Document:

Exhibit 10.1

 

EXECUTION
COPY

 

 

 

 

SEPARATION
AGREEMENT

 

by
and among

 

SOCIÉTÉ
GÉNÉRALE,

 

SG
AMERICAS, INC.,

 

SG
AMERICAS SECURITIES HOLDINGS, INC.,

 

COWEN
AND COMPANY, LLC

 

 

and

 

 

COWEN
GROUP, INC.

 

 

Dated
as of July 11, 2006

 

 

 

 

TABLE
OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
  SECTION 1.01.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE SEPARATION

  	
  9

  
	
  SECTION 2.01.

  	
  Organization of Cowen Inc.; IPO; Intercompany
  Transactions

  	
  9

  
	
  SECTION 2.02.

  	
  The Separation Transactions

  	
  12

  
	
  SECTION 2.03.

  	
  Transaction Documents

  	
  18

  
	
  SECTION 2.04.

  	
  Disclaimer of Representations and Warranties; Bulk
  Sales

  	
  18

  
	
  SECTION 2.05.

  	
  Financing Arrangements; Adjustments

  	
  19

  
	
  SECTION 2.06.

  	
  Leases

  	
  22

  
	
  SECTION 2.07.

  	
  Employee Investment Vehicles

  	
  23

  
	
  SECTION 2.08.

  	
  NYSE-Archipelago Merger Proceeds

  	
  23

  
	
  SECTION 2.09.

  	
  Termination of Agreements

  	
  23

  
	
  SECTION 2.10.

  	
  Settlement of Accounts Between SG and Cowen Inc

  	
  24

  
	
  SECTION 2.11.

  	
  Novation of Liabilities

  	
  24

  
	
  SECTION 2.12.

  	
  Mixed Contracts; Mixed Accounts

  	
  24

  
	
  SECTION 2.13.

  	
  Further Assurances

  	
  26

  
	
  SECTION 2.14.

  	
  Transition Committee

  	
  26

  
	
  SECTION 2.15.

  	
  Conditions to the Separation

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  MUTUAL RELEASES; INDEMNIFICATION

  	
  28

  
	
  SECTION 3.01.

  	
  Indemnification Agreement

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CERTAIN OTHER MATTERS

  	
  28

  
	
  SECTION 4.01.

  	
  Insurance Matters

  	
  28

  
	
  SECTION 4.02.

  	
  Late Payments

  	
  29

  
	
  SECTION 4.03.

  	
  SG Financial Statements

  	
  29

  
	
  SECTION 4.04.

  	
  Certain Employee Matters

  	
  30

  
	
  SECTION 4.05.

  	
  Compliance with Regulatory Requirements

  	
  31

  
	
  SECTION 4.06.

  	
  Tax Treatment

  	
  31

  
	
  SECTION 4.07.

  	
  Warrants Held by Cowen LLC

  	
  31

  
	
  SECTION 4.08.

  	
  Registration Statement and Prospectus Disclosures

  	
  31

  
				

 

i

 

	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  EXCHANGE OF INFORMATION; CONFIDENTIALITY

  	
  32

  
	
  SECTION 5.01.

  	
  Agreement for Exchange of Information

  	
  32

  
	
  SECTION 5.02.

  	
  Ownership of Information

  	
  32

  
	
  SECTION 5.03.

  	
  Record Retention

  	
  32

  
	
  SECTION 5.04.

  	
  Limitations of Liability

  	
  32

  
	
  SECTION 5.05.

  	
  Other Agreements Providing for Exchange of
  Information

  	
  32

  
	
  SECTION 5.06.

  	
  Confidentiality

  	
  33

  
	
  SECTION 5.07.

  	
  Protective Arrangements

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  DISPUTE RESOLUTION

  	
  34

  
	
  SECTION 6.01.

  	
  Disputes

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  TERMINATION

  	
  35

  
	
  SECTION 7.01.

  	
  Termination

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  NON-SOLICITATION; NON-DISPARAGEMENT; EMPLOYEE
  ARRANGEMENTS; COMPETITION

  	
  35

  
	
  SECTION 8.01.

  	
  Non-Solicitation

  	
  35

  
	
  SECTION 8.02.

  	
  Non-Disparagement

  	
  36

  
	
  SECTION 8.03.

  	
  No Other Business Restrictions

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  MISCELLANEOUS

  	
  36

  
	
  SECTION 9.01.

  	
  Counterparts; Entire Agreement; Corporate Power;
  Facsimile Signatures

  	
  36

  
	
  SECTION 9.02.

  	
  Governing Law

  	
  37

  
	
  SECTION 9.03.

  	
  Assignability

  	
  37

  
	
  SECTION 9.04.

  	
  Third Party Beneficiaries

  	
  37

  
	
  SECTION 9.05.

  	
  Notices

  	
  38

  
	
  SECTION 9.06.

  	
  Severability

  	
  39

  
	
  SECTION 9.07.

  	
  Force Majeure

  	
  39

  
	
  SECTION 9.08.

  	
  Responsibility for Expenses

  	
  39

  
	
  SECTION 9.09.

  	
  Headings

  	
  39

  
	
  SECTION 9.10.

  	
  Survival

  	
  39

  
	
  SECTION 9.11.

  	
  Subsidiaries

  	
  40

  
	
  SECTION 9.12.

  	
  Waivers

  	
  40

  
				

 

ii

 

	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 9.13.

  	
  Amendments

  	
  40

  
	
  SECTION 9.14.

  	
  Interpretation

  	
  40

  
	
  SECTION 9.15.

  	
  Advisors

  	
  41

  
	
  SECTION 9.16.

  	
  Mutual Drafting

  	
  41

  
	
  SECTION 9.17.

  	
  No Right to Set-Off

  	
  41

  
	
  SECTION 9.18.

  	
  Enforcement Costs

  	
  41

  
	
  SECTION 9.19.

  	
  Remedies

  	
  41

  

 

iii

 

SCHEDULES

 

	
  Schedule 1.01(a)

  	
  Cowen Benefit
  Plans

  
	
  Schedule 1.01(b)

  	
  Cowen’s Knowledge

  
	
  Schedule 1.01(c)

  	
  Excluded Assets

  
	
  Schedule 1.01(d)

  	
  Leases

  
	
  Schedule 1.01(e)

  	
  SG’s Knowledge

  
	
  Schedule 1.01(f)

  	
  Transferred Entities

  
	
  Schedule 2.02(a)(i)

  	
  Scheduled Cowen Assets

  
	
  Schedule 2.02(a)(ii)

  	
  Scheduled Cowen Liabilities

  
	
  Schedule 2.02(b)

  	
  Scheduled SG Liabilities

  
	
  Schedule 2.06(a)

  	
  Lease Guarantees; Fees Payable to SG

  
	
  Schedule 2.09

  	
  Arrangements Not to be Terminated

  
	
  Schedule 2.10

  	
  Intercompany Accounts Not to be Terminated

  
	
  Schedule 2.14

  	
  Transition Committee Members

  
	
  Schedule 4.01

  	
  Insurance Policies

  
	
  Schedule 4.07

  	
  Warrants Held by Cowen LLC

  

 

EXHIBITS

 

	
  Exhibit A

  	
  Amended and Restated By-Laws of Cowen Inc.

  
	
  Exhibit B

  	
  Amended and Restated Certificate of Incorporation of
  Cowen Inc.

  
	
  Exhibit C

  	
  Cowen Employee Ownership Plan

  
	
  Exhibit D

  	
  Employee Matters Agreement

  
	
  Exhibit E

  	
  Indemnification Agreement

  
	
  Exhibit F

  	
  Stockholders Agreement

  
	
  Exhibit G

  	
  Tax Matters Agreement

  
	
  Exhibit H

  	
  Transition Services Agreement

  

 

iv

 

SEPARATION
AGREEMENT

 

THIS
SEPARATION AGREEMENT, dated as of July 11, 2006, is made
by and among SOCIÉTÉ GÉNÉRALE, a French banking corporation (“SG”), 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.”).

 

R
E C I T A L S:

 

WHEREAS,
SG is the sole stockholder of SGAI, SGAI is the sole stockholder of SGASH and
SGASH is the sole member of Cowen LLC and the sole stockholder of Cowen UK;

 

WHEREAS,
Cowen Inc. is a newly-formed corporation and, as of the date hereof, a
wholly-owned Subsidiary of SGASH;

 

WHEREAS,
SG, SGAI and SGASH have determined that it is appropriate and advisable to
separate the Cowen Business (as defined herein) from the SG Business (as
defined herein) (the “Separation”); and

 

WHEREAS,
each of the Parties hereto has determined that it is necessary and advisable to
set forth the principal transactions required to effect the Separation and to
describe other agreements that will govern certain other matters prior to and
following the Separation.

 

NOW,
THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement (as defined herein), the
Parties (as defined herein) hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.01.  Definitions.  Reference is made to Section 9.14
regarding the interpretation of certain words and phrases used in this
Agreement.  In addition, for the purpose
of this Agreement, the following terms shall have the meanings set forth below.

 

“AAA” has the
meaning set forth in Section 6.01.

 

“Agreement” means
this Separation Agreement and each of the Schedules and Exhibits hereto.

 

“Assets” means
assets, rights, claims and properties of all kinds, real and personal,
tangible, intangible and contingent, including rights and benefits pursuant to
any contract, license, permit, indenture, note, bond, mortgage, agreement,
concession, franchise, instrument, undertaking, commitment, understanding or
other arrangement and any rights or benefits pursuant to any Proceeding.

 

 

“BHCA” has the
meaning set forth in Section 4.05(a).

 

“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.

 

“Business Entity”
means any corporation, general or limited partnership, trust, joint venture,
unincorporated organization, limited liability entity or other entity.

 

“By-Laws” means
the amended and restated By-Laws of Cowen Inc., substantially in the form of Exhibit A.

 

“Certificate of
Incorporation” means the amended and restated Certificate of Incorporation
of Cowen Inc., substantially in the form of Exhibit B.

 

“Closing Distribution
Amount” has the meaning set forth in Section 2.02(d).

 

“Closing Litigation
Reserve” has the meaning set forth in Section 2.05(b).

 

“Closing Statement”
has the meaning set forth in Section 2.05(d).

 

“Code” means the
Internal Revenue Code of 1986, as amended.

 

“Consents” means
any consents, waivers or approvals from, or notification requirements to, any
Third Parties.

 

“Conveyance and
Assumption Instruments” means, collectively, such deeds, bills of sale,
Asset transfer agreements, endorsements, assignments, assumptions (including
Liability assumption agreements), leases, subleases, affidavits and other instruments
of sale, conveyance, contribution, distribution, lease, transfer and assignment
between SG or, where applicable, any SG Subsidiary, on the one hand, and Cowen
Inc. or, where applicable, any Cowen Subsidiary or designee of Cowen Inc., on
the other hand, as may be necessary or advisable under the laws of the relevant
jurisdictions to effect the Separation.

 

“Cowen Assets” has
the meaning set forth in Section 2.02(a)(i).

 

“Cowen Balance Sheet”
means the audited combined statement of financial condition of Cowen Inc.,
Cowen LLC and the other Cowen Subsidiaries, including the notes thereto, as of
December 31, 2005, included in the Prospectus.

 

“Cowen Benefit Plans”
means, collectively, the plans and arrangements set forth on Schedule 1.01(a) and
any other benefit plans maintained, sponsored or adopted by Cowen LLC, Cowen
Inc. or the Cowen Subsidiaries, whether before or after the Separation Date.

 

“Cowen Business”
means the businesses and operations conducted prior to the Separation Date by
Cowen LLC and the Transferred Entities, excluding the Transferred Businesses.

 

“Cowen Common Stock”
means the outstanding shares of common stock, par value $0.01, of Cowen Inc.

 

2

 

“Cowen Contracts”
means any contract, agreement or instrument (other than this Agreement and any
Transaction Document) to which Cowen LLC, Cowen Inc. or any Cowen Subsidiary is
a party or by which any of their respective assets are bound.

 

“Cowen Employee
Ownership Plan” means the 2006 Equity and Incentive Plan adopted by Cowen
Inc. as of the Separation Date, substantially in the form attached as Exhibit C.

 

“Cowen Inc.” has
the meaning set forth in the Preamble.

 

“Cowen Indemnitees”
means Cowen Inc. and each Cowen Subsidiary and their respective successors and
assigns.

 

“Cowen Indemnity
Obligations” has the meaning set forth in the Indemnification Agreement.

 

“Cowen Liabilities”
has the meaning set forth in Section 2.02(a)(ii).

 

“Cowen LLC” has
the meaning set forth in the Preamble.

 

“Cowen Subsidiary”
means Cowen LLC, Cowen UK and any other Subsidiary of Cowen Inc.

 

“Cowen UK” means
Cowen International Limited, a private limited company organized in England and
Wales.

 

“Cowen UK Purchase
Agreement” shall have the meaning set forth in Section 2.02(c).

 

“Cowen’s Knowledge”
means the actual knowledge of the officers and employees listed on Schedule 1.01(b) as
of the IPO Date.

 

“Cowen Sublease”
has the meaning set forth in Section 2.06(a).

 

“Employee Matters
Agreement” means the Employee Matters Agreement entered into on or prior to
the Separation Date among SG, SGAI, SGASH, Cowen LLC and Cowen Inc.,
substantially in the form attached as Exhibit D hereto.

 

“Employment Tax”
means withholding, payroll, social security, workers compensation, unemployment,
disability and any similar tax imposed by any Tax Authority, and any interest,
penalties, additions to tax or additional amounts with respect to the foregoing
imposed on any taxpayer or consolidated, combined or unitary group of
taxpayers.

 

“Escrow Agent”
means JPMorgan Chase Bank, N.A., or such other financial institution as
mutually agreed upon by the Parties, in its capacity as escrow agent under the
Escrow Agreement.

 

“Escrow Agreement”
means the Escrow Agreement entered into on or prior to the Separation Date
among SGASH, Cowen LLC, Cowen Inc. and the Escrow Agent.

 

“Estimated
Distribution Amount” has the meaning set forth in Section 2.05(c).

 

3

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, together with the
rules and regulations promulgated thereunder.

 

“Excluded Assets”
means all of the following assets of the Parties or their respective
Subsidiaries:

 

(i)  all
Assets of the Parties or their respective Subsidiaries to the extent such
Assets relate to, arise out of or result from the SG Business;

 

(ii)  all
cash and cash equivalents as of the Separation Date of SG, each SG Subsidiary,
Cowen LLC and each Cowen Subsidiary, except (x) any cash and cash equivalents
included in the Initial Capital retained by Cowen LLC pursuant to Section 2.05(a) and
(y) any cash or cash equivalents held for customers pursuant to
Rule 15c3-3 promulgated under the Exchange Act;

 

(iii) 
subject to Section 2.13, all Assets that are expressly contemplated
by this Agreement or any Principal Transaction Document to be Assets retained
by or transferred to SG or any SG Subsidiary; and

 

(iv)  all
other Assets listed or described on Schedule 1.01(c).

