UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

 

 

1221 Avenue of the Americas
New York, New York 10020

April 30, 2007

Dear Fellow Stockholder:

You are cordially invited to attend the 2007 Annual Meeting of Stockholders of Cowen Group, Inc. to be held on June 7, 2007, at 10:00 a.m., Eastern Daylight Time, in the conference room on the second floor at 1221 Avenue of the Americas, New York, New York. The information regarding matters to be voted upon at the Annual Meeting is set out in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.

In addition to the election of directors and the ratification of our independent registered public accounting firm, the proxy statement contains a proposal to approve our 2007 Equity and Incentive Plan. The Board of Directors believes that the new plan is critical to Cowen’s future success. The new plan will allow Cowen to further its goal of aligning employees’ interests with the interests of stockholders, will foster an ownership culture among employees, will assist in the recruitment and retention of employees, and will allow Cowen to pay compensation in equity, in lieu of cash. The Board of Directors recommends that you vote for approval of the new plan.

It is important that your shares be represented at the Annual Meeting, regardless of the number of shares you hold or whether you plan to attend the meeting in person. I urge you to read the accompanying proxy statement and vote your shares as soon as possible. The proxy card contains instructions on how to cast your vote.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Date:		Thursday, June 7, 2007
Time:		10:00 a.m., Eastern Daylight Time
Place:		1221 Avenue of the Americas, New York, New York, 10020 Second Floor Conference Room
Purpose:

 

1.                To elect two directors to the Board of Directors of Cowen Group, Inc. to serve three-year terms expiring at the later of the annual meeting of stockholders in 2010 or upon a successor being elected and qualified.

2.                To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for Cowen Group, Inc. for the fiscal year ending December 31, 2007.

3.                To consider a Company proposal to adopt the 2007 Equity and Incentive Plan.

4.                To transact such other business as may properly come before the meeting or any adjournments or postponements thereof.

 

 

April 30, 2007

YOUR VOTE IS IMPORTANT!

Whether or not you plan to attend the meeting, please submit your proxy card or voting instructions promptly so that we can be assured of having a quorum present at the meeting and so that your shares may be voted in accordance with your wishes. Most stockholders have a choice of voting over the Internet, by telephone or by using a traditional proxy card. Please refer to the attached proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you.

Proxy Statement
Table of Contents

 

 

 

 

PROXY STATEMENT
2007 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2007

The Board of Directors of Cowen Group, Inc., or the Company, is soliciting proxies for use at the annual meeting of stockholders to be held on June 7, 2007 at 1221 Avenue of the Americas, New York, New York, and at any adjournment or postponement of the meeting. This proxy statement and the enclosed proxy card are first being mailed or given to stockholders on or about April 30, 2007.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

What is the purpose of the meeting?

At our annual meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders. These include the election of directors, approval of the 2007 Equity and Incentive Plan and ratification of the selection of our independent registered public accounting firm for 2007. Also, management will report on matters of current interest to our stockholders and respond to questions from our stockholders.

Who is entitled to vote at the meeting?

The Board has set April 23, 2007 as the record date for the annual meeting. If you were a stockholder of record at the close of business on April 23, 2007, you are entitled to vote at the meeting. As of the record date, 15,820,979 shares of common stock, representing all of our voting stock, were issued and outstanding and, therefore, eligible to vote at the meeting.

What are my voting rights?

Holders of our common stock are entitled to one vote per share. Therefore, a total of 15,820,979 votes are entitled to be cast at the meeting. There is no cumulative voting.

How many shares must be present to hold the meeting?

In accordance with our bylaws, shares equal to a majority of our capital stock issued and outstanding and entitled to vote as of the record date must be present at the annual meeting in order to hold the meeting and conduct business. This is called a quorum. Shares are counted as present at the meeting if:

·       you are present and vote in person at the meeting; or

·       you have properly and timely submitted your proxy as described below under “How do I submit my proxy?”

What is a proxy?

It is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may direct the proxy how to vote your shares. We refer to this as your “proxy vote.” Two of our executive officers, Kim S. Fennebresque, our Chairman and Chief Executive Officer, and J. Kevin McCarthy, our General Counsel, have been designated as proxies for our 2007 annual meeting of stockholders.

What is a proxy statement?

It is a document that we are required to give you, in accordance with regulations promulgated by the Securities and Exchange Commission, or the SEC, when we ask you to designate proxies to vote your shares of Cowen Group, Inc. common stock at a meeting of our stockholders. The proxy statement includes information regarding the matters to be acted upon at the meeting and certain other information

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required by regulations promulgated by the Securities and Exchange Commission and rules of the Nasdaq Stock Market.

What is the difference between a stockholder of record and a “street name” holder?

If your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares, while you are considered the beneficial owner of those shares. In the latter case, your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the method described below under “How do I submit my proxy?”

How do I submit my proxy?

If you are a stockholder of record or if you hold restricted stock, you can submit a proxy to be voted at the meeting in any of the following ways:

·       electronically, using the Internet;

·       over the telephone by calling a toll-free number; or

·       by completing, signing and mailing the enclosed proxy card.

If you hold your shares in street name, you can vote your shares in the manner prescribed by your broker, bank, trust company or other nominee. Your broker, bank, trust company or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the broker, bank, trust company or other nominee how to vote your shares.

What does it mean if I receive more than one set of proxy materials?

If you receive more than one set of proxy materials or multiple control numbers for use in submitting your proxy, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or voting instruction card you receive or, if you submit your proxy by Internet or telephone, vote once for each card or control number you receive.

Can I vote my shares in person at the meeting?

If you are a stockholder of record, you may vote your shares in person at the meeting by completing a ballot at the meeting. Even if you currently plan to attend the meeting, we recommend that you also submit your proxy as described above so your vote will be counted if you later decide not to attend the meeting. If you submit your vote by proxy and later decide to vote in person at the annual meeting, the vote you submit at the meeting will override your proxy vote.

If you are a street name holder, you may vote your shares in person at the meeting only if you obtain and bring to the meeting a signed letter or other form of proxy from your broker, bank, trust or other nominee giving you the right to vote the shares at the meeting.

How does the Board recommend that I vote?

The Board of Directors recommends a vote:

·       FOR all of the nominees for director;

·       FOR the 2007 Equity and Incentive Plan; and

·       FOR the ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm of Cowen Group, Inc. for the year ending December 31, 2007.

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What if I do not specify how I want my shares voted?

If you are a stockholder of record or a holder of restricted stock and you submit a signed proxy card or submit your proxy by Internet or telephone but do not specify how you want to vote your shares on a particular manner, we will vote your shares:

·       FOR all of the nominees for director;

·       FOR the 2007 Equity and Incentive Plan; and

·       FOR the ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm of Cowen Group, Inc. for the year ending December 31, 2007.

Your vote is important. We urge you to vote, or to instruct your broker, bank, trust or other nominee how to vote, on all matters before the annual meeting. If you are a street name holder and fail to instruct the stockholder of record how you want to vote your shares on a particular matter, those shares are considered to be “uninstructed.” New York Stock Exchange rules determine the circumstances under which member brokers of the New York Stock Exchange may exercise discretion to vote “uninstructed” shares held by them on behalf of their clients who are street name holders. These rules generally permit member brokers to exercise voting discretion with respect to uninstructed shares only on certain routine matters, including the election of directors and the ratification of the selection of a company’s independent registered public accounting firm. The rules do not permit member brokers to exercise voting discretion with respect to the approval of an equity incentive plan, such as the 2007 Equity and Incentive Plan. Therefore, member brokers may not vote uninstructed shares on this matter. An uninstructed share that is not voted by a broker, bank or other nominee is sometimes referred to as a “broker non-vote.” A broker non-vote will not have any effect on the approval or rejection of the proposal. For more information regarding the effect of broker non-votes on the outcome of the vote, see below under “How are votes counted?”

Can I change or revoke my vote after submitting my proxy?

Yes. If you are a record holder or a holder of restricted stock, you may revoke your proxy and change your vote at any time before your proxy is voted at the annual meeting, in any of the following ways:

·       by submitting a later-dated proxy by Internet or telephone before the deadline stated on the enclosed proxy card;

·       by submitting a later-dated proxy to the corporate secretary of the Company, which must be received by us before the time of the annual meeting;

·       by sending a written notice of revocation to the corporate secretary of the Company, which must be received by us before the time of the annual meeting; or

·       by voting in person at the meeting.

If you are a street name holder, please refer to the voting instructions provided to you by your broker, bank, trust company or other nominee.

What vote is required to approve each item of business included in the notice of meeting?

The two director nominees who receive the most votes cast at the meeting in person or by proxy will be elected. The affirmative vote of the holders of a majority of the outstanding shares of common stock present in person or represented by proxy and voting affirmatively or negatively on the proposal is required to approve our 2007 Equity and Incentive Plan and to ratify the selection of our independent registered public accounting firm.

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How are votes counted?

You may either vote “FOR” or “WITHHOLD” authority to vote for each director nominee. You may vote “FOR,” “AGAINST” or “ABSTAIN” on the other proposals. If you properly submit your proxy but withhold authority to vote for one or more director nominees or abstain from voting on one or more of the proposals, your shares will be counted as present at the meeting for the purpose of determining a quorum but will not be counted for the purpose of calculating the vote on the particular matter(s) with respect to which you abstained from voting or withheld authority to vote. If you do not submit your proxy or voting instructions and also do not vote by ballot at the annual meeting, your shares will not be counted as present at the meeting for the purpose of determining a quorum unless you hold your shares in street name and the broker, bank, trust or other nominee has discretion to vote your shares and does so. For more information regarding discretionary voting, see the information above under “What if I do not specify how I want my shares voted?”

If you withhold authority to vote for one or more of the director nominees or you do not vote your shares on this matter (whether by broker non-vote or otherwise) or, if for any other proposal before the meeting, you abstain from voting or do not vote your shares, or, for shares held in street name, if you abstain from voting or do not submit voting instructions and your broker, bank, trust or other nominee also does not vote your shares, this will have no effect on the outcome of the vote.

Will my vote be kept confidential?

Yes. We have procedures to ensure that, regardless of whether you vote by Internet, telephone, mail or in person:

·       all proxies, ballots and voting tabulations that identify stockholders are kept permanently confidential, except as disclosure may be required by federal or state law or expressly permitted by a stockholder; and

·       voting tabulations are performed by an independent third party.

How can I attend the meeting?

All of our stockholders are invited to attend the annual meeting. You may be asked to present valid photo identification, such as a driver’s license or passport, before being admitted to the meeting. If you hold your shares in street name, you also may be asked to present proof of ownership to be admitted to the meeting. A brokerage statement or letter from your broker, bank, trust or other nominee proving ownership of the shares on April 23, 2007, the record date, are examples of proof of ownership.

To help us plan for the meeting, please let us know whether you expect to attend, by responding affirmatively when prompted during Internet or telephone voting or by marking the attendance box on the proxy card.

Who pays for the cost of proxy preparation and solicitation?

