Exhibit 10.2

 

EXECUTION COPY

 

 

 

TAX MATTERS AGREEMENT

 

by and among

 

SG AMERICAS, INC.,

 

SG AMERICAS SECURITIES HOLDINGS, INC.,

 

COWEN AND COMPANY, LLC

 

and

 

COWEN GROUP, INC.

 

 

Dated as of July 12, 2006

 

 

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

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

 

TAX MATTERS AGREEMENT

 

THIS TAX MATTERS AGREEMENT, dated as of July 12, 2006 among SG Americas, Inc., a
Delaware corporation (“SGAI”), SG Americas Securities Holdings, Inc., a Delaware
corporation (“SGASH”), Cowen and Company, LLC, a Delaware limited liability
company (“Cowen LLC”), and Cowen Group, Inc., a Delaware corporation (“Cowen
Inc.”) (each of SGAI, Cowen LLC, SGASH and Cowen Inc. are referred to herein
collectively as the “Parties”, and individually, as a “Party”).

 

RECITALS

 

WHEREAS, pursuant to the Separation Agreement dated as of July 11, 2006 among
Societe Generale, a French banking corporation, SGAI, SGASH, Cowen LLC and Cowen
Inc. (the “Separation Agreement”), Cowen Inc. has agreed, on the terms and
subject to the conditions set forth in the Separation Agreement, to acquire (the
“Acquisition”), directly or indirectly, all the outstanding membership interests
of Cowen LLC, all of the capital stock of Cowen UK and certain other assets of
the Parties or their respective Subsidiaries (the Cowen LLC membership
interests, the Cowen UK stock and such other assets, the “Cowen Assets”) in a
transaction that will constitute a taxable disposition of the Cowen Assets by
SGASH to Cowen Inc. for United States federal income tax purposes.

 

WHEREAS, immediately following completion of the transfer of Assets described
above, SGASH will sell, pursuant to a firm commitment underwriting, more than
20% of the common stock of Cowen Inc. received in the transfer described above
pursuant to the IPO.

 

WHEREAS, SGAI, SGASH, Cowen Inc. and certain other Affiliates (as defined in
Section 1 below) of SGAI have been members of an affiliated group of
corporations of which SGAI is the common parent (the “SGAI Affiliated Group”)
within the meaning of Section 1504(a) of the Code, and the members of the SGAI
Affiliated Group have heretofore filed or will file United States federal income
tax returns on a consolidated basis (the “SGAI Consolidated Returns”) pursuant
to Section 1501 of the Code.

 

WHEREAS, certain of SGAI, SGASH, Cowen Inc. and its Affiliates have heretofore
joined (or will join) in the filing of certain combined, consolidated, or other
similar United States state, local, or other governmental or foreign income or
franchise tax returns (the “SGAI Combined Returns”), and each group filing such
a return is designated a “Combined Group.”

 

WHEREAS, as a consequence of the acquisition of the Cowen Assets and the IPO,
Cowen Inc. and the business comprised of the Cowen Assets will no longer be part
of the SGAI Affiliated Group or be members of a Combined Group.

 

WHEREAS, the Parties to this Agreement desire to make certain covenants with
respect to tax matters, to allocate the liability for certain United States and
foreign federal, state, local, and other taxes that may be owed to or asserted
by United States or foreign federal, state, local Tax Authority, and to provide
for certain payments in respect of tax benefits.

 

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

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

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
below and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the Parties
agree as follows:

 

SECTION 1.   Certain Defined Terms. For the purposes of this Agreement, unless
the context requires otherwise, the following terms shall have the following
meanings:

 

“Acceleration Assumption Date” shall mean the date of any Acceleration Notice or
an Asset Transfer Date.

 

“Acceleration Assumptions” shall mean, as of an Acceleration Assumption Date,
the assumptions that (1) in each Covered Taxable Year ending after such
Acceleration Assumption Date Cowen Inc. will have taxable income sufficient to
fully utilize the deductions arising from the Basis Adjustment and the Imputed
Interest during such Covered Taxable Year and (2) the federal, state and local
income Tax rates in effect for each such Covered Taxable Year will be the
maximum rates applicable to Cowen Inc. as in effect on the Acceleration
Assumption Date.

 

“Acceleration Payment” shall have the meaning set forth in Section 14(d)(i).

 

“Acceleration Notice” shall have the meaning set forth in Section 14(c).

 

“Acceleration Rate” shall mean nine (9) percent.

 

“Acquisition Price” shall mean, the fair market value of the Cowen Assets on the
Separation Date, determined as provided in Section 4 hereof.

 

“Actual Tax Liability” shall have the meaning set forth in Section 13(a).

 

“Affiliate” shall mean, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The term
“control” (including its correlative meanings “controlled by” and “under common
control with”) shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).

 

“Asset Transfer Date” shall have the meaning set forth in Section 14(e).

 

“Basis Adjustment” shall have the meaning set forth in Section 4(a).

 

“Beginning Basis” shall have the meaning set forth in Section 4(a).

 

“Change of Control” shall mean (a) the acquisition by any Person or Persons of
direct or indirect beneficial ownership of securities representing fifty percent
(50%) or more of the combined voting power of Cowen Inc.’s then outstanding
securities; or (b) a merger, consolidation, reorganization or other business
combination, however effected, resulting in the securities of Cowen Inc.
outstanding immediately prior thereto failing to continue to represent at least
fifty percent (50%) of the combined voting power of the outstanding securities
of Cowen Inc. or the surviving Person outstanding immediately after such
combination.