 

“Final Closing
Statement”  means (x) the Closing
Statement, if no Notice of Disagreement with respect thereto is duly and timely
delivered pursuant to Section 2.05, or (y) if such a Notice of
Disagreement is so delivered, the Closing Statement as agreed by Cowen Inc. and
SG or as prepared by the arbiter, in each case pursuant to Article VI.

 

“Final Distribution
Amount” means the Closing Distribution Amount, as set forth in the Final
Closing Statement.

 

“Firm Public Offering
Shares” means the Cowen Common Stock to be sold in the IPO as contemplated
in the Underwriting Agreement, other than Cowen Common Stock to be sold as a
result of the Underwriters’ over-allotment option.

 

“GAAP” means U.S.
generally accepted accounting principles, as applied by SGAI as of the
Separation Date.

 

“Governmental
Authority” means any supranational, international, national, federal,
state, or local court, government, department, commission, board, bureau,
agency, official or other regulatory, self-regulatory, administrative or
governmental authority, including the NASD, the NYSE and any similar regulatory
or self-regulatory body under applicable securities laws or regulations.

 

“Greenwich Capital
Partners” means SG Cowen/Greenwich Street Capital Partners II, L.P., a
Delaware limited partnership.

 

“IAS” means the
international financial reporting standards issued by the International
Accounting Standards Board, as applied by SG and SG Subsidiaries.

 

4

 

“Indemnification
Agreement” means the Indemnification Agreement entered into on or prior to
the Separation Date among the Parties, substantially in the form attached as Exhibit E
hereto.

 

“Information”
means information, whether or not patentable or copyrightable, in written,
oral, electronic or other tangible or intangible forms, including studies, reports,
records, books, contracts, instruments, surveys, discoveries, ideas, concepts,
know-how, techniques, designs, specifications, drawings, blueprints, diagrams,
models, prototypes, samples, flow charts, data, computer data, disks,
diskettes, tapes, computer programs or other software, marketing plans,
customer names, communications by or to attorneys (including attorney-client
privileged communications), memos and other materials prepared by attorneys or
under their direction (including attorney work product), and other technical,
financial, employee or business information or data.

 

“Initial Capital”
has the meaning set forth in Section 2.05(a).

 

“Insurance Proceeds”
means, with respect to any insured party, those monies, net of any applicable
premium adjustments (including reserves and retrospectively rated premium
adjustments) and net of any out-of-pocket costs or expenses incurred in the
collection thereof, which are either: 
(i) received by an insured from an insurance carrier or its estate;
or (ii) paid by an insurance carrier or its estate on behalf of the
insured.

 

“IPO” means the
initial public offering of shares of Cowen Common Stock pursuant to the
Registration Statement.

 

“IPO Date” means
the date of the closing of the IPO.

 

“Leases” means the
real property leases and subleases entered into by Cowen LLC or any of the
Cowen Subsidiaries prior to the date hereof, each of which is listed on Schedule 1.01(d).

 

“Liabilities”
means all debts, liabilities, obligations, responsibilities, response actions,
losses, damages (other than punitive, consequential, treble or other similar
damages, except to the extent that the same are paid to Third Parties), fines,
penalties and sanctions, absolute or contingent, matured or unmatured,
liquidated or unliquidated, foreseen or unforeseen, joint, several or
individual, asserted or unasserted, accrued or unaccrued, known or unknown,
whenever arising, including those arising under or in connection with any law,
statute, ordinance, regulation, rule or other pronouncements of
Governmental Authorities having the effect of law, Proceeding, threatened
Proceeding, order or consent decree of any Governmental Authority or any award
of any arbitration tribunal, those arising under any contract, guarantee,
commitment or undertaking, whether sought to be imposed by a Governmental
Authority, private party, or Party, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, or otherwise,
and those, in respect of Cowen Inc. or any Cowen Subsidiary and SG and any SG
Subsidiary, pursuant to indemnification or contribution arrangements with their
respective directors, officers, employees and agents, and including any costs,
expenses, interest, attorneys’ fees, disbursements and expense of counsel,
expert and consulting fees and costs related thereto (including allocated costs
of in-house counsel and other personnel) or to the investigation, preparation
or defense thereof.

 

5

 

“MBF Purchasers”
means the purchasers of the partnership interests in the Merchant Banking Fund
identified on Schedule 1.01(g).

 

“Merchant Banking Fund”
means SG Merchant Banking Fund L.P., a Delaware limited partnership.

 

“Mixed Accounts”
has the meaning set forth in Section 2.12(b).

 

“Mixed Contract”
has the meaning set forth in Section 2.12(a).

 

“NASD” means the
National Association of Securities Dealers, Inc.

 

“NASDAQ” means the
NASDAQ Stock Market.

 

“Notice of
Disagreement” has the meaning set forth in Section 2.05(e).

 

“NYSE” means the
New York Stock Exchange, Inc.

 

“NYSE-Archipelago
Merger Proceeds” means, collectively, all of Cowen LLC’s right, title and
interest in and to the cash, equity and any other proceeds or consideration to
which the holders of equity or membership interests of the NYSE are entitled in
connection with the merger between the NYSE and Archipelago, as effected
pursuant to the Merger Agreement between the NYSE and Archipelago
Holdings, Inc., dated as of April 20, 2005, as amended.

 

“Parties” means
the parties to this Agreement.

 

“Person” means
any:  (i) individual;
(ii) Business Entity; or (iii) Governmental Authority.

 

“Prime Rate” means
the rate which SG (or its successor or another major money center commercial
bank agreed to by the Parties) announces as its prime lending rate, as in
effect from time to time.

 

“Principal Transaction
Documents” means:  (i) the
Employee Matters Agreement; (ii) the Escrow Agreement; (iii) the
Indemnification Agreement; (iv) the Stockholders Agreement; (v) the
Tax Matters Agreement; (vi) the Transition Services Agreement; and
(vii) any and all Leases.

 

“Proceeding”
means:  (i) any past, present or
future suit, countersuit, action, arbitration, mediation, alternative dispute
resolution process, claim, counterclaim, demand, proceeding; (ii) any
inquiry, proceeding or investigation by or before any Governmental Authority;
or (iii) any arbitration or mediation tribunal, in each case involving SG,
any SG Subsidiary, any SG Indemnitee (but only if in a capacity entitling such
Person to the rights of an SG Indemnitee), Cowen LLC, Cowen Inc., any Cowen
Subsidiary or any Cowen Indemnitee (but only if in a capacity entitling such
Person to the rights of a Cowen Indemnitee).

 

“Prospectus” means
the prospectus forming a part of the Registration Statement as the same may be
amended or supplemented from time to time.

 

6

 

“Registration
Statement” means the registration statement on Form S-1 (File
No. 333-132602) filed under the Exchange Act on March 21, 2006,
pursuant to which the Cowen Common Stock to be sold in the IPO has been
registered, together with all amendments and supplements thereto.

 

“SEC” means the
Securities and Exchange Commission.

 

“Securities Act”
means the Securities Act of 1933, as amended, together with the rules and
regulations promulgated thereunder.

 

“Security Interest”
means any mortgage, security interest, pledge, lien, charge, claim, option,
right to acquire, voting or other restriction, right-of-way, covenant, condition,
easement, encroachment, restriction on transfer, or other encumbrance of any
nature whatsoever.

 

“Separation” has
the meaning set forth in the Recitals.

 

“Separation Date”
means the date as of which the Separation is consummated.

 

“Service Level Agreements”
has the meaning set forth in the Transition Services Agreement.

 

“SG” has the
meaning set forth in the Preamble.

 

“SGAI” has the
meaning set forth in the Preamble.

 

“SGASH” has the
meaning set forth in the Preamble.

 

“SG Business”
means all businesses and operations conducted prior to the Separation Date by
SG and any of the SG Subsidiaries, in each case that are not included in the
Cowen Business.  For purposes of this
Agreement and the Transaction Documents only, the SG Business shall also be deemed
to include the Transferred Businesses.

 

“SG Contracts”
means any contract, agreement or instrument (other than this Agreement and any
Transaction Document) to which SG or any of the SG Subsidiaries is a party or
by which SG or any SG Subsidiaries, or any of their respective assets, are
bound.

 

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

 

“SG Indemnitees”
means SG and each SG Subsidiary and each of their respective successors and
assigns.

 

“SG Indemnity Obligations”
has the meaning set forth in the Indemnification Agreement.

 

“SG Liabilities”
has the meaning set forth in Section 2.02(b).

 

“SG’s Knowledge”
means the actual knowledge of the officers and employees listed on Schedule 1.01(e) as
of the IPO Date.

 

7

 

“SG Subsidiary”
means any Subsidiary of SG other than Cowen LLC, Cowen Inc. and any Cowen
Subsidiary.

 

“Stockholders
Agreement” means the Stockholders Agreement entered into as of the
Separation Date among Cowen Inc. and certain of its stockholders, including
SGASH, substantially in the form attached as Exhibit F hereto.

 

“Subsidiary” of
any Person means another Business Entity that is directly or indirectly
controlled by such Person.  As used
herein, “control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Business
Entity, whether through ownership of voting securities or other interests, by
contract or otherwise.  For the avoidance
of doubt, Cowen Inc. and the Cowen Subsidiaries are not Subsidiaries of SG as
that term is used in this Agreement.

 

“Tax” means:  (i) any income, net income, gross
income, gross receipts, profits, capital stock, franchise, property, ad
valorem, stamp, excise, severance, occupation, service, sales, use, license,
lease, transfer, import, export, customs duties, value added, alternative
minimum, estimated or other similar tax (including any fee, assessment, or
other charge in the nature of or in lieu of any tax) imposed by any Tax
Authority, and any interest, penalties, additions to tax or additional amounts
with respect to the foregoing imposed on any taxpayer or consolidated, combined
or unitary group of taxpayers; and (ii) any Employment Tax.

 

“Tax Authority”
means, with respect to any Tax, the Governmental Authority or political
subdivision thereof that imposes such Tax, and the agency (if any) charged with
the collection of such Tax for such entity or subdivision.

 

“Tax Matters Agreement”
means the Tax Matters Agreement entered into on or prior to the Separation Date
among SGAI, SGASH, Cowen LLC and Cowen Inc., substantially in the form attached
as Exhibit G hereto.

 

“Third Party”
means any Person other than SG, any SG Subsidiary, Cowen Inc. and any Cowen
Subsidiary.

 

“Third Party Claim”
has the meaning set forth in the Indemnification Agreement.

 

“Transaction Documents”
means all written agreements, instruments, understandings, assignments or other
arrangements (other than this Agreement) entered into by the Parties or any of
their respective Subsidiaries in connection with the Separation and the other
transactions contemplated by this Agreement, including the following:  (i) the Conveyance and Assumption Instruments;
(ii) the Employee Matters Agreement; (iii) the Escrow Agreement;
(iv) the Indemnification Agreement; (v) the Stockholders Agreement;
(vi) the Tax Matters Agreement; (vii) the Transition Services
Agreement; (viii) any and all Leases; and (ix) any other agreements
which the Parties determine are necessary or advisable in connection with the
Separation and the other transactions contemplated by this Agreement and the
Transaction Documents.

 

“Transferred
Businesses” means (i) the Private Client Group division sold by SG
Cowen Securities Corporation to Lehman Brothers Holdings Inc. in
October 2000, (ii) the bond brokerage business sold by SG Cowen
Securities Corporation to Fimat Futures, USA, Inc. in

 

8

 

2000,
(iii) the correspondent clearing operations sold by SG Cowen Securities
Corporation to BNY Clearing Services LLC in January 2000 and (iv) the
SG Cowen Asset Management Business.

 

“Transferred Entities”
means the entities set forth on Schedule 1.01(f).

 

“Transition Services
Agreement” means the Transition Services Agreement entered into on or prior
to the Separation Date among SG, SGAI, SGASH, Cowen LLC and Cowen Inc.,
substantially in the form attached as Exhibit H hereto.

 

“Underwriters”
mean the managing underwriters for the IPO.

 

“Underwriting Agreement”
means the firm commitment underwriting agreement to be entered into by and
among SGASH, Cowen Inc. and the Underwriters in connection with the offering of
Cowen Common Stock in the IPO.

 

“U.S.” or “United
States” means the United States of America, including each of the 50 states
thereof, the District of Columbia and Puerto Rico, but excluding all other
territories and possessions.

 

ARTICLE II

THE SEPARATION

 

SECTION 2.01.  Organization of Cowen Inc.; IPO;
Intercompany Transactions.

 

(a)  Incorporation
of Cowen Inc.  The Parties
acknowledge that: (i) SGASH caused Cowen Inc. to be incorporated in
Delaware on February 15, 2006 under the name “Cowen Group, Inc.”; and
(ii) immediately prior to the IPO, SGASH will be the sole stockholder of
Cowen Inc.

 

(b)  Adoption of
Cowen Inc.’s Amended and Restated Charter and By-Laws.  On or prior to the Separation Date, SGASH and
Cowen Inc. shall take all necessary actions so that, effective immediately
prior to the Separation Date, the Certificate of Incorporation and the By-Laws
shall be the certificate of incorporation and by-laws of Cowen Inc.

 

(c)  Cowen Inc.’s
Directors and Officers.  On or prior
to the Separation Date, SGASH and Cowen Inc. shall take all necessary actions
so that immediately following the Separation: (i) the directors and
executive officers of Cowen Inc. shall be those set forth in the Prospectus,
unless otherwise agreed by the Parties; and (ii) Cowen Inc. shall have
such other officers as Cowen Inc. shall desire.

 

(d)  NASDAQ
Listing.  Cowen Inc. shall prepare
and file, and shall use commercially reasonable efforts to have approved prior
to the Separation Date, an application for the listing on NASDAQ of the shares
of Cowen Common Stock to be sold pursuant to the IPO.

