Item 8.01. Other Events.
As previously disclosed, on August 1, 2022, Cowen Inc., a Delaware corporation
(the "Company" or "Cowen"), The Toronto-Dominion Bank, a Canadian chartered bank
("TD" or "Parent"), and Crimson Holdings Acquisition Co., a Delaware corporation
and an indirect wholly owned subsidiary of Parent ("Merger Sub"), entered into
an Agreement and Plan of Merger (the "merger agreement") pursuant to which, upon
the terms and subject to the conditions set forth therein, Merger Sub will be
merged with and into the Company (the "merger"), with the Company surviving the
merger (sometimes hereinafter referred to as the "Surviving Corporation") as a
wholly owned subsidiary of Parent. On September 27, 2022, Cowen filed a
preliminary proxy statement (the "preliminary proxy statement") with the
Securities and Exchange Commission ("SEC"), and on October 11, 2022, Cowen filed
a definitive proxy statement (the "proxy statement") with the SEC, in each case,
in connection with the merger.
Since the filing of the preliminary proxy statement with the SEC, eight
complaints have been filed in the United States District Court for the Southern
District of New York, the United States District Court for the District of
Delaware and a state court in New York by purported Cowen stockholders against
the Company and members of the board of directors of the Company (the "Board")
in connection with the merger: Shiva Stein vs. Cowen Inc., et al., Case No.
1:22-cv-08254 (filed September 27, 2022) (S.D.N.Y.); Ryan O'Dell vs. Cowen Inc.,
et al., Case No. 1:22-cv-08297 (filed September 28, 2022) (S.D.N.Y.); John
Alberts vs. Cowen Inc., et al., Case No. 1:22-cv-08319 (filed September 29,
2022) (S.D.N.Y.); Stephen Bushansky vs. Cowen Inc., et al., Case No.
1:22-cv-08551 (filed October 7, 2022) (S.D.N.Y.); Catherine Coffman vs. Cowen
Inc., et al., Case No. 1:22-cv-09130 (filed October 25, 2022) (S.D.N.Y.); Jacob
Wheeler vs. Cowen Inc., et al., Case No. 1:22-cv-01417 (filed October 26, 2022)
(D. Del.) and Sam Carlisle vs. Cowen Inc., et al., Case No. 1:22-cv-09296 (filed
October 30, 2022) (S.D.N.Y.) (collectively, the "Federal Stockholder
Litigation")) and Peter Barcia vs. Cowen Inc., et al., Case No. 67539/2022
(filed October 26, 2022) (N.Y., Westchester County) (the "State Stockholder
Litigation" and, collectively with the Federal Stockholder Litigation, the
"Stockholder Litigation")). The complaints in the Federal Stockholder
Litigation allege, among other things, that the defendants filed or caused to be
filed a materially incomplete and misleading preliminary proxy statement or
proxy statement, as applicable, with the SEC relating to merger in violation of
Sections 14(a) and 20(a)of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14a-9 promulgated thereunder. The State Stockholder
Litigation purports to allege fraudulent and negligent misrepresentation and
concealment under New York common law relating to the proxy statement.
Additionally, on October 4, 2022, October 5, 2022, October 21, 2022, October 27,
2022 and October 28, 2022, six purported Cowen stockholders sent demand letters
alleging similar insufficiencies in the disclosures in the preliminary proxy
statement and/or the proxy statement in violation of Sections 14(a) and 20(a) of
the Exchange Act and Rule 14a-9 promulgated thereunder (such letters, the
"Demand Letters" and, collectively with the Stockholder Litigation, the
"Litigation Matters"). The plaintiffs in the Stockholder Litigation seek
various remedies, including an order enjoining the defendants from proceeding
with the merger or the vote of the Company's stockholders in connection with the
merger, requiring the defendants to disclose allegedly material information that
was allegedly omitted from the proxy statement, rescinding the merger to the
extent already consummated or in the event that it is consummated or granting
rescissory damages, awarding costs, including attorneys' and expert fees and
expenses, and granting such other and further relief as the applicable court may
deem just and proper.