 

3

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

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

 

“Change of Control Acceleration Payment” shall have the meaning set forth in
Section 14(b).

 

“Covered Taxable Year” shall mean any Taxable Year of Cowen Inc. ending after
the IPO Closing Date and on or before the end of the Taxable Year including the
date which is the twentieth (20th) anniversary of the IPO Closing Date.

 

“DAP Interest” shall mean interest on all unpaid Deferred Acceleration Payments
accruing at a rate equal to nine (9) percent compounded annually.

 

“Deferred Acceleration Payments” shall have the meaning set forth in Section
14(d)(ii).

 

“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.

 

“Hypothetical Tax Liability” shall have the meaning set forth in Section 13(b).

 

“Imputed Interest” shall mean, any interest imputed under Section 1272, 1274 or
483 or any other provision of the Code and the similar provision of state, local
or foreign law with respect to Cowen Inc.’s payment obligations under this
Agreement, as reasonably determined by SGAI in good faith.

 

“IPO Closing Date” shall mean the date on which the IPO closes.

 

“Non –Cowen Stock Compensation” shall have the meaning set forth in Section
11(b).

 

“Original Payment” shall have the meaning set forth in Section 13(c).

 

“Partial Acceleration Payment” shall mean the payment by Cowen Inc. to SGASH
described in Section 14(e).

 

“Partial Acceleration Payment Notice” shall have the meaning set forth in
Section 14(e).

 

“Preliminary Determination” shall have the meaning set forth in Section 13(b).

 

“Recomputed Tax Benefit Payment” shall have the meaning set forth in Section
13(d).

 

“Recomputing Event” shall have the meaning set forth in Section 13(d).

 

“Reconciliation Procedures” shall mean those procedures set forth in Section 17
of this Agreement.

 

“Redetermined Tax Basis” shall have the meaning set forth in Section 4(a).

 

“Relevant States” shall mean (i) Massachusetts, New Jersey, New York and Ohio
and (ii) any states to which the operations or businesses located in the
foregoing states as of the IPO Closing Date are thereafter moved, to the extent
such movement of assets is made for a

 

4

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

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

 

significant purpose of reducing the Tax Benefit Payments to be made by Cowen
Inc. under to this Agreement.

 

“Scheduled Termination Date” shall have the meaning set forth in Section 14(d).

 

“Straddle Period” shall mean any taxable period that begins on or before and
ends after the IPO Closing Date.

 

“Tax Benefit Payment” shall mean, with respect to any Covered Taxable Year, the
net aggregate payments, if any made by Cowen Inc. to SGAI pursuant to Sections
13, with respect to such Covered Taxable Year.

 

“Taxable Year” shall mean a taxable year as defined in Section 441(b) of the
Code (and thus may include a period of less than 12 months for which a return is
made).

 

“Tax Return” or “Return” shall mean any return, declaration, report, claim for
refund, information return or similar statement filed or required to be filed
with respect to any Taxes or by any Tax Authority, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Vesting Event” shall have the meaning set forth in Section 11(b).

 

Capitalized terms not otherwise defined herein shall have the meaning set forth
in the Separation Agreement and Ancillary Documents.

 

SECTION 2.           Filing of Tax Returns.

 

(a)           (i) SGAI shall prepare (or cause to be prepared) and file (or
cause to be filed) all necessary SGAI Consolidated Returns for all Taxable Years
(whether ending before, on, or after the IPO Closing Date) and all necessary
SGAI Combined Returns for all Taxable Years (whether ending before, on, or after
the IPO Closing Date) which reflect income or operations of Cowen LLC or Cowen
Inc. SGAI shall prepare (or cause to be prepared) and file (or cause to be
filed), all Tax Returns required to be filed by or with respect to Cowen LLC and
Cowen Inc. with respect to all periods ending on or before the IPO Closing Date
and any Straddle Period, as well as any Tax Returns described in Section 3(c).
SGAI’s preparation and filing obligations with respect to Tax Returns described
in this Section 2(a) shall apply without regard to whether the obligation to
file such Tax Return arises prior to, on or after the IPO Closing Date. SGAI
shall pay any Taxes for which it is responsible pursuant to Sections 3(a) and
(c) of this Agreement. SGAI shall permit Cowen Inc. to review and comment on
each Tax Return for which Cowen Inc. may be liable under this Agreement, and
shall make such revisions to such Tax Returns as are reasonably requested by
Cowen Inc. Cowen Inc. shall pay to SGAI an amount equal to the Taxes for which
it is liable pursuant to Sections 3(b) and (c) but which are payable with Tax
Returns to be filed by SGAI pursuant to this Section 2(a) within 10 days prior
to the due date for the filing of such Tax Returns.

 

(b)           Cowen Inc. shall, except to the extent that filing such Tax
Returns is the responsibility of SGAI under Section 2(a), prepare (or cause to
be prepared) and file (or cause to be filed), all Tax Returns relating to Cowen
LLC and Cowen Inc. Cowen Inc. shall permit SGAI

 

5

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

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

 

to review and comment on each Tax Return for which SGAI may be liable under this
Agreement, and shall make such revisions to such Tax Returns as are reasonably
requested by SGAI. SGAI shall pay to Cowen Inc. an amount equal to the Taxes for
which it is liable pursuant to Section 3(a) but which are payable with Tax
Returns to be filed by Cowen Inc. pursuant to the previous sentence within 10
days prior to the due date for the filing of such Tax Returns. Cowen Inc. shall
pay or cause to be paid to the applicable Tax Authority all Taxes due and
payable in respect of all Tax Returns required to be prepared by Cowen Inc.
pursuant to this Section 2(b).