Cowen Group, Inc. pays for the cost of proxy preparation and solicitation, including the reasonable charges and expenses of brokerage firms, banks, trusts or other nominees for forwarding proxy materials to street name holders. We have retained Georgeson Inc. to assist in the solicitation of proxies for the annual meeting for a fee of approximately $10,000, plus reimbursement of out-of-pocket expenses. We are soliciting proxies primarily by mail. In addition, our directors, officers and regular employees as well as our proxy solicitor may solicit proxies by telephone or facsimile or personally. Our directors, officers and regular employees will receive no additional compensation for their services other than their regular compensation.

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ITEM 1—ELECTION OF DIRECTORS

The number of directors currently serving on our Board of Directors is seven. Our Board of Directors, upon the recommendation of the Nominating Committee, has resolved to reduce the size of the Board to six directors, effective as of the close of the polls for the 2007 annual meeting. Our Board of Directors is divided into three classes of approximately equal size. Except for the initial appointment of directors in connection with our initial public offering, the members of each class are elected to serve a three-year term with the term of office for each class ending in consecutive years. At this year’s annual meeting, the terms of our Class III directors will expire. The table below lists the two directors nominated for election as Class III directors at the Annual Meeting. The directors elected at the 2007 annual meeting will serve three-year terms expiring at the annual meeting in 2010 or until their successors are elected and qualified. All ages are as of April 23, 2007.

 

Steven Kotler and Mr. Pool currently serve as Class III directors with their terms expiring at the 2007 annual meeting. In addition to nominating Mr. Pool to stand for re-election, the Board has nominated Mr. Wardell, currently a Class I director, for election to the Board as a Class III director. Mr. Wardell has tendered his resignation as a Class I director which will be effective at the close of the polls for the 2007 annual meeting, contingent upon Mr. Wardell being elected as a Class III director. Mr. Kotler’s service as a director will terminate on the date of our 2007 annual meeting. Our Board initially appointed Mr. Wardell as a director on July 12, 2006 and initially appointed Mr. Pool as a director on September 12, 2006. Each of the nominees has agreed to serve as a director if elected. If, for any reason, any nominee becomes unable to serve before the annual meeting occurs, the persons named as proxies may vote your shares for a substitute nominee selected by the Board of Directors.

The two nominees receiving a plurality of the votes cast at the meeting in person or by proxy will be elected. Proxies may not be voted for more than two directors.

The Board of Directors recommends a vote FOR the election of the two director nominees. Proxies will be voted FOR the election of the two nominees unless otherwise specified.

Set forth below is biographical information for each of the nominees for election as director, for the directors whose terms of office will continue after the meeting and for the director who will not stand for reelection and whose service as a director will terminate on the date of our 2007 annual meeting. All ages are as of April 23, 2007.

(1)          Member of the Audit Committee.

(2)          Member of the Compensation and Benefits Committee.

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(3)          Mr. Kotler’s service as a director will terminate on the date of our 2007 annual meeting and he is not standing for re-election.

(4)          Member of the Corporate Governance Committee.

(5)          Member of the Nominating Committee.

(6)          Mr. Wardell was nominated to stand for election as a Class III director and has tendered his resignation as a Class I director which will be effective at the close of the polls for the 2007 annual meeting, contingent upon Mr. Wardell being elected as a Class III director.

CLASS III DIRECTORS—NOMINEES FOR TERMS ENDING IN 2010

PHILIP B. POOL, JR.:   Mr. Pool currently serves as a Managing Director of Willis Stein & Partners, a middle market leveraged buyout firm. Prior to joining Willis Stein in July 2001, Mr. Pool was a Managing Director in the Investment Banking Group of Credit Suisse First Boston Corporation, or CSFB, where he worked from November 2000 to May 2001 following CSFB’s acquisition of Donaldson, Lufkin & Jenrette Securities Corporation, or DLJ. Mr. Pool joined DLJ in 1994, where he co-headed the Private Fund Group. From 1985 to 1994, Mr. Pool was an investment banker with Merrill Lynch & Co., and from 1980 to 1985, he was an investment banker with Kidder, Peabody & Co. Incorporated.

CHARLES W.B. WARDELL, III:   Mr. Wardell is a Managing Director of Korn/Ferry International’s New York office and Head of the Northeast Region. Korn/Ferry International is an executive search firm with more than 70 offices throughout the world. Mr. Wardell has six years of service with Korn/Ferry. Prior to joining Korn/Ferry, Mr. Wardell held senior positions at a number of firms, including Nordeman Grimm, American Express, Travelers, Mastercard International and Citicorp. Mr. Wardell also served as Deputy Special Assistant and Staff Assistant to Presidents Nixon and Ford, Administrative Aide to General Alexander Haig and Richard Cheney when they served as President Nixon’s and Ford’s Chief of Staff, respectively, and was appointed by President Ford as a Deputy Assistant Secretary of State. Mr. Wardell graduated from Harvard College and was honorably discharged as an officer in the Army after distinguished service in Vietnam.

CLASS II DIRECTORS—TERMS ENDING IN 2008

JEFFREY KURZWEIL:   Mr. Kurzweil has been a partner with the law firm Venable LLP since 2002. Mr. Kurzweil focuses his practice on public policy and government relations at the federal, state, and local levels. Prior to joining Venable, Mr. Kurzweil was a sole practitioner for six years from 1998 to 2002 and also focused on public policy and government relations. Prior to that, Mr. Kurzweil was a partner at several Washington D.C. firms. In government service from 1978 to 1979, Mr. Kurzweil served as Special Assistant to the General Counsel of the U.S. Department of Commerce. Mr. Kurzweil is a cum laude graduate of Duke University and received his law degree from Vanderbilt Law School. Mr. Kurzweil has served on the Board of Trustees of Duke University, the Board of Visitors of Johnson C. Smith University, the Alumni Board of Vanderbilt Law School, and the Board of Directors of The American Schools of Oriental Research. In addition to serving as a director of Cowen Group, Inc., Mr. Kurzweil also currently serves as one of two non-family members of the Board of Directors of JWM Family Enterprises, a Marriott Family private enterprise.

JOHN E. TOFFOLON, JR.:   Mr. Toffolon is a partner of The Shermen Group and is the Chief Financial Officer and a Member of the Board of Directors of Shermen WSC Acquisition Corp., a blank check company formed for the purpose of acquiring an operating business in the alternative energy and/or agricultural field, which is currently in registration with the Securities and Exchange Commission. From 2001 to 2003 Mr. Toffolon served as an advisor to the Chairman and Chief Executive Officer of Royster-Clark, Inc., a privately-held chemicals distribution company. From 1992 to 2000, Mr. Toffolon served in various capacities, including Executive Managing Director, Chief Financial Officer and Chief

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Administrative Officer for Nomura Holding America, Inc. and Nomura Securities International, Inc. Mr. Toffolon also served as a member of the Boards of Directors of both Nomura companies. From 1979 to 1990, Mr. Toffolon worked at The First Boston Corporation in various capacities, including Chief Financial Officer and Managing Director, and served on the Management and Capital Commitment Committees.

CLASS I DIRECTORS—TERMS ENDING IN 2009

KIM S. FENNEBRESQUE:   Mr. Fennebresque currently serves as our Chairman, Chief Executive Officer and President. Mr. Fennebresque has served as our Chairman and President since the formation of Cowen Group, Inc. in February 2006 and has served as Chief Executive Officer since July 2006. Mr. Fennebresque has served as Chief Executive Officer and President of Cowen and Company, LLC, and its predecessor companies, since November 1999 and as Chairman of Cowen and Company, LLC and its predecessors since August 2005. Prior to becoming Chief Executive Officer of Cowen and Company, LLC, Mr. Fennebresque served as Head of Mergers & Acquisitions of Cowen and Company, LLC from 1998 to 1999 and became Head of Investment Banking in 1999. Mr. Fennebresque joined Cowen and Company, LLC in March 1998 from UBS Securities where he had served as Head of the Corporate Finance and Mergers & Acquisitions Departments. From 1991 to 1994, he was a General Partner and Co-Head of Investment Banking at Lazard Frères & Co. From 1977 to 1991, he was with The First Boston Corporation where he held various positions including Head of Leveraged Acquisitions, Head of Transaction Development and Co-Head of General Investment Banking.

L. THOMAS RICHARDS, M.D.:   Since graduating from Harvard Medical School in 2003, Dr. Richards has served as a Resident Physician in Emergency Medicine at Highland Hospital in Oakland, California and UCSF Hospital in San Francisco, California. Prior to attending medical school in 1999, Dr. Richards served as an associate in the Mergers & Acquisitions departments of Cowen and Company, LLC and UBS Securities LLC. He began his finance career at Lazard Freres & Co in the Banking Group in 1993.

DIRECTOR NOT STANDING FOR RE-ELECTION

STEVEN KOTLER:   Mr. Kotler currently serves as Vice Chairman of the private equity firm of Gilbert Global Equity Partners, which he joined in 2000. From 1973 until 2000, Mr. Kotler was employed by Schroder & Co. and its predecessor firm, Wertheim & Co., serving as its Chief Executive Officer and President, and a member of the Group Executive Committee and the Board of Directors of Schroders plc, the parent company of Schroder & Co. Mr. Kotler is Co-Chairman of the Board of Directors of True Temper Sports, and is on the Board of CPM Holdings.

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Our Board of Directors believes that good corporate governance is important to ensure that Cowen Group, Inc. is managed for the long-term benefit of its stockholders. This section describes key corporate governance guidelines and practices that our Board has adopted. Complete copies of our Corporate Governance Guidelines, the charters of our Audit, Compensation and Benefits, Corporate Governance and Nominating Committees and our Code of Ethics and Business Conduct are available on the investor relations section of our website, www.cowen.com. Alternatively, you can request a copy of these documents by writing to Cowen Group, Inc., Attn: Corporate Secretary, 1221 Avenue of the Americas, New York, NY, 10020.

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Corporate Governance Guidelines

Our Board has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interests of Cowen Group, Inc. and our stockholders. These guidelines, which provide a framework for the conduct of the Board’s business, provide that:

·       the Board’s goal is to oversee and direct management in building long-term value for the Company’s stockholders;

·       a majority of the members of the Board shall be independent directors;

·       the independent directors shall meet regularly in executive session;

·       directors have access to management and, as appropriate, to the Company’s outside advisors;

·       new directors participate in an orientation program and all directors are expected to participate in continuing director education on an ongoing basis; and

·       at least annually, the Board and its committees conduct a self-evaluation to determine whether they are functioning effectively.

Director Independence

Under applicable Nasdaq Stock Market rules, a director will only qualify as an “independent director” if, in the opinion of our Board, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Our Board has determined that none of Messrs. Kotler, Kurzweil, Pool, Richards, Toffolon or Wardell has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 4200(a)(15) of the Nasdaq Stock Market, Inc. Marketplace Rules.

