Document:

Exhibit 10.7

 

EXECUTION COPY

 

 

 

 

ESCROW AGREEMENT

 

by and among

 

SG AMERICAS SECURITIES HOLDINGS, INC.,

 

COWEN GROUP, INC.

 

COWEN AND COMPANY, LLC

 

and

 

JPMORGAN CHASE BANK, N.A.

 

Dated as of July 12, 2006

 

 

 

 

This ESCROW
AGREEMENT (this “Agreement”), dated as of July 12, 2006, is by and among
SG AMERICAS SECURITIES HOLDINGS, INC., a Delaware corporation (“SGASH”),
COWEN GROUP, INC., a Delaware corporation (“Cowen Inc.”), COWEN AND
COMPANY, LLC, a Delaware limited liability company (“Cowen LLC”) and
JPMORGAN CHASE BANK, N.A., a national banking association (the “Escrow Agent”).
Capitalized terms which are used but not otherwise defined in this Agreement
have the meaning assigned to such terms in the Separation Agreement (as defined
below).

 

WHEREAS, SGASH,
Cowen Inc. and Cowen LLC are parties to that certain Separation Agreement,
dated as of July 11, 2006 (the “Separation Agreement”), pursuant to
which the Cowen Business is separated from the SGASH Business (the “Separation”);

 

WHEREAS,
SGASH, Cowen Inc. and Cowen LLC are also parties to that certain
Indemnification Agreement, dated as of the date hereof (the “Indemnification
Agreement”) pursuant to which SGASH has agreed to indemnify Cowen LLC
against, among other things, any liability Cowen may incur in respect of
certain specified contingent liabilities identified in Schedule 2.02(b)
to the Separation Agreement (the “Contingent Liabilities”) to the extent
such liabilities are not paid out of the Escrow Fund (as defined below);

 

WHEREAS, in
connection with the Separation, Cowen LLC will deliver to the Escrow Agent
$72,315,741 in cash, which amount equals the amount of the Closing Litigation
Reserve, as such term is defined in the Separation Agreement (the “Initial
Escrow Amount”);

 

WHEREAS, the
Initial Escrow Amount shall be held pursuant to the terms and conditions of
this Agreement;

 

WHEREAS, the
funds held by Escrow Agent from time to time pursuant to this Agreement,
together with all income accrued thereon which has not been distributed
pursuant to this Agreement, are collectively referred to herein as the “Escrow
Fund.”

 

NOW,
THEREFORE, in consideration of the mutual undertakings contained herein, the
parties hereto agree as follows:

 

1.             Appointment
of Escrow Agent; Creation of Escrow Fund. SGASH, Cowen Inc. and Cowen LLC
hereby appoint the Escrow Agent to serve as escrow agent under the terms of
this Agreement. Cowen LLC will deliver the Initial Escrow Amount to the Escrow
Agent to establish the Escrow Fund upon execution of this Agreement. The Escrow
Agent hereby agrees to hold and dispose of the Escrow Fund, and to act as
escrow agent, in accordance with all the terms, conditions and provisions of
this Agreement. The Escrow Fund shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party hereto. During the term of this Escrow Agreement,
the Escrow Fund shall be invested and reinvested by the Escrow Agent in the
investment indicated on Schedule I hereto or such other investments as
shall be directed jointly in writing by SGASH and Cowen Inc. and as shall be
reasonably acceptable to the Escrow Agent. In the absence of written
instruction from the parties, hereto regarding an investment, the Escrow Agent
will invest the funds in a JPMorgan Money Market Account.

 

 

2.             Escrow
Account. During the term of this Agreement, the Escrow Agent shall hold the
Escrow Fund in a segregated account maintained by the Escrow Agent (the “Escrow
Account”). The Escrow Agent shall not dispose of the Escrow Fund except as
expressly set forth in this Agreement or as otherwise instructed in a writing
signed by SGASH.

 

3.             Adjustments;
Disbursements from the Escrow Fund. Except as provided in this Section 3,
the Escrow Agent shall only distribute the Escrow Fund in accordance with the
written instructions of the officers of SGASH set forth on Schedule III
hereto, which may be amended by SGASH from time to time in respect of SG
Persons.