 

(e)  IPO
Procedures.  In connection with the
IPO, Cowen LLC and Cowen Inc.:

 

9

 

(i)  shall
timely consult with, and cooperate in all respects with, SG and the SG
Subsidiaries in connection with the pricing of the Cowen Common Stock to be
offered in the IPO;

 

(ii)  shall
promptly furnish to SG and SGASH copies of reasonably complete drafts of all
such documents prepared to be filed (including exhibits) in connection with the
IPO, provide SG and SGASH with the reasonable opportunity to object to any
information contained therein and make any corrections reasonably requested by
SG and SGASH that are reasonably acceptable to Cowen LLC and Cowen Inc. with
respect to such information prior to filing any such registration statement or
amendment;

 

(iii)  shall
timely execute and deliver the Underwriting Agreement in such form and
substance as is satisfactory to Cowen Inc., Cowen LLC, SG and the SG
Subsidiaries;

 

(iv)  shall
notify SG and SGASH promptly of any request by the SEC for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information;

 

(v)  shall,
during the period when the Prospectus is required to be delivered under the
Securities Act, promptly file all documents required to be filed with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;

 

(vi)  shall
otherwise use their respective reasonable best efforts to comply with all
applicable rules and regulations of the SEC, including the Securities Act
and the Exchange Act and the rules and regulations promulgated thereunder,
and make generally available to Cowen Inc.’s security holders an earnings
statement satisfying the provisions of Section 11(a) of the
Securities Act no later than thirty (30) days after the end of the twelve (12)
month period beginning with the first day of Cowen Inc.’s first fiscal quarter
commencing after the effective date of a registration statement, which earnings
statement shall cover said twelve (12) month period, and which requirement will
be deemed to be satisfied if Cowen Inc. timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise
complies with Rule 158 under the Securities Act; and

 

(vii)  shall
promptly take any and all other actions reasonably necessary or desirable to
consummate the IPO as contemplated in the Registration Statement and the
Underwriting Agreement.

 

(f)  Representations
Regarding Disclosure.

 

(i)  Cowen
LLC and Cowen Inc., jointly and severally, hereby represent and warrant to SG
and SGASH that, to Cowen’s Knowledge, the information in the Prospectus and
Registration Statement and any amendments or supplements thereto does not on
the date hereof or on the date of the execution of the Underwriting Agreement
and will not as of the IPO Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;

 

10

 

(ii)  SG
hereby represents and warrants to Cowen LLC and Cowen Inc. that, to SG’s
Knowledge, (A) the information in the sections of the Prospectus entitled
“Business—Regulation”, “Business—Legal Proceedings” and “Use of Proceeds” and
the information relating to SG (and not to Cowen LLC or Cowen Inc. or their
respective offices and employees) in the Section of the Prospectus
entitled “Principal and Selling Stockholders” and any amendments or supplements
thereto does not on the date hereof or on the date of the execution of the
Underwriting Agreement and will not as of the IPO Date contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (B) any
financial information furnished in writing by SG to Cowen LLC expressly for use
in the combined statements of financial condition of Cowen Inc. contained in
the Prospectus was true and correct as of the date such financial information
was provided (or, if the information provided related to a prior period or
date, was true and correct as of the end of such prior period or as of such
prior date).

 

(iii)  The
representations and warranties in this Section 2.01(f) shall
survive until the date eighteen (18) months following the IPO Date, at which
date such representations and warranties shall terminate and cease to be of
further force or effect.

 

(iv)  Notwithstanding
anything to the contrary in Sections  2.01, 2.02, 3.01(a) and
3.02(b) of the Indemnification Agreement), no Person shall be
(A) relinquished, released or discharged pursuant to Section 2.01
or 2.02 of the Indemnification Agreement from Liabilities arising from
any breach of the representations and warranties in this Section 2.01(f) or
(B) entitled to indemnification for or against any Liabilities to the
extent such Liabilities relate to, arise out of or result from any breach of
the representations and warranties in this Section 2.01(f).

 

(g)  Opinion and
Comfort Letter.  Cowen Inc. shall
furnish or cause to be furnished to the Underwriters a signed counterpart of
(A) an opinion or opinions of counsel to Cowen Inc., and (B) a
comfort letter or comfort letters from Cowen Inc.’s independent public
accountants, each at the times required by the Underwriting Agreement, in the
form attached to the Underwriting Agreement, addressed to the Underwriters, and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the Underwriters reasonably request.

 

(h)  Self-Regulatory
Membership.  Prior to the Separation
Date, Cowen Inc. shall consult with the NYSE, and any other self-regulatory
organization of which Cowen LLC currently is a member, with respect to the
transactions contemplated by this Agreement, and, sufficiently prior to the
Separation Date as is required or appropriate under the circumstances, shall
submit to the NYSE or such other self-regulatory organization such information
as the NYSE or such other self-regulatory organization may require under its
rules and regulations by reason of the transactions contemplated by this
Agreement.  SG agrees to cooperate with
Cowen Inc. by furnishing to Cowen Inc. such information as may reasonably be
requested for this purpose by Cowen, the NYSE or other such self-regulatory
organization.

 

11

 

SECTION 2.02.  The Separation Transactions.  The Parties acknowledge that the Separation
is intended to result in Cowen Inc.’s directly or indirectly operating the
Cowen Business, owning the Cowen Assets and assuming the Cowen Liabilities as
set forth below in this Article II.

 

(a)  Transfer of
Cowen Assets and Liabilities.

 

(i)  Transfer
of Cowen Assets.  Subject to Section 2.02(f) and
Section 2.15, on the Separation Date, and in any event following the
transactions described in Sections 2.01(b), (c) and (d),
Sections 2.02(d) and (e), Section 2.05(b) and
Sections 2.15(a)(i) and (a)(ii), SG shall, and shall cause
each applicable SG Subsidiary to, assign, transfer, convey and deliver to Cowen
Inc., Cowen LLC or such other Cowen Subsidiaries as Cowen Inc. may designate,
and Cowen Inc. and Cowen LLC shall, and shall cause Cowen LLC and such Cowen
Subsidiaries to, accept from SG and the SG Subsidiaries, all of SG’s and the SG
Subsidiaries’ respective rights, title and interest in and to only the
following Assets of the Parties or their respective Subsidiaries, but excluding
any Excluded Assets (collectively, the “Cowen Assets”):

 

(A)  the outstanding
membership interests of Cowen LLC;

 

(B)  the outstanding
capital shares of Cowen UK;

 

(C)  the
Assets included on the Cowen Balance Sheet after completion of the transactions
contemplated by this Agreement and the Transaction Documents or any notes or
subledger thereto that are owned by any Party or any of their respective
Subsidiaries as of the IPO Date;

 

(D)  the
Assets of any Party or any of their respective Subsidiaries as of the Separation
Date that are of a nature or type that would have resulted in such Assets being
included as Assets on a pro forma combined statement of financial condition of
Cowen Inc. or the notes or subledgers thereto as of the IPO Date (were such
statement of financial condition, notes and subledgers to be prepared) on a
basis consistent with the determination of the Assets included on the Cowen
Balance Sheet or any subledger thereto;

 

(E)  the
Assets expressly allocated to Cowen Inc. or any Cowen Subsidiary under this
Agreement or any of the Principal Transaction Documents;

 

(F)  the
Assets used or held by Cowen Inc. or any Cowen Subsidiary for use in the Cowen
Business and the rights to the Cowen Business;

 

(G)  all
right, title and interest to the trade name, trademark and service mark
“Cowen”, together with the goodwill associated therewith;

 

(H)  the
trade secrets, know-how, proprietary information (including any clinical study
data and product registrations), any other rights or intellectual property and
any other rights, claims or properties, in each case:  (A) as of the Separation Date;
(B) to the

 

12

 

extent primarily related
to the Cowen Business; and (C) that are not otherwise specifically
addressed under any other subsection of this definition; and

 

(I)  the Assets identified on Schedule 2.02(a)(i).

 

(ii)  Transfer
of Cowen Liabilities.  Subject to Section 2.02(f) and
Section 2.15, on the Separation Date, and in any event following
the transactions described in Sections 2.01(b), (c) and (d),
Sections 2.02(d) and (e), Section 2.05(b) and
Sections 2.15(a)(i) and (a)(ii), Cowen Inc. shall, or shall
cause the applicable Cowen Subsidiaries to accept, assume and agree faithfully
to perform, discharge and fulfill all of the following Liabilities of the
Parties or their respective Subsidiaries (collectively, the “Cowen
Liabilities”) in accordance with their respective terms:

 

(A)  all
Liabilities included on the Cowen Balance Sheet or any subledger thereto that
remain outstanding as of the Separation Date after completion of the
transactions contemplated by this Agreement and the Transaction Documents;

 

(B)  all
other Liabilities that are incurred or accrued by any Party or any of their
respective Subsidiaries from the date of the Cowen Balance Sheet to the
Separation Date that are of a nature or type that would have resulted in such
Liabilities being included as Liabilities on a pro forma combined statement of
financial condition of Cowen Inc. and the notes or subledgers thereto as of the
Separation Date (were such statement of financial condition, notes or
subledgers to be prepared) on a basis consistent with the determination of the
Liabilities included on the Cowen Balance Sheet or any subledger thereto;

 

(C)  all Liabilities
expressly allocated to Cowen Inc. or any Cowen Subsidiary pursuant to this
Agreement or any Transaction Document, and all agreements, obligations and
Liabilities of Cowen Inc. and any Cowen Subsidiaries under this Agreement or
any Transaction Document;

 

(D)  all
Liabilities relating to, arising out of or resulting from investment decisions
or the management of portfolio companies relating to SG Cowen Ventures (including all claims by limited partners
of SG Cowen Ventures and other Third Parties); provided, however,
that Liabilities relating to, arising out of or resulting from the
administration of SG Cowen Ventures, including the accuracy or correctness of
disbursements and the distribution of materials by or on behalf of the general
partner of SG Cowen Ventures to limited partners of SG Cowen Ventures shall be
deemed “SG Liabilities” as contemplated in Section 2.02(b);

 

(E)  all
Liabilities relating to, arising out of or resulting from investment decisions
or the management of portfolio companies of or relating to the Merchant Banking
Fund on or after January 1, 2004 (including all claims by limited partners
of the Merchant Banking Fund and other Third Parties); provided, however,
that Liabilities relating to, arising out of or resulting from (w) the sale and
transfer of partnership interests in the Merchant Banking Fund to the MBF
Purchasers (except that any rights of SG or any SG Subsidiaries in respect of
the representations and warranties made to the MBF Purchasers

 

13

 

in the sale and transfer
documents shall not be deemed to have been waived pursuant to this clause (w)),
(x) the administration of the Merchant Banking Fund, including the accuracy or
correctness of disbursements and the distribution of materials by or on behalf
of the Merchant Banking Fund to the partners of the Merchant Banking Fund or
participants in the Merchant Banking Co-investment Plan and (y) any claim by
former partners of the Merchant Banking Fund that do not relate to investment
decisions or management of the Merchant Banking Fund after January 1, 2004
shall be deemed “SG Liabilities” as contemplated in Section 2.02(b);

 

(F)  all
Liabilities relating to, arising out of or resulting from any business or
operations conducted at any time prior to, on or after the IPO Date by the
employees of SG’s London Branch whose employment was primarily associated with
the Cowen Business (including but not limited to those employees who are
“Transferred Employees” as defined in the Cowen UK Purchase Agreement); provided,
however, that any such Liabilities relating to, arising out of or
resulting from claims pending as of the IPO Date shall be added to Schedule 2.02(b) and
shall be deemed “SG Liabilities” as contemplated in Section 2.02(b);

 

(G)  all
Liabilities relating to, arising out of or resulting from any claim in respect
of any period prior to the IPO Date by an employee of Cowen Inc. or any Cowen
Subsidiary who does not execute an Executive Award Agreement and a release
satisfactory to SG and Cowen Inc.; provided, however, that the
foregoing shall exclude any such claim by any employee of Cowen Inc. or any
Cowen Subsidiary who did execute
an Executive Award Agreement and release satisfactory to SG and Cowen Inc., and
the Parties acknowledge and agree that each of SG and the SG Subsidiaries, on
the one hand, and Cowen Inc. and the Cowen Subsidiaries, on the other hand,
shall be responsible for any Liabilities arising from claims against it (or its
Subsidiaries) in respect of any period prior to the IPO Date by an employee who
executed an Executive Award Agreement and release satisfactory to SG and Cowen
Inc.;

 

(H)  all
Liabilities relating to, arising out of or resulting from the Cowen Benefit
Plans;

 

(I)  all Liabilities relating to, arising out of
or resulting from (1) Cowen Inc.’s adoption of the Cowen Employee
Ownership Plan, (2) Cowen Inc.’s adoption of any directed share program,
and (3) any employment agreements, retention agreements, guaranteed
bonuses, bonus plans or payments, deferred compensation plans and any other
agreements, arrangements or understandings between Cowen LLC, Cowen Inc. or the
Cowen Subsidiaries and their respective directors, officers and employees; provided,
however, that Liabilities pertaining to deferred compensation plans
(other than the SG-USA Fidelity Bonus Plan) maintained by SG for any SG
Subsidiary and Cowen LLC prior to the IPO, shall be deemed “SG Liabilities”;

 

(J)  Cowen Inc.’s portion, determined in
accordance with Section 2.12, of Liabilities associated with Mixed
Contracts and Mixed Accounts;

 

14

 

(K)  all Liabilities relating to, arising out of
or resulting from Cowen Inc.’s, Cowen LLC’s or any of their respective
Subsidiaries’ breach of or failure to perform any Cowen Contract;

 

(L)  those specific Liabilities set forth on Schedule 2.02(a)(ii) as
of the Separation Date (which schedule shall be updated from time to time
as mutually agreed in good faith by Cowen Inc. and SG up to the IPO Date), in
each case subject to the limitations set forth in Schedule 2.02(a)(ii);
and

 

(M)  except to the extent expressly excluded from
the Cowen Liabilities above, all other known and unknown Liabilities relating
to, arising out of or resulting from the Cowen Business, the Cowen Assets, the
other Cowen Liabilities or any business or operations conducted by Cowen Inc.,
Cowen LLC or any of their respective Subsidiaries, at any time prior to, on or
after the Separation Date (whether or not such Liabilities cease being contingent,
mature, become known, are asserted or foreseen, or accrue, in each case,
before, on or after the Separation Date) that are not expressly retained or
assumed by SG or the SG Subsidiaries pursuant to this Agreement or any
Transaction Document.

 

Notwithstanding anything to the contrary in this
Agreement or any Transaction Document, Cowen Liabilities shall in no event
include any Liabilities (a) relating to, arising out of or resulting from
the Excluded Assets, (b) for which SG or any of its Affiliates has
responsibility pursuant to applicable provisions of any Service Level
Agreements or any Transaction Documents in connection with the provision of
services to Cowen Inc. or any Cowen Subsidiary thereunder or (c) expressly
allocated to or retained by SG or any SG Subsidiary pursuant to clauses (i) through
(v) or (ix) through (xiii) of Section 2.02(b) of
this Agreement.

