Plaintiffs'  Co-Lead  Counsel shall apply in good faith to the Court to have the
Class Notice Funds  refunded to the  Settling  Defendant as part of  plaintiffs'
costs of  litigation;  and (b)  regardless of the size of the Class'  aggregate,
gross recovery,  if the Class  subsequently  obtains a final judgment against or
settlement  with the  Settling  Defendant in this  litigation,  any Class Notice
Funds not refunded to Settling Defendant pursuant to (a) shall be credited, with
simple  interest at the rate  described in Section 8, against the judgment after
trebling or against the settlement. To the extent required,  plaintiffs' Co-Lead
Counsel agree in good faith to move the Court for such appropriate orders as may
be necessary to effectuate  the credit  against any judgment.  The provisions of
this Section relating to the refunding of the Class Notice Funds to the Settling
Defendant  shall, in the event this Settlement  Agreement does not become final,
be severable and subject to separate approval.
         28.      Binding Effect.
         This  Settlement  Agreement  shall be  binding  upon,  and inure to the
benefit of, the successors and assigns of the Settling  Defendant,  the Released
Parties,  class plaintiffs and class members who do not exclude  themselves from
the Class.
         29.      Integrated Agreement.
         This Settlement Agreement contains an entire,  complete, and integrated
statement  of each and  every  term and  provision  agreed  to by and  among the
parties and is not  subject to any  condition  not  provided  for  herein.  This
Settlement  Agreement  shall not be modified in any respect  except by a writing
executed by all the parties hereto.
         30.      No Conflict Intended.
         Any  inconsistency  between this Settlement  Agreement and the exhibits
attached  hereto shall be resolved in favor of this  Settlement  Agreement.  Any
inconsistency  between the headings  used in this  Settlement  Agreement and the
text of the Sections of this Settlement  Agreement shall be resolved in favor of
the text.
         31.      Neither Party is the Drafter.
         None of the parties  hereto  shall be  considered  to be the drafter of
this  Settlement  Agreement  or any  provision  hereof  for the  purpose  of any
statute, case law or rule of interpretation or construction that might cause any
provision to be construed against the drafter hereof.
         32.      Choice of Law.
         All terms of this Settlement Agreement and the exhibits hereto shall be
governed by and interpreted  according to the  substantive  laws of the State of
New York without regard to its choice of law or conflict of laws principles.
         33.      Submission to and Retention of Jurisdiction.
         The Settling Defendant and the Class to the fullest extent permitted by
law hereby irrevocably submit to the exclusive jurisdiction of the United States
District  Court for the  Southern  District of New York,  for any suit,  action,
proceeding or dispute arising out of or relating to this  Settlement  Agreement,
or to the applicability of this Settlement Agreement and exhibits hereto.
         34.      Opt-Out Provision.
         The Settling Defendant, in its sole and absolute discretion, shall have
the option to  terminate  this  Settlement  Agreement  and thus  prevent it from
becoming  final,  in  accordance  with the  procedures  set forth in a  separate
"Supplemental  Agreement," if Non-Individual Class Members,  whose market shares
(as determined in accordance with the  Supplemental  Agreement) of the volume of
Class Securities  traded from May 1, 1989 through May 31, 1994 (inclusive of all
dates in  between)  exceed  in the  aggregate  the  threshold  specified  in the
Supplemental  Agreement,  file with the Court timely requests for exclusion from
the Class in  accordance  with the  provisions  of the Class  Notice  procedures
approved by the Court.
         The Supplemental  Agreement will not be filed with the Court unless and
until either (a) a dispute among the parties  concerning its  interpretation  or
application  arises, and in that event it shall be filed and maintained with the
Court under seal, or (b) the Court otherwise orders the  Supplemental  Agreement
disclosed on motion by any person with standing to so move.
         35.      Execution in Counterparts.
         This Settlement  Agreement may be executed in  counterparts.  Facsimile
signatures  shall be  considered  as  valid  signatures  as of the date  hereof,
although  the  original  signature  pages shall  thereafter  be appended to this
Settlement Agreement. By signing this Settlement Agreement,  Plaintiffs' Co-Lead
Counsel  represent  that  they are  authorized  to enter  into  this  Settlement
Agreement  by and on behalf of  counsel  for all named  plaintiffs  in the Class
Action.
         36.      Definitions.
         A.       "Any" means one or more.
         B.       "Ask" or "offer" means the price quoted on Nasdaq at which a 
                  market maker offers to sell a specific quantity of a 
                  particular Nasdaq Security.
         C.       "Bid" means the price quoted on Nasdaq at which a market maker
                  offers to buy a specific quantity of a particular Nasdaq 
                  Security.
         D.       The "Class Action" means In Re: Nasdaq Market-Makers Antitrust
                  Litigation, 94 Civ. 3996 (RWS), M.D.L. No. 1023, including  
                  each and every individual action that has been consolidated as
                  part of this multidistrict class action.
         E.       "Class Securities" means the list of Nasdaq securities
                  appended as Exhibit A to the Refiled Consolidated Complaint,
                  or as expanded pursuant to Section 2 of this Settlement 
                  Agreement.
         F.       "Dealer spread" means the difference between a market maker's
                  bid and ask on Nasdaq for a particular Nasdaq Security at 
                  any given time.
         G.       "Defendants" means the 35 companies that are now defendants 
                  in the above-captioned multidistrict litigation (or its
                  constituent cases).
         H.       "Future Settlement(s)" means settlement(s) entered into 
                  between Plaintiffs' Co-Lead Counsel and any Other Defendant 
                  in the Class Action.
         I.       "Future Settling Defendant(s)" means any Other Defendant(s) 
                  who enters into a Future Settlement.
         J.       "Inside spread" means the difference between the highest bid 
                  and the lowest ask on Nasdaq of all market makers for a 
                  particular Nasdaq Security at any given time.
         K.       "Market maker" means an NASD member firm that qualifies as a 
                  market maker under Section 3(a)(38) of the Securities Exchange
                  Act of 1934, as amended.
         L.       "Nasdaq" means the computerized stock quotation system 
                  operated by the Nasdaq Stock Market, Inc. that displays the
                  quotes of market makers in Nasdaq Securities.
         M.       "Nasdaq Security" means any Nasdaq National Market System 
                  stock or any Nasdaq Small Cap Security stock quoted on Nasdaq,
                  or, should these terms be changed or amended, any successor 
                  group of stocks quoted on Nasdaq.
         N.       "Non-Individual Class Members" shall mean all Class Members 
                  who are not natural persons.
         O.       "Or" means or.
         P.       "Other Defendants" means the 34 defendants other than the 
                  Settling Defendant.
         Q.       "Price" means the price at which a Nasdaq Security is bought 
                  or sold.
         R.       "Quote increment" means the difference between a market 
                  maker's bid or ask on Nasdaq and that market maker's  
                  immediately  preceding or  immediately  subsequent bid or ask
                  on Nasdaq for a particular Nasdaq Security.
         S.       "Quote" means a bid or an ask on Nasdaq.
         T.       "Released Claims" shall mean those claims identified in 
                  Section 14 of this Settlement Agreement.
         U.       "Released Parties" shall mean Settling Defendant Sherwood
                  Securities Corp. and its predecessors or successors and, in 
their respective capacity related to Sherwood,  but not in any  capacity  
related  to any Other  Defendant,  any of its  present  or former
members,  principals,   officers,   directors,   employees,  agents,  attorneys,
shareholders,  advisors, parents,  subsidiaries or affiliates (including but not
limited to National Discount Brokers, Equitrade, Triak Services Corp. and MXNet,
Inc.  and The  Sherwood  Group)  and  associates  (as  defined in SEC Rule 12b-2
promulgated  pursuant to the Securities  Exchange Act of 1934) and each of their
assigns,  representatives,  heirs,  executors and administrators (and present or
former members, principals,  officers, directors,  employees, agents, attorneys,
shareholders  or  advisors  of all such  parents,  subsidiaries,  affiliates  or
associates in any capacity  related to Sherwood but not in any capacity  related
to any Other Defendant).
         V.       "Settlement Fund" means the principal amount of the settlement
paid, or to be paid, by the Settling Defendant as set forth in ss.8 hereof, 
plus any accrued interest as provided for herein.
         W.       "Settling Defendant" means Defendant Sherwood Securities Corp.
         X. "Statutory  Disqualifier" means any Court Order, or portion thereof,
that would  constitute  a  disqualifying  event or  grounds  for  suspension  or
revocation of registration, or membership disqualification, under any provisions
of federal or state  securities  laws or regulations or any rule of any national
securities association or of any securities exchange.

Dated:   April 9, 1997


                                         By
                                         Arthur M. Kaplan, Esq.
                                         FINE, KAPLAN AND BLACK
                                         23rd Floor, 1845 Walnut Street
                                         Philadelphia, PA 19103
                                         (215) 567-6565


                                         By
                                         Christopher Lovell, Esq.
                                         LOVELL & SKIRNICK, LLP
                                         63 Wall Street
                                         New York, New York 10005
                                         (212) 480-1600


                                         By
                                         David J. Bershad, Esq.
                                         Leonard B. Simon, Esq.
                                         MILBERG WEISS BERSHAD HYNES
                                         & LERACH
                                         600 West Broadway
                                         1800 One America Plaza
                                         San Diego, CA  92101-5050
                                         (619) 231-1058

                                      -and-

                                         One Pennsylvania Plaza
                                         New York, New York
                                         (212) 594-5300


                                         By
                                         Robert A. Skirnick, Esq.
                                         LOVELL & SKIRNICK, LLP
                                         63 Wall Street
                                         New York, New York 10005
                                         (212) 480-1600
                                         Plaintiffs' Co-Lead Counsel with 
                                         authority to sign pursuant to Pre-Trial
                                         Order No. 1 on behalf of
                                         plaintiffs


                                         By
                                         Brian J. McMahon, Esq.
                                         Guy V. Amoresano, Esq.
                                         CRUMMY, DEL DEO, DOLAN,
                                         GRIFFINGER & VECCHIONE
                                         One Riverfront Plaza
                                         Newark, New Jersey  07102-5497
                                         (201) 596-4500

                                         Counsel for Sherwood Securities Corp.















                                           UNITED STATES DISTRICT COURT
                                       FOR THE SOUTHERN DISTRICT OF NEW YORK

 ...........................................................

                                                            94 Civ. 3996 (RWS)
IN RE:

                                                            M.D.L. No. 1023
NASDAQ MARKET-MAKERS
ANTITRUST LITIGATION
                                                       This Document Relates To:
                                                       All Actions
 ...........................................................


                             ORDER GRANTING PRELIMINARY APPROVAL TO SETTLEMENT
                                          WITH SHERWOOD SECURITIES CORP.

                  Upon review and  consideration of the Class Action  Settlement
Agreement (the  "Settlement  Agreement")  dated April 9, 1997 between  defendant
Sherwood  Securities  Corp. (the "Settling  Defendant") and Plaintiffs'  Co-Lead
Counsel acting on behalf of plaintiffs and the Class (collectively,  the "Class"
or "class  plaintiffs") in this  consolidated  multidistrict  class action ("the
Action"), and the exhibits annexed thereto;
                  Upon Consideration of all prior proceedings in the Action; and
                  Upon  consideration  of the  agreement of  plaintiffs  and the
Settling Defendant to the terms and conditions of the Settlement Agreement which
would have the  effect of  settling  and  dismissing  the Action as against  the
Settling Defendant upon the terms set forth in the Settlement Agreement;
         NOW,  upon  the  joint  application  of  plaintiffs  and  the  Settling
Defendant, it is hereby ORDERED as follows:
         1. This Court has  jurisdiction  over the subject matter of this Action
and over all parties to this  Action,  including  all  members of the Class,  as
defined in the Settlement Agreement.
         2. The Court hereby preliminarily  approves the terms of the Settlement
Agreement and the settlement set forth therein and finds that said settlement is
sufficiently  within the range of  reasonableness so that notice of the proposed
settlement should be given.
         3. As soon as  practicable  after the entry of this Order,  Plaintiffs'
Co-Lead  Counsel shall propose a program for and a proposed form of Class Notice
of this Action, which notice shall be merged with Notice of Settling Defendant's
Settlement  Agreement.  The program of class notice, and form of notice, as well
as the procedure for requesting  exclusion  from the class,  among other things,
and the timing and  nature of a final  settlement  hearing  will  thereafter  be
determined approved by later Order of this Court. This Order expressly preserves
the  Non-Settling  Defendants'  rights to  respond to the  plaintiffs'  proposed
program  of class  notice  and the  plaintiffs'  right to reply as set  forth in
Pretrial Order No. 4.
         4. If the Settlement  Agreement is not approved or consummated  for any
reason  whatsoever,  the  Settlement  and  all  proceedings  had  in  connection
therewith  shall be  without  prejudice  to the  status  quo ante  rights of the
plaintiffs  and the Settling  Defendant,  except as set forth in the  Settlement
Agreement.
         SO ORDERED this ___ day of _________, 1997.



                                               --------------------------------
                                                Hon. Robert W. Sweet
                                                United States District Judge




                                           UNITED STATES DISTRICT COURT
                                       FOR THE SOUTHERN DISTRICT OF NEW YORK

 ...........................................................

                                                            94 Civ. 3996 (RWS)
IN RE:

                                                            M.D.L. No. 1023
NASDAQ MARKET-MAKERS
ANTITRUST LITIGATION
                                                      This Document Relates To:
                                                      All Actions
 ...........................................................


                                       FINAL JUDGMENT AND ORDER OF DISMISSAL

         This matter having come before the Court on a joint motion for approval
of a Class  Action  Settlement  Agreement  dated April 9, 1997 (the  "Settlement
Agreement")   between  defendant   Sherwood   Securities  Corp.  (the  "Settling
Defendant")  and  Plaintiffs'  Co-Lead  Counsel on behalf of  plaintiffs  in the
above-captioned  consolidated  multidistrict  class action (the "Class Action"),
and the Court,  having  considered  all  papers  filed and  proceedings  held in
connection  with said  motion,  having  held a Hearing on ______,  notice of the
Hearing  having  duly been given in  accordance  with this  Court's  Order dated
______, and finding no just reason for delay in entry of this Final Judgment and
good cause appearing therefor, it is this day of _______, 1997,
         ORDERED, ADJUDGED AND DECREED THAT:
         1. This Court has  jurisdiction  over the subject  matter of this Class
Action and over all parties to this Action,  including all members of the Class.
The Class is defined for  settlement  purposes and,  therefore,  for purposes of
this Final  Judgment and Order of Dismissal  ("Settlement  Class" or "Class") as
follows:
                  All  persons,   firms,   corporations,   and  other   entities
                  (excluding  Defendants  and other  Nasdaq  market-makers,  and
                  their  respective  affiliates)  who  purchased  or sold  Class
                  Securities on the Nasdaq National Market, trading directly (or
                  through agents) with the Defendants or their  co-conspirators,
                  or with their respective affiliates,  during the period May 1,
                  1989 to May 27, 1994 ("Class Period"); and

                  A subclass consisting of those members of the class defined in
                  the immediately preceding clause, who at the time Class Notice
                  (as defined in the Refiled Consolidated Complaint) are current
                  brokerage  customers of defendants (or their  affiliates),  or
                  whose  brokerage  accounts are cleared by defendants (or their
                  affiliates), and to whom defendants (or their affiliates) send
                  periodic mailings.

