-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+oY+FcPRml3uNiW7q1DIEg37XSocjWDAxVVjeVthqoutvzXcWSCOqz4t8anqPtI BHE2bfxfPEzk8vrcCt8r9g== 0000351903-04-000016.txt : 20040603 0000351903-04-000016.hdr.sgml : 20040603 20040603124717 ACCESSION NUMBER: 0000351903-04-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040602 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: J NET ENTERPRISES INC CENTRAL INDEX KEY: 0000351903 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880169922 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09728 FILM NUMBER: 04846441 BUSINESS ADDRESS: STREET 1: 4020 LAKE CREEK DRIVE, #100 CITY: WILSON STATE: WY ZIP: 83014 BUSINESS PHONE: 307-739-8603 MAIL ADDRESS: STREET 1: 4020 LAKE CREEK DRIVE, #100 CITY: WILSON STATE: WY ZIP: 83014 FORMER COMPANY: FORMER CONFORMED NAME: JACKPOT ENTERPRISES INC DATE OF NAME CHANGE: 19920703 8-K 1 form8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 2, 2004 J Net Enterprises, Inc. __________________________________________________________________________ (Exact name of registrant as specified in its charter) Nevada 1-9728 88-0169922 ____________________________ ________________________ ___________________ (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation or Identification No.) organization) 4020 Lake Creek Drive, #100 Wilson, Wyoming 83014 ________________________________________ __________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (307) 739-8603 ___________________________________________________________ (Former name or former address, if changed since last report) Item 1. Changes in Control of Registrant Item 2. Acquisition or Disposition of Assets This report contains forward-looking statements, which are subject to inherent uncertainties which are difficult to predict, and may be beyond the ability of the Company to control. Certain statements in this Report on Form 8-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are not historical facts but rather reflect the Company's current expectations concerning future results and events. The words "believes," "expects," "intends," "plans," "anticipates," "hopes," "likely," "will," and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company (or entities in which the Company has interests), or industry results, to differ materially from future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management's view only as of the date of this Form 8-K. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstance after the date hereof or to reflect the occurrence of unanticipated events, conditions or circumstances. The Epoch Acquisition. On June 2, 2004, J Net Enterprises, Inc. acquired Epoch Investment Partners, Inc. ("Epoch"), an investment advisory and investment management business (the "Acquisition"). Epoch was formed in April 2004 and co-founded by Mr. William W. Priest. Epoch has registered as an investment adviser with the SEC. Mr. Priest has over 30 years experience in the investment advisory business. CI Mutual Funds Inc. ("CI"), a client of Mr. Priest at his former firm, has agreed to transfer its contract for sub-advisory services to Epoch, representing assets under management of approximately $645 million as of April 30, 2004, and other clients of Mr. Priest at his former firm will be asked to transfer their accounts to Epoch shortly (representing up to approximately another $195 million of assets under management as of April 30, 2004). The Merger Agreement The Acquisition was effected pursuant to the merger of Epoch Acquisition Corp., a Delaware corporation and newly-created, wholly-owned subsidiary of J Net ("Acquisition Sub"), with and into Epoch, with Epoch surviving as a wholly-owned subsidiary of J Net and Epoch's former stockholders acquiring the right, upon the satisfaction of certain conditions, to be issued shares constituting a majority of the outstanding shares of common stock of J Net, as further discussed below. The merger was consummated under Delaware law and pursuant to an Agreement of Merger and Plan of Reorganization, dated June 2, 2004 (the "Merger Agreement"), as discussed below. J Net intends to carry on Epoch's investment advisory and investment management business as J Net's primary line of business. Under Nevada law, J Net did not need the approval of its stockholders to complete the merger, as the constituent corporations in the merger were Acquisition Sub and Epoch. J Net was not a constituent corporation in the merger. The merger and its related transactions were approved by the unanimous written consent of Epoch stockholders. The Acquisition Consideration Initial Stock Consideration In consideration for the Acquisition, we issued 6,426,153 shares of our common stock to the former stockholders of Epoch, representing approximately 42% of our common stock issued and outstanding (the "Initial Stock Consideration"). See "-Stockholders Agreement," below, for a description of certain vesting provisions concerning the Initial Stock Consideration. Escrow Consideration At the closing of the Acquisition, we issued and placed into escrow on behalf of the former stockholders of Epoch an additional 2,669,563 shares of our common