Board Meetings and Attendance

Following our initial public offering, and the underwriters’ exercise of their overallotment option in July 2006, our Board consisted of three directors, only one of whom, Mr. Wardell, was independent. At the Board’s meeting on September 12, 2006, our remaining five independent directors were appointed, following which one of our inside directors resigned. Our Board met five times from the date of our initial public offering through December 31, 2006. From the date of each director’s appointment through December 31, 2006, each director attended at least 75% of the aggregate number of Board meetings and the number of meetings held by all committees on which he then served.

Director Attendance at Annual Meeting of Stockholders

Because we are a newly public company, our annual meeting to be held on June 7, 2007 will be our first annual meeting of stockholders. Our Corporate Governance Guidelines provide that directors are invited and encouraged to attend the annual meeting of stockholders.

Committees of the Board

Our Board has established four standing committees—Audit, Compensation and Benefits, Corporate Governance, and Nominating—each of which operates under a charter that has been approved by our Board. Current copies of each committee’s charter are posted on the investor relations section of our website, www.cowen.com. Alternatively, you can request a copy of these documents by writing to Cowen Group, Inc., Attn: Corporate Secretary, 1221 Avenue of the Americas, New York, NY, 10020.

Our Board has determined that all of the members of each of the Board’s four standing committees are independent as defined under the rules of the Nasdaq Stock Market, and, in the case of all members of the Audit Committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, or the Exchange Act.

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The Board expects to combine the Nominating Committee and the Corporate Governance Committee at its first meeting following the 2007 Annual Meeting.

Audit Committee

The Audit Committee’s responsibilities include:

·       being directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;

·       reviewing the performance of the independent registered public accounting firm and making the decision to replace or terminate the independent registered public accounting firm or the lead partner;

·       evaluating the independence of the registered public accounting firm ;

·       reviewing and discussing with management and the independent registered public accounting firm and the head of the Company’s internal audit department all critical accounting policies and practices;

·       reviewing the adequacy and effectiveness of the Company’s accounting and internal control policies and procedures;

·       discussing our risk management policies;

·       reviewing and discussing with the independent registered public accounting firm the results of the year-end audit of the Company;

·       establishing and implementing policies and procedures for the Committee’s review and approval or disapproval of proposed related party transactions; and

·       preparing the audit committee report required by SEC rules, which is included on page 47 of this proxy statement.

The current members of our Audit Committee are Messrs. Toffolon (Chairperson), Kotler and Pool. Our Board of Directors has determined that Mr. Toffolon, who is an independent director, is an “audit committee financial expert” as defined by applicable SEC rules. Our Audit Committee met four times during fiscal 2006.

Compensation and Benefits Committee

The Compensation and Benefits Committee’s responsibilities include:

·       annually reviewing the goals and objectives of the Company’s executive compensation plans;

·       annually reviewing the Company’s executive compensation plans in light of the Company’s goals and objectives;

·       annually evaluating the CEO’s and other executive officers’ performance and determining and approving the CEO’s and other executive officers’ compensation level based on such evaluation;

·       overseeing and administering our equity and incentive compensation plans, with the oversight of the full Board of Directors;

·       annually reviewing the compensation process of the Company’s equity research personnel to ensure compliance with applicable laws, rules and regulations;

·       reviewing and discussing annually with management our “Compensation Discussion and Analysis,” which is included beginning on page 13 of this proxy statement; and

·       preparing the compensation and benefits committee report required by SEC rules, which is included on page 23 of this proxy statement.

The processes and procedures followed by our Compensation and Benefits Committee in considering and determining executive and director compensation are described below under the heading “Executive and Director Compensation Processes” on page 10 and in the Compensation Discussion and Analysis section beginning on page 13.

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The current members of our Compensation and Benefits Committee are Messrs. Wardell (Chairperson), Pool and Toffolon. Our Compensation and Benefits Committee met three times during fiscal 2006.

Nominating Committee

The Nominating Committee’s responsibilities include:

·       assisting in identifying, recruiting and interviewing director candidates, including persons suggested by stockholders;

·       reviewing the background and qualifications of individuals being considered as director candidates;

·       recommending to the Board the director nominees for election;

·       annually reviewing with the Board the composition of the Board as a whole;

·       recommending to the Board the size and composition of each standing committee of the Board; and

·       annually reviewing committee assignments and the policy with respect to the rotation of committee memberships and/or chairmanships.

The processes and procedures followed by the Nominating Committee in identifying and evaluating director candidates are described below under the heading “Director Nomination Process” on page 11 of this proxy statement.

The current members of our Nominating Committee are Messrs. Kurzweil (Chairperson), Richards and Wardell. Following our initial public offering in July 2006, our Nominating Committee, which consisted of our two non-independent directors and our one independent director, met two times to nominate additional independent directors to the Board. Following the appointment of the additional independent directors in September 2006, the newly constituted Nominating Committee, consisting of the directors named above, did not meet during fiscal 2006.

Corporate Governance Committee

The Corporate Governance Committee’s responsibilities include:

·       making recommendations on the frequency and structure of Board meetings;

·       monitoring the functioning of the committees of the Board;

·       annually reviewing the Corporate Governance Guidelines and recommending any desirable changes to the Board; and

·       overseeing the self-evaluation of the Board as a whole and the self-evaluation of each Board committee.

The current members of our Corporate Governance Committee are Messrs. Kotler (Chairperson), Kurzweil and Richards. The Board expects to combine the Nominating Committee and the Corporate Governance Committee at its first meeting following the 2007 Annual Meeting. Our Corporate Governance Committee did not meet during fiscal 2006.

Executive and Director Compensation Processes

For a discussion of the process relating to executive officer compensation, please see “Compensation Discussion and Analysis” included elsewhere in this proxy statement.

The Compensation and Benefits Committee is responsible for periodically reviewing the level and form of compensation of our non-employee directors, including how such compensation relates to director  compensation of companies of comparable size, industry and complexity, and for making recommendations to the Board with respect to such compensation. For a description of the annual compensation paid to each non-employee director, please see “Compensation Program for Non-Employee Directors” below.

The Compensation and Benefits Committee has delegated to a New Hire and Retention Award Committee of the Board of Directors limited authority to make equity awards under our existing equity

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compensation plan. The New Hire and Retention Award Committee consists solely our Chairman of the Board and Chief Executive Officer. The New Hire and Retention Award Committee may only make equity awards in connection with hiring new employees, retention of existing employees and significant promotions. The New Hire and Retention Award Committee may not grant or modify awards to executive officers or certain other senior employees. Subject to annual and individual share limitations set by the Compensation and Benefits Committee every year, the New Hire and Retention Award Committee has the authority to determine the recipient of the award as well as the type and amount of the award. The New Hire and Retention Award Committee will perform the same functions with regard to 2007 Equity and Incentive Plan if it is approved by stockholders, and the annual limits set by the Compensation and Benefits Committee will apply in the aggregate to awards under our 2006 Equity and Incentive Plan and the new plan.

Director Nomination Process

Going forward, the process to be followed by our Nominating Committee to identify and evaluate director candidates will include requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Committee and the Board.

In considering whether to recommend any particular candidate for inclusion in the Board’s slate of recommended director nominees, our Nominating Committee will apply the criteria set forth in the Committee’s charter and in our Corporate Governance Guidelines. These criteria include the candidate’s experience, skills, expertise, diversity, integrity, character, business judgment, time availability, dedication, age, conflicts of interest, reputation for honesty and ethical conduct, and material relationships with the Company and independence from management and the Company. The Committee will not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. Our Board believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities. Our Corporate Governance Guidelines require that if there is a significant change in a director’s primary job responsibilities, such director must tender his or her resignation from the Board and the Nominating Committee shall recommend to the Board whether the Board should accept such proposed resignation or request that the director continue to serve on the Board. In addition, our Corporate Governance Guidelines require that any director attaining the age of 70 must annually tender his or her proposed retirement from the Board and the Nominating Committee shall recommend to the Board whether the Board should accept such proposed retirement or request that the director continue to serve on the Board.

Stockholders may recommend individuals to our Nominating Committee for consideration as potential director candidates by submitting to the Nominating Committee the proposed director’s name, age, business address, principal occupation and principal qualifications. The stockholder making the recommendation must include a statement as to the amount of shares beneficially owned by the stockholder and a statement as to whether the proposed director has consented to serve as a director if elected. Stockholders should send all notice to the Nominating Committee, c/o Corporate Secretary, Cowen Group, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Stockholders may make recommendations at any time, but recommendations for consideration as nominees at the next annual meeting of stockholders must be received not less than 120 days before the first anniversary of the date that the proxy statement was first mailed to stockholders in connection with the previous year’s annual meeting. Assuming that appropriate biographical and background material has been provided on a timely basis, the Committee will evaluate stockholder-recommended candidates by following the same process, and applying the same criteria, as it follows for candidates submitted by others. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in the Company’s proxy card for the next annual meeting.

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Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the Committee or the Board, by following the procedures set forth under “Procedures for Nominating Director Candidates.”

At the Annual Meeting, stockholders will be asked to consider the election of Messrs. Pool and Wardell, who have been nominated for election as directors for the first time. During 2006, Messrs. Pool and Wardell were appointed by our Board as new directors. Messrs. Pool and Wardell were each originally proposed to the Nominating Committee by our Chief Executive Officer and the Board determined to include each of them among its nominees.

Procedures for Nominating Director Candidates

Stockholders may directly nominate a person for election to our Board by complying with the procedures set forth in Article II, Section 2.10 of our bylaws, and with the rules and regulations of the SEC. Under our bylaws, only persons nominated in accordance with the procedures set forth in the bylaws will be eligible to serve as directors. In order to nominate a candidate for service as a director, you must be a stockholder at the time you give the Board notice of your nomination, and you must be entitled to vote for the election of directors at the meeting at which your nominee will be considered. In accordance with our bylaws, director nominations generally must be made pursuant to notice to our Corporate Secretary delivered to or mailed and received at our principal executive offices at 1221 Avenue of the Americas, New York, NY, 10020, not later than the 90th day, nor earlier than the 120th day, prior to the first anniversary of the prior year’s annual meeting of stockholders. Your notice must set forth (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class or series and number of shares of capital stock of Cowen Group, Inc. owned beneficially or of record by the nominee and (iv) all other information relating to the nominee that is required to be disclosed in solicitations of proxies for the election of directors in an election contest, or is otherwise required, in each case pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.

Procedures for Contacting the Board of Directors

Our Board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. The Chairperson of the Nominating Committee, with the assistance of our General Counsel, is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he or she considers appropriate.

Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the General Counsel considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we receive repetitive or duplicative communications.

Stockholders who wish to send communications on any topic to our Board should address such communications to Board of Directors, c/o Corporate Secretary, Cowen Group, Inc., 1221 Avenue of the Americas, New York, NY, 10020.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code on our website, www.cowen.com. In addition, we intend to post on our website all disclosures that are

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required by law or Nasdaq Stock Market listing standards concerning any amendments to, or waivers from, any provision of the code. You may also request a copy of the code by writing to Cowen Group, Inc., Attn: Corporate Secretary, 1221 Avenue of the Americas, New York, NY 10020.