Cowen believes that the claims asserted in the Litigation Matters are without
merit and that no further disclosure is required to supplement the proxy
statement under applicable laws. However, in order to avoid the risk of the
Litigation Matters delaying or adversely affecting the merger and to minimize
the costs, risks and uncertainties inherent in litigation, and without admitting
any liability or wrongdoing, Cowen has determined to voluntarily make the
following supplemental disclosures to the proxy statement, as described in this
Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be
deemed an admission of the legal necessity or materiality under applicable laws
of any of the disclosures set forth herein. To the contrary, Cowen specifically
denies all allegations in the Litigation Matters that any additional disclosure
was or is required.
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These supplemental disclosures will not change the merger consideration to be
paid to Cowen stockholders in connection with the merger or the timing of the
special meeting of stockholders of the Company on November 15, 2022 at 10:00
a.m. Eastern Time (the "special meeting") in a virtual-only meeting format. To
access the virtual special meeting, you should visit
www.virtualshareholdermeeting.com/COWN2022SM. You will be required to enter a
control number, included on your proxy card, voting instruction form or other
notice that you may receive, which will allow you to participate in the virtual
meeting and vote your shares of common stock if you are a Cowen stockholder as
of the record date. The Board continues to unanimously recommend a vote "FOR"
the proposals to be voted on at the special meeting described in the proxy
statement.
SUPPLEMENTAL DISCLOSURES TO THE PROXY STATEMENT IN CONNECTION WITH THE
LITIGATION MATTERS
The following disclosures in this Current Report on Form 8-K supplement the
disclosures contained in the proxy statement and should be read in conjunction
with the disclosures contained in the proxy statement, which in turn should be
read in its entirety. All page references are to the proxy statement and all
terms used below shall have the meanings ascribed to such terms in the proxy
statement.
The disclosure in the section entitled "The Merger-Background of the Merger",
beginning on page 31 of the proxy statement, is hereby amended as follows:
The fourth full paragraph on page 31 is amended and supplemented as follows
(with new text underlined):
On March 2, 2022, Mr. Solomon contacted Mr. Ahmed to inform Mr. Ahmed that,
following the March 1 meeting and internal discussions including with Mr. Barth
and with other members of the Company's management, the Company would be
interested in continuing the conversation regarding their respective businesses
and potential opportunities for the Company and TD to consider.
The last full paragraph on page 31 is amended and supplemented as follows (with
new text underlined):
On April 5, 2022, representatives of the Company including Mr. Solomon, Mr. Dan
Charney, Managing Director and Co-President of the Company's broker-dealer
business, and Mr. Larry Wieseneck, Managing Director and Co-President of the
Company's broker-dealer business, met with Mr. Ahmed and Mr. Pryde. A
representative of Perkins Advisors, LLC, a financial advisor to the Company
(which we refer to as "Perkins Advisors"), also attended at the request of the
Company's management. Such representative of Perkins Advisors had routinely
performed consulting and other strategic advisory services for the Company, and
was asked to join such meeting based on his substantial industry knowledge and
longstanding familiarity with the Company's businesses. During this meeting,
management of the Company and of TD discussed their respective businesses,
including a potential strategic partnership between TD and the Company.
The last paragraph on page 31 and the carry over paragraph on page 32 is amended
and supplemented as follows (with new text underlined and deleted text marked
with a strikethrough):
On April 12, 2022, Mr. Solomon and Mr. Stephen Lasota, the Company's Managing
Director and Chief Financial Officer, met with representatives of Company A to
discuss their respective businesses, including the growth of the research, sales
and trading and investment banking divisions at Cowen, the alignment of Cowen's
culture with the culture at TD Company A and the potential for a strategic
partnership between Company A and the Company. A representative of Perkins
Advisors also attended at the request of the Company's management.