 

(a)           Adjustments
to Litigation Reserve and Escrow Fund. SGASH shall periodically review and,
if appropriate, after consultation with Cowen Inc. and Cowen Inc.’s outside
auditors, adjust the Litigation Reserve Amount and Litigation Reserve
Sub-Amounts (each as defined below) if the adjustment in the reserves for the
Contingent Liabilities to which such Litigation Reserve Amount and Litigation
Reserve Sub-Amount is required in accordance with generally accepted accounting
principles.

 

(b)           Litigation
Reserve Amount and Litigation Reserve Sub-Amounts, Defined.

 

(i)            As used in this
Agreement, “Litigation Reserve Amount” shall mean the Closing Litigation
Reserve, as adjusted from time to time pursuant to Section 3(a) of this
Agreement.

 

(ii)           As used in this
Agreement, “Litigation Reserve Sub-Amounts” shall mean the specified
reserve amounts allocated by SG to each of the matters set forth on Schedule
2.02(b) to the Separation Agreement, which specified amounts shall in the
aggregate equal the Closing Litigation Reserve, as adjusted from time to time
pursuant to Section 3(a) of this Agreement.

 

(c)           Payment
of Contingent Liabilities from Escrow Fund. If at any time prior to the
Termination Date (as hereinafter defined), SGASH reasonably determines in good
faith, in accordance with the Indemnification Agreement and Separation
Agreement, that a Contingent Liability is to be paid or if there is any
judgment or settlement requiring payment that has not been made by SG or SGASH,
SGASH shall provide prompt written notice of such payment to the Escrow Agent
and Cowen LLC (a “Notice of Claim”). Promptly following its receipt of
any Notice of Claim,

 

(i)            the Escrow Agent shall
withdraw from the Escrow Fund and pay to the Person(s) designated as payee(s)
in the Notice of Claim by the due date specified in the Notice of Claim an
amount equal to the lesser of (i) the aggregate amount of the claims asserted
in the Notice of Claim or (ii) the balance in the Escrow Fund on the date of
payment.

 

(ii)           if the Escrow Fund as
of the date the Escrow Agent received the Notice of Claim is less than the
aggregate amount of the claims asserted in the Notice of Claim, SGASH or an
SGASH Subsidiary designated by SGASH shall pay the amount of the shortfall to
the payee(s) designated in the Notice of Claim by the due date specified in the
Notice of Claim.

 

3

 

(iii)          if immediately after
making the payment(s) described in the Notice of Claim, the Escrow Fund is
greater than the Litigation Reserve Amount, as most recently determined by
SGASH pursuant to Section 3(a), SGASH shall instruct the Escrow Agent
to, and the Escrow Agent shall, promptly distribute the amount of the
difference to SGASH or the SGASH Subsidiary designated by SGASH.

 

(d)           Adjustment
Disbursement. If at any time prior to the Termination Date, SGASH, in
accordance with Section 3(a), decreases a Litigation Reserve Sub-Amount,
SGASH may instruct the Escrow Agent to, and the Escrow Agent shall, distribute
to SGASH or the SGASH Subsidiary designated by SGASH, an amount equal to the
amount of such decrease.

 

(e)           Statements.
Within ten (10) Business Days following the last day of each calendar month
(each a “Month End”) during the term of this Agreement, the Escrow Agent
shall provide to SGASH and Cowen LLC, at no additional cost, a statement
reflecting the dollar amount of the Escrow Fund, including all income accrued
thereon which has not been distributed, as at the applicable Month End. As used
herein, “Business Day” means any day that is not a Saturday, a Sunday or
a day on which the Escrow Agent is required or permitted to be closed for
business.

 

(f)            Return
of Interest Earned on Escrow Fund. Within ten (10) Business Days following
the last day of each calendar quarter (each a “Quarter End”) during the
term of this Agreement, the Escrow Agent shall, without further instructions
from SGASH and in the manner contemplated by Section 3(h) below,
distribute to SGASH any interest earned on the Escrow Fund and not yet
distributed to SGASH as of such Quarter End.

 

(g)           Release
of Escrow Fund. On the Termination Date, the Escrow Agent shall distribute
to SGASH an amount equal to the balance of the Escrow Fund. As used herein, “Termination
Date” means the date on which the Escrow Agent and Cowen LLC receive notice
from SGASH in accordance with Section 7 that SGASH has determined, after
consultation with Cowen Inc. and Cowen Inc.’s outside auditors, that the
Litigation Reserve Amount may be adjusted to Zero U.S. Dollars ($0.00) pursuant
to Section 3(a).

