Document:

Exhibit 10.8

FULLY
DISCLOSED CLEARING AGREEMENT

OF

SG AMERICAS SECURITIES, LLC

THIS
AGREEMENT is made and entered into this          
day of                     ,
20        by and between SG AMERICAS
SECURITIES, LLC (“Clearing Agent”), a Delaware limited liability company, and COWEN
AND COMPANY, LLC (“Introducing Firm”), a Delaware limited liability company.

1.                                      AGREEMENT

From the date of this Agreement until the
termination of this Agreement as provided in Section 22 hereof, Clearing Agent
shall carry the proprietary accounts of Introducing Firm, and the cash, margin
and “receive versus payment” and “delivery versus payment” (“RVP/DVP”) accounts
of the customers of Introducing Firm introduced by Introducing Firm to Clearing
Agent, and accepted by Clearing Agent, and shall clear transactions on a fully
disclosed basis for such accounts, in the manner and to the extent set forth in
this Agreement.

2.                                      ALLOCATION OF RESPONSIBILITY

2.1                                 Responsibilities of the Parties.

Pursuant to New York Stock
Exchange (“NYSE”) Rule 382, responsibility for compliance with applicable laws,
rules, and regulations of the Securities and Exchange Commission (“SEC”), the National
Association of Securities Dealers, Inc. (“NASD”), the NYSE, and any other
regulatory or self-regulatory agency or organization (collectively the “Rules”)
shall be allocated between Clearing Agent and Introducing Firm as set forth in
this Agreement.  To the extent that a
particular function is allocated to one party under this Agreement, the other
party shall supply that party with information in its possession pertinent to
the performance and supervision of that function.

2.2                                 Relationship with Customers.

Clearing Agent shall provide
services under this Agreement to Introducing Firm only to the extent explicitly
required by specific provisions contained in this Agreement and shall not be
responsible for any duties or obligations not specifically allocated to
Clearing Agent pursuant to this Agreement. 
Introducing Firm shall enter into appropriate contractual arrangements
with customers on its own behalf, and such agreements shall make Introducing
Firm, and not Clearing Agent, responsible to customers for the provision of
services.  Neither Introducing Firm nor
any investment advisor provided by Introducing Firm shall be deemed to be an
agent of Clearing Agent for any purpose, nor 

 

 

shall Clearing Agent, except
to the extent required by law, be deemed to have a fiduciary relationship with
any of Introducing Firm’s customers. 
Introducing Firm acknowledges that Clearing Agent does not control the
business or operations of Introducing Firm.

3.                                      REPRESENTATIONS AND WARRANTIES

3.1                                 Introducing Firm.  Introducing Firm represents and warrants
that:

3.1.1                        Duly Organized.  Introducing Firm is a limited liability
company duly formed, validly existing, and in good standing under the laws of
the state of Delaware.

3.1.2                        Registration.  Introducing Firm is duly registered and in
good standing as a broker-dealer with the SEC.

3.1.3                        Authority to Enter Agreement.  Introducing Firm has all requisite authority,
whether arising under applicable federal or state law or the rules and
regulations of any regulatory or self-regulatory organization to which
Introducing Firm is subject, to enter into this Agreement and to retain the
services of Clearing Agent in accordance with the terms of this Agreement.

3.1.4                        Material Compliance with Rules and Regulations.  Introducing Firm
and, to its knowledge, each of its employees is in material compliance with,
and during the term of this Agreement shall remain in material compliance with,
the registration, qualification, capital, financial reporting, customer
protection, and other requirements of every self-regulatory organization of
which Introducing Firm is a member, of the SEC, and of every state to the
extent that Introducing Firm or any of its employees is subject to the
jurisdiction of that state.

3.1.5                        No Pending Action, Suit, Investigation, or Inquiry.  Introducing Firm has
provided  to Clearing Agent  a copy of its Form BD which discloses, to the
extent required by such Form, every material action, suit, investigation,
inquiry, or proceeding (formal or informal) pending or threatened against or
affecting Introducing Firm, any of its affiliates, or any officer, director, or
general securities principal or financial and operations principal of
Introducing Firm, or their respective property or assets, by or before any
court or other tribunal, any arbitrator, any governmental authority, or any
self-regulatory organization of which any of them is a member.  Introducing Firm shall notify Clearing Agent
promptly of the initiation of any action, suit, investigation, inquiry, or
proceeding that may have a material impact on the capital of Introducing Firm.

3.1.6                        Introducing Firm Responsibility. Introducing Firm shall be responsible for all internal
operations related to its business including without limitation (i) all
accounting, bookkeeping, record-keeping, commodity transactions, or any other
transactions not involving securities; or any matter not contemplated by this
Agreement; (ii) preparation of Introducing Firm’s payroll records, financial
statements, or any analysis thereof; and (iii) preparation or issuance of
checks in payment of Introducing Firm’s expenses, other than expenses incurred
by Clearing Agent on behalf of Introducing Firm pursuant to this Agreement.

 

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3.1.7                        Customer Referrals.  With respect to all introduced customers that
have been referred to Introducing Firm by other entities and as to which
customers Introducing Firm and the referring entities share commissions,
Introducing Firm has entered into duly authorized referral or similar
arrangements and such agreements are, to best of Introducing Firm’s knowledge,
in compliance with all applicable Rules.

3.1.8                        Licensure, Registration, Etc.  Introducing Firm is licensed, registered or
authorized to conduct business in every jurisdiction, including every foreign
jurisdiction, in which any of its customers introduced to Clearing Agent by Introducing
Firm is domiciled.

3.2                                 Clearing Agent.  Clearing Agent represents and warrants that:

3.2.1                        Duly Organized.  Clearing Agent is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Delaware.

3.2.2                        Registration.  Clearing Agent is duly registered and in good
standing as a broker-dealer with the SEC and is a member firm in good standing
of the NYSE and the NASD and every exchange of which it is a member.

3.2.3                        Authority to Enter Agreement.  Clearing Agent has all requisite authority,
whether arising under applicable federal or state law, or the rules and
regulations of any regulatory or self-regulatory organization to which Clearing
Agent is subject, to enter into this Agreement and to provide services in
accordance with the terms of this Agreement.

3.2.4                        Compliance with Rules and Regulations. Clearing Agent and, to its knowledge, each of its employees
is in material compliance with, and during the term of this Agreement shall
remain in material compliance with the registration, qualification, capital,
financial reporting, customer protection, and other requirements of every
self-regulatory organization of which Clearing Agent is a member, of the SEC,
and every state.

4.                                      ESTABLISHING AND ACCEPTING NEW ACCOUNTS

4.1                                 Opening of New Accounts.  Introducing Firm shall be responsible for
opening and approving new accounts in compliance with the Rules and for complying with the obligations described
in the Anti-Money Laundering Program (“AML Program”), attached as Appendix A to
this Agreement.  No account may be opened
without the prior approval of Clearing Agent as provided in Section 4.2.

4.1.1                        Option Accounts.  Before engaging in option trading for any
customer, Introducing Firm shall deliver to customer a current disclosure
statement of the Options Clearing Corporation, the Special Statement for
Uncovered Option Writing, and any effective supplements.  Introducing Firm shall obtain the required
signatures on all option agreements, shall obtain proper approval for the
opening of all option accounts, and shall otherwise comply with the rules
applicable to options accounts and options trading.  Introducing Firm shall deliver to Clearing
Agent a copy of a signed option agreement for each customer approved by it for
options trading in a form acceptable to Clearing Agent.

 

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4.1.2                        Accounts for Which Agent Holds Power of Attorney.  Upon the opening of
any Account for which an agent holds a power of attorney on behalf of a
principal, Introducing Firm shall provide Clearing Agent with the name of each
principal for whom such agent is acting and with written evidence of the agent’s
authority to act on the principal’s behalf. Introducing Firm hereby warrants
that any orders or instructions of such agent which are transmitted to Clearing
Agent pursuant to this Agreement shall have been fully and properly authorized
and that the execution of such instructions or orders shall not violate the
Rules.

4.1.3                        Third-Party Introducing Firm Accounts. 
Introducing Firm shall not open any account for any third-party
introducing firm with whom the Introducing Firm deals on a principal or agency
basis without the prior written approval of Clearing Agent.  If Clearing Agent decides, in its sole
discretion, to permit Introducing Firm to open accounts for a third-party
introducing firm with whom the Introducing Firm deals on a principal or agency
basis, Clearing Agent will promptly communicate its consent to Introducing Firm
following receipt of all information reasonably requested and contingent upon
execution and approval by all required regulatory authorities of all necessary
agreements.

4.2                                 Acceptance of New Accounts by Clearing Agent.  Clearing Agent
reserves the right to reject any account that the Introducing Firm may forward
to Clearing Agent as a potential new account, and to terminate any account
previously accepted by it as a new account. No
funds or securities may be deposited into an account, nor may any transactions
be executed with respect to an account, before the account has been accepted by
Clearing Agent. Clearing Agent shall promptly notify Introducing Firm of
each such rejection or termination.

4.3                                 Maintenance of Account Information.  Clearing Agent may
rely without inquiry on the validity of all customer information furnished to
it by Introducing Firm.  Possession of
any such documents or information, however provided, concerning Introducing
Firm’s customers does not create a duty on the part of Clearing Agent to review
or understand the content of those documents. 
Introducing Firm shall regularly
review its customer accounts, at least every thirty-six (36) months, to keep
its knowledge and understanding of the customer and the customer’s business up
to date.

5.                                      SUPERVISION OF ORDERS AND ACCOUNTS

5.1                                 Responsibility for Compliance.  Introducing Firm shall be solely responsible
for compliance with suitability, “Know Your Customer” rules, and other
requirements of federal and state law and regulatory and self-regulatory rules
and regulations governing transactions and accounts that are introduced by
Introducing Firm, except for the responsibilities of Clearing Agent as set
forth in Section 7.3 of this Agreement. 
Possession by Clearing Agent of surveillance records, exception reports,
or other similar data that have been provided by Introducing Firm shall not
obligate Clearing Agent to review or be aware of their contents.  Clearing Agent shall not be required to make
any investigation into the facts surrounding any transaction that it may
execute or clear for Introducing Firm or any customer of Introducing Firm except to the extent 

 

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that such review forms a part of
Clearing Agent’s anti-money laundering obligations as outlined in the AML
Program (Appendix A).

5.2                                 Compliance Procedures.  Introducing Firm agrees to supervise
compliance with the Rules.  Introducing
Firm shall review transactions and accounts to assure compliance with
prohibitions against manipulative practices, insider trading, market timing and
late trading of mutual fund shares and other requirements of federal and state
law and applicable regulatory and self-regulatory rules and regulations to
which Introducing Firm or its customer are subject.  Without limiting the above, Introducing Firm
shall be responsible for compliance with the supervisory requirements in
Section 15(b)(4) of the Securities Exchange Act of 1934, as amended, NASD Rule
3010, NYSE Rules 342, 351 and 431, and similar rules adopted by any other
regulatory or self-regulatory agency or organization, to the extent
applicable.  In addition, in each case in
which a customer is an employee of a member organization, a self-regulatory
organization or financial institution, the approval of which is necessary to
the opening and maintenance of such customer’s account, Introducing Firm shall
be solely and exclusively responsible for obtaining the approval of such
employer, and otherwise complying with NYSE Rule 407 and NASD Rule 3050.

5.3                                 Knowledge of Customer’s Financial Resources and Investment
Objectives.  Introducing Firm shall comply with Rule
405(1) of the NYSE or comparable requirements of similar rules of any other
regulatory or self-regulatory organization to which Introducing Firm is
subject.  Introducing Firm shall obtain
all essential facts relating to each customer, each cash and margin account,
each order, and each person holding a power of attorney over any account, in
order to assess the suitability of transactions (when required by applicable rules),
the authenticity of orders, signatures, endorsements, certificates, or other
documentation, and the frequency of trading. 
Introducing Firm warrants that, to the best of its knowledge,
Introducing Firm will not open or maintain accounts for persons who are minors
or who are otherwise legally incompetent and that Introducing Firm will comply
with NYSE Rule 407 and other laws, rules, or regulations that govern the manner
and circumstances in which accounts may be opened or transactions authorized.

5.4                                 Furnishing of Investment Advice.  Introducing Firm
shall be solely responsible for any recommendation or advice it may offer to
its customers.

5.5                                 Discretionary Accounts.  Introducing Firm shall be solely responsible
for obtaining customer approval for and supervising discretionary accounts.

5.6                                 Obligations Regarding Certain Disclosures.  Introducing Firm
shall make any disclosures and obtain any agreements from its customers
required by applicable law or regulation, including, without limitation,
qualification letters or any disclosures or agreements required for margin,
listed options, IPOs, penny stocks, derivative securities, account transfers or
conversions.  The cost of making such
disclosures or obtaining such agreements shall be borne by Introducing Firm.

 

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6.                                      EXTENSION OF CREDIT

6.1                                 Presumption of Cash Account.  Clearing Agent may, but is not required to,
permit customers of Introducing Firm to purchase securities on margin, but all
transactions for a customer will be deemed to be either RVP/DVP or cash
transactions, and payment for those transactions will be required in the manner
applicable to RVP/DVP or cash transactions, unless, on or prior to settlement,
Introducing Firm has furnished Clearing Agent with an executed margin agreement
and consent to loan of securities.

6.2                                 Margin Requirements.  Margin accounts introduced by Introducing
Firm, including Introducing Firm’s own margin account carried by Clearing
Agent, shall be subject to Clearing Agent’s margin requirements as in effect
from time to time.  Clearing Agent
reserves the right to refuse to accept any transaction in a margin account
without the actual receipt of the necessary margin and to impose a higher
margin requirement for a particular account when, in Clearing Agent’s
discretion, the past history or nature of the account or other factors or the
securities held in it warrant such action. 
Introducing Firm may require higher margin than imposed by Clearing
Agent for any particular account, group of accounts, or all accounts introduced
by Introducing Firm to Clearing Agent. 
In any case where Introducing Firm requests Clearing Agent to extend
credit upon control or restricted securities, pursuant to Rule 144 under the
Securities Act of 1933, as amended (“Rule 144”), or otherwise; Introducing Firm
shall submit to Clearing Agent such documentation, agreements and information
as shall be reasonably required by Clearing Agent to decide to extend such
credit.  Any extension of credit so
approved shall be subject to Clearing Agent’s credit policies as shall be in
effect from time to time.

6.3                                 Margin Maintenance and Compliance with Regulation T and SEC
Rule 15c3-3(m).

6.3.1                        Initial Margin.  Introducing Firm shall be responsible for the
initial margin requirement for any transaction until such initial margin has
been received by Clearing Agent in acceptable form.

6.3.2                        Margin Calls.  After the initial margin for a transaction
has been received, subsequent margin calls may be made by Clearing Agent at its
discretion.  Clearing Agent shall
calculate the maintenance requirement and notify Introducing Firm of any
amounts due. In the case of margin calls concerning its customers, Introducing
Firm shall be responsible for forwarding the margin call to its customer and
obtaining the amount due directly from Introducing Firm’s customer.  If Introducing Firm fails to take the
appropriate action, Clearing Agent reserves the right to collect the amount due
directly from Introducing Firm’s customer or, in the case of the Introducing
Firm’s margin account, the Introducing Firm. 
Introducing Firm agrees to cooperate with Clearing Agent in complying
with and obtaining margin in response to such calls.

6.3.3                        Actions upon Failure to Meet Margin Calls or Deliver
Securities.  In the event that satisfactory margin is not
provided within the time specified by Clearing Agent, or securities sold are
not delivered as required, Clearing Agent may take such actions as Clearing
Agent deems appropriate, including, but not limited to, entering orders to
buy-in 

 

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or sell-out. 
Introducing Firm shall cooperate with Clearing Agent by entering orders
to buy-in or sell-out securities. 
Compliance with a request to withhold action shall not be deemed a
waiver by Clearing Agent of any of its rights under this Agreement.

6.4                                 Charging of Interest and Disclosures Pursuant to Rule 10b-16
and NASD Rule 2341.  Interest charged by Clearing Agent to
Introducing Firm’s customers with respect to debit balances in customers’
accounts shall be determined in accordance with Clearing Agent’s standard
disclosure under NYSE Rule 382. 
Introducing Firm shall send each margin customer a written Margin
Disclosure Statement and other written disclosures, in a form acceptable to
Clearing Agent, at the time of the opening of a margin account as required by
SEC Rule 10b-16 and NASD Rule 2341.  If
not already delivered to each margin customer by Clearing Agent in connection
with the delivery of the written new account Disclosure Statement in accordance
with NYSE Rule 382, Introducing Firm agrees to deliver a written disclosure
statement to its customer as required by SEC 
Rule 10b-16.

6.5                                 Unsecured Debits or Unsecured Short Positions. Pursuant to Section 19 of this Agreement, Clearing Agent
shall charge against the Deposit Accounts of Introducing Firm an amount equal
to the value of any unsecured debit or short position (on a “mark to market”
basis) in a customer account if that position has not been promptly resolved by
payment or delivery.

6.6                                 Extension Of Credit To Introducing Firm.  In addition to the
provisions of this section 6 and any margin agreement between Clearing Agent
and Introducing Firm, Clearing Agent may, in its sole discretion, extend credit
from time to time to Introducing Firm in connection with trading in its
proprietary or inventory accounts.  Such
extension of credit will be generally consistent with past practice between the
parties.  However, Clearing Agent will,
in its sole discretion, set limits on the amount of credit that will be
extended, rates at which such credit will be extended, and requirements on
collateral that must be posted.  Clearing
Agent will communicate these requirements to Introducing Firm.  If collateral levels are insufficient in view
of the limits determined by Clearing Agent, Clearing Agent shall so notify
Introducing Firm and Introducing Firm shall promptly post sufficient collateral
to meet those requirements.  If
Introducing Firm fails to meet the requirements in a timely fashion, Clearing
Agent shall have the right, in its complete discretion, to liquidate securities
in Introducing Firm’s accounts and/or to offset, deduct, setoff, recoup and/or
use and apply all or any portion of any Introducing Firm’s revenue and/or other
monies, including, but not limited to the Deposit Account and any commission
accounts (and the proceeds and products of any of the foregoing, collectively
the “Collateral”), then in possession, custody or control of Clearing Agent
(whether held in an account or otherwise), and to apply proceeds to Introducing
Firm’s obligations hereunder.  Any
remaining liability shall not be extinguished. 
Introducing Firm hereby grants, transfers, assigns and conveys to the
Clearing Agent a first and prior lien and security interest in the Collateral,
including without limitation any after-acquired Collateral which is now or
subsequently in the possession, custody or control of Clearing Agent.  Introducing Firm hereby acknowledges and
agrees that any rights set forth herein shall be in 

 

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addition to all other remedies available to Clearing Agent
under this Agreement or at law or equity.

6.7                                 EXTENSION OF NONPURPOSE CREDIT

6.7.1                        Nonpurpose Credit.  Clearing Agent may, but is not required to,
extend and maintain nonpurpose credit to customers of Introducing Firm not for
purposes of purchasing, carrying, or trading in securities, but all extensions
of credit to a customer will be deemed to be purpose credit subject to Regulation
T unless, prior to extending the credit, Introducing Firm or its customer has
furnished Clearing Agent with an executed Federal Reserve Form T-4.

6.7.2                        Nonpurpose Lending Requirements.  Nonpurpose credit
extended by Clearing Agent shall be subject to nonpurpose lending requirements
as established and modified by Clearing Agent from time to time.  Clearing Agent reserves the right to refuse
to extend nonpurpose credit without the actual receipt of the necessary underlying
collateral and to impose a higher underlying collateral value requirement for a
particular account when, in Clearing Agent’s discretion, the past history or
nature of the account or other factors or the securities held in it warrant
such action.  In all instances,
Introducing Firm may require a lower loan advance rate to collateral value than
imposed by Clearing Agent for any particular account, group of accounts, or all
accounts introduced by Introducing Firm to Clearing Agent.  In any case where Introducing Firm requests
Clearing Agent to extend nonpurpose credit upon control or restricted
securities, pursuant to Rule 144 under the Securities Act of 1933, as amended,
or otherwise, Introducing Firm shall submit to Clearing Agent such
documentation, agreements and information as shall be reasonably required by
Clearing Agent to decide to extend such credit. 
Any extension of nonpurpose credit so approved shall be subject to
Clearing Agent’s credit policies as shall be in effect from time to time.