 

Except as expressly set forth in this Agreement, Cowen
Inc., Cowen LLC and such other Cowen Subsidiaries shall be responsible for all
Cowen Liabilities, regardless of (a) when or where such Cowen Liabilities
arose or arise or whether the facts on which such Cowen Liabilities are based
occurred prior to, on or following the Separation Date, (b) where or
against whom such Cowen Liabilities are asserted or determined or whether
asserted or determined prior to, on or following the Separation Date or the
date hereof and (c) whether arising from or alleged to arise from
negligence, recklessness, violation of law, fraud or misrepresentation.

 

(b)  Retention of
SG Liabilities.  SG shall, or shall
cause the applicable SG Subsidiaries to, retain, accept, assume and agree
faithfully to perform, discharge and fulfill all of the following Liabilities
of the Parties or their respective Subsidiaries (collectively, the “SG
Liabilities”) in accordance with their respective terms:

 

(i)  all
Liabilities expressly allocated to SG or any SG Subsidiaries pursuant to this
Agreement or any Transaction Document, and all agreements, obligations and
Liabilities of SG and any SG Subsidiaries under this Agreement or any
Transaction Document;

 

(ii)  all
Liabilities relating to, arising out of or resulting from the administration of
SG Cowen Ventures, including the accuracy or correctness of disbursements and
the distribution of materials by or on behalf of the general partner of SG
Cowen Ventures to

 

15

 

limited partners of SG
Cowen Ventures; provided, however, that Liabilities relating to,
arising out of or resulting from investment decisions or the management of
portfolio companies relating to SG Cowen Ventures (including all claims by
limited partners of SG Cowen Ventures and other Third Parties) shall be deemed
“Cowen Liabilities” as contemplated by Section 2.02(a)(ii);

 

(iii)  all
Liabilities relating to, arising out of or resulting from (x) the
administration of the Merchant Banking Fund, including the accuracy or
correctness of disbursements and the distribution of materials by or on behalf
of the Merchant Banking Fund to the partners of the Merchant Banking Fund or
participants in the Merchant Banking Co-investment Plan and (y) investment
decisions or the management of portfolio companies of or relating to the
Merchant Banking Fund prior to January 1, 2004; provided, however,
that Liabilities relating to, arising out of or resulting from investment
decisions or the management of portfolio companies of or relating to the
Merchant Banking Fund on or after January 1, 2004 (including all claims by
limited partners of the Merchant Banking Fund and other Third Parties) shall be
deemed “Cowen Liabilities” as contemplated by Section 2.02(a)(ii);

 

(iv)  all
Liabilities relating to, arising out of or resulting from the sale and transfer
of partnership interests in the Merchant Banking Fund to the MBF Purchasers
(except that any rights of SG or any SG Subsidiaries in respect of the
representations and warranties made to the MBF Purchasers in the sale and
transfer documents shall not be deemed to have been waived hereby);

 

(v)  all
Liabilities for expenses payable by SG as provided in Section 9.08;

 

(vi)  SG’s
portion, determined in accordance with Section 2.12, of Liabilities
associated with Mixed Contracts and Mixed Accounts;

 

(vii)  all
Liabilities relating to, arising out of or resulting from SG’s or any SG
Subsidiary’s breach of or failure to perform any SG Contract;

 

(viii) 
except to the extent expressly excluded from the SG Liabilities in this Section 2.02(b) or
included as Cowen Liabilities in Section 2.02(a)(ii), all
Liabilities relating to, arising out of or resulting from any business
conducted by SG or any SG Subsidiary at any time prior to, on or after the
Separation Date;

 

(ix)  all
Liabilities relating to, arising out of or resulting from the Transferred
Businesses whether arising prior to, on or after the Separation Date;

 

(x)  all Liabilities relating to, arising out of
or resulting from employee-related claims made by any current or former
employees of SG or any SG Subsidiary that are asserted by such current or
former employees against Cowen Inc. or any Cowen Subsidiaries in respect of any
period prior to the IPO Date;

 

(xi)  all Liabilities (other than Cowen
Liabilities) to the extent such Liabilities relate to, arise out of or result
from a claim by any Third Party, including any Governmental Authority, against
Cowen Inc. or any Cowen Subsidiaries that relate

 

16

 

primarily to the terms,
amount or procurement of insurance with respect to the Cowen Business prior to
the Separation Date; provided, however, that the term “SG
Liabilities” shall not include and SG shall have no indemnity obligation in
respect of Liabilities relating to, arising out of or resulting from a claim
(including but not limited to a claim by a Third Party) under or relating to
the insurance policies listed on Schedule 4.01;

 

(xii)  those specific contingent Liabilities set
forth on Schedule 2.02(b) as of the Separation Date (which
schedule shall be updated from time to time as mutually agreed in good
faith by Cowen Inc. and SG up to the IPO Date), in each case solely to the
extent that payment in respect of such Liabilities has not been made out of the
escrow therefor pursuant to Section 2.05(b); provided, however,
that, unless otherwise specifically identified on Schedule 2.02(b),
any suit, inquiry, proceeding or investigation (including but not limited to
any such suit, inquiry, proceeding or investigation that relates to, arises out
of or results from the litigation and regulatory matters set forth on Schedule 2.02(b))
that is not known to SG as of the IPO Date shall not be deemed an “SG
Liability” for purposes of this Agreement; and

 

(xiii)  all Liabilities relating to, arising out of
or resulting from the Excluded Assets.

 

Except as expressly set forth in this Agreement, SG or
the applicable SG Subsidiaries shall be responsible for all SG Liabilities,
regardless of (a) when or where such SG Liabilities arose or arise or
whether the facts on which such SG Liabilities are based occurred prior to, on
or following the Separation Date, (b) where or against whom such SG
Liabilities are asserted or determined or whether asserted or determined prior
to, on or following the Separation Date or the date hereof and (c) whether
arising from or alleged to arise from negligence, recklessness, violation of
law, fraud or misrepresentation.

 

(c)  Separation
of U.K. Operations.  Prior to the
date hereof, SG’s London Branch has transferred Cowen Assets related to the
London operations of the Cowen Business to Cowen UK pursuant to and subject to the terms of the Intra-Group Asset
Sale and Purchase Agreement, dated as of May 1, 2006, by and between SG
London Branch and Cowen UK (the “Cowen UK Purchase Agreement”).  Liabilities relating to, arising out of or
resulting from any business or operations conducted by the employees of SG’s
London Branch whose employment was primarily associated with the Cowen Business
(including but not limited to those employees who are “Transferred Employees”
as defined in the Cowen UK Purchase Agreement) shall be transferred to Cowen UK
pursuant to and subject to the terms of Section 2.02(a)(ii)(F) of
this Agreement.

 

(d)  Cash
Distribution.  In connection with the
Separation, Cowen LLC shall make a cash distribution to SGASH in an amount (the
“Closing Distribution Amount”) equal to the dollar amount by which Cowen
LLC’s group equity exceeds the $207.0 million Initial Capital to be retained by
Cowen LLC pursuant to Section 2.05(a), after giving effect to the
transactions contemplated by this Agreement and the Transaction Documents but
without giving effect to the impact of any gain or loss associated with SGASH’s
sale of shares of Cowen Common Stock in the IPO.  The Closing Distribution Amount shall be paid
and, if appropriate, adjusted as follows:

 

17

 

(i)  On the
Separation Date and immediately prior to the Separation, Cowen LLC shall make a
cash distribution to SGASH in an amount equal to the Estimated Distribution
Amount; and

 

(ii)  Upon
the determination of the Final Distribution Amount pursuant to Section 2.05(d) through
(j), the Parties shall make any adjustments and payments required by Section 2.05(g).

 

(e)  Stock
Issuance.  On the Separation Date,
Cowen Inc. shall, in consideration of the Separation and the transfers by SGASH
of the assets and liabilities specified in Section 2.02(a), issue
to SGASH the number of shares of Cowen Common Stock that are mutually agreed to
by SGASH and the Underwriters, which shares of Cowen Common Stock, together
with such shares of Cowen Common Stock held by SGASH prior to the Separation
Date, shall represent 100% of the shares of Cowen Common Stock outstanding
immediately prior to the IPO.  For
purposes of determining whether SGASH owns shares representing 100% of the shares
of Cowen immediately prior to the IPO in accordance with the preceding
sentence, any shares of Cowen Common Stock issued, effective immediately
following the IPO, under the Cowen Employee Ownership Plan shall not be deemed
to be outstanding immediately prior to the IPO.

 

(f)  Rescission.  Notwithstanding anything to the contrary set
forth in this Agreement, all transactions theretofore contemplated under this
Agreement or any of the Transaction Documents (excluding the transactions set
forth in Sections 2.01(a) and 2.02(c), the distribution
described in Section 2.02(d) and the rescission transactions
described in this Section 2.02(f)) shall immediately be rescinded
in all respects and this Agreement and all of the Transaction Documents (other
than any Leases) shall terminate and all Assets transferred pursuant to this
Agreement or the Transaction Documents shall be returned to the entities that
transferred such Assets, and all assumptions of liabilities hereunder and
thereunder shall be rescinded and nullified to the maximum extent possible, if
(1) prior to the time as of which the Underwriters and SGASH agree on the
final purchase price per share of Cowen Common Stock to be paid to SGASH by the
Underwriters pursuant to the Underwriting Agreement, SG elects in its sole
discretion, for any reason or no reason, to rescind such transactions and
terminate such Agreements or (2) delivery of the Firm Public Offering
Shares to the Underwriters against payment therefor is not complete within ten
(10) Business Days after the Separation Date.

 

SECTION 2.03.  Transaction Documents.  Prior to the Separation Date, the Parties
shall execute and deliver, or where applicable shall cause their respective
Subsidiaries to execute and deliver, each Transaction Document to which they
are intended to be a party; provided, however, that if this Article II
calls for a Transaction Document to be executed and delivered on or as of a
later time, it shall be executed and delivered on or as of such later time.

 

SECTION 2.04.  Disclaimer of Representations and
Warranties; Bulk Sales.

 

(a)  Except as
expressly set forth in Sections 2.01(f), 4.08 and 9.01(c) and
in the Underwriting Agreement, the Parties understand and agree that no Party
hereto and no party to any Transaction Document is making any representations
or warranties whatsoever, whether expressed or implied, as to any Cowen Assets,
Cowen Liabilities, SG Liabilities, Assets of SG or the transactions
contemplated by this Agreement or any Transaction Document, including any

 

18

 

representations or
warranties as to:  (i) any Consents
required in connection therewith; (ii) the value of or freedom from any
Security Interests in, or any other matter concerning, any Cowen Asset; (iii) the
absence of any defenses to or right of setoff against or freedom from
counterclaim with respect to any claim; (iv) the merchantability or
fitness for a particular purpose of any of the Cowen Assets; (v) the legal
sufficiency of any Conveyance and Assumption Instruments to convey title to any
Cowen Asset or thing of value upon the execution, delivery and filing of such
Conveyance and Assumption Instruments; or (vi) any projections or
forecasts of the future financial performance of Cowen Inc., Cowen LLC and the
other Cowen Subsidiaries or SG and the SG Subsidiaries, in each case, whether
referenced in the Registration Statement, the Prospectus or otherwise.  The Parties further understand and agree that
all Cowen Assets are being transferred on an “as is,” “where is” basis, and
Cowen Inc. and its Subsidiaries shall bear the economic and legal risks that:
(a) any Conveyance and Assumption Instrument may prove to be insufficient
to vest in the transferee good and marketable title, free and clear of any Security
Interest; and (b) any necessary Consents are not obtained or that any
requirements of laws, agreements, Security Interests or judgments are not
complied with; provided, however, that SG agrees that the
outstanding membership interests of Cowen LLC and capital shares of Cowen UK
shall be transferred to Cowen Inc. free and clear of any liens or encumbrances.

 

(b)  Cowen Inc.
hereby waives compliance by SG and the SG Subsidiaries with the “bulk-sale” or
“bulk-transfer” laws of any jurisdiction that may otherwise be applicable to
the transfer of any or all of the Cowen Assets to Cowen Inc. and the Cowen
Subsidiaries.

 

SECTION 2.05.  Financing Arrangements; Adjustments.

 

(a)  Cowen Inc.’s
Group Equity.  Notwithstanding
anything to the contrary in this Agreement, Cowen Inc.’s group equity
immediately following the IPO Date, after giving effect to the transactions
contemplated under this Agreement (including but not limited to any
distribution payable to SGASH under Section 2.02(d) and any
Liabilities and expenses allocated to Cowen Inc. or SG in connection with this
Agreement, the Separation and the IPO) but without giving effect to the impact
of any gain or loss associated with SGASH’s sale of shares of Cowen Common
Stock in the IPO, (“Initial Capital”) shall be $207.0 million.

 

(b)  Litigation
Reserve; Cash Escrow Account.

 

(i)  On or
prior to the Separation Date, Cowen LLC shall deposit with the Escrow Agent an
amount in cash equal to the cash litigation reserve on its books as of such
time (the “Closing Litigation Reserve”). 
The amount of the Closing Litigation Reserve shall be determined by SG,
after consultation with Cowen Inc.’s outside auditors, in accordance with
GAAP.  The dollar amount deposited with
the Escrow Agent pursuant to this Section 2.05(b) shall be
held by the Escrow Agent in accordance with the terms and conditions of the
Escrow Agreement and shall be subject to adjustment from time to time by SG or
SGASH in accordance with the terms and conditions of the Escrow Agreement.

 

(ii) 
Notwithstanding anything to the contrary in this Agreement or the Transaction
Documents, each of SGASH and Cowen Inc. agrees that the Closing Litigation
Reserve shall be deemed to be an asset of Cowen Inc. for purposes of
calculating the Initial Capital pursuant to this Section 2.05,
which amount shall be offset

 

19

 

by the SG Liabilities set
forth on Schedule 2.02(b). 
SGASH covenants that, if at any time prior to the termination of the
Escrow Agreement the amount of the Closing Litigation Reserve held in escrow by
the Escrow Agent is determined by Cowen Inc.’s outside auditors or a
Governmental Entity (a) not to constitute an allowable asset or
(b) to be valued using a discount rate less than that applied to cash held
by an entity, then SGASH shall pay to Cowen Inc. an amount in cash or other
mutually agreed upon qualifying assets equal to the amount then held by the
Escrow Agent (or, in the case of a decrease in the discount rate applied, the
amount by which the funds held by the Escrow Agent is deemed an allowable asset
has decreased).  If such a payment is
made, Cowen Inc. covenants to pay to the Escrow Agent for contribution to the
funds held by the Escrow Agent an amount equal to each payment made from such
funds in satisfaction of an SG Liability set forth on Schedule 2.02(b) (or,
in the case of a decrease in the discount rate, the pro rata amount
attributable to any payment made from the funds held by the Escrow Agent in
satisfaction of such Liability); provided, however, that in no
case shall Cowen Inc. be obligated to contribute an aggregate amount in excess
of the amount received from SGASH pursuant to this paragraph.