         For  purposes  of this  settlement  and  Final  Judgment  and  Order of
Dismissal, all brokers are deemed agents and, therefore, the Class includes, but
is not limited to, all  persons,  firms,  corporations  and other  entities,  as
described above, who traded through brokers. For purposes of this settlement and
Final Judgment and Order of Dismissal,  institutional  investors  (including but
not  limited  to banks,  savings  and loan  associations,  insurance  companies,
registered investment companies,  investment advisors and all private and public
mutual, retirement, pension, profit sharing or other types of funds) are "firms,
corporations  and other entities"  included in the Class to the extent that they
purchased or sold Class Securities in the manner and during the period described
in the Class  definition.  The term "affiliates" as used in the Class definition
includes parents,  subsidiaries and other commonly owned or commonly  controlled
affiliates.
         2.  This  Court  hereby  approves  the  settlement  set  forth  in  the
Settlement  Agreement and finds that said settlement is, in all respects,  fair,
reasonable  and adequate to the Class in accordance  with Rule 23 of the Federal
Rules of Civil Procedure.
         3. This Court hereby finds and  concludes  that the notice given to the
Class was in  compliance  with this  Court's  Order dated  _____,  and that said
notice,  along  with the  Class  Notice  dated  _________,  was the best  notice
practicable under the circumstances and fully satisfies the requirements of Rule
23 of the Federal Rules of Civil Procedure and the  requirements of due process,
including, but not limited to, the form of notice and methods of identifying and
giving notice to the Class.
         4. This Court  hereby  dismisses,  on the  merits  and with  prejudice,
without costs to any party, this Class Action in favor of the Settling Defendant
and against the members of the Class who did not timely  request  exclusion from
the Class.  A list of those members of the Class who have filed timely  requests
for  exclusion  from the Class is  annexed  hereto as  Exhibit A and made a part
hereof.  Those  persons  appearing on the list annexed  hereto as Exhibit A, who
have requested  exclusion from the Class,  shall not participate in the proceeds
of the Settlement hereby approved nor receive any benefits hereunder. Any member
of the Class whose name does not appear on the list annexed  hereto as Exhibit A
failed  to file a timely  request  for  exclusion  from the  Class and is hereby
barred from asserting otherwise.
         5. Each and every member of the Class (other than those  members of the
Class who have filed a valid  request  for  exclusion  from the Class) is hereby
permanently  barred and enjoined from instituting,  maintaining,  prosecuting or
enforcing,  either  directly or  indirectly,  any Released  Claim (as defined in
Paragraph 6 below of this Final Judgment and Order of Dismissal)  against any of
the following: Settling Defendant Sherwood Securities Corp. and its predecessors
or successors and, in their respective capacity related to Sherwood,  but not in
any  capacity  related  to any Other  Defendant,  any of its  present  or former
members,  principals,   officers,   directors,   employees,  agents,  attorneys,
shareholders,  advisors, parents,  subsidiaries or affiliates (including but not
limited to National Discount Brokers,  Equitrade,  Triak Services Corp.,  MXNet,
Inc.  and The  Sherwood  Group)  and  associates  (as  defined in SEC Rule 12b-2
promulgated  pursuant to the Securities  Exchange Act of 1934) and each of their
assigns,  representatives,  heirs,  executors and administrators (and present or
former members, principals,  officers, directors,  employees, agents, attorneys,
shareholders  or  advisors  of all such  parents,  subsidiaries,  affiliates  or
associates in any capacity  related to Sherwood but not in any capacity  related
to  any  Other  Defendant)  (collectively  referred  to  as  "Released  Parties"
hereinafter).
         6. Each  Released  Party  referred to in  Paragraph 5 above,  is hereby
released and forever  discharged  from all manner of claims,  demands,  actions,
suits,  and  causes of  action  relating  to all  Nasdaq  Securities  (including
securities  that  are not  Class  Securities),  whether  class,  individual,  or
otherwise  in nature,  damages,  whenever  incurred,  liabilities  of any nature
whatsoever,  including costs, expenses,  penalties and attorneys' fees, known or
unknown, suspected or unsuspected, in law or equity, that any class plaintiff or
members  of the Class who have not  timely  excluded  themselves  from the Class
Action  (whether or not they make a claim upon or  participate in the Settlement
Fund) ever had, now has or  hereafter  can,  shall or may have,  arising from or
relating in any way to (a) any conduct complained of in the Refiled Consolidated
Complaint in this matter or the constituent actions  consolidated  therein,  (b)
any  conduct  involving  any  express or implied or tacit  joint or  coordinated
activity  between  Settling  Defendant   (including  any  employee  of  Settling
Defendant) and any other Nasdaq Market maker  (including  any employee  thereof)
with respect to quotes, quote increments,  movements of quotes,  prices,  dealer
spreads or inside spreads of any Nasdaq  Security,  (c) any conduct  relating in
any way to the fixing,  stabilizing,  maintaining or widening of bid-ask spreads
(either dealer spreads or inside spreads or both) for any Nasdaq  Security,  (d)
any conduct  relating in any way to the fixing of or movement (or  increments of
movement) of bid or ask quotations for any Nasdaq  Security  (including  without
limitation  movements of quotes at the request of or pursuant to agreement  with
another  Market  maker),  (e) any conduct  relating in any way to the minimum or
maximum number of shares that Nasdaq Market makers, or any of them, were willing
to trade at their quoted bid or, quoted ask, (f) any conduct relating in any way
to the subject matter of any of the negative covenants set forth in the proposed
Stipulation  and  Order  annexed  to  the  Settlement  Agreement  as  Exhibit  C
(regardless  of  whether  said  Stipulation  and Order is ever  entered  or ever
becomes  effective or is rendered void ab initio),  (g) any conduct  relating in
any way to any boycott, harassment, refusal to deal or other behavior toward any
person or entity  relating  in any way to the conduct  described  in (a) through
(f); including,  without limitation, any such claims which have been asserted or
could have been asserted in this litigation  against the Released Parties or any
one of them,  or which arise under or relate to any federal or state  antitrust,
unfair competition,  unfair practices, price discrimination,  unitary pricing or
trade practice law,  securities law, or other law or regulation,  or common law,
including without limitation,  the Sherman Antitrust Act, 15 U.S.C. ss.1 et seq.
(hereinafter  and as further defined in Section 16 of the Settlement  Agreement,
the "Released Claims");  provided, however, that this release does not include a
release of any claims (i) for alleged  churning of securities,  (ii) for alleged
fraud  relating to undisclosed  payment for order flow,  (iii) for alleged fraud
relating to material  misstatements or omissions bearing on the underlying value
of specific securities (and unrelated to market-making activities,  such as, but
not limited to, movement of quotes,  quote  increments,  dealer spreads,  inside
spreads and agreements or  arrangements  between market makers  relating to such
market-making  activities),  or (iv) enumerated in any Complaint which was filed
and  served  upon  Settling  Defendant  prior  to the  date of  this  Settlement
Agreement  (April 9,  1997)  except  for this  Class  Action  and except for any
similar State or Federal  action which was  voluntarily  dismissed  prior to the
date of this Settlement Agreement.
         7. Without  affecting the finality of this  judgment,  the Court hereby
reserves and retains  continuing  and  exclusive  jurisdiction  over all matters
relating to the  administration  and consummation of the terms of the Settlement
Agreement and the settlement embodied therein.
         8. Plaintiff's Co-Lead Counsel shall file with the Clerk of the Court a
list of those members of the Class who have timely excluded  themselves from the
Class and a copy of all requests for exclusion from the Class.
         9.       All terms used, but not otherwise defined herein, shall have 
the meanings ascribed to them in the Settlement Agreement.
         10.      This Court determines pursuant to Fed. R. Civ. P. 54(b) that 
there is no just reason for delay and hereby certifies this Final Judgment and 
Order of Dismissal as final and appealable.



Dated:


                                                Hon. Robert W. Sweet
                                                United States District Judge


















                     METHODOLOGY FOR CALCULATION OF SHERWOOD MARKET SHARE

         The calculation of Settling  Defendant's  market share  contemplated by
the Settlement  Agreement will be made  predominantly  using  computerized  data
available from the NASD (the "NASD database") for the time period 3/1/93 through
5/31/94 (the "Test Period").  Machine  readable data for earlier time periods is
not  available  from the NASD.  Using the NASD  database,  Settling  Defendant's
Consultant  will  calculate  the  aggregate  total  volume  of  trades  of Class
Securities  in Class  Months by the 35 named  defendants  during the Test Period
("Defendants' Total Test Volume").  From Defendants' Total Test Volume, Settling
Defendant's Consultant will subtract 14.4%,  representing the average percentage
of total volume  previously  estimated by defendants as  constituting  trades on
Instinet  or  Posit,   and  from  that  result  will  further   subtract  21.4%,
representing  the average  percentage  of total volume  previously  estimated by
defendants as  constituting  market maker to market maker volume.  The resulting
sum shall be used as Defendants' Class Test Volume.

         Using the same NASD data,  Settling  Defendant's  Consultant  will then
calculate  Settling  Defendant's  total volume of trades of Class  Securities in
Class  Months  ("Sherwood's  Total Test  Volume").  From  Sherwood's  Total Test
Volume,  Settling Defendant's  Consultant will then make appropriate  percentage
subtractions for Instinet,  Posit and market maker to market maker volume. These
deductions  will be made by  using  data  available  from  Sherwood  and/or  its
clearing agents to calculate Sherwood's average percentage Instinet/Posit volume
and market maker to market maker volume, without double counting during the Test
Period.  For  these  purposes,  a  market  maker  will  mean  any  firm  with  a
Market-Maker  Identification  Code ("MMID") in the NASD database.  To the extent
that data received from Sherwood's clearing agent supplies the coded identity of
the executing  broker,  the executing broker code will be converted into an MMID
using the National  Securities  Clearing  Corporation  directories as of July 1,
1994 and July 1, 1996. The resulting sum shall be used as Sherwood's  Class Test
Volume.

         By  Dividing  Sherwood's  Class Test Volume by  Defendants'  Class Test
Volume,  Defendants' Consultant will arrive at Sherwood's Class Market Share for
the Test  Period.  Defendants'  Consultant  will next seek to develop a sampling
methodology  to test  the  likelihood  that  Sherwood's  market  share  would be
affected if reliable,  machine  readable data were  available for all defendants
for  the  entire  Class  Period.  This  sampling  will  take  the  form  of some
statistically  significant  comparison  between Sherwood volume in a sampling of
Class  Securities  during earlier  portions of the Class Period and total volume
figures  available from The Center for Research on Securities Prices ("CRSP") in
the same Class Securities.  If sampling  discloses,  for example,  that Sherwood
volume in the selected Class Securities in comparison to CRSP volume in the same
Class  Securities  during  earlier  portions  of the Class  Period was lower (or
higher) than that  disclosed by the same  comparison  performed  during the Test
Period,  an  appropriate  downward (or upward)  adjustment of  Sherwood's  Class
Market Share will be made. The resulting market share figure will be reported to
Plaintiffs'  Co-Lead  counsel in  connection  with  Section 8 of the  Settlement
Agreement.

         The  figures  and  methodology  used  herein are  mutually  adopted for
purposes  of this  Settlement  only and shall not be  introduced  in evidence or
deemed an admission by  Plaintiffs or the Settling  Defendant  except to enforce
the terms of this settlement.


<PAGE>



                                           UNITED STATES DISTRICT COURT
                                       FOR THE SOUTHERN DISTRICT OF NEW YORK

 ...........................................................

                                                            94 Civ. 3996 (RWS)
IN RE:

                                                            M.D.L. No. 1023
NASDAQ MARKET-MAKERS
ANTITRUST LITIGATION
                                                      This Document Relates To:
                                                      All Actions
 ...........................................................


                                               STIPULATION AND ORDER
         For  the  reasons  set  forth  in  the  Settlement   Agreement  between
Plaintiffs and Defendant Sherwood Securities Corp. ("Settling Defendant"), dated
April 9, 1997, which was  preliminarily  approved by this Court on ____________,
and finally approved on ________,  Plaintiffs and the Settling  Defendant hereby
agree as follows:
I.       DEFINITIONS
         A.       "Any" means one or more.
         B.       "Ask" or "offer" means the price quoted on Nasdaq at which a 
market maker offers to sell a specific quantity of a particular Nasdaq security.
         C.       "Bid" means the price quoted on Nasdaq at which a market maker
offers to buy a specific
quantity of a particular Nasdaq security.
         D.       "Dealer spread" means the difference between a market maker's 
bid and ask on Nasdaq for a particular Nasdaq security at any given time.
         E.       "Effective date" means the date on which Stipulations and 
Orders containing like restrictions
are entered by and final and effective against at least 24 other Defendants in 
this Action.
         F.       "Inside spread" means the difference between the highest bid 
and the lowest ask on Nasdaq of all market makers for a particular Nasdaq 
security at any given time.
         G.       "Market maker" means an NASD member firm that qualifies as a
market maker under Section
3(a)(38) of the Securities Exchange Act of 1934, as amended.
         H.       "NASD" means the National Association of Securities Dealers, 
Inc.
         I.       "Nasdaq" means the computerized stock quotation system 
operated by the Nasdaq Stock Market, Inc. that displays the quotes of market 
makers in Nasdaq securities.
         J.       "Nasdaq security" means any Nasdaq National Market System 
stock or any Nasdaq Small Cap Security stock quoted on Nasdaq, or, should these
terms be changed or amended, any successor group of stocks
quoted on Nasdaq.
         K.       "Or" means and/or.
         L. "OTC desk" means any  organizational  element of a defendant engaged
in market making, or its successor, that accounted for ten percent (10%) or more
of such defendant's total  market-making  volume,  measured in shares, in Nasdaq
securities in the immediately preceding fiscal year.
         M.       "Person" means any individual, corporation, partnership,
company, sole proprietorship, firm, or other legal entity.  "Other person" 
means a person who is not an officer, director, partner, employee, or agent
of a defendant.
         N.       "Price" means the price at which a Nasdaq security is bought
or sold.
         O.       "Quote increment" means the difference between a market 
maker's bid or ask on Nasdaq and that market maker's immediately preceding or
immediately subsequent bid or ask on Nasdaq for a particular Nasdaq security.
         P.       "Quote" means a bid or an ask on Nasdaq.
         Q. "Quoting convention" means any practice of quoting Nasdaq securities
whereby  stocks with a  three-quarter  (3/4) point or greater  dealer spread are
quoted on Nasdaq in even eighths and are updated in quarter-point  (even eighth)
quote increments.
         R.       "SEC" means the United States Securities and Exchange 
Commission.
         S.       All terms not otherwise defined above shall have the same 
meaning given to them in the Settlement Agreement.
II.      PROHIBITED CONDUCT
         Commencing on the Effective Date of this Stipulation and Order,  unless
permitted to engage in activities by Section III of this  Stipulation and Order,
the Settling Defendant shall not, directly or through any trade association,  in
connection  with the  activities  of its OTC desk in  making  markets  in Nasdaq
securities:
         A.       Agree with any other market maker to fix, raise, lower or
maintain quotes or prices for any
                  Nasdaq security;
         B.       Agree with any other market maker to fix, increase, decrease
or maintain any dealer spread,
                  inside spread, or the size of any quote increment (or any 
relationship between or among dealer
                  spread, or the size of any quote increment), for any Nasdaq 
security;
         C.       Agree with any other market maker to adhere to a quoting 
convention;
         D.       Agree   with  any  other   market   maker  to  adhere  to  any
                  understanding  or agreement (other than an agreement on one or
                  a series of related trades)  requiring a market maker to trade
                  at its quotes on Nasdaq in quantities  of shares  greater than
                  either (1) the minimum  size  required by Nasdaq or NASD rules
                  or (2) the size  displayed or otherwise  communicated  by that
                  market maker, whichever is greater;
         E.       Engage in any harassment or intimidation of any other market 
maker, whether in the form of
                  written, electronic, telephonic, or oral communications, for 
decreasing its dealer spread or
                  the inside spread in any Nasdaq security;
         F.       Engage in any harassment or  intimidation  of any other market
                  maker, whether in the form of written, electronic, telephonic,
                  or oral  communications,  for  refusing to trade at its quoted
                  prices in  quantities  of shares  greater  than either (1) the
                  minimum size  required by Nasdaq or NASD rules or (2) the size
                  displayed or otherwise communicated by that market maker;
         G.       Engage in any harassment or intimidation of any other market 
                  maker, whether in the form of written, electronic, telephonic,
                  or oral communications, for displaying a quantity of shares on
                  Nasdaq in excess of the minimum size required by Nasdaq or 
                  NASD rules; and
         H.       Refuse,  or  threaten  to refuse to trade,  (or agree  with or
                  encourage  any other market maker to refuse to trade) with any
                  market maker at defendant's published Nasdaq quotes in amounts
                  up to the published  quotation  size because such market maker
                  decreased  its dealer  spread,  decreased the inside spread in
                  any Nasdaq security,  or refused to trade at its quoted prices
                  in a quantity  of shares  greater  than either (1) the minimum
                  size  required  by  Nasdaq  or  NASD  rules  or (2)  the  size
                  displayed or otherwise communicated by that market maker.
III.     PERMITTED CONDUCT
         Notwithstanding the provisions of Section II.A.-H., the Settling 
         Defendant shall be entitled to:
         A.       Set unilaterally its own bid and ask in any Nasdaq security, 
                  the prices at which it is willing
                  to buy or sell any Nasdaq security, and the quantity of shares
                  of any Nasdaq security that it
                  is willing to buy or sell;
         B.       Set unilaterally its own dealer spread, quote increment, or 
                  quantity of shares for its
                  quotations (or set any relationship between or among its 
                  dealer spread, inside spread, or the
                  size of any quote increment) in any Nasdaq security;
         C.       Communicate its own bid or ask, or the price at or the 
                  quantity of shares in which it is willing to buy or sell any 
                  Nasdaq security to any person, for the purpose of exploring 
                  the possibility of a purchase or sale of that security, and to
                  negotiate for or agree to such
                  purchase or sale;
         D.       Communicate  its  own  bid  or  ask,  or the  price  at or the
                  quantity  of shares in which it is  willing to buy or sell any
                  Nasdaq  security,  to any person for the purpose of  retaining
                  such person as an agent or  subagent  for  defendant  or for a
                  customer  of  defendant  (or for the  purpose of seeking to be
                  retained as an agent or  subagent),  and to  negotiate  for or
                  agree to such purchase or sale;
         E.       Engage in any conduct or activity authorized or required by 
                  the federal securities laws, including but not limited to the
                  rules, regulations, or interpretations of the SEC, the NASD,
                  or any other self-regulatory organization, as defined in 
                  Section 3(a)(26) of the Securities
                  Exchange Act of 1934, as amended;
         F.       Engage in any underwriting (or any syndicate for the
                  underwriting) or securities to the extent
                  permitted by the federal securities laws;
         G.       Act as Qualified Block Positioners as defined in SEC Rule 
                  3b-8(c), promulgated under the Securities Exchange Act of 
                  1934, as amended, to the extent permitted by the federal 
                  securities law;
         H.       Except as provided in Sections II.E.-H. of this Stipulation 
                  and Order, take any unilateral action or make any unilateral
                  decision regarding the market makers with which it will trade
                  and the terms on which it will trade; and
         I.       Engage in conduct protected under the Noerr-Pennington 
                  doctrine.
         No finding of any violation of this  Stipulation  and Order may be made
based solely on parallel  conduct.  No provision of this  Stipulation  and Order
shall be  enforceable  against  the  Settling  Defendant  if a State of  Federal
government  agency or authority  commences an action or  proceeding  in which it
formally  asserts  that  such  provision,  alone or in  combination  with  other
provisions  is a  Statutory  Disqualifier,  in  which  case  such  provision  or
provisions shall be deemed null and void ab initio.
         This Stipulation and Order shall expire ten (10) years from its date of
entry by the Court.

Dated:   April 9, 1997

                                              By
                                              Arthur M. Kaplan, Esq.
                                              FINE, KAPLAN AND BLACK
                                              23rd Floor, 1845 Walnut Street
                                              Philadelphia, PA 19103
                                              (215) 567-6565



<PAGE>


                                              By
                                              Christopher Lovell, Esq.
                                              LOVELL & SKIRNICK, LLP
                                              63 Wall Street
                                              New York, New York  10005
                                              (212) 480-1600

                                              By
                                              David J. Bershad, Esq.
                                              Leonard B. Simon, Esq.
                                              MILBERG      WEISS
                                              BERSHAD   HYNES  &
                                              LERACH   600  West
                                              Broadway  1800 One
                                              America  Plaza San
                                              Diego, CA 92101-5050
                                              (619) 231-1058

                                      -and-

                                              One Pennsylvania Plaza
                                              New York, New York
                                              (212) 594-5300


                                              By
                                              Robert A. Skirnick, Esq.
                                              LOVELL & SKIRNICK, LLP
                                              63 Wall Street
                                              New York, New York  10005
                                              (212) 480-1600

                                              Plaintiffs' Co-Lead Counsel with
                                              authority to sign Pursuant to 
                                              Pre-Trial Order No. 1 on behalf
                                              of plaintiffs


                                              By
                                              Brian J. McMahon, Esq.
                                              Guy V. Amoresano, Esq.
                                              CRUMMY,  DEL  DEO,
                                              DOLAN,  GRIFFINGER
                                              &  VECCHIONE   One
                                              Riverfront   Plaza
                                              Newark, New Jersey 07102-5497   
                                              (201) 596-4500
                                              Counsel for Sherwood
                                              Securities Corp.