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The first full paragraph on page 35 is amended and supplemented as follows (with
new text underlined):
On May 19, 2022, representatives of Simpson Thacher & Bartlett LLP (which we
refer to as "Simpson Thacher"), outside counsel to TD, contacted representatives
of Cravath and communicated that, while TD was considering a proposal for an
acquisition of the Company, TD would not be willing to pursue a transaction
without restructuring and reducing the Company's existing "change of control"
severance obligations that would otherwise become payable in connection with a
transaction. The representatives of Simpson Thacher did not communicate a
proposal for the restructuring or reduction of such "change of control"
severance obligations. After discussion with Mr. Barth and representatives of
the Company's management team, representatives of Cravath communicated to
representatives of Simpson Thacher a request that any proposal should include
the proposed price to be paid per share of class A common stock in a potential
transaction and, in order for the Board to assess whether any proposal were
actionable, TD's proposal regarding restructuring or reducing the Company's
"change of control" severance obligations.
The last paragraph on page 36 and the carry over paragraph on page 37 is amended
and supplemented as follows (with new text underlined):
On June 6, 2022, the Board held a meeting by videoconference, with members of
the Company's management and representatives of Cravath, Ardea and Perkins
Advisors attending. Mr. Solomon communicated the June 5 Proposal to the
Independent Directors, and Mr. Solomon and representatives of Ardea described to
the Independent Directors their respective conversations with TD and its
advisors. The Board then discussed a potential response to the June 5 Proposal,
noting that the June 5 Proposal had been communicated verbally and did not
include a description of any contingencies to the proposal or any further
details on the May 26 Proposal with respect to retention arrangements with
members of the Company's senior management team in lieu of "change of control"
payments, and that while Company A was continuing to conduct due diligence,
Company A had not yet submitted an indication of interest. Representatives of
Ardea noted that Ardea was reviewing the Financial Forecasts with the Company's
management, including reconciling economic operating income to unlevered free
cash flow for purposes of a preliminary valuation analysis, and that Ardea would
prepare preliminary financial analyses of the June 5 Proposal for discussion at
a subsequent meeting of the Board. After discussion the Board determined to
continue evaluating the June 5 Proposal, but not to request a written proposal
from TD at that time. The Board then discussed whether any other third party may
be interested in an acquisition of the Company, including Ardea's views on
potential bidders based on Ardea's knowledge of the industry and information
from management on third parties that had previously expressed interest in
partnerships or other strategic transactions involving the Company. After
discussion, the Board determined that there was a limited number of
counterparties that may be interested in and able to execute an acquisition of
the Company, and that given the risk of a leak and the potential damage to the
Company's business and employee retention in the event of a leak, it was
advisable to continue discussions with TD and Company A but not to contact other
parties regarding a potential transaction at that time. The Board then discussed
the status of discussions with Company A, noting that the Company had continued
to engage in discussion with Company A and Company A had reviewed additional
diligence materials, but that Company A had not yet retained financial advisors
or submitted an indication of interest and was not progressing its diligence
process as quickly as TD. The Board then instructed the Company's management and
advisors to continue discussions with, and request an indication of interest
from, Company A. The members of Company management then informed the Board that
it was also evaluating the implementation of potential cost cutting measures in
light of the then-current economic environment and its impact on the Company's
performance, but that management would defer any decision on such implementation
until the conclusion of the ongoing discussions with third parties regarding a
partnership or other strategic transaction involving the Company. The members of
Company management, Ardea and Perkins Advisors then exited the meeting and the
Independent Directors commenced an executive session with representatives of
Cravath participating. The Independent Directors further discussed a potential
response to the June 5 Proposal, noting that the proposal represented a
substantial increase of over 20% from the May 26 Proposal, that, during that
same period, the Company's financial performance had continued to be impacted by
downward trends in the financial markets, and the risks associated with
remaining a standalone public company in such an environment, including the
potential impact of a downturn on the Company's profitability and therefore its
ability to compensate and retain employees. The Independent Directors also noted
that the May 26 Proposal and June 5 Proposal were conditioned upon TD reaching
satisfactory arrangements with certain members of the Company's senior
management related to the "change of control" severance entitlements, that there
was a risk that TD would not be able to reach an agreement with all requisite
members of the Company's senior management, and that it was unlikely that TD or
any other potential bidder that was expecting to retain the Company's senior
management team after an acquisition of the Company would be willing to pursue a
transaction without reaching an agreement on retention arrangements given the
relative size of the "change of control" severance entitlements compared to the
Company's then-current market capitalization. The Independent Directors
discussed that the Independent Directors should continue to direct the process,
and that, while the Company's management should not discuss the terms of any
proposal relating to compensation or retention with potential counterparties to
a transaction at that time, the Company's management itself was a key asset of
the Company and such discussions would need to occur at a later date when
authorized by the Independent Directors in order to facilitate a transaction.