 

(h)           Method
of Distributions. Any amount distributed to SGASH or Cowen LLC pursuant to
this Agreement shall be paid in U.S. Dollars. Unless otherwise instructed by
the party to whom funds are to be released, the Escrow Agent shall liquidate
assets in the Escrow Fund to the extent that sufficient cash is not available
in the Escrow Fund at the time any such distribution is to be made and shall
pay the proceeds thereof to SGASH or Cowen LLC, as applicable, in accordance
with this Section 3(h). Unless otherwise instructed by the party to whom
funds are to be released, any distribution from the Escrow Fund to SGASH or
Cowen LLC shall be paid by wire transfer of immediately available funds to the
account and in accordance with the wire transfer instructions designated for
such party on Schedule III attached hereto or to such other account as
SGASH or Cowen LLC, as applicable, may designate in writing.

 

(i)            Call-Back
Schedule. In the event fund transfer instructions are given, whether in
writing, by facsimile or otherwise, the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call-back to the person or
persons designated on Schedule III attached hereto, and the Escrow Agent
may rely upon the confirmations of anyone purporting to be the person or
persons so designated. The persons and telephone numbers for call-backs and

 

4

 

signatures for
the fund transfer instructions set forth for a party on Schedule III
attached hereto may be changed only in writing signed by such party actually
received and acknowledged by the Escrow Agent. The Escrow Agent and the
beneficiary’s bank in any funds transfer may rely solely upon any account
numbers or similar identifying numbers provided by SGASH or Cowen LLC to
identify (i) the beneficiary, (ii) the beneficiary’s bank or (iii) an
intermediary bank. All fund transfer instructions must include the signature of
the person(s) listed on Schedule III attached hereto, as amended from
time to time in accordance with this Agreement. The parties to this Agreement
acknowledge that these security procedures are commercially reasonable.

 

4.             Liability
of Escrow Agent. The Escrow Agent’s duties and obligations under this
Agreement shall be determined solely by the express provisions of this
Agreement and the Escrow Agent shall not have any duties or responsibilities
except as expressly provided in this Agreement. The Escrow Agent shall not be
obligated to recognize, and shall not have any liability or responsibility
arising under, any agreement to which the Escrow Agent is not a party, even
though reference thereto may be made herein. With respect to the Escrow Agent’s
responsibility, SGASH, Cowen Inc. and Cowen LLC further agree that:

 

(a)           The
Escrow Agent shall not be liable to anyone whomsoever by reason of any error of
judgment or for any act done or step taken or omitted by the Escrow Agent, or
for any mistake of fact or law or anything which the Escrow Agent may do or
refrain from doing in connection herewith, except to the extent caused by or
arising out of the Escrow Agent’s gross negligence or willful misconduct. The
Escrow Agent may consult with counsel and accountants of its own choice and
execute any of its powers and perform any of its duties hereunder directly or
through agents or attorneys (and shall be liable only for the careful selection
of any such agent or attorney) and may consult with counsel, accountants and
other skilled persons to be selected and retained by it and shall have full and
complete authorization and protection for any action taken or suffered by the
Escrow Agent hereunder in good faith and in accordance with the opinion of such
counsel or accountants. SGASH, Cowen Inc. and Cowen LLC shall jointly and
severally indemnify and hold the Escrow Agent and its directors, agents and
employees harmless from and against any and all liability and expense which may
arise out of any action taken or omitted by the Escrow Agent in accordance with
this Agreement, except to the extent that a court of competent jurisdiction
determines that the Escrow Agent’s gross negligence or willful misconduct was
the primary cause of any loss. This Section 4(a) shall survive
notwithstanding any termination of this Agreement or the Escrow Agent’s
resignation. Anything in this Escrow Agreement to the contrary notwithstanding,
in no event shall the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Escrow Agent has been advised of the likelihood
of such loss or damage and regardless of the form of action.

 

(b)           SGASH
and Cowen LLC may examine the records pertaining to the Escrow Fund at any time
during normal business hours at the Escrow Agent’s office upon twenty-four (24)
hours’ prior notice.

 

(c)           The
provisions of this Agreement are solely for the benefit of the parties hereto,
their successors, permitted assigns and heirs and to no other person
whomsoever.