Compensation Program for Non-Employee Directors

Other than Mr. Wardell, directors who are not Cowen employees received total compensation of $62,502 for their service from the date of their appointment, which in every case, except Mr. Wardell’s, was in September 2006, through the 2007 annual stockholders meeting. Such compensation included $37,500 in cash plus $25,002 in Restricted Stock Units valued as of the close of business on September 13, 2006. Since Mr. Wardell became a director in connection with our initial public offering in July 2006, he received an additional $25,000 in cash. For each year thereafter, each director who is not a Cowen employee will receive annual compensation of $75,000, consisting of $50,000 in cash and $25,000 in Restricted Stock Units. No separate meeting fees are paid. The Restricted Stock Units are vested and not subject to forfeiture, but, except in the event of death, the underlying shares of Cowen Group, Inc. common stock will not be delivered to the holder for at least one year from the date of grant. These equity awards are intended to further align the interests of our directors with those of our stockholders.

The following table contains compensation information for our non-employee directors for the year ended December 31, 2006.

(1)          The amounts in this column reflect the cash consideration earned by each director from the time of his appointment through December 31, 2006.

(2)          The stock awards column represents the grant date fair market value of stock awards in accordance with FAS 123R as recognized in our 2006 financial statements. Each director was granted 1,632 restricted stock units effective September 13, 2006. The number of units was determined by dividing $25,000 by the grant date closing price of $15.32, and represents the aggregate total stock awards outstanding for each director as of December 31, 2006.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Each of our “named executive officers” listed in the Summary Compensation Table served as an executive officer for the full year period ending on December 31, 2006. Our “named executive officers” consisted of the following individuals:

·       Kim S. Fennebresque, who serves as our Chairman, Chief Executive Officer and President;

·       Thomas K. Conner, who serves as our Chief Financial Officer and Treasurer;

·       Christopher A. White, who serves as our Vice President and the Chief of Staff and Chief Administrative Officer of Cowen and Company, LLC, our wholly-owned broker-dealer subsidiary;

·       Mark A. Egert, who serves as Chief Compliance Officer of Cowen and Company, LLC; and

·       Jean Orlowski, who serves as Chief Information Officer of Cowen and Company, LLC.

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Each of the named executive officers was a member of the Office of the Chief Executive of Cowen and Company, LLC, or the OCE, as of December 31, 2006 and served as a member of the OCE from the date of our initial public offering in July 2006. Subject to the oversight of our Board of Directors, the OCE is responsible for establishing policies and procedures regarding overall corporate decisions, including investment decisions, legal, regulatory and compliance matters, insurance coverage, human resources and administration, information technology, and tax matters. In addition, the OCE sets general compensation policies, determines our financing requirements, objectives and principles, and considers, where appropriate, acquisitions, dispositions and other significant transactions. In addition to the named executive officers listed above, our other executive officers are our General Counsel and the Head of Human Resources of Cowen and Company, LLC, each of whom is a member of the OCE. The members of the OCE are appointed annually by our CEO.

Compensation Philosophy and Objectives

We are committed to maintaining a ratio of compensation and benefit expense to revenues in an amount between 58% and 60%, excluding expense associated with the initial grant of restricted stock and options in connection with our initial public offering and payments related to deferred compensation plans that were terminated as a result of our separation from Société Générale. We were within this range in fiscal 2006. Our compensation program, including compensation of the named executive officers, is designed to achieve three objectives:

·       Pay for Performance.   A significant portion of the total compensation paid to each named executive officer is variable. The amount of compensation paid is determined based on the performance of the Company through an evaluation of internal goals and a comparison of our results to competitor firms, and an evaluation of each executive officer’s contribution to the Company and his or her performance against individualized goals.

·       Align Executive Officers’ Interests with Stockholders’ Interests.   We believe that equity ownership directly aligns the interests of our executive officers with those of our stockholders. We pay our highly compensated employees a portion of their year-end bonus in the form of equity awards subject to service-based vesting requirements. In connection with fiscal 2006 bonus payments, all employees earning at least $300,000 in total compensation for the year received a portion of their bonus in restricted stock. In addition, during 2006, in connection with our separation from Société Générale and our initial public offering, we granted certain of our senior employees, including all of our named executive officers, restricted stock, stock options, or a combination of both.

·       Recruiting and Retention.   We operate in an intensely competitive industry, and we believe that our success is closely related to our recruiting and retention of highly talented employees and a strong management team. We try to keep our compensation program comparable to industry practices so that we can continue to recruit and retain talented executive officers and employees.

Compensation Actions Prior to and in Connection with our Initial Public Offering

Compensation reported in the Summary Compensation Table and elsewhere in this proxy statement reflects several actions taken before or in connection with our separation from Société Générale and our related initial public offering in July 2006. These actions were negotiated prior to the initial public offering and the formation of our Compensation and Benefits Committee, or the Compensation Committee. This Compensation Discussion and Analysis describes our compensation philosophy and objectives since we became a public company and on a going-forward basis. However, we also describe compensation actions before and in connection with our initial public offering since they significantly affect the amounts reported in this proxy statement. The most significant actions are summarized briefly in this section to provide context.

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In connection with our initial public offering, our Chief Executive Officer received 975,000 shares of restricted stock (6.5% of our common stock outstanding immediately following the offering). These shares “cliff vest” on December 31, 2010 provided Mr. Fennebresque remains employed with us on that date (subject to earlier vesting in the event of specified terminations as described elsewhere in this proxy statement). Other executive officers also received awards of restricted stock as well as stock options in connection with our initial public offering. The amount of Mr. Fennebresque’s stock award was determined by Société Générale. For our other executive officers, the amounts of these awards were determined by our Chief Executive Officer and Société Générale. Please see the “Grants of Plan-Based Awards” table on page 25 below for a description of the awards made to our named executive officers. The amount of the initial public offering related equity awards that we recognized as compensation expense for 2006 financial reporting purposes under FAS 123R are included in the Summary Compensation Table on page 23, and will continue to be reported in that table in future years as the compensation expense is recognized over the vesting period.

Also, in light of the importance of Mr. Fennebresque’s continued service to us and his contributions to our separation from Société Générale and initial public offering, we executed an employment agreement with Mr. Fennebresque prior to our initial public offering. Mr. Fennebresque’s employment agreement is further described below in “Employment Agreement with Kim S. Fennebresque” on page 25. Under this agreement, Mr. Fennebresque receives a base salary of $250,000 per year and a minimum guaranteed annual bonus of $1,750,000 per year, which can be increased in the Compensation Committee’s discretion.

Finally, in connection with our separation and initial public offering, certain of our named executive officers received various distributions under deferred compensation arrangements that were terminated as a result of our separation from Société Générale. These distributions are described in “Non-Qualified Deferred Compensation Plans” on page 31 below. We do not currently maintain non-qualified deferred compensation arrangements for our executive officers.

As noted above, we have excluded these initial public offering related equity grants and the deferred compensation distributions from the computation of our ratio of compensation and benefits expense to revenues.

Setting Compensation

Our Board of Directors, based on recommendations from the Compensation Committee, has the responsibility for approving the compensation paid to our executive officers as well as certain other highly compensated employees. At the end of each year, the Compensation Committee recommends to the Board that the Board approve the amount of total compensation to be paid to such individuals in recognition of the previous year’s performance. Except as noted below, the Board of Directors has full discretion to determine the amount of compensation to be paid to each of these individuals. As described above, our Chief Executive Officer’s salary and minimum annual bonus are set forth in our employment agreement with him. The Compensation Committee has discretion to increase, but not decrease, the minimum annual bonus or provide other forms of compensation to our Chief Executive Officer.

Involvement of Executive Officers

Our Chief Executive Officer, in consultation with our Chief Administrative Officer and employees in our Human Resources department, assists the Compensation Committee with its work. These individuals assist the Compensation Committee by presenting information to the Compensation Committee and making recommendations for the Compensation Committee’s review and consideration. Such information and recommendations include, among other things, the compensation that should be received by the executive officers and certain other highly compensated employees; performance evaluations; financial information regarding the Company that should be reviewed in connection with compensation decisions;

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the firms to be included in a compensation peer group; and the evaluation and compensation process to be followed by the Compensation Committee.

Compensation Peer Group

In making compensation decisions, our Compensation Committee reviewed two sets of peer group data. One set of data included a compensation peer group of firms identified by management with which we compete for executive talent. For 2006, our compensation peer group consisted of Greenhill & Co., Inc., Jefferies Group, Inc., Knight Capital Group, Lazard LLC, Piper Jaffray & Co., and Thomas Weisel Partners Group, LLC. Management, together with PricewaterhouseCoopers, or PWC, the Compensation Committee’s compensation consultant, gathered and provided information to the Compensation Committee relating to the compensation of the executive officers of these peer firms, including annual base salary, annual cash bonus, equity awards and all other compensation. The Compensation Committee used these data when determining our 2006 compensation levels to ensure that our compensation levels are competitive relative to the compensation paid by our peer group.

The other set of peer group data was external market surveys provided by MGMC, Inc., a compensation advisory firm. These market surveys allowed the Compensation Committee to benchmark each executive officer’s total compensation against that of certain boutique investment banks and global investment banks. We use these external market surveys because we compete with companies of various sizes for executive officers and other senior employees. For 2006, the boutique investment banks included the following firms: BNP Paribas, CIBC, Dresdner Kleinwort Wasserstein, Jefferies Group, Inc., Lazard LLC, Piper Jaffray & Co., Prudential, Thomas Weisel Partners Group, LLC and Wachovia Securities. The global investment banks included the following firms: Banc of America, Barclays Capital, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS. Each executive officer’s total compensation for each of 2005 and 2004, and his compensation recommendation by management to the Compensation Committee for 2006, were compared to: (i) the 2005 midpoint and projected 2006 midpoint of total compensation of a similarly positioned executive officer at a boutique investment bank; and (ii) the 2005 and projected 2006 average, 25th, 50th and 75th percentile of total compensation of an officer with similar functions (but not necessarily the same title) at a global investment bank. The amounts projected for 2006 were derived from MGMC’s compensation trend analysis for both boutique and global investment banks. The Compensation Committee reviews such composite market data to determine the market median compensation paid to similarly-situated executives. Market data are some of the many factors considered by the Compensation Committee when setting compensation, and the amount paid to each executive officer may be more or less than the composite market median based on the roles and responsibilities of the executive officer, experience level and other factors.

Compensation Consultant

In 2006, the Compensation Committee engaged PWC as a compensation consultant to provide peer group analyses, competitive assessments and advice. At the request of the Compensation Committee, PWC participated in several Compensation Committee meetings during 2006 and advised the Compensation Committee as to the competitiveness of the base salary and bonus recommendations presented by our Chief Executive Officer, and the competitiveness of the ultimate compensation levels approved by the Board of Directors for each executive officer (including the Chief Executive Officer) and certain other highly compensated employees.