 

SECTION 3.           Responsibility for Taxes. (a)  Except as provided in
Section 3(c) SGAI shall be liable for and will indemnify Cowen Inc. and all of
its Subsidiaries for all Taxes attributable to, imposed on, or for which Cowen
LLC or Cowen Inc. may otherwise be liable, for events occurring or periods
ending on or before the IPO Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period ending on the IPO Closing Date. SGAI
shall be entitled to any refund of Taxes of Cowen LLC or Cowen Inc. attributable
to Taxes paid with respect to such periods. Except as provided in Section 3(c)
SGAI shall also indemnify and hold harmless Cowen LLC and Cowen Inc. for (i) any
Taxes (“SGAI Consolidated Taxes”) with respect to SGAI Consolidated Returns, and
(ii) any Taxes (“SGAI Combined Taxes”) with respect to SGAI Combined Returns.

 

(b)           Cowen Inc. shall be liable for and will indemnify SGAI and its
Affiliates for all Taxes attributable to, imposed on, or for which Cowen LLC or
Cowen Inc. may otherwise be liable for any Taxable Year or period that begins
after the Closing and, with respect to any Straddle Period, the portion of such
Straddle Period beginning the day after the IPO Closing Date. Cowen Inc. shall
be entitled to any refund of Taxes of Cowen Inc. or any of its Subsidiaries
attributable to Taxes paid with respect to such periods.

 

(c)           In the case of certain state or local Tax Returns filed by SGASH
or Cowen LLC or their respective Affiliates (whether or not such Tax Returns
have been filed as of this date), such Tax Returns being identified on Schedule
3(c) hereof:  (i) to the extent such Tax Returns have not been filed as of the
IPO Closing Date, SGASH will pay the amount of Taxes shown as due and payable on
such Tax Returns filed or to be filed for Taxable Years ending on or before the
IPO Closing Date and, with respect to any Straddle Period, the portion of such
Straddle Period ending on or before the IPO Closing Date, and (ii) SGASH and
Cowen Inc. shall bear equally the costs of any Taxes arising from a Final
Determination from any audits or examinations of such Tax Returns relating to
such periods (or portion thereof). SGAI shall be entitled to any refund of Taxes
of Cowen LLC or Cowen Inc. attributable to Taxes paid with respect to such
periods; provided, however, SGAI and Cowen Inc. shall share equally in any
refund of such Taxes, if and to the extent such refund is attributable to Taxes
incurred and borne equally by SGAI and Cowen Inc. pursuant to this Section 3(c).
SGASH and Cowen Inc. shall bear equally the costs associated with SGAI’s
preparation and defense of any Tax Returns to be filed pursuant to this Section
3(c) (as such costs are incurred).

 

(d)           In order to apportion appropriately any Taxes relating to a
Straddle Period between the portion of such Straddle Period ending on and
including the IPO Closing Date and the portion of such Straddle Period beginning
after the IPO Closing Date, the Parties shall, to the extent permitted under
applicable law, elect with the relevant Tax Authority to treat for all Tax

 

6

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

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

 

purposes the IPO Closing Date as the last day of a taxable period. In the case
of any other Taxes for a Straddle Period for which such election to close the
taxable period is not permitted, the portion of such Taxes that are allocable to
the portion of the Straddle Period ending on and including the IPO Closing Date
shall be:  (i) in the case of ad valorem or similar Taxes that are imposed on a
periodic basis, an amount equal to the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on an arrears basis (such as
real property Taxes), the amount of such Taxes for the immediately preceding
period) multiplied by a fraction the numerator of which is the number of days in
the Straddle Period prior to and including the IPO Closing Date and the
denominator of which is the number of days in the entire relevant Straddle
Period; and (ii) in the case of Taxes not described in (i) (such as Taxes that
are either (A) based upon or related to income, receipts or premiums, or (B)
imposed in connection with any sale or other transfer or assignment of property
(real or personal, tangible or intangible)), deemed equal to the amount that
would be payable if the taxable period ended on and included the IPO Closing
Date.

 

(e)           Indemnification payments under this Section 3 shall be made in
immediately available funds within 30 days after receipt by the indemnifying
Party of a written request therefor.

 

SECTION 4.           Determination and Allocation of Acquisition Price;
Treatment of the Separation.

 

(a)           SGAI and Cowen Inc. shall determine the Acquisition Price by
adding the amount of the Cowen Liabilities assumed in the Separation to the
value of the Cowen stock received by SGASH in exchange for the Cowen Assets
pursuant to Section 2.02(e) of the Separation Agreement (as determined by the
price at which Cowen stock is sold in the IPO). Cowen Inc. shall allocate the
Acquisition Price to each Cowen Asset or class of Cowen Assets as set forth on
the Final Allocation Schedule attached to this Agreement. The Acquisition Price
allocation made pursuant to this Section 4 is intended to comply with the
allocation method required by Section 1060 of the Code and applicable Treasury
regulations and the Parties hereto shall cooperate to comply with all procedural
requirements of Section 1060 of the Code and applicable Treasury regulations.
The Final Allocation Schedule shall also include (i) the Tax basis of each Cowen
Asset or class of Cowen Assets as recorded on Cowen LLC’s Tax books and records
immediately before the Acquisition (the “Beginning Basis”), (ii) with respect to
each Cowen Asset or class of Cowen Assets, the amount of the Acquisition Price
(as adjusted pursuant to clause (b)) allocated to such Cowen Asset or class of
Cowen Assets (pursuant to this Section 4(a)) (the “Redetermined Tax Basis”) and
(iii) with respect to each Cowen Asset or class of Cowen Assets, the excess, if
any, of the Redetermined Tax Basis over the Beginning Basis (the “Basis
Adjustment”), all as determined by SGAI and Cowen Inc. in good faith.