 

5

 

(d)           No
succession to, or assignment of, the interest of SGASH, Cowen Inc. or Cowen LLC
shall be binding upon the Escrow Agent unless and until written evidence of
such succession or assignment, in form reasonably satisfactory to the Escrow
Agent, has been delivered to and acknowledged by the Escrow Agent.

 

(e)           The
Escrow Agent may rely upon and shall not be liable for acting or refraining
from acting upon any written notices, requests or instructions signed by the
proper parties or bearing a signature or signatures believed by the Escrow
Agent in good faith to be the genuine signatures of the proper parties and
shall be under no duty to inquire into or investigate the validity, accuracy or
content of any such document. In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder or shall receive instructions,
claims or demands from any party hereto which, in its reasonable opinion,
conflict with any of the provisions of this Agreement, it shall notify SGASH
and Cowen LLC of such fact and request that they direct the Escrow Agent in
writing as to the appropriate action.

 

(f)            In
case any property held by the Escrow Agent shall be attached, garnished or
levied upon under a court order, or the delivery thereof shall be stayed or
enjoined by a court order, or any writ, order, judgment or decree shall be made
or entered by any court, or any order, judgment or decree shall be made or
entered by any court affecting the property deposited under this Agreement or
any part thereof, the Escrow Agent is hereby expressly authorized to obey and
comply with all writs, orders, judgments or decrees so entered or issued,
whether with or without jurisdiction, and in case the Escrow Agent obeys or
complies with any such writ, order, judgment or decree, the Escrow Agent shall
not be liable to SGASH and Cowen LLC or to any other person by reason of such
compliance in connection with such litigation. SGASH agrees to pay to the
Escrow Agent on demand its reasonable and documented costs, attorneys’ fees,
charges, disbursements and expenses in connection with such litigation.

 

(g)           The
Escrow Agent reserves the right to resign at any time by giving written notice
of resignation to SGASH, Cowen Inc. and Cowen LLC specifying the effective date
thereof, provided that the Escrow Agent shall continue to perform all of
its duties and obligations set forth hereunder until the distribution of the
property held hereunder to a successor escrow agent. Within sixty (60) days
after receiving such notice, SGASH and Cowen LLC jointly shall appoint a
successor escrow agent to which the Escrow Agent may distribute the property
then held hereunder. If a successor escrow agent has not been appointed and has
not accepted such appointment by the end of such thirty-day period, the Escrow
Agent may apply to a court of competent jurisdiction for the appointment of a
successor escrow agent, and SGASH shall bear all reasonable and documented
costs, expenses and attorney’s fees which are incurred by the Escrow Agent in
connection with such proceeding.

 

5.             Compensation
of the Escrow Agent. SGASH agrees to pay the Escrow Agent upon execution of
this Agreement and from time to time thereafter reasonable compensation for
services to be rendered by the Escrow Agent hereunder, which unless otherwise
agreed in writing by SGASH and the Escrow Agent shall be as set forth on Schedule
II attached hereto, and further agrees to pay or reimburse the Escrow Agent
upon request for all reasonable and documented expenses, disbursements and
advances, including reasonable attorney’s fees and expenses, incurred or made
by the Escrow Agent in connection with the performance or any necessary
modification or the termination of this Agreement.

 

6

 

6.             Tax
Reporting. SGASH, Cowen Inc. and Cowen LLC agree to provide the Escrow
Agent upon execution of this Agreement with certified tax identification
numbers for each of them by furnishing appropriate Forms W-9 (or Forms W-8, in
the case of non-U.S. persons) and other forms and documents that the Escrow
Agent may reasonably request (collectively, “Tax Reporting Documentation”).
The parties hereto understand that if such Tax Reporting Documentation is not
so certified to the Escrow Agent, the Escrow Agent may be required by the
Internal Revenue Code, as it may be amended from time to time, to withhold a portion
of any interest or other income earned on the investment of monies or other
property held by the Escrow Agent pursuant to this Agreement. The Parties
hereby agree that notwithstanding the terms of the Separation Agreement or any
other Ancillary Agreement, solely for United States federal income tax purposes
(a) the Escrow Fund shall be treated as funded by a distribution of the Initial
Escrow Amount from Cowen LLC to SGASH prior to the Separation followed by a
contribution of such amount to the Escrow Fund by SGASH and (b) SGASH shall be
treated as the owner of the Escrow Fund assets. Accordingly, SGASH shall
include in its Tax Returns all income, gain, losses, deductions and credits
with respect to the Escrow Fund assets. This Section 6 shall survive
notwithstanding any termination of this Agreement.