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Compensation Program and Payments

Our executive compensation consists of base salary, an annual bonus paid in the form of cash and equity-based awards and benefits, such as life insurance and other personal benefits. In addition, in connection with our initial public offering, all of our executive officers received grants of restricted stock, stock options or a combination of both and some named executive officers received payouts from non-qualified deferred compensation plans that were sponsored by Société Générale. Our Chief Executive Officer is also eligible to receive certain payments upon a termination or change in control.

Base Salary

When making compensation decisions, the Compensation Committee makes a determination as to the total compensation an executive officer should receive for that fiscal year, and base salary is a component of that total compensation. The purpose of base salary is to provide a set amount of cash compensation for each executive officer that is not variable in nature and is generally competitive with market practices. Each year the Compensation Committee approves a cap on the aggregate firm-wide dollar amount of base salary increases based on a percentage of the prior year firm-wide base salary level. The base salary levels established for our named executive officers reflect a desire to maintain a relatively equitable compensation baseline among all senior employees, including our Chief Executive Officer. In fiscal 2006, the base salaries of our named executive officers did not constitute a significant portion of their overall compensation. This is consistent with standard practice within the securities industry and we believe this allows us to reward performance.

On occasion, we may adjust executive officers’ base salaries within the firm-wide base salary cap described above. For fiscal 2006, we maintained the base salary of each named executive officer, other than for Mr. White, from that paid during fiscal 2005. Each of the named executive officers, other than Mr. Fennebresque, received a base salary of $200,000 for fiscal 2006. Consistent with our employment agreement with Mr. Fennebresque, he received a base salary of $250,000. For fiscal 2006, Mr. White’s base salary was increased from his fiscal 2005 base salary to reflect his new role at Cowen and Company, LLC and the increased responsibilities associated with that role. For fiscal 2007, each of Mr. Conner’s and Mr. White’s base salaries has been increased to $250,000. The fiscal 2007 base salaries for all of our other named executive officers will remain the same as their fiscal 2006 base salaries.

Annual Bonus

The majority of total compensation received by each executive officer is paid in the form of an annual bonus. This is consistent with our view that a significant portion of compensation paid is to be based on the performance of the Company and of each executive officer. Each year, our senior management develops an equity distribution grid that sets forth the percentage of total compensation an employee will receive in the form of equity awards, in lieu of, not in addition to, a cash payment. The equity component of the annual bonus is subject to a vesting schedule as discussed below. The equity distribution grid is discussed and ultimately approved by the Compensation Committee. When approving the equity distribution grid, the Compensation Committee reviews how much stock is available under our equity and incentive plans for grants to employees and attempts to maximize our objective of aligning executives’ interests with the interests of our stockholders. While doing this evaluation, the Compensation Committee reviews the practices of our peer companies. For fiscal 2006, the equity distribution grid set forth that any employee, regardless of title, earning total compensation in excess of $300,000 would receive a percentage of his or her compensation over $250,000 in the form of an equity award. According to the equity distribution grid, the percentage of total compensation that must be paid in equity increases as total compensation increases. For example, according to the fiscal 2006 equity distribution grid, an employee earning $300,000 in total compensation will receive 1.6% of his or her total compensation in the form of an equity award, while an employee earning over $3 million in total compensation will receive at least 28% of his or her total

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compensation in the form of an equity award. The Compensation Committee will evaluate the grid every year and make necessary changes to both remain competitive with our peer companies and to continue aligning the interests of our executive officers’ with the interests of our stockholders.

For fiscal 2006, the Compensation Committee decided that all equity compensation, including that paid to Mr. Fennebresque, relating to fiscal 2006 bonuses was to be paid in shares of restricted stock vesting as follows: 25% on the first anniversary of the grant date, 25% on the second anniversary of the grant date, and 50% on the third anniversary of the grant date. In deciding what form the equity awards should take, the Compensation Committee evaluated the following factors:

·       the number of shares of restricted stock that would need to be granted to achieve the appropriate dollar amount of equity being awarded to the employee;

·       the number of options that would need to be granted to achieve the appropriate dollar amount of equity being awarded to the employee, which for fiscal 2006 the Compensation Committee determined was approximately two and a half times the number of shares of restricted stock;

·       limiting as much as possible the dilution to our stockholders associated with the issuance of additional shares; and

·       the limited number of shares of common stock available for grant under our 2006 Equity and Incentive Plan.

Based on these and other factors, the Compensation Committee decided that, for fiscal 2006, restricted stock was the preferable form of equity award to be granted for compensation purposes.

At its December 21, 2006 meeting, the Compensation Committee reviewed and recommended for the Board of Directors’ approval the final fiscal 2006 bonuses for our executive officers and certain other highly compensated employees. On December 22, 2006, the Board of Directors reviewed and approved the Compensation Committee’s recommendations. All bonuses relating to fiscal 2006 were paid in early 2007. The equity portion of the bonus was granted in January 2007 and the cash portion of the bonus was paid in February 2007. To eliminate the impact that a significant price change in the market value of our common stock may have on the number of shares of restricted stock that were to be delivered to an employee, the Compensation Committee approved valuing the restricted stock using the volume-weighted average price for the 15 trading days ending on a date in early January, which equaled $19.57 per share.

As noted above, our employment agreement with our Chief Executive Officer provides that he is entitled to a guaranteed minimum annual bonus of $1,750,000. The Compensation Committee may exercise discretion to pay him additional amounts. Our Chief Executive Officer’s total compensation, which includes his minimum annual bonus, is subject to the equity distribution grid described above.

Compensation Determinations and Relevant Factors

When determining the amount of annual bonus to be paid for fiscal 2006, the Compensation Committee reviewed and considered the following information:

·       the improved financial performance of the Company as a whole and each individual business unit as reflected by a 17.2% increase in the Company’s revenue for fiscal 2006 compared to fiscal 2005;

·       the financial performance of the Company compared to comparable public companies and other companies in the securities industry;

·       external market surveys of total compensation paid by certain boutique investment banks and global investment banks;

·       historical compensation information for each executive officer;

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·       the successful separation of the Company from Société Générale;

·       the successful completion of the Company’s initial public offering;

·       performance evaluations of the members of the OCE other than the Chief Executive Officer, prepared by the Chief Executive Officer, reflecting the Chief Executive Officer’s review and peer reviews of each executive officer, which the Compensation Committee discussed with the Chief Executive Officer;

·       base salary, cash bonus, equity awards and all other compensation paid by the compensation peer group; and

·       recommendations of the Chief Executive Officer regarding total compensation, which the Compensation Committee discussed with the Chief Executive Officer.

Mr. Fennebresque’s Compensation.   When setting fiscal 2006 total compensation for Mr. Fennebresque, in addition to the terms of his employment agreement, the following factors significantly influenced the Compensation Committee:

·       Mr. Fennebresque played a significant leadership role in planning and executing the Company’s separation from Société Générale, including the establishment of corporate functions previously provided by Société Générale, such as risk management, legal and compliance, and internal audit.

·       Mr. Fennebresque played a significant leadership role in the Company’s initial public offering, including negotiating various separation agreements with Société Générale in preparation for the offering and leading the team responsible for marketing the offering.

·       The Company achieved improved financial results for 2006 compared to 2005, including a 17.2% revenue increase, with revenue growth across all platforms including sales and trading, which experienced revenue growth for the first time since 2000.

·       The Company strengthened its existing platform through strategic personnel investments and new initiatives, such as:

·        hiring a new Head of Investment Banking;

·        trading listed options; and

·        creating sales teams focused on middle market investors and soft dollars.

·       The Company took significant steps towards adding complementary business lines, such as:

·        hiring a Head of Asset Management; and

·        forming Cowen Healthcare Royalty Partners to conduct an alternative asset management business.

·       Mr. Fennebresque is subject to an employment agreement that set the minimum amount of his annual bonus for fiscal 2006, as described below under “Employment Agreement with Kim S. Fennebresque.”

The Compensation Committee considered the achievements described above, consulted with Mr. Fennebresque regarding these achievements and his potential compensation and decided to increase Mr. Fennebresque’s bonus in light of these achievements.

Under the SEC’s rules, we are required to report in the Summary Compensation Table the dollar amounts of the restricted stock received by Mr. Fennebresque that are recognized by the Company as compensation costs for financial reporting purposes (excluding forfeiture assumptions) in accordance with

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FAS 123R for the fiscal year. As a result, no portion of the bonus paid to Mr. Fennebresque in the form of restricted stock for his fiscal 2006 performance is included in the Summary Compensation Table because the equity award was made in 2007. The table below sets forth the total compensation awarded to Mr. Fennebresque for his fiscal 2006 performance. The amount includes the dollar value of the entire amount of the equity award received by Mr. Fennebresque in January 2007 but does not include the amount of restricted stock awarded to Mr. Fennebresque in connection with our initial public offering. We believe this information is helpful to understanding how our compensation program rewarded Mr. Fennebresque for his performance during fiscal 2006.

Based on the information and factors described above, the Compensation Committee awarded Mr. Fennebresque total compensation for fiscal 2006 of $4,000,000 (excluding the award of restricted stock in connection with our initial public offering and distributions of certain deferred compensation plans). Such amount, after being subject to the equity distribution grid, was paid as follows:

(1)          All other compensation for Mr. Fennebresque includes the $65,000 salary of his personal driver and a de minimis annual premium payment for a $50,000 term life insurance policy.

Other Named Executive Officers’ Compensation.   Total compensation for the other four named executive officers was based on their respective contributions in achieving the Company’s accomplishments described above. Under the SEC’s rules, we are required to report in the Summary Compensation Table the dollar amounts of the restricted stock for each named executive officer recognized by the Company as compensation costs for financial reporting purposes (excluding forfeiture assumptions) in accordance with FAS 123R for the fiscal year. As a result, no portion of the bonuses paid in restricted stock to our named executive officers for their fiscal 2006 performance is included in the Summary Compensation Table because the equity awards were made in 2007. The table below sets forth the total compensation awarded to the named executive officers for their fiscal 2006 performance. These amounts include the dollar value of the entire amount of the equity award received by the named executive officer in January 2007 but does not include any amounts for the restricted stock and options paid to the named executive officers in connection with our initial public offering. As noted, certain of the named executive officers received a one time special bonus to recognize his efforts in connection with our initial public offering, which amounts are included in the table. We believe this information is helpful to understanding how our compensation program rewarded our executive officers for their performance during fiscal 2006.

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Based on the information and factors described above, the Compensation Committee awarded each of the following named executive officers total compensation for fiscal 2006 as set forth below in the “Total Compensation” column (excluding the awards of restricted stock and stock options in connection with our initial public offering and distributions of certain deferred compensation plans). Such amounts, after being subject to the equity distribution grid, were paid as follows:

(1)          Messrs. Conner, Egert and Orlowski each received a one-time special bonus in connection with the unique efforts in furtherance of the Company’s separation from Société Générale and the initial public offering as follows: Mr. Conner, $75,000; Mr. Egert, $80,000; Mr. Orlowski, $50,000. This bonus was subject to the equity distribution grid; therefore the amounts listed in the “Cash Bonus,” “Restricted Stock” and “Total Compensation” columns reflect the payment of this bonus.