<PAGE>


         The Court  having  given  final  approval to the  Settlement  Agreement
between the Class and the  Settling  Defendant  and having found that this Court
has  jurisdiction  over the parties to this  Stipulation and Order, it is hereby
ORDERED:
         THAT the parties comply with the terms of this Stipulation and Order;
         THAT the Refiled Consolidated Complaint is dismissed with prejudice as 
to the Settling Defendant and without costs;
         THAT the Court  retains  exclusive  jurisdiction  to enable  any of the
parties to this Stipulation and Order to apply to the Court at any time for such
further  orders  and  directions  as may be  necessary  or  appropriate  for the
construction  or   implementation   of  this  Stipulation  and  Order,  for  the
enforcement  or  modification  of any of its  provisions,  or for  punishment by
contempt.
         SO ORDERED this ___ day of _________, 1997.



                                               --------------------------------
                                               Hon. Robert  W. Sweet
                                               United States District Judge


<PAGE>



                                           UNITED STATES DISTRICT COURT
                                       FOR THE SOUTHERN DISTRICT OF NEW YORK

 ...........................................................

                                                            94 Civ. 3996 (RWS)
IN RE:

                                                            M.D.L. No. 1023
NASDAQ MARKET-MAKERS
ANTITRUST LITIGATION
                                                      This Document Relates To:
                                                      All Actions
 ...........................................................


                                          STIPULATION GOVERNING SETTLING
                                       DEFENDANTS' PRODUCTION OF AUDIOTAPES

         WHEREAS Sherwood  Securities  Corp. (the "Settling  Defendant") and the
Plaintiffs' Co-Lead Counsel in In Re: Nasdaq Market-Makers Antitrust Litigation,
a  multidistrict  class  Action  (the  "Class  Action"),  have  entered  into  a
Settlement Agreement (the "Settlement Agreement") dated April 9, 1997;
         WHEREAS the Settlement  Agreement  provides that the Settling Defendant
shall provide to the Plaintiffs' Co-Lead Counsel various audiotape recordings as
defined in the Settlement Agreement;
         WHEREAS the Settlement  Agreement  provides that the procedure by which
the Settling  Defendant  will copy and make tape  available  to the  Plaintiffs'
Co-Lead  Counsel  shall be in  accordance  with the  procedure  that has been in
effect  to date and  which is  incorporated  in a  Stipulation  executed  by the
Settling Defendant's Counsel and the Plaintiffs' Co-Lead Counsel  simultaneously
with the execution of the Settlement Agreement.
         IT IS HEREBY AGREED THAT:
         1.       All requests for the production of audiotapes for review 
shall be made in writing by the Plaintiffs' Co-Lead Counsel.
         2.  The  Settling  Defendant  will  make  available  (pursuant  to  the
procedures  set  forth  below),  the  audiotape  identified  in  the  Settlement
Agreement and no other audiotape.
         3. The  Settling  Defendant  will make  tape  available  for  review on
mutually  agreed upon dates in the offices of the Settling  Defendant's  Counsel
between 9:00 a.m. and 6:30 p.m.  Monday  through  Friday except on holidays when
defense counsel's office is closed.  The Settling  Defendant will make available
three sets of equipment,  and plaintiffs'  counsel may bring an additional three
sets, to permit plaintiffs'  counsel to listen to the tape.  Plaintiffs' counsel
will be permitted to review tapes and take notes  concerning the tapes' content,
but shall not be permitted to copy any portion of the tape recordings.
         4.       Plaintiffs' counsel will designate calls to be produced to the
Document Depository.  The designation may be made within thirty (30) days of 
the date of review.
         5.       The Settling Defendant will produce or object to the
production of designated calls thirty (30) days after receipt of the 
designations.
                  (a)  By  permitting   the   plaintiffs  to  review  the  tape,
defendants  have  not  waived  any  right  to deny  the  production  of  certain
conversations  on the grounds that they are  protected  by any  privilege or the
work-product  doctrine;  nor have  plaintiffs  waived their right to contest any
such denial of production.
                  (b)  By  permitting   the   plaintiffs  to  review  the  tape,
defendants  have not waived any right to deny the  production on the ground that
certain  conversations  are highly personal or on any other grounds permitted by
the Federal Rules of Civil Procedure;  nor have plaintiffs waived their right to
contest any such denial of production.
         6. All tape produced to the depository shall be subject to the terms of
the Stipulated  Order Regarding  Confidential  Documents dated October 12, 1995.
The  production of tape to the  depository  shall not constitute a wavier of any
party's rights.

Dated:   April 9, 1997


                                                 By
                                                 Arthur M. Kaplan, Esq.
                                                 FINE, KAPLAN AND BLACK
                                                 23rd Floor, 1845 Walnut Street
                                                 Philadelphia, PA 19103
                                                 (215) 567-6565


                                                 By
                                                 Christopher Lovell, Esq.
                                                 LOVELL & SKIRNICK, LLP
                                                 63 Wall Street
                                                 New York, New York  10005
                                                 (212) 480-1600


                                                 By
                                                 David J. Bershad, Esq.
                                                 Leonard B. Simon, Esq.
                                                 MILBERG      WEISS
                                                 BERSHAD   HYNES  &
                                                 LERACH   600  West
                                                 Broadway  1800 One
                                                 America  Plaza 
                                                 San Diego, CA  92101-5050   
                                                 (619) 231-1058

                                      -and-

                                                 One Pennsylvania Plaza
                                                 New York, New York
                                                 (212) 594-5300



<PAGE>



                                                  By
                                                  Robert A. Skirnick
                                                  LOVELL & SKIRNICK, LLP
                                                  63 Wall Street
                                                  New York, New York  10005
                                                 (212) 480-1600

                             Plaintiffs' Co-Lead Counsel with authority to sign
                             Pursuant to Pre-Trial Order No. 1 on behalf of
                             plaintiffs



                                                   By
                                                   Brian J. McMahon, Esq.
                                                   Guy V. Amoresano, Esq.
                                                   CRUMMY, DEL DEO, DOLAN,
                                                   GRIFFINGER & VECCHIONE, P.C.
                                                   One Riverfront Plaza
                                                   Newark, New Jersey 07102-5497
                                                   (201) 596-4500

                                          Counsel for Sherwood Securities Corp.









                                         STOCK PURCHASE AGREEMENT

                                               dated as of

                                              April 11, 1997

                                                 between

                                             DRESDNER BANK AG

                                                   and

                                         THE SHERWOOD GROUP, INC.


<PAGE>








                                            -iii-
<TABLE>

                                             TABLE OF CONTENTS


<CAPTION>
                                                                                                      Page
             <S>                                                                                        <C>
             
             ARTICLE 1                       PURCHASE AND SALE
             1.1    Specialist Business..................................................................1
             1.2    Preliminary Balance Sheet............................................................1
             1.3    Base Purchase Price..................................................................2
             1.4    Stock Certificates...................................................................2
             1.5    Closing Date Balance Sheet...........................................................2
             1.6    Payment of Adjustment Amount.........................................................3
             1.7    Post-Closing Payments................................................................4

             ARTICLE 2                            CLOSING

             ARTICLE 3           REPRESENTATIONS AND WARRANTIES OF SELLER

             3.1    Organization.........................................................................4
             3.2    Authorization........................................................................4
             3.3    No Consents..........................................................................5
             3.4    Non-Contravention....................................................................5
             3.5    Title to Stock.......................................................................5
             3.6    Due Incorporation of the Company;
                          Capitalization.................................................................6
             3.7    Specialist Securities................................................................6
             3.8    Litigation...........................................................................6
             3.9    Compliance With Law..................................................................7
             3.10   Financial Report.....................................................................7
             3.11   Audited Financial Statements.........................................................7
             3.12   No Undisclosed Liabilities...........................................................8
             3.13   Taxes................................................................................8
             3.14   Employee Matters....................................................................10
             3.15   Operations of the Company...........................................................11
             3.16   Brokers.............................................................................12
             3.17   Real Property.......................................................................12
             3.18   Absence of Certain Changes or Events................................................12
             3.19   Agreements..........................................................................14
             3.20   Minute and Stock Transfer Book......................................................14
             3.21   Filings.............................................................................14
             3.22   Intellectual Property...............................................................15
             3.23   Insurance...........................................................................15
             3.24   Affiliate Transactions..............................................................15
             3.25   Officers and Directors..............................................................16
             3.26   Disclosure Letter...................................................................16
             3.27   No Other Representations or Warranties..............................................16

             ARTICLE 4            REPRESENTATIONS AND WARRANTIES OF BUYER

             4.1    Organization........................................................................16
             4.2    Authorization.......................................................................16
             4.3    No Consents.........................................................................17
             4.4    Non-Contravention...................................................................17
             4.5    Litigation..........................................................................17
             4.6    Disclosure..........................................................................18

             ARTICLE 5              COVENANTS AND AGREEMENTS OF SELLER

             5.1    Affirmative Covenants...............................................................18
             5.2    Negative Covenants..................................................................19
             5.3    Exclusive Agreement.................................................................20

             ARTICLE 6               COVENANTS AND AGREEMENTS OF BUYER

             6.1    Affirmative Covenants...............................................................20
             6.2    Negative Covenants..................................................................21
             6.3    Transfer Taxes and Other Fees.......................................................21

             ARTICLE 7                JOINT COVENANTS AND AGREEMENTS

             7.1    Access to Records After Closing.....................................................22
             7.2    Required Consents...................................................................22
             7.3    Transferred Employees...............................................................22
             7.4    NYSE Memberships....................................................................25
             7.5    Pre-Closing Transfers and Payments..................................................25
             7.6    Press Releases......................................................................26
             7.7    Proprietary Information.............................................................26
             7.8    Reasonable Commercial Efforts; Further
                          Assurances....................................................................26
             7.9    Tax Matters.........................................................................27
             7.10   Notifications.......................................................................30

             ARTICLE 8                     CONDITIONS TO CLOSING

             8.1    Mutual Conditions...................................................................30
             8.2    Buyer's Conditions..................................................................31
             8.3    Seller's Conditions.................................................................33

             ARTICLE 9                          TERMINATION

             9.1    Termination.........................................................................34
             9.2    Effect of Termination...............................................................35
             9.3    Right to Proceed....................................................................35

             ARTICLE 10                        MISCELLANEOUS

             10.1   Notices.............................................................................35
             10.2   Survival............................................................................36
             10.3   Indemnification.....................................................................36
             10.4   Expenses............................................................................38
             10.5   Governing Law.......................................................................38
             10.6   Assignment; Successors and Assigns..................................................39
             10.7   Counterparts........................................................................39
             10.8   Titles and Headings.................................................................39
             10.9   Entire Agreement....................................................................39
             10.10  Amendment and Modification..........................................................39
             10.11  Arbitration of Disputes; Submission to
                          Jurisdiction..................................................................39
             10.12  Waiver..............................................................................40
             10.13  Severability........................................................................40


</TABLE>

                                              List of Annexes

Annex A               Specialist Securities as of April 11, 1997
Annex B               Employees Subject to Transfer
Annex C               Forms of Agreement and General Release
Annex D               Form of Opinion of Seller and Company
                           Counsel and of Buyer and Successor Counsel



<PAGE>







                                         STOCK PURCHASE AGREEMENT


                  THIS  AGREEMENT is dated as of April 11, 1997,  among DRESDNER
BANK AG,  a  corporation  incorporated  under  German  law  ("Seller"),  and The
Sherwood Group, Inc., a Delaware corporation ("Buyer").

         W I T N E S S E T H:

                  WHEREAS,  Seller  is  the  owner  of all  of  the  issued  and
outstanding shares of common stock, par value $100.00 per share (the "Stock") of
Dresdner-NY Incorporated (the "Company"); and

                  WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller,  the Stock upon the terms and conditions  hereinafter  set
forth; and

                  WHEREAS,  Buyer is the majority  limited  partner of Equitrade
Partners,  a limited  partnership formed under the laws of the State of New York
(the "Successor");

                  NOW,  THEREFORE,  in consideration  of the mutual  agreements,
covenants, representations and warranties contained in this Agreement, Buyer and
Seller agree as follows:


                                                 ARTICLE 1
                                             PURCHASE AND SALE

                  1.1  Specialist  Business.  On the  terms and  subject  to the
conditions and exceptions contained herein, Seller and Buyer agree to diligently
pursue  and use their  respective  reasonable  commercial  efforts to obtain the
approval of the New York Stock Exchange ("NYSE") for Buyer to purchase the Stock
and for  Successor to conduct as of the Closing (as  hereinafter  defined),  the
specialist  business  with  respect to all of the NYSE  equity  securities  (the
"Securities") for which the Company is acting as the specialist unit immediately
prior to the Closing (the "Specialist Business").



<PAGE>







                                            -14-
                  Preliminary  Balance  Sheet.  Not later than two business days
prior  to the  Closing  Date,  Seller  shall  prepare  and  deliver  to Buyer an
unaudited  pro forma  balance  sheet of the  Company  as of a date  falling  not
earlier than fifteen  business  days prior to the Closing  Date,  which  balance
sheet  shall  give pro forma  effect to the  transactions  contemplated  by this
Agreement (the "Preliminary Balance Sheet").

                  1.3 Base Purchase  Price.  Subject to the terms and conditions
contained  herein, at the Closing Seller shall sell the Stock to Buyer and Buyer
shall  purchase  the  Stock  from  Seller.  Buyer  agrees  to pay to  Seller  in
immediately  available funds by wire transfer by 10:00 a.m. New York time on the
Closing Date an amount equal to (i) $5,215,000 plus (ii) the total stockholder's
equity of the Company as reflected on the  Preliminary  Balance Sheet (the "Base
Purchase Price").

                  Stock  Certificates.  At the Closing,  Seller shall deliver to
Buyer  certificates  representing the Stock, duly endorsed in blank for transfer
or accompanied  by duly executed blank stock powers  together with all necessary
stock  transfer  stamps  affixed  thereto  and such other  instruments  as shall
reasonably  be  required  by Buyer to  transfer  to Buyer all  right,  title and
interest  in the  Stock,  free and  clear of any  claims,  liens,  encumbrances,
mortgages,  charges, security interests,  options, rights, restrictions or other
interests  or any  other  interests  or  imperfections  of title  (collectively,
"Encumbrances"), except for such Encumbrances as may be created by, or arise due
to the nature, status or affairs of, Buyer.

                  Closing Date Balance  Sheet.  Not later than 15 business  days
following the Closing Date, Coopers & Lybrand L.L.P. ("Coopers & Lybrand") shall
prepare  and  deliver  to  Buyer  and  KPMG  Peat  Marwick  L.L.P.  ("KPMG")  an
unqualified  opinion on the balance sheet for the Company as of the Closing Date
(the  "Closing  Date Balance  Sheet") and an audited  income  statement  for the
Company for the period from  January 1, 1997 through and  including  the Closing
Date (the "Income Statement") (footnotes included),  each prepared in accordance
with  United  States  generally  accepted  accounting  principles  ("GAAP")  and
consistent with the Audited Financial  Statements,  except that the Closing Date
Balance Sheet shall be adjusted to reduce  stockholder's equity to the extent of
any tax  receivables  relating  to  taxable  periods  ending  on or prior to the
Closing  Date and to  increase  stockholder's  equity  by the  amount of any tax
payables,  relating  to tax  periods or  portions  of tax periods up through the
Closing  Date  (in  adjusting  for tax  payables  relating  to  taxable  periods
beginning  before and ending after the Closing Date,  the  principles of Section
7.9(f) hereof shall be applied).  The working papers  associated  with Coopers &
Lybrand's  audit of the Closing Date Balance Sheet and Income  Statement will be
made available to Buyer and KPMG upon issuance of the Closing Date Balance Sheet
and Income Statement.  Within 10 days after receipt of such Closing Date Balance
Sheet and Income  Statement,  Buyer shall  deliver to Coopers & Lybrand,  with a
copy to Seller,  a notice that either  (a)states  that the Closing  Date Balance
Sheet is satisfactory  to Buyer or (b) explains with reasonable  specificity any
adjustments to the Closing Date Balance Sheet that Buyer requests as a result of
comments  received  from KPMG.  If Buyer  provides  the notice  described in (b)
above,  Seller and Buyer will use their best efforts to reach a mutual agreement
on any  appropriate  adjustments  to be made to the Closing Date  Balance  Sheet
within 10 days of the receipt of such notice.  If Seller and Buyer are unable to
resolve any disputes  within 10 days of receipt of notice from Buyer,  then such
disputes  shall be referred to a  nationally  recognized  independent  certified
public  accounting firm mutually agreed upon by Seller and Buyer. The accounting
firm to which such  disputes are referred  shall,  within thirty (30) days after
such  disputes  shall  have been  referred  to it  deliver to Seller and Buyer a
written  report  indicating  its views on the item or items in  dispute  and its
resolution  thereof.  The  determination  of the  accounts,  including the total
stockholder's  equity of the Company as of the Closing Date, as reflected on the
Closing  Date Balance  Sheet,  pursuant to the terms of the Section 1.5 shall be
final and binding on the Buyer and the Seller in the absence of manifest  error.
Seller  shall pay all fees and expenses of Coopers & Lybrand and Buyer shall pay
all fees and expenses of KPMG in connection  with the preparation of the Closing
Date Balance Sheet.  In the event that a dispute  regarding the Closing  Balance
Sheet and Income  Statement  is referred to an  independent  accounting  firm as
provided above, the cost thereof shall be divided equally between the Seller and
Buyer.

                  Payment of Adjustment  Amount. On a date falling no later than
2 business days after the final  determination of the Closing Date Balance Sheet
pursuant to Section  1.5,  (i) Buyer shall pay to Seller an amount  equal to the
difference  between the total  stockholder's  equity of the Company reflected on
the Closing Date Balance Sheet and the total stockholder's equity of the Company
reflected on the Preliminary Balance Sheet, in the event that such difference is
a  positive  amount or (ii)  Seller  shall  pay to Buyer an amount  equal to the
difference  between the total  stockholder's  equity of the Company reflected on
the Closing Date Balance Sheet and the total stockholder's equity of the Company
reflected on the Preliminary Balance Sheet, in the event that such difference is
a  negative  amount.  The amount  owed by Buyer or  Seller,  as the case may be,
pursuant to clauses (i) or (ii) above  shall  hereinafter  be referred to as the
"Adjustment Amount". Seller shall pay to Buyer, or Buyer shall pay to Seller, as
the case may be, the Adjustment  Amount in immediately  available  funds by wire
transfer to such  account as Buyer shall have  designated  to Seller,  or Seller
shall have designated to Buyer, as the case may be, not less than 24 hours prior
to the payment  thereof.  The Base Purchase Price, as adjusted by the Adjustment
Amount, shall be referred to herein as the "Purchase Price".