6.7.3                        Underlying Collateral Maintenance and Compliance with
Regulation T and SEC Rule 15c3-3(m).

6.7.3.1                         Initial Underlying Collateral.  Introducing Firm shall be responsible for the
initial underlying collateral requirement for any extension of nonpurpose
credit until such initial underlying collateral has been received by Clearing
Agent in acceptable form.

6.7.3.2                         Underlying Collateral Calls.  After the initial underlying collateral for
an extension of nonpurpose credit has been received, subsequent underlying
collateral calls may be made by Clearing Agent at its discretion.  Clearing Agent shall calculate the
maintenance requirement and notify Introducing Firm of any amounts due.  Introducing Firm shall be responsible for issuing
the underlying collateral call to its customer and obtaining the amount due
directly from Introducing Firm’s customer. 
If Introducing Firm fails to take the appropriate action, Clearing Agent
reserves the right to collect the amount due directly from Introducing Firm’s
customer.  Introducing Firm agrees to
cooperate with Clearing Agent in complying with and obtaining underlying
collateral in response to such calls.

 

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6.7.4                        Actions Upon Failure to Meet Underlying Collateral Calls or
Deliver Securities.  In the event that satisfactory underlying
collateral is not provided within the time specified by Clearing Agent, or
securities sold are not delivered as required, Clearing Agent may take such
actions as Clearing Agent deems appropriate, including, but not limited to,
entering orders to buy-in or sell-out. 
Introducing Firm shall cooperate with Clearing Agent by entering orders
to buy-in or sell-out securities. 
Compliance with a request to withhold action shall not be deemed a
waiver by Clearing Agent of any of its rights under this Agreement.

6.7.5                        Charging of Interest and Disclosures Pursuant to Rule 10b-16.  Interest charged
with respect to the extension of nonpurpose credit shall be determined in
accordance with Clearing Agent’s standard disclosure under NYSE Rule 382.  Introducing Firm shall send each customer a
written disclosure statement, in a form acceptable to Clearing Agent, at the
time of the extension of nonpurpose credit as required by SEC Rule 10b-16.

6.7.6                        Unsecured Debits. Pursuant
to Section 19 of this Agreement, Clearing Agent shall charge against the
Deposit Accounts of Introducing Firm an amount equal to the value of any
unsecured debit (on a “mark to market” basis) in a customer account if that
position has not been promptly resolved by payment or delivery.

7.                                      MAINTENANCE OF BOOKS AND RECORDS

7.1                                 Stock Records.  Clearing Agent shall maintain stock records
and other prescribed books and records of all transactions executed or cleared
through it.  Unless otherwise required by
law, Clearing Agent shall have no obligation to maintain, or make available to
Introducing Firm, such books and records after termination of this
Agreement.  If, however, Clearing Agent
does make such books and records available to Introducing Firm after the
termination of this Agreement, Introducing Firm shall reimburse Clearing Agent
for its costs and expenses in retrieving such books and records.

7.2                                 Regulatory Reports and Records.  Introducing Firm shall prepare, submit, and
maintain copies of all reports, records, and regulatory filings required of
Introducing Firm by any entity that regulates it, including, but not limited
to, copies of all account agreements and similar documentation obtained
pursuant to Section 4 of this Agreement and any reports and records required to
be made or kept under the Currency and Foreign Transactions Reporting Act of
1970 (the “Bank Secrecy Act”) and any rules and regulations promulgated
pursuant thereto.

7.2.1.                     Records Provided to Clearing Agent.  Introducing Firm
shall provide Clearing Agent with a copy of all records created and maintained
pursuant to Sections 4.1 and 7.2 and the AML Program (Appendix A) and such
records shall be maintained in the U.S. by Clearing Agent for review by the SEC
or any other regulatory body or governmental authority to whose jurisdiction
Clearing Agent is subject.

7.3                                 ANTI-MONEY LAUNDERING, OFFICE OF FOREIGN ASSETS CONTROL, AND
ANTI-TERRORIST FINANCING OBLIGATIONS

 

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Introducing Firm and
Clearing Agent wish to assure each other that each party to this Agreement is
performing its anti-money laundering obligations as required by law and
regulation and otherwise set forth the responsibilities that each party will
undertake to prevent money laundering and terrorist financing as contemplated
by the USA PATRIOT Act and other laws and regulations.

At the time of the opening
of any new account, the Introducing Firm must obtain sufficient information
from its customer to satisfy itself as to the identity of its client and the
source of its funds as more fully set forth in this Section 7.3.

Introducing Firm
acknowledges it has the primary relationship with the customer which
Introducing Firm introduces to Clearing Agent and therefore Introducing Firm is
in the best position to know: (1) the client’s identity; (2) the client’s
source of funds; (3) the client’s intention for those funds; and (4) whether
any particular transaction is unusual or suspicious for that particular client
based on Introducing Firm’s interaction with the client.

Clearing Agent acknowledges
it: (1) fully shares with Introducing Firm the responsibility to combat money
laundering and terrorist financing; (2) shall assist Introducing Firm in
fulfilling its anti-money laundering obligations by providing certain
transaction monitoring tools and reports to help Introducing Firm detect money
laundering and other suspicious activity; (3) shall engage in its own
transaction monitoring of Introducing Firm’s customers in cooperation with
Introducing Firm; and (4) cooperate with Introducing Firm to detect money
laundering and terrorist financing.

                Introducing
Firm and Clearing Agent hereby agree and acknowledge that the requirements
outlined in the AML Program (Appendix A) shall govern their respective roles in
complying with anti-money laundering laws and regulations, including any future
obligations that may be imposed on Introducing Firm or Clearing Agent by laws
or regulations to know its customers, their source and use of funds, and to
monitor for and identify suspicious activity. 
Introducing Firm agrees to notify Clearing Agent in writing if (a) any
representation or warranty made in connection with the anti-money laundering
provisions herein is untrue; (b) Introducing Firm has not complied with the
anti-money laundering provisions herein or the AML Program (Appendix A); or (c)
Introducing Firm believes that it may not be in a position to comply with any
anti-money laundering provisions herein or any provision of the AML Program
(Appendix A).

7.3.1                        Introducing Firm’s Responsibilities:

a.                                       Anti-Money Laundering Obligations.  Introducing Firm
hereby agrees and acknowledges that it is obligated to and hereby represents
and warrants that it now does and will continue to comply with anti-money
laundering laws and regulations, including any future obligations that may be
imposed on Introducing Firm by laws or regulations, to know its customers,
their source and use of funds, and to monitor for and identify suspicious
activity.

b.                                      Anti-Money Laundering Program.  Introducing Firm represents and warrants that
it has established and maintains an anti-money laundering program, consisting
of, 

 

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at a minimum, written internal policies, procedures and
controls including a means for monitoring and identifying suspicious activity,
the designation of an anti-money laundering compliance officer (whose identity
shall be made known to Clearing Agent and to the NASD and the NYSE), an ongoing
employee training program, an independent audit function to test such programs
annually, and any additional requirements set forth in the rules of any
self-regulatory organization of which Introducing Firm is a member.  Introducing Firm will allow Clearing Agent
access to such information as Clearing Agent deems necessary in order for
Clearing Agent to test Introducing Firm’s adherence to Introducing Firm’s
anti-money laundering program. If the testing will be conducted at Introducing
Firm’s office, Clearing Agent shall provide Introducing Firm with reasonable
prior notice (at least three business days). Testing shall be done on a
business day and during regular business hours.  Introducing Firm must certify annually to
Clearing Agent that Introducing Firm has implemented an anti-money laundering
program and shall perform the requirements allocated to Introducing Firm as set
forth in the AML Program (Appendix A).

7.3.2                        Introducing Firm to File CTRs and Provide Copies to Clearing
Agent. 
Unless otherwise agreed by the parties, Introducing Firm is responsible
for filing currency transaction reports (“CTRs”) and will provide a copy of all
such reports to Clearing Agent at the same time as they are filed in accordance
with applicable regulations.

a.                                       Suspicious Activity Reports.  Introducing Firm shall be responsible for
reviewing for suspicious activities and filing suspicious activity reports on
Form SAR-SF and shall coordinate such filing with Clearing Agent.  Introducing Firm shall, as soon as practical
after identifying a suspicious activity and in any event prior to filing a suspicious
activity report on SAR-SF, notify Clearing Agent’s Anti-Money Laundering
Compliance Officer and shall, provided each of Introducing Firm and Clearing
Agent has made the filings contemplated by Section 7.3.9 hereof, communicate
with Clearing Agent about the transaction for purposes of sharing information
about the transaction and determining whether Introducing Firm or Clearing
Agent shall file the SAR-SF, unless such sharing of information is prohibited
by law.  Introducing Firm will provide
Clearing Agent with copies of all SAR-SFs and other communications it files
with respect to accounts held at Clearing Agent, unless prohibited by law.  In addition, Introducing Firm shall promptly
notify Clearing Agent regarding any account activity Introducing Firm
reasonably believes to be suspicious, not legitimate, not having a reasonably
apparent explanation, or could support the filing of a Form SAR-SF.

b.                                      Other Transaction Reports.  Prior to filing any report with the Treasury
Department, the IRS, the U.S. Customs Service or any regulatory body or
organization relating to the reporting of currency transactions or the transfer
of currency or monetary instruments into or outside of the United States,
including, but not limited to, CTRs, CMIRs and SAR-SFs, Introducing Firm shall
notify Clearing Agent’s Anti-Money Laundering Compliance Officer (unless such
notification is prohibited by law) and cooperate with Clearing Agent as
Clearing Agent may deem appropriate. 
Introducing Firm will provide Clearing Agent with 

 

11

 

copies of all reports and other communications with respect
to accounts held at Clearing Agent that Introducing Firm files with the
Treasury Department, the IRS, the U.S. Customs Service, or any regulatory body
or organization relating to the reporting of currency transactions, the
transfer of currency or monetary instruments into or outside of the United
States, or in regard to any suspicious activity, including, but not limited to,
CTRs, CMIRs and SAR-SFs, unless the provision of such reports or communications
is prohibited by law.

7.3.3                        Reports by Clearing Agent.  Clearing Agent has the obligation and
reserves the right to make and file such suspicious activity or other reports
as listed in Section 7.3.2 when it deems it necessary or appropriate; and
Introducing Firm recognizes that when Clearing Agent does so, Clearing Agent
does not thereby assume any responsibility for making and filing reports on
behalf of Introducing Firm or relieve Introducing Firm of its own
responsibility for making and filing reports as necessary under U.S. or other
laws and regulations.  Clearing Agent
will provide Introducing Firm a copy of any such report that relates to an
account of the Introducing Firm or a customer of the Introducing Firm, unless
prohibited by law from doing so.

7.3.4                        Restrictions and Conditions on Certain Accounts.  Introducing Firm
hereby agrees and acknowledges that it is obligated to comply with restrictions
and conditions on opening and accepting certain accounts, including but not
limited to, the following:

a.                                       Know Your Customer and Government List Obligations, Including
OFAC. 
At the time of the opening of any new account, Introducing Firm must
obtain sufficient information (but no less than the minimum required under
Section 326 of the USA PATRIOT Act) from its customer in order to reasonably
identify and verify the identity of the customer and the source of the customer’s
funds.  Introducing Firm also must
satisfy itself that opening the account would not violate the provisions of
various Executive Orders and regulations administered by the U.S. Treasury
Department’s Office of Foreign Assets Control (“OFAC”) or be subject to other
restriction based on such relevant government lists as may be published from
time to time.  Introducing Firm will promptly
inform Clearing Agent of the existence of any account subject to an OFAC or
government list restriction.  Clearing
Agent uses interdiction software and will provide such relevant information as
may from time to time be available to assist Introducing Firm in detecting
possible OFAC and government list violations.

b.                                      Non-Resident Alien Accounts Carried Directly or Through an
Investment Advisor.  For any account opened for a non-resident
alien, Introducing Firm shall record the customer’s passport number and obtain
a copy of the government document used to verify the individual’s identity at
the time the account is opened. 
Introducing Firm shall also obtain a copy of a passport or other
governmental identification for any of the following: the grantor/settlor of a
foreign trust; and any beneficial owner of an offshore corporate account if:
(1) the account is a personal holding company or private investment company; or
(2) the beneficial owner of the entity which maintains the account holds more
than a 10% interest in the entity. 
Introducing Firm shall not open any introduced account for a personal
holding 

 

12

 

company or private investment company if one or more
beneficial owners are U.S. persons.  With
respect to those accounts involving registered investment advisers, Introducing
Firm shall conduct a sufficient inquiry to obtain, record and verify
information as outlined above about the adviser’s customer, including
ascertaining the identity of each beneficial owner of any such account prior to
opening the account.

c.                                       Restrictions on Numbered Accounts.  Introducing Firm
will not establish or maintain specially coded or numbered accounts without the
written consent of Clearing Agent.

d.                                      Source and Use of Funds.  Introducing Firm will use reasonable efforts
to ascertain that the source of a customer’s funds are purportedly from
customer, the customer is not engaged in unlawful activities, the assets being
invested have been legitimately obtained, and any disbursements to a customer
or third party are for legitimate purposes.

e.                                       Transaction Reports and Transaction Monitoring Systems.  In order to detect
suspicious activity, Introducing Firm shall perform its own transaction
monitoring in order to detect suspicious activity.

f.                                         Customer Identification Program.  In order to induce
reasonable reliance by Clearing Agent on Introducing Firm with respect to
Introducing Firm’s customer identification program (“CIP”), Introducing Firm
represents and warrants: (1) it has a written CIP consistent with Section 326
of the USA PATRIOT Act and the rules thereunder; (2) it is subject to a rule
implementing 31 U.S.C., Section 5318(h); (3) it is regulated by a Federal
functional regulator as that term is defined under 31.C.F.R., Section
103.120(a)(2); and (4) it will certify annually to Clearing Agent, as set forth
above, that it has implemented an anti-money laundering program and will
perform the requirements set forth in Introducing Firm’s written CIP.

g.                                      Shell Bank Accounts, Foreign Bank Accounts, and Private
Banking Accounts.  Introducing Firm, working in conjunction with
Clearing Agent, shall implement the provisions of Sections 312, 313, and 319 of
the USA PATRIOT Act  in accordance with
information disseminated by Clearing Agent from time to time.  Copies of all certifications obtained by
Introducing Firm shall be forwarded to Clearing Agent.

7.3.5                        FinCEN Requests under Section 314(a) of USA PATRIOT Act. Introducing Firm will respond to a FinCEN request about
accounts or transactions by promptly searching its records to determine whether
it maintains any account for, or has engaged in any transaction with, any
individual, entity, or organization named in FinCEN’s request.  Upon receiving an information request,
Introducing Firm will designate one person to be the point of contact regarding
the request and to receive similar requests in the future. Unless otherwise
stated in FinCEN’s request, Introducing Firm will search current accounts,
accounts maintained by a named suspect during the preceding twelve months 

 

13

 

and transactions conducted by or on behalf of a named suspect
during the preceding six months. If Introducing Firm finds a match, it will
report it to FinCEN by completing FinCEN’s subject information form.

7.3.6                        Jurisdiction Warranting Special Measures. Introducing Firm will take such special measures as it may
deem appropriate with respect to any foreign jurisdiction, institution(s),
class(es) of account(s) designated by the U.S. Treasury Department to be of “primary
money laundering concern” in accordance with Section 311 of the USA PATRIOT
Act.

7.3.7                        Clearing Agent’s Responsibilities:

a.                                       Anti-Money Laundering Obligations.  Clearing Agent
hereby agrees and acknowledges that it is obligated to comply with anti-money
laundering laws and regulations, including any future obligations that may be
imposed on Clearing Agent, and that it is responsible to combat money laundering
and terrorist financing.

b.                                      Anti-Money Laundering Program.  Clearing Agent has established and shall
continue to maintain an anti-money laundering compliance program in accordance
with Section 352 of the USA PATRIOT Act as well as NYSE and NASD rules.  Clearing Agent further represents and
warrants: (1) it has written anti-money laundering policies and procedures
including procedures to identify and report suspicious activity consistent with
its role as a clearing broker; (2) it has a designated Anti-Money Laundering
Compliance Officer (whose identity has been made known to Introducing Firm and
the NASD and NYSE); (3) it provides continuous anti-money laundering training
to its employees; and (4) its anti-money laundering program is independently
audited on an annual basis.

c.                                       Transaction Reports.  Clearing Agent will provide Introducing Firm
with anti-money laundering and other activity reports that can be used to
detect suspicious activity in order to assist Introducing Firm to meet its
obligations.  Clearing Agent will, upon
request, provide Introducing Firm with relevant information in Clearing Agent’s
possession that the Introducing Firm needs in order to file various required
reports on a timely basis, including Forms CTR, CMIR, and SAR-SF and will provide
such further assistance as may be required in the filing of such reports.

d.                                      Notification if Clearing Agent Detects Suspicious Activity.  Through its trained
employees and the use of automated systems, Clearing Agent will review for and
may detect suspicious activity utilizing a risk-based approach.  Clearing Agent’s review does not relieve
Introducing Firm of its own responsibilities to review for suspicious activity.
When Clearing Agent detects suspicious activity, Clearing Agent will contact
Introducing Firm about the transaction for purposes of sharing information
about the transaction, unless Clearing Agent believes that Introducing Firm
itself may be engaged in suspicious activity or Clearing Agent would be
prohibited by law from sharing with Introducing Firm information about the 

 

14

 

suspicious transaction. 
Nothing in this Section shall be read to prohibit Clearing Agent from
filing its own suspicious activity and other reports, as it believes necessary
or appropriate.  Introducing Firm shall
take such steps as Clearing Agent may reasonably request in connection with any
potential suspicious activity in an account, including closing the account.

e.                                       Incoming FedWires.  For all incoming federal fund wires (“FedWires”),
Clearing Agent shall initially check relevant information, which will include
the remitter’s name, address, and account number, and the originating bank’s
name and address (to the extent provided on an incoming wire) to detect
possible OFAC restrictions.

f.                                         Outgoing FedWires for Third Parties.  Requests for
third-party wires are processed by Clearing Agent on an exception basis using a
risk-based approach.  When allowed, for
outgoing FedWires ordered to the delivery of a person or entity other than the
account holder, Clearing Agent shall review relevant information, including the
payee’s name, address, and account number, and the recipient bank’s name and
address, to detect possible violations of OFAC restrictions.

g.                                      Incoming Securities.  For securities received, Clearing Agent shall
review the names of the specified holder of the security to detect possible
violations of OFAC restrictions in those circumstances when the registration on
the security received is different than the name on the account into which the
securities are deposited.

h.                                      Outgoing Securities for Third Parties.  For outgoing
securities to third parties, Clearing Agent shall check the names and addresses
of the third party to whom the security is to be delivered to detect possible
violations of OFAC restrictions.

i.                                          Systematic Daily Screening, Government Lists Including OFAC.  On a daily basis,
Clearing Agent shall compare all new accounts opened on its systems and all
substantial changes made to account data resident on its systems to determine
if any such new or changed account may be subject to an OFAC or other
designated government list.  In addition,
Clearing Agent shall compare its existing customer database to added restrictions
as may be published by the Federal Government from time to time.  Further, Clearing Agent shall periodically compare
its existing customer database to the existing OFAC government lists.  In the event that Clearing Agent’s
comparisons indicate that an account may be subject to an OFAC or government
list restriction, Clearing Agent will notify Introducing Firm if it believes
there is a match.  Introducing Firm shall
cooperate fully with Clearing Agent to determine whether, in fact, the account
is subject to any such restriction. 
Introducing Firm will cooperate with Clearing Agent in implementing any
such action as may be determined by Clearing Agent to be necessary or
appropriate.  Introducing Firm
acknowledges that Clearing Agent may rely on a third-party vendor to provide
current OFAC and other government restricted list data, and Clearing Agent
shall not be held liable for any errors or omissions caused by such third-party
vendor.