 

(c)  Estimated
Distribution Amount.  On or prior to
the anticipated Separation Date, SG shall deliver to Cowen LLC:

 

(i)  a
statement containing a good faith estimate (the “Estimated Distribution
Amount”) of the Closing Distribution Amount, together with

 

(ii)  a
statement confirming that Cowen Inc.’s Initial Capital (after payment of the
Estimated Distribution Amount and any Liabilities and expenses allocated to
Cowen Inc. or SG in connection with this Agreement, the Separation and the IPO)
will be $207.0 million, as required by Section 2.05(a).  Following the Separation Date, the Estimated
Distribution Amount shall be subject to adjustment as set forth below in this Section 2.05.

 

(d)  Cowen
Delivery of Financials; Closing Statement. 
As soon as practicable following the end of the fiscal quarter in which
the IPO occurs, Cowen Inc. shall deliver to SG audited combined statements of
financial condition, operations, cash flow and stockholders’ equity of Cowen
Inc., Cowen LLC and the other Cowen Subsidiaries as of, and for the periods
ended on, the IPO Date, all of which shall have been prepared in accordance with
GAAP and present fairly, in all material respects, the consolidated financial
position of Cowen Inc., Cowen LLC and the other Cowen Subsidiaries at the date
specified in such financial statements and the results of their operations for
the periods stated therein.  The combined
statements of financial condition, operations, cash flow and stockholders’
equity to be delivered hereunder shall be audited unless SG determines
otherwise in its sole discretion, and any such audit shall be conducted by a
nationally-recognized accounting firm. 
SG shall reimburse Cowen Inc. for the reasonable fees and expenses of
the accounting firm that are attributable to such audit.  Within 30 days after the date it receives
such financial statements from or on behalf of Cowen Inc., SG shall prepare and
deliver to Cowen Inc. a statement (the “Closing Statement”) setting
forth in reasonable detail:

 

(i)  a
calculation of the Closing Distribution Amount; and

 

20

 

(ii)  Cowen
Inc.’s Initial Capital (after payment of the Closing Distribution Amount and
any Liabilities and expenses allocated to Cowen Inc. in connection with this
Agreement, the Separation and the IPO).

 

(e)  Cowen Review
of Closing Statement.  During the
15-day period following Cowen Inc.’s receipt of the Closing Statement, Cowen
Inc. and its independent accountants shall at Cowen Inc.’s expense be permitted
to review, and SG shall make available to Cowen Inc., the supporting schedules,
analyses, working papers and other documentation of SG relating to the Closing
Statement and to ask questions, receive answers and request such other data and
information from each of them as shall be reasonable under the
circumstances.  The Closing Statement
shall become final and binding upon the parties at 5:00 p.m. (New York
City time) on the 15th day following delivery thereof (or, if the 15th
day is not a Business Day, on the first Business Day thereafter) and the
Closing Distribution Amount reflected in the Closing Statement shall be deemed
to be the Final Distribution Amount under this Agreement, unless Cowen Inc.
gives written notice of its disagreement with the Closing Statement (a “Notice
of Disagreement”) to SG prior to such time.

 

(f)  Dispute
Resolution.  Following the delivery of
any Notice of Disagreement, Cowen Inc. and SG shall resolve any differences
that they may have with respect to the matters specified in the Notice of
Disagreement in accordance with Article VI.  In resolving any such disputed matters and
determining the appropriate Closing Distribution Amount, the Parties and any
individual, mediator, arbiter or other party designated pursuant to Article VI
shall (i) be bound by the principles set forth in this Section 2.05
and (ii) limit their review to matters set forth in the Notice of
Disagreement.  Any Closing Distribution
Amount determined pursuant to this Section 2.05(f) shall be
deemed to be the Final Distribution Amount under this Agreement

 

(g)  Adjustments
Following Determination of Final Distribution Amount.  Upon determination of the Final Distribution
Amount pursuant to Section 2.05(e) or Section 2.05(f),
as applicable, the Parties shall make the following adjustments, as applicable:

 

(i)  If the
Final Distribution Amount is less than the Estimated Distribution Amount, then
SG shall pay or cause an SG Subsidiary to pay Cowen Inc. a dollar amount equal
to the difference;

 

(ii)  If the
Final Distribution Amount is greater than the Estimated Distribution Amount,
then Cowen Inc. shall pay to SG or a SG Subsidiary designated by SG a dollar
amount equal to the difference; or

 

(iii)  If the
Final Distribution Amount equals the Estimated Distribution Amount, then there
shall be no adjustment pursuant to this Section 2.05.

 

Within five
(5) Business Days after the Final Distribution Amount is determined, any
amount payable under Section 2.05(g)(i) or (ii) shall
be paid by wire transfer of immediately available funds to an account
designated in writing by the payee.

 

(h)  Cooperation.  Each of the Parties agrees that it will, and
will use commercially reasonable efforts to cause its respective Subsidiaries,
agents and representatives to, cooperate and assist in obtaining any requisite
regulatory consent in respect of any capital

 

21

 

distribution, preparing the Closing Statement,
calculating the Closing Distribution Amount and Final Distribution Amount and
conducting the reviews and dispute resolution process referred to in this Section 2.05.

 

(i)  Purpose of
Adjustments.  The provisions of this Section 2.05,
including but not limited to the post-Separation adjustment provisions of Sections
2.05(d), (e), (f) and (g), are solely intended to
allocate and adjust capital as of the IPO Date between SG and the SG
Subsidiaries, on the one hand, and Cowen Inc., Cowen LLC and the other Cowen
Subsidiaries, on the other hand, as agreed by the Parties.  Nothing in this Section 2.05,
including but not limited to Sections 2.05(d), (e), (f) and
(g), shall operate to modify the other provisions of this Agreement, the
Indemnification Agreement or the Principal Transaction Documents, including the
Parties’ allocation of Cowen Assets, SG Assets, Cowen Liabilities, SG
Liabilities, Cowen Indemnity Obligations and SG Indemnity Obligations hereunder
and thereunder.

 

(j)  Tax Treatment of Adjustments.  Any payment by SGAI or Cowen Inc. under this Section 2.05
shall be treated for Tax purposes as an adjustment to the Acquisition Price (as
defined in the Tax Matters Agreement).

 

SECTION 2.06.  Leases.

 

(a)  Guarantees.  If SG or any SG Subsidiary has guaranteed
(whether pursuant to a formal guarantee or by a similar arrangement such as
agreeing to act as co-lessee) the obligations of Cowen LLC, Cowen Inc. or any
of their respective Subsidiaries under any Lease (other than the sublease by
and between SG and Cowen LLC dated December 19, 2005 for certain premises
located at 1221 Avenue of the Americas, New York, New York 10020 (the “Cowen
Sublease”), then Cowen LLC, Cowen Inc. and the applicable Cowen Subsidiary
shall (a) as of the Separation Date, unconditionally terminate and release
such guarantees (or equivalent arrangements), and obtain, or cause to be
obtained, any Consent, substitution, or amendment required to obtain in writing
any Third Party’s unconditional termination and release of SG and any SG
Subsidiary from such guarantees (or equivalent arrangements), or
(b) commencing as of the Separation Date, pay SG or the applicable SG
Subsidiary a fee equal to the fair market value of providing such guarantees
(or equivalent arrangements), in accordance with the arrangements and fee
structure set forth on Schedule 2.06(a) and subject to
adjustment from time to time upon mutual agreement by SG and Cowen Inc.  Any post-Separation guarantee (or equivalent
arrangement), provided by SG or any SG Subsidiary pursuant to the foregoing
clause (b) shall remain in effect only until the expiration or termination
of the initial or base term of the applicable Lease and not during any renewal
or extension thereof.

 

(b)  Leasehold
Improvements.  Cowen LLC acknowledges
that (i) as of December 31, 2005, SG had incurred costs in the amount
of $9,277,854.00 for leasehold improvements made to the premises subject to the
Cowen Sublease and (ii) prior to the execution of this Agreement it agreed
to pay SG for the cost of such improvements in equal monthly installments in
the amount of $99,762.00.  SG
acknowledges that Cowen LLC has made all monthly payments required starting in
January of 2006 until the date of this Agreement.  Cowen Inc. or a Cowen Subsidiary shall
continue to make such monthly payments to SG on the first day of each month
after the date of this Agreement until September 1, 2013 or such other
date when the aggregate amount specified in the first sentence of this Section 2.06(b) is
fully paid to SG.

 

22

 

SECTION 2.07.  Employee Investment Vehicles.

 

(a)  Merchant
Banking Fund.  On or prior to the
Separation Date, (i) SG Capital Partners L.L.C. will resign as the general
partner of the Merchant Banking Fund and transfer its 0.15% ownership interest
in the Merchant Banking Fund to the entity and in the manner designated by SG
and (ii) Cowen LLC and Cowen Inc. will cause any officer or employee of
Cowen LLC, Cowen Inc. and their respective Subsidiaries who is a member of the
Administrative Committee of the SG Merchant Banking Coinvestment Plan or
otherwise responsible for managing or administering the SG Merchant Banking
Coinvestment Plan or the Merchant Banking Fund to resign from such
Administrative Committee or such management or administrative position.  Notwithstanding the foregoing, (x) Cowen LLC
or Cowen Inc. and any of their respective Subsidiaries may enter into an
agreement with the MBF Purchasers regarding management by Cowen Inc. and/or any
of its Subsidiaries, following such sale, of the assets acquired by the MBF
Purchasers and (y) SG or a SG Subsidiary will, pursuant to a service level
agreement, engage Cowen LLC or Cowen Inc. to act as the investment advisor for any
assets of the Merchant Banking Fund that are not transferred or sold by SG to
the MBF Purchasers.

 

(b)  Greenwich
Capital Partners.  On or prior to the
Separation Date, (i) Cowen LLC will resign as the general partner of
Greenwich Capital Partners and be replaced by an entity designated by SG and
(ii) Cowen LLC and Cowen Inc. will cause any officer or employee of Cowen
LLC, Cowen Inc. and their respective Subsidiaries who is a member of the
Investment Committee of Greenwich Capital Partners or otherwise responsible for
managing or administering Greenwich Capital Partners to resign from such
Investment Committee or such management or administrative position.

 

SECTION 2.08.  NYSE-Archipelago Merger Proceeds.  The Parties agree that the NYSE-Archipelago
Merger Proceeds are an “Excluded Asset”. 
Prior to the date hereof, Cowen LLC has transferred all of its right,
title and interest in and to the NYSE-Archipelago Merger Proceeds to SGASH.

 

SECTION 2.09.  Termination of Agreements.

 

(a)  Termination
of Agreements between SG and Cowen. 
Except as set forth in Section 2.09(b), Cowen Inc. and each
Cowen Subsidiary, on the one hand, and SG and each SG Subsidiary, on the other
hand, hereby terminate and agree to cause to be terminated all agreements,
arrangements, commitments or understandings, whether or not in writing, entered
into prior to the Separation Date between or among Cowen LLC, Cowen Inc. or any
Cowen Subsidiaries, on the one hand, and SG or any SG Subsidiaries, on the
other hand, effective as of immediately prior to the consummation of the IPO; provided
that the provisions of this Section 2.09(a) shall not
terminate any rights or obligations between SG and any SG Subsidiary or between
any SG Subsidiaries.

 

(b)  Exceptions.  The provisions of Section 2.09 (a) shall
not apply to any of the following agreements, arrangements, commitments or
understandings (or to any of the provisions thereof):  (i) this Agreement and the Transaction
Documents; (ii) any agreements, arrangements, commitments or
understandings listed or described on Schedule 2.09; (iii) any
agreements, arrangements, commitments or understandings to which any Third
Party is a party;

 

23

 

and (iv) any
agreements, arrangements, commitments or understandings to which any non-wholly
owned Subsidiary of SG or Cowen Inc., as the case may be, is a party (it being
understood that directors’ qualifying shares or similar interests shall be
disregarded for purposes of determining whether a Subsidiary is wholly owned).  To the extent that the rights and obligations
of SG or any SG Subsidiaries under any agreements, arrangements, commitments or
understandings not terminated under this Section 2.09 constitute
Cowen Assets or Cowen Liabilities, they shall be assigned or assumed pursuant
to this Agreement.

 

SECTION 2.10.  Settlement of Accounts Between SG and
Cowen Inc.  All intercompany
receivables, payables and loans (other than in respect of balances under
clearing arrangements or intercompany receivables, payables and loans otherwise
specifically provided for in this Agreement or any Transaction Document as
described on Schedule 2.10), including in respect of any cash
balances, any cash balances representing deposited checks or drafts for which
only a provisional credit has been allowed or any cash held in any centralized
cash management system, between SG or any SG Subsidiary, on the one hand, and
Cowen LLC, Cowen Inc. or any Cowen Subsidiary, on the other hand, and to which
there are no Third Parties, shall, immediately prior to the consummation of the
IPO, be settled, capitalized, cancelled, assigned or assumed by SG or one or
more SG Subsidiaries, in each case in the manner determined prior to the
consummation of the IPO by duly authorized representatives of SG and Cowen Inc.

 

SECTION 2.11.  Novation of Liabilities.  Each of SG and Cowen Inc., and their
respective Subsidiaries, at the request of the other, shall use commercially
reasonable efforts to: (a) obtain, or cause to be obtained, any Consent,
substitution, or amendment required to novate or assign all Cowen Liabilities
and obtain in writing the unconditional release of SG and any SG Subsidiary
that is a party to any such arrangements, so that, in any such case, Cowen Inc.
and its designated Subsidiaries shall be solely responsible for such Cowen
Liabilities; (b) obtain, or cause to be obtained, any Consent,
substitution, or amendment required to novate or assign all SG Liabilities and
obtain in writing the unconditional release of Cowen Inc. and any Cowen Subsidiary
that is a party to any such arrangements, so that, in any such case, SG and its
designated Subsidiaries shall be solely responsible for such SG Liabilities;
(c) unconditionally terminate and release any guarantees by SG or any SG
Subsidiary of any Cowen Liabilities, provided, however, that a
guarantee by SG or any SG Subsidiary of any Lease shall be subject to Section 2.06(a);
and (d) unconditionally terminate and release any guarantees by
Cowen Inc. or any Cowen Subsidiary of any SG Liabilities; provided, however,
that nothing herein shall require any attempt to substitute Cowen Inc. or any
Cowen Subsidiary for SG or any SG Subsidiary as a party in any Proceeding.

 

SECTION 2.12.  Mixed Contracts; Mixed Accounts.