                  Post-Closing  Payments.  To the  extent not  reflected  in the
Closing Date  Balance  Sheet,  Seller shall pay or reimburse  Buyer on demand if
Buyer shall be required  to pay any amounts due  pursuant to clauses  Second and
Third  of  Section  11 of  Article  II of the  New  York  Stock  Exchange,  Inc.
Constitution (the  "Constitution") as a result of activities  conducted prior to
the Closing Date with respect to a "membership"  (as such term is defined in the
Constitution)  being  transferred to Successor as contemplated in this Agreement
(singularly a "Membership" or collectively the "Memberships").


                                                 ARTICLE 2
                                                  CLOSING

                  The closing of the transactions contemplated by this Agreement
(the  "Closing")  shall occur at the  offices of Sullivan & Cromwell,  125 Broad
Street,  New York,  New York  10004,  at 5:00 p.m. on the later of (i) April 30,
1997, and (ii) the first business day after the  satisfaction  of the conditions
contained in Section 8.1 hereof,  or at such other time and place as is mutually
agreed in  writing  by Buyer and  Seller.  The time and date of the  Closing  is
herein called the "Closing Date".


                                                 ARTICLE 3
                                 REPRESENTATIONS AND WARRANTIES OF SELLER

                  Seller represents and warrants to Buyer that:

                  Organization.  Seller is a corporation duly organized, 
validly existing and in good standing under the laws of the Federal Republic of
Germany.

                  3.2  Authorization.  Seller has the full  corporate  power and
authority  to  enter  into  and  perform  this  Agreement  and  to  perform  its
obligations  hereunder.  The execution and delivery of this Agreement and of all
documents  and  instruments   required  hereby  and  the   consummation  of  the
transactions  contemplated  hereby  by  Seller  or the  Company  have  been duly
authorized  by all  necessary  corporate  action of Seller or the Company and no
other corporate proceedings on the part of Seller are necessary to authorize the
execution,  delivery and  performance of this Agreement on the part of Seller or
by the Seller or the Company to consummate the transactions contemplated hereby.
This Agreement and the other documents and instruments to be delivered by Seller
or the Company have been, or will be, duly and validly executed and delivered by
Seller or the Company and constitute, or upon the execution and delivery thereof
will  constitute,  the valid and binding  obligations  of Seller or the Company,
enforceable against it in accordance with their respective terms.

                  No Consents.  Other than as contemplated in Sections 7.2, 7.3,
7.4 and 7.5 hereof,  no notice to,  filing with,  or  authorization,  consent or
approval of any  governmental or regulatory  authority or other person or entity
is required of Seller or the Company in connection with the execution,  delivery
and  performance  by  Seller  of  this  Agreement  or the  other  documents  and
instruments to be delivered by Seller or the Company  pursuant to this Agreement
or the  consummation by Seller or the Company of the  transactions  contemplated
herein or therein.

                  Non-Contravention.  The execution, delivery and performance of
this Agreement by Seller and the consummation of the  transactions  contemplated
hereby by  Seller or the  Company  do not and will not  contravene,  result in a
violation,  loss of rights or default under, constitute an event creating rights
of acceleration,  termination,  repayment or cancellation under, entitle a party
to receive any payment or benefit  pursuant to, or result in the creation of any
Encumbrance upon any of the Stock or property or assets of the Company under (i)
the  articles or  certificate  of  incorporation  or bylaws or other  charter or
organizational  documents  of  either  of  Seller  or the  Company  or (ii)  any
applicable law, regulation or administrative order, contract,  judgment, decree,
or ruling to which  Seller or the Company is a party or by which  either of them
or their  respective  assets or  properties  is bound or  affected  (subject  to
receipt of the relevant  approvals and other matters  addressed in Sections 7.2,
7.3, 7.4 and 7.5 hereof).

                  Title to Stock. Seller is the owner of the Stock, beneficially
and of  record,  free and clear of any  Encumbrances  and upon  delivery  of the
certificate  or  certificates  for the Stock at the Closing,  Buyer will acquire
good and valid title to the Stock,  free and clear of any  Encumbrances,  except
for such  Encumbrances as may be created by, or arise due to the nature,  status
or affairs of, Buyer.

                  3.6 Due  Incorporation  of the  Company;  Capitalization.  The
Company is a corporation  duly organized,  validly existing and in good standing
as a corporation  under the laws of the State of Delaware,  with full  corporate
power and authority to own and operate its business and  properties and to carry
on its business as presently  conducted by it. The Company's  authorized capital
stock  consists  solely of 5,000 shares of common  stock,  par value $100.00 per
share,  all of which are issued and  outstanding.  Such  issued and  outstanding
shares  are  validly  issued,  fully paid and  nonassessable.  Except for rights
created  pursuant to this  Agreement,  and as set forth in Schedule  3.6 hereto,
there are no outstanding  options,  warrants or other rights to acquire,  or any
outstanding securities or obligations  convertible into or exchangeable for, any
shares of capital stock of the Company. Other than the transactions contemplated
by  this  Agreement,  there  are no  outstanding  contracts  or  obligations  to
restructure  or  recapitalize  the Company.  The Company is duly qualified to do
business and, with respect to jurisdictions  that recognize the concept of "good
standing",  is in good standing as a foreign  corporation  in all  jurisdictions
where such  qualification is required.  The Company has no subsidiaries and does
not control,  directly or  indirectly,  any other  person.  The Company is not a
party  to any  joint  venture  or  partnership  arrangement  and does not own or
control any interest in any other person except in connection with its ownership
from time to time of the Securities.

                  3.7  Specialist  Securities.  On the date hereof,  the Company
acts as the NYSE  specialist  unit for each of the Securities  listed in Annex A
hereto.  Except as  disclosed  in  Schedule  3.7,  the  Company has no reason to
believe and has not been  advised that it may be required to cease acting as the
NYSE specialist unit for any of such Securities, nor has it agreed to act as the
NYSE specialist unit for any security (other than the Securities) nor will it so
agree without the prior written approval of Buyer.

                  3.8  Litigation.  Except as  disclosed in Schedule 3.8 hereto,
there  are no  lawsuits,  actions,  proceedings,  inquiries,  claims,  orders or
investigations  by  or  before  any  court  or  any  federal,  state,  local  or
governmental or other regulatory or  self-regulatory  agency,  authority,  body,
board,  bureau,   commission,   department  or  instrumentality   ("Governmental
Authority")  pending  or, to  Seller's or the  Company's  knowledge,  threatened
against  the  Company or Seller  which  could  reasonably  be expected to have a
material  adverse  effect  on the  business,  financial  condition,  results  of
operations or properties of the Company nor are there any facts or circumstances
known to Seller  that are likely to result in a claim for  damages or  equitable
relief  which,  if decided  adversely,  are likely  to,  individually  or in the
aggregate, have a material adverse effect on the business,  financial condition,
results of  operations  or  properties  of the Company or impair in any material
respect  the  ability  of Seller  or the  Company  to  perform  its  obligations
hereunder.  Except as disclosed in Schedule 3.8 hereto,  neither the Company nor
the  Seller is subject to or in default  with  respect to any  judgment,  order,
writ, regulation, injunction or decree of any Governmental Authority which could
have a material adverse effect on the business,  financial condition, results of
operations  or  properties  of the Company or  materially  impair the ability of
Seller to perform its obligations hereunder.


                  3.9 Compliance  With Law.  Except as disclosed in Schedule 3.9
hereto,  Seller, with respect to its operation of the Company,  and the Company,
are in  compliance  in all  material  respects  with all laws,  regulations  and
administrative orders, and the rules of all Governmental  Authorities applicable
to the Company or to Seller with respect to its  operation  of the Company.  The
Company has obtained all material licenses, permits, approvals,  authorizations,
waivers,  grants,  exemptions and orders  required to be obtained by it from any
Governmental  Authority.  The Company has the minimum net capital  necessary  to
conduct,  and is in compliance  with all net capital  requirements in connection
with the operation of, its business as it is presently conducted.

                  3.10 Financial Report. The Financial Report for Specialists (a
"Financial  Report")  filed by the Company with the NYSE for the fiscal  quarter
ended  December  31, 1996 (a copy of which has been  provided to Buyer) and each
Financial  Report  filed by the Company with the NYSE during the period from the
date hereof to the Closing Date,  complied or when so filed will comply,  as the
case may be, in all material  respects with the relevant NYSE  instructions  for
the completion of Financial Reports.

                  3.11  Audited  Financial  Statements.  Seller  has  previously
furnished to Buyer true and complete copies of the audited balance sheet for the
Company at December 31, 1996 and the related  audited income  statements for the
one-year  period then ended (the "Audited  Financial  Statements").  The Audited
Financial  Statements  have been prepared in  conformity  with GAAP applied on a
consistent basis (except for changes,  if any, disclosed  therein).  The Audited
Financial  Statements  present  fairly in all  material  respects the results of
operations of the Company for the respective  periods  covered and the financial
condition of the Company as of their respective dates.

                  3.12 No Undisclosed  Liabilities.  As of the Closing Date, the
Company  will not be subject  to any  obligation  or  liability  of any  nature,
whether absolute,  accrued, contingent or otherwise and whether due or to become
due,  other than to the extent  accrued or reserved  against in the Closing Date
Balance Sheet.

                  3.13  Taxes.  Except as set forth in Schedule 3.13 hereto:

                  (a) (i)  all Tax  Returns  with  respect  to  Taxes  that  are
required to be filed (giving regard to extensions set forth in Schedule 3.13) by
or with  respect to the Company on or before the Closing  Date have been or will
be duly filed on or before the  Closing  Date,  and all such Tax  Returns are or
will be true, correct and complete in all material respects,  (ii) all Taxes due
from or in respect of the  Company  for the  periods  covered by the Tax Returns
referred to in clause (i) and for the taxable periods or portions thereof ending
on or before the Closing Date have been or will be paid in full on or before the
Closing  Date or,  subject to the  provisions  of Section  1.5  hereof,  will be
properly  accrued for on the Closing Date Balance Sheet and  provision  made for
payment  thereof or the Company has made or will make all  payments of estimated
Taxes required to be made on or before the Closing Date,  (iii) all deficiencies
asserted  or  assessments  made on or  before  the  Closing  Date as a result of
examinations by federal, state, local or foreign taxing authorities have been or
will be paid in full on or before the Closing  Date and (iv) no issues that have
been raised by the United  State  Internal  Revenue  Service or any other taxing
authority in a writing  received by the Company,  or Seller or any subsidiary of
Seller on behalf of the Company,  in connection  with the  examination of any of
the Tax Returns referred to in clause (i) are currently pending. Seller does not
expect  any taxing  authority  to assess any  additional  Taxes for any  taxable
period for which Tax Returns have been filed. No claim has ever been made by any
taxing  authority  in a  jurisdiction  where the Company or any other entity for
whose liability for Tax the Company may be liable does not file Tax Returns that
it is or  may  be  subject  to  taxation  by  that  jurisdiction.  There  are no
encumbrances  on any of the assets of the Company that arose in connection  with
any failure or alleged failure to pay any Taxes by any of Seller, any subsidiary
of Seller, or the Company.

                  (b) With  respect to all  periods  through  the most  recently
completed  fiscal quarter of the Company for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, the Company has made due and
sufficient current accruals for such Taxes in accordance with GAAP, and, subject
to the provisions of Section 1.5 hereof,  such current accruals will be duly and
fully provided for in the Closing Date Balance Sheet.

                  (c) As of the Closing  Date,  the Company  will not be a party
to,  will not be bound by, and will have no  obligation  under,  any tax sharing
agreement or contract.

                  (d) The  Company  is not and has not been at any time a member
of any  affiliated,  consolidated,  combined  or  unitary  group for  income Tax
purposes.

                  (e) The Company has no  liability  for the Taxes of any person
under  section  1.1502-6  of the  U.S.  Treasury  regulations  (or  any  similar
provision  of state,  local or foreign  law) as a transferee  or  successor,  by
contract or otherwise.

                  (f) The Company is subject to income tax only with  respect to
the United States, the State of New York and the City of New York.

                  (g) The  Company has not been a United  States  real  property
holding  corporation  within the meaning of section  897(c)(2)  of the  Internal
Revenue Code of 1986,  as amended,  (the "Code")  during the  applicable  period
specified in section 897(c)(1)(A)(ii) of the Code.

                  (h) The  Company  owns no  interest  in real  property  in any
jurisdiction in which a Tax is imposed on the transfer of a controlling interest
in an entity that owns any interest in real property.

                  (i) Seller has made  available to Buyer  complete and accurate
copies of all  stand-alone  Tax  Returns  of the  Company  that were part of the
consolidated and combined returns as filed and, if applicable,  as amended, with
respect to all open Tax  periods  that have been filed or will be required to be
filed (after  giving  effect to all valid  extensions  of time for filing) on or
before the Closing  Date.  Seller will provide  Buyer with complete and accurate
copies of the  stand-alone  Tax  Returns  of the  Company  that were part of the
consolidated and combined returns as filed and, if applicable,  as amended,  for
the period  ending August 31, 1996 as promptly as  practicable  after the filing
thereof.

                  (j) No audits of the Tax Returns with respect to United Stated
federal   income  Taxes  have  been  completed  and  there  is  no  judicial  or
administrative  claim,  audit,  action,  suit,  proceeding or investigation  now
pending or, to the knowledge of the Company,  threatened against or with respect
to the  Company in  respect of any Tax of the  Company  for any  taxable  period
ending on or prior to the  Closing  Date.  To the  knowledge  of Seller  and the
Company, there is no reasonable basis for any deficiency, claim or adjustment of
additional  Taxes for any taxable  period ending on or prior to the Closing Date
and there are no Liens for Taxes upon the assets of the Company except Liens for
current  Taxes  (i) not yet due or (ii)  being  contested  in good  faith and by
appropriate proceedings and for which adequate reserves have been established on
the Audited Financial Statements or the Closing Date Balance Sheet.

                  (k) For  purposes of this  Agreement,  "Taxes"  shall mean all
federal, state, local, or foreign income, franchise, sales, use, gross receipts,
license,  payroll,  employment,   withholding,   disability,   social  security,
property, excise or other taxes, fees, charges or similar assessments imposed by
any governmental  authority,  and any interest or penalties thereon with respect
to the Company.  For purposes of this  Agreement,  "Tax Returns"  shall mean all
reports  and  returns  required  to be filed  with  respect  to the Taxes of the
Company including any schedule or attachment thereto and including any amendment
thereof relating to the Company.

                  3.14  Employee Matters.

                  (a)  The  Company  is not  and has  never  been a party  to or
otherwise  obligated  under any  collective  bargaining  agreement.  At Closing,
except as  contemplated  by Section 7.3 hereof and as set forth on Schedule 3.14
hereto,  the  Company  (i) will not be a party to,  obligated  under or have any
liabilities  with respect to any  employment,  change in control,  consulting or
agency  contract with any person and (ii) will not maintain,  contribute  to, or
have any liability or obligation  for which the Company,  Buyer or Successor may
have any  liability  or  obligation  after the Closing  Date with respect to any
employee program,  policy or "employee  benefit" plan as defined in Section 3(3)
of the Employee  Retirement  Income  Security Act of 1974, as amended  ("ERISA")
including,  without limitation,  any deferred  compensation,  pension,  medical,
severance,  accident,  life,  disability,  stock or  incentive  plan,  policy or
program  maintained by Seller or any entity that is considered a single-employer
with the  Company  under  Section  4001 of ERISA or Section  414 of the Code (an
"ERISA  Affiliate").  At Closing,  the Company  will not have any  liability  or
obligation  for which the Company,  Buyer or Successor may have any liability or
obligation after the Closing Date under the Mortgage  Assistance  Plan,  Tuition
Reimbursement  Plan,  Travel Subsidy Plan or any cafeteria or flexible  benefits
plans  maintained by Seller,  the Company or any ERISA Affiliate of the Company.
The liability or obligation  described above includes  without  limitation those
attributable  to acts or  omissions  of Seller  or any of its  ERISA  Affiliates
(determined as of the Closing) that occur after the Closing.

                  (b) The Seller  Savings Plan (as defined in Section 7.3) is in
compliance with the applicable  provisions of ERISA and the Code and Seller, the
Company and each ERISA Affiliate of the Company (determined immediately prior to
the  Closing  Date) have  performed  all of their  obligations  under the Seller
Savings Plan, other than any event of noncompliance or nonperformance that would
not have a material adverse effect on the business, financial condition, results
of operations or  properties of the Company or on the Seller  Savings Plan.  All
contributions  required  to be made under the terms of the Seller  Savings  Plan
have been  timely  made.  To the best of the  Seller's  knowledge,  there are no
claims (other than routine  claims for benefits)  pending or threatened  against
the Seller  Savings Plan or its assets,  and no facts exist that could give rise
to any claims that would have a material  adverse effect on either the business,
financial  condition,  results of  operations or properties of the Company or on
the Seller Savings Plan. The Seller Savings Plan has been duly authorized by all
necessary corporate action by Seller or its applicable affiliate. No "prohibited
transaction"  (within the meaning of Code Section 4975 or ERISA Sections 406 and
408) has occurred with respect to the Seller Savings Plan as a result of any act
of Seller,  the Company or any of their affiliates or their directors,  officers
and  employees,  provided,  however,  the foregoing does not apply to investment
directions made by Seller Savings Plan participants in a plan that complies with
all the  requirements  of ERISA  Section  404(c).  The  Seller  Savings  Plan is
qualified in form and operation  under Section  401(a) of the Code and the trust
thereunder  is exempt from tax under  Section  501(a) of the Code.  No event has
occurred that will subject the Seller Savings Plan to a tax under Section 511 of
the Code.  The Company and the Seller  Savings  Plan are  permitted  to take all
actions pertaining to the Seller Savings Plan described in Section 7.3(b).