stock, representing an additional 9% of our common stock issued and outstanding (the "Escrow Consideration"). Such stockholders are entitled to the Escrow Consideration if in at least 45 calendar days but not more than 120 calendar days following the effective date of the Acquisition, Epoch has received consents from clients to the transfer of assets under management to Epoch of 92.5% of Epoch's target of $842 million ($779 million) based on the market value of such assets as of April 30, 2004 plus (or less) net additions (or net withdrawals) thereafter. Each such stockholder has the right to vote and receive dividends in respect of the shares held in escrow by J Net. The Escrow Consideration will be reduced, and shares included therein will be cancelled, proportionately to the extent such 92.5% of Epoch's target is not achieved. Contingent Stock Consideration Additional shares of our common stock will be issued to the former stockholders of Epoch if we in the future incur costs relating to taxes for periods prior to the effective time of the Acquisition of greater than $2 million (the "Contingent Stock Consideration"). For illustration purposes only, the maximum number of additional shares that may be issued to the former stockholders of Epoch pursuant to the relevant provisions of the Merger Agreement (assuming that our shares are trading at $1.50 per share at the time of issuance) is approximately 7.7 million shares, which would occur if we incur an amount of such costs equal to or in excess of $8 million. If our shares are trading at a price that is lesser than or greater than $1.50 per share, we will be required to issue a greater or lesser amount of shares, respectively. The foregoing description of the Acquisition is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached as Exhibit 2.1, and which is incorporated herein in its entirety by reference. Stockholders Agreement J Net, the Epoch stockholders and certain trusts formed by them (their "Family Affiliates") and David R. Markin and Allan R. Tessler (the "Existing Stockholders") have entered into a Stockholders Agreement (the "Stockholders Agreement"). The Stockholders Agreement governs vesting, transfers and voting of the shares of J Net common stock received by the Epoch stockholders and Family Affiliates in the Acquisition and the J Net shares held by the Existing Stockholders (the "Initial Shares"). Vesting. The Stockholders Agreement provides that the Initial Shares held by the Epoch stockholders who are to be employees of J Net going forward (the "Employee Owners") and their Family Affiliates will be subject to vesting over a three year period on the following schedule: 12.5% vested as of the date of the Stockholders Agreement, 25% vested as of the first anniversary thereof, 50% vested as of the second anniversary thereof and 100% vested as of the third anniversary thereof. If an Employee Owner's employment with J Net is terminated within three years of the date of the Stockholders Agreement, the unvested Initial Shares held by such Employee Owner and his or her Family Affiliates will be subject to purchase by J Net at a price of $0.01 per share. Transfer Restrictions. The Stockholders Agreement prohibits any transfers of Initial Shares by the Epoch stockholders or their Family Affiliates or the Existing Stockholders (together, the "Stockholder Parties") prior to June 2, 2007, except in those circumstances noted below. Thereafter, the Stockholder Parties may transfer their Initial Shares only as follows: . Each Employee Owner together with his or her Family Affiliates may in the aggregate transfer (1) on and after June 2, 2007 and prior to June 2, 2008, a number of Initial Shares not to exceed 12.5% of the aggregate number of Initial Shares received in the Acquisition by such Employee Owner and Family Affiliates, (2) on and after June 2, 2008 and prior to June 2, 2009, a number of Initial Shares not to exceed 12.5% of the aggregate number of Initial Shares received in the Acquisition by such Employee Owner and Family Affiliates, (3) on and after June 2, 2009 and prior to June 2, 2010, a number of Initial Shares not to exceed 25% of the aggregate number of Initial Shares received in the Acquisition by such Employee Owner and Family Affiliates and (4) on and after June 2, 2010, any number of Initial Shares, provided that, in all cases, prior to the first anniversary of the termination of employment of any Employee Owner, neither such Employee Owner nor his or her Family Affiliates may transfer Initial Shares if, as a result of such transfer, such Employee Owner and Family Affiliates would in the aggregate own less than 30% of the aggregate number of Initial Shares received in the Acquisition by such Employee Owner and Family Affiliates. The number of Initial Shares eligible for transfer in any one calendar year but not transferred may be added to the number otherwise eligible to be transferred in any future year. . Each Stockholder Party other than the Employee Owners and their Family Affiliates may transfer any Initial Shares on and after the third anniversary of the date of the Stockholders Agreement. Notwithstanding the foregoing, if