 

7.             Notices.
Any notice, request, demand or other communication given by any party under
this Agreement (each a “notice”) shall be in writing, may be given by a
party or its legal counsel, and shall be deemed to be duly given (i) when
personally delivered or (ii) upon delivery by an internationally
recognized express courier service which provides evidence of delivery or
(iii) when four (4) Business Days have elapsed after its transmittal by
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party to whom directed at that party’s address as it appears
below or another address of which that party has given notice or (iv) when
delivered by confirmed facsimile transmission if a copy thereof is also
delivered in person or by overnight courier. Notices of address change shall be
effective only upon receipt notwithstanding the provisions of the foregoing
sentence.

 

Notices to
SGASH:

 

Société
Générale

1221 Avenue of
the Americas

New York, New York 10020

Attn:  General Counsel, SG Americas

Facsimile:
 (212) 278-7432

 

with a copy
(which shall not constitute notice to SGASH) to:

 

Mayer, Brown,
Rowe & Maw LLP

1675 Broadway

New York, New York  10019

Attn:  James B. Carlson

Facsimile:  (212) 262-1910

 

7

 

Notices to
Cowen and Cowen LLC:

 

Cowen Group,
Inc.

1221 Avenue of the Americas

New York, New York 10020

Attn:  General Counsel

Facsimile:  (646) 562-1861

 

with a copy
(which shall not constitute notice to Cowen) to:

 

Skadden, Arps,
Slate, Meagher & Flom LLP

Four Times Square

New York, NY  10036-6522

Attn: Lou R. Kling

         Thomas W. Greenberg

Facsimile: (212) 735-2000

 

Notices to
Escrow Agent:

 

JPMorgan Chase
Bank, N.A.

Worldwide Securities
Services

4 New York
Plaza, 21st Floor

New York, NY
10004

Attention:  Glenn Sturman

Facsimile:  (212) 623-6168

 

Notwithstanding
the above, in the case of communications delivered to the Escrow Agent pursuant
to clause (ii) or (iii) of this Section 7, such
communications shall be deemed to have been given on the date received by the
Escrow Agent. In the event that the Escrow Agent, in its sole discretion, shall
reasonably determine that an emergency exists, the Escrow Agent may use such
other means of communication as the Escrow Agent deems appropriate, provided
that such notice shall be effective only upon actual receipt by the intended
recipient.

 

8.             Binding
Effect; Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

 

9.             Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term of this
Agreement, such provision shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from
this Agreement.

 

10.           No
Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any person.

 

8

 

11.           Headings.
The headings used in this Agreement are for convenience of reference only and
do not constitute a part of this Agreement and will not be deemed to limit,
characterize or in any way affect any provision of this Agreement, and all
provisions of this Agreement will be enforced and construed as if no heading
had been used in this Agreement.

 

12.           Counterparts.
This Agreement may be executed in two or more counterparts, any one of which
need not contain the signatures of more than one person, but all such
counterparts taken together will constitute one and the same instrument.

 

13.           Governing Law. All issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York. In furtherance of the foregoing, the internal
law of the State of New York shall control the interpretation and construction
of this Agreement, even though under that jurisdiction’s choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.

 

14.           Account
Opening Information. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A
NEW ACCOUNT IN THE UNITED STATES AND/OR FOR NON-U.S. ACCOUNTS:  To help the government fight the funding of
terrorism and money laundering activities, federal law requires all financial
institutions to obtain, verify and record information that identifies each
person who opens an account. When an account is opened, the Escrow Agent will
ask for information that will allow it to identify relevant parties.

 

15.           Merger
of Escrow Agent. Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without further act, provided
that, upon any merger, conversion, consolidation of the Escrow Agent or
transfer of its interest in this Agreement or its corporate trust business,
SGASH and Cowen may mutually agree in writing to appoint a replacement escrow
agent.

 

16.           Force
Majeure. In the event that any party hereto is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other cause reasonably beyond its control, the Escrow Agent shall not be liable
for damages to the other parties for any damages resulting from such failure to
perform otherwise from such causes. Performance under this Agreement shall
resume when the Escrow Agent is able to perform substantially.