 

15

 

j.                                          Electronic Funds Transfer Rule and Travel Rule.  Clearing Agent
represents it has systems designed to comply with the electronic transfer of
funds rules, specifically the “Funds Transfer Rule” and the “Travel Rule,” 31
C.F.R., Section 103.33(f) and (g), when processing disbursements on behalf of
Introducing Firm.  Clearing Agent shall
comply with these rules based on information provided by Introducing Firm.

k.                                       FinCEN Requests under Section 314(a) of USA PATRIOT Act. Clearing Agent will respond to a FinCEN request about
accounts or transactions by immediately searching its records to determine
whether it maintains any account for, or has engaged in any transaction with,
any individual, entity, or organization named in FinCEN’s request.   If Clearing Agent finds a match, it will
report it to FinCEN by completing FinCEN’s subject information form.

l.                                          Jurisdiction Warranting Special Measures. Clearing Agent will take such special measures as it may
deem appropriate with respect to any foreign jurisdiction, institution(s),
class(es) of account(s) designated by the U.S. Treasury Department to be of “primary
money laundering concern” in accordance with Section 311 of the USA PATRIOT
Act.

m.                                    Services, Information, Reports and Other Data.  Clearing Agent
hereby agrees and acknowledges that it is obligated to provide to Introducing
Firm all such services, information, reports and other data, in such manner and
within such time periods, as set forth in this Agreement and as required by
applicable laws and regulations.

n.                                      Further Description of Services.  Further description of
services beyond that set forth in this Agreement shall be set forth in writing
and shall be subject to the mutual agreement of the parties.

7.3.8                        Bulletins and Other Informational Memoranda.  Clearing Agent shall
from time to time issue Bulletins or other informational memoranda to
Introducing Firm setting forth Clearing Agent’s policies and procedures
regarding anti-money laundering and terrorist financing.  Introducing Firm agrees to become familiar
with such Bulletins and informational memoranda and to abide by them.

7.3.9                        Cooperation.  Consistent with Section 314(b) of the USA
PATRIOT Act and this Agreement, Introducing Firm and Clearing Agent shall
cooperate with each other and exchange information to assist each other in
detecting money laundering and terrorist financing.  Introducing Firm and Clearing Agent shall
each submit to the Financial Crimes Enforcement Network of the United States
Treasury Department the notice set forth in 31 CFR Part 103.110(b)(2) and shall
renew such notice each year.  Each
instance of information sharing shall constitute a confirmation by Introducing
Firm to Clearing Agent and by Clearing Agent to Introducing Firm that the
requisite notice has been filed. 
Clearing Agent and Introducing Firm agree to consult with each other
from time to time on the allocation of each other’s anti-money laundering
responsibilities between them.

 

16

 

7.3.10                  No
Party to Cause Violation by the Other.  Neither Clearing Agent nor Introducing Firm
shall knowingly take any action to cause the other party to be in violation of
any anti-money laundering laws or regulations.

8.                                      RECEIPT AND DELIVERY OF FUNDS AND
SECURITIES

8.1                                 Receipt and Delivery of Funds and Securities.

8.1.1                        Cashiering Functions.  Clearing Agent shall perform cashiering
functions for accounts introduced by Introducing Firm.  These functions shall include receipt and
delivery of securities; receipt and payment of funds owed by or to customers;
and provision of custody for securities and funds.  Introducing Firm shall provide Clearing Agent
with the data and documents that are necessary or appropriate to permit
Clearing Agent to perform its obligations under this Section, including but not
limited to copies of records documenting receipt of customers’ funds and
securities received directly by Introducing Firm.  Such data and documents must be compatible
with the requirements of Clearing Agent’s data processing systems.  Clearing
Agent may reasonably refuse or decline to accept any particular payment or form
of payment, as it deems appropriate. 
Clearing Agent will not accept payment in currency, money orders,
traveler’s checks, double-endorsed checks, checks drawn on non-U.S. banks,
starter checks or checks drawn against lines of credit.

8.1.2                        Purchases.  Introducing Firm shall be responsible for
purchases (including transactions on a “when issued” basis) made for customers
until actual and complete payment has been received by Clearing Agent.  Introducing Firm shall not introduce accounts
requiring settlement on a “delivery versus payment” or “receive versus payment”
basis unless such account utilizes the facilities of a securities depository or
qualified vendor as defined in NYSE Rule 387 for all depository eligible
transactions.

8.1.3                     Sales.  Introducing Firm shall be responsible for
sales (including those on a “when issued” basis), until Clearing Agent has
received, in acceptable form, the securities involved in the transaction.  If Clearing Agent does not receive delivery
of securities in an acceptable form, Clearing Agent may buy-in all or part of
the securities.

8.1.4                        Funds and Securities Received by Introducing Firm.  Introducing Firm
shall promptly deposit with Clearing Agent funds or securities received by
Introducing Firm from its customers, together with such information as may be
relevant or necessary to enable Clearing Agent to record such remittances and
receipts in the respective customer accounts.

8.1.5                        Failure to Settle or Pay.  In the event of a failure to timely deposit
required funds or securities, Clearing Agent may take appropriate remedial
action.  Without waiving or otherwise
limiting its right to take other remedial action, Clearing Agent may at its
option charge interest at rates as agreed in Clearing Agent’s standard disclosure
under NYSE Rule 382.  Introducing Firm
may pass such charges on to its customers but Introducing Firm remains
responsible therefor until actually paid.

 

17

 

8.2                                 Restricted and Control Stock Requirements.  Introducing Firm
shall be responsible for determining whether any securities held in Introducing
Firm’s or its customer accounts are restricted or control securities as defined
by applicable laws, rules, or regulations. 
Introducing Firm is responsible for assuring that orders and other
transactions executed for such securities comply with such laws, rules, and
regulations.

8.3                                 Corporate Action Requests/Soliciting Dealer Agreements.  Introducing Firm
requests and authorizes Clearing Agent to execute as Introducing Firm’s
agent-in-fact any and all Soliciting Dealer Agreements (except as provided in
Section 12.7) for corporate actions involving securities or other interests
held by Introducing Firm’s customers on the books of Clearing Agent.  Clearing Agent agrees to provide a written
notice of the pending corporate action to Introducing Firm at its designated
locations.  Clearing Agent further agrees
to collect and submit corporate action requests from Introducing Firm and
submit them to the soliciting party in accordance with the instructions
received from the soliciting party. 
Clearing Agent agrees to use commercially reasonable efforts to
communicate corporate action information to Introducing Firm and, where applicable,
Introducing Firm’s customers, but shall not be liable for a) any delays in the
communication of corporate action information or b) delays in the transmission
of collected corporate action requests to the soliciting party unless caused by
Clearing Agent’s gross negligence.  All
fees received from the soliciting party will be credited to Introducing
Firm.  In consideration of providing this
service to Introducing Firm, Introducing Firm agrees to indemnify and hold
harmless Clearing Agent, its affiliates, officers, agents and employees from
all claims, suits, investigations, damages and defense costs (including
reasonable attorney’s fees) that arise in connection with this Section.

8.4                                 Lost, Stolen or Forged Securities. Introducing Firm shall be responsible for any defect in
title to any securities purchased, sold, borrowed, delivered or transferred
under this Agreement which may have been forged, counterfeited, raised,
altered, lost or stolen.

9.                                      SAFEGUARDING OF FUNDS AND SECURITIES

Except as otherwise provided
in this Agreement, Clearing Agent shall be responsible for the safekeeping of
all money and securities received by it pursuant to this Agreement.  However, Clearing Agent will not be
responsible for any funds or securities delivered by a customer to Introducing
Firm until such funds or securities are actually received by Clearing Agent or
deposited in bank accounts maintained by Clearing Agent. Whenever Clearing
Agent has agreed to act as custodian of securities in any account, or to hold
securities in “safekeeping”, Clearing Agent may hold the securities in the
customer’s name (“Customer Name Securities”), or may cause such securities to
be registered in the name of Clearing Agent or its nominee or in the names or
nominees of any depository used by Clearing Agent. In connection with Customer
Name Securities, Clearing Agent shall have no responsibility for, among other
things, collecting and paying of dividends, transmitting and handling tenders
or exchanges pursuant to tender offers and exchange offers, transmitting proxy
materials and other shareholder communications, and handling exercises or
expirations of rights and warrants or redemptions.

 

18

 

10.                               CONFIRMATIONS AND STATEMENTS

10.1                           Preparation and Transmission of Confirmations and Statements.  Clearing Agent shall
prepare confirmations and summary periodic statements and shall, to the extent
required by the Rules, transmit them to customers and Introducing Firm in a
timely fashion except to the extent the parties agree in writing that Introducing
Firm may transmit confirmations to customers. 
Confirmations and statements shall be prepared on forms disclosing that
the account is carried on a fully-disclosed basis for the Introducing Firm in
accordance with applicable rules, regulations, and interpretations.  Introducing Firm will have the ultimate
responsibility for compliance with the prospectus delivery requirements of the
Securities Act of 1933, as amended, regardless of its retention of a prospectus
fulfillment service to perform delivery of same; provided that the parties
acknowledge that prospectus delivery services shall be provided to Introducing
Firm by Clearing Agent.

10.2                           Examination and Notification of Errors.  Introducing Firm
shall examine all confirmations, statements, and other reports in whatever
medium provided to Introducing Firm by Clearing Agent.  Introducing Firm must notify Clearing Agent
of any error claimed by Introducing Firm in any confirmation, statement or
other report within a reasonable time following receipt of the confirmation,
statement or other report at issue.  If
Introducing Firm fails to do so, Introducing Firm shall be deemed to have
waived its right to make any claim against Clearing Agent with respect to such
error.

11.                               ACCEPTANCE AND EXECUTION OF TRANSACTIONS

11.1                           Responsibility to Accept or Reject Trades.  Clearing Agent shall
execute transactions in customers’ accounts and release or deposit money or
securities to or for accounts only upon Introducing Firm’s instructions or the
instructions of Introducing Firm’s clients’ investment advisors.  Clearing Agent reserves the right to accept
written or oral transaction orders from Introducing Firm’s customers in
circumstances where it determines that either (i) the customers are unable to
execute those transactions through Introducing Firm or (ii) Clearing Agent is
required to do so by applicable or relevant law.  Notwithstanding any instructions to the
contrary, Clearing Agent may, after notifying Introducing Firm orally or in
writing: (i) refuse to confirm a transaction or cancel a confirmation; (ii)
reject a delivery or receipt of securities or money; (iii) refuse to clear a
trade executed by Introducing Firm; or (iv) refuse to execute a trade for the
account of a customer or Introducing Firm.

11.2                           Responsibility for Errors in Execution.  Introducing Firm
shall be responsible for transmission to Clearing Agent of all orders and for
any errors in the Introducing Firm’s recording or transmission of such orders.

12.                               OTHER OBLIGATIONS AND RESPONSIBILITIES OF
INTRODUCING FIRM

12.1                           Disciplinary Action, Suspension, or Restriction.  If Introducing Firm
or any of its affiliates, or any officer, director, or general securities
principal or financial and 

 

19

 

operations principal of Introducing Firm, becomes subject to
suspension, restriction or disciplinary action by a federal or state agency,
stock exchange, or regulatory or self-regulatory organization having
jurisdiction over Introducing Firm or Introducing Firm’s securities or
commodities business, Introducing Firm shall give notice to Clearing Agent
promptly, orally and in writing, and provide Clearing Agent a copy of any
decision relating to such suspension, restriction or disciplinary action.  Clearing Agent may take any action it
reasonably deems to be necessary (i) to assure that it will continue to comply
with all applicable legal, regulatory, and self-regulatory requirements,
notwithstanding such, suspension, restriction or disciplinary action; and (ii)
to comply with any requests, directives, or demands made upon Clearing Agent by
any such federal or state agency, stock exchange, or regulatory or
self-regulatory organization.  Notwithstanding the foregoing, Introducing
Firm need not notify Clearing Agent of “minor rule violations” (as that term is
defined in connection with Form U-5) of individuals, with the exception of
directors, general securities principals, financial principals, operations
principals and individuals listed on Schedule A of Introducing Firm’s Form BD.

12.2                           Provision of Financial Information.  Introducing Firm
shall furnish Clearing Agent copies of FOCUS Reports, financial statements for
the current fiscal year, the executed Forms X-17a-5 (Parts I and IIA) filed
with the SEC, any amendments to Introducing Firm’s Form BD, and any other
financial reports Clearing Agent may from time to time reasonably require.  Introducing Firm shall provide such reports
to Clearing Agent at the time Introducing Firm files such reports with its
primary examining authority.

12.3                           Executing Brokers.  If Introducing Firm wishes to act as an “Executing
Broker” as such term is understood in that certain letter dated January 25,
1994, from the Division of Market Regulation of the SEC, as the same may be
amended, modified or supplemented from time to time (the “No-Action Letter”),
then all terms herein shall have the same meaning as ascribed thereto either in
this Agreement or in the No-Action Letter as the sense thereof shall
require.  Introducing Firm may, from time
to time, execute trades (either directly or through Clearing Agent) for Prime
Broker Accounts in compliance with the requirements of the No-Action
Letter.  (The No-Action Letter requires,
inter alia, that a contract be executed between Clearing Agent and Prime Broker,
and between Clearing Agent and Prime Brokerage Customer prior to the transaction
of any business hereunder.)  Introducing
Firm shall promptly notify Clearing Agent, but in no event later than 5:00 p.m.
New York time, of trade date in a mutually acceptable fashion, of such trades
in sufficient detail for Clearing Agent to be able to report and transfer any
trade executed by Introducing Firm on behalf of a Prime Brokerage Account to
the relevant Prime Broker.  Introducing
Firm understands and agrees that if Prime Broker shall disaffirm or “dk” any
trade executed by Introducing Firm on behalf of a Prime Brokerage Account,
Introducing Firm shall open an account for such Prime Brokerage Account in its
range of accounts and shall transfer or deliver the trade to such account at
the risk and expense of Introducing Firm to the same extent as for any account
introduced by Introducing Firm pursuant to this Agreement.  Introducing Firm understands and agrees that
all Prime Brokerage Accounts shall be conducted in accordance with the
requirements of the No-Action 

 

20

 

Letter and any relevant agreement between Introducing Firm
and a Prime Brokerage Customer or between Clearing Agent and relevant Prime
Broker.  Introducing Firm further agrees
to supply Clearing Agent with such documents, papers and things, which from
time to time are reasonably required by Clearing Agent to carry out the
intention of this Section.  Introducing
Firm agrees that it shall know its customer, obtain appropriate documentation,
including new account form, conduct its own credit check and determine the
availability of shares as required for processing of any short sales.  Introducing Firm shall be responsible for any
disaffirmed trades.

12.4                           Protection of Intellectual Property.  Introducing Firm
shall use reasonable efforts to preserve and protect Clearing Agent’s and its
affiliates’ patent, trade secret, copyright and other proprietary rights in
Clearing Agent’s or its affiliates’ products, services, trademarks and
tradenames, at least to the same extent used by Introducing Firm to preserve
and protect its own proprietary data or information and to notify Clearing
Agent of any action by any third party known by Introducing Firm to constitute
an infringement of Clearing Agent’s or any of its affiliates’ proprietary
rights and to cooperate with Clearing Agent in protecting such rights.  Without limiting the foregoing, Introducing
Firm shall note Clearing Agent’s or its affiliates’ patent, trade secret,
copyrights, trademarks and trade names when Introducing Firm makes reference to
or distributes products or services provided by Clearing Agent or its
affiliates, as applicable.

12.5                           Currency Fluctuation.  If Introducing Firm directs Clearing Agent to
enter into or to clear and settle any transaction to be effected on any
securities exchange or in any market on which transactions are settled in a
foreign currency, (i) any profit or loss arising as a result of a fluctuation
in the rate of exchange between such currency and the United States Dollar
shall be entirely for Introducing Firm’s account and risk, (ii) all initial and
maintenance margin deposits required or requested by Clearing Agent shall be in
the currency required by the applicable marketplace or clearing agency in such
amounts as Clearing Agent in its reasonable discretion may require, and (iii)
Clearing Agent is authorized to convert funds in the Account into and from such
foreign currency at rates of exchange prevailing at the banking or other
institutions (including affiliated financial institutions, including Societe
Generale) with which Clearing Agent normally does business.

12.6                           Execution Away from Clearing Agent.  In the event that
Introducing Firm shall place for execution with firms other than Clearing Agent
orders for its customers’ accounts, Introducing Firm shall be responsible for
any duty of best execution or any failure by any contra broker or dealer to
settle the transaction for any reason whatsoever, and Introducing Firm shall promptly
reimburse Clearing Agent for any losses or expenses sustained by Clearing Agent
in connection therewith.

13.                               OTHER OBLIGATIONS AND RESPONSIBILITIES OF
CLEARING AGENT

13.1                           Use of Third-Party Services.
Clearing Agent may, at its reasonable option, and consistent with common
industry practice, retain one or more independent data processing or other
service bureaus to perform functions (including, but not limited to, 

 

21

 

pricing services or proxy mailing services) assigned to
Clearing Agent under this Agreement.

13.2                           Tax Withholding.  Introducing Firm hereby agrees to take
necessary measures to comply with the income tax withholding requirements of
Section 3406 and Sections 1441 through 1446 (the nonresident alien
withholding  requirements) of the
Internal Revenue Code of 1986, as amended (“Internal Revenue Code”) with
respect to its customer accounts. 
Introducing Firm agrees to furnish to Clearing Agent any tax
information, e.g., taxpayer identification numbers and certifications provided
by the customer on IRS Forms W-8, W-8BEN, W-8IMY, W-8EXP, W-8ECI, W-9, or any
acceptable substitute in its possession relating to each customer account
transferred to Clearing Agent and to each future customer account opened.  Introducing Firm acknowledges that Clearing
Agent will rely on such information for purposes of determining Clearing Agent’s
obligation to withhold federal income tax pursuant to Sections 1441 through
1446 and 3406 of the Internal Revenue Code. 
Introducing Firm hereby authorizes Clearing Agent to employ any
procedures permitted under applicable law or regulation to achieve compliance
with its withholding obligations under federal income tax law.

13.3                           Transmission of Exception Reports to Introducing Firm. On or before the effective date of this Agreement, and
annually thereafter, Clearing Broker shall provide to Introducing Firm,
pursuant to NYSE Rule 382(e), a list of all reports (e.g., exception reports)
it offers to Introducing Firm. Introducing Firm shall promptly advise Clearing
Agent, in writing, of those specific reports it elects to receive. Pursuant to
NYSE Rule 382(e) and NASD Rule 3230(c)(3), Clearing Agent shall send to the
Chief Executive Officer and Chief Compliance Officer of Introducing Firm by
July 31 of each year a list of exception reports available from Clearing Agent
as well as the reports requested by or supplied to the Introducing Firm as of
such date in order to assist Introducing Firm in supervising its day to day
business activities. Clearing Agent shall also provide to the Introducing Firm’s
Designated Examining Authority (or, if none, to its appropriate regulatory
agency or authority) a copy of the notice sent to Introducing Firm transmitting
the reports referred to in the preceding sentence.

14.                               ORDER AUDIT TRAIL SYSTEM (OATS)

Clearing Agent shall have no
responsibility for capturing, recording or transmitting to the NASD, on
Introducing Firm’s behalf, any order information that is required to be
recorded and transmitted pursuant to the NASD Rules 6950 through 6957 (Order
Audit Trail System (“OATS”) Rules) and the OATS Reporting Technical
Specifications.

15.                               TRANSMISSION OF ORDERS TO CLEARING AGENT
AS PRIME BROKER

15.1                           General Introducing Firm Functions. Introducing Firm may, from time to time, collect and
transmit to Clearing Agent orders and other instructions to Clearing Agent from
Introducing Firm’s prime brokerage customers (“Prime Brokerage Orders”) and
provide Clearing Agent with such reports, data and services as Clearing Agent 

 

22

 

requires in order to act as prime broker with respect to such
Prime Brokerage Orders, consistent with applicable rules and regulations.