an Employee Owner's employment with J Net terminates due to disability or death, the Employee Owner (or his or her estate) and his or her Family Affiliates may transfer any vested Initial Shares without restriction. In addition, our board of directors or a body designated by our board of directors has the authority to make exceptions to any or all of the transfer restrictions applicable to vested Initial Shares contained in the Stockholders Agreement and may permit or cause other persons to become party to the agreement. Voting. Each of the Stockholder Parties has agreed to vote their shares and take any other actions necessary to effectuate the following agreements: 1. The J Net board of directors will have seven members; 2. four of those directors will be designated by William W. Priest (of which at least two will not be current or former shareholders or officers of Epoch), who will also have the right to cause the removal and/or replacement of those directors in the future; 3. three of the directors on the board prior to the effective time of the Acquisition (Allan R. Tessler, David R. Markin and Eugene M. Freedman) shall continue to serve as members of the board; and 4. the bylaws of J Net shall be amended to provide that the following decisions of the board of directors must be made by a two-third majority: (i) compensation of Mr. Priest except as described below under "CEO Agreement," (ii) issuance of additional shares of J Net to any Employee Owner (other than pursuant to the Merger Agreement) and (iii) any amendment of the Stockholders Agreement. The Stockholders Agreement provides that the agreement of the Stockholder Parties to vote in accordance with these provisions will expire on June 2, 2007, provided that the obligation of each Employee Owner and his or her Family Affiliates shall continue thereafter with respect to provisions 1 and 2 above as long as any of them holds any Initial Shares and Priest is employed by J Net. CEO Agreement. The Stockholders Agreement provides that prior to the third anniversary thereof, J Net will enter into an employment arrangement with William W. Priest customary for chief executive officers of peer group companies. Such agreement need only be approved by a simple majority of J Net's directors. Call Right. The Stockholders Agreement provides that J Net may repurchase 30% of the Initial Shares received in the Acquisition of an Employee Owner and his or her Family Affiliates at a purchase price of $0.01 per share if at any time during employment or the one year after leaving such Employee Owner engages in: . soliciting or accepting business from any person or institution who was a client or prospective client of J Net or its subsidiaries during the year prior to the departure of the Employee Owner (or, in the case of an action taken during employment, during the prior year); and . employing or soliciting for employment employees of J Net or its subsidiaries. Registration Rights Agreement Pursuant to the Acquisition, we entered into a registration rights agreement with those of our stockholders who are receiving shares of our common stock in the Acquisition (the "Registration Rights Agreement"). The Registration Rights Agreement requires us, on demand of either of William W. Priest or Berenson Epoch LLC on up to two occasions for each such stockholder, to prepare and file a registration statement that covers the resale of those shares, and the shares of any other holders of registration rights electing to participate in the registration. In addition, we must give the holders of registration rights notice at least 15 days prior to the proposed date of filing a registration statement for the offer and sale of common shares for us or for any other selling stockholder, and provide these holders with the opportunity to participate and have their common shares included in the registration statement, subject to customary underwriter cutback provisions. This participation right does not apply to registration statements related to an employee benefit plan, a dividend reinvestment plan or on Form S-4 or Form S-8 under the Securities Act of 1933, as amended. We will bear all expenses incident to our obligations under the Registration Rights Agreement, other than any underwriting fees, discounts or commissions, or any out-of-pocket expenses of the persons exercising the registration rights, or any transfer taxes relating to the resale of their shares. Board of Directors; Change of Control Pursuant to the Stockholders Agreement, the total number of members of the board of directors will be increased from five to seven. William W. Priest has the right to nominate four members of J Net's board of directors at any meeting of stockholders. Both Mr. Priest and Jeffrey Berenson were appointed to the board of directors at the closing of the Acquisition, with Messrs. Alan J. Hirschfield and Robert L. McDonald, Sr. resigning at such time. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information regarding the number of shares of common stock of J Net beneficially owned on June 2, 2004 following the consummation of the Acquisition, by: . each person who is known by J Net to beneficially own 5% or more of the common stock of J Net; . each of the directors and executive officers of J Net; and . all of J Net's directors and executive officers, as a group. Except as otherwise set forth below, the address of each of the persons listed below is c/o J Net Enterprises, Inc., 4020 Lake Creek Drive, #100, Wilson, Wyoming 83014. Percentage of Number of Shares Shares Name and Address of Beneficially Owned Beneficially Beneficial Owner (1)(2) Owned (3) _________________________________ __________________ _____________ Gabelli Asset Management, Inc.(4) 1,760,600 9.8% William W. Priest 3,138,022 17.6% Berenson Epoch LLC 2,774,194 15.6% Timothy T. Taussig 1,136,964 6.4% J. Philip Clark(5) 1,136,964 6.4% David Pearl 909,572 5.1% Allan R. Tessler(6) 673,557 3.8% Eugene M. Freedman(7) 87,500 * David R. Markin(8) 510,320 2.8% Jeffrey Berenson(9) 2,774,194 15.6% Mark E. Wilson(10) 40,000 * Directors and executive officers as a group (8 persons)(11) 9,497,521 52.0% ________________________ * Less than 1% of outstanding shares (1) Unless otherwise indicated, includes shares owned by a spouse, minor children, by relatives sharing the same home, and entities owned or controlled by the named person. Also includes shares if the named person has the right to acquire such shares within 60 days after June 2, 2004, by the exercise of any warrant, stock option or other right. Unless otherwise noted, shares are owned of record and beneficially by the named person. (2) Includes the Initial Consideration and the Escrow Consideration payable to the former stockholders of Epoch pursuant to the Merger Agreement but excludes the Contingent Stock Consideration. (3) Based upon 17,834,737 shares of common stock outstanding as of June 2, 2004. (4) Based solely upon a Schedule 13D/A filed by Gabelli Asset Management on May 4, 2004. (5) Includes 1,136,964 shares held by the J Philip/Deborah K Clark Trust u/a 10/06/1994. (6) Includes 112,500 shares issuable upon the exercise of vested options. (7) Includes 27,500 shares issuable upon the exercise of vested options. (8) Includes 262,500 shares issuable upon the exercise of vested options. (9) Includes 2,774,194 shares held by Berenson Epoch LLC. Berenson & Company, as to which Mr. Berenson is the President and Chief Executive Officer, is the managing member of Berenson Epoch LLC. (10) Includes 40,000 shares issuable upon the exercise of vested options. (11) Includes an aggregate of 442,500 shares issuable upon the exercise of vested options. Description of Business A description of J Net's existing enterprise software and technology infrastructure business is more fully set forth in J Net's Annual Report on Form 10-K for the year ended June 30, 2003, filed with the SEC on September 29, 2003. Set forth below is information solely concerning the recently-acquired asset management business of Epoch. Unless the context otherwise requires, the term "we," "us," "our" or "J Net" when used in this Form 8-K ("Report") refers to J Net Enterprises, Inc. a Nevada corporation, and its consolidated subsidiaries and predecessors, including Epoch Investment Partners, Inc. General Epoch was formed in April 2004 and co-founded by Mr. William W. Priest. Epoch has registered as an investment adviser with the SEC. Mr. Priest has over 30 years experience in the investment advisory business. CI, a client of Mr. Priest at his former firm, has agreed to transfer its contract for sub-advisory services to Epoch, representing assets under management of approximately $645 million as of April 30, 2004, and other clients of Mr. Priest at his former firm will be asked to transfer their accounts to Epoch shortly (representing up to approximately another $195 million of assets under management as of April 30, 2004). Mr. Priest is resigning his position as a Senior Partner and Portfolio Manager at Steinberg, Priest & Sloane Capital Management, LLC ("SPSCM") and joining Epoch. SPSCM currently manages approximately $2 billion in assets for large retirement funds, endowments, foundations, family offices, and wealthy individuals. Mr. Priest joined SPSCM in 2001, and was instrumental in increasing the assets under management from approximately $800 million to $2 billion, broadening SPSCM's product offering and enhancing the professional staff through recruitment and general management. Prior to joining SPSCM, Mr. Priest was a member of the Global Executive Committee of Credit Suisse Asset Management, Chairman and CEO of Credit Suisse Asset Management Americas ("CSAM-Americas") and CEO of its predecessor firm BEA Associates, which he co-founded in 1972. During his tenure at BEA Associates and CSAM-Americas, Mr. Priest developed the firm into a well-recognized investment manager with over $100 billion in assets under management. Mr. Priest has agreed to join J Net as our Chief Executive Officer on or about June 17, 2004. We will manage investment assets and provide services for our clients through our subsidiary, Epoch. Epoch will provide investment advisory services to high net worth individuals and institutions including corporate retirement accounts, public retirement accounts, endowments, foundations, and mutual