 

(b)           As promptly as practicable following the payment of any amount
pursuant to Section 13 hereunder, SGAI shall deliver to Cowen Inc. an amended
Final Allocation Schedule that takes into account the amount of such payment
(other than Imputed Interest) as an adjustment to the Acquisition Price and
recomputes the Redetermined Tax Basis of each Cowen Asset or class of Cowen
Assets according to the principles set forth in Section 4(a).

 

7

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

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

 

(c)           If either Party is unable to agree as any item reflected on the
Final Allocation Schedule or any amended Final Allocation Schedule, such Party
shall notify the other Parties of such disagreement and its reasons for so
disagreeing, in which case the Parties shall attempt to resolve the
disagreement. To the extent the Parties cannot agree on a mutually acceptable
determination and/or allocation of the Acquisition Price, such determination
and/or allocation shall be made pursuant to the Reconciliation Procedures. The
Parties hereto agree to file all Tax Returns and claims and other statements
consistent with such allocation, including Internal Revenue Service Form 8594
(or any equivalent statement), and shall not make any written statement or take
any position inconsistent with such allocation on any return, on any refund or
other claim, during the course of any Internal Revenue Service or other audit or
appeal, for any other financial or regulatory purpose, in any litigation,
investigation, proceeding or otherwise.

 

(d)           The Parties agree that the transactions constituting the
Separation shall for United States federal income tax purposes be treated as a
taxable transfer of the Cowen Assets to Cowen Inc. for consideration equal to
the Acquisition Price. Absent a Final Determination to the contrary, the Parties
shall file or cause to be filed all Tax Returns in a manner consistent with this
Section 4, including the Final Allocation Schedule, and shall not take, or
permit any Affiliate to take, any position inconsistent therewith.

 

(e)           In accordance with the applicable provisions of the Code and the
regulations thereunder, SGAI will retain the benefit of all the net operating
loss carryforwards and tax credit carryforwards generated by the business of
Cowen LLC for all periods prior to and through the IPO Closing Date.

 

SECTION 5.           Cooperation; Exchange of Information. The Parties will
cooperate fully with each other and shall cause their respective Affiliates,
officers, employees, agents, auditors and representatives to cooperate fully in
connection with (a) the preparation and filing of any federal, state, local or
foreign Tax Returns that include the business and operations of the Cowen Inc.
or its Subsidiaries or otherwise relating to the Cowen Business and (b) any
audit examination by any Tax Authority of the Tax Returns referred to in clause
(a). Such cooperation shall include, without limitation, the furnishing or
making available of records, books of account or other materials of Cowen Inc.
and its Subsidiaries necessary or helpful for the defense against and resolving
assertions of any Tax Authority as to any Tax Returns referred to in clause (a)
and obtaining the signatures of appropriate entities for applicable Tax Returns.
Each Party shall provide timely notice to the other Party in writing of any
pending or threatened tax audits or assessments of Cowen Inc. or any of its
Subsidiaries for taxable periods for which the other may have a liability under
this Agreement and shall furnish the other Party with copies of all
correspondence received from any Tax Authority in connection with any Tax audit
or information request with respect to any such audit or assessment. Cowen Inc.
shall, and shall cause each Subsidiary and Affiliate to, prepare any response to
a taxing authority in respect of a dispute, audit or other controversy on a
basis consistent with past practices of the relevant entity. SGAI and its
Affiliates will need access, from time to time, after the IPO Closing Date, to
certain accounting and Tax records and information held by Cowen Inc., and its
Subsidiaries to the extent such records and information pertain to events
occurring prior to the IPO Closing Date; therefore, Cowen Inc. shall, and shall
cause Cowen LLC and each Subsidiary to, (i) retain and maintain such records
until such time as SGAI agree that such retention and maintenance is no longer
necessary, and (ii) allow SGAI and their agents and representatives (and agents
or

 

8

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

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

 

representatives of any of their Affiliates), at times and dates mutually and
reasonably acceptable to the Parties, to inspect, review and make copies of such
records as SGAI may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and at SGAI’s expense
(except to the extent provided in Section 3(c)).

 

SECTION 6.           Control.

 

(a)           Unless SGAI in its sole discretion elects otherwise, SGAI will
have the exclusive right to file any amended Tax Returns and to control any
audit or other administrative or judicial proceeding with respect to SGAI
Consolidated Taxes, SGAI Combined Taxes and/or the allocation shown on the Final
Allocation Schedule, and any other audit or other administrative or judicial
proceeding regarding any other matter that may result in any Tax liability for
which SGAI or a Subsidiary thereof is responsible under this Agreement;
provided, however, that (i) SGAI shall provide Cowen Inc. an opportunity to
review and comment upon any such amended Tax Return or written communication
regarding any audit or other administrative or judicial proceeding if and to the
extent any such communication relates to the Final Allocation Schedule, Cowen
Inc., or any Subsidiary thereof and (ii) SGAI will not settle or compromise any
such proceeding in a manner that would adversely affect Cowen Inc. without the
consent of Cowen Inc., which consent may not be unreasonably withheld.

 

(b)           Subject to Section 6(a), SGAI will keep Cowen Inc. informed of,
consult with Cowen Inc. regarding, and permit Cowen Inc. to participate in (at
Cowen Inc.’s own expense), any such filing, audit, or other judicial or
administrative proceeding relating to the Final Allocation Schedule or that may
otherwise affect Cowen Inc. or any Affiliate of Cowen Inc.