(2)          On April 18, 2007, Mr. Orlowski submitted his resignation. As a result, all of Mr. Orlowski’s equity awards will be forfeited.

Form of Payment

Consistent with our philosophy regarding aligning executive officers’ interests with stockholders’ interests, the annual bonus for the named executive officers, including our Chief Executive Officer, was paid in a combination of cash and equity. As discussed above, the equity distribution grid set forth the percentage of total compensation an employee must receive in the form of equity awards. For our named executive officers, the equity portion represented 11% to 36% of the total annual bonus payment, and was paid entirely in shares of restricted stock. The restricted stock was granted on January 16, 2007 and the cash portion was paid on February 15, 2007. The restricted stock will vest over a three year period with 25% vesting on the first anniversary of the grant date, 25% on the second anniversary of the grant date and 50% vesting on the third anniversary of the grant date, in each case, subject to the terms and conditions of the applicable award agreements. The number of shares of restricted stock granted to each executive officer was calculated by first referencing the equity distribution grid to determine the percentage of total compensation that was to be paid in equity and second, dividing the dollar amount of such percentage by $19.57, which, as described above, was the volume-weighted average price for the 15 trading days ending in early January.

Other Compensation and Benefits

As a subsidiary of Société Générale, certain of our senior employees and executive officers had participated in various Société Générale deferred compensation and other compensation plans, including the Fidelity Bonus Plan, the Société Générale Corporate and Investment Banking Partnership, the SG Deferred Compensation Plan for Executives, the Merchant Banking Fund Co-investment Plan and SG Cowen Ventures I L.P. Each of these plans is described in more detail in the “Non-Qualified Deferred

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Compensation” section below. Employees who participated in these plans were either granted a deferred bonus award or voluntarily deferred compensation. Such amounts were either invested or deemed invested in certain measuring investments. Funds deposited in certain of these plans vested immediately, while other plans required vesting over time. However, in connection with our initial public offering and separation from Société Générale, all employees who participated in these deferred compensation plans became fully vested (other than leverage, if any, provided by Société Générale under the Merchant Banking Fund Co-investment Plan) and in most instances amounts due to such employees were distributed to them in connection with our separation from Société Générale. Certain of our named executive officers received distributions from these plans during fiscal 2006 as shown in the “Non-Qualified Deferred Compensation” table set forth below. Following our initial public offering, we have not maintained any deferred compensation plans.

In determining our compensation and benefits expense to revenue ratio for fiscal 2006, we excluded from our calculation the compensation expense associated with the deferred compensation plans that were terminated as a result of our separation from Société Générale and our initial public offering. We believe that these amounts should be excluded because these payments related solely to our separation from Société Générale, Société Générale required us to accelerate payments where possible and most of these payments will not recur.

During fiscal 2006, Mr. Fennebresque and Mr. Orlowski each exercised Société Générale stock options previously awarded to them. The value realized by Messrs. Fennebresque and Orlowski upon exercise was $1,117,696 and $92,112, respectively.

During fiscal 2006, we paid $65,000 for a driver for Mr. Fennebresque, which amount has been attributed to Mr. Fennebresque as compensation.

Awards in Connection with Our Initial Public Offering

Consistent with our philosophies regarding aligning executives’ interests with stockholders’ interests and retention of senior employees and in connection with our initial public offering and separation from Société Générale, we granted certain of our senior employees and executive officers equity awards. We and Société Générale agreed that a combination of restricted stock and stock options was the optimal way to align the long-term and short-term goals of Cowen, Société Générale and our other stockholders. Société Générale agreed to fund the restricted stock portion of the equity grant. The amount of restricted stock that Société Générale contributed was determined through negotiations between our executive officers and Société Générale. These negotiations preceded our initial public offering. As a result, the Compensation Committee was not involved in these negotiations.

The amount of restricted stock and stock options awarded to our executive officers and senior employees was determined by our Chief Executive Officer and Société Générale. Our Chief Executive Officer’s equity award was determined solely by Société Générale. See the “Summary Compensation” and the “Grants of Plan-Based Awards” tables for the amount of restricted stock and stock options granted to each of our named executive officers in connection with our initial public offering.

With the exception of the shares granted to Mr. Fennebresque, the restricted stock vests as follows: 25% on each of the third and fourth anniversaries of the grant date and the remaining 50% of the shares on the fifth anniversary of the grant date. Mr. Fennebresque’s shares of restricted stock will all vest on December 31, 2010, except as set forth below under “Employment Agreement with Kim S. Fennebresque.” The stock options have an exercise price of $16.00 per share, which was the initial offering price to the public of our common stock. The options vest in 25% annual increments commencing on the second anniversary of the grant date. The grant date of both the restricted stock and the stock options was the date of our initial public offering, July 12, 2006.

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In determining our compensation expense to revenue ratio for fiscal 2006, we excluded from our calculation the compensation expense associated with the equity awards made in connection with our initial public offering.

Termination and Change of Control Arrangements

The equity award agreements with our named executive officers, other than our Chief Executive Officer, mandate that upon a termination of employment, other than a qualified retirement, all unvested equity awards, and on occasion, all vested equity awards, will be forfeited. See “Provisions of Equity Award Agreements with Named Executive Officers other than our Chief Executive Officer” below for a discussion of the equity award agreements. In addition, each named executive officer, other than our Chief Executive Officer, must be employed by us on the payment date, with respect to cash, and on the grant date, with respect to equity awards, to receive those components of his annual bonus. Upon a change-in-control, all equity awards, including those granted to our Chief Executive Officer, will fully vest and all restrictions will lapse.

Our employment agreement with Mr. Fennebresque provides for severance payments in certain cases upon the termination of his employment and for the accelerated vesting of his equity awards. See “Potential Payments Upon Termination or Change-In-Control” for a discussion of the circumstances and the amounts that would be paid to Mr. Fennebresque if his employment is terminated. Mr. Fennebresque’s employment agreement was negotiated with Société Générale prior to our initial public offering.

COMPENSATION AND BENEFITS COMMITTEE REPORT

The Compensation and Benefits Committee has reviewed and discussed the Compensation Discussion and Analysis with management and has recommended to the Board of Directors the inclusion of the Compensation Discussion and Analysis in this proxy statement.

Compensation and Benefits Committee of the Board of Directors of Cowen Group, Inc.

Charles W.B. Wardell, III, Chairperson
Philip B. Pool, Jr.
John E. Toffolon, Jr.

Summary Compensation Table

The following table sets forth compensation information for the year ended December 31, 2006 for our Chief Executive Officer, our Chief Financial Officer, and our three other most highly-compensated named executive officers, all of whom were serving as executive officers at the year-end.

(1)          The amounts in this column reflect cash bonuses paid to the named executive officers for fiscal 2006 performance. Messrs. Conner, Orlowski and Egert each received a special one-time bonus in connection with our initial public offering as follows: Mr. Conner, $75,000, Mr. Egert, $80,000 and

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Mr. Orlowski, $50,000. The entries in this column for Messrs. Conner, Orlowski and Egert include the cash component of their special one-time bonuses in the amounts of $60,000, $40,000 and $64,000, respectively. The remaining portion of their special one-time bonus was awarded as equity following our fiscal 2006 year end and is therefore not reflected in the table. The amount of cash bonus for each named executive officer was determined by inputting each named executive officer’s fiscal 2006 total compensation (as set forth above under “Compensation Discussion and Analysis—Compensation Program and Payments”) into the equity distribution grid to determine the amount of cash and the amount of equity each named executive officer will receive. All bonuses for named executive officers were entirely discretionary except for Mr. Fennebresque’s bonus. Pursuant to Mr. Fennebresque’s employment agreement, he was entitled to receive a minimum annual bonus of $1,750,000. Any annual bonus amount awarded to Mr. Fennebresque greater than $1,750,000 was awarded at the discretion of the Compensation Committee.

(2)          The entries in the stock awards column reflect the dollar amounts of stock-based compensation recognized for 2006 financial statement reporting purposes in accordance with FAS 123R, excluding forfeiture assumptions. For each named executive officer, the amount reflects the compensation cost of the restricted stock awards granted in connection with our initial public offering in July 2006. In accordance with FAS 123R expense recognition provisions, unearned compensation associated with share-based awards with graded vesting periods is expensed on an accelerated basis over the vesting period of the award. Please refer to Note 14 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 for a discussion of the relevant assumptions used to determine the valuation of our stock for accounting purposes. Please note that this table does not include restricted stock awards related to fiscal 2006 bonuses since those awards were made after December 31, 2006. Please see “Compensation Discussion and Analysis—Compensation Program and Payments” above for the amount of restricted stock granted to named executive officers in connection with fiscal 2006 bonuses.

(3)          The entries in the option awards column reflect the dollar amounts of stock-based compensation recognized for 2006 financial statement reporting purposes in accordance with FAS 123R, excluding forfeiture assumptions. For each named executive officer, the amount reflects the compensation cost of the stock option awards granted in connection with our initial public offering in July 2006. In accordance with FAS 123R expense recognition provisions, unearned compensation associated with share-based awards with graded vesting periods is expensed on an accelerated basis over the vesting period of the award. Please refer to Note 14 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 for a discussion of the relevant assumptions used to determine the valuation of our stock options for accounting purposes.

(4)          Entries in this column exclude distributions made to certain of our named executive officers under certain deferred compensation plans sponsored by Société Générale and terminated in connection with our separation from Société Générale and our initial public offering. In 2006, Messrs. Fennebresque, Conner and White received $2,973,405, $65,791 and $431,610, respectively, in connection with these deferred compensation plans. For additional information regarding the individual plans and distributions please see “Non-Qualified Deferred Compensation Plans” below.

(5)          All other compensation for Mr. Fennebresque includes the $65,000 salary of his personal driver and a de minimis annual premium payment for a $50,000 term life insurance policy.

(6)          On April 18, 2007, Mr. Orlowski submitted his resignation. As a result, all of Mr. Orlowski’s equity awards will be forfeited.

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Grants of Plan-Based Awards

The following table provides information regarding grants of plan-based awards made to the named executive officers during fiscal 2006. All grants were made under the 2006 Equity and Incentive Plan.

(1)          Amounts in this column represent one-time awards of restricted stock to our named executive officers in connection with our initial public offering. Pursuant to the equity award agreement, all shares of restricted stock were granted at $16.00 per share, equal to our initial public offering price. Our stock began trading on the Nasdaq Global Market on July 13, 2006.

(2)          Amounts in this column represent one-time awards of options to our named executive officers in connection with our initial public offering. Pursuant to the equity award agreement, the exercise price of the options is $16.00 per share, equal to our initial public offering price. Our stock began trading on the Nasdaq Global Market on July 13, 2006.