 

*       *       *       *

 

9

 

IN WITNESS
WHEREOF, the parties hereto have executed this Escrow Agreement on the day and
year first above written.

 

 

	
   

  	
  SG AMERICAS
  SECURITIES HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jean-Philippe Coulier

  	
   

  
	
   

  	
  Name:  Jean-Philippe Coulier

  
	
   

  	
  Title:    President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COWEN GROUP,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Christopher A. White

  	
   

  
	
   

  	
  Name: Christopher
  A. White

  
	
   

  	
  Title:   Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COWEN AND
  COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Christopher A. White

  	
   

  
	
   

  	
  Name:
  Christopher A. White

  
	
   

  	
  Title:   Chief Administrative Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Saverio A. Lunetta

  	
   

  
	
   

  	
  Name: Saverio
  A. Lunetta

  
	
   

  	
  Title:   Vice President

  

 

 

Escrow AgreementExhibit
10.7

CONSULTING AGREEMENT

THIS AGREEMENT
made as of and to have effect from the 1st day of October, 2005

	
  BETWEEN:

  	
   

  
	
   

  	
  WENTWORTH ENERGY, INC., a
  company duly incorporated under the laws of the State of Oklahoma, having its
  head office at Suite 1415, 115 West 7th Street, Fort
  Worth, Texas, 76102 (hereinafter called the “Company”)

  	
   

  
	
   

  	
  OF THE FIRST PART

  
	
  AND:

  	
   

  
	
   

  	
  DANIEL M. LEONARD, of P.O. Box
  9753, Fort Worth, Texas, 76147 (hereinafter called the “Consultant”)

  	
   

  
	
   

  	
  OF THE SECOND PART

  

 

WHEREAS the
Company is a reporting company whose common stock is quoted for trading on the
NQB Pink Sheets; and

WHEREAS the
Company wishes to engage the Consultant as advisor and the Consultant has
agreed to be engaged by the Company on the terms and conditions hereinafter set
forth.

NOW THEREFORE THIS
AGREEMENT WITNESSES that in consideration of the premises and of the covenants
and agreements hereinafter contained, the parties hereto have agreed as
follows:

1.           DEFINITIONS

1.01       In this
agreement:

a)               “Fair
Market Value” means the closing price per share of the Shares on the NQB Pink
Sheets or NASD Over-the-Counter Bulletin Board. If the Shares cease to be
quoted on NQB Pink Sheets or NASD Over-the-Counter Bulletin Board, the Company
shall designate an alternative method of determining Fair Market Value;

b)              “Monthly
Fee” has the meaning ascribed thereto in paragraph 4.01 of this agreement; and

c)               “Shares”
means shares of the $0.001 par value common stock of the Company.

 

2.           DUTIES
AND DEVOTION OF TIME

2.01       It is
acknowledged and agreed by the Consultant that the work of the Consultant is
and will be of such a nature that regular hours may be impossible and there may
be occasions in which the Consultant will be required to work more than eight
hours per day and five days per week. It is also anticipated that there will be
certain evenings, Saturdays, Sundays and holidays during which the Consultant
will be required to work. The work of the Consultant is of an advisory and
supervisory nature and accordingly the Consultant agrees that the consideration
herein set forth will be in full and complete satisfaction for the Consultant’s
work and services, no matter how or when performed, and the Consultant hereby
releases the Company from any claims for overtime pay or compensation
whatsoever which the Consultant might have by reason of any existing or future
legislation or otherwise.

 

2.02       During the
term of this agreement, the Consultant will be responsible for all day-to-day
oil and gas operations of the Company, including, without restricting the
generality of the foregoing:

a)                                            identification,
review, negotiation, acquisition and maintenance of oil and gas property
interests;

b)                                           planning
exploration and development;

c)                                            approval
of invoices and collection of revenue relating to oil and gas operations;

d)                                           hiring
oil and gas operations personnel;

e)                                            regulatory
compliance;

f)                                              budgeting;
and

g)                                           preparation
of business plans.

 

2.03       In conducting
its duties under this agreement, the Consultant will report to the Company’s
Chief Executive Officer or, in his absence, the President and will act
consistently with the Company’s directives and policies.

3.           TERM

3.01       The effective
date of this agreement is the date set out above and the engagement of the Consultant
hereunder will from such date continue until terminated in accordance with the
terms and provisions of this agreement, but in any case not more than three
years from the date hereof, unless extended by the parties in writing.