15.2                           Trading Activity Functions.
Introducing Firm shall perform the following functions as introducing firm for
its prime brokerage customers:

a.                                       Report all trading activity for the accounts of Introducing
Firm’s prime brokerage customers (whether executing with Clearing Agent or
away) to Clearing Agent via such method as may agreed upon by Clearing Agent
and Introducing Firm) on trade date by a time to be determined by Clearing
Agent and Introducing Firm  from time to
time.

b.                                      Accept, via electronic mail (or telephone) on T+1,
information regarding all trade breaks and respond to Clearing Agent regarding
resolution of such trade breaks by 12:00 noon (NYC time) on T+1.

c.                                       Obtain pre-approval from Clearing Agent for any short sales
directed by Introducing Firm’s prime brokerage customers.

d.                                      Provide all information to Clearing Agent related to the
eligibility of any of Introducing Firm’s customers to receive or to continue to
receive prime brokerage services.

15.3                           Other Prime Brokerage Functions. Introducing Firm shall perform the following additional
functions as introducing firm for its prime brokerage customers:

a.                                       Obtain and deliver to Clearing Agent an executed Prime
Brokerage Client Agreement in substantially the form provided by Clearing Agent
to Introducing Firm, for each prime brokerage customer of Introducing Firm.

b.                                      Obtain and deliver to Clearing Agent an executed Prime
Brokerage Investment Advisor Agreement in substantially the form provided by
Clearing Agent to Introducing Firm, for any investment advisor with discretion
over an account of a prime brokerage customer of Introducing Firm (the “Investment
Advisor”).

c.                                       Deliver to Clearing Agent for acceptance or rejection the
name of, and any information requested by Clearing Agent regarding, each
Executing Broker that Introducing Firm proposes to utilize to execute prime
brokerage trades. Introducing Firm acknowledges that Clearing Agent does not
select any Executing Broker, and makes no representation regarding the
financial condition or ability of any Executing Broker.

d.                                      Obtain and deliver to Clearing Agent an executed Schedule A
for each prime brokerage agreement between Clearing Agent (as Prime Broker) and
each Executing Broker accepted by Clearing Agent, showing each prime brokerage
customer of Introducing Firm for whose Account Prime Brokerage Orders will be
placed and, thereafter, deliver to Clearing Agent executed Forms 1 to Schedule
A to reflect additions and deletions of prime brokerage customers as
appropriate.

 

23

 

e.                                       Perform any other functions reasonably requested by Clearing
Agent to facilitate Clearing Agent’s performance of the prime brokerage
services hereunder and as contemplated by the No-Action Letter.

15.4                           Introducing Firm Acknowledgements Regarding Prime Brokerage.  Introducing Firm
acknowledges that Clearing Agent may disaffirm or dk transactions of any prime
brokerage customers of Introducing Firm. 
Introducing Firm will be responsible for resolving all unmatched items,
and advising Clearing Agent of their status in a timely manner.  Introducing Firm acknowledges that Clearing
Agent shall monitor the net equity of accounts of Introducing Firm’s prime
brokerage customers carried by Clearing Agent, and shall notify Introducing
Firm who in turn shall notify the relevant prime brokerage customers on
Introducing Firm’s letterhead whenever such customers’ net equity falls below
the minimum required by Clearing Agent. 
If an account falls below the minimum net equity set by Clearing Agent,
the account will not be permitted to place any further Prime Brokerage Orders
until the net equity is increased to the level required by Clearing Agent.  Introducing Firm agrees to provide access to
its personnel and records for the purpose of complying with Clearing Agent’s
obligations as Prime Broker under applicable laws, rules and regulations in
relation to the provision of the prime brokerage services.

15.5                           Compensation.  In consideration of Clearing Agent acting as
Prime Broker, Introducing Firm agrees to pay the amounts set forth in Schedule
A hereto.

15.6                           Limitation of Liability.  In addition to the provisions of Section 17
in this Agreement and not in limitation thereof, Introducing Firm acknowledges
and agrees that:

a.                                       Clearing Agent accepts no responsibility for the Prime
Brokerage Orders received from the Introducing Firm via such method as may
agreed upon by Clearing Agent and Introducing Firm, except in the event of
gross negligence or willful misconduct by Clearing Agent or its employees.

b.                                      Clearing Agent accepts no responsibility and disclaims all
liability for any communication linkage failure associated with the transmittal
of Prime Brokerage Orders except in the event of gross negligence or willful
misconduct by Clearing Agent or its employees.

c.                                       Any notice by Clearing Agent hereunder or as required to
perform prime brokerage services to prime brokerage customers of Introducing
Firm shall be made to Introducing Firm, whether on Introducing Firm’s behalf or
on behalf of such customers.  Any notice
made to Introducing Firm shall be deemed to be made to, or done for,
Introducing Firm’s prime brokerage customers, as applicable.  Introducing Firm shall be responsible for all
communication with Introducing Firm’s prime brokerage customers regarding all
services to be performed hereunder. 
Clearing Agent is not responsible for communication failure between
Introducing Firm and Introducing Firm’s prime brokerage customers.

 

24

 

d.                                      In connection with this Section 15.6, Clearing Agent
disclaims liability not only for direct damages to the Introducing Firm,
Clearing Agent, Introducing Firm’s prime brokerage customers or a third party,
but in addition disclaims any and all liability for special, indirect or
consequential or incidental damages whether in tort or in contract even if
Clearing Agent has been advised of the possibility of such damage except in the
event of gross negligence or willful misconduct by Clearing Agent or its
employees.

15.7                           No Joint Venture.  Nothing contained in this Agreement (i) shall
constitute Clearing Agent and Introducing Firm as members of any partnership,
joint venture, association, syndicate, unincorporated business or other
separate entity, (ii) shall be construed to impose any liability as such on any
of them or (iii) shall be deemed to confer on any of them any express, implied
or apparent authority to incur any obligation or liability on behalf of the
others.

15.8                           Representations and Warranties.  In addition to, and no way in limitation of,
Introducing Firm’s representations and warranties as contained elsewhere in
this Agreement, Introducing Firm represents and warrants that:

a.                                       Introducing Firm has been duly appointed and authorized by
Introducing Firm’s prime brokerage customers to transmit Prime Brokerage Orders
to Clearing Agent.

b.                                      All Introducing Firm’s customers whose accounts will
participate in prime brokerage activities have been advised, via client
agreements or otherwise, that their accounts will engage in prime brokerage
activities, Clearing Agent will act as Prime Broker for their accounts, and
said customers or the Investment Advisor thereof may place orders for the
execution of trades for their accounts at Executing Brokers, all in conformity
with applicable under applicable laws, rules and regulations.

16.                               DAMAGES

As between the parties,
neither party shall be liable for special, indirect, incidental, consequential
or punitive damages, whether such damages are incurred or experienced as a
result of entering into or relying on this Agreement or otherwise, even if the
parties have been advised of the possibility of such damages.  Introducing Firm and Clearing Agent each
agree not to assist any claim for punitive damages against the other.

16.1                           Allocation of Risks.  Introducing Firm acknowledges and agrees that
the fees charged by Clearing Agent reflect the allocation of risks including,
but not limited to, any limitation of liability set forth in this
Agreement.  A modification of the
allocation of risks set forth in this Agreement would affect the fees charged
by Clearing Agent, and in consideration of such fees, Introducing Firm agrees
to such allocation of risks.

17.                               LIABILITY

17.1                           Liability of Clearing Agent.

 

25

 

17.1.1              Disclaimer of Warranties.  
Introducing Firm expressly agrees that Introducing Firm’s use of
Clearing Agent’s services is at Introducing Firm’s risk.  Neither Clearing Agent nor any of its
directors, officers, employees, agents, contractors, affiliates, information
providers, licensors, or other suppliers providing data, information, services
or software, including but not limited to the NYSE, warrants that the services
will be uninterrupted or error free; nor do any of them make any warranty as to
the results that may be obtained from the use of the services or as to the
timeliness, sequence, accuracy, completeness, reliability or content of any
data, information, services, or transactions provided and Clearing Agent shall
not be responsible for any losses liabilities or damages caused by the acts or
omissions of those third party agents, contractors, information providers or
other suppliers selected by the Clearing Agent with reasonable care beyond any
amount which Clearing Agent is able to recover pursuant to its agreement with
such entity.  Except as specifically set
forth in this Section 17.1, Clearing Agent’s services are provided on an “as
is,” “as available” basis, without warranties of any kind, either express or
implied, including, without limitation, those of merchantability, fitness for a
particular purpose, and non-infringement, other than those warranties which are
implied by and incapable of exclusion, restriction or modification under the
laws applicable to this Agreement.

17.1.2                  Clearing
Agent Indemnification.  In addition to any other obligations it may
possess under other provisions of this Agreement, Clearing Agent shall
indemnify, defend, and hold harmless Introducing Firm and any controlling
person of Introducing Firm, from and against all allegations, claims, demands,
proceedings, suits and actions (“Claims”) and all liabilities, expenses,
reasonable attorney’s fees (including fees and costs incurred in enforcing
Introducing Firm’s right to indemnification), and costs in connection therewith
arising out of any negligent, reckless, dishonest, fraudulent, or criminal act
or omission on the part of any of Clearing Agent’s officers or employees with
respect to the services provided by Clearing Agent under this Agreement.

17.1.3                   Clearing Agent Right to Compete. 
Nothing in this Agreement shall be deemed to restrict in any way the
right of Clearing Agent or any affiliate of Clearing Agent to compete with
Introducing Firm in any or all aspects of Introducing Firm’s business.

17.2                           Liability of Introducing Firm.

17.2.1                  Introducing
Firm Indemnification.  In addition to any other obligations it may
possess under other provisions of this Agreement, Introducing Firm shall
indemnify, defend and hold harmless Clearing Agent, and any controlling person
of Clearing Agent, from and against all Claims and all liabilities, expenses,
reasonable attorney’s fees (including fees and costs incurred in enforcing
Clearing Agent’s right to indemnification), and costs in connection therewith
arising out of one or more of Introducing Firm’s or any of its employee’s
negligent, dishonest, fraudulent, or criminal act or omission or any of the
following:

17.2.1.1                   Failure to Make Payment or Deliver Securities.   A check received by
Clearing Agent from a customer shall not constitute payment until it has been
paid and the proceeds are 

 

26

 

actually received and finally credited to Clearing Agent
(without any subsequent charge back) by its bank.

17.2.1.2                   Margin Calls.  Failure of a customer to meet any initial
margin call or any maintenance call, except that Clearing Agent shall be
responsible for the portion of any such loss or damage that Introducing Firm
establishes was directly attributable to Clearing Agent’s failure to give
notification to Introducing Firm as required in Section 6.3.2 of this
Agreement.

17.2.1.3                   Introducing Firm’s Failure to Perform.  Failure of
Introducing Firm to perform any duty, obligation, or responsibility with
respect to customer accounts as set forth in this Agreement.  Introducing Firm’s indemnification obligation
under this Section shall not be affected by the participation of Clearing Agent
or any person controlling it or controlled by it within the meaning of the
Securities Exchange Act of l934, as amended, in any transaction giving rise to
such an obligation, unless such participation constitutes recklessness, fraud,
or criminal conduct.

17.2.1.4                   Failure of a Customer to Perform Obligations.  Any failure by any
of Introducing Firm’s customers to perform any commitment or obligation with
respect to a transaction carried by Clearing Agent under this Agreement,
whether or not such failure was under the control of Introducing Firm.

17.2.1.5                   Improper Conduct by Agents.  Any negligent, dishonest, fraudulent, or
criminal act or omission on the part of Introducing Firm’s directors or agents.

17.2.1.6                   Customer Claims and Disputes.  Any claim or dispute between Introducing Firm
and a customer with respect to services provided under this Agreement,
including, but not limited to, any claim or dispute concerning the validity of
a customer order in the form the order was transmitted to Clearing Agent by
Introducing Firm and any claim arising in connection with Clearing Agent’s
guarantee of any signature of any customer of Introducing Firm or at the
request of Introducing Firm.

17.2.1.7                   Warranties.  Any adverse claim with respect to any
security delivered by Introducing Firm or cleared by Clearing Agent, including
a claim of a defect in title with respect to securities that are alleged to
have been forged, counterfeited, raised or otherwise altered, or if they are
alleged to have been lost or stolen.  The
parties agree that Clearing Agent shall be deemed to be an intermediary between
Introducing Firm and customer and shall be deemed to make no warranties other
than as provided in Section 8-306(3) of the Uniform Commercial Code.

17.2.1.8                   Default of Third-Party Introducing Firm.  Any default by a
third-party Introducing Firm with whom the Introducing Firm deals on a
principal or agency basis in a transaction either not executed by Clearing
Agent or not cleared by Clearing Agent.

17.2.1.9                   Prior Self-Clearing Arrangements.  Any guarantee,
indemnification, or hold harmless agreement in connection with Introducing Firm’s
business or customers that Clearing Agent may provide to the National
Securities Clearing Corporation, the Depository Trust Company, or any other
clearing, depository, or self-regulatory organization with 

 

27

 

respect to transactions self-cleared by Introducing Firm prior
to transfer of such functions to Clearing Agent.

17.2.1.10             Breach
of Warranty by Introducing Firm.  Any breach by Introducing Firm in any
material respect of any representation or warranty made by it under this
Agreement.

17.2.1.11             Deposit
of Checks to Customer Accounts.  Any failure to exercise due diligence in
reviewing checks received from customers to ensure that same are in proper
form, or in the issuance of instructions to Clearing Agent regarding the
accounts into which checks are to be deposited.

17.2.1.12             Infringement
of Intellectual Property Rights.  Any act or omission of Introducing Firm, its
agents or employees which infringes on any patent, trade secret, copyright,
trademark, or other intellectual property right of Clearing Agent.

17.2.2                  Defense
of Claims.  Introducing Firm will institute defense
against any Claims at the sole expense of Introducing Firm and using counsel
reasonably acceptable to Clearing Agent. 
Introducing Firm will keep Clearing Agent informed of the status of the
defense of such Claims, and Introducing Firm will not agree to any settlement
without consent of Clearing Agent, which consent will not be unreasonably
withheld.  Notwithstanding the foregoing,
Clearing Agent will have the right to assume its defense of such Claims at the
expense of Clearing Agent if (i) the employment of such separate counsel has
been authorized in writing by Introducing Firm, such authorization not to be
unreasonably withheld, (ii) Introducing Firm has not employed counsel to
conduct the defense of Clearing Agent, or (iii) Clearing Agent shall have
reasonably concluded that, as between Clearing Agent and Introducing Firm,
there may be a conflict of interest requiring separate counsel.

18.                               FEES AND SETTLEMENTS FOR SECURITIES
TRANSACTIONS

18.1                           Commissions.  Clearing Agent shall charge each of
Introducing Firm’s customers the commission, markup, and any other charge or
expense that Introducing Firm instructs it to charge for each transaction.  If instructions are not received with respect
to a transaction in the time period required by Clearing Agent to implement
those instructions, Clearing Agent shall charge the customer the commission,
markup, or other charge or expense prescribed in the basic commission schedule
delivered to Clearing Agent by Introducing Firm.  This basic schedule may be amended from time
to time by Introducing Firm by written instructions delivered to Clearing
Agent.  Clearing Agent shall only be
required to implement such amendments to the basic schedule to the extent such
amendments are within the usual capabilities of Clearing Agent’s data
processing and operations systems and only within such reasonable time
limitations as Clearing Agent may deem necessary to avoid disruption of its
normal operating capabilities.

18.2                           Fees for Clearing Services.  As compensation for services provided
pursuant to this Agreement, Clearing Agent shall deduct from the commissions,
mark-up, mark-down, 

 

28

 

or fees charged Introducing Firm’s customers the amounts set
forth in the fully-disclosed pricing schedule attached hereto as Schedule A.

18.3                           Miscellaneous Charges.  Introducing Firm agrees to pay Clearing Agent
the fees and charges described in Schedule A hereto.  Notwithstanding the foregoing, Introducing
Firm may instruct Clearing Agent to pass through such fees to Introducing Firm’s
customers.

19.                               DEPOSIT ACCOUNT

19.1                           Establishment of Deposit Account.  To further assure
Introducing Firm’s performance of its obligations under this Agreement, including
but not limited to its indemnification obligations under Section 17,
Introducing Firm shall, on or before the execution of this Agreement, establish
an account at Clearing Agent to be designated as the Introducing Firm’s Deposit
Account (the “Deposit Account”).  The
Deposit Account shall not represent an ownership interest by Introducing Firm
in Clearing Agent.  The Deposit Account
shall at all times contain cash, securities, or a combination of both, having a
market value of at least seven hundred fifty thousand dollars ($750,000) (the “Required
Amount”).  The securities placed in the
Deposit Account shall consist only of direct obligations issued by or
guaranteed as to principal and interest by the United States Government.  In the event of a substantial change in the
nature and extent of Introducing Firm’s business operations, Clearing Agent may
require that an additional amount be deposited promptly in the Deposit
Account.  If such a deposit is not made
in the amount specified, whether or not Introducing Firm agrees that the amount
is justified under this Section, Clearing Agent may terminate this Agreement
forthwith.

19.2                           Clearing Agent’s Right to Offset.  If (i) Clearing
Agent shall have any claim against Introducing Firm or a customer of
Introducing Firm which has not been resolved within ten (10) business days
after Clearing Agent presents such claim to Introducing Firm; or (ii) if
Clearing Agent shall suffer any loss or incur any expense for which it is
entitled to be indemnified pursuant to this Agreement, and Introducing Firm
shall fail to make such indemnification within ten (10) business days after being requested to do so, Clearing
Agent may deduct the amount of such claim, loss, or expense from the Deposit
Account and apply proceeds to Introducing Firm’s obligation hereunder.  Clearing Agent may withdraw cash or
securities (or both) having a market value equal to the amount of such claimed
deficiency.  If those funds are withdrawn
from the Deposit Account, then Introducing Firm shall be obligated to make a prompt
deposit in the Deposit Account of cash or securities sufficient to bring the
Deposit Account back to a value of at least the Required Amount.  Clearing Agent shall give prior notice to
Introducing Firm of all deductions from the Deposit Account made hereunder.

19.3                            Termination of Deposit Account.  Within thirty (30) days of termination of
this Agreement, Clearing Agent shall pay and deliver to Introducing Firm, the
funds and securities in the Deposit Account, less any amounts to which it is
entitled under the preceding Section; provided, however, that Clearing Agent
may:  (i) retain the Deposit 

 

29

 

Account until transfer of all customer and proprietary
accounts of Introducing Firm has been completed and (ii) retain in the Deposit
Account such amount for such period as it reasonably deems appropriate for its
protection from any claim or proceeding of any type, then pending or
threatened, until the final determination of such claim or proceeding is
made.  If a threatened claim or
proceeding is not resolved or if a legal action or proceeding is not instituted
within 90 days after the termination of this Agreement, any amount retained
with respect to such claim, proceeding, or action shall be paid or delivered to
Introducing Firm.

20.                                PROPRIETARY ACCOUNTS OF INTRODUCING
FIRMS AND DEALERS (PAIB)

Clearing Agent shall
establish a separate reserve account for proprietary assets held by Introducing
Firm so that Introducing Firm can treat these assets as allowable assets under
SEC Rule 15c3-1.  Clearing Agent agrees
to perform the required computation on behalf of Introducing Firm in accordance
with the following provisions:

20.1                           Clearing Agent will perform a separate computation for PAIB
assets (PAIB reserve computation) of Introducing Firm in accordance with the
customer reserve computation set forth in SEC Rule 15c3-3 (customer reserve
formula) with the following modifications:

a.                                       Any credit (including a credit applied to reduce a debit)
that is included in the customer reserve formula will not be included as a
credit in the PAIB reserve computation;

b.                                      Note E(3) to Rule 15c3-3a, which reduces debit balances by
one percent under the basic method and subparagraph (a)(1)(ii)(A) of Rule
15c3-1, which reduces debit balances by three percent under the alternative
method, will not apply; and

c.                                       Neither Note E(I) to Rule 15c3-3a nor NYSE Interpretation /04
to Item 10 of Rule 15c3-3a regarding securities concentration charges is
applicable to the PAIB reserve computation.

20.2                           The PAIB reserve computation will include all the proprietary
accounts of Introducing Firm. All PAIB assets will be kept separate and
distinct from customer assets under the customer reserve computation set forth
in SEC Rule 15c3-3.

20.3                           The PAIB reserve computation will be prepared within the same
time frames as those prescribed by Rule 15c3-3 for the customer reserve
formula.