(3)          The amounts in this column represent the grant date fair value of the awards in accordance with FAS 123R, excluding forfeiture assumptions. Refer to Note 14 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 for a discussion of the relevant assumptions used to determine the valuation of our stock and options for accounting purposes.

(4)          The grant date fair value of Mr. Conner’s awards consists of $204,848 related to restricted stock awards and $78,644 related to option awards.

(5)          The grant date fair value of Mr. White’s awards consists of $307,472 related to restricted stock awards and $117,706 related to option awards.

(6)          On April 18, 2007, Mr. Orlowski submitted his resignation. As a result, all of Mr. Orlowski’s equity awards will be forfeited.

(7)          The grant date fair value of Mr. Orlowski’s awards consists of $122,912 related to restricted stock awards and $47,190 related to option awards.

(8)          The grant date fair value of Mr. Egert’s awards consists of $81,984 related to restricted stock awards and $31,405 related to option awards.

Employment Agreement with Kim S. Fennebresque

We entered into an employment agreement with Mr. Fennebresque effective January 1, 2006, pursuant to which Mr. Fennebresque serves as Chairman and Chief Executive Officer of Cowen and Company, LLC. The employment agreement has an initial term that continues through December 31, 2007 (subject to earlier termination by us or Mr. Fennebresque), and will be automatically renewed for one additional two-year period (2008 and 2009) and one additional one-year period (2010), unless either party provides written notice to the other that the term will not be so extended. Mr. Fennebresque may not

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voluntarily retire, resign or otherwise terminate his employment relationship with us (other than for good reason as defined in “Potential Payments Upon Termination or Change-In-Control” below) without first giving us at least 180 days prior written notice of his retirement, resignation or other termination.

Pursuant to the employment agreement, Mr. Fennebresque receives a base salary of $250,000 per year. In addition to his base salary, Mr. Fennebresque is entitled to receive, with respect to each of the first four years of the agreement’s term (assuming Mr. Fennebresque is still employed by us), a minimum annual bonus of $1,750,000 (less applicable tax and payroll deductions). Beginning in the fifth year of the agreement’s term (assuming Mr. Fennebresque is still employed by us), Mr. Fennebresque will be entitled to receive a minimum annual bonus of $1,750,000 (less applicable tax and payroll deductions), of which $750,000 will be paid within two-and-one-half months after the end of the fiscal year in which such bonus was earned and $1,000,000 of which will be deferred in accordance with the provisions of Section 409A of the Internal Revenue Code of 1986, or the Code, and the guidance and regulations promulgated thereunder and will be paid to Mr. Fennebresque immediately following the six-month anniversary of his termination of employment (or earlier, if permitted by Section 409A of the Code). In addition, in each year in which Mr. Fennebresque is employed by us, he will be entitled to earn an additional annual bonus as determined by the Compensation Committee.

Mr. Fennebresque is also entitled to receive retirement and welfare benefits on the same basic terms and conditions we provide to other employees of similar position, rank and status.

In connection with our initial public offering, Mr. Fennebresque received 975,000 shares of restricted stock (6.5% of our common stock outstanding immediately following the offering) that vest on December 31, 2010. In order to vest in such shares, Mr. Fennebresque must be employed by us on December 31, 2010; provided, however, such shares will become fully vested if Mr. Fennebresque’s employment terminates by reason of death or disability, if Mr. Fennebresque is terminated by us without cause (as defined below in “Potential Payments Upon Termination or Change-In-Control”) or if Mr. Fennebresque terminates his employment for good reason (as defined below in “Potential Payments Upon Termination or Change-In-Control”) prior to that date. In the event Mr. Fennebresque terminates his employment without good reason or is terminated by us for cause prior to December 31, 2010, he will not be entitled to vest in any such shares. In the event we experience a change in control (as defined below in “Potential Payments Upon Termination or Change-In-Control”) while Mr. Fennebresque is employed by us during the term of his employment agreement, any outstanding equity awards then held by Mr. Fennebresque will become fully vested and exercisable and any restrictions thereon will lapse. Please see “Potential Payments Upon Termination or Change in Control” below for a description of payments that Mr. Fennebresque would be entitled to receive upon a termination or change in control.

In the event Mr. Fennebresque is terminated during the term of his employment agreement or within one year following the expiration of the term of the employment agreement (other than a termination due to a change in control), Mr. Fennebresque will be subject to a non-solicitation restrictive covenant. Pursuant to the terms of his employment agreement, Mr. Fennebresque may not, during his employment or thereafter, disclose or furnish any of our confidential and proprietary information to any third party, except as otherwise required by law. At our request, and in any event upon termination of employment, Mr. Fennebresque is obligated to return all company property and work product to us.

Provisions of Equity Award Agreements with Named Executive Officers other than our Chief Executive Officer

Pursuant to the award agreements with our named executive officers other than Mr. Fennebresque, restricted stock awarded in connection with our initial public offering will vest with respect to 25% of the shares on each of the third and fourth anniversaries of the grant date and the remaining 50% on the fifth anniversary of the grant date provided that the terms and conditions of the applicable award agreements are satisfied. Award recipients retain the right to vote restricted shares they hold and to receive dividends,

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if any, paid at the same rate paid to our other stockholders. Also, pursuant to their award agreements, options awarded to our named executive officers in connection with our initial public offering expire on the seventh anniversary of the initial public offering and vest in 25% annual increments commencing on July 12, 2008, the second anniversary of the grant date.

In addition, pursuant to the award agreements with our named executive officers other than Mr. Fennebresque, if an award recipient is terminated for cause (as defined below), both vested and unvested equity awards are subject to forfeiture. If an award recipient’s employment is terminated other than for cause, except for a qualified retirement (as defined below), the award recipient’s unvested equity awards are subject to forfeiture. In addition, a retired employee’s unvested equity awards and equity awards that vested during retirement, are subject to forfeiture if the employee violates any of the covenants in his or her award agreement.

For the purposes of the award agreements with the named executive officers, other than Mr. Fennebresque, relating to the restricted stock and options awarded in connection with our initial public offering:

·       “cause” means (A) a breach by the employee of any provisions of the award agreement, including any of the restrictive covenants contained therein; or (B) (I) the employee has been convicted of any crime; (II) fraud, dishonesty, gross negligence or substantial misconduct in the employee’s performance of his or her duties and responsibilities; (III) the employee violates or fails to comply with the Company’s internal policies or the rules and regulations of any regulatory or self-regulatory organization with jurisdiction over the Company; or (IV) the employee fails to perform the material duties of his or her position.

·       a “qualified retirement” means a retirement in accordance with Company policies after such person has attained the age of 55 and completed five years of continuous service for the Company or one of its subsidiaries or affiliates, but only including such service after December 31, 2003.

Outstanding Equity Awards at Fiscal Year End

The following table contains certain information regarding equity awards held by the named executive officers as of December 31, 2006.

(1)          Options expiring on July 12, 2013 will vest in 25% annual increments commencing on July 12, 2008, the second anniversary of the grant date, in each case so long as the award recipient complies with the terms and conditions of the applicable award agreements.

(2)          Except in the case of Mr. Fennebresque, all of the above stock awards will vest with respect to 25% of the shares on each of the third and fourth anniversaries of the grant date and the remaining 50% on the fifth anniversary of the grant date provided that the terms and conditions of the applicable award agreements are satisfied. Mr. Fennebresque’s stock awards will vest on December 31, 2010 except as otherwise set forth in his employment agreement.

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(3)          The values in the column are based on the $21.15 closing price of our common stock on the Nasdaq Global Market on December 29, 2006, the last trading day of 2006.

(4)          On April 18, 2007, Mr. Orlowski submitted his resignation. As a result, all of Mr. Orlowski’s equity awards will be forfeited.

Option Exercises and Stock Vested

None of the equity awards held by the named executive officers vested or were exercisable during the fiscal year ended December 31, 2006.

In 2006, two of our named executive officers exercised options to purchase shares of Société Générale stock. These options were granted prior to 2003 under a compensation plan sponsored by Société Générale and were fully vested at the time of our separation from Société Générale. The following table sets forth certain information concerning the exercise of those options.

 

Potential Payments Upon Termination or Change-In-Control

The award agreements with our named executive officers relating to the equity grants made in connection with our initial public offering (both restricted stock and options) mandate the forfeiture of all unvested equity grants upon the termination of employment, other than as a result of death, disability or retirement. In addition, if a named executive officer (other than Mr. Fennebresque, whose employment agreement is discussed below) is terminated for cause (as defined above in “Provisions of Equity Award Agreements with Named Executive Officers other than our Chief Executive Officer”), all equity awards that are currently vested and held by such executive officer will also be forfeited, or if no longer held by such executive officer, the executive officer must pay the Company an amount equal to the fair market value of such shares on the date of disposition by the executive officer. If the executive officer’s employment is terminated as a result of death or disability, all unvested equity awards immediately vest. In the event that an executive officer retires, then all equity awards shall continue to vest according to their vesting schedule, provided, however, that any unvested equity awards and any equity awards that vested after the date of retirement will be immediately forfeited if prior to the one year anniversary of the full vesting of an equity award the executive violates any provision of the award agreement or directly or indirectly becomes involved with a competitor of the Company (other than through a less than 1% ownership of the stock of such competitor). The Compensation Committee, in its sole discretion, may waive, in whole or in part, the forfeiture provisions and any covenants in an award agreement. In addition, an executive officer must be employed by us on the payment date, with respect to cash, and on the grant date, with respect to equity awards, to receive their annual bonus.

The 2006 Equity and Incentive Plan, under which all equity awards have been granted, mandates that upon a change in control (as defined below), all unvested equity awards become fully vested and exercisable and all restrictions, forfeiture conditions or deferral periods immediately lapse.

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The following table sets forth the fair market value, as of December 31, 2006, of all equity awards to our named executive officers that would have vested in the event of a change-in-control on that date.

(1)          The values in the column are based on the $21.15 closing price of our common stock on the Nasdaq Global Market on December 29, 2006, the last trading day of 2006.

(2)          The values in this column represent the intrinsic value of options awards based on the exercise price of $16.00 and the $21.15 closing price of our common stock on the Nasdaq Global Market on December 29, 2006, the last day of trading in 2006.

In addition, our employment agreement with Mr. Fennebresque provides for payments in connection with his termination under certain circumstances. In the event that Mr. Fennebresque is terminated during the term of his employment agreement or within one year following the expiration of the term of the employment agreement (other than a termination due to change in control), Mr. Fennebresque will be subject to a non-solicitation restrictive covenant. Pursuant to his employment agreement, Mr. Fennebresque will also be entitled to certain payments and benefits as described below depending on the circumstances of the termination of his employment. Mr. Fennebresque will not be entitled to any payment upon a change in control (other than the accelerated vesting of his equity awards) unless his employment is terminated as described below.