4.           REMUNERATION

4.01       The Consultant
will faithfully, honestly and diligently provide services to the Company as set
out herein in consideration of which the Company will pay the Consultant a
monthly fee (the “Monthly Fee”) of $10,000.00 payable as follows:

a)                                            prior
to the first anniversary of the effective date of this agreement, not less than
one-quarter (1⁄4) and not more than one-half (1⁄2) of the Monthly Fee in cash and
the balance by the issuance of Shares registered pursuant to the Securities Act
of 1933 at a price equal to 110% of the Fair Market Value on the date of
issuance;

b)                                           following
the first anniversary of the effective date of this agreement, the Monthly Fee
in cash.

 

4.02       The Company
will grant to the Consultant options from time to time to purchase Shares in
such amounts and under such terms as is approved by the Company’s board of
directors, but in any case options to purchase not less than 750,000 Shares.
Such options shall be exercisable at a price of $0.50 per Share and shall vest
and may be exercised during the term of the said options such that:

a)                                            one-twelfth
(1/12) of the said options will be exercisable as of and from the date of
grant; and

b)                                           a
further one-twelfth (1/12) of the said options will be exercisable as of and
from each three-month anniversary of the date of grant, until the date which is
33 months after the date of grant.

 

4.03       The Consultant
acknowledges it is an independent contractor, not an employee, and as such is
solely responsible for the payment or remittance of all deductions, taxes and
assessments relating to this engagement, and agrees to save the Company
harmless from, and indemnify the Company

 

for, any and all
liability therefrom.

 

5.           AMENDMENT
OF REMUNERATION PAYABLE

5.01       The
remuneration payable to the Consultant may be altered from time to time during
the term of this agreement by mutual agreement between the parties in writing,
executed by the parties hereto.

6.           REIMBURSEMENT
FOR EXPENSES

6.01       The Consultant
will be reimbursed for all reasonable out-of-pocket expenses incurred by the
Consultant in or about the execution of the Company’s engagement, PROVIDED THAT
such expenses exceeding $1,000.00 in any calendar month shall be approved in
advance by the Company in writing.

7.           INTERRUPTION
OF COMPANY’S BUSINESS

7.01       If during the
term of this agreement the Company discontinues or interrupts the operations of
its business for a period of 60 days, then this agreement will automatically
terminate without liability on the part of either of the parties hereto.

8.           NOTICE

8.01       Any notice to
be given under this agreement will be in writing and will be deemed to have
been given if sent by telecopy, or delivered or sent by prepaid registered post
addressed to the respective addresses of the parties appearing on the first
page of this agreement (or to such other address as one party provides to the
other in a notice given according to this paragraph). Where a notice is given
by registered post, it shall be conclusively deemed to be given and received on
the fifth day after its deposit in a post office at any place in United States
or Canada.

9.           CONFIDENTIAL
INFORMATION

9.01       The parties
hereto acknowledge and agree that the Consultant by virtue of its engagement
with the Company will have access to confidential and secret information and
therefore the Consultant agrees that during the term of this agreement and on
termination or expiry of the same, for any reason whatsoever, it will not
divulge or utilize to the detriment of the Company any such confidential or
secret information so obtained.

10.         TERMINATION
OF AGREEMENT

10.01     Notwithstanding
any other provision herein, it is understood and agreed by and between the
parties hereto that the Consultant may terminate this agreement in its entirety
at any time by giving the Company not less than 60 days’ written notice of such
intention to terminate.

10.02     The
Company may terminate this agreement in its entirety, with or without cause,
for any reason whatsoever at any time by delivering to the Consultant notice of
termination in writing not less than 60 days prior to the date of termination.

 

10.03     The
Consultant hereby agrees that the notice referred to in paragraph 10.02 herein
is sufficient notice, and that the Company will not be liable to pay any
further monies, notwithstanding that such termination may be without cause. The
expression “such further monies” will include, without restricting the
generality of the foregoing, additional fees, severance pay, bonuses, penalties
and any or all other monies arising out of the engagement of the Consultant.
Any advance payment, or portion thereof, of fees provided for in paragraph 4.01
hereto shall be refunded forthwith by the Consultant to the Company.