                  3.15   Operations   of  the   Company.   Except  as  otherwise
contemplated  by this  Agreement,  since  December  31,  1996,  the  Company has
conducted its  operations and each action it has taken has been, in the ordinary
course consistent with past practice and there has not been,  occurred or arisen
any change in the  business,  operations,  or  condition  of the  Company  that,
individually  or in the  aggregate,  has had or is  reasonably  likely to have a
material  adverse  effect  on the  business,  financial  condition,  results  of
operations  or properties of the Company,  other than changes  resulting  from a
change in general economic or market conditions.

                  3.16 Brokers.  Except as disclosed in Schedule  3.16,  neither
Seller nor the Company has retained  any broker,  finder,  investment  banker or
financial   advisor  in  connection  with  this  Agreement  or  any  transaction
contemplated hereby that would be entitled to a broker's,  finder's,  investment
banker's, financial advisor's or similar fee in connection therewith.

                  Real Property.  The Company does not own (of record or 
beneficial), nor does it have any interest in, any real property.

         Absence of Certain Changes or Events. Except as otherwise  contemplated
by this Agreement, the Company has not, since December 31, 1996:

                  (a) issued,  sold or granted or contracted  to issue,  sell or
grant any of its stock, notes, bonds, other securities or any option to purchase
any of the same;

                  (b)  amended its certificate of incorporation or by laws;

                  (c)  made any expenditure or commitment in excess of $50,000 
for the acquisition of any property other than in the ordinary course of 
business of the Company;

                  (d)  incurred,  assumed,  guaranteed  (including by way of any
agreement  to "keep  well"  or of any  similar  arrangement)  any  liability  or
obligation,  prepaid  any  indebtedness  or amended  the terms  relating  to any
indebtedness (including, without limitation, capital leases, payments in respect
of the deferred purchase price of property,  letters of credit,  loan agreements
and other agreements relating to the borrowing of money or extension of credit),
issued or sold any debt securities or made material expenditures,  in each case,
in excess of  $50,000  other  than in the  ordinary  course of  business  of the
Company;

                  (e) redeemed,  repurchased,  or otherwise  acquired any of its
capital stock or securities,  convertible  into or exchangeable  for its capital
stock or entered into any agreement with respect to any of the foregoing;

                  (f) sold, transferred,  assigned, conveyed, mortgaged, pledged
or  otherwise  subjected to any  Encumbrance  any of its  properties  or assets,
tangible or intangible, except in the ordinary course of business of the Company
consistent with past practices;

                  (g)  entered  into  any  agreement  or  commitment   involving
aggregate  payments  by the Company in excess of $20,000  that,  pursuant to its
terms,  is not cancelable by the Company  without  penalty on 60 days' notice or
less;

                  (h) except as disclosed in Schedule  3.18,  increased the rate
of compensation payable or to become payable to the officers of employees of the
Company,  or increased the amounts paid or payable to such officers or employees
under  any  bonus,  insurance,  pension  or  other  benefit  plan,  or made  any
arrangements  therefore with or for any of said officers or employees except for
increases consistent with the Company's ordinary course of business or increases
resulting  from the  application  of existing  formulas  under  existing  plans,
agreements or policies relating to employee compensation;

                  (i) entered into, adopted or materially amended any collective
bargaining,  bonus,  profit  sharing,   compensation,   stock  option,  pension,
retirement,  deferred  compensation  or other plan,  agreement,  trust,  fund or
arrangement  for the benefit of its employees,  except as otherwise  required or
permitted herein;

                  (j) suffered any strike or other labor dispute that has had or
could  reasonably be expected to have a material adverse effect on the business,
financial condition, results of operations or properties of the Company;

                  (k) changed in any material respect any accounting  principle,
procedure or practice  followed by the Company or changed the method of applying
such principle,  procedure or practice, except for changes required by the NYSE,
GAAP or applicable law;
                  (l) made any  material  changes  in its  general  policies  or
practices  relating to selling  practices,  discounts or other material terms of
sale or accounting therefor; or

                  (m) suffered any damage,  destruction  or other  casualty loss
(whether or not covered by insurance)  affecting its properties or assets which,
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
material  adverse  effect  on the  business,  financial  condition,  results  of
operations or properties of the Company.

                  3.19 Agreements. Correct and complete copies of all contracts,
agreements and other instruments to which the Company is a party or by which any
of its  property  or assets are bound,  which are  material  to the  business or
operations of the Company  ("Business  Agreements"),  have  heretofore been made
available to Buyer.  The  foregoing  Business  Agreements  include,  but are not
limited to, all notes, debentures, employment agreements, commission agreements,
option plans,  options,  real property  agreements,  mortgages,  equipment lease
agreements,  pension  plans,  401(k)  plans,  clearing  agreements  and employee
welfare benefit plans as defined under ERISA.  The Company is not in default and
no event has occurred which,  with notice or lapse of time or both,  could cause
or become a default by the Company, under any Business Agreement.

                  3.20 Minute and Stock  Transfer  Book. The minute books of the
Company  are  correct  (including  signatures),  complete  and  current,  in all
material  respects,  and  accurately  reflect,  in all  material  respects,  the
corporate  actions of the Board of Directors and each  committee of the Board of
Directors and the  shareholders of the Company.  The stock transfer books of the
Company are correct (including signatures), complete and current and reflect all
transactions in the Company's common stock.



<PAGE>







                                            -42-
                  3.21 Filings.  Since  December 31, 1995, the Company has filed
all  material  registrations,  reports,  statements,  notices and other  filings
required to be filed with any  Governmental  Authority by the Company  including
all required amendments or supplements to any of the above. Such filings made by
the Company complied to the extent  applicable in all material respects with the
requirements of applicable law and the applicable Governmental Authority. Seller
has made  available to Buyer complete and correct copies of (i) all such filings
made since  December 31, 1995,  (ii) all audit  reports  received by the Company
from any Governmental  Authority and all written  responses  thereto made by the
Company since December 31, 1995, (iii) copies of all inspection reports provided
to the Company by any  Governmental  Authority  since December 31, 1995 and (iv)
all  correspondence  relating  to any inquiry or  investigation  provided to the
Company by any Governmental Authority since December 31, 1995.

                  3.22  Intellectual  Property.  Except for the name "Dresdner",
the  Dresdner  logo,  and  variations  thereof  which are and shall  remain  the
property  of Seller  whether  such name or logo is  copyrighted,  registered  or
otherwise  protected,  the Company owns or has valid,  binding,  enforceable and
adequate  rights to use all material  computer  software,  patents,  trademarks,
trade  names,  service  marks,  service  names,  copyrights,  other  proprietary
intellectual property rights,  applications therefor,  registrations thereof and
licenses or other rights in respect thereof ("Intellectual  Property") necessary
for use in  connection  with the  business  of the  Company  as it is  currently
conducted,  without any conflict  with the rights of others.  Neither the Seller
nor the Company has received any notice from any other person  pertaining  to or
challenging  the right of the  Company to use any  Intellectual  Property or any
trade secrets,  proprietary  information,  inventions,  know-how,  processes and
procedures  owned or used by or licensed to the Company,  except with respect to
rights the loss of which,  individually  or in the  aggregate,  have not had and
would  not be  reasonably  likely  to  have a  material  adverse  effect  on the
business,  financial  condition,  results of  operations  or  properties  of the
Company.

                  3.23  Insurance.  Schedule  3.23  sets  forth  a  correct  and
complete list of all material  insurance  policies and fidelity bonds maintained
on the  date  hereof  by or for the  benefit  of the  Company.  Seller  has made
available to Buyer  complete and correct  copies of all such policies and bonds,
together with all riders and amendments thereto as of the date hereof. As of the
date  hereof,  such  policies  and bonds are in full force and  effect,  and all
premiums  due thereon  have been paid.  The Company has complied in all material
respects with the terms and  provisions of such policies and bonds.  There is no
claim in excess of $50,000 by the Company  pending as of the date  hereof  under
any of such policies or bonds as to which coverage has been  questioned,  denied
or disputed by the underwriters of such policies or bonds.

                  3.24  Affiliate  Transactions.  Schedule  3.24  sets  forth  a
correct and complete list of all agreements,  arrangements or other  commitments
in effect as of date hereof between the Company, on the one hand, and the Seller
or any officer,  director or  shareholder  of Seller or the Company on the other
hand,  other  than   compensation  or  benefit   agreements,   arrangements  and
commitments set forth on Schedule 3.14.

                  3.25 Officers and Directors.  Schedule 3.25 lists the officers
and directors of the Company. No other officers or directors of the Company will
be elected or appointed after the date hereof.

                  Disclosure  Letter.  The disclosure letter delivered by Seller
to Buyer and dated the date hereof (the "Disclosure  Letter") is true,  accurate
and  complete,  except for such errors or omissions as would not have a material
adverse effect on the business,  financial  condition,  results of operations or
properties of the Company.

                  No  Other  Representations  or  Warranties.   Except  for  the
representations  and warranties  contained in this Article 3 or in the Schedules
attached hereto or in the Disclosure Letter, neither Seller, the Company nor any
other person makes any express or implied  representation  or warranty on behalf
of Seller or the Company, and Seller hereby disclaims any such representation or
warranty  whether by Seller,  the Company or any of the  respective  affiliates,
officers, directors, employees, agents or representatives or any other person.


                                                 ARTICLE 4
                                  REPRESENTATIONS AND WARRANTIES OF BUYER

                  Buyer represents and warrants to Seller as follows:

                  Organization.  Buyer is a corporation duly formed and validly
existing under the laws of the State of Delaware.  Successor is a limited 
partnership formed under the laws of New York.

                  Authorization. Buyer has the full power and authority to enter
into and perform this Agreement and to perform its  obligations  hereunder.  The
execution  and delivery of this  Agreement  and all  documents  and  instruments
acquired hereby and the consummation of the transactions  contemplated hereby by
Buyer or Successor have been duly authorized by all necessary action of Buyer or
Successor and no other corporate  proceedings on the part of Buyer are necessary
to authorize the  execution,  delivery and  performance of this Agreement on the
part  of  Buyer  or  by  Buyer  or  Successor  to  consummate  the  transactions
contemplated  hereby.  This Agreement and the other documents and instruments to
be delivered by Buyer hereunder have been, or will be duly and validly  executed
and  delivered  by Buyer and  constitute,  or upon the  execution  and  delivery
thereof will constitute, the valid and binding obligations of Buyer, enforceable
against it in accordance with their respective terms.

                  No Consents.  Other than as  contemplated  in Sections 7.2 and
7.4 and  Schedule  4.3 hereof,  no notice to,  filing  with,  or  authorization,
consent or approval of any  Governmental  Authority or other person or entity is
required of Buyer in connection with the execution,  delivery and performance by
Buyer of this Agreement or the other  documents and  instruments to be delivered
by Buyer or Successor pursuant to this Agreement or the consummation by Buyer or
Successor of the transactions  contemplated  herein or therein or the conduct by
Successor of the Specialist Business following the Closing.

                  Non-Contravention.  The execution, delivery and performance of
this Agreement by Buyer and the  consummation of the  transactions  contemplated
hereby  by  Buyer or  Successor  do not and will  not  contravene,  result  in a
violation,  loss of rights or default under, constitute an event creating rights
of acceleration,  termination,  repayment or cancellation under, entitle a party
to receive any payment or benefit  pursuant to, or result in the creation of any
Encumbrance  upon any of the stock or assets of Buyer under (i) the  articles or
certificate  of  incorporation  or bylaws  or other  charter  or  organizational
documents of Buyer or Successor or (ii) violate any applicable  law,  regulation
or administrative order,  contract,  judgment,  decree, order or ruling to which
Buyer is a party or by  which  either  of them or  their  respective  assets  or
properties  is bound or affected  (subject to receipt of the relevant  approvals
and other matters addressed in Sections 7.2 and 7.4 and Schedule 4.3 hereof).

                  4.5 Litigation.  There are no lawsuits, actions,  proceedings,
inquiries,  claims,  orders  or  investigations  by or before  any  Governmental
Authority  pending  or,  to  Buyer's  knowledge,  threatened  against  Buyer  or
Successor and there are no facts or circumstances known to Buyer that are likely
to  result  in a claim  for  damages  or  equitable  relief  which,  if  decided
adversely,  are  likely  to,  individually  or in the  aggregate,  impair in any
material  respect  the ability of Buyer to perform  its  obligations  under this
Agreement  or the  ability of  Successor  to  conduct  the  Specialist  Business
following  the Closing.  Neither Buyer nor Successor is subject to or in default
with respect to any judgement, order, writ, regulation,  injunction or decree of
any  Governmental  Authority  which could impair  materially  the ability of the
Buyer to  perform  its  obligations  under  this  Agreement  or the  ability  of
Successor to conduct the Specialist Business following the Closing.

                  4.6 Disclosure. There are no facts or circumstances concerning
Buyer or  Successor  known to Buyer that Buyer has not  disclosed  to Seller and
that could  reasonably be expected to impair  materially the ability of Buyer to
perform its  obligations  under this  Agreement  or the ability of  Successor to
conduct the Specialist Business following the Closing.


                                                 ARTICLE 5
                                    COVENANTS AND AGREEMENTS OF SELLER

                  5.1  Affirmative Covenants.  Prior to the Closing, except as
otherwise specifically contemplated by this Agreement, Seller shall, or shall 
cause the Company to:

                  (a)  conduct  its  business  only in the  ordinary  course  of
business  consistent with past practices  (subject,  however, to compliance with
any  applicable  requirements  imposed  by the  NYSE,  Securities  and  Exchange
Commission or other applicable law);

                  (b)  maintain the books, accounts and records of the Company 
consistent with past practices;

                  (c) maintain all of the Company's  existing  material licenses
and  regulatory  approvals and the minimum net capital  necessary to conduct the
Specialist  Business  as  currently  conducted  by the Company and comply in all
material respects with all regulatory requirements applicable to the business of
the  Company,  except for any  failure to comply  that would not have a material
adverse  effect on  Successor's  ability  to  conduct  the  Specialist  Business
following the Closing;

                  (d) provide to Buyer,  promptly  after the filing  thereof,  a
copy of the  Financial  Report filed by the Company with the NYSE for the fiscal
quarter ended March 31, 1997;

                  (e) use reasonable  commercial  efforts to maintain intact its
business organization and the good will of persons having business relationships
with the Company; and

                  (f) upon  reasonable  notice,  afford Buyer and its  officers,
employees,  counsel,  accountants and other  authorized  representatives  during
normal business hours,  reasonable  access to such of the Company's  properties,
books,  contracts,  and  records,  and a reasonable  opportunity  to discuss the
Company's  business  affairs,  condition  (financial and otherwise),  assets and
liabilities  with  such  third  persons,  including,   without  limitation,  its
directors,  officers,  employees,  accountants,  and counsel,  as is  reasonably
necessary or appropriate in connection with the consummation of the transactions
contemplated  by this  Agreement  (including  as  necessary  or  appropriate  in
connection with the Buyer's investigation and review of the Company's NYSE files
and any investigation undertaken by Buyer to verify that the representations and
warranties  of Seller  remain true and correct as of the Closing  Date);  and to
make copies of such information to the extent reasonably necessary. Buyer agrees
that it will not use any  information  obtained  pursuant to this Section 5.1(f)
for purposes of trading in securities.

                  In  addition,  if in  connection  with any filing  required by
federal  securities  law Buyer or an  affiliate  of Buyer is required to present
separate or combined  financial  statements  for the business  operations of the
Company which Buyer is  purchasing,  Seller will furnish or cause the Company to
furnish to Buyer such financial  information as Buyer may reasonably  request to
enable Buyer to prepare at Buyer's sole cost and expense financial statements of
the operations of the Company which Buyer is acquiring for the Company's  fiscal
year end next preceding the Closing and will reasonably cooperate with Buyer, at
Buyer's sole cost and expense, to obtain an audit of such financial statements.

                  5.2  Negative Covenants.  Prior to the Closing, without the
prior written consent of Buyer, except as otherwise specifically contemplated by
this Agreement, Seller shall not permit the Company to:

                  (a) enter into any contract, agreement or commitment which, if
entered into prior to the date of this Agreement, would render untrue any of the
representations and warranties contained in Article 3;

                  (b) take any action which could  reasonably be  anticipated to
have a material adverse effect on the business,  financial condition, results of
operations or properties of the Company;

                  (c) enter into any contract,  agreement or  commitment,  other
than in the  ordinary  course of business  consistent  with the  Company's  past
practices,  or amend,  modify or terminate (except upon expiration in accordance
with the terms  thereof or as  required  by the NYSE) any  material  contract or
agreement to which the Company is a party;

                  (d)  terminate the employment of any of John W. Nick, David A.
Green, Richard K. Green or James Fraschilla except for good cause or upon a 
voluntary departure; or

                  (e)  effect any dissolution, winding up, liquidation or 
termination of the Company.

                  5.3  Exclusive  Agreement.  Seller  agrees  that  prior to the
Closing it will not, directly or indirectly,  solicit,  initiate,  enter into or
conduct any discussions with any other individual,  corporation,  partnership or
other entity (each, a "Person") in connection  with any proposal for such Person
to become the NYSE  specialist  unit for the  Securities,  nor will it otherwise
conduct  any  discussions  with the  intent  of  entering  into or  consummating
transactions similar to those contemplated by this Agreement.


                                                 ARTICLE 6
                                     COVENANTS AND AGREEMENTS OF BUYER

                  6.1 Affirmative Covenants. (a) During the period from the date
hereof to the Closing  Date,  Buyer shall and shall cause  Successor to maintain
all  existing  licenses  and  regulatory  approvals  and the minimum net capital
necessary  to permit  Buyer to  acquire  the Stock  and to permit  Successor  to
conduct the Specialist  Business  following the Closing as  contemplated by this
Agreement.

                  (b) Not later than 10 days after the Closing Date,  Buyer will
cause the Company to file with the appropriate  Governmental  Authorities in the
state of  Delaware  (and not later  than 30 days after the name  change  becomes
effective   therein  will  cause  the  Company  to  file  with  the  appropriate
Governmental  Authority  in each  other  jurisdiction  in which the  Company  is
qualified or licensed to transact business) all documents necessary to reflect a
change of its name to a name that does not include  "Dresdner"  or any variation
thereof.  Not later than 10 days after the  Closing,  Buyer,  the  Company,  the
Successor and their affiliates  shall cease all use of the name "Dresdner",  the
Dresdner  logo  or any  variation  thereof,  including  but not  limited  to any
letterhead, catalogues, brochures, advertising,  promotional or other materials.
Buyer will cause the Company and Successor to promptly  provide to Seller copies
of any documents on which such name or logo appear.