--------------------------------------------------------------------------------
The third full paragraph on page 37 is amended and supplemented as follows (with
new text underlined):
Also on June 8, 2022, representatives of management of Company A and of the
Company held a diligence call to discuss the potential sources of value in the
Company's business outside of the Company's core investment banking and
broker-dealer franchise (including the value of the Company's investment
management business and balance sheet investments). Representatives of Perkins
Advisors also participated in that meeting to facilitate due diligence based on
Perkins Advisors' familiarity with such businesses and investments. During this
meeting, representatives of the Company's management and Perkins Advisors
indicated to the representatives of Company A that any indication of interest
should reflect the net consideration payable to the holders of common stock
based on the Company's intrinsic value (also taking into account the value of
these businesses and investments) and should not be based on the then-current
trading price of the class A common stock, which was $25.04 as of June 9, 2022,
the last trading day before such meeting.
The second full paragraph on page 38 is amended and supplemented as follows
(with new text underlined):
On June 12, 2022, the Board held a meeting by videoconference, with
representatives of the Company's management and representatives of Cravath,
Morris, Nichols, Arsht & Tunnell LLP (which we refer to as "Morris Nichols"),
outside Delaware counsel to the Company, Ardea and Perkins Advisors attending.
Ardea provided an overview of their preliminary financial analyses of the June 5
Proposal based on the Financial Forecasts and the Weightings. Representatives of
Cravath then reviewed with the Board draft process guidelines that had been
circulated to the Board in advance of the meeting, which reiterated instructions
that the Company's management should not discuss the terms of any proposal
relating to compensation or retention with potential counterparties to a
transaction until specifically authorized to do so by the Independent Directors,
and stated that the Independent Directors would direct the process and have
ultimate decision-making authority with respect to all questions arising from
such process. The guidelines also specified that at least one representative of
Ardea should be included in any substantive communications with potential
counterparties to a transaction on behalf of the Company in order to ensure that
an independent advisor would conduct such communications on behalf of, and at
the instruction of, the Independent Directors, and that all such communications
should be promptly reported to the Independent Directors.