 

(a)  Mixed
Contracts.  Unless the Parties agree
otherwise (including but not limited to the Parties’ agreement in Section 4.01
regarding insurance matters), any agreement to which SG, Cowen Inc., Cowen LLC
or any of their respective Subsidiaries is a party prior to the Separation Date
that inures to the benefit or burden of each of the SG Business and the Cowen
Business (a “Mixed Contract”) shall be assigned in part to Cowen Inc. or
its Subsidiaries, if so assignable, prior to, on or after the Separation Date,
so that each Party or their respective

 

24

 

Subsidiaries shall
be entitled to the rights and benefits and shall assume the related portion of
any obligations and Liabilities inuring to their respective businesses; provided,
however, that in no event shall SG, Cowen Inc, Cowen LLC or any of their
respective Subsidiaries be required to assign any Mixed Contract in its
entirety.  If any Mixed Contract cannot
be so partially assigned, SG and Cowen Inc. shall, and shall cause each of
their respective Subsidiaries to, take such other reasonable and permissible
actions to cause:  (i) the Assets
associated with that portion of each Mixed Contract that relates to the Cowen
Business to be enjoyed by Cowen Inc. or a Cowen Subsidiary; (ii) the
Liabilities associated with that portion of each Mixed Contract that relates to
the Cowen Business to be borne by Cowen Inc. or a Cowen Subsidiary;
(iii) the Assets associated with that portion of each Mixed Contract that
relates to the SG Business to be enjoyed by SG or an SG Subsidiary; and
(iv) the Liabilities associated with that portion of each Mixed Contract
that relates to the SG Business to be borne by SG or an SG Subsidiary.  If any Liability associated with the Mixed
Contracts cannot be allocated as set forth in the preceding sentence, such
Liability shall be allocated to SG and Cowen Inc. based on the relative
proportions of total benefit received (over the term of the Mixed Contract,
measured as of the date of the allocation) under the relevant Mixed Contract as
mutually determined by SG and Cowen Inc. 
Notwithstanding the foregoing, each party shall be responsible for any
or all Liabilities arising out of or resulting from its breach of the relevant
Mixed Contract by reason of any failure to properly perform its obligations
thereunder.

 

(b)  Mixed
Accounts.  Except as may otherwise be
agreed by the Parties, the Parties shall not seek to assign any accounts
receivable or accounts payable relating to both the SG Business and the Cowen
Business (“Mixed Accounts”).  SG
and Cowen Inc. shall, and shall cause each of their respective Subsidiaries to,
take such other reasonable and permissible actions to cause:  (i) the Assets associated with that
portion of each Mixed Account that relates to the SG Business to be enjoyed by
SG or an SG Subsidiary; (ii) the Liabilities associated with that portion
of each Mixed Account that relates to the SG Business to be borne by SG or an
SG Subsidiary; (iii) the Assets associated with that portion of each Mixed
Account that relates to the Cowen Business to be enjoyed by Cowen Inc. or a
Cowen Subsidiary; and (iv) the Liabilities associated with that portion of
each Mixed Account that relates to the Cowen Business to be borne by Cowen Inc.
or a Cowen Subsidiary. If any Liability associated with the Mixed Accounts
cannot be allocated as set forth in the preceding sentence, such Liability
shall be allocated to SG and Cowen Inc. based on the on the relative
proportions of total benefit received (over the life of the Mixed Account,
measured as of the date of the allocation) under the relevant Mixed Account as
mutually determined by SG and Cowen Inc. 
Notwithstanding the foregoing, each party shall be responsible for any
or all Liabilities arising out of or resulting from its breach of the relevant
Mixed Account by reason of any failure to properly perform its obligations
thereunder.

 

(c)  Misdirected
Benefits.  If SG or an SG Subsidiary,
on the one hand, or Cowen Inc. or a Cowen Subsidiary, on the other hand,
receives any benefit or payment under any Mixed Contract or Mixed Account that
was intended for the other party, SG or an SG Subsidiary, on the one hand, or
Cowen Inc. or a Cowen Subsidiary, on the other hand, will use their respective
reasonable best efforts to deliver, transfer or otherwise afford such benefit
or payment to the other party.

 

25

 

(d)  No Payments.  Nothing in this Section 2.12
shall require SG, Cowen Inc. or any of their respective Subsidiaries to make
any payment, incur any obligation or grant any concession to any Third Party,
other than ordinary and customary fees to Governmental Authorities, in order to
effect any transaction contemplated by this Section 2.12.

 

SECTION 2.13.  Further Assurances.

 

(a)  Additional
Actions.  Except as set forth in Section 2.15,
in addition to the actions specifically provided for elsewhere in this
Agreement, each Party shall, and shall cause each of its respective
Subsidiaries to, use commercially reasonable efforts, prior to, at and after the
Separation Date to take, or cause to be taken, all actions, and to do, or cause
to be done, all things, necessary or advisable under applicable laws,
regulations and agreements to consummate the transactions contemplated by this
Agreement and the Transaction Documents; provided, however, that
neither SG nor Cowen Inc. (nor any of their respective Subsidiaries) shall be
obligated under this Section 2.13 to pay any consideration, grant
any concession or incur any additional Liability to any Third Party other than
ordinary and customary fees paid to a Governmental Authority.

 

(b)  Cooperation.  Without limiting the foregoing, prior to, at
and after the Separation Date, each Party shall, and shall cause each of its
Subsidiaries to, cooperate with the other Party without any further
consideration to execute and deliver, or use commercially reasonable efforts to
cause to be executed and delivered, all Conveyance and Assumption Instruments
and to make all filings with, and to obtain all Consents of, any Governmental
Authority or any other Person under any permit, license, agreement, indenture
or other instrument (including any Consents), and to take all such other
actions as such Party may reasonably be requested to take by the other Party
from time to time, consistent with the terms of this Agreement and the
Transaction Documents, in order to effectuate the provisions and purposes of
this Agreement and the Transaction Documents and the transfers of the Cowen
Assets and the assignment and assumption of the Cowen Liabilities and the other
transactions contemplated hereby and thereby.

 

(c)  Misallocations.  In the event that at any time or from time to
time (whether prior to, on or after the Separation Date), a Party or any of its
Subsidiaries shall receive or otherwise possess any Asset that is allocated to
any other Person pursuant to this Agreement or any Transaction Document, such
Party shall promptly transfer, or cause its Subsidiary to transfer, such Asset
to the Person so entitled thereto or such Party’s Subsidiary or designee.

 

SECTION 2.14.  Transition Committee.  To facilitate an orderly separation and
transition of the Cowen Business from the SG Business, each of SG and Cowen
Inc. has designated two key transition contacts on Schedule 2.14,
who shall be primarily responsible for cooperation and coordination between the
Parties regarding the matters contemplated by this Agreement and the Principal
Transaction Documents.  SG and Cowen Inc.
shall cause their respective key transition contacts to meet with their counterparts
to establish procedures for such cooperation and coordination within 30 days
after the Separation Date.  The key
transition contacts shall designate such other contacts in specific functional
areas as they agree from time to time are necessary or appropriate.  The key transition contacts and such other
contacts may be

 

26

 

removed or
replaced at any time by the Party (or key transition contacts) who designated
them pursuant to this Section 2.14.

 

SECTION 2.15.  Conditions to the Separation.

 

(a)  The
Conditions.  Subject to Section 7.01,
the satisfaction or waiver by SG of the following shall be conditions to SG’s
obligation to effect the Separation:

 

(i)  Cowen
Inc. shall have duly authorized the issuance, pursuant to Section 2.02(e),
of the number and classes of shares of Cowen Common Stock that are mutually
agreed to by SGASH and the Underwriters, which shares shall represent 100% of
the shares of Cowen Common Stock outstanding immediately prior to the IPO;

 

(ii)  the
Underwriting Agreement shall have been executed and delivered by each of the
parties thereto and shall be in full force and effect;

 

(iii)  the
Registration Statement shall have been declared effective by the SEC, and there
shall be no stop-order in effect with respect thereto and no Proceeding for
that purpose shall have been instituted by the SEC;

 

(iv)  the
actions and filings with regard to state securities and blue sky laws of the
United States (and any comparable laws under any foreign jurisdictions) shall
have been taken and, where applicable, shall have become effective or been
accepted;

 

(v)  no
order, injunction or decree issued by any Governmental Authority or court of
applicable jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement or any
Transaction Document shall have been threatened or in effect;

 

(vi)  any
Consents necessary to consummate the Separation and the transactions
contemplated by this Agreement to be consummated on or prior to the Separation
Date shall have been obtained and be in full force and effect;

 

(vii)  no
events or developments shall have occurred subsequent to the date hereof that
SG believes, in its sole discretion, could result in an adverse effect on SG,
any SG Subsidiary, or on their respective shareholders;

 

(viii)  the
Parties shall have performed and complied with all of their respective
covenants, obligations and agreements contained in this Agreement and required
to be performed or complied with by them on or prior to the Separation Date;
and

 

(ix)  the
Parties shall have executed and delivered or, where applicable, shall have
caused their respective Subsidiaries to execute and deliver, the Transaction
Documents that are contemplated by this Agreement to be executed and delivered
on or prior to the Separation Date.

 

(b)  Conditions
for Benefit of SG.  The foregoing
conditions are for the sole benefit of SG and the SG Subsidiaries and shall not
give rise to or create any duty on the part of

 

27

 

SG, the SG
Subsidiaries or their respective boards of directors to waive or not waive such
conditions or in any way limit SG’s right to terminate this Agreement as set
forth in Article VII or alter the consequences of any such
termination from those specified in such Article.  Any determination made by SG prior to the
Separation concerning the satisfaction or waiver of any or all of the
conditions set forth in this Section 2.15 shall be conclusive; provided,
however, that SG’s determination concerning the satisfaction or waiver
of Section 2.15(a)(i), (vi), (vii), (viii) and
(ix) shall be made as of the time as of which the Underwriters and
SGASH agree on the final purchase price per share of Cowen Common Stock to be
paid to SGASH by the Underwriters pursuant to the Underwriting Agreement, and
SG may not thereafter terminate this Agreement due to a failure of such
conditions.

 

ARTICLE III

MUTUAL RELEASES; INDEMNIFICATION

 

SECTION 3.01.  Indemnification Agreement.  The Parties agree that the mutual releases
and indemnification in respect of the Liabilities of SG, Cowen Inc. and their
respective Subsidiaries, including those that relate to, arise out of or result
from the Separation or the IPO, shall be as set forth in the Indemnification
Agreement.  Any indemnification by Cowen
Inc. of the SG Indemnitees or by SG of the Cowen Indemnitees in respect of
Liabilities for Taxes shall be as set forth in the Tax Matters Agreement.

 

ARTICLE IV

CERTAIN OTHER MATTERS

 

SECTION 4.01.  Insurance Matters.

 

(a)  Insurance
Policies.  Prior to the Separation
Date, duly authorized representatives of Cowen Inc. and SG and its Subsidiaries
shall enter into arrangements with their insurance providers to separate their
insurance coverages effective as of the consummation of the IPO, including any
pre- Separation Date and other obligations related thereto, in a manner
consistent with this Section 4.01.

 

(b)  Termination
of Cowen Coverage.  Effective as of
the consummation of the IPO, Cowen Inc. Cowen LLC and the other Cowen
Subsidiaries will be removed as insureds from all insurance policies of SG and
its Subsidiaries under which Cowen Inc., Cowen LLC or the other Cowen
Subsidiaries are then covered.  Cowen
Inc., Cowen LLC and the other Cowen Subsidiaries shall, as of and following the
consummation of the IPO, procure and maintain such policies of general,
liability, worker’s compensation, directors’ and officers’ liability,
employment practices liability and such other forms of insurance as are
customary, in the good faith judgment of Cowen Inc.’s board of directors, for
businesses of the type of Cowen Inc., Cowen LLC and the other Cowen
Subsidiaries.  As of and following the consummation
of the IPO, Cowen Inc. and its Subsidiaries shall be responsible for the
payment of all premiums and any other costs or expenses associated with such
insurance policies.  Nothing herein shall
affect any rights of Cowen Inc., Cowen LLC and the other Cowen Subsidiaries
with respect to any claims made under any such insurance policy prior to the
Separation Date.

 

28

 

(c)  Cowen LLC
Coverage Prior to IPO Date.  Until
the consummation of the IPO, SG shall be responsible for the payment of all
premiums and any other costs or expenses associated with insurance policies
that SG maintains for Cowen Inc., Cowen LLC, their respective Subsidiaries and
the Cowen Business.  Notwithstanding the
foregoing, until the consummation of the IPO, SG shall allocate the cost of all
such policies, and Cowen Inc. and Cowen LLC shall reimburse SG therefor, in
accordance with SG’s policies and customary practices.

 

(d)  Future
Insured Claims.  After the
consummation of the IPO, Cowen Inc. and the Cowen Subsidiaries shall have no
right to make an insurance claim on or under any insurance contract to which SG
or any SG Subsidiary is a party other than in respect of any occurrence-based
insurance policies set forth on Schedule 4.01 under the caption
“Section 4.01(d)” that covered Cowen Inc. or any Cowen Subsidiary prior to
the IPO.  In respect of each
occurrence-based insurance policy set forth on Schedule 4.01, Cowen
Inc. and the Cowen Subsidiaries shall only make claims in accordance with the
terms and conditions of such policy and shall provide SG with prompt written
notice of any such claims (even where such notice is not required by the
applicable policy).

 

(e)  No Liability.  In respect of each of the insurance policies
set forth on Schedule 4.01 under the caption “Section 4.01(e)”,
Cowen Inc. does hereby, for itself and each of its Subsidiaries, agree that
none of SG, any SG Subsidiary or any SG Indemnitee shall have any Liability
whatsoever, and Cowen Inc. shall make no claim or demand, or commence any
Proceeding asserting any claim or demand, alleging such Liability, as a result
of the policies, practices and procedures regarding insurance matters of SG or
any SG Subsidiary as in effect at any time prior to the Separation Date,
including as a result of the limits or scope of any insurance, the
creditworthiness of any insurance carrier, the collectibility of Insurance
Proceeds, the terms and conditions of any policy, the handling or disposition
of any claims, the adequacy or timeliness of any notice to any insurance carrier
with respect to any claim or potential claim or otherwise.

 

SECTION 4.02.  Late Payments.  Except as provided in any Transaction
Document, any amount not paid when due pursuant to this Agreement or any
Transaction Document (and any amounts billed or otherwise invoiced or demanded
and properly payable that are not paid within 30 days of the date of such bill,
invoice or other demand) shall accrue interest at a rate per annum equal to the
Prime Rate plus 2%.