                  6.2  Negative Covenants.  During the period from and including
the date hereof to the Closing, without the prior written consent of Seller, 
Buyer shall not and shall not permit Successor to:

                  (a) create,  incur,  assume or suffer to exist any Encumbrance
on any of their respective  assets that could materially  impair Buyer's ability
to perform its  obligations  under this Agreement or the ability of Successor to
conduct the Specialist Business following the Closing; or

                  (b) enter  into any  merger,  consolidation  or other  form of
combination with any Person,  dispose of its assets substantially as an entirety
or engage in any  transaction  which is reasonably  likely to materially  impair
Buyer's ability to perform its  obligations  under this Agreement or the ability
of Successor to conduct the Specialist Business following the Closing.


                  6.3  Transfer  Taxes  and  Other  Fees.  Buyer  will  pay  any
transfer,  sales,  purchase,  use or  similar  Tax under the laws of the  United
States or the State of New York, and any city or political  subdivision  thereof
arising out of the  transactions  contemplated by this Agreement,  any filing or
recording fees payable in connection with the  instruments of transfer  provided
for herein and any fees or expenses  required in connection  with  obtaining the
approvals  contemplated by Sections 7.2 and 7.4 hereof.  Buyer shall prepare and
file the required Tax Returns and other required documents with respect to Taxes
and fees  required  to be paid  pursuant  to the  preceding  sentence  and shall
promptly provide Seller with copies of such Tax Returns and other documents with
evidence  of the payment of such Taxes and fees.  Seller will pay any  transfer,
sales,  purchase, use or similar Tax under the laws of any nation or state other
than the United  States or the State of New York (or any  political  subdivision
thereof) arising out of the transactions contemplated by this Agreement.  Seller
will pay any income,  gross  receipts or profits  Taxes  attributable  to any of
Seller's  income,  gain,  gross  receipts,  accretion  of wealth or  receipt  of
consideration  arising out of the  transactions  contemplated by this Agreement.
Notwithstanding  any provision of this Section 6.3, to the extent that any Taxes
are generated or triggered by any transaction described in clause (i) of Section
7.5, Seller shall pay any such Taxes.


                                                 ARTICLE 7
                                      JOINT COVENANTS AND AGREEMENTS

                  7.1 Access to Records After  Closing.  After the Closing Date,
Seller,  on the one hand, and Buyer,  on the other,  agree that it will give, or
cause to be given,  to the other party and its  representatives,  on  reasonable
prior notice by the requesting  party,  during normal  business hours and at the
requesting party's expense, such reasonable access to the properties, contracts,
books,  records,  files and documents  (but  excluding  attorney work product or
other privileged  communications) of Seller, the Company, Buyer or Successor, as
the case may be, as is  reasonably  necessary to allow the  requesting  party to
obtain  information which is in the other party's  possession and relates to any
right, obligation or liability of the requesting party. Each of Seller and Buyer
agrees that it will not use any  information  obtained  pursuant to this Section
7.1 for purposes of trading in securities.

                  7.2 Required Consents. All the parties hereto acknowledge that
consummation of the transactions contemplated by this Agreement will require (i)
approval from the NYSE and (ii) review by the Federal Trade  Commission  ("FTC")
and  the  Department  of  Justice  ("DOJ")  pursuant  to the  Hart-Scott  Rodino
Antitrust  Improvement  Act of 1976 (the "HSR  Act") with  respect to  antitrust
matters and expiration or early  termination  of the  applicable  waiting period
under the HSR Act. Accordingly, each of Seller and Buyer will use its respective
reasonable   commercial   efforts  to  obtain  all  consents  from  Governmental
Authorities  including,  without  limitation,  the NYSE, to obtain expiration or
early  termination  of the  applicable  waiting  period under the HSR Act and to
obtain all consents or approvals from any third parties (collectively, "Required
Consents")  necessary to the  consummation of the  transactions  contemplated by
this  Agreement.  Buyer further will use its  reasonable  commercial  efforts to
obtain from  Governmental  Authorities  any licenses or permits,  necessary  for
Buyer to acquire the Stock and for Successor to conduct the Specialist  Business
after the Closing Date (collectively, "Required Licenses").

                  7.3 Transferred Employees.  (a) Buyer agrees that it shall, no
later  than  30 days  prior  to the  Closing  Date,  cause  Successor  to  offer
employment as of the Closing Date to those officers and employees of the Company
listed in Annex B. Such offers of employment  shall be on the terms set forth in
Annex B; it being  understood  that in connection  with such offer of employment
each Member (as defined in Section 7.4 below) shall be required to enter into an
Agreement and General Release  substantially in the form of Annex C hereto, with
such  modifications  as appropriate  for each Member's  circumstances  (each, an
"Agreement and General Release"), and that, at Buyer's discretion, such offer of
employment to any of the other  employees  listed on Annex B may be  conditioned
upon the  receipt  from such  employee of (i) an  agreement  waiving all of such
employee's  rights under and terminating  such  employee's  letter of employment
with the Company and (ii) a release of all claims  against  Seller,  the Company
and their  affiliates  arising out of or relating to such employee's  employment
with the Company (collectively,  a "General Release"). It is expressly agreed by
Buyer and Seller that the  parties'  respective  obligations  hereunder  are not
conditioned  upon the  willingness  of any person listed in Annex B to accept or
continue  employment  with the  Successor  thereto  and that the  refusal of any
person to accept such  employment  shall not be grounds for  termination of this
Agreement. Buyer further agrees that (i) Seller shall have no liability to Buyer
whatsoever for any refusal of any person listed in Annex B to accept or continue
employment  with the  Successor and (ii) Buyer shall be liable for and indemnify
Seller,  up to the amounts  listed for each such  employee set forth on Schedule
7.3(a),  for any  compensation  or  severance  costs  or  other  liabilities  or
obligations  that are paid by Seller to any person listed in Annex B as a result
of the  termination  of such  person's  employment  by Seller on or prior to the
Closing  Date or by the  Successor  on or  following  the  Closing  Date or such
person's  refusal to accept  employment with the Successor.  Employees listed on
Annex B who accept offers of  employment  with  Successor,  shall be referred to
herein as the "Transferred  Employees".  Seller agrees and acknowledges  that it
will cause the  Company to  terminate  prior to or as of the Closing  Date,  the
employment of all employees of the Company (x) who are not listed in Annex B and
(y) who are listed in Annex B who do not become  Transferred  Employees.  Seller
shall be liable for and indemnify Buyer and the Company for any  compensation or
severance  costs or other  liabilities  or  obligations  that become  payable by
Seller or the Company to any  employee of the Company not listed in Annex B as a
result of the termination of such person's employment with the Company.

                  (b)  Effective  as  of  the  Closing  Date,  all   Transferred
Employees  and  their  dependents  shall  (i) cease to be  covered  by  Seller's
employee  welfare  benefit  plans except to the extent  provided by the terms of
such  welfare  plans and (ii) be treated as  terminated  participants  under the
Retirement Plan for Employees of Dresdner Securities USA, Inc. Buyer shall cause
the  Transferred  Employees and their  dependents  to be covered by  Successor's
employee welfare benefit plans as of the Closing Date, which plans shall include
a "group  health  plan" within the meaning of Section  5000(b) of the Code,  and
Buyer  shall,  or shall cause  Successor  to, use its best efforts to cause such
plans to waive  any  pre-existing  condition  limitations  with  respect  to the
Transferred   Employees.   To  the  extent  permitted  by  law,   including  the
qualification  requirements  of the Code,  Transferred  Employees shall be given
credit for all service with Seller and the Company  under all  employee  benefit
plans,  programs and policies of Successor in which they become participants for
purposes of satisfying any waiting period,  eligibility or vesting  requirements
but not for purposes of calculating benefit accruals;  provided,  however,  that
Successor  shall not be  obligated  to give  Transferred  Employees  credit  for
service with Seller and the Company under any employee benefit plan,  program or
policy of  Successor  that is adopted  after the Closing Date and under which no
employee  of  Successor  is given  credit for  service  prior to the date of the
adoption of such plan,  program or policy.  Effective  as of the  Closing  Date,
Successor  shall cover the  Transferred  Employees  who, as of the Closing Date,
were participants in the Dresdner North America 401(k) Plan (the "Seller Savings
Plan")  under  the  defined   contribution  plan  sponsored  by  Successor  (the
"Successor Savings Plan").  Seller shall cause to be transferred from the Seller
Savings  Plan to the  Successor  Savings  Plan  the  liability  for the  account
balances  of the  Transferred  Employees,  together  with assets the fair market
value of which on the transfer date is equal to such liability, determined as of
the regular valuation date under the Seller Savings Plan that is coincident with
or  immediately  preceding  the transfer  date.  Buyer shall cause the Successor
Savings  Plan to accept such  transfer.  Such  transfer  shall be subject to the
requirements of Section 414(l) of the Code and Section 208 of ERISA. Pending the
completion  of the transfer of assets  described in this  paragraph,  Seller and
Successor shall make  arrangements for any required  payments to the Transferred
Employees  from  the  Seller  Savings  Plan,  and the  amount  of  assets  to be
transferred  shall be reduced by the amount of any such  payments made after the
Closing  Date and prior to the date of  transfer.  The  transfer of assets shall
take place as soon as practicable, but no later than ninety (90) days, following
the Closing Date; provided,  however,  that in no event shall such transfer take
place  until the last to occur of the  following:  (i) Buyer  has  furnished  to
Seller a favorable  determination  letter from the Internal Revenue Service with
respect to the  qualification of the Successor Savings Plan under Section 401(a)
of the Code and (ii) Seller has  furnished  to Buyer a  favorable  determination
letter from the Internal  Revenue Service with respect to the  qualification  of
the Seller  Savings  Plan or a favorable  determination  letter  relating to the
prototype plan adopted by Seller.

                  Seller  shall  provide to  Successor,  as soon as  practicable
following  the  Closing  Date,  a list of the  Transferred  Employees  who  were
participants in or otherwise  entitled to benefits under the Seller Savings Plan
as of the Closing Date,  which list shall indicate each  Transferred  Employee's
period of service for eligibility and vesting  purposes under the Seller Savings
Plan and each Transferred  Employee's account balance thereunder,  and Successor
and Seller shall  provide one another with such  additional  information  as may
reasonably  be requested  by either of them in order for  Successor to establish
and administer the transferred account balances of the Transferred Employees and
for Seller to effect the transfer of such account balances.

                  Effective  as of the  Closing  Date,  Seller  shall  cause the
account  balances of each of the Transferred  Employees under the Seller Savings
Plan to be fully vested.


                  7.4 NYSE Memberships.  The parties hereto acknowledge that, on
the date hereof,  the following  four persons are NYSE members:  David A. Green,
Richard K.  Green,  John W. Nick,  and James D.  Fraschilla  (collectively,  the
"Members").  The parties further  acknowledge that, as of the date hereof,  each
Member is a party to an A-B-C and Use and Proceeds Agreement, except in the case
of James D. Fraschilla,  who leases a Membership from a lessor who is a party to
such an  agreement,  (collectively,  the "Member  Agreements")  with the Company
pursuant  to which each of the  Members'  (or his lessor in the case of James D.
Fraschilla)  have  contributed  their  Memberships,  or rights  thereto,  to the
Company.  Each of Seller and Buyer agrees to enter into, or in the case of Buyer
to cause  Successor to enter into, any necessary  contracts or agreements and to
use its reasonable  commercial  efforts to obtain any consent or approval of the
NYSE  required  in  connection  with the  transfer  of the four  Memberships  to
Successor (or its nominee).  Buyer further agrees to pay any transfer or related
fees, required in connection with the aforesaid transfer of the four Memberships
subject to the Member Agreements, subject to Section 1.7 hereof.

                  Pre-Closing Transfers and Payments. On or prior to the Closing
Date,  Seller will cause the Company to (i) assign and  transfer to Seller or an
affiliate of Seller all of the  furniture  and  fixtures  owned or leased by the
Company and each of the NYSE memberships used by the Company other than the four
Memberships   subject  to  the  Member   Agreements,   in  each  case  for  such
consideration  (including  nominal  consideration)  as Seller shall, in its sole
discretion,  deem appropriate and (ii) use its reasonable  commercial efforts to
pay or prepay all accounts  payable and accrued  expenses payable by the Company
to Seller,  any affiliate of Seller or any third party. Buyer further agrees and
acknowledges  that prior to the Closing Date Seller may, in its sole discretion,
cause the Company to accelerate the collection or liquidation of its receivables
from broker-dealers,  floor brokerage receivables, owned Securities and clearing
deposits and may cause the Company to dividend to Seller or apply to the payment
of the Company's  liabilities all or any portion of the cash proceeds thereof or
other cash held by the Company.

                  7.6  Press  Releases.  All  press  releases  or  other  public
communications  of Seller or any of its  employees of any sort  relating to this
Agreement or the transactions  contemplated herein, and the method and timing of
release for publication thereof, will be subject to the prior approval of Buyer,
unless  counsel  for Seller  advises  Seller it is  required  by law to make the
disclosure.  All  press  releases  or other  public  communications  of Buyer or
Successor or of any of their respective employees,  of any sort relating to this
Agreement or the transactions  contemplated herein, and the method and timing of
release  for  publication  thereof,  will be  subject to the prior  approval  of
Seller, unless counsel for Buyer advises Buyer it is required by law to make the
disclosure.

                  Proprietary Information. In connection with this Agreement and
the  transactions  contemplated  hereby,  the parties  have  exchanged  and will
exchange with one another  information  and  financial  data they consider to be
confidential.  In that regard, Buyer agrees to keep confidential any information
concerning  the business and  properties of Seller and the Company  disclosed to
them (including information disclosed pursuant to Section 7.1) except (i) to the
extent otherwise required by law, subpoena or judicial process,  and (ii) to the
extent such  information is or becomes  publicly  available  through no fault of
Buyer.  Buyer shall not be required to keep confidential  information  regarding
the Company  after the Closing  Date.  Seller  agrees to keep  confidential  any
proprietary or confidential information of Buyer and the Company disclosed to or
known by it (including information disclosed pursuant to Section 7.1) except (i)
to the extent otherwise  required by law, subpoena or judicial process or as may
be  required  by  bank  regulatory  authorities,  and  (ii) to the  extent  such
information is or becomes  publicly  available  through no fault of Seller.  The
respective  obligations  of Seller and Buyer under this Section 7.7 will survive
by three years the Closing or any earlier termination of this Agreement.

                  7.8 Reasonable Commercial Efforts; Further Assurances. Subject
to the terms and conditions herein provided,  and in addition to its obligations
under  Section  7.2  hereof,  each  of the  parties  hereto  agrees  to use  its
reasonable commercial efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things  reasonably  necessary,  proper or advisable
under  applicable  laws and  regulations  to consummate  and make  effective the
transactions contemplated by this Agreement.

                  7.9  Tax Matters.

                  (a) Seller is and shall be  responsible  for all Taxes payable
and entitled to all refunds for all taxable periods of the Company or any return
group of which the Company is or was a member  ending on or prior to the Closing
Date. All refunds or credits  attributable to a carryback of losses or otherwise
for a taxable  period of the Company or any return group of which the Company is
or was a member  ending on or prior to the Closing  Date shall  belong to Seller
and shall be  remitted  by the  Company  or caused  by Buyer to be  remitted  to
Seller.  Subject to Section  7.9(f) hereof,  Buyer shall be responsible  for all
Taxes payable and entitled to all refunds for all taxable  periods  ending after
the Closing Date. Buyer agrees to provide,  and to cause the Company to provide,
Seller with such cooperation as Seller may reasonably request in order to permit
a carryback of net operating losses,  capital losses or other items of deduction
or loss  arising in any taxable  period of the Company  from any taxable  period
ending  on or  prior  to  the  Closing  Date  to any  prior  taxable  period  (a
"Carryback").  Such cooperation shall, without limitation, include (i) providing
access to such books,  records and  personnel  of the Buyer or Company as Seller
may  determine  necessary  to  effectuate  a  Carryback,  (ii) the making of any
federal, state or local tax election required in order to permit a Carryback and
(iii) the filing of any return  required in order to permit a  Carryback.  Buyer
shall not make,  and shall not permit  the  Company to make,  any  elections  or
filings  that would have the effect of  decreasing  the size of a net  operating
loss or Carryback generated in a period ending on or prior to the Closing Date.

                  (b) Seller shall  provide  Buyer with a draft of the Company's
federal,  state and local  income tax  returns  for the  taxable  period  ending
December 31, 1996 and any other taxable periods thereafter ending on or prior to
the Closing  Date,  to the extent not already  filed,  and Buyer shall cause the
Company to file such  returns in the form  provided  within 30 days of receiving
them.  Buyer may not file such returns  other than in the form provided or amend
such returns without the prior written consent of Seller,  which consent may not
be  unreasonably  withheld.  Buyer  agrees to make,  and to cause the Company to
make, an election in accordance with Section 172 of the Internal Revenue Code of
1986,  as amended,  to forego the  carryback  of any net  operating  loss of the
Company  generated  in any tax period  ending  after the  Closing  Date to a tax
period ending prior or on the Closing Date.  Buyer shall notify Seller  promptly
of any  examinations,  audits,  litigation or other  proceedings  respecting the
Company  with  respect to any taxable  period  ending on or prior to the Closing
Date  and  Seller  shall  have the  right to  control  the  conduct  of any such
examination,  audit,  litigation or other  proceeding.  Buyer shall provide,  or
shall cause the Company to provide, Seller with such assistance and cooperation,
including the execution of powers of attorney,  as Seller may reasonably request
in order to enable Seller to exercise such control.

                  (c) On or prior to the Closing  Date,  Seller will  provide to
Buyer a certification,  in a form and manner satisfying the requirements of U.S.
Treasury regulation section  1.1445-2(c)(3)(i),  that the Company has not been a
United States real property  holding  corporation  within the meaning of section
897(c)(2)  of the  Code  during  the  applicable  period  specified  in  section
897(c)(1)(A)(ii) of the Code.

                  (d) Except to the extent  described  in  section  7.9(b)  with
respect to taxable  periods ending on or prior to the Closing Date,  Buyer shall
timely  prepare  and  file  with the  appropriate  authorities  all Tax  Returns
required to be filed after the Closing  Date with respect to the Company for all
taxable  periods  ending  after the Closing Date and will pay all Taxes due with
respect to such Tax Returns.