20.4                           Clearing Agent will establish and maintain a separate “Special
Reserve Account for the Exclusive Benefit of PAIB Customers” with a bank in
conformity with the standards of Rule 15c3-3(f) (PAIB Reserve Account).  Cash and/or qualified securities as defined
in the Rule will be maintained in the PAIB Reserve Account in an amount equal
to the PAIB reserve requirement.

 

30

 

20.5                           If the PAIB reserve computation results in a deposit
requirement, the requirement can be satisfied to the extent of any excess debit
in the customer reserve formula of the same date.  However, a deposit requirement resulting from
the customer reserve formula cannot be satisfied with excess debits from the
PAIB reserve computation.

20.6                           Within two business days of entering into this Agreement,
Introducing Firm shall notify its designated examining authority (“DEA”) in
writing that it has entered into a PAIB agreement with Clearing Agent.

20.7                           Upon discovery that any deposit made to the PAIB Reserve
Account did not satisfy its deposit requirement, Clearing Agent will
immediately notify its DEA and the SEC. 
Unless a corrective plan is found to be acceptable by the SEC and the
DEA, Clearing Agent will provide written notification within five business days
of the date of discovery to Introducing Firm that PAIB assets held by Clearing
Agent will not be deemed allowable assets for net capital purposes.

20.8                           To the extent applicable, commissions receivable and other
receivables of Introducing Firm from Clearing Agent (excluding clearing
deposits) that are otherwise allowable assets under the net capital rule are
not to be included in the PAIB reserve computation, provided the amounts have
been clearly identified as receivables on the books and records of the
Introducing Firm and as payables on the books of Clearing Agent.

21.                               COMMUNICATION

21.1                           Notice to Customers.  Clearing Agent shall, upon the opening of an
account pursuant to Section 4 of this Agreement, mail to each customer a copy
of the notice to customers required by NYSE Rule 382(c). Clearing Agent shall
provide Introducing Firm with a copy of its form of notice on request, and if
and when any material changes are made thereto, Clearing Agent shall provide
Introducing Firm, as a courtesy, a copy of the form of notice prior to
beginning use of such form .

21.2                           Customer Complaint Reporting and Customer Notification.  Introducing Firm
authorizes and instructs Clearing Agent to forward promptly any written
customer complaint received by Clearing Agent regarding Introducing Firm and/or
its associated persons relating to functions and responsibilities allocated to
Introducing Firm under this Agreement to a) Introducing Firm and b) Introducing
Firm’s DEA designated under Section 17 of the Securities Exchange Act of 1934,
as amended, or, if none, to Introducing Firm’s appropriate regulatory agency or
authority.  Further, Introducing Firm
authorizes Clearing Agent to notify the customer, in writing, that Clearing
Agent has received the complaint, and that the complaint has been forwarded to
Introducing Firm’s DEA (or, if none, to the appropriate regulatory agency).

21.3                           Restriction on Advertising.  Neither Clearing Agent nor Introducing Firm
shall utilize the name of the other in any way without the other’s prior
written consent except to disclose the relationship between the parties.  Neither party shall employ the other’s name
in such a manner as to create the impression that the relationship between them

 

31

 

is anything other than that of clearing firm and introducing
firm.  Introducing Firm shall not hold
itself out as an agent of Clearing Agent or as a subsidiary or company
controlled directly or indirectly by or affiliated with Clearing Agent except
as provided in this Section. 
Notwithstanding the foregoing section 21.3, Introducing Firm may hold
itself out as a company affiliated with Clearing Agent until Introducing Firm
is no longer under common control with Clearing Agent.

21.4                           Linking Between Sites.  Without express written authorization, following
the initial public offering of Introducing Firm neither party may provide or
allow an electronic hyperlink directly from its service or site on the Internet
or another site over which that party has control to the service or site on the
Internet of the other party.

22.                               TERM OF AGREEMENT AND TERMINATION OF
AGREEMENT

22.1                           Term.  The term of this Agreement shall commence as
of the date this Agreement is signed by both parties and continue until the
close of business on December 31, 2006 (the “Termination Date”) (the “Initial
Term”).  At no time during the Initial Term
of this Agreement shall either Introducing Firm or Clearing Agent cancel this
Agreement except as provided in Sections 22.2 or 22.3.  Either party must provide written notice no
later than sixty (60) days prior to Termination Date if it intends not to renew
this Agreement.  Failure to do so will
result in this Agreement being renewed for successive sixty (60) day periods (“Renewal
Term”).  During any Renewal Period,
either party may cancel this Agreement without cause upon sixty (60) days prior
written notice to the other party.

22.2                           Termination upon 60-Day Notice.  Either Party may terminate this Agreement
upon sixty (60) days prior written notice to the other party in the event that:
(i) the other party breaches a material provision of this Agreement and such
breach, if curable, shall continue without remedy for a period of 10 days after
written notice from the non-defaulting party is transmitted in accordance with
section 25 of this Agreement; (ii) any representation, warranty or covenant of
the other party in this Agreement is false or misleading in any material
respect; (iii) any director, executive officer, general securities principal or
financial and operations principal of the other party is enjoined, prohibited,
disciplined or suspended as a result of administrative or judicial proceedings,
or proceedings of a self-regulatory organization of which the other party is a
member, from engaging in securities business activities constituting all or
portions of the other party’s securities business.

22.3                           Immediate Termination.  This Agreement may be terminated upon written
notice by Clearing Agent or Introducing Firm immediately in the event that (a)
the other party is enjoined, disabled, suspended, prohibited, or otherwise
becomes unable to engage in the securities business or any part of it by
operation of law or as a result of any administrative or judicial proceeding or
action by the SEC, any state securities law administrator, or any regulatory or
self-regulatory organization having jurisdiction over such party or (b) the
other party (i) becomes or is declared insolvent; (ii) voluntarily files or is
the subject of, a petition commencing a case under any chapter of Title 11 of
the United States Code; (iii) makes a general assignment for the benefit 

 

32

 

of its creditors; (iv) admits in writing its inability to pay
its debts as they mature; (v) sells or enters into negotiations to sell all or
substantially all of its assets; (v) files an application or consents to the
appointment of, or there is appointed, any receiver, or a permanent or interim
trustee of that party or any of its subsidiaries, as the case may be, or all or
any portion of its property, including, without limitation, the appointment or
authorization of a trustee, receiver or agent under applicable law or under a
contract to take charge of its property for the purpose of enforcing a lien
against such property or for the purpose of general administration of such
property for the benefit of its creditors; (vii) files a petition seeking a
reorganization of its financial affairs or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
law or statute or files an answer admitting the material allegations of a
petition filed against it in any proceeding under any such law or statute; or
(viii) takes any corporate action for the purpose of effecting any of the
foregoing.

22.4                           Conversion of Accounts.
In the event that this Agreement is terminated for any reason, Introducing Firm
shall arrange for the conversion of its customer accounts to another clearing
broker or to Introducing Firm if it becomes self-clearing.  Introducing Firm shall give Clearing Agent Notice
(the “Conversion Notice”) of: (i) the name of the broker that will assume
responsibility for clearing services for Customers and Introducing Firm; (ii)
the date on which such broker will commence providing such services; (iii)
Introducing Firm’s undertaking, in form and substance satisfactory to Clearing
Agent, that Introducing Firm’s agreement with such clearing broker provides
that such clearing broker will accept on conversion all Introducing Firm and
customer accounts then maintained by Clearing Agent; and (iv) the name of an
individual or individuals within the new clearing broker’s organization whom
Clearing Agent may contact to coordinate the conversion.  The Conversion Notice shall accompany
Introducing Firm’s notice of termination given pursuant to this Section.  If Introducing Firm fails to give Conversion
Notice to Clearing Agent, Clearing Agent may notify Introducing Firm’s
customers as Clearing Agent deems appropriate of the termination of this
Agreement and may make such arrangements as Clearing Agent deems appropriate
for transfer or delivery of customer accounts. 
The expense of notifying those customers and making such arrangements
shall be charged to Introducing Firm.

22.5                           Survival.  Termination of this Agreement in any manner
shall not release Introducing Firm or Clearing Agent from any liability or
responsibility with respect to any representation or warranty or transaction
effected on the books of Clearing Agent.

22.6                           Conversion Costs. 
If Introducing Firm terminates this Agreement pursuant to Section 22.1, 22.2 or 22.3 above, Introducing
Firm shall promptly pay all reasonable expenses directly related to the transition
of Introducing Firm’s business to any successor Clearing Agent.

22.7                           Failure to Convert.  Introducing Firm shall be solely and
exclusively responsible for any cost, expense (including, but not limited to,
reasonable fees and expenses of legal counsel) or damages sustained or incurred
by Clearing Agent arising out of Introducing Firm’s failure to promptly convert
all of Introducing Firm’s and its customer accounts for clearing by Clearing
Agent unless otherwise agreed in writing.

 

33

 

23.                               CONFIDENTIALITY

23.1                           “Confidential Information” of a party shall mean all data and
information submitted to the other party or obtained by the other party in
connection with the services, including information relating to a party’s
customers (which includes, without limitation, Non-Public Personal Information
as that term is defined in Securities and Exchange Commission Regulation S-P),
technology, operations, facilities, consumer markets, products, capacities,
systems, procedures, security practices, research, development, business
affairs, ideas, concepts, innovations, inventions, designs, business
methodologies, improvements, trade secrets, copyrightable subject matter and
other proprietary information.

23.2                           All Confidential Information relating to a party shall be
held in confidence by the other party to the same extent and in at least the
same manner as such party protects its own confidential or proprietary
information.  Neither party shall
disclose, publish, release, transfer or otherwise make available Confidential
Information of the other party in any form to, or for the use or benefit of,
any person or entity without the other party’s consent.  Each party shall, however, be permitted to
disclose relevant aspects of the other party’s Confidential Information to its
officers, agents, subcontractors and employees to the extent such disclosure is
reasonably necessary for the performance of its duties and obligations under
this Agreement and such disclosure is not prohibited by Gramm-Leach-Bliley Act
of 1999 (“GLBA”), which amends the Securities Exchange Act of 1934, as it may
be amended from time to time, the regulations promulgated by the Securities and
Exchange Commission thereunder or other applicable law; provided, however, that
such party shall take all reasonable measures to ensure that Confidential
Information of the other party is not disclosed or duplicated in contravention
of the provisions of this Agreement by such officers, agents, subcontractors
and employees.  The obligations in this
Section shall not restrict any disclosure by either party pursuant to any
applicable law, or by order of any court or government agency (provided that
the disclosing party shall give prompt notice to the non-disclosing party of
such order) and shall not apply with respect to information which (i) is
developed by the other party without violating the disclosing party’s
proprietary rights; (ii) is or becomes publicly known (other than through
unauthorized disclosure); (iii) is disclosed by the owner of such information
to a third party free of any obligation of confidentiality; (iv) is already
known by such party without an obligation of confidentiality other than
pursuant to this Agreement or any confidentiality agreements entered into
between the parties before the effective date of this Agreement; or (v) is
rightfully received by a party free of any obligation of confidentiality.  If the GLBA, the regulations promulgated by
the Securities and Exchange Commission thereunder or other applicable law now
or hereafter in effect imposes a higher standard of confidentiality to the
Confidential Information, such standard shall prevail over the provisions of
this Section.

23.3                           Introducing Firm acknowledges that the services Clearing
Agent provides hereunder involve Introducing Firm access to proprietary
technology, trading and other systems, and that techniques, algorithms and
processes contained in such systems constitute trade secrets and shall be
safeguarded by Introducing Firm, and that Introducing Firm 

 

34

 

shall exercise reasonable care to protect Clearing Agent’s
interest in such trade secrets.  Introducing
Firm agrees to make the proprietary nature of such systems known to those of
its consultants, staff, agents or clients who may reasonably be expected to
come into contact with such systems. 
Introducing Firm agrees that any breach of this confidentiality
provision may result in its being liable for damages as provided by law.

23.4                           Sections 23.1 through 23.3 shall survive the termination of
this Agreement.

24.                               ACTION AGAINST CUSTOMERS BY CLEARING
AGENT

Clearing Agent may, in its
sole discretion and at its own expense and, upon written notice to Introducing
Firm, institute and prosecute in its name any action or proceeding against any
of Introducing Firm’s customers in relation to any controversy or claim arising
out of Clearing Agent’s transactions with Introducing Firm or with Introducing
Firm’s customers.  Nothing contained in
this Agreement shall be deemed either (i) to require Clearing Agent to
institute or prosecute such an action or proceeding; or (ii) to impair or
prejudice its right to do so, should it so elect, nor shall the institution or
prosecution of any such action or proceeding relieve Introducing Firm of any
liability or responsibility which Introducing Firm would otherwise have had
under this Agreement.  Introducing Firm
assigns to Clearing Agent its rights against its customer to the extent
necessary to effectuate the provisions of this Section and not in derogation of
Introducing Firm’s own rights.

25.                               NOTICES

All notices required or
permitted by this Agreement shall be in writing and shall be deemed to have
been given one day after being delivered personally or by messenger or being
received via telecopy, telex or other electronic transmission, or two days
after being sent by overnight delivery service, in all cases addressed to the person
for whom it is intended at the addresses as follows:

If to Introducing Firm, to:

Cowen and Company, LLC

1221 Avenue of the Americas

New York, New York 10020

Attn:  Jeff Charne

Fax No.:  (646) 562-1596

 

With a copy to:

 

General Counsel

Fax No.: (646) 562-1861

If to Clearing Agent, to:

 

SG Americas Securities, LLC

480 Washington Blvd.

Jersey City, NJ 07310

 

 

35

 

 

Attn:  Walter Koller

Fax No.: (201) 839-8243

 

With a copy to:

 

SG Americas Securities, LLC

1221 Avenue of the Americas

New York, NY 10020

Attn: General Counsel

Fax No.: (212) 278-7053

 

or
to such other address as a party hereto shall have designated by notice in
writing to the other party in the manner provided by this Section 25.

26.                               ARBITRATION

26.1                           ARBITRATION DISCLOSURE

This Agreement contains a
pre-dispute arbitration clause. By signing an arbitration agreement the parties
agree as follows:

(A)                              All parties to
this agreement are giving up the right to sue each other in court, including
the right to a trial by jury, except as provided by the rules of the
arbitration forum in which a claim is filed.

(B)                                Arbitration
awards are generally final and binding; a party’s ability to have a court
reverse or modify an arbitration award is very limited.

(C)                                The ability of
parties to obtain documents, witness statements and other discovery is
generally more limited in arbitration than in court proceedings.

(D)          The arbitrators do not have to explain the reason(s) for
their award.

(E)                                 The panel of
arbitrators will typically include a minority of arbitrators who were or are
affiliated with the securities industry.

(F)                                 The rules of
some arbitration forums may impose time limits for bringing a claim in
arbitration. In some cases. A claim that is ineligible for arbitration may be
brought in court.

(G)                                The rules of
the arbitration forum in which the claim is filed, and any amendments thereto,
shall be incorporated into this agreement.

26.2                           ARBITRATION AGREEMENT

ANY DISPUTE, CLAIM OR CONTROVERSY
BETWEEN US ARISING OUT OF OR RELATING TO YOUR BUSINESS OR THIS AGREEMENT THAT
CANNOT BE RESOLVED BY THE PARTIES SHALL BE SUBMITTED TO ARBITRATION 

 

36

 

CONDUCTED BEFORE THE NEW YORK
STOCK EXCHANGE, INC., OR NASD DISPUTE RESOLUTION, INC. (OR THEIR SUCCESSOR
FIRMS), AND IN ACCORDANCE WITH THE RULES THEN OBTAINING OF THE SELECTED
ORGANIZATION AND SHALL BE CONDUCTED AS A BROKER TO BROKER OR MEMBER VS MEMBER
DISPUTE.  ARBITRATION MUST BE COMMENCED BY
SERVICE UPON THE OTHER PARTY OF A WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN
NOTICE OF INTENTION TO ARBITRATE, THEREIN ELECTING THE ARBITRATION TRIBUNAL.
UNLESS OTHERWISE AGREED BY THE PARTIES OR REQUIRED BY THE APPLICABLE
ARBITRATION FORUM, THE ARBITRATION SHALL BE HELD IN NEW YORK, NEW YORK, AND IN
ALL EVENTS THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, EXCEPT FOR ITS
CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN ALL CLAIMS AND DEFENSES SET FORTH IN
THE ARBITRATION. ANY FINAL AWARD RENDERED IN ARBITRATION SHALL BE FINAL AND
BINDING BETWEEN THE PARTIES, AND JUDGMENT THEREON MAY BE ENTERED IN ANY COURT
OF COMPETENT JURISDICTION.

 

NO PERSON SHALL BRING A PUTATIVE
OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE
ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE
CLASS ACTION AND WHO IS A MEMBER OF A PUTATIVE CLASS AND WHO HAS NOT OPTED OUT
OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS
ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED;
OR (iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.  SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO
ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT
EXCEPT TO THE EXTENT STATED HEREIN.

 

27.                               INJUNCTIVE RELIEF

In the event of a breach or
threatened breach of the provisions of Section 23 of this Agreement by
Introducing Firm or any employee or representative of Introducing Firm,
Introducing Firm acknowledges that Clearing Agent shall be entitled to seek
preliminary and permanent injunctive relief to enforce the provisions
hereof.  In addition, Introducing Firm
acknowledges that a breach of the terms regarding confidentiality of
information and ownership of Clearing Agent’s intellectual property would cause
irreparable and incalculable damage to Clearing Agent.  Nothing herein shall preclude the parties
from pursuing any action or other remedy for any breach or threatened breach of
this Agreement, all of which shall be cumulative.

28.                               BUSINESS CONTINUITY

Clearing Agent will provide
Introducing Firm with a current copy of its disaster recovery and business
continuity plan and will cooperate and participate with Introducing Firm and
designated vendors in the periodic testing and implementation of Introducing
Firm’s disaster recovery and business continuity plan. Introducing Firm will
provide Clearing Agent with a 

 

37

 

current
copy of its disaster recovery and business continuity plan and will cooperate
and participate with Clearing Agent and designated vendors in the periodic
testing and implementation of Clearing Agent’s disaster recovery and business
continuity plan.

29.                               AUDIT

29.1                           Subject to satisfying the notice
requirements set forth in Section 29.2 hereof, Introducing Firm, or its designated representative, shall have the right to
audit, once during each twelve month period while this Agreement is in effect,
commencing on the date this Agreement is signed, all records and materials
pertaining to the services provided to Introducing Broker in order to determine
the adequacy of operational controls, including the quality and completeness of
data and services performed, physical and environmental controls maintained at
the Clearing Agent processing facility, adherence to established service level
agreements, general controls (e.g.,
operational controls and 
procedures,  including program
change controls, quality assurance, system processing and data access
controls), security practices and procedures and disaster recovery and back-up procedures that are used by Clearing Agent
in providing services (“Services”) to Introducing Firm pursuant to this
Agreement.

 

29.2                           Introducing Firm shall give Clearing Agent written notice of
any proposed audit. In such notice, Introducing Firm shall advise Clearing
Agent of (i) the commencement date of the audit, which may not be earlier than thirty
(30) days after the date of Clearing Agent’s receipt of the audit notice, (ii)
the scope of the audit in detail, (iii) the anticipated termination date of the
audit, which may not be longer than thirty (30) days after
the commencement date, unless Clearing Agent agrees to a longer period and (iv)
the names of Clearing Agent’s employees who will conduct the audit. All audits will be conducted during
Clearing Agent’s normal business hours.  Notwithstanding
anything else contained in this Section, Clearing Agent agrees that it shall
make its facilities, personnel and records available at any time without prior
notice if requested by any of Introducing Firm’s regulators pursuant to an
audit of Introducing Firm by any of such regulators.

 

29.3                           Clearing Agent agrees to provide Introducing Firm’s employees who are conducting an audit with such assistance and with access to
such  employees and agents of Clearing
Agent and to such records, materials and systems pertaining to, or that are
used in providing, the Services to enable Introducing Firm to determine whether
Clearing Agent’s general controls, operational procedures, security practices
and procedures, disaster recovery and
back-up procedures used in providing the Services are adequately
controlled and meet applicable regulatory requirements; provided, however, that
Clearing Agent reserves the right to impose reasonable safeguards and to
deny Introducing Firm access to confidential information of other customers of
Clearing Firm and their clients.