 

(c)           Except as otherwise provided in Section 6(a), Cowen Inc. will have
the exclusive right to control any audit or other administrative or judicial
proceeding with respect to the Tax liability of Cowen Inc. or its Subsidiaries.
Cowen Inc. will keep SGAI informed of, consult with SGAI regarding, and permit
SGAI to participate in (at SGAI’s own expense), any such filing, audit, or other
judicial or administrative proceeding that may affect SGAI or any Affiliate of
SGAI.

 

SECTION 7.           Tax Sharing Agreements. Notwithstanding anything in any
other agreement to the contrary, all liabilities and obligations between SGAI or
any of its Affiliates (other than the Cowen Inc. and its Subsidiaries), on the
one hand, and the Cowen Inc. and its Subsidiaries, on the other hand, under any
Tax allocation or Tax sharing agreement in effect prior to the IPO Closing Date
(other than this Agreement) shall cease and terminate as of the IPO Closing
Date.

 

SECTION 8.           Consolidated and Combined Return Status. On or prior to the
IPO Closing Date, neither Cowen Inc. nor any Subsidiary thereof, nor any
director, officer, employee or agent thereof will take any action or fail to act
(including without limitation engaging in an extraordinary transaction after the
IPO closing on the IPO Closing Date), without the consent of SGAI, that could
reasonably be expected to adversely affect the tax treatment, tax status or
overall tax liability of SGAI or any of its Affiliates.

 

9

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

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

 

SECTION 9.           Transfer and Similar Taxes. All transfer Taxes assessed as
a result of the transactions contemplated hereby shall be borne equally by SGAI
and Cowen Inc. and the Party upon which the Tax is imposed shall be responsible
for any filing of Tax Returns required in connection therewith. The Parties
agree to cooperate and take such reasonable actions as are necessary to minimize
the amount of transfer Taxes imposed as a consequence of the transactions
contemplated herein.

 

SECTION 10.         Purchase Price Adjustment. Any payment by SGAI or Cowen Inc.
under this Agreement or Section 2.06 of the Separation Agreement shall be
treated as an adjustment to the Acquisition Price.

 

SECTION 11.         [Reserved]

 

SECTION 12.         Litigation Reserve and Escrow Fund. The Parties hereby agree
that notwithstanding the terms of the Separation Agreement or any other
Ancillary Agreement, solely for United States federal income tax purposes SGASH
shall constitute the obligor with respect to all liabilities associated with the
Final Litigation Reserve and be treated as the owner of the Escrow Fund assets.
Accordingly, SGASH shall include in its Tax Returns all income, gain, losses,
deductions and credits with respect to the Escrow Fund and shall be entitled to
all federal, state and local income tax deductions arising in connection with
payments relating to the Final Litigation Reserve. To the extent SGASH is not
directly involved in the settlement or resolution of any matter for which the
Final Litigation Reserve relates, following the payment of any amounts in
connection with the settlement or resolution of such matter, Cowen Inc. shall
promptly notify SGASH in writing of each such payment. Based on the foregoing,
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 or local
income Tax deduction for the payment of any amounts in connection with the
settlement or resolution of any matter relating to the Final Litigation Reserve
and neither Cowen Inc. nor any of its Subsidiaries shall take any action
inconsistent therewith.

 

SECTION 13.         Tax Benefit Payments.

 

(a)           The provisions of Section 13(b), (c), (d) and Section 14 below
shall be effective only in the event that the aggregate Redetermined Tax Basis
exceeds the aggregate Beginning Basis.

 

(b)           Within ten (10) calendar days following the date Cowen Inc.
actually files its United States federal income tax return for any Covered
Taxable Year, Cowen Inc. shall submit to SGASH a preliminary determination (the
“Preliminary Determination”) of (A) the liability for Taxes that would be due on
such date assuming the same facts and using the same methods, elections,
conventions and practices used in determining the actual liability for Taxes for
such Covered Taxable Year; provided, however, that such liability shall be
calculated (i) with reference to the Beginning Tax Basis instead of the
Redetermined Tax Basis of each Cowen Asset or class of Cowen Assets and (ii)
excluding any deduction attributable to Imputed Interest (“Hypothetical Tax
Liability”) and (B) the actual liability for Taxes due on such date with respect
to such Tax Return (“Actual Tax Liability”) and shall pay to SGASH fifty percent
(50%) of the excess, if any, of the Hypothetical Tax Liability over the Actual
Tax Liability as shown in

 

10

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

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

 

the Preliminary Determination. For purposes of calculating the Hypothetical Tax
Liability and the Actual Tax Liability pursuant to this Section 13(b), the
Parties shall assume that Cowen Inc. and its Subsidiaries file state Tax Returns
only in the Relevant States.

 

(c)           Within thirty (30) calendar days after its receipt of the
Preliminary Determination, SGASH shall notify Cowen Inc. in writing of any
proposed adjustments thereto. Promptly thereafter, Cowen Inc. shall make such
adjustments to the Preliminary Determination to the extent reasonably requested
in good faith by SGASH. If the Parties, using their best efforts, are unable to
successfully resolve the issues raised by SGASH within 60 calendar days after
delivery of the Preliminary Determination to SGASH, Cowen Inc. and SGASH shall
employ the Reconciliation Procedures. Within five (5) days after finalizing such
determination, (i) Cowen Inc. shall pay to SGASH the excess, if any, of (A)
fifty percent (50%) of the excess of such Hypothetical Tax Liability over such
Actual Tax Liability over (B) the aggregate amount previously paid by Cowen Inc.
to SGASH under Section 13(b) with respect to such Covered Taxable Year, or (ii)
SGASH shall pay to Cowen Inc. the excess, if any, of (A) the aggregate amount
previously paid by Cowen Inc. to SGASH under Section 13(b) with respect to such
Taxable Year over (B) fifty percent (50%) of the excess, if any, of such
Hypothetical Tax Liability over such Actual Tax Liability. For purposes of
calculating the Hypothetical Tax Liability and the Actual Tax Liability pursuant
to this Section 13(c), the Parties shall assume that Cowen Inc. and its
Subsidiaries only file state Tax Returns in the Relevant States.