--------------------------------------------------------------------------------
The last paragraph on page 38 and the carry over paragraph on page 39 is amended
and supplemented as follows (with new text underlined):
After discussion, the Board adopted such guidelines. Mr. Solomon noted to the
Board that, while management did not intend to negotiate compensation or
retention arrangements with TD or other potential counterparties until
specifically authorized to do so by the Board, Mr. Solomon expected, based on
preliminary discussions with individual members of the Company's senior
management team, that the retention arrangements communicated verbally in the
May 26 Proposal would be inadequate to retain all desired members of the
Company's management and that TD would likely need to improve the value and
vesting terms of such retention arrangements if TD's proposals continued to be
contingent on such arrangements. Mr. Solomon then provided the Board with an
update on discussions with TD and Company A, noting that TD was awaiting a
response to the June 5 Proposal and that Company A had continued to show
interest in a potential transaction, including hiring a financial advisor and
engaging members of senior management in meetings with the Company. After
discussion, the members of Company management exited the meeting and the
Independent Directors commenced an executive session, with representatives of
Cravath, Morris Nichols, Ardea and Perkins Advisors participating. The
Independent Directors discussed the June 5 Proposal and potential responses to
TD, including that TD had already materially increased its proposal by over 20%
between the May 26 Proposal and the June 5 Proposal despite a continuing decline
in broader financial markets, and whether TD would be willing to further improve
the price of its proposal above $39.00 per share. After discussion, the
Independent Directors instructed Ardea and Perkins Advisors to communicate to
Perella Weinberg that the $39.00 per share of common stock proposed in the June
5 Proposal was insufficient, and that TD should submit an improved proposal in
writing, which should also include details on any contingencies relating to
retention arrangements with members of the Company's management and the proposed
terms of such retention arrangements so that the Board could assess whether a
transaction would be achievable on the terms proposed. The Independent Directors
authorized Ardea and Perkins Advisors to communicate to TD that the Board
expected a valuation of at least $42.00 per share of common stock, which would
represent an increase of $10.00 per share from the May 26 Proposal. The
Independent Directors also instructed Ardea and Perkins Advisors to continue
engagement with Company A, and to encourage Company A to submit an indication of
interest by the end of the week of June 13, 2022. Representatives of Ardea and
Perkins Advisors then exited the meeting, and the Independent Directors
continued an executive session, with representatives of Cravath and Morris
Nichols attending. The Independent Directors then discussed the formal retention
of Ardea as a financial advisor to the Company, noting that Ardea had provided
disclosure to the Board confirming that Ardea did not have any material business
relationships with TD, Company A or other potentially interested parties. After
discussion, the Independent Directors determined that it was advisable to
continue with negotiating the terms of Ardea's engagement. The Independent
Directors also discussed the formal retention of Perkins Advisors as a financial
advisor to the Company, noting that Perkins Advisors had substantial industry
knowledge and familiarity with Cowen's businesses, including that Tod Perkins of
Perkins Advisors had a long-standing relationship with the Company and its
management, having routinely performed consulting and other strategic advisory
services for the Company, and that Perkins Advisors' involvement in the process
was beneficial for strategic advice and assistance in negotiating a potential
transaction, as well as facilitating due diligence regarding the Company's
businesses. The Independent Directors noted that Perkins Advisors' involvement
would not include valuation analysis of the proposed transaction and that any
valuation analyses or fairness opinion in connection with a potential
transaction would be provided by Ardea given Ardea's relevant expertise. After
discussion, the Independent Directors determined that it was advisable to
formally engage Perkins Advisors in connection with the transaction, subject,
given Mr. Perkins' familiarity with the Company's management, to compliance with
the process guidelines discussed earlier in the meeting. The Independent
Directors also reaffirmed the proposed response to TD that had been discussed
with Ardea and Perkins Advisors.
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The following paragraph is inserted immediately following the carry over
paragraph on page 39 (with new text underlined):
On July 11, 2022, the Company, with the authorization of the Independent
Directors, entered into an engagement letter to formally retain Perkins Advisors
as a financial advisor to the Company in connection with the proposed
transaction. Pursuant to an engagement letter among the Company, SenaHill
Advisors, LLC, together with its broker-dealer affiliate, SenaHill Securities,
LLC ("SenaHill") (the registered broker-dealer of which Mr. Perkins is a
registered representative), and Perkins Advisors, dated July 11, 2022, the
Company retained SenaHill and Perkins Advisors as its financial advisor in
connection with the transactions contemplated by the merger agreement. The
engagement letter specified that all advisory services provided thereunder would
be performed by Mr. Perkins. In connection with the transaction, pursuant to
the engagement letter, SenaHill and Perkins Advisors will receive financial
advisory fees from the Company estimated, based on the information available as
of the date of the announcement, to be approximately $11.5 million (equal to
0.75% of the total proceeds and other consideration received and to be received
by the Company's equityholders, including consideration received and to be
received by holders of the Company's preferred stock) payable contingent upon
the completion of the transactions contemplated by the merger agreement.