Termination Without Cause or Voluntarily with Good Reason

If Mr. Fennebresque is terminated without cause or voluntarily terminates his employment for good reason (as defined below), he will be entitled to a lump sum cash payment equal to that portion of his base salary and any other benefits or compensation earned but not yet paid as of the date of termination plus a severance amount equal to two times the sum of (i) his base salary plus (ii) the previous year’s annual bonus. Had Mr. Fennebresque’s employment been terminated under those circumstances on January 1, 2007, Mr. Fennebresque would have received a lump sum cash payment of $8 million, which is twice the sum of his fiscal 2006 total compensation. In addition, any outstanding equity awards will become fully vested and exercisable provided that Mr. Fennebresque has not violated the applicable award agreement.

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Termination by Reason of Death or Disability

In the event that Mr. Fennebresque’s employment is terminated by reason of his death or disability, he or his estate will be entitled to receive only that portion of his base salary and any benefits or compensation that have been earned, but are unpaid, as of the date of termination and a pro-rata share of any annual bonus due for the year in which termination of employment occurs. Had Mr. Fennebresque’s employment been terminated under those circumstances on January 1, 2007, Mr. Fennebresque or his estate would have received a lump sum payment of $3,750,000, which is the amount of his fiscal 2006 bonus earned, but not yet paid, plus a de minimus amount reflecting the pro rata portion of his base salary and bonus for fiscal 2007. In addition, upon such a termination of employment, any outstanding equity awards (including, but not limited to, any equity awards granted in connection with an initial public offering as described above) shall become fully vested and exercisable and any restrictions thereon shall lapse.

Termination for Cause or Voluntarily without Good Reason

In the event Mr. Fennebresque resigns his employment without good reason prior to the expiration of the term or if we terminate Mr. Fennebresque’s employment for cause, he is entitled to receive only his base salary and any benefits or compensation that have been earned or vested in accordance with the terms of the relevant plans, if any, but unpaid, as of the date of such termination of employment. Had Mr. Fennebresque’s employment been terminated under those circumstances on January 1, 2007 that amount would have been a de minimis amount reflecting the portion of Mr. Fennebresque’s base salary earned for fiscal 2006 and fiscal 2007 that has not yet been paid. In addition, he shall not be entitled to any unpaid annual bonus whatsoever for the year of termination.

For purposes of this section:

·       “cause” means (A) fraud, dishonesty, gross negligence or substantial misconduct in the performance of duties and responsibilities; (B) any wrongful act that materially adversely affects the business or reputation of the Company, including, but without limitation, breach of a fiduciary duty and/or intentional material violations of the Company’s policies or any violation of law; and (C) failure or refusal, after written notice of such failure or refusal has been given, in any material respect, to perform faithfully or diligently, the provisions of the employment agreement or the duties of Chief Executive Officer, including, by way of example and not of limitation, the failure or refusal to follow instructions reasonably given in the course of employment, or violation of any material duty to the Company;

·       a “change in control” will result if any of the following events shall occur: (A) any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing more than forty percent (40%) of the combined voting power of the Company’s then outstanding voting securities, excluding any person who becomes such a beneficial owner in connection with a transaction described in clause (a) of paragraph (C) below; or (B) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date of our initial public offering constitute the Board of Directors of the Company and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date of our initial public offering or whose appointment, election or nomination for election was previously so approved or recommended by such directors, provided, that no change of control for this purpose shall be deemed to occur by virtue of (I) the death,

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disability, retirement or voluntary resignation of any directors, (II) the resignation, removal or other departure of any director under circumstances involving cause or under circumstances involving the affirmative vote, approval or acceptance of such departure by a majority of the remaining directors; or (C) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (a) a merger or consolidation which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (b) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing more than forty percent (40%) of the combined voting power of the Company’s then outstanding securities; or (D) the stockholders of the Company approve a plan of liquidation or dissolution of the Company or there is consummated an agreement for the sale or other disposition, directly, or indirectly, by the Company of all or substantially all of the Company’s assets, other than such sale or other disposition by the Company of all or substantially all of the Company’s assets to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale and other than a sale; and

·       “good reason” means (A) a failure by the Company to comply with any material provision of the employment agreement which has not been cured within thirty (30) days after written notice of such noncompliance has been given by to the Company, (B) action by the Company resulting in a material diminution of title, duties or authority or (C) the Company’s relocation of the Chief Executive Officer’s principal place of employment to a location more than twenty-five (25) miles outside of New York City.

Non-Qualified Deferred Compensation Plans

Prior to our initial public offering and separation from Société Générale, certain of our named executive officers participated in deferred compensation plans sponsored by Société Générale. The following table sets forth the distributions made to certain named executive officers under the deferred compensation plans which were terminated in connection with our initial public offering and separation from Société Générale as well as the Merchant Banking Fund Co-investment Plan. For a more detailed description of the terms and characteristics of these deferred compensation plans, please see the summaries of the individual plans following this table.

(1)          Mr. Fennebresque’s aggregate distributions consist of $1,796,984 and $1,176,421 paid out under the Fidelity Bonus Plan and the Société Générale Corporate and Investment Banking Partnership, respectively.

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(2)          Mr. Conner’s aggregate distribution consists of $65,791 paid out under the SG Deferred Compensation Plan for Executives.

(3)          Mr. White’s aggregate distributions consist of $348,798, $50,816 and $31,995 paid out under the SG Deferred Compensation Plan for Executives, the Fidelity Bonus Plan and the Merchant Banking Fund Co-investment Plan, respectively.

Fidelity Bonus Plan

Société Générale required selected employees to defer a portion of their performance related compensation in the form of a Fidelity Bonus. The Fidelity Bonus was announced at the time all other bonuses were announced and vested ratably over a three-year period. Participants were entitled to a rate of return on those funds based on a hypothetical investment in various alternative investment vehicles. In connection with our initial public offering and separation from Société Générale, our participating named executive officers became fully vested under the Fidelity Bonus Plan and were paid out in full.

SG Deferred Compensation Plan

Société Générale sponsored a voluntary deferred compensation plan for certain of our key executives (the “Deferred Compensation Plan”). Our employees stopped contributing to the Deferred Compensation Plan in 2003, and no further contributions were made thereafter. Participants were allowed to make hypothetical investments in various alternative investment funds. In connection with our initial public offering and separation from Société Générale, the Deferred Compensation Plan was terminated resulting in distributions to participating named executive officers.

Société Générale Corporate and Investment Banking Partnership

Certain of our employees received a cash award pursuant to the Société Générale Corporate and Investment Banking Partnership. The participants in the partnership were selected every year and were entitled to receive an amount based on the net income of Société Générale’s Corporate and Investment Banking division. Participants were eligible to receive the award only if certain return on equity goals were met in the partnership year. To the extent awards were earned, they were subject to a four year cliff vest. In connection with our initial public offering and separation from Société Générale, one of our named executive officers who was a participant in the partnership became fully vested and was paid out in full.

Merchant Banking Fund Co-investment Plan

Société Générale sponsored a plan enabling eligible employees to defer a portion of their performance-related compensation and make a hypothetical investment in an alternative investment vehicle indexed to the performance of merchant banking investments made by SG Merchant Banking Fund L.P. In addition to deferring a portion of their discretionary bonus, many participating employees received a leverage factor that vested in accordance with a vesting schedule prescribed by the Merchant Banking Investment Committee at the time the leverage was granted, essentially representing a non-recourse loan to the employee, which enabled them to increase their participation in the plan. We did not make an equity investment in the Merchant Banking Fund, but our liability to our employees was based upon the performance of their hypothetical investment, including any returns generated on the leverage factor. There will be no change to the payment or vesting schedules under this plan as a result of our initial public offering. In connection with our initial public offering and separation from Société Générale, we transferred the liability related to our employees (including some of our named executive officers) to Société Générale. As a result, Société Générale is responsible for all future payments under this plan.

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SECURITY OWNERSHIP

Beneficial Ownership of Directors, Nominees and Executive Officers

The following table shows how many shares of our common stock were beneficially owned as of April 23, 2007, by each of our directors, director nominees and Named Executive Officers, and by all of our directors and executive officers as a group. Unless otherwise noted, the stockholders listed in the table have sole voting and investment power with respect to the shares owned by them.

*                    Corresponds to less than 1% of Cowen Group, Inc. common stock.

(1)          Includes 975,000 shares of restricted stock that vest in full on December 31, 2010; 68,345 shares of restricted stock that vest in full on January 16, 2010; and 6,000 shares of common stock owned by Mr. Fennebresque’s daughter.

(2)          Includes 12,803 shares of restricted stock that vest in full on July 12, 2011 and 3,322 shares of restricted stock that vest in full on January 16, 2010. This amount does not include 12,879 unvested options.

(3)          Includes 19,217 shares of restricted stock that vest in full on July 12, 2011 and 7,027 shares of restricted stock that vest in full on January 16, 2010. This amount does not include 19,276 unvested options.

(4)          Includes 7,682 shares of restricted stock that vest in full on July 12, 2011 and 2,300 shares of restricted stock that vest in full on January 16, 2010. This amount does not include 7,728 unvested options.

(5)          On April 18, 2007, Mr. Orlowski submitted his resignation. As a result, all of Mr. Orlowski’s equity awards will be forfeited.

(6)          Includes 5,124 shares of restricted stock that vest in full on July 12, 2011 and 2,300 shares of restricted stock that vest in full on January 16, 2010. This amount does not include 5,143 unvested options.

(7)          Includes 1,632 fully vested but not yet delivered restricted stock units.

(8)          Includes 1,000 shares of common stock owned by Mr. Kurzweil’s daughter.

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Beneficial Owners of More than Five Percent of Our Common Stock

Based on filings made under Section 13(d) and Section 13(g) of the Securities Exchange Act of 1934, as of April 23, 2007, the persons known by us to be beneficial owners of more than 5% of our common stock (other than Mr. Fennebresque, whose beneficial ownership is listed in the table on the preceding page) were as follows:

(1)          This information is based on a Schedule 13G filed with the SEC on February 12, 2007 by SG Americas Securities Holdings, Inc. SG Americas Securities Holdings reported that it has sole voting and dispositive power with respect to all 1,382,608 shares reflected in the table.

(2)          This information is based on a Schedule 13G filed with the SEC on February 9, 2007 by Skyline Asset Management, LP. Skyline reported that it has shared voting power as to 986,375 shares and shared dispostive power as to 1,033,600 shares. As an investment advisor, Skyline may be deemed to have beneficial ownership of the shares owned by its advisory clients, but it disclaims beneficial ownership of these shares.

(3)          This information is based on a Schedule 13G filed with the SEC on February 8, 2007 by Eagle Asset Management, Inc. Eagle reported that is has sole voting and dispositive power with respect to all 889,755 shares reflected in the table.

(4)          This information is based on a Schedule 13G filed with the SEC on February 12, 2007 by Perry Corp. and Richard C. Perry, in his capacities as the President and sole stockholder of Perry Corp. Perry Corp. and Mr. Perry reported that each of them have sole voting and sole dispositive power with respect to all 835,000 shares reflected in the table.

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