funds. Our overall investment philosophy will be determined by William W. Priest, and, with respect to the bulk of assets under management, will be focused in the near-term on achieving a superior risk-adjusted return by investing in companies that are undervalued relative to the investment team's determination of fair value. The security selection and portfolio construction processes will be designed to protect capital in declining markets and participate fully in rising markets. Managed Asset Classes We expect to provide clients with a range of investment asset classes designed to meet varying investment objectives. Our intention is to offer portfolios in the following asset classes: All Cap Equity, Small Cap Equity, Global Small Cap Equity and Balanced. Each equity portfolio will be diversified with respect to sectors, industries and security weightings, with the Global Small Cap Equity portfolios additionally being diversified among countries. Balanced portfolios will consist of an equity portfolio similar to our All Cap Equity portfolio and a fixed income portfolio that includes municipal bonds, U.S. Treasuries and corporate bonds. Investment Strategy Our investment process will build upon two concepts - return seeking strategies and risk reducing tactics. Security selection drives returns and portfolio construction processes control risk exposure. Return Strategy: Security selection involves a business analysis, a cash flow financial analysis, and a valuation process. We analyze a business in the same manner a private investor would if he were purchasing the entire company. We will invest only in those businesses we believe we can understand and only in those businesses where we have confidence in the financial statements from which to build our financial perspectives. We seek those businesses that generate excess or ''free" cash flow. As a generality, we seek those securities that have unrecognized potential yet posses a combination of above average yield, above average free cash flow growth and/or a below average valuation. Risk Control Strategy: At the heart of portfolio construction is diversification. One wants to neutralize or diversify away the risks one does not want to take. We accomplish that end by diversifying across attractive sectors, limiting individual holding sizes, and possessing a sell discipline based on a risk/reward analysis of the security price relative to the fundamental business outlook and pre-established sell criteria. Our goal is to produce an efficient portfolio with respect to the risk/return relationship. In other words, in light of our expectations for returns, we want to create the least volatile portfolio consistent with those expectations. Advisory and Subadvisory Service Agreements Epoch will manage accounts of its clients under investment advisory and subadvisory agreements. Such agreements are usually terminable upon short notice and provide for compensation based on the market value of the client's assets under management. Fees generally are payable in arrears on a quarterly basis. Epoch will provide overall investment management services including providing advice and recommendations concerning investments and reinvestments. Unless directed otherwise by clients, Epoch will have the authority to vote all proxies with respect to a client's assets. CI has agreed to transfer its contract for sub-advisory services to Epoch, under which it will perform substantially the same service as it does under an advisory agreement. Subadvisory fees are computed upon the daily net assets of the client and are payable on a monthly basis. Distribution Channels We will market our services through a variety of channels that allow us to expand the reach of our investment advisory services. These channels will provide us the ability to leverage the existing distribution infrastructure and capabilities of other financial services firms and intermediaries and focus on our core competency of developing outstanding investment asset classes. Institutional Investment Consultants Investment management consulting firms serve as gatekeepers to an overwhelming percentage of corporate pension plans, endowments and foundations, which represent a key Epoch client market. Consultants provide guidance and expertise in setting a client's asset allocation strategy, as well as the establishment of an investment policy. In addition, consultants make recommendations of best in class investment firms that they believe will allow their client's investment objectives to best be met. Epoch will seek consulting firm relationships, and create services to increase the awareness of our products in both the consultant community and the potential institutional client base. Subadvisory Relationships Subadvisory relationships will allow us to extend the reach of our investment management services to the clients of another investment company that has far reaching distribution capabilities. In a sub-advisory arrangement, our client would be the investment company through which our services will be offered to investors. In our subadvisory arrangement with CI, our investment advisory services are made available