 

29.4                           Clearing Agent and Introducing Firm
shall meet to review each audit report by Introducing Firm promptly after the
issuance thereof and shall mutually agree upon the appropriate manner in which
to respond to the changes, if any, suggested by the audit report. Clearing
Agent shall formally reply in writing to an audit report by Introducing 

 

38

 

Firm’s
auditors not later than forty five (45) days after the audit report is
issued.  If Introducing Firm advises
Clearing Agent that Introducing Firm’s audit of Clearing Agent identified a
bona fide, reasonable problem that in Introducing Firm’s opinion materially and
adversely affects Clearing Agent’s control environment or security policies and
procedures and Clearing Agent agrees with Introducing Firm regarding such
material and adverse effect, then, at Introducing Firm’s request, Clearing
Agent shall correct such problem within a mutually acceptable timetable.

 

29.5                           At Introducing Firm’s request, Clearing
Agent shall furnish Introducing Firm with copies of such portions of Clearing
Agent’s internal and external audit reports that relate to the Services
(redacted to remove references to matters other than the Services).

 

29.6                           Clearing Agent shall promptly notify
Introducing Firm of changes in Clearing Agent’s control environment (including
all changes in external auditors, disaster recovery policies and standards,
change control procedures and similar policies, standards and statements),
breaches of security, and regulatory violations and investigations, which in
Clearing Agent’s reasonable opinion materially and adversely affect, directly
or indirectly, Clearing Agent’s provision of the Services.

 

29.7                           Introducing Firm will bear its own costs relating to the performance of all

audits by or on behalf of
Introducing Firm.

30.                               GENERAL PROVISIONS

30.1                           Successors and Assigns.  This Agreement shall be binding upon and
shall inure to the benefit of the respective successors and assigns of
Introducing Firm and Clearing Agent.  No
assignment of this Agreement or any rights, including those to indemnification
hereunder by either party shall be effective unless the other party’s written
consent shall be first obtained. 
Notwithstanding the foregoing, Clearing Agent may assign this Agreement
to any of its affiliates without the consent of Introducing Firm, provided that
the affiliate is a duly registered broker dealer in good standing with the SEC.
 For the purpose of this section 30.1, “affiliate”
shall mean any company that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
Clearing Agent.

30.2                           Severability.  If any provision of this Agreement shall be
held to be invalid or unenforceable, the validity or enforceability of the
remaining provisions and conditions shall not be affected thereby.

30.3                           Counterparts.  This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute a single agreement.

30.4                           Entire Agreement Amendments and Duties Not Specifically
Enumerated Herein.  This Agreement represents the entire
agreement between the parties with respect to the subject matter contained herein
and all prior discussions, agreements, and promises, written or oral, are
merged herein.  This Agreement may not be
changed orally, but only by an agreement in writing signed by the parties.  Clearing Agent shall not be 

 

39

 

responsible or liable for failure to perform any duties not
specifically enumerated herein.

30.5                           Captions.  Captions herein are for convenience only and
are not of substantive effect.

30.6                           Choice of Law.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York,
without giving effect to the conflicts of laws or principles thereof.  This Agreement shall not be governed by the
United Nations Convention on the International Sale of Goods.

30.7                           Citations.  Any reference to the rules or regulations of
the SEC, NASD, the NYSE, or any other regulatory or self-regulatory
organization are current citations.  Any
changes in the citations (whether or not there are any changes in the text of
such rules or regulations) shall be automatically incorporated herein.

30.8                           Construction of Agreement.  Neither this Agreement nor the performance of
the services hereunder shall be considered to create a joint venture or
partnership between Clearing Agent and Introducing Firm or between Introducing
Firm and other Introducing Firms for whom Clearing Agent may perform the same
or similar services.

30.9                           Third-Parties.  This Agreement is between the parties hereto
and is not intended to confer any benefits on third-parties including, but not
limited to, customers of Introducing Firm.

30.10                     Non-Exclusivity of Remedies.  The enumeration herein of specific remedies
shall not be exclusive of any other remedies. 
Any delay or failure by a party to this Agreement to exercise any right,
power, remedy, or privilege herein contained, or now or hereafter existing
under any applicable statute or law, shall not be construed to be a waiver of
such right, power, remedy, or privilege. 
No single, partial, or other exercise of any such right, power, remedy,
or privilege shall preclude the further exercise thereof or the exercise of any
other right, power, remedy, or privilege.

30.11                     SIPA; Rule 15c3-3.  All introduced customers are the customers of
Introducing Firm except as provided under SIPA and SEC financial responsibility
rules.  Nothing in this Section will
otherwise change or affect the provisions of this Agreement which provide that
the customer account remains Introducing Firm’s customer account for all other
purposes, including but not limited to, supervision, suitability and
indemnification.

30.12                     Force Majeure.  Clearing Agent shall not be liable for any
loss caused, directly or indirectly, resulting from any circumstances beyond
its reasonable control, including without limitation, labor disputes, riots,
sabotage, insurrection, fires, flood, storm, explosions, earthquakes,
electrical power failures, telecommunications system failures, Internet
failure, outbreaks of computer viruses, worms, parasites and the like, acts of
God or nature, war, both declared or undeclared, or acts of terrorism. In
addition, Clearing Agent shall not be liable for any loss caused, directly or
indirectly, resulting from the acts or omissions of third parties over which it
has no control.

 

40

 

30.13                     Audio Taping of Telephone Conversations.  Each party
understands that for quality control, dispute resolution or other business
purposes, the parties may record some or all telephone conversations between them.  Each party hereby consents to such
recording.  It is further understood that
all such conversations are deemed to be solely for business purposes.

31.                               APPROVAL

This Agreement shall be
subject to approval by the NYSE and by any other self-regulatory organization
vested with the authority to review or approve it.  Clearing Agent shall submit this Agreement to
the NYSE and Introducing Firm shall submit this Agreement to any
self-regulatory organization from which Introducing Firm is required to obtain
approval.  In the event of disapproval,
the parties shall bargain in good faith to achieve the requisite approval.

 

41

 

IN WITNESS WHEREOF the
parties have hereto affixed their signatures by their duly authorized officers
on the day and date first above written.

THIS AGREEMENT CONTAINS A
PRE-DISPUTE ARBITRATION CLAUSE, WHICH CAN BE FOUND ON PAGES [   ] AND [  
] IN SECTION 26 OF THIS AGREEMENT.

 

	
  COWEN AND COMPANY, LLC

  	
   

  	
  SG AMERICAS SECURITIES,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

42

 

APPENDIX A

 

ANTI-MONEY LAUNDERING PROGRAM

 

I.              Introducing
Firm’s Anti-Money Laundering Responsibilities:

 

A.            Customer Identification Program.  At the time of the opening of any new
account, Introducing Firm must obtain sufficient information from its Customer
to enable it to form a reasonable belief that it knows the identity of the
Customer and the source of its funds. 
Accordingly, Introducing Firm agrees to establish and maintain a
Customer Identification Program consisting of procedures reasonably designed to
accomplish the following:

 

                                                                (1)           Obtaining the following information
from each Customer prior to opening the respective account:

 

(a)                                  name;

 

(b)                                 date of birth (for an individual);

 

(c)                                  street address (for an individual, the address must be a
residential or business address — if no residential or business address, an
Army Post Office or Fleet Post Office box number, or the residential or
business street address of next of kin or another contact individual; for an
organization or entity, the address must be the principal place of business,
local office, or other physical location); and

 

(d)                                 identification number (e.g.,
a taxpayer identification number, passport number and country of issuance,
alien identification card number or the number and country of issuance or any
other government-issued document indicating nationality or residence and
bearing a photograph or similar safeguard).

 

If an organization or entity does not have an
identification number or presents identification documentation that is
unfamiliar, at a minimum Introducing Firm must request and obtain
government-issued documentation certifying the existence of the business.

 

(2)           Verifying
each customer’s identity using either documentary means (e.g., examining a passport) or
non-documentary means (e.g.,
contacting references), or both. 
Introducing Firm must use documentary means unless no such documents are
available; and where no original documents are available, Introducing Firm must
use a combination of documentary means and non-documentary means to verify the
identity of the Customer.

 

Introducing Firm shall verify a
customer’s identity prior to opening an account.  When
relying on documents to verify a customer’s identity, Introducing Firm shall:

 

43

 

 

(a)                                  Rely only on known government-issued identification as
verification of a customer’s identity (for individuals, a valid government-issued
identification indicating nationality or residence and bearing a photograph or
similar safeguard (e.g., a
non-expired driver’s license or passport); for organizations, documents showing
the existence of the entity, such as certified articles of incorporation, a
government-issued business license or a partnership agreement);

 

(b)                                 Refrain from opening an account if a document shows any
indication of fraud;

 

(c)                                  Refrain from accepting unfamiliar identification documents;
and

 

(d)                                 Review at least 2 documents described in (a) above.

 

(e)                                  Record a description of the documents, including (1) the type
of document, (2) any identification number contained in the document, (3) the
place of issuance, (4) the date of issuance, and (5) expiration date, if any.

 

When relying on non-documentary methods, Introducing
Firm shall use at least one of the following non-documentary methods to verify
a Customer’s identity:

 

(a)                                  Crosscheck the identification information the Customer
provides against information available through a known and reliable databases,
such as Lexis-Nexis;

 

(b)                                 Obtain a written reference from a regulated financial
institution or another Customer in good standing;

 

(c)                                  Obtain the Customer’s most recent financial statement that
has been audited by an accounting firm with which Introducing Firm is familiar;
and

 

(d)                                 Record the methods used and the results of those methods.

 

With respect to those accounts involving investment
advisers, Introducing Firm shall conduct a sufficient inquiry to obtain, record
and verify information as outlined above about the adviser’s customer,
including ascertaining the identity of each beneficial owner, of any such
account prior to opening the account.

 

(3)           Reviewing
the logical consistency of all information obtained from Customers (e.g., by ensuring that the country or area
code provided with a phone number matches the 
Customer’s address).

 

44

 

(4)           Keeping
records of identification information for at least 5 years after the Account
has been terminated and records used for verification for at least 5 years
after the record is created.

 

(5)           Reviewing
all lists published by the U.S. Federal Government relating to known or
suspected terrorists prior to opening an account (to be supplied by Clearing
Agent if and when the U.S. Federal Government creates such lists).

 

(6)           Refusing
to open, closing or taking other appropriate steps with respect to an account
when identification information cannot be obtained or verified.

 

(7)           Taking
reasonable steps to notify customers in writing or orally that Introducing Firm
and Clearing Agent are obtaining, verifying, and recording customer information
using language such as the following:  “In
accordance with our legal obligations to obtain, verify, and record
identification information regarding each individual and organization who opens
an account, you will be required to provide identification information, such as
your name, address, date of birth and other information and may be required to
provide documentation to verify your identity.”

 

(8)           Conducting
additional due diligence with respect to certain higher risk customers when
such accounts are opened.  Introducing
Firm will conduct the additional due diligence with respect to the following
customers:

 

(a)                                  Introducing Firm agrees to use at least two of the
verification methods referenced in Section 1.A(2) above prior to opening
accounts for any customers from countries that are not members of the Financial
Action Task Force (“FATF”).  Introducing
Firm agrees to contact Clearing Agent’s Anti-Money Laundering Compliance
Officer when a potential customer is from a country not a member of the FATF
and perform any additional due diligence that Clearing Agent’s Anti-Money
Laundering Compliance Officer determines is required.

 

(b)                                 Introducing Firm agrees to use at least two of the
verification methods referenced in Section 1.A(2) above prior to opening an
account for a person who is known to be a senior foreign political figure (“SFPFs”),
as defined below.  Introducing Firm
agrees to contact Clearing Agent’s Anti-Money Laundering Compliance Officer
when a potential customer is a SFPF and perform any additional due diligence
that Clearing Agent’s Anti-Money Laundering Compliance Officer determines is
required.

 

SFPFs include: (i) current or former senior officials
in the executive, legislative, administrative, military or judicial branches of
a non-U.S. government (whether elected or not), a senior official of a major
non-U.S. political party, or a senior executive of a non-U.S. government-owned
commercial enterprise; (ii) a 

 

 

45

 

corporation, business, or other entity that has been
formed by, or for the benefit of, any such individual; (iii) an immediate
family member of any such individual; and (iv) a person who is widely and
publicly known (or is actually known by Introducing Firm) to be a close
associate of any such individual.

 

(c)                                  Introducing Firm agrees to 
(i) ascertain the identity of all customers who directly or beneficially
own a “private banking account” as that is defined below; (ii) ascertain
whether the customer is a SFPF (as that term is defined above); and (iii)
ascertain the source(s) of funds deposited into the account.  Introducing Firm agrees to contact Clearing
Agent’s Anti-Money Laundering Compliance Officer when a potential customer
directly owns or beneficially owns a private banking account and perform any
additional due diligence that Clearing Agent’s Anti-Money Laundering Compliance
Officer determines is required.

 

For purposes of the accounts, a “private banking
account” is any account that: (i) requires a minimum aggregate deposit of funds
or other assets of not less than $1,000,000 and (ii) is established on behalf
of one or more individuals who have direct or beneficial ownership interest
(control or entitlement to the funds or assets) in the account.

 

After a private banking account is opened, Introducing
Firm is responsible for an ongoing review of the activity in the account to
ensure that it is consistent with the information obtained about the customer’s
source of funds and stated purpose and use of the account (e.g., a single, large deposit, if it is
unusual given the anticipated activity and other expected sources, or a deposit
that comes from an unusual source itself may warrant additional scrutiny).

 

(9)           Contacting
the Clearing Agent’s Anti-Money Laundering Compliance Officer where significant
risk factors (other than those referenced in 1.A(8)) are present when opening a
account, such as information that a potential customer is suspected of engaging
in illegal activities.  Introducing Firm
shall perform any additional due diligence efforts that Clearing Agent’s
Anti-Money Laundering Compliance Officer determines are required.

 

                B.            Prohibition
Against Accounts Held by Non-U.S. “Shell Banks.”

 

(1)           Introducing
Firm shall obtain certifications, on forms adopted by the U.S. Department of
the Treasury (attached as Annexes I and II hereto), or substantially equivalent
forms if provided by Clearing Agent, from all customers who are non-U.S.
financial institutions.  Such
certifications shall:  (i) reflect that
Introducing Firm took reasonable steps to ensure that the non-U.S. financial
institution customer does not 

 

 

46

 

establish, maintain, administer, or manage any account
that is used by that non-U.S. bank indirectly to provide banking services to a
non-U.S. shell bank, except as may be permitted by U.S. law; (ii) record the
name and address of a person in the U.S. authorized to accept service of legal
process for records regarding such account; and (iii) record the ownership of
the non-U.S. financial institution.

 

(2)           Introducing
Firm shall obtain and provide such certifications to Clearing Agent along with
all other account opening and CIP documentation for review and approval by
Clearing Agent.  Introducing Firm shall
obtain re-certifications at least once every three years on the anniversary of
the date on which the account was opened or upon request by Clearing Agent, and
shall provide such re-certifications to Clearing Agent within thirty days of
receipt of the re-certification. 
Introducing Firm shall close any account held by a non-U.S. financial
institution if the appropriate certification or the documentation required by
the certification are not obtained or where Clearing Agent directs Introducing
Firm to close such account.  In addition
to any other rights set forth herein, Clearing Agent reserves the right to
close or restrict any account if Clearing Agent believes the account is for, or
on behalf of, a foreign financial institution from which an appropriate
certification has not been received.

 

(3)           Upon
receipt of notice from the U.S. Secretary of the Treasury or the U.S. Attorney
General that a non-U.S. financial institution customer has failed to either:
(a) respond to a subpoena or summons; or (b) to contest such a subpoena or
summons, Clearing Agent’s Anti-Money Laundering Compliance Officer will notify
Introducing Firm that all accounts maintained for that non-U.S. financial
institution must be terminated. 
Introducing Firm shall terminate all such accounts maintained for that
non-U.S. financial institution within ten days of receipt of such notice.

 

(4)           Introducing
Firm shall retain all certifications, documents and other information obtained
regarding accounts held by non-U.S. financial insitutions for at least five
years after the account has been terminated.

 

C.            Prohibitions on Certain Accounts.  The following types of entities will not be
permitted to open accounts: (i) an entity in a jurisdiction deemed “non-cooperative”
by the FATF; or (ii) an entity in a jurisdiction for which the U.S. Federal
Government has issued a money laundering advisory.  Upon request by Clearing Agent, Introducing
Firm will immediately search its records to determine whether it maintains an
account for, or has engaged in any transaction with, any individual, entity, or
organization named in a U.S. Department of the Treasury Financial Crimes
Enforcement Network (“FinCEN”) request. 
Unless otherwise stated, Introducing Firm will search current accounts,
accounts maintained by a named suspect during the preceding twelve months and
transactions conducted by or on behalf of a named suspect during the preceding
six months.  If Introducing Firm finds a
match, it shall notify Clearing Agent immediately.

 

D.            Jurisdictions Warranting Special Measures.  Upon notification from Clearing Agent,
Introducing Firm shall take such special measures as Clearing Agent’s
Anti-Money Laundering Compliance Office deems appropriate with respect to
non-U.S. jurisdictions, 

 

 

47

 

institutions, or classes of accounts designated by the U.S.
Department of the Treasury to be of “primary money laundering concern.”

 

E.             Source and Use of Funds.  Introducing Firm shall use reasonable efforts
to ascertain that the source of a customer’s funds are from the customer, the
customer is not engaged in unlawful activities, the assets being invested have
been legitimately obtained, and any disbursements to a customer or third party
are for legitimate purposes.

 

F.             Reporting Suspicious Activity.         Introducing
Firm must review transactions to detect suspicious activities.  As soon as practicable after identifying
suspicious activity, Introducing Firm shall notify Clearing Agent’s Anti-Money
Laundering Compliance Officer and shall communicate with Clearing Agent about
the transaction for the purpose of sharing information, unless such sharing of information
is prohibited by law.  In addition,
Introducing Firm shall promptly notify Clearing Agent regarding any account
activity that Introducing Firm reasonably believes to be suspicious, not
legitimate, or not having a reasonably apparent explanation.

 

G.            Restrictions on Numbered Accounts.  Introducing Firm will not establish or
maintain specially coded or numbered accounts.

 

H.            Providing Information to and Cooperating with
Clearing Agent.  Introducing
Firm agrees to provide to Clearing Agent any record created in accordance with
or pursuant to, or related to, this Agreement, prior to account opening, as
soon as practicable after account opening, or within seventy-two hours of
Clearing Agent’s request for such information. 
Introducing Firm agrees to cooperate in all reasonable respects with any
request by Clearing Agent in connection with its efforts to comply with its
obligations under the USA PATRIOT Act of 2001 (“Patriot Act”), the regulations
issued thereunder, and other applicable anti-money laundering and
anti-terrorism laws and regulations.

 

I.              Annual Certification.  Introducing Firm shall annually certify, in
the form attached as Annex III hereto (or substantially equivalent form), that
it continues to provide services and maintain procedures that comply with the
requirements of this Agreement.

 

II.            Clearing
Agent’s Responsibilities:

 

A.            Customer Identification Program.  When opening a new account, Introducing Firm
shall provide all information as required by Clearing Agent with respect to
such customer to enable Clearing Agent to form a reasonable belief that it
knows the identity of the customer and the source of its funds as required
under Clearing Agent’s Customer Identification Program.

 

B.            Notification if Clearing Agent Detects Suspicious Activity.  Through its trained employees and the use of
automated systems, Clearing Agent will review for and may detect suspicious
activity utilizing a risk-based approach. 
Clearing Agent’s review does not relieve Introducing Firm of its own
responsibilities to review for suspicious activity under this Agreement.  If Clearing Agent detects suspicious
activity, Clearing Agent will contact Introducing Firm about the transaction
for purposes of sharing information about the transaction, unless Clearing
Agent believes that Introducing Firm itself may be engaged in suspicious
activity 

 

48

 

or Clearing Agent would be prohibited by law from sharing
with Introducing Firm information about the suspicious transaction.  Introducing Firm shall take such steps as
Clearing Agent may reasonably request in connection with any potential
suspicious activity in an account, including closing the account.