10.04     In
the event that the Consultant will at any time during the term hereof by reason
of illness or mental or physical disability or incapacity be prevented from or
incapable of performing the Consultant’s duties hereunder, then the Consultant
will be entitled to receive the remuneration provided for herein at the rate
hereinbefore provided for the period during which such incapacity will continue
but not exceeding 60 consecutive days and, if such incapacity will continue for
a longer period, then the engagement of the Consultant may, at the option of
the Company’s board of directors, be forthwith terminated, and the Consultant
will not be entitled to any compensation from the Company in respect of such
termination.

11.         ARBITRATION

11.01     Any
controversy or claim arising out of or relating to this agreement or any breach
of this agreement will be finally settled by arbitration in accordance with the
laws of the State of Texas.

12.         INDEPENDENT
ACTIVITIES

12.01     Except
as expressly provided herein, the Consultant shall have the free and
unrestricted right to independently engage in and receive the full benefit of
any and all business endeavours of any sort whatsoever, whether or not
competitive with the endeavours contemplated herein, without consulting the
Company or inviting or allowing the Company to participate therein. The
Consultant shall not be under any fiduciary or other duty to the Company which
will prevent it from engaging in or enjoying the benefits of competing
endeavours.

12.02     Notwithstanding
paragraph 12.01, the Consultant shall not, directly or indirectly, be a
director, officer, consultant, employee or controlling owner any corporation or
other entity, save and except Leonard Brothers Operating Company and Sandhill
Operating Company, that owns or will own oil or gas interests without the prior
written consent of the Company’s board of directors. Where the Company’s board
of directors has considered and declined to acquire a particular oil or gas
interest, such consent shall be deemed to have been given.

13.         MISCELLANEOUS

13.01     This
agreement shall enure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.

13.02     This
agreement shall be governed by and construed in accordance with the laws of the
State of Texas which shall be deemed to be the proper law hereof.

13.03     All
rights and remedies of either party hereunder are cumulative and are in
addition to, and shall not be deemed to exclude, any other right or remedy
allowed by law. All rights and remedies may be exercised concurrently.

 

13.04     Should
any part of this agreement be declared or held invalid for any reason, such
validity shall not affect the validity of the remainder which shall continue in
full force and effect and be construed as if this agreement had been executed
without the invalid portion and it is hereby declared the intention of the parties
hereto that this agreement would have been executed without reference to any
portion which may, for any reason, be hereafter declared or held invalid.

13.05     No
condoning, excusing or waiver by any party hereto of any default, breach or
non-observance by any other party hereto at any time or times in respect of any
covenant, proviso or condition herein contained shall operate as a waiver of
that party’s rights hereunder in respect of any continuing or subsequent
default, breach or non-observance, or so as to defeat or affect in any way the
rights of that party in respect of any such continuing or subsequent default,
breach or non-observance, and no waiver shall be inferred from or implied by
anything done or omitted to be done by the party having those rights.

13.06     This
agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto or by their successors or permitted assigns.

13.07     The
titles of headings to the respective paragraphs of this agreement shall be regarded
as having been used for reference and convenience only.

13.08     In
this agreement a reference to currency means the currency of the United States
of America.

13.09     Time
shall be of the essence in this agreement.

13.10     This
agreement may be executed in several parts in the same form and such parts as
so executed will together constitute one original agreement, and such parts, if
more than one, will be read together as if all the signing parties hereto had
executed one copy of this agreement.

13.11     This
agreement constitutes the entire agreement between the parties hereto and
supersedes all prior agreements and understandings, oral or written, by and
between any of the parties hereto with respect to the subject matter hereof.

13.12     This
agreement may not be assigned by any of the parties hereto without the prior
written consent of the other party.

IN WITNESS WHEREOF
the parties hereto have executed this agreement as of the day and year first
above written.

 

	
  The common seal of Wentworth Energy, Inc.

  	
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  was hereunto affixed in the presence of:

  	
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  /s/ Gordon C. McDougall

  	
   

  	
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  C/S

  
	
   

  	
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  /s/ John Punzo

  	
   

  	
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  SIGNED, SEALED AND DELIVERED by the

  	
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  Consultant in the presence of:

  	
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  Signature

  	
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  Name

  	
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  /s/ Daniel M. Leonard

  	
   

  
	
  Address

  	
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  Daniel M. Leonard

  
	
   

  	
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