through retail-based mutual fund offerings. CI sponsors the mutual funds and is responsible for marketing, distribution, operations and accounting related to these funds. Managed Accounts Managed accounts are typically high net worth individuals or small institutions. Many of these prospective clients have been clients of William W. Priest for periods of time ranging from one year to, in a few cases, nearly thirty years. Services to be provided include asset allocation recommendations as well as portfolio management services. Growth Strategy We believe that we will establish a strong platform to support future growth, deriving our strength in large part from the experience and capabilities of our management team and skilled investment professionals. We believe that assembling this focused, stable team will contribute to our investment performance results, provide quality customer service and a growing array of asset classes under management. Opportunities for our future growth are expected to come from clients our principals have existing relationships with and new clients, strategic acquisition and alliances, and strengthening of our brand name. Generate growth from clients our principals have existing relationships with and consultant relationships. As its primary business objective, Epoch intends to create, maintain and enhance relationships with clients our principals have existing relationships with and investment consultants by providing solid investment performance and a high level of quality service to these relationships. Additionally, Epoch will pursue growth through targeted sales and marketing efforts that emphasize our performance results and client service. New institutional client accounts are generally derived via investment consultants. Epoch intends to establish a dedicated sales effort to this distribution channel. Attract and retain key employees. In order to achieve Epoch's performance and client relationship objectives, we must be able to retain and attract talented investment professionals. We believe that Epoch is creating a workplace environment in which motivated, performance-driven, and client-oriented individuals thrive. As a public company, we will offer to our employees a compensation program that includes strong equity incentives so that the success of our employees will be closely tied to the success of our business. We believe this is a critical ingredient to continuing to build a stable, client-focused environment. Pursue strategic acquisitions and alliances. We will evaluate strategic acquisition, joint venture and alliance opportunities carefully. We may, in time, have an interest in pursuing asset management firms or trust companies that have assets with respect to which we have expertise or those that appear appropriate as a means of expanding the range of our asset classes. By acquiring investment firms that successfully manage asset classes in which we do not specialize, we could attract new clients and provide our existing clients with a more diversified range of asset classes. We may also consider entering into alliances with other financial services firms that would allow us to leverage our core competency of developing superior investment products in combination with alliance partners that provide world-class distribution capabilities. Competition Epoch will be subject to substantial and growing competition in all aspects of its business. Barriers to entry to the asset management business are relatively low, and our management anticipates that we will face a growing number of competitors. Although no one company dominates the asset management industry, many companies are larger, better known and have greater resources than we do. Further, Epoch will compete with other asset management firms on the basis of asset classes offered, the investment performance of those asset classes in absolute terms and relative to peer group performance, quality of service, fees charged, the level and type of compensation offered to key employees, and the manner in which asset classes are marketed. Many of our competitors have more asset classes and services and may also have substantially greater assets under management. Epoch will compete against an ever-increasing number of investment dealers, banks, insurance companies and others that sell equity funds, taxable income funds, tax-free investments and other investment products. Also, the allocation by many investors of assets away from active equity investment to index funds, fixed income or similar asset classes has enhanced the ability of firms offering non-equity asset classes and passive equity management to effectively compete with us. In short, the competitive landscape in which we operate is both intense and dynamic, and there can be no assurance that we will be able to compete effectively in the future as an independent company. Additionally, most prospective clients perform a thorough review of an investment manager's background, investment policies and performance before committing assets to that manger. In many cases, prospective clients invite a number of competing firms to make presentations. The process of obtaining