 

C.            Incoming FedWires.  For all incoming federal fund wires (“FedWires”),
Clearing Agent shall initially check relevant information, including the
remitter’s name, address, and account number, and the originating bank’s name
and address (to the extent provided on an incoming wire) to detect possible
OFAC restrictions. For incoming third party FedWires, Clearing Agent shall
reserve the right to inquire about the source of funds, and reject the wire
transfer if explanation is not satisfactory.

 

D.            Outgoing FedWires for
Third Parties.  No instruction
to wire or pay proceeds from one account to any other account at the Clearing
Firm or outside of the Clearing Firm not in the exact name of the customer and
at the customer’s designated official address as recorded in the account
documentation will be accepted or acted upon by the Margin Department unless the Introducing Firm obtains
from the customer a Letter of Authorization (LOA) signed by the customer,
notarized, and initialed by a Supervisor at the Introducing Firm.  Once so validated, the LOA will be maintained
by the Margin Department as a standing instruction, if applicable.

 

 

E.             Incoming Securities.  For securities received, Clearing Agent shall
review the names of the specified holder of the security to detect possible
violations of OFAC restrictions in those circumstances when the registration on
the security received is different than the name on the account into which the
securities are deposited.  Clearing Agent
will receive shares only from a custodial agent — no shares shall be received
directly from a customer or any third party.

 

F.             Outgoing Securities for Third Parties.  Requests for delivery of securities to third
parties are prohibited.  All securities
will be forwarded to Introducing Firm for disbursement.

 

G.            Systematic Daily Screening, Government Lists
Including OFAC.  Daily,
Clearing Agent shall compare all new accounts opened on its systems and all
substantial changes made to account data resident on its systems to determine
whether any such new or changed account may be subject to an OFAC or other
designated government list.  In addition,
Clearing Agent shall compare its existing customer database to added
restrictions as may be published by the U.S. Federal Government from time to
time.  Further, periodically, Clearing
Agent shall compare its existing customer database to the existing OFAC
government lists.  In the event that
Clearing Agent’s comparisons indicate that an account may be subject to an OFAC
or government list restriction, Clearing Agent will notify Introducing Firm if
it believes there is a match.  Introducing
Firm shall cooperate fully with Clearing Agent to determine whether, in fact,
the account is subject to any such restriction. 
Introducing Firm will cooperate with Clearing Agent in implementing any
such action as may be determined by Clearing Agent to be necessary or
appropriate.  Introducing Firm
acknowledges that Clearing Agent may rely on a third-party vendor to provide
current OFAC and other government restricted list data, and Clearing Agent
shall not be held liable for any errors or omissions caused by such third-party
vendor.

 

 

49

 

H.            Electronic Funds Transfer Rule and Travel Rule.  Clearing Agent represents it has systems
designed to comply with the electronic transfer of funds rules, specifically
the “Funds Transfer Rule” and the “Travel Rule,” 31 C.F.R., Section 103.33(f)
and (g), when processing disbursements on behalf of Introducing Firm.  Clearing Agent shall comply with these rules
based on information provided by Introducing Firm.

 

I.              FinCEN Requests under Section 314(a) of Patriot Act.
Clearing Agent will respond to any FinCEN request about accounts or
transactions by immediately searching its records to determine whether it
maintains any account for, or has engaged in any transaction with, any
individual, entity, or organization named in the request.   If Clearing Agent finds a match, it will
report the match to FinCEN by completing FinCEN’s subject information form.

 

J.             Jurisdiction Warranting Special Measures.
Clearing Agent will take such special measures as it may deem appropriate with
respect to any jurisdiction, institution(s), class(es) of account(s) designated
by the U.S. Department of the Treasury to be of “primary money laundering
concern” in accordance with Section 311 of the Patriot Act.

 

K.            Bulletins and Other Informational Memoranda.  Clearing Agent may from time to time issue
Bulletins or other informational memoranda to Introducing Firm setting forth
Clearing Agent’s policies and procedures regarding anti-money laundering and terrorist
financing.  Introducing Firm agrees to
become familiar with such Bulletins and informational memoranda and to abide by
them.

 

                L.             Notification to Clearing Agent on AML Matters.  All required notifications, certification or
disclosures under this Appendix A must be made pursuant to section 25 of the
Agreement and further notification shall be provided as follows:  AML Compliance Officers, SG Americas
Securities, LLC, 1221 Avenue of the Americas, New York, NY 10020, Fax: (212) 278-7419.

 

50

 

ANNEX I

 Appendix A to subpart I of part 103

 

 

51

 

ANNEX II

Appendix
B to subpart I of part 103

 

 

52

 

ANNEX III

 

CERTIFICATION REGARDING ANTI-MONEY
LAUNDERING AGREEMENT

 

Dear
                        :

 

                This letter is to inform you
that Cowen and Company, LLC continues to provide services and maintain
procedures in compliance with the Anti-Money Laundering Program Agreement with
SG Americas Securities, LLC dated                   ,
2006.

 

                In addition, Cowen and Company,
LLC continues to monitor closely the regulations administered by the U.S.
Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) to
ensure that OFAC requirements are complied with.

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

53

 

 

SCHEDULE
A

Fees
and ChargesExhibit
10.10

 

EMPLOYEE
MATTERS AGREEMENT

 

THIS
EMPLOYEE MATTERS AGREEMENT (the “Agreement”) is
made as of                ,
2006 (the “Effective Date”) by and among Société Générale (“SG”),
SG Americas Inc., SG Americas Securities Holdings, Inc. (“SGASH”), Cowen
& Co., LLC (“Cowen LLC”) and Cowen Group, Inc. (“Cowen Inc.”).

 

BACKGROUND

 

  The parties have entered into a Separation Agreement effective as
of the Effective Date (the “Separation Agreement”) pursuant to which SG
shall or shall cause its subsidiaries to assign, transfer, convey and deliver
to Cowen Inc. the Cowen Assets (as defined in the Separation Agreement), which
Cowen Assets shall include all of the outstanding membership interests of Cowen
LLC and all of the capital stock of Cowen International Limited (each of which,
immediately prior to the transactions contemplated by the Separation Agreement,
were owned in their entirety by SGASH) and thereafter Cowen Inc., directly or
indirectly, will operate the Cowen Business (as defined in the Separation
Agreement), own the Cowen Assets (as defined in the Separation Agreement) and
have responsibility for the Cowen Liabilities (as defined in the Separation
Agreement).  The parties have agreed to
enter into this Agreement for the purpose of allocating between SG and the SG
Subsidiaries (as defined in the Separation Agreement) on the one hand, and
Cowen Inc., Cowen LLC and the Cowen Inc. Subsidiaries (each as defined in the
Separation Agreement) on the other hand, responsibilities and liabilities for
employees, employee compensation and benefit plans, programs, policies and
arrangements following the transactions contemplated by the Separation
Agreement.

 

AGREEMENT

 

ARTICLE I

DEFINITIONS

SECTION 1.1                 Certain Defined Terms.  The following capitalized terms as used in
this Agreement shall have the meaning set forth below unless otherwise
specified herein.  Capitalized terms used
herein that are not defined below or elsewhere in this Agreement shall have the
meaning set forth in the Separation Agreement.

 

“Award,” when immediately preceded by “SG,”
means SG Restricted Stock and SG Restricted Stock Units and, when immediately
preceded by “Cowen Inc.,” means Cowen Inc. Restricted Stock and Restricted
Stock Units.

“Benefit Plan” shall mean, in the context where
used, any employee benefit plan, program, policy, contract or arrangement,
including, but not limited to, any employee benefit plan as defined in section
3(3) of ERISA.

“Benefit Plan Bifurcation Date” means January
1, 2004.

 

1

“Business Day” 
means any day other than (i) a Saturday or Sunday or (ii) a day on which
banks are required or authorized to close in New York, New York.

“Cowen Benefit Plans” shall mean the Benefit
Plans sponsored, maintained or contributed to by any Cowen Entity immediately
prior to the Separation Date and each other Benefit Plan sponsored, maintained
or contributed to by any Cowen Entity at any time since the Benefit Plan
Bifurcation Date.

“Cowen Employee” means any individual who, immediately
prior to the Separation Date, is either actively employed by, or then on an
approved leave of absence from, any Cowen Entity.

“Cowen Employee Ownership Plan” means the 2006
Equity and Incentive Plan adopted by Cowen Inc. as of the IPO Date.

“Cowen Entities” means, collectively, Cowen
Inc., Cowen LLC and the Cowen Subsidiaries.

“Cowen Subsidiaries” means, collectively, the
Cowen Inc. Subsidiaries and Cowen LLC Subsidiaries.

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended.

“Fidelity Plan” means the SG-USA Fidelity Bonus
Plan.

“Final Determination” shall have the meaning
ascribed to such term in Section 1313(a) of the Code or similar provision of
state, local or foreign law, as applicable, or any other event (including the
execution of a Form 870-AD) that finally and conclusively establishes the
amount of any liability for Tax.

“Former Cowen Employee” means any individual
who is a former employee of any Cowen Entity as of the Separation Date.

“Indemnification Agreement” has the meaning
give to such term in the Separation Agreement.

“IPO” has the meaning given to such term in the
Separation Agreement.

“IPO Date” has the meaning given to such term
in the Separation Agreement.

“Option” when immediately preceded by “SG,” means
an option (either nonqualified or incentive) to purchase shares of SG Common
Stock pursuant to a SG Long-Term Incentive Plan. When immediately preceded by “Cowen
Inc.,” Option means an option (either nonqualified or incentive) to purchase
shares of Cowen Inc. Common Stock pursuant to the Cowen Employee Ownership
Plan.

“Principal Transaction Document”  has the meaning give to such term in the
Separation Agreement.

 

2

“Registration Statement” has the meaning given
to such term in the Separation Agreement.

“SCIB Partnership” means the Société Générale
Corporate and Investment Banking Partnership.

“Separation” has the meaning given to such term
in the Separation Agreement.

“SG Benefit Plans” shall mean the Benefit Plans
sponsored, maintained or contributed to by SG or any SG Subsidiary; provided
that the term “SG Benefit Plans” shall not include any of the SG Executive
Benefit Plans.

“SG Common Stock” shall mean the common shares
of SG.

“SG Compensation Expense” has the meaning given
to such term in Section 3.12(a) below.

“SG Cowen Ventures” means SG Cowen Ventures
L.L.P., a Delaware limited partnership.

“SG Deferred Compensation Plan” means the
Société Générale Deferred Compensation Plan for Executives, As Amended and
Restated Effective January 1, 2003.

“SG Entities” means, collectively, SG and the
SG Subsidiaries.

“SG Executive Benefit Plans” means the
compensation and benefit plans, programs, and other arrangements established,
sponsored, maintained, or agreed upon, by SG or its affiliates for the benefit
of employees and former employees of SG or its affiliates and/or the Cowen
Employees and Former Cowen Employees before the Close of the Separation Date,
if the participants in such plan or arrangement benefits are solely or
primarily executive and other management employees.  The SG Executive Benefit Plans shall include,
without limitation, deferred compensation plans that are not qualified under
Code section 401(a), including the Fidelity Plan, the SG Deferred Compensation
Plan and the SG Merchant Banking Plan.

“SG Stock Option Plan” means the Societe Generale Stock Option Plan, as
in effect as of the time relevant to the applicable provisions of this
Agreement.

“SG Merchant Banking Plan” means the SG
Merchant Banking Co-investment Plan.

“Tax” has the meaning given to such term in the
Separation Agreement.

“Vesting Event” has the meaning given to such
term in Section 3.12(b) below.

 

ARTICLE II

GENERAL EMPLOYMENT AND COMPENSATION MATTERS

 

3

SECTION 2.1                 Employment of Employees.  As of the Separation Date, all Cowen
Employees shall continue to be employees of a Cowen Entity.

 

SECTION 2.2                 General
Allocation of Benefit Plan Liabilities.

(a)           As
of the Separation Date, except as expressly provided in this Agreement, the
Separation Agreement or any other Transaction Document (as defined in the
Separation Agreement), SG shall, and cause the SG Subsidiaries to, assume or
retain, as applicable, and SG hereby agrees to (or to cause an SG Subsidiary
to) pay, perform, fulfill and discharge, in due course in full (i) all
Liabilities under all SG Benefit Plans, (ii) all Liabilities under all SG
Executive Benefit Plans (other than Liabilities related to Cowen Employees and
Former Cowen Employees under the Fidelity Plan), and (iii) any other
Liabilities expressly assigned to SG and/or the SG Subsidiaries under this
Agreement or the Separation Agreement.

(b)           From
and after the Separation Date, except as expressly provided in this Agreement,
the Separation Agreement or any other Transaction Document (as defined in the
Separation Agreement), Cowen Inc. and Cowen LLC shall, and shall cause the
other Cowen Entities to, assume or retain, as applicable, and Cowen Inc. and
Cowen LLC hereby agree to (or cause another Cowen Entity, as applicable, to)
pay, perform, fulfill and discharge, in due course in full (i) all Liabilities
under all Cowen Benefit Plans, (ii) all Liabilities related to Cowen Employees
and Former Cowen Employees under the Fidelity Plan and (iii) any other
Liabilities that are expressly assigned to the Cowen Entities under this
Agreement or the Separation Agreement.

 

SECTION 2.3                 Cowen Participation in SG
Plans.  Except as expressly provided
in this Agreement, effective as of Separation Date, the Cowen Entities shall
cease to be participating companies in all SG Benefit Plans and SG Executive
Benefit Plans, and SG, Cowen Inc. and Cowen LLC shall take all necessary
actions before the Separation Date to effectuate such cessation.

 

SECTION 2.4                 Interpretation of Cowen
Obligations.  Nothing in this
Agreement shall be interpreted or construed to restrict the ability or right of
any Cowen Entity to modify or change any employee’s or service provider’s terms
and conditions of employment or engagement (including compensation or Benefit
Plans) with respect to services performed for the Cowen Entities after the IPO
Date, or to establish the terms and conditions of employment for Cowen
Employees with respect to services performed after the IPO Date.  Except as otherwise provided in any
Transaction Document, nothing in this Agreement shall be interpreted or
construed to require any Cowen Entity to offer any Benefit Plan to any person
or to restrict any Cowen Entity’s ability to amend, modify, change, terminate
or establish any Cowen Benefit Plan after the IPO Date.

 

SECTION
2.5                 Interpretation of
SG Obligations.  Except as otherwise
provided in any Transaction Document, nothing in this Agreement shall be
interpreted or construed to require any SG Entity to offer any Benefit Plan to
any person or to restrict any SG Entity’s ability to amend, modify, change,
terminate or establish any SG Benefit Plan or any SG Executive Benefit Plans
after the IPO Date.

 

4

 

ARTICLE III

EXECUTIVE BENEFITS AND OTHER BENEFITS

 

SECTION 3.1                 Assumption Of Obligations.  Schedule 3.1(a) sets forth a complete
list of SG Benefit Plans and the SG Executive Benefit Plans other than the
Fidelity Plan, which it is agreed shall not be listed in Schedule 3.1(a).  Schedule 3.1(b) sets forth a complete
list of Cowen Benefit Plans, including the Fidelity Plan. Except as otherwise
provided in this Agreement or in any Transaction Document, effective as of the
Separation Date, Cowen Inc. shall assume and be solely responsible for all
Liabilities to or relating to the Cowen Benefit Plans and for all Liabilities
to or relating to Cowen Employees and Former Cowen Employees under any Benefit
Plan that is not set forth in Schedule 3.1(a).  For the avoidance of doubt, it is agreed
that, except to the extent otherwise expressly provided in this Agreement, the
foregoing provisions of this Section 3.1 shall apply to all Liabilities payable
or otherwise distributable on or after the Separation Date, regardless of when
such Liabilities arose.  If (i) the
Separation, or any other transaction related to the Separation, constitutes a
change in control (as that term is defined in Code section 280G); (ii) any
Cowen Employee becomes subject to tax under Code section 4999 in connection
with such change in control; and (iii) the Cowen Employee becomes eligible for
any reimbursement for such taxes (or any other additional taxes incurred as a
consequence of such reimbursement described in this clause (iii)), the Cowen Entities
shall be solely responsible for payment of such reimbursement.  

 

SECTION 3.2                 SG Cowen Ventures.

 

(a)           After the Separation Date, SG shall
(or shall cause the applicable SG Subsidiaries to) assume and be responsible
for all Liabilities relating to, arising out of or resulting from the
administration of SG Cowen Ventures as described in Section 2.02(b)(ii)
of the Separation Agreement, including Liabilities relating to, arising out of
or resulting from the administration of hypothetical investments in SG Cowen
Ventures made by Cowen Employees who are not “accredited investors” (within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of
1933).  After the Separation Date, Cowen
Inc. shall be responsible for all Liabilities relating to, arising out of or
resulting from investment decisions or the management of portfolio companies
relating to SG Cowen Ventures as described
in Section 2.02(a)(ii)(D) of the Separation Agreement.

 

(b)           No Cowen Employee shall make
additional contributions for any new actual or hypothetical investments in SG
Cowen Ventures after the Separation Date. 
Subject to Section 3.2(c), SG Cowen Ventures, in the case of
actual investments in SG Cowen Ventures, or by SG (or the applicable SG
Subsidiaries) in the case of hypothetical investments in SG Cowen Ventures,
shall be responsible for paying any and all distributions that are payable to
or with respect to Cowen Employees in accordance with the terms of SG Cowen
Ventures, including distributions to Cowen Employees whose investments in SG
Cowen Ventures are hypothetical and not actual; provided, however,
that with respect to distributions that are payable to or with respect to any
such Cowen Employee who received a leveraged investment in connection with such
Cowen Employee’s participation in SG Cowen Ventures and pursuant to the terms
of the SG Cowen Ventures employee investment program (including as such program
relates to

 

5

 

hypothetical investments by Cowen Employees who are
not accredited investors), such distributions shall first be applied toward
such leverage obligation and any remaining distributions shall be made to such
Cowen Employee.

 

(c)           Notwithstanding anything in this Section
3.2 to the contrary, Cowen Inc. shall act as a paying agent with respect to
amounts distributed in respect of SG Cowen Ventures, it being understood that
SG shall (or shall cause SG Cowen Ventures or the applicable SG Subsidiaries
to) pay such amounts to Cowen Inc. and Cowen Inc. shall promptly pay such
amounts to the applicable Cowen Employees. 
Cowen Inc. shall, and shall cause its Subsidiaries to, cooperate
reasonably and in good faith with SG with respect to the determination of
amounts payable in respect of SG Cowen Ventures to Cowen Employees.

 

SECTION 3.3                 SG Annual Bonus Plan.  With respect to any annual bonus that Cowen
Employees may merit under the SG Annual Bonus Plan, for the period commencing
January 1, 2006 and ending on the IPO Date, Cowen LLC shall accrue and record
liabilities to reflect such in accordance with the methodology used in the
first quarter of calendar year 2006, as reflected in the combined statements of
financial condition of Cowen Inc. contained in the Registration Statement, and
Cowen LLC shall be solely responsible for payment to Cowen Employees of any
such annual bonus; provided, however, that in the event that
Cowen LLC accrues or records an aggregate amount of such Liabilities in excess
of the aggregate amount of such bonuses that are actually paid, Cowen LLC shall
pay to SG, promptly, but in no event more than ten Business Days, after the
bonus payment date, an amount equal to such excess accrual or recording.  At least ten Business Days prior to Cowen LLC
paying any such annual bonus to Cowen Employees, Cowen LLC shall notify SGAI in
writing of such payment and such notice shall set forth in reasonable detail
the calculation of such payment and whether Cowen LLC is required to make any
payment to SG pursuant to this Section 3.3.  Neither Cowen LLC nor any other Cowen Entity
shall accrue or record any Liabilities for any other bonuses with respect to
any period ending on or prior to the IPO Date.

 

SECTION 3.4                 SG Merchant Banking Plan.

(a)           On or prior to the Separation Date,
the actions described in Section 2.07(a) of the Separation Agreement
shall occur with respect to the SG Merchant Banking Plan.  SG will (or will cause the applicable SG
Subsidiaries to) maintain the SG Merchant Banking Plan after the Separation
Date.