 

SECTION 4.03.  SG Financial Statements.  Cowen Inc. agrees that if SG and the SG
Subsidiaries (including SGASH) are required during any fiscal year, in
accordance with IAS, to consolidate Cowen Inc.’s financial statements with its
financial statements), then in respect of such fiscal year:

 

(a)  Auditors.  Cowen Inc. shall provide SG and any SG
Subsidiary, and their respective auditors and representatives, access upon
reasonable notice during normal business hours to Cowen Inc.’s and the Cowen
Subsidiaries’ books and records so that SG and any applicable SG Subsidiary may
conduct reasonable audits relating to the financial statements of Cowen Inc.,
as well as to the internal accounting controls and operations of Cowen Inc. and
the Cowen Subsidiaries.

 

29

 

(b)  Cooperation.  Cowen Inc. will (i) provide to SG and
any SG Subsidiary on a timely basis and in a manner consistent with past
practice all information that SG or any SG Subsidiary reasonably requires in
order to meet its schedule for the timely preparation, printing, and, if
applicable, public filing and dissemination of their respective financial
statements, (ii) when reasonably requested by SG or any SG Subsidiary, to
provide such information within five Business Days following the end of the
calendar month to which such information relates and (iii) in the event of
a consolidation involving Cowen Inc., provide SG with prompt written notice of
any reported or expected material inadequacies during the course of such
consolidation.

 

(c)  Accounting
Estimates and Principles.  Cowen Inc.
will give SG reasonable prior notice of any proposed material change in
accounting principles from those in effect with respect to Cowen LLC and the
Cowen Subsidiaries immediately prior to the Separation Date, and will give SG
notice immediately following the adoption of any such changes that are mandated
or required by the SEC, the Financial Accounting Standards Board or the Public
Company Accounting Oversight Board.  In
connection therewith, Cowen Inc. will consult with SG and, if requested by SG,
SG’s auditors with respect thereto.  As
to material changes in accounting principles that could affect SG or any SG
Subsidiary, Cowen Inc. will not make or permit any such changes without SG’s
prior written consent if such a change would be sufficiently material to be
required to be disclosed in Cowen Inc.’s financial statements as filed with the
SEC or otherwise publicly disclosed therein, unless such changes are mandated
or required by the SEC, the Financial Accounting Standards Board, the Public
Company Accounting Oversight Board or Cowen Inc.’s auditors, provided, however,
that Cowen Inc. shall provide prior written notice to SG in respect of any such
mandated or required material change that does not require SG’s prior written
consent.  If SG so requests, Cowen Inc.
will be required to obtain the concurrence of Cowen Inc.’s auditors as to such
material change prior to its implementation. 
Notwithstanding the foregoing, accounting principles applied in
calculating the Estimated Distribution Amount, the Final Distribution Amount or
any other amounts paid or payable under Section 2.05 of this
Agreement shall not be changed without the Parties’ written mutual
agreement.  Any dispute among the Parties
in connection with the immediately preceding sentence shall be settled in
accordance with Article VI.

 

SECTION 4.04.  Certain Employee Matters.  Subject to the consummation of the IPO and
the terms of the Cowen Employee Ownership Plan:

 

(a)  Initial
Awards.  Upon the consummation of the
IPO, Cowen Inc. will issue shares of Cowen Common Stock and options to purchase
Cowen Common Stock only to the employees and officers of Cowen Inc. set forth
in the notice delivered by Cowen Inc. to SG immediately prior to the Parties’
execution of this Agreement, and in each case only up to the respective amounts
set forth next to each employee’s or officer’s name on such notice, which
schedule may be amended at any time and from time to time with the consent
of SG until the date that is one (1) Business Day prior to the anticipated
Separation Date.

 

(b)  Consummation
of IPO.  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.

 

30

 

SECTION 4.05.  Compliance with Regulatory Requirements.

 

(a) 
General.  Cowen Inc. understands
and agrees that, subject to subsection (b) of this Section 4.05,
so long as SG owns or controls, directly or indirectly, 5% or more of any class
of voting stock of Cowen Inc. or 25% or more of Cowen Inc.’s total voting and
nonvoting equity, or SG determines, in its sole discretion, that it otherwise
“controls” Cowen Inc. for purposes of the Bank Holding Company Act of 1956, as
amended (“BHCA”), it shall:

 

(i)  limit its activities to those activities that are permissible
for financial holding companies under section 4(k) of the BHCA and
implementing regulations and orders of the Board of Governors of the Federal
Reserve System (“Federal Reserve Board”) promulgated thereunder;

 

(ii)  make available, upon SG’s reasonable prior request, to any
Governmental Authority with jurisdiction over the activities of SG any and all
information concerning the business and activities of Cowen Inc., and its
dealings and relationships with SG, to which such Government Authority is
entitled under applicable law;

 

(iii)  comply with applicable requirements of federal, state and
foreign financial institutions laws and regulations as required by SG’s
“continued relationship” with Cowen Inc. within the meaning of such laws and
regulations; and

 

(iv)  provide SG and any SG Subsidiary, and their respective
representatives, access upon reasonable notice during normal business hours to
Cowen Inc.’s and the Cowen Subsidiaries’ books and records, so that SG and any
applicable SG Subsidiary may conduct reasonable reviews relating to the matters
set forth in this Section 4.05.

 

(b) 
Termination.  The requirements of
subsection (a) above shall cease to be applicable with respect to
U.S. laws and regulations at such time that: (i) SG neither owns or
controls, directly or indirectly, 5% or more of any class of voting stock of
Cowen Inc. nor 25% or more of Cowen Inc.’s total voting and nonvoting equity
and (ii) SG determines, in its sole discretion, that it does not otherwise
“control” Cowen Inc. for purposes of the BHCA.

 

SECTION 4.06.  Tax Treatment.  The Parties intend that the transactions
constituting the Separation shall for United States federal income tax purposes
be treated as a taxable asset transfer to Cowen Inc. for consideration equal to
the Acquisition Price (as defined in the Tax Matters Agreement) and shall not
take any position on any Tax Return or any action inconsistent with such
treatment.

 

SECTION 4.07.  Warrants Held by Cowen LLC.  Each of Cowen Inc. and Cowen LLC represents
and warrants as of the Separation Date that set forth on Schedule 4.07
hereto is a true, correct and complete list of the warrants held by Cowen LLC.

 

SECTION 4.08.  Registration Statement and Prospectus
Disclosures.  Each of the
representations and warranties made by Cowen Inc. to the Underwriters in
Sections 2(a)(ii) through 2(a)(iv) and Section 2(a)(xii) of the
Underwriting Agreement is hereby incorporated by reference herein and made a
part hereof, as though directly made by Cowen Inc. to SG and SGASH hereunder; provided
that such representations and warranties shall be deemed made hereunder as of
the date they are deemed made under the Underwriting Agreement.

 

31

 

ARTICLE V

EXCHANGE OF INFORMATION; CONFIDENTIALITY

 

SECTION 5.01.  Agreement for Exchange of Information.

 

(a) 
Exchange of Information.  Each of
SG and Cowen Inc., on behalf of itself and its Subsidiaries, shall provide, or
cause to be provided, to the other, at any time before or after the Separation
Date, as soon as reasonably practicable after written request therefor, any
Information in its possession or under its control to the extent that:  (i) such Information relates to the
Cowen Business, or any Cowen Asset or Cowen Liability, if Cowen Inc. is the
requesting Party, or to the SG Business, or any Assets of SG (other than the
Cowen Assets) or SG Liability, if SG is the requesting Party; or (ii) such
Information is required by the requesting Party to comply with any obligation
imposed by any Governmental Authority; provided, however, that in
the event that any Party determines that any such provision of Information
could be commercially detrimental, violate any law or agreement, compromise
client confidentiality or waive any applicable privilege, the Parties shall use
commercially reasonable efforts to permit the compliance with such obligations
in a manner that avoids any such harm or consequence.  The Party providing Information pursuant to
this subsection (a) shall only be obligated to provide such
Information in the form, condition and format in which it then exists and in no
event shall such Party be required to perform any improvement, modification,
conversion, updating or reformatting of any such Information.  The Parties acknowledge that the Tax Matters
Agreement shall exclusively govern the exchange of Information with respect to
Taxes.

 

(b) 
Compensation for Providing Information. 
The Party requesting Information agrees to reimburse the other Party for
the reasonable costs, if any, of creating, gathering, copying and transporting
such Information.

 

SECTION 5.02.  Ownership of Information.  The provision of any Information pursuant to Section 5.01
shall not affect the ownership of such Information (which shall be determined
solely in accordance with the terms of this Agreement and the Principal
Transaction Documents), or constitute the grant of rights of license in any
such Information.

 

SECTION 5.03.  Record Retention.  The Parties agree to use their reasonable
best efforts to retain all books, records and other Information in their
respective possession or control as of the Separation Date in accordance with
applicable law and regulatory requirements.

 

SECTION 5.04.  Limitations of Liability.  No Party shall have any Liability to another
Party in the event that any Information exchanged or provided pursuant to this
Agreement is found to be inaccurate in the absence of gross negligence or
willful misconduct by the Party providing such Information.  No Party shall have any Liability to any
other Party if any Information is destroyed after commercially reasonable
efforts by such Party to comply with the provisions of this Article V.

 

SECTION 5.05.  Other Agreements Providing for Exchange of
Information.  The rights and
obligations granted under this Article V are subject to any
specific limitations,

 

32

 

qualifications or additional provisions on the sharing, exchange,
retention or confidential treatment of Information set forth in any Principal
Transaction Document.

 

SECTION 5.06.  Confidentiality.

 

(a) 
Confidentiality.  Subject to Section 5.07,
SG, on behalf of itself and each SG Subsidiary, and Cowen Inc., on behalf of
itself and each Cowen Subsidiary, agrees to hold, and to cause its respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives to hold, in strict confidence, with at least the same
degree of care that applies to SG’s confidential and proprietary information
pursuant to policies in effect as of the Separation Date, all Information
concerning the other (or its business) and the other’s Subsidiaries (or their
respective businesses) that is either in its possession (including Information in
its possession prior to the Separation Date) or furnished by the other or the
other’s Subsidiaries or their respective directors, officers, employees,
agents, accountants, counsel and other advisors and representatives at any time
pursuant to this Agreement or any Transaction Document, and shall not use any
such Information other than for such purposes as may be expressly permitted
hereunder or thereunder, except, in each case, to the extent that such
Information has been: (i) in the public domain through no fault of such
Party or its Subsidiaries or any of their respective directors, officers,
employees, agents, accountants, counsel and other advisors and representatives;
(ii) later lawfully acquired from other sources by such Party (or any of
its Subsidiaries) which sources are not themselves bound by a confidentiality
obligation; or (iii) independently generated without reference to any
proprietary or confidential Information of the other Party.

 

(b) 
No Release; Return or Destruction. 
Each Party agrees not to release or disclose, or permit to be released
or disclosed, any Information addressed in Section 5.06(a) to
any other Person, except its directors, officers, employees, agents,
accountants, counsel and other advisors and representatives who need to know
such Information, and except in compliance with this Section 5.06
and Section 5.07.  Without
limiting the foregoing, when any Information furnished by the other Party after
the Separation Date pursuant to this Agreement or any Transaction Document is
no longer needed for the purposes contemplated by this Agreement or any
Transaction Document, each Party shall, at such Party’s option, promptly after
receiving a written request from the other Party either return to the other
Party all such Information in a tangible form (including all copies thereof and
all notes, extracts or summaries based thereon) or certify to the other Party
that it has destroyed such Information (and such copies thereof and such notes,
extracts or summaries based thereon); provided, however, that each Party may
retain copies of such Information if necessary to satisfy applicable regulatory
requirements.

 

SECTION 5.07.  Protective Arrangements.  In the event that SG or Cowen Inc. or any of
their respective Subsidiaries either determines on the advice of its counsel
that it is required or advisable to disclose any Information pursuant to
applicable law or the rules or regulations of any Governmental Authority
or receives any demand under lawful process or from any Governmental Authority
to disclose or provide Information of another Party (or such other Party’s
Subsidiaries) that is subject to the confidentiality provisions hereof, the
Party contemplating the disclosure shall notify the other Party a reasonable
time prior to disclosing or providing the other Party’s Information and shall
cooperate in seeking any reasonable protective arrangements requested in a
reasonably timely manner by the other Party. 
The reasonable out-of-pocket

 

33

 

costs and expenses incurred by the Parties in connection with seeking
any such protective arrangements shall be borne by the Party or Parties
requesting the protective arrangements for its Information (solely to the
extent the protective arrangement applies to its Information).  Without limiting the generality of the
foregoing, to the extent that any disclosure contemplated pursuant to this Section 5.07
would consist of Information of the disclosing Party that is “bundled” with
Information of the other Party, the Party required to disclose such “bundled”
Information shall notify the other Party a reasonable time prior to such
disclosure and such other Party shall as promptly as practicable either
(i) arrange for the unbundling of such Information at its sole cost and
expense (including any out-of-pocket costs and expenses incurred by the
disclosing Party) or (ii) consent to the disclosure of such “bundled”
Information.  Subject to the satisfaction
of the foregoing provisions of this Section 5.07, the Party that
received a request for any such protective arrangements, or its Subsidiaries,
may thereafter disclose or provide Information to the extent required by or
advisable under such law (as so advised by counsel) or by lawful process or
such Governmental Authority.

 

ARTICLE VI

DISPUTE RESOLUTION

 

SECTION 6.01.  Disputes.

 

(a) 
Agreement to Arbitrate Disputes. 
The Parties acknowledge that, from time to time after the Separation
Date, a controversy, dispute or claim may arise relating to a Party’s rights or
obligations under this Agreement.  The
Parties agree that any controversy, dispute or claim (whether arising in
contract, tort or otherwise) arising out of or in connection with the
performance or breach of this Agreement, including any question regarding its
enforcement, existence, validity, interpretation or termination shall be
resolved by binding arbitration.

 

(b) 
Conduct of the Arbitration.  An
arbitration conducted pursuant to this provision shall be administered by and
held before the American Arbitration Association (“AAA”) in accordance
with the laws of the State of New York and the AAA’s then current Commercial
Arbitration Rules.  Notwithstanding the
foregoing, no pre-hearing discovery shall be permitted unless specifically
authorized by the arbitration panel, provided, however, that unless the Parties
agree otherwise, there shall be no pre-hearing depositions or
interrogatories.  Any hearing or
authorized discovery shall take place in New York City, unless the Parties
agree otherwise.

 

(c) 
Composition and Selection of Panel: 
Unless the Parties agree otherwise, the arbitration panel shall consist
of three persons appointed by the AAA from its National Roster pursuant to
Rule R-11 of the AAA’s Commercial Arbitration Rules.

 

(d) 
Limitations on Available Relief. 
The arbitration panel shall have no authority or jurisdiction to award
consequential, exemplary or punitive damages.