 

(d)           If, the amount of any Tax Benefit Payment with respect to a
Covered Taxable Year (an “Original Payment”) would have been different if
calculated based upon (i) a Final Determination relating to such Covered Taxable
Year, (ii) an amended Tax Return filed for such Covered Taxable Year for which
SGAI has been previously provided an opportunity to review and comment upon and
consent to the filing thereof, which consent may not be unreasonably withheld,
(iii) a correction of inaccuracies in the Hypothetical Tax Liability calculation
identified as a result of factual information relating to such Covered Taxable
Year in the original Final Allocation Schedule identified after the Closing Date
as a result of the receipt of additional information relating to facts or
circumstances on or prior to the IPO Closing Date, or (iv) the carryback of a
loss or other tax item to such Covered Taxable Year (each, a “Recomputing Event”
and the Tax Benefit Payment as so calculated, a “Recomputed Tax Benefit
Payment”), then SGASH shall pay to Cowen Inc. the excess, if any, of the
Original Payment over the Recomputed Tax Benefit Payment together (in the case
of Recomputing Events described in (i), (ii) or (iii) above) with any interest
thereon, computed at the rate set forth in Section 15 commencing from the date
the Original Payment was due and payable, and Cowen Inc. shall pay to SGASH the
excess, if any, of the Recomputed Tax Benefit Payment over the Original Payment
together (in the case of Recomputing Events described in (i), (ii) or (iii)
above) with any interest thereon, computed at the rate set forth in Section 15
commencing from the date the Original Payment was due and payable. If Cowen Inc.
receives notice of or otherwise becomes aware of any Recomputing Event that
could result in any difference between an Original Payment and a Recomputed Tax
Benefit Payment, it shall promptly notify SGASH in writing and shall provide
SGASH with any related information reasonably requested by SGASH. Within thirty
(30) days following notice of any such Recomputing Event, Cowen Inc. shall
deliver a notice to SGASH setting forth the amount of the Recomputed Tax Benefit
Payment, and, upon review by SGASH, shall promptly make adjustments to such
calculation to the extent reasonably requested in good faith by SGASH. If the
Parties, using their best efforts, are unable

 

11

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

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

 

to successfully resolve the issues raised by SGASH within 60 calendar days after
delivery of the notice of the Recomputing Event to SGASH, Cowen Inc. and SGASH
shall employ the Reconciliation Procedures. Within five (5) days of finalizing
the Recomputed Tax benefit Payment, the Party required to make a payment
hereunder with respect to such Recomputed Tax Benefit Payment shall make such
payment to the other Party except, however, that SGASH shall not be required to
make any payment resulting from a Recomputation Event arising as a result of the
carryback of a loss or other tax attribute until ten (10) days after the filing
of the income Tax Return for the Taxable Year from which the loss or other tax
attribute was carried back.

 

(e)           Each payment hereunder shall be made by wire transfer of
immediately available funds to a bank account of the recipient previously
designated by it.

 

SECTION 14.         Change of Control; Asset Transfers; Termination.

 

(a)           Cowen Inc. may terminate this Agreement at any time by paying to
SGASH the Acceleration Payment. If Cowen Inc. chooses to exercise its right of
early termination under this Section 14(a), Cowen Inc. shall make such
Acceleration Payment pursuant to the requirements set forth in Sections 14 (c)
and (d) hereof. Upon payment of the Acceleration Payment by Cowen Inc., neither
SGASH nor Cowen Inc. shall have any further payment obligations under Section 13
of this Agreement, other than for any (i) Tax Benefit Payment agreed to by Cowen
Inc. and SGASH as due and payable but unpaid as of the Acceleration Payment
Notice and (ii) Tax Benefit Payment due for the Covered Taxable Year ending with
or including the date of the Acceleration Payment Notice (except to the extent
that the amount described in clause (i) or (ii) is included in the Acceleration
Payment).

 

(b)           In the event of a Change in Control, notwithstanding anything to
the contrary contained in this Agreement, Cowen Inc. shall have the option to
pay to SGASH an amount of cash equal to (i) seventy percent (70%) of the
Acceleration Payment (the “Change of Control Acceleration Payment”) or (ii) the
Deferred Acceleration Payments. Cowen Inc. shall pay either the Change of
Control Acceleration Payment or the Deferred Acceleration Payments described in
this subsection (b) to SGASH pursuant to the requirements set forth in Sections
14(c) and (d) hereof. Upon payment of such Change of Control Acceleration
Payment or the final installment of the Deferred Acceleration Payments by Cowen
Inc., neither SGASH nor Cowen Inc. shall have any further payment obligations
under Section 13 of this Agreement, other than for any (i) Tax Benefit Payment
agreed to by Cowen Inc. and SGASH as due and payable but unpaid as of the
Acceleration Notice and (ii) Tax Benefit Payment due for the Covered Taxable
Year ending with or including the date of the Acceleration Notice (except to the
extent that the amount described in clause (i) or (ii) is included in the Change
of Control Acceleration Payment or the Deferred Acceleration Payments).