(b)           Other than hypothetical investments
in the SG Merchant Banking Plan made prior to the date hereof by Cowen
Employees, no Cowen Employee currently holds an investment in the SG Merchant
Banking Plan.  No Cowen Employee shall
make additional contributions for any new hypothetical investments in respect
of the SG Merchant Banking Plan after the Separation Date; provided, however,
that the leverage component of any previous hypothetical investment of any
Cowen Employee under the plan shall continue to vest in accordance with its
terms as though the Separation had not occurred.

(c)           SG shall (or shall cause the
applicable SG Subsidiaries to) be responsible for those Liabilities with
respect to the SG Merchant Banking Plan that are described in Section
2.02(b)(iii) of the Separation Agreement and Cowen shall be responsible for
those Liabilities

 

6

with respect to the SG Merchant Banking Plan that are
described in Section 2.02(a)(ii)(E) of the Separation Agreement.  Subject to Section 3.4(d), SG (or the
applicable SG Subsidiaries) shall be responsible for paying any and all
distributions that, pursuant to the terms of the employee investment program
that related to hypothetical investments by Cowen Employees in the SG Merchant
Banking Plan, are payable to or with respect to Cowen Employees; provided,
however, that with respect to distributions that are payable to or with
respect to any such Cowen Employee who received a leveraged investment in
connection with such Cowen Employee’s hypothetical investment in the SG
Merchant Banking Plan (and pursuant to the terms of the employee investment
program that relates to hypothetical investments by Cowen Employees in the SG
Merchant Banking Plan), such distributions shall first be applied toward
repayment of such leverage obligation and any remaining distributions shall be
made directly to such Cowen Employee.

(d)           Notwithstanding anything in this Section
3.4 to the contrary, Cowen Inc. shall act as a paying agent with respect to
amounts distributed in respect of the SG Merchant Banking Plan, it being
understood that SG shall (or shall cause the applicable SG Subsidiaries to) pay
such amounts to Cowen Inc. and Cowen Inc. shall promptly pay such amounts to
the applicable Cowen Employees.  Cowen
Inc. shall, and shall cause its Subsidiaries to, cooperate reasonably and in
good faith with SG with respect to the determination of amounts payable in
respect of the SG Merchant Banking Plan to Cowen Employees.

 

SECTION 3.5                 Stock Options.  All SG Options
granted under the SG Stock Option Plan (collectively, the “SG Option Awards”)
that are held by Cowen Employees as of the IPO Date shall become nonforfeitable
as of such date.  For purposes of the SG
Option Awards, the occurrence of the Separation or the IPO shall not result in
any SG Option Awards being replaced with awards based on Cowen LLC stock, and
the IPO Date shall constitute a termination of employment for all Cowen
Employees (who are not employed by an SG entity immediately after the IPO Date)
for purposes of any SG Option Award.  The
right of either Cowen Inc. or SGAI to claim any federal, state, local or
foreign income Tax compensation deductions in respect of any Stock Award shall
be determined in accordance with Section 3.12 hereof.

 

SECTION 3.6                 Foreign Grants/Awards.  To the extent that
the SG Option Awards are granted to any non-U.S. Cowen Employee under any
domestic or foreign equity-based incentive program that, prior to the IPO Date,
was sponsored by a SG Entity, then, subject to the provisions of this Section
3.6, SG and Cowen LLC shall use their commercially reasonable efforts to
preserve, at and after the IPO Date, the value and tax treatment accorded to
such awards.  The parties hereby delegate
to the SG Executive Vice President-Human Resources, for periods before the IPO
Date, the authority to determine an appropriate methodology for adjusting such
grants or awards in a manner that is, to the extent possible, consistent with
the treatment of such awards and grants for U.S. employees.  The right of either Cowen Inc. or SGAI to
claim any federal, state, local or foreign income Tax compensation deductions
in respect of any Stock Award shall be determined in accordance with Section
3.12 hereof.

 

SECTION 3.7                 Miscellaneous Option And
Other Award Terms.  After the IPO
Date, Cowen Inc. Options and Cowen Inc. Awards, regardless of by whom held,
shall be settled by Cowen Inc. pursuant to the terms of the Cowen Employee
Ownership Plan.

 

7

 

SECTION 3.8                 Approval of Cowen Employee
Ownership Plan.  Prior to the
Separation Date, SGASH shall cause Cowen Inc. to adopt the Cowen Employee
Ownership Plan substantially in the form attached as Exhibit C to the
Separation Agreement, and SGASH shall approve the plan, subject to Section
4.04(a) of the Separation Agreement.

(a)           All awards granted under the Cowen
Employee Ownership Plan shall permit cancellation without cost to Cowen Inc.,
SG, or any of their respective Subsidiaries or affiliates if conditions
established by SG and SGASH relating to the IPO or the Separation are not
satisfied.

(b)           A participant’s receipt of awards
under the Cowen Employee Ownership Plan shall be conditioned on such
participant’s execution and delivery of an Executive Award Agreement and a
release satisfactory to SG and Cowen Inc. and the occurrence of the IPO.

(c)           If the IPO is not consummated for any
reason or no reason, the Employee Ownership Plan and any shares or options
issued thereunder shall be null and void and of no force and effect.

 

SECTION 3.9                 Fidelity Plan and SG
Deferred Compensation Plan.

(a)           The parties acknowledge and agree
that the IPO constitutes “Good Reason” as defined in the Fidelity Plan and,
thus, all unvested amounts held in the Fidelity Plan for the account of Cowen
Employees shall become fully vested upon the IPO.   All vested amounts in such Cowen Employees’
deferral accounts as of the IPO Date under the Fidelity Plan, including those
amounts that vest as described in the foregoing sentence, will be distributed
by Cowen LLC to such Cowen Employees as soon as practicable, but in no event
more than thirty (30) days, following the IPO Date; provided, however,
that if any Cowen Employee previously elected to defer the payment of any
amounts under the Fidelity Plan, then those amounts will be distributed by
Cowen LLC at the time set forth in, and otherwise in accordance with, such
Cowen Employee’s prior deferral election.

(b)           All amounts held in the SG Deferred
Compensation Plan as of the IPO Date for the account of Cowen Employees who were
Participants (as defined in the SG Deferred Compensation Plan) in the SG
Deferred Compensation Plan prior to January 1, 2001 will be distributed by SG
to such Cowen Employees (subject to Section 3.9(c)) as soon as
practicable, but in no event more than four (4) weeks, following the IPO Date; provided,
however, that if any such Cowen Employee previously elected to defer the
payment of any amounts under the SG Deferred Compensation Plan, then those
amounts will be distributed by SG at the time set forth in, and otherwise in
accordance with, such Cowen Employee’s prior deferral election.  All amounts related to Cowen Employees who
became Participants (as defined in the SG Deferred Compensation Plan) in the SG
Deferred Compensation Plan on or following January 1, 2001 will be distributed
by SG to such Cowen Employees as soon as practicable, but in no event more than
four (4) weeks, following the IPO Date.

(c)           Notwithstanding anything in this Section
3.9 to the contrary, Cowen Inc. shall act as a paying agent with respect to
amounts distributed under the SG Deferred Compensation Plan, it being
understood that SG shall (or shall cause the applicable SG Subsidiaries to) pay
such amounts to Cowen Inc. and Cowen Inc. shall promptly pay such amounts to
the applicable

 

8

Cowen Employees. 
Cowen Inc. shall, and shall cause its Subsidiaries to, cooperate
reasonably and in good faith with SG with respect to the determination of
amounts payable from the SG Deferred Compensation Plan to Cowen Employees.

 

SECTION 3.10               Employee Stock Purchase Plan.  After the IPO Date, SG stock obtained
pursuant to purchases made under the various Global Employee Share Ownership
Offerings under the Société Générale International Group Saving Plan shall not
be subject to the five-year holding period otherwise provided by that plan.

 

SECTION 3.11               SCIB Partnership.

(a)            If, immediately following the IPO,
SGASH owns less than 33% of the outstanding common stock of Cowen Inc., then as
soon as practicable after the IPO Date SG shall cause the SCIB Partnership to
pay to each Cowen Employee listed on Schedule A hereto the dollar amount
set forth next to such Cowen Employee’s name on Schedule A.  Following the distribution of such amounts,
none of the SCIB Partnership, SG or the SG Subsidiaries shall have any further
obligations to any Cowen Employee (or Former Cowen Employees) under or with
respect to the SCIB Partnership.

(b)           If, immediately following the IPO,
SGASH owns 33% or more of the outstanding common stock of Cowen Inc., then the
payments contemplated by Schedule A shall not be made and any awards granted to Cowen Employees prior to the IPO Date under the
SCIB Partnership shall continue to vest and, as applicable, be paid in
accordance with their terms as though the Separation had not occurred.

 

SECTION 3.12               Income Tax Deductions for
Compensation Expense.

 

(a)           SGAI shall be entitled to claim all
federal, state, local and foreign income Tax compensation deductions
attributable to the payment of any amounts to Cowen Employees for services
performed by such Cowen Employees prior to the IPO Date (an “SG Compensation
Expense”).  Such SG Compensation
Expenses shall include but not be limited to all payments to be made to Cowen
Employees pursuant to Sections 3.2, 3.4, 3.9 and 3.11
of this Agreement and all Cowen Employee bonuses accrued during the period
beginning on January 1, 2006 and ending on the IPO Date, except to the extent
such accrued bonus amounts are returned to SGASH pursuant to Section 3.3
hereof.  Unless and until there has been
a Final Determination to the contrary, neither Cowen Inc. nor any of its
Subsidiaries shall claim a federal, state, local or foreign income Tax
compensation deduction in respect of such payments.  If Cowen Inc. or any Subsidiary thereof is
responsible for making payments in satisfaction of the SG Compensation Expense,
Cowen Inc. shall promptly notify SGAI in writing of such payment when made.

(b)           Cowen Inc. shall be entitled to claim
all federal, state, local and foreign income Tax compensation deductions
permitted by applicable law in respect of any amounts attributable to a
vesting, exercise or other event giving rise to any inclusion of compensation
income (a “Vesting Event”) by any Cowen Employee with respect to the stock
of Cowen Inc.  Unless and until there is
a Final Determination to the contrary, neither SGAI nor any of its

 

9

subsidiaries shall claim
a federal, state or local income tax deduction in respect of such amounts.  If and to the extent any Cowen Employee in
the U.S. or otherwise has rights with respect to SG Option Awards, following a
Vesting Event, (i) SGAI or its Subsidiaries shall be entitled to claim all
federal, state, local and foreign income tax deductions permitted by applicable
law in respect of such vesting, exercise or other income inclusion arising in
connection with such SG Option Awards, (ii) Cowen Inc. shall promptly notify
SGAI in writing of such event (if such Vesting Event is within Cowen Inc.’s
knowledge) and (iii) unless and until there is a Final Determination to the
contrary, neither Cowen Inc. nor any of its Subsidiaries shall claim a federal,
state, local or foreign income Tax compensation deduction in respect of any
amounts in connection with any such amounts.

ARTICLE IV

EMPLOYEE BENEFIT PLAN ADMINISTRATION

SECTION 4.1                 Employee Benefit Plan
Matters.  Except as otherwise
provided in the Transition Services Agreement or as otherwise expressly
provided herein, neither SG nor any SG Subsidiary shall have any responsibility
for providing services to any Cowen Entity with respect to employees or Benefit
Plan matters after the Separation Date.

 

ARTICLE V

GENERAL

SECTION 5.1                 Audit and Information
Rights; Indemnification.

(a)           Each of SG and Cowen Inc., and their
duly authorized representatives, shall have the right to conduct reasonable
audits with respect to all information required to be provided to it by the
other party under this Agreement.  The
party conducting the audit (the “Auditing Party”) may adopt reasonable
procedures and guidelines for conducting audits and the selection of audit
representatives under this Section 5.1. The Auditing Party shall have
the right to make copies of any records at its expense, subject to any
restrictions imposed by applicable laws and to any confidentiality provisions
set forth in the Separation Agreement, which are incorporated by reference
herein.  The party being audited shall
provide the Auditing Party’s representatives with reasonable access during
normal business hours to its operations, computer systems and paper and
electronic files, and provide workspace to its representatives.  After any audit is completed, the party being
audited shall have the right to review a draft of the audit findings and to
comment on those findings in writing within ten Business Days after receiving
such draft.

(b)           The Auditing Party’s audit rights
under this Section 5.1 shall include the right to audit, or participate
in an audit facilitated by the party being audited and to require the other
party to request any benefit providers and third parties with whom the party
being audited has a relationship, or agents of such party, to agree to such an
audit to the extent any such persons are affected by or addressed in this
Agreement (collectively, the “Non-Audit Parties”). The party being
audited shall, upon written request from the Auditing Party, provide an
individual (at the Auditing Party’s expense) to supervise any audit of a
Non-Audit Party.  The Auditing Party
shall be responsible for supplying, at the Auditing Party’s expense, additional
personnel sufficient to

 

10

complete the audit in a reasonably timely manner.  The responsibility of the party being audited
shall be limited to providing, at the Auditing Party’s expense, a single
individual at each audited site for purposes of facilitating the audit.

(c)           Upon the reasonable request of SG,
Cowen Inc. shall provide SG with documentary support that it has complied with
all employment withholding obligations in connection with payments made to
Cowen Employees pursuant to this Agreement.

(d)           Except as otherwise specifically set
forth in any provision of the Indemnification Agreement (including but not
limited to the penultimate paragraph of Section 3.01 of the
Indemnification Agreement) or of any other Principal Transaction Document,
Cowen Inc. shall, to the fullest extent permitted by law, indemnify, defend and
hold harmless each of the SG Indemnitees from and against all Liabilities to
the extent such Liabilities relate to, arise out of or result from (i) the
failure of Cowen Inc. or any Cowen Subsidiary to comply with all employment
withholding obligations in connection with payments made by Cowen Inc. or any
Cowen Subsidiary to Cowen Employees pursuant to this Agreement or (ii) Cowen
Inc.’s failure to comply with its obligations as paying agent under Sections
3.2(c), 3.4(d) and 3.9(c) of this Agreement.

 

SECTION 5.2                 Notices.

(a)           Any notices given pursuant to this
Agreement shall be made in accordance with the notice provisions of the
Separation Agreement.

(b)           Cowen Inc. shall provide prompt
written notice to SG informing of any change in circumstances with respect to a
Cowen Employee or a Former Cowen Employee, including but not limited to the
termination of a Cowen Employee’s employment, such that SG may continue to
comply with its obligations under this Agreement.  Such written notice shall include to the
extent reasonably available, a current or forwarding address or similar contact
information for such Cowen Employee or Former Cowen Employee.

 

SECTION 5.3                 No Third Party Beneficiaries.  This Agreement is an agreement solely among
parties hereto.  Nothing in this
Agreement, whether express or implied, confers upon any employee or former
employee of any party, any participant or beneficiary under any Benefit Plan or
any other person, any rights or remedies, including, but not limited to (i) any
right to employment or recall; (ii) any right to continued employment or
continued service for any specified period; or (iii) any right to claim any
particular compensation, benefit or aggregation of benefits, or any kind or
nature.

 

SECTION 5.4                 Facsimile Signatures.  Each party acknowledges that it and the other
parties may execute this Agreement by facsimile, stamp or mechanical
signature.  Each party expressly adopts
and confirms each such facsimile, stamp or mechanical signature made in its
respective name as if it were a manual signature, agrees that it shall not
assert that any such signature is not adequate to bind such party to the same
extent as if it were signed manually and agrees that at the reasonable request
of the other party at any time it shall as promptly as reasonably practicable
cause this Agreement to be manually executed (any such execution to be as of
the date of the initial date thereof).

 

11

 

SECTION 5.5                 Further Assurances and
Consents.  In addition to the actions
specifically provided elsewhere in this Agreement, each of the parties hereto
will use reasonable commercial efforts to (i) execute and deliver such further
instruments and documents and take such other actions as the other party may
reasonably request in order to effectuate the purposes of this Agreement and
carry out the terms hereof; and (ii) take or cause to be taken, all actions and
do, or cause to be done, all things, reasonably necessary, proper or advisable
under applicable laws, regulations and agreements or otherwise to consummate
and make effective the transactions contemplated by this Agreement, including,
without limitation, using its reasonable efforts to obtain any consent and
approvals and to make any filings and applications necessary or desirable in
order to consummate the transactions contemplated by this Agreement; provided
that no party hereto shall be obligated to pay any consideration therefor
(except for fling fees and other similar charges) to any third party from whom
such consents, approvals and amendments are required or to take any action or omit
to take any action if the taking or the omission to take action would be
unreasonably burdensome to the party or the business thereof.

 

SECTION 5.6                 Assignability.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that no party hereto may
assign its rights or delegate its obligations under this Agreement without the
express prior written consent of the other parties hereto.  Notwithstanding the foregoing, this Agreement
shall be assignable in whole in connection with a merger or consolidation or
the sale of all or substantially all of the Assets of a party so long as the
resulting, surviving or transferee Person assumes all the obligations of the relevant
party thereto by operation of law or pursuant to an agreement in form and
substance reasonably satisfactory to the other party.

 

SECTION 5.7                 Third Party Consent.  If the obligation of any party under this
Agreement is dependent on the consent of a third party consent and such consent
is withheld, the parties shall use reasonable commercial efforts to implement
the applicable provisions of this Agreement to the fullest extent
practicable.  If any provision of this
Agreement cannot be implemented due to the failure of a third party to consent,
the parties shall negotiate in good faith to implement the provision in a
mutually satisfactory manner, taking into account the original purposes of the
provision in light of the Separation and communications to affected
individuals.

 

SECTION 5.8                 Effect if Separation Does
Not Occur.  If the Separation does
not occur, then all actions and events that are to be taken under this
Agreement as of the Separation Date or otherwise in connection with the
Separation, shall not be taken or occur except to the extent specifically
provided by SG or an SG Subsidiary.

 

SECTION 5.9                 Governing Law.  This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of New York,
irrespective of the choice of laws principles of the State of New York, as to
all matters, including matters of validity, construction, effect,
enforceability, performance and remedies.

 

12

 

SECTION 5.10               Disputes.  Any disputes with respect to matters arising
under this Agreement shall be resolved in accordance with the dispute
resolution procedures set forth in the Separation Agreement.

 

SECTION 5.11               Amendments.  No provisions of this Agreement shall be
deemed amended, supplemented or modified unless such amendment, supplement or
modification is in writing and signed by an authorized representative of each
of the parties.

 

SECTION 5.12       Severability.  If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party.  Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable provision to effect the original intent of the
parties.

 

SECTION 5.13               Entire Agreement.  Except as otherwise provided herein by
reference to the Separation Agreement, this Agreement constitutes the entire
agreement and understanding between the parties relating to the matters
addressed herein and supersedes and takes the place of all other agreements and
understandings, written or oral, of the parties relating to such matters.

 

SECTION 5.14               Counterparts; Headings;
Interpretation.  This Agreement may
be executed in one or more counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.  Delivery of an
executed counterpart of a signature page to this Agreement by facsimile shall
be as effective as delivery of an executed original of such counterpart to this
Agreement.  The Section headings herein
are inserted for convenience only and are not to be construed as part of this
Agreement.  All provisions of this
Agreement shall be interpreted so as to give effect to the intent of the
parties hereto.

 

SECTION 5.15               Mutual Drafting.  This Agreement shall be deemed to be the
joint work product of the parties and any rule of construction that a document
shall be interpreted or construed against a drafter of such document shall not
be applicable.

 

SECTION
5.16                Remedies.  In the event of a breach by a party of its
obligations under this Agreement, each other party, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.  Each party agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any provision of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it will waive
the defense that a remedy at law would be adequate.

 

*
* * * *

 

13

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their authorized representatives.

SOCIÉTÉ GÉNÉRALE

By:  __________________________________ 
        Name:
        Title:

SG AMERICAS, INC.

By:  __________________________________ 
        Name:
        Title:

SG AMERICAS SECURITIES HOLDINGS, INC.

By:  __________________________________ 
        Name:
        Title:

COWEN AND COMPANY, LLC

By:  __________________________________ 
        Name:
        Title:

COWEN GROUP, INC.

By:  __________________________________ 
        Name:
        Title:

14

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