Further, the Company has agreed to reimburse SenaHill for certain of its
expenses, including reasonable fees and expenses of SenaHill's legal counsel and
to indemnify SenaHill, Perkins Advisors and related persons against various
liabilities, including certain liabilities under federal securities laws.
During the two-year period ended August 1, 2022, neither SenaHill, Perkins
Advisors nor any of their respective affiliates has been engaged by TD and/or
any of its affiliates to provide financial advisory, underwriting and/or other
financial and non-financial services for which SenaHill, Perkins Advisors or any
of their respective affiliates has recognized compensation. SenaHill, Perkins
Advisors and their respective affiliates may in the future provide financial
advisory, underwriting and/or other financial and non-financial services to TD
and/or its affiliates for which SenaHill, Perkins Advisors or such affiliates
may receive compensation. During the two-year period ended August 1, 2022, Mr.
Perkins (individually or through SenaHill or Perkins Advisors) received
approximately $2.4 million in compensation from the Company for financial
advisory and other financial and non-financial services, including a monthly
consulting fee for routine consulting services, advisory fees in connection with
the Company's acquisitions of Portico Capital Advisors and the investment
banking business of MHT Partners, and allocations in certain special purpose
investment vehicles sponsored by the Company and its affiliates.
The disclosure in the section entitled "The Merger-Financial Forecasts",
beginning on page 61 of the proxy statement, is hereby amended as follows:
The last paragraph on page 63 and the carry over paragraph on page 64 is amended
and supplemented as follows (with new text underlined):
The following table sets forth a summary of the financial projections made
available to the Board, the Company's financial advisors and certain parties
potentially interested in a transaction with the Company (the "Financial
Forecasts"); the summary of the Financial Forecasts is not included in this
proxy statement to induce any Cowen stockholder to vote in favor of the approval
of the merger proposal or any other proposals to be voted on at the special
meeting:
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$mm Low Case
2022E
excl.
Period(1) 1QA 2022E 2023E 2024E 2025E 2026E
Gross Revenue $1,047 $1,378 $1,403 $1,424 $1,467 $1,515
Less: Interest Expense $(36) $(27) $(40) $(40) $(40) $(40)
Less: Non-Interest Expense $(948) $(1,237) $(1,224) $(1,252) $(1,290) $(1,333)
Less: Tax $(17) $(31) $(37) $(36) $(37) $(39)
Less: Preferred Dividend $(5) $(7) $(7) $(7) $(7) $(7)
Unlevered Free Cash Flow(2) $382 N/A $149 $200 $144 $165
Add: Depreciation $6 $9 $8 $8 $8 $8
Add: Amortization $9 $12 $12 $12 $12 $12
Total: Economic Operating
Income(2) N/A $96 $114 $109 $113 $117
Economic Operating Income per
Share(3) N/A $3.03 $3.57 $3.51 $3.62 $3.75
Unlevered Free Cash Flow(4) $382 N/A $149 $200 $144 $165
$mm Base Case
2022E
excl.
Period(1) 1QA 2022E 2023E 2024E 2025E 2026E
Gross Revenue $1,220 $1,550 $1,868 $1,855 $1,945 $2,073
Less: Interest Expense $(37) $(27) $(40) $(40) $(40) $(40)
Less: Non-Interest Expense $(1,016) $(1,305) $(1,489) $(1,495) $(1,559) $(1,646)
Less: Tax $(45) $(59) $(91) $(86) $(93) $(104)
Less: Preferred Dividend $(5) $(7) $(7) $(7) $(7) $(7)
Unlevered Free Cash Flow(2) $477 N/A $350 $305 $281 $333
Add: Depreciation $6 $9 $8 $8 $8 $8
Add: Amortization $9 $12 $12 $12 $12 $12
Total: Economic Operating
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COWEN INC. 