 

(c)           In the event an Acceleration Payment, Change of Control
Acceleration Payment or Deferred Acceleration Payments are to be made pursuant
to this Section 14, Cowen Inc. shall promptly deliver to SGASH, and in any event
no later than ten (10) days prior to a Change in Control, a written notice (the
“Acceleration Notice”) specifying Cowen Inc.’s intention to make the
Acceleration Payment, Change of Control Acceleration Payment or the Deferred
Acceleration Payments and showing in reasonable detail the calculation of the
Acceleration Payment, Change of Control Acceleration Payment or the Deferred
Acceleration Payments, as

 

12

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

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

 

the case may be. At the time Cowen Inc. delivers the Acceleration Notice to
SGASH it shall deliver to SGASH schedules and work papers providing reasonable
detail regarding the calculation of the Acceleration Payment, Change of Control
Acceleration Payment or the Deferred Acceleration Payments, as applicable, in a
manner consistent with the guidelines set forth in Section 14(d) hereof. The
Acceleration Notice shall become final and binding on the Parties unless SGASH,
within 30 calendar days after receiving such Acceleration Notice, provides Cowen
Inc. with notice of a material objection to such Acceleration Notice made in
good faith. If the Parties, using their best efforts, are unable to successfully
resolve the issues raised in such notice within 60 calendar days after such
Acceleration Notice was delivered to SGASH, Cowen Inc. and SGASH shall employ
the Reconciliation Procedures. Except as provided in Section 14(d) below, within
five (5) calendar days of the delivery to SGASH of the Acceleration Notice or
any amendment to the Acceleration Notice, Cowen Inc. shall pay to SGASH an
amount equal to the Acceleration Payment, Change of Control Acceleration Payment
or the first installment of the Deferred Acceleration Payments. Such payment
shall be made by wire transfer of immediately available funds to a bank account
designated by SGASH.

 

(d)           (i)            An Acceleration Payment shall be calculated as of
the date of an Acceleration Notice and shall be equal the present value,
discounted at the Acceleration Rate, of all Tax Benefit Payments that would be
required to be paid by Cowen Inc. to SGASH during the period from the date of
the Acceleration Notice through the end of the first Taxable Year ending on the
twentieth (20th) anniversary of the IPO Closing Date (the “Scheduled Termination
Date”) assuming (A) the Acceleration Assumptions are applied and (B) any loss
carryovers or the Imputed Interest generated by the Basis Adjustment and
available as of the date of the Acceleration Notice will be utilized by Cowen
Inc. on pro rata basis from the date of the Acceleration Notice through the
Scheduled Termination Date.

 

(ii)           The Deferred Acceleration Payments shall be calculated as of the
date of an Acceleration Notice and shall be payable by Cowen Inc. to SGASH
annually beginning on the date of the first installment required to be paid as
set forth in Section 14(c) hereof and on each anniversary of the date of the
Change of Control thereafter through and including the Scheduled Termination
Date (each such date a “Deferred Acceleration Payment Date”). Each Deferred
Acceleration Payment to be made shall be equal to:  (A) seventy percent (70%) of
an amount equal to the present value, discounted at the Acceleration Rate, of
all Tax Benefit Payments that would be required to be paid by Cowen Inc. to
SGASH during the period from the date of the Acceleration Notice through the end
of the first Taxable Year ending on the twentieth (20th) anniversary of the IPO
Closing Date assuming (x) the Acceleration Assumptions are applied and (y) any
loss carryovers or the Imputed interest generated by the Basis Adjustment and
available as of the date of the Acceleration Notice will be utilized by Cowen
Inc. on pro rata basis from the date of the Acceleration Notice through the
Scheduled Termination Date divided by (B) the aggregate number of Deferred
Acceleration Payment Dates including the date of the Change of Control. To each
such payment obligation described in the preceding sentence shall be added all
unpaid DAP Interest as of such Deferred Acceleration Payment date. In the event
all Tax Benefit Payments payable (based on the assumptions set forth in the
preceding sentence) have not been paid as of the Scheduled Termination Date, all
remaining amounts payable shall be paid by Cowen Inc. to SGASH on such date.

 

13

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

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

 

(e)           In the event that Cowen Inc. transfers all or any material portion
of the Cowen Assets in a transaction in which the full amount of gain or loss is
not recognized for federal income tax purposes and such transfer is not a Change
in Control, then, within thirty (30) days of such transfer, Cowen Inc. shall
notify SGASH, in sufficient written detail, of the Cowen Asset transfer and the
date thereof (the “Asset Transfer Date”), and as soon as practicable thereafter,
Cowen Inc. shall deliver to SGASH in writing a good faith determination of the
reduction in Tax Benefit Payments attributable to such transfer (the “Partial
Acceleration Payment Notice”) calculated in a manner consistent with the
principles of Section 14(d)(i). The Partial Acceleration Payment Notice shall
identify the amount of the Partial Acceleration Payment which shall be an amount
equal to the product of: (i) seventy percent (70%) of the Acceleration Payment
(calculated as of the Asset Transfer Date) and (ii) a fraction the numerator of
which is the adjusted basis (determined as of the Asset Transfer Date) of the
amortizable and/or depreciable Cowen Assets transferred and the denominator of
which is the adjusted basis (determined as of the Asset Transfer Date) of all of
the amortizable and depreciable Cowen Assets. The Partial Acceleration Payment
Notice shall become final and binding on the Parties unless SGASH, within 30
calendar days after receiving such Partial Acceleration Payment Notice, provides
Cowen Inc. with notice of a material objection to such Partial Acceleration
Payment Notice made in good faith. If the Parties, using their best efforts, are
unable to successfully resolve the issues raised in such notice within 60
calendar days after such Acceleration Payment Notice was delivered to SGASH,
Cowen Inc. and SGASH shall employ the Reconciliation Procedures. Within five (5)
calendar days of the delivery to SGASH of the Partial Acceleration Payment
Notice or any amendment to the Partial Acceleration Payment Notice, Cowen Inc.
shall pay to SGASH an amount equal to the Partial Acceleration Payment.