 

(e) 
Confidentiality.  The Parties
agree that any arbitration commenced pursuant to this provision shall be and
remain confidential, and the Parties shall not make any public

 

34

 

statements concerning any arbitration, except to the extent that
disclosure of or any statement concerning any arbitration is, in the opinion of
counsel for one of the Parties, required by law.

 

(f) 
Final and Binding Nature of Arbitration Award.  Any award rendered by the arbitrators shall
be final and binding between the Parties and judgment thereon may be entered in
any court of competent jurisdiction.  If
a Party seeks to vacate or to appeal an award rendered by the arbitration panel
and such Party’s motion to vacate is denied or its appeal is unsuccessful, then
that Party shall pay the costs and expenses, including reasonable attorneys’
fees, of the prevailing Party.

 

ARTICLE VII

TERMINATION

 

SECTION 7.01.  Termination.  This Agreement and all Transaction Documents
may be terminated or abandoned at any time prior to the Separation Date by and
in the sole discretion of SG without the approval of Cowen Inc.  In the event of such termination, no Party
shall have any Liability of any kind to any other Party.  After the Separation Date, this Agreement may
not be terminated except pursuant to Section 2.02(f) or Section 2.15
or by an agreement in writing signed by all of the Parties.

 

ARTICLE VIII

NON-SOLICITATION; NON-DISPARAGEMENT;

EMPLOYEE ARRANGEMENTS; COMPETITION

 

SECTION 8.01.  Non-Solicitation.  For a period of one year commencing on the
IPO Date:

 

(a) 
SG and the SG Subsidiaries will not, directly or indirectly, in one or a series
of transactions, (i) solicit or recruit for the purpose of hiring, or
hire, any individual who was employed by Cowen Inc. or a Cowen Subsidiary
within the twelve (12) month period preceding the date of the incident in question
or (ii) otherwise induce or influence any such individual to discontinue,
reduce or modify his or her employment with Cowen Inc. or a Cowen Subsidiary;
and

 

(b) 
Cowen Inc. and the Cowen Subsidiaries will not, directly or indirectly, in one
or a series of transactions, (i) solicit or recruit for the purpose of
hiring, or hire, any individual who was employed by SG or a SG Subsidiary
within the twelve (12) month period preceding the date of the incident in
question or (ii) otherwise induce or influence any such individual to
discontinue, reduce or modify his or her employment with SG or a SG Subsidiary.

 

Notwithstanding the
foregoing provisions of this Section 8.01, nothing herein shall
prevent SG and the SG Subsidiaries or Cowen Inc. and the Cowen Subsidiaries,
from:  (i) using an independent
employment agency, so long as such agency is not directed to contact a specific
employee of the other party, (ii) placing general advertisements not
targeted at a specific employee of the other party or (iii) engaging in
discussions with or hiring employees of the other party regarding employment
when discussions are initiated by such employee.

 

35

 

SECTION 8.02.  Non-Disparagement.  For a period of one year commencing on the
IPO Date, Cowen Inc. agrees, on behalf of itself and the Cowen Subsidiaries,
that it shall not, and shall not cause or permit any of its officers or
directors (or the officers or directors of Cowen Subsidiaries) to make any
false, defamatory or disparaging statements about SG or SG Subsidiaries, or the
officers or directors of SG or any SG Subsidiaries.  For so long as SGASH owns any shares of Cowen
Common Stock, SG agrees, on behalf of itself and the SG Subsidiaries, that it
shall not, and shall not cause or permit any of its officers or directors (or
the officers or directors of any SG Subsidiaries) to make any false, defamatory
or disparaging statements about Cowen Inc. or the officers or directors of
Cowen Inc. or any Cowen Subsidiaries.

 

SECTION 8.03.  No Other Business Restrictions.  Except as expressly provided to the contrary
in this Agreement or in any Principal Transaction Document, nothing in this
Agreement or any Transaction Document shall require SG or Cowen Inc. or any of
their respective Subsidiaries to refrain from: 
(a) engaging in the same or similar activities or lines of business
as the other Party or any of its Subsidiaries; (b) doing business with any
potential or actual supplier or customer of the other Party or any of its
Subsidiaries; or (c) engaging in, or refraining from, any other activities
whatsoever relating to any of the potential or actual suppliers or customers of
the other Party or any of its Subsidiaries.

 

ARTICLE IX

MISCELLANEOUS

 

SECTION 9.01.  Counterparts; Entire Agreement; Corporate
Power; Facsimile Signatures.

 

(a) 
Counterparts.  This Agreement and
each Transaction Document may be executed in two 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.

 

(b) 
Entire Agreement.  This Agreement,
the Transaction Documents and the exhibits, schedules and annexes hereto and
thereto contain the entire agreement between the Parties with respect to the
subject matter hereof and supersede 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
therein.  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 any Principal Transaction Document, the provisions of such
Principal Transaction Document shall control.

 

(c) 
Corporate Power.  SG represents on
behalf of itself and, to the extent applicable, each SG Subsidiary, and Cowen
Inc. represents on behalf of itself and, to the extent applicable, each Cowen
Subsidiary, as follows:

 

36

 

(i)  each such Person has the requisite corporate or other power
and authority and has taken all corporate or other action necessary in order to
execute, deliver and perform this Agreement and each Principal Transaction
Document to which it is a party and to consummate the transactions contemplated
hereby and thereby; and

 

(ii)  this Agreement and each Principal Transaction Document to
which it is a party has been duly executed and delivered by it and constitutes
a valid and binding agreement of it enforceable in accordance with the terms
thereof.

 

(d) 
Facsimile Signatures.  Each Party
acknowledges that it and the other Parties may execute this Agreement and
certain of the Transaction Documents 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 each such Transaction Document to be manually executed (any such
execution to be as of the date of the initial date thereof).

 

SECTION 9.02.  Governing Law.  This Agreement and, unless otherwise
expressly provided therein, each Transaction Document, 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.

 

SECTION 9.03.  Assignability.  Except as set forth in any Transaction
Document, this Agreement and each Transaction Document shall be binding upon
and inure to the benefit of the Parties hereto and the parties thereto,
respectively, and their respective successors and permitted assigns; provided,
however, that no Party hereto nor any party thereto may assign its
rights or delegate its obligations under this Agreement or any Transaction
Document without the express prior written consent of the other Parties hereto
or the other parties thereto. 
Notwithstanding the foregoing, this Agreement and the Transaction
Documents (except as may be otherwise provided in any such Transaction
Document) 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 9.04.  Third Party Beneficiaries.  Except for the indemnification rights under
this Agreement and any Principal Transaction Documents of any SG Indemnitee or
Cowen Indemnitee in their respective capacities as such and for the releases
under Article II of the Indemnification Agreement of any Person provided
therein: (a) the provisions of this Agreement and each Transaction
Document are solely for the benefit of the Parties and their respective
Subsidiaries, after giving effect to the Separation, and are not intended to
confer upon any Person except the Parties and their respective Subsidiaries,
after giving effect to the Separation, any rights or remedies hereunder; and
(b) there are no other Third Party beneficiaries of this Agreement or any
Transaction Document and neither this Agreement nor any Transaction Document
shall provide any other Third Party with any remedy, claim, liability,
reimbursement,

 

37

 

claim of action or other right in excess of those existing without reference
to this Agreement or any Transaction Document.

 

SECTION 9.05.  Notices.  All notices or other communications under
this Agreement or any Transaction Document (except as otherwise provided
therein) must be in writing and shall be deemed to be duly given: (a) when
delivered in person; (b) upon transmission via confirmed facsimile
transmission, provided that such transmission is followed by delivery of a
physical copy thereof in person, via U.S. first class mail, or via a private
express mail courier; or (c) two days after deposit with a private express
mail courier, in any such case addressed as follows:

 

If
to SG:

 

Société
Générale

1221
Avenue of the Americas

New York, New York 10020

Attn:  General Counsel, SG Americas

Facsimile:
 (212) 278-7432

 

With
a copy to:

 

Mayer,
Brown, Rowe & Maw LLP

1675 Broadway

New York, New York  10019

Attn:  James B. Carlson

Facsimile:  (212) 262-1910

 

If
to Cowen Inc.:

 

Cowen
Group, Inc.

1221 Avenue of the Americas

New York, New York 10020

Attn:  General Counsel

Facsimile:  (646) 562-1861

 

With
a copy to:

 

Skadden,
Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY  10036-6522

Attn: Lou R. Kling

Thomas
W. Greenberg

Facsimile:
(212) 735-2000

 

Any
Party may, by notice to the other Party, change the address to which such
notices are to be given.

 

38

 

SECTION 9.06.  Severability.  If any provision of this Agreement or any
Transaction Document 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 thereof, 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 or thereby, as the case may be, 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 9.07.  Force Majeure.  No Party shall be deemed in default of this
Agreement or any Transaction Document to the extent that any delay or failure
in the performance of its obligations under this Agreement or any Transaction
Document results from any cause beyond its reasonable control and without its
fault or negligence, such as acts of God, acts of Governmental Authority,
embargoes, epidemics, war, riots, insurrections, acts of terrorism, fires,
explosions, earthquakes, floods, unusually severe weather conditions, labor
problems or unavailability of parts, or, in the case of computer systems, any
failure in electrical or air conditioning equipment.  In the event of any such excused delay, the
time for performance shall be extended for a period equal to the time lost by
reason of the delay.

 

SECTION 9.08.  Responsibility for Expenses.

 

(a) 
Expenses Incurred on or Prior to the Consummation of the IPO.  Except as otherwise expressly set forth in
this Agreement or any Principal Transaction Document, SG shall bear each of the
Parties’ and their affiliates’ costs and expenses incurred or accrued prior to
the consummation of the IPO in connection with the Separation or the IPO; provided,
however, that SG shall not be required to pay (or reimburse) any such
expenses attributable to Cowen Inc. or any Cowen Subsidiary to the extent that
SG is prohibited by law from paying (or reimbursing) such expenses.

 

(b) 
Expenses Incurred or Accrued after the Separation Date.  Except as otherwise expressly set forth in
this Agreement or any Principal Transaction Document, each Party shall bear its
own costs and expenses incurred or accrued after the consummation of the IPO.

 

SECTION 9.09.  Headings.  The article, section and paragraph
headings contained in this Agreement and in the Transaction Documents are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or any Transaction Document.

 

SECTION 9.10.  Survival.  Except as expressly set forth in this
Agreement (including but not limited to Section 2.01(f)(iii)) or
any other Principal Transaction Document, the covenants, releases, indemnities,
representations and warranties contained in this Agreement and each Transaction
Document, and liability for the breach of any obligations contained herein or
therein, shall survive the Separation Date and shall remain in full force and
effect for the periods therein indicated (as of the end of which period they
shall terminate and cease to be of further force or effect) or, where not
indicated, without limitation as to time.

 

39

 

SECTION 9.11.  Subsidiaries.  SG shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any SG Subsidiary and Cowen Inc. shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Cowen Subsidiary.

 

SECTION 9.12.  Waivers.  The observance of any term of this Agreement
or any Transaction Document may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the Party hereto or the
party thereto entitled to enforce such term, but such waiver shall be effective
only if it is in a writing signed by the Party hereto or the party thereto
against whom the existence of such waiver is asserted.  Unless otherwise expressly provided in this
Agreement or any Transaction Document, no delay or omission on the part of any
Party hereto or party thereto in exercising any right or privilege under this
Agreement or such Transaction Document shall operate as a waiver thereof, nor
shall any waiver on the part of any Party hereto or party thereto of any right
or privilege under this Agreement or any Transaction Document operate as a
waiver of any other right or privilege under this Agreement or such Transaction
Document 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 or such Transaction Document.  No failure by any Party or any party to any
Transaction Document to take any action or assert any right or privilege
hereunder or thereunder 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
hereto or party thereto, as the case may be, against whom the existence of such
waiver is asserted.

 

SECTION 9.13.  Amendments.  No provisions of this Agreement or any
Transaction Document 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 9.14.  Interpretation.  Words in the singular shall be deemed to
include the plural and vice versa and words of one gender shall be deemed to
include the other genders as the context requires.  The terms “hereof,” “herein,” and “herewith”
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto and thereto) and not to any particular provision of this Agreement.  Article, Section, Exhibit and
Schedule references are to the Articles, Sections, Exhibits, and Schedules
to this Agreement unless otherwise specified. 
Unless otherwise stated, all references to any agreement shall be deemed
to include the exhibits, schedules and annexes to such agreement.  The word “including” and words of similar
import when used in this Agreement shall mean “including, without limitation,”
unless the context otherwise requires or unless otherwise specified.  The word “or” shall not be exclusive.  Unless otherwise specified in a particular
case, the word “days” refers to calendar days. 
References herein to this Agreement or any Transaction Document shall be
deemed to refer to this Agreement or such Transaction Document as of the
Separation Date and as it may be amended thereafter, unless otherwise
specified.  References to the
performance, discharge or fulfillment of any Liability in accordance with its
terms shall have meaning only to the extent such Liability

 

40

 

has terms; if the Liability does not have terms, the reference shall
mean performance, discharge or fulfillment of such Liability.

 

SECTION 9.15.  Advisors.  Cowen Inc. acknowledges, for itself and each
Cowen Subsidiary, that Mayer, Brown, Rowe & Maw LLP, has acted only in
the capacity as counsel to SG, and not as counsel to Cowen LLC, Cowen Inc. or
any Cowen Subsidiary, in connection with this Agreement and the Transaction
Documents and the documents and transactions contemplated herein or therein.

 

SECTION 9.16.  Mutual Drafting.  This Agreement and the Transaction Documents
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 9.17.  No Right to Set-Off.  Each Party shall pay the full amount of any
payments, costs and disbursements required under this Agreement or any
Transaction Document, and shall not set off, counterclaim or otherwise withheld
any other amount owed by such Party to other Persons on account of any
obligation owed by other Persons to such Party.

 

SECTION 9.18.  Enforcement Costs.  In the event that a Party breaches any
provision of this Agreement or any of the Transaction Documents, such Party
agrees to reimburse the non-breaching Parties for all expenses related to the
enforcement by the non-breaching Parties of their respective legal rights under
this Agreement or any of the Transaction Documents, including but not limited
to the non-breaching Parties’ respective attorneys’ fees, court costs,
administrative fees and all other costs, fees and expenses incurred by the
non-breaching Parties that are associated with enforcing their respective legal
rights under this Agreement or any of the Transaction Documents.

 

SECTION 9.19.  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.

 

* * * * *

 

41

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly
authorized representatives.

 

	
   

  	
  SOCIÉTÉ GÉNÉRALE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jean-Philippe Coulier

  	
   

  
	
   

  	
   

  	
  Name: Jean-Philippe Coulier

  
	
   

  	
   

  	
  Title:   Chief Operating
  Officer, Americas

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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

  

 

 

Separation AgreementExhibit 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

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