                  (e) Buyer shall have the sole right to  represent  the Company
in any Tax audit or  administrative  or court proceeding for all taxable periods
ending  after  the  Closing  Date,  and to employ  counsel  of choice at its own
expense.

                  (f)  Seller  shall pay to the Buyer  within 20  business  days
after the date on which Taxes are paid with respect to taxable periods which end
after the Closing  Date and begin before the Closing Date an amount equal to the
portion of such Taxes that  relates to the  portion of the period  ending on the
Closing Date to the extent such Taxes are not fully  provided for in the Closing
Date  Balance  Sheet and are not covered by estimated  Tax  payments  made on or
prior to the Closing  Date.  For purposes of this  section  7.9,  whenever it is
necessary to determine  the  liability for Taxes for a portion of a taxable year
or period that begins before and ends after the Closing Date, the  determination
of the Taxes for the portion of the year or period ending on, and the portion of
the year or period  beginning  after,  the Closing Date shall be  determined  by
assuming that the taxable year or period ended at the close of the Closing Date,
except that  exemptions,  allowances  or  deductions  that are  calculated on an
annual basis,  such as the deduction  for  depreciation,  shall be prorated on a
time basis. In the event of any refund  (including  interest)  attributable to a
taxable period beginning before and ending after the Closing Date, Buyer, within
20 business  days of the receipt or crediting of such refund and any  applicable
interest  received  on such  refund,  shall,  or shall cause the Company to, pay
Seller  the  portion  of such  refund,  and any  applicable  interest  received,
attributable  to the  portion  of the  period  ending on the  Closing  Date,  as
determined in accordance with the principles of this Section 7.9(f).

                  (g)  Notwithstanding  section 7.9(b),  the Seller shall not be
entitled  to  settle,  either  administratively  or after  the  commencement  of
litigation,  any claim for Taxes which would adversely  affect the liability for
Taxes of the Buyer or the Company for any period  after the Closing  Date to any
extent   (including,   but  not  limited  to,  the   imposition  of  income  tax
deficiencies,  the reduction of asset basis or cost adjustments, the lengthening
of any  amortization  or  depreciation  periods,  the denial of  amortization or
depreciation deductions) without the prior consent of Buyer, which consent shall
not be unreasonably withheld.

                  (h)  Assistance and Cooperation.  After the Closing Date,
Sellers and Buyer shall:

                           (i)  assist  the  other  party in  preparing  any Tax
                  Returns or reports which such other party is  responsible  for
                  preparing and filing in accordance with this Section 7.9;

                           (ii) use their best  efforts to  properly  retain and
                  maintain  (until such time as Buyer and Seller agree that such
                  retention and  maintenance  is no longer  necessary) and shall
                  make  available to the other party (at such  party's  expense)
                  and  to any  taxing  authority  as  reasonably  requested  all
                  information,  records,  and  documents  relating to Taxes with
                  respect to the Company and  necessary in  connection  with the
                  preparation  of Tax Returns and the resolution of disputes and
                  audits relating to Taxes with respect to all taxable periods;

                           (iii) cooperate fully in preparing for any audits of,
                  or disputes with taxing authorities regarding, any Tax Returns
                  of the Company for taxable periods or portions  thereof ending
                  on or before the Closing Date;

                           (iv) provide timely notice to the other in writing of
                  any  pending  or  threatened  tax audits  with  respect to the
                  Company  for  taxable  periods  for which the other may have a
                  liability under this Section 7; and

                           (v)   furnish   the   other   with   copies   of  all
                  correspondence   received   from  any  taxing   authority   in
                  connection  with any tax  audit or  information  request  with
                  respect to any such taxable period.

                  7.10  Notifications.  Buyer agrees to promptly notify Seller 
and Seller agrees to promptly notify Buyer of:

                  (a) any fact,  condition,  event or occurrence known to Seller
that will or  reasonably  may be expected to result in the failure of any of the
conditions contained in Sections 8.1, 8.2 or 8.3 to be satisfied;

                  (b) any notice or other communication from any person alleging
that the consent of such Person is or may be  required  in  connection  with the
transactions contemplated by this Agreement;

                  (c)      any filing or registration with or any notice or 
other communication from, any Governmental Authority in connection with the
transactions contemplated by this Agreement; and

                  (d) any actions, suits, claims,  investigations or proceedings
commenced  or,  to the  knowledge  of  Seller  or  Buyer,  as the  case  may be,
threatened  against,  relating to or involving or otherwise  affecting Seller or
the Company or Buyer or Successor,  as the case may be, which, if pending on the
date of this Agreement, would have been required to have been disclosed pursuant
to  Section  3 or  Section  4,  as the  case  may be,  or  which  relate  to the
transactions contemplated by this Agreement.



                                                 ARTICLE 8
                                           CONDITIONS TO CLOSING

                  8.1  Mutual Conditions.  The respective obligations of each 
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to Closing of the following conditions:

                  (a)  All Required Consents and Required Licenses shall have
been obtained;

                  (b) No Governmental  Authority of competent jurisdiction shall
have  enacted,  issued,  promulgated,  enforced  or entered any  statute,  rule,
regulation,   judgment,  decree,  injunction  or  other  order  which  prohibits
consummation of the transactions  contemplated by this Agreement.  No litigation
or  threatened  litigation   challenging  this  Agreement  or  the  transactions
contemplated thereby shall exist; and

                  (c) At least  eight days  prior to the  Closing,  Seller,  the
Company and  Successor  shall enter into an Agreement  and General  Release with
each of the Members.  None of the Members shall have  effectively  rescinded his
Agreement and General  Release and each such Agreement and General Release shall
be in full force and effect.  Each Member  shall have  performed in all material
respects all of his obligations under the Agreement and General Release.

                  8.2  Buyer's Conditions.  The obligation of Buyer to 
consummate the transactions contemplated by this Agreement shall be subject to 
the fulfillment prior to or at Closing of each of the following conditions:

                  (a) All  representations and warranties made by Seller in this
Agreement  shall be true,  correct and complete in all material  respects on the
date  hereof  and as of the  Closing  Date as though  such  representations  and
warranties  were  made as of the  Closing  Date,  and  Seller  shall  have  duly
performed  or  complied  in all  material  respects  with all of the  covenants,
obligations  and  conditions  to be performed  or complied  with by it under the
terms of this Agreement at or prior to Closing.

                  (b) There  shall have been no material  adverse  change in the
business,  financial  condition,  results of  operations  or  properties  of the
Company  subsequent  to  the  date  hereof.  The  loss  by  the  Company  of its
registration  as the  specialist for any Security shall not be deemed a material
adverse change unless such Security,  considered singly or in the aggregate with
any  other  Securities  as to which the  Company  shall  have lost  registration
subsequent to the date of this Agreement, shall have accounted for more than 10%
of the Company's  total billed agency share trading volume in Securities  during
the  twelve  months  ended at the month end  immediately  prior to the date such
registration was lost.

                  (c)  Seller shall have delivered to Buyer the following 
documents:

                           (i) such instruments of sale,  transfer,  assignment,
         conveyance and delivery, in form and substance reasonably  satisfactory
         to counsel  for Buyer,  as are  required  to transfer to Buyer good and
         marketable  title to the  Stock,  free and  clear of all  Encumbrances,
         together with the certificates representing the Stock;

                          (ii) a certificate of an officer of Seller,  dated the
         Closing Date, to the effect that (l) he is familiar with this Agreement
         and (2) to the best of his knowledge  after  reasonable  investigation,
         the conditions specified in Section 8.2(a) have been satisfied;

                         (iii)  a  certificate  of the  Secretary  or  Assistant
         Secretary of Seller,  dated the Closing Date,  as to the  incumbency of
         any officer of Seller  executing this Agreement or any document related
         thereto;

                          (iv)  certified  copies  of  (1)  the  certificate  of
         incorporation  and by-laws or other charter  documents of Seller and of
         the Company and all  amendments  thereto and (2)  documents  evidencing
         Seller's  authority  with  respect  to  the  execution,   delivery  and
         consummation  of  this  Agreement  and  the  transactions  contemplated
         hereby;

                           (v)      certificates of good standing for the 
         Company from the Secretary of State of Delaware dated not more than
         seven days prior to the Closing;

                          (vi)      such other documents or instruments as Buyer
         reasonably requests to effect the transactions contemplated hereby;

                         (vii)      an opinion of counsel for Seller and the 
         Company substantially in the form of Annex D hereto; and

                  (viii)            all books and records of the Company,
         including the original minute book, stock transfer records and 
         cancelled stock certificates.

         (d)  ABC Agreements shall have been executed and delivered between the
Successor and each of John W. Nick, Jr., David A. Green, Richard K. Green and 
James P. Fraschilla with respect to the four Memberships subject as of the date 
of this Agreement to ABC agreements between the Company and each of John W.
Nick, Jr., David A. Green, Richard K. Green and Martin J. Bentsen (the 
"Existing ABC Agreements").  The Existing ABC Agreements shall have been 
terminated without the exercise of Option A. The lease of a NYSE membership
between Martin J. Bentsen and James P. Fraschilla shall have been terminated.

         (e) Each  director  and  officer of the  Company  shall  have  resigned
effective on the Closing Date.

                  8.3  Seller's Conditions.  The obligation of Seller to 
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing of each of the following conditions:

                  (a) All  representations  and warranties made by Buyer in this
Agreement  shall be true,  correct and complete in all material  respects on the
date  hereof  and as of the  Closing  Date as though  such  representations  and
warranties were made as of the Closing Date, and Buyer shall have duly performed
or complied in all material respects with all of the covenants,  obligations and
conditions  to be  performed  or  complied  with by it under  the  terms of this
Agreement at or prior to Closing.

                  (b)  Buyer shall have delivered to Seller the following 
documents:

                           (i) a certificate  of an officer of Buyer,  dated the
         Closing  Date,  to  the  effect  that  (1)  he is  familiar  with  this
         Agreement,  and  (2) to the  best  of his  knowledge  after  reasonable
         investigation,  the  conditions  specified in Section  8.3(a) have been
         satisfied;

                          (ii) a  certificate  of  the  Secretary  or  Assistant
         Secretary of Buyer, dated the Closing Date, as to the incumbency of any
         officer of Buyer  executing  this  Agreement  or any  document  related
         thereto;

                         (iii)  certified  copies  of  (1)  the  certificate  of
         incorporation  and by-laws or other charter  documents of Buyer and all
         amendments  thereto  and  (2)  the  resolutions  of  Buyer's  Board  of
         Directors authorizing the execution,  delivery and consummation of this
         Agreement and the transactions contemplated hereby;

                          (iv)      a certificate of good standing for Buyer 
         from the Secretary of State of Delaware dated not more than seven days
         prior to the Closing;

                           (v)      such other documents or instruments as 
         Seller reasonably requests to effect the transactions contemplated 
         hereby; and
                          (vi)      an opinion of counsel for Buyer 
         substantially in the form of Annex D attached hereto.

                  (c) The Company and such other  applicable  persons shall have
delivered to Seller such  documents and  instruments of assignment as Seller may
reasonably  require to evidence the transfer of the NYSE seats to Seller (or its
nominee) as contemplated by Section 7.5 hereof.

                  (d) Buyer shall have paid to Seller the Base  Purchase  Price,
as set forth in Section 1.3.


                                                 ARTICLE 9
                                                TERMINATION

                  9.1  Termination.  This Agreement may be terminated at any 
time prior to Closing as
                       -----------
follows:

                  (a)  by mutual consent of Seller and Buyer;

                  (b) by Seller  if Buyer  shall  breach,  or by Buyer if Seller
shall breach, in any material respect any of its representations,  warranties or
obligations contained in this Agreement;  provided that such breach is not cured
in all material  respects within a 10-day period  commencing on the date written
notice of such breach is received by the breaching party;

                  (c) by Seller,  on the one hand, or by Buyer, on the other, if
all Required  Consents and Required  Licenses have not been obtained by June 15,
1997;

                  (d) by  Seller,  if any  condition  to  Closing  set  forth in
Section 8.3 shall have become  impossible of  fulfillment,  or by Buyer,  if any
condition  to Closing set forth in Section 8.2 shall have become  impossible  of
fulfillment; or

                  (e) by Seller,  on the one hand, or by Buyer, on the other, if
the  Closing  shall not have  occurred on or before June 15, 1997 (or such later
date as may be agreed upon in writing by Buyer and Seller).

                  9.2 Effect of  Termination.  If this  Agreement is  terminated
pursuant  to  Section  9.1,  all  rights  and  obligations  of Seller  and Buyer
hereunder  shall  terminate  and no party shall have any  liability to the other
party,  except for  obligations  of the  parties in Article  10, and except that
nothing  herein  will  relieve  any party from  liability  for any breach of any
representation or warranty herein contained prior to such termination.

                  9.3  Right  to  Proceed.  Anything  in this  Agreement  to the
contrary notwithstanding, if any of the conditions specified in Section 8.2 have
not been  satisfied  at or prior to the  Closing,  Buyer shall have the right to
proceed with the  transaction  contemplated  hereby  without  waiving any of its
rights hereunder, and if any of the conditions specified in Section 8.3 have not
been  satisfied  at or prior to the  Closing,  Seller  shall  have the  right to
proceed with the  transactions  contemplated  hereby without  waiving any of its
rights hereunder.


                                                ARTICLE 10
                                               MISCELLANEOUS

                  10.1 Notices. All notices or other communications  required or
permitted  hereunder  shall be in  writing  and shall be  delivered  personally,
telecopied  or sent by  certified,  registered  or  express  air  mail,  postage
prepaid,  and shall be deemed given when so delivered  personally or telecopied,
or if mailed,  five days after the date of mailing, as follows (or to such other
address as any party hereto shall have duly notified the other parties):

                  If to Buyer:      The Sherwood Group, Inc.
                                            Ten Exchange Place Center
                                            Jersey City, New Jersey 07302
                               Tel:         201-946-4414
                               Fax: 201-946-4510
                              Attn: William Karsh


                  If to Seller:     Dresdner Bank AG
                                            c/o Dresdner Kleinwort Benson North 
                                            America LLC
                                            75 Wall Street
                                            New York, NY  10005-2889
                                            Tel:     (212) 429-2624
                                            Fax:  (212) 429-2123
                                            Attn:     Markus Bischofberger

                  A copy of any notice delivered to Buyer shall be sent to 
Crummy, Del Deo, Dolan, Griffinger & Vecchione, P.C., One Riverfront Plaza, 
Newark, N.J., 07102.  Attention: Frank Lawatsch, Jr., Telecopier No. 
(201) 639-6249, and a copy of any notice delivered to Seller shall be sent to
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, Attention: 
David Huggin, Telecopier No. (212) 558-3588 (or to such other addressee as any 
party hereto shall have duly notified the other parties).

                  10.2 Survival. The representations and warranties provided for
in Article  III of this  Agreement  shall  survive for two years  following  the
Closing for the benefit of the parties hereto and their  successors and assigns;
provided,  however, that the representations and warranties in Sections 3.13 and
3.14 hereof shall survive indefinitely.

         10.3  Indemnification.  (a) Seller  hereby agrees to indemnify and hold
harmless  Buyer  and its  affiliates  from  and  against  any  and  all  losses,
liabilities,   claims,   expenses  (including  reasonable  attorney's  fees  and
expenses) and damages  ("Losses") to the extent such Losses arise from or out of
or are related to (i) any breach of any of the  representations,  warranties of,
or (ii) any breach of any of the  covenants  or  agreements  of, the  Company or
Seller  contained in this  Agreement or any  schedule  hereto which  survive the
Closing.

                  (b) Buyer agrees to indemnify  and hold  harmless  Seller from
and  against  all Losses to the extent  that such  Losses and to the extent such
Losses  arise  from  or  out  of or  are  related  to  (i)  any  breach  of  the
representations  and warranties of Buyer contained in this Agreement or (ii) any
breach  of any of the  covenants  and  agreements  of  Buyer  contained  in this
Agreement which survive the Closing.

                  (c) In  order  for a party  (the  "Indemnified  Party")  to be
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by, or an action,  proceeding
or  investigation  instituted  by, any person not a party to this  Agreement  (a
"Third Party Claim"),  such  Indemnified  Party must notify the other party (the
"Indemnifying  Party") in writing,  and in reasonable detail, of the Third Party
Claim  within ten days after such  Indemnified  Party  learns of the Third Party
Claim;  provided,  however,  that  failure to give such  notification  shall not
affect  the  indemnification   provided  hereunder  except  to  the  extent  the
Indemnifying  Party  shall  have been  actually  prejudiced  as a result of such
failure (except that the Indemnifying Party shall not be liable for any expenses
incurred  during the period in which the  Indemnified  Party failed to give such
notice).  Thereafter,  the Indemnified  Party shall deliver to the  Indemnifying
Party, within five days after the Indemnified Party's receipt thereof, copies of
all notices and documents  (including  court papers) received by the Indemnified
Party relating to the Third Party Claim.

                  (d) If a Third  Party  Claim is made  against  an  Indemnified
Party,  the  Indemnifying  Party will be entitled to  participate in the defense
thereof (unless (i) the  Indemnifying  Party is also a party to such Third Party
Claim  and  the   Indemnified   Party   determines  in  good  faith  that  joint
representation  would be inappropriate  or (ii) the Indemnifying  Party fails to
provide reasonable  assurance to the Indemnified Party of its financial capacity
to defend such Third Party Claim and  provide  indemnification  with  respect to
such Third Party  Claim) and,  if it so chooses,  to assume the defense  thereof
with counsel selected by the Indemnifying  Party and reasonably  satisfactory to
the  Indemnified  Party.  Should the  Indemnifying  Party so elect to assume the
defense of a Third Party Claim,  (i) it shall be  conclusively  established  for
purposes  of this  Agreement  that the claims made in such Third Party Claim are
within the scope of and subject to  indemnification;  and (ii) the  Indemnifying
Party will not as long as it legitimately conducts such defense be liable to the
Indemnified  Party in connection with the defense  thereof.  If the Indemnifying
Party  assumes  such  defense,  the  Indemnified  Party  shall have the right to
participate in the defense  thereof and to employ  counsel,  at its own expense,
separate from the counsel employed by the  Indemnifying  Party. The Indemnifying
Party  shall be liable  for the fees and  expenses  of counsel  employed  by the
Indemnifying  Party for any period during which the  Indemnifying  Party has not
legitimately  assumed the defense thereof (other than during any period in which
the Indemnified  Party shall have failed to give notice of the Third Party Claim
as provided above). If the Indemnifying Party chooses to defend or prosecute any
Third Party Claim,  all of the parties hereto shall  cooperate in the defense or
prosecution thereof.  Such cooperation shall include the retention and (upon the
Indemnifying Party's request) the provision to the Indemnifying Party of records
and  information  which are reasonably  relevant to such Third Party Claim,  and
making employees  available on a mutually convenient basis to provide additional
information and explanation of any material provided  hereunder.  Whether or not
the  Indemnifying  Party shall have  assumed the defense of a Third Party Claim,
the Indemnifying Party shall have no liability with respect to any compromise or
settlement of such claims effected without its written consent (such consent not
to be  unreasonably  withheld);  the  Indemnifying  Party  shall  not  admit any
liability with respect to, or settle,  compromise or discharge, such Third Party
Claim without the Indemnified Party's prior written consent (which consent shall
not be  unreasonably  withheld)  unless (A) there is not finding or admission of
any  violation of law or any violation of the rights of any person and no effect
on any other claims that may be made against the  Indemnified  Party, or (B) the
sole  relief  provided  is  monetary  damages  that  are  paid  in  full  by the
Indemnifying Party.