 

SECTION 15.         Interest. In the event that any payment required to be made
under this Agreement is made after the date on which such payment is due,
interest will accrue on the amount of such payment from (but not including) the
due date of such payment to (and including) the date such payment is actually
made at nine percent (9%), compounded on a daily basis.

 

SECTION 16.         Survival of Obligations. Except to the extent inconsistent
with applicable law, the indemnity and payment obligations set forth in this
Agreement will survive until the date which is six months after the date of
expiration of the applicable statute of limitations (including any extensions or
waivers thereof). The right to indemnification with respect to claims of which
notice was given prior to the expiration of the applicable survival period will
survive such expiration until such claim is finally resolved and any obligations
with respect thereto are fully satisfied.

 

SECTION 17.         Reconciliation Procedures. In the event that Cowen Inc. and
SGASH are unable to resolve a disagreement within the relevant period designated
in this Agreement, the matter shall be submitted for determination to a
nationally recognized expert in the particular area of disagreement mutually
acceptable to both Parties. The expert shall be employed by a nationally
recognized accounting firm or a law firm, and the expert shall not, and the firm
that employs the expert shall not, have any material relationship with either
Cowen Inc. or SGASH or other actual or potential conflict of interest. If the
matter is not resolved before any payment that is the subject of a disagreement
is due or any Tax Return reflecting the subject of a disagreement is due, such
payment shall be made on the date prescribed by this Agreement and such Tax

 

14

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

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

 

Return may be filed as prepared by Cowen Inc. or its affiliate, subject to
adjustment or amendment upon resolution. The costs and expenses relating to the
engagement of such expert or amending any return shall be borne by the Party who
did not have the prevailing position, or if a compromise is reached by Cowen
Inc. and SGASH, the costs and expenses shall be borne equally by the Parties.
The expert shall determine which Party prevails. The determinations of the
expert pursuant to this Section 17 shall be binding on the Parties absent
manifest error.

 

SECTION 18.         Notices. Any notices given pursuant to this Agreement shall
be made in accordance with the notice provisions of the Separation Agreement.

 

SECTION 19.         Waivers. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the Party entitled to enforce such term, but such waiver shall
be effective only if it is in a writing signed by the Party against whom the
existence of such waiver is asserted. Unless otherwise expressly provided in
this Agreement, no delay or omission on the part of any Party in exercising any
right or privilege under this Agreement shall operate as a waiver thereof, nor
shall any waiver on the part of any Party of any right or privilege under this
Agreement operate as a waiver of any other right or privilege under this
Agreement nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or the exercise of any other
right or privilege under this Agreement. No failure by any Party to take any
action or assert any right or privilege hereunder shall be deemed to be a waiver
of such right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the Party against whom the existence of such waiver is asserted.

 

SECTION 20.         Assignment. No Party may assign its duties and obligations
under this Agreement without the prior written consent of all other Parties.
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. This Agreement shall be binding on, and shall inure to the
benefit of, the Parties hereto and to their respective successors and permitted
assigns.

 

SECTION 21.         Governing Law. This Agreement shall be governed by and
construed 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.

 

SECTION 22.         Amendment. 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 23.         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

 

15

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

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

 

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 24.         Entire Agreement; No Third Party Beneficiaries. This
Agreement contains the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all previous agreements, negotiations,
discussions, writings, understandings, commitments and conversations with
respect to such subject matter, and there are no agreements or understandings
between the Parties other than those set forth or referred to herein or in the
Separation Agreement. Notwithstanding any other provisions in this Agreement to
the contrary, in the event and to the extent that there is a conflict between
the provisions of this Agreement and the provisions of the Separation Agreement,
the provisions of this Agreement shall control. This Agreement is not intended
to confer any rights or remedies hereunder upon any person other than the
Parties hereto.

 

SECTION 25.         Counterparts; Headings; Interpretation. This Agreement may
be executed in counterparts, each of which when so executed shall be deemed 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 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.

 

SECTION 26.         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.

 

16

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

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

 

IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.

 

 

SG AMERICAS, INC.

 

 

 

 

 

By:

  /s/ Jean-Philippe Coulier

 

 

 

Name: Jean-Philippe Coulier

 

 

Title: Vice President

 

 

 

 

 

SG AMERICAS SECURITIES HOLDINGS, INC.

 

 

 

 

 

By:

  /s/ Jean-Philippe Coulier

 

 

 

Name: Jean-Philippe Coulier

 

 

Title: President

 

 

 

 

 

COWEN AND COMPANY, LLC

 

 

 

 

 

By:

  /s/ Christopher A. White

 

 

 

Name: Christopher A. White

 

 

Title:   Chief Administrative Officer

 

 

 

 

 

COWEN GROUP, INC.

 

 

 

 

 

By:

  /s/ Christopher A. White

 

 

 

Name: Christopher A. White

 

 

Title:  Vice President

 

Tax Matters Agreement

 

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

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