a new client typically takes twelve to eighteen months from the time of the initial contact. While historically Epoch has achieved a degree of success in competing successfully for new clients, it is a process to which we must dedicate significant resources over an extended period, with no certainty of success. Regulation Virtually all aspects of Epoch's proposed businesses are subject to various federal and state laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients and stockholders of registered investment companies. Under such laws and regulations, agencies that regulate investment advisers, such as ourselves, have broad administrative powers, including the power to limit, restrict or prohibit such an adviser from carrying on its business in the event that it fails to comply with such laws and regulations. In such an event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in certain lines of business for a specified period of time, revocation of investment adviser and other registrations censures and fines. We believe that we are in substantial compliance with all material laws and regulations. Epoch's business is subject to regulation at both the federal and state level by the SEC and other regulatory bodies. Epoch is registered with the SEC under the Investment Advisers Act of 1940 and under the laws of relevant states. As a registered investment adviser, Epoch is regulated and subject to examination by the SEC. The Investment Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, record keeping requirements, operational requirements, marketing requirements and disclosure obligations. Under the rules and regulations of the SEC promulgated pursuant to the federal securities laws, Epoch is subject to periodic examination by the SEC. The SEC is authorized to institute proceedings and impose sanctions for violations of the Investment Advisers Act, ranging from censure to termination of an investment adviser's registration. The failure of Epoch to comply with the requirements of the SEC could have a material adverse effect on us. We believe that Epoch is in substantial compliance with the requirements of the regulations under the Investment Advisers Act. Employees At June 2, 2004 Epoch had 3 full-time employees. Within two weeks from the closing of the Acquisition, Epoch expects to employ 16 full-time employees, consisting of portfolio managers, research and trading professionals, marketing and client service professionals and operations and business management personnel. None of Epoch's employees will be represented by a labor union, and we believe our employee relations will be good. Description of Property Epoch is conducting its principal operations through a space use agreement with approximately 6,500 square feet located at 667 Madison Avenue, New York City, New York. We anticipate moving Epoch to a larger facility before year-end 2004 in New York City. Epoch Financial Statements Epoch has had limited financial activity since its formation in April of 2004 and initial equity capitalization of $100,000. Since that time, Epoch has entered into a small number of transactions to set up business operations, including hiring of three employees, entering into the space use agreement described above under "Properties," the license of a portfolio management system and the lease of office equipment. In addition, Epoch has incurred liabilities for legal fees relating to its organization and the Acquisition. In order to finance some of these costs, Epoch has borrowed $100,000 from William W. Priest pursuant to a demand note. Cautionary Statements If any of the following material risks occur, Epoch's (and consequently our) business, financial condition or results of operations would likely suffer. Neither we nor Epoch have any operating history as an asset management business, and therefore most of our historical financial information may not be indicative of our future performance. Our acquisition of Epoch was completed on June 2, 2004. Prior to that date, J Net's business was centered on enterprise software and technology infrastructure. Therefore, our historical financial information for all periods prior to the completion of the Acquisition may not be indicative of our future performance as a company engaged in significant part in asset management. Epoch has limited operations and history as an asset management business. It currently has no clients (although one significant client has consented to the transfer of its account) and a small number of employees. Although we are confident the former stockholders and employees of Epoch have experience, good reputations and good prospects in the asset management business, the acquisition of clients and generation of revenue cannot be assured. Some members of our management are critical to our success, and our inability to attract and retain key employees could compromise our future success. We believe that Epoch's future success will depend to a significant extent upon the services of its executive officers, particularly William W. Priest. We do not have employment agreements with any of our key employees, including Mr. Priest. However, pursuant to the