                  (e) The  amount of any  Losses  for which  indemnification  is
provided  under  this  Agreement  shall  be  net  of any  amounts  recovered  or
recoverable by the Indemnified  Party under  insurance  policies with respect to
such Losses.

                  (f) The parties agree that any  indemnification  payments made
pursuant to this Agreement shall be treated for tax purposes as an adjustment to
the Purchase Price.

                  10.4 Expenses. Regardless of whether the transactions provided
for in this Agreement are consummated, except as otherwise provided herein, each
party  hereto  shall pay its own  expenses  incident to this  Agreement  and the
transactions contemplated herein.

                  Governing  Law.  This  Agreement  shall  be  governed  by  and
construed in accordance  with the internal laws of the State of New York without
reference to conflict of law principles thereof.

                  10.6 Assignment;  Successors and Assigns.  Except as otherwise
provided  herein,  this  Agreement  may not be assigned by  operation  of law or
otherwise.  This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.

                  10.7   Counterparts.   This   Agreement  may  be  executed  in
counterparts,  each of which shall be deemed an original  agreement,  but all of
which together shall constitute one and the same instrument.

                  Titles and  Headings.  The  headings  and table of contents in
this Agreement are for reference  purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.

                  10.9 Entire Agreement.  This Agreement  (including the Annexes
hereto) and the  agreements  referred to herein shall  together  constitute  the
entire  agreement  among the parties with respect to the matters  covered hereby
and shall supersede all previous written,  oral or implied  understandings among
them with respect to such matters.

                  10.10 Amendment and  Modification.  This Agreement may only be
amended or modified in writing signed by the party against which  enforcement of
such amendment or modification is sought.

                  Arbitration  of  Disputes;  Submission  to  Jurisdiction.  Any
disputes  between the parties  arising under this Agreement  shall be settled by
arbitration  in  accordance  with the rules of the NYSE,  provided  that each of
Buyer and Seller shall have the right,  exercisable  in good faith,  to veto any
proposed member of a NYSE arbitration  panel. If agreement on a NYSE arbitration
panel cannot be reached,  any disputes  arising  under this  Agreement  shall be
arbitrated in accordance with the Code of Arbitration  Procedure of the NASD. In
the event that neither the NYSE nor the NASD has  jurisdiction  over any dispute
(an "Ineligible  Dispute")  arising  hereunder each of the parties hereby agrees
(i) to  submit  to the  exclusive  jurisdiction  of the  United  States  Federal
District  Court of the Southern  District of New York solely with respect to any
Ineligible Dispute, (ii) waives, and agrees not to assert by way of motion, as a
defense, or otherwise,  in any action based on an Ineligible Dispute,  any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from  attachment  or  execution,  that the
action based on an Ineligible Dispute is brought in an inconvenient  forum, that
the venue of the action based on an Ineligible Dispute is improper,  or that the
subject matter of the Ineligible Dispute may not be enforced in or by such court
and (iii)  agrees  that  service of process  upon such party in any such  Action
shall be effective if notice is given in accordance with Section 10.1 hereof.

                  10.12 Waiver. Any of the terms or conditions of this Agreement
may be  waived  at any time by the  party or  parties  entitled  to the  benefit
thereof,  but only by a written  notice  signed by the party or parties  waiving
such terms or conditions.

                  10.13 Severability.  The  invalidity of any portion hereof 
shall not affect the validity,  force or effect of the remaining portions 
hereof. If it is ever held that any restriction  hereunder is too broad to 
permit  enforcement of such restriction to its fullest extent, each party 
agrees that an arbitrator may construe, and a court of competent jurisdiction 
may enforce, such restriction to the maximum extent permitted by law.



<PAGE>












                                   [This page intentionally left blank]


<PAGE>


                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be duly executed as of the day and year first above written.


                                                DRESDNER BANK AG



                                                By:
                                                Name:  George Fugelsang
                                                Title: Chief Executive Officer
                                                 North America
                                                 As Attorney-in-Fact



                                                By:
                                                Name:  Markus Bischofberger
                                                Title: Senior Vice President,
                                                         Dresdner Kleinwort    
                                                         Benson North America
                                                         LLC
                                                As Attorney-in-Fact


                                                THE SHERWOOD GROUP, INC.



                                                By:
                                                Name:
                                                Title:





<PAGE>







                                                                       Annex A

                                 SPECIALIST SECURITIES AS OF APRIL 11,1997

Ticker            Issuer

CDS                        Alliance Entertainment Corporation
ATR                        Aptargroup, Inc.
ASL                        Ashanti Goldfields Company Limited
BKUPRA                     Bank United of Texas Noncumulative Preferred
                           A

BKUPRB                     Bank United of Texas Noncumulative Preferred
                           B

BTZ                        Berlitz International, Inc.

BTV                        BET Holdings

CNIPP                      Canadian National Railway Company

CIC                        Carson Products, Inc.

ECP                        Central Newspapers

CXE                        Colonial High Income Municipal Trust

COP                        Consolidated Products, Inc.

CON                        Continental Home Holdings Corp.

DM                         Dames and Moore

DY                         Dycom Industries, Inc.

ELM                        Empresa La Moderna S.A. de C.V.

EWB                        E.W. Blanch Holdings, Inc.

FGP                        Ferellgas Partners, L.P.

FLH                        Fila Holdings, SPA

FBP                        First Federal Savings Bank of Puerto Rico

FMS                        Fresenius Medical Care AG

FMSPR                      Fresenius Medical Care AG Preferred

GML                        Global Directmail Corp.


<PAGE>





IO                         Input/Output, Inc.

JFI                        Jardine Fleming India Fund, Inc.

LCI                        LCI International, Inc.

MWT                        McWhorter Technologies, Inc.

MIBRA                      Midland Bank PLC Preferred A

MIBRB                      Midland Bank PLC Preferred B

MIBRC                      Midland Bank PLC Preferred C

MIBRD                      Midland Bank PLC Preferred D

RLR                        Rellia Star Financial

RLRPRA                     Rellia Star Financial Preferred A

NCO                        Nuveen California Municipal Market Opportunity Fund

PPR                        Pilgrim Prime Rate Trust
PI                         Premdor, Inc.
RIT                        Rightchoice Managed Care, Inc.
SQF                        Seligman Quality Municipal Fund, Inc.
SEL                        Seligman Select Municipal Fund, Inc.
SSW                        Sterling Software, Inc.
TCB                        T.C.F. Financial Corp.
TK                         Teekay Shipping Corporation
TL                         Telex Chile, S.A.
TCT                        The Town and Country Trust
TMM                        Transportacion Maritima ADS L
TMMA                       Transportacion Maritima ADS Ordinary
VLY                        Valley National Bancorp.
VAL                        The Valspar Corporation
VCD                        Value City Department Stores, Inc.
VPI                        Vintage Petroleum, Inc.
WSO                        Watsco, Inc.


<PAGE>



                                                                        Annex B



                                       EMPLOYEES SUBJECT TO TRANSFER


John W. Nick, Jr.                                    see Annex C
David A. Green                                                see Annex C
Richard K. Green                                     see Annex C
James Fraschilla                                     see Annex C
Robert Poulos                                                 $60,000 per annum
Nicholas Abdinoor                                    $20,000 per annum
Robert T. Hally                                      $50,000 per annum
Gregory Kane                                                  $50,000 per annum
James Lancaro                                                 $50,000 per annum
Turlough Pollard                                     $20,000 per annum
Eric Boscak                                                   $42,000 per annum

In addition, each of the above employees shall be entitled to participate in the
employee welfare plans of Successor as summarized on the following 3 pages.


<PAGE>



                                                                        Annex C


                                      Agreement and General Releases
                                            [on Crummy system]


<PAGE>


                                                                        Annex D
         Form of Opinion of Seller and Company Counsel
                                    and of Buyer and Successor Counsel


         1. [Buyer] has been duly incorporated and is an existing corporation 
in good standing under the laws of  the State of Delaware.
         2.  [Successor] [The Company] has been duly [organized] [incorporated] 
and is an existing [partnership] [corporation] in good standing under the laws 
of the State of [New York] [Delaware].
         3. The Stock Purchase Agreement [has been duly authorized, executed and
delivered by Buyer and] constitutes the valid and legally binding  obligation of
each of [Buyer]  [Seller]  enforceable in accordance with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         The opinions  shall  limited to the Federal laws of the United  States,
the laws of the State of New York and the General  Corporation  Law of the State
of  Delaware,  and will  express  no opinion as to the effect of the laws of any
other  jurisdiction.  In  addition,  counsel  to the  Seller  may assume the due
authorization  execution and delivery by Seller, of the Stock Purchase Agreement
in connection  with the opinion in 3 above.  In addition,  Buyer shall receive a
separate opinion of German counsel to the Seller to the following effect:

         1. Seller is a banking  corporation duly organized and validly existing
under the laws of the Federal  Republic of Germany and Seller has all  requisite
powers and authority  (corporate and otherwise) to execute,  deliver and perform
the Stock Purchase Agreement.
         2. The Stock Purchase Agreement has been duly executed and delivered by
Seller  and no  further  authorization  by any  corporate  action  of  Seller is
required in  connection  with the  authorization,  execution and delivery of the
Stock Purchase Agreement.
         3. Assuming  that the Stock  Purchase  Agreement is a legal,  valid and
binding  obligation under New York law, the Stock Purchase Agreement will be the
legal, valid and binding obligation of Seller enforceable in accordance with its
terms against Seller subject to (i) bankruptcy, insolvency, fraudulent transfer,
reorganization,   liquidation,  moratorium  or  similar  laws  relating  to,  or
affecting  generally the enforcement of creditor's rights that may be applicable
in the event that Seller is the subject of such  proceeding,  (ii) the equitable
power of a court or the  power of a  governmental  or  regulating  authority  to
restrain  performance  by Seller of the Stock  Purchase  Agreement and (iii) the
rules of civil procedure of the Federal Republic of Germany. [German law opinion
currently under review in Germany]





<PAGE>


                                               Schedule 3.6

Right of first refusal of John W. Nick, Jr. to purchase the Company contained 
in paragraph 8 of the employment letter dated January 1, 1995 and signed by the
Company.


<PAGE>



                                               Schedule 3.7

Letter, dated November 2, 1996, from the Market Performance Committee of the New
York Stock  Exchange Rule  regarding  103A  performance  improvement  action and
imposition of allocation freeze on November 20, 1996.


<PAGE>


                                               Schedule 3.8

Letter, dated November 2, 1996, from the Market Performance Committee of the New
York Stock  Exchange Rule  regarding  103A  performance  improvement  action and
imposition of allocation freeze on November 20, 1996.


<PAGE>


         Schedule 3.9

Letter, dated November 2, 1996, from the Market Performance Committee of the New
York Stock  Exchange Rule  regarding  103A  performance  improvement  action and
imposition of allocation freeze on November 20, 1996.


<PAGE>


                                               Schedule 3.13

Extensions
1.  Federal,  New York  state and New York city tax  returns  for the tax period
ended August 31, 1996.

2.  Federal,  New York  state  and New York city tax  returns  for the short tax
period ended December 31, 1996.

Consolidated Groups
The Company was a member of a federal  consolidated group from inception through
the tax period ending  August 31, 1996 and was a member of a combined  group for
New York state and New York city  purposes  from January 1, 1991 through the tax
period  ending  August  31,  1996.  The name of the  taxpayer  in both cases was
Dresdner Securities (USA) Inc.


<PAGE>


                                               Schedule 3.14


                                      Dresdner Employment Agreements

Employment Agreement Letter to Mr. James Fraschilla, dated March 1, 1996/April 
16, 1996.
Employment Agreement Letter to Mr. David A. Green, dated January 1, 1995.
Employment Agreement Letter to Mr. Richard K. Green, dated March 1, 1996/April 
18, 1996.
Employment Agreement Letter to Mr. John W. Nick, Jr., dated January 1, 1995.
Letter of Employment to Mr. Nicholas Abdinoor, dated December 1, 1995.
Letter of Employment to Mr. Eric Bosak, dated November 4, 1996
Letter of Employment to Mr. Gregory Kane, dated December 1, 1995.
Letter of Employment to Mr. Turlough Pollard, dated March 15, 1996.
Letter of Employment to Mr. Robert Poulos, dated March 20, 1996.




                                    Dresdner NY Additional Obligations

The  Company  will pay up to $50,000 to a employee  of the  Company  who will be
terminated  prior to the  Closing as a severance  payment.  The Company has also
agreed  to pay to Mr.  J.  Nick  and Mr.  D.  Green,  a total of  $1,000,000  in
supplemental  compensation on the Closing Date for services rendered through the
Closing Date.
                                              ABC Agreements
The Company has outstanding A-B-C and Use and Proceeds Agreements with Messrs. 
J. Nick, D. Green, M. Bentsen and R. Green.


<PAGE>


                                               Schedule 3.16


The Company will pay to Dresdner  Kleinwort  Benson  North  America LLC a fee of
$400,000 for its services in connection with the sale of certain assets,  namely
the three NYSE seats used by the Company  other than the four NYSE seats subject
to the Member  Agreements,  and the failed sale to Equitrade  Partners of all of
the assets of the Company  constituting  the  Specialist  Business  and the four
Memberships subject to the Member Agreements.




<PAGE>


                                               Schedule 3.18

The  Company  will pay up to $50,000 to a employee  of the  Company  who will be
terminated prior to the Closing as a severance payment.

Supplemental Compensation Agreement with Mr. John W. Nick, dated as of 
April 11, 1997.

Supplemental Compensation Agreement with Mr. David A. Green, dated as of April 
11, 1997.




<PAGE>


                                               Schedule 3.23

                  Until the Closing  Date,  the Company will be insured  through
policies  held by Dresdner  Kleinwort  Benson  North  America LLC and covering a
number of Dresdner Bank AG affiliates as follows:

         Commercial Package (Colonia Insurance Co)
                  Commercial Property Coverage
                  Commercial General Liability
         Business Auto  Coverage  (Colonia  Insurance  Co) Workers  Compensation
         Coverage (Twin City Fire Ins Co) Commercial  Umbrella Coverage (Colonia
         Insurance  Co) Excess  Liability  Coverage  (Hartford  Casualty Ins Co)
         Excess Liability Coverage (American Natl Fire Ins)








<PAGE>


                                               Schedule 3.24


The Company will pay to Dresdner  Kleinwort  Benson  North  America LLC a fee of
$400,000 for its services in connection with the sale of certain assets,  namely
the three NYSE seats used by the Company  other than the four NYSE seats subject
to the Member  Agreements,  and the failed sale to Equitrade  Partners of all of
the  assets  of the  Company  constituting  the  Specialist  Business  and  four
Memberships subject to the Member Agreements.


<PAGE>


                                               Schedule 3.25

Officers and Directors
John W. Nick, Jr.                   Director and President
Lewis Cohen                                 Director, Chief Financial
Officer and Treasurer


<PAGE>


                                               Schedule 4.3


Buyer consents to come from Buyer.


<PAGE>


                                              Schedule 7.3(a)

                                                             Severance

Richard K. Green                                              $22,500


James Fraschilla                                              $ 6,250






<TABLE>


                                                                  THE SHERWOOD GROUP, INC. AND SUBSIDIARIES            EXHIBIT 11
                                                                 COMPUTATION OF NET INCOME PER COMMON SHARE
<CAPTION>


                                                                                         Three Months Ended
                                                                          -------------------------------------------------------
                                                                              February 28, 1997          February 29, 1996
                                                                          ---------------------------  --------------------------
<S>                                                                                       <C>                         <C>   

Common stock and common stock equivalents:
  Average common stock outstanding                                                        12,832,835                  12,728,616
  Average common stock equivalents
    issuable under stock options                                                              50,883                     498,637
                                                                          ---------------------------  --------------------------

Total average common stock and common stock
  equivalents used for earnings per share computation                                     12,883,718                  13,227,253
                                                                          ===========================  ==========================

Income:
    Net income                                                            $                 (242,352)  $               5,140,626
                                                                          ===========================  ==========================

Net (loss) income per common and common equivalent share (a)<F1>:
    Net (loss) income                                                     $                    (0.02)  $                    0.39
                                                                          ===========================  ==========================

<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>





                                                                                            Nine Months Ended
                                                                          -------------------------------------------------------
                                                                              February 28, 1997          February 29, 1996
                                                                          ---------------------------  --------------------------
Common stock and common stock equivalents:
  Average common stock outstanding                                                        12,941,668                  12,577,903
  Average common stock equivalents
    issuable under stock options                                                              46,478                     660,680
                                                                          ---------------------------  --------------------------

Total average common stock and common stock
  equivalents used for earnings per share computation                                     12,988,146                  13,238,583
                                                                          ===========================  ==========================

Income:
    Net income                                                            $                6,055,974   $              12,781,877
                                                                          ===========================  ==========================

Income per common and common equivalent share (a)<F1>(b)<F2>:
    Net income                                                            $                        0.47$                       0.97
                                                                          ===========================  ==========================

<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
<F2>(b)   The sum of the  individual  quarters'  earnings  per common share does not
      equal the total  amount for the nine  months  ended  February  28, 1997 or
      February 29, 1996 due to the effect of  averaging  the number of shares of
      common stock and common stock equivalents throughout the year.
</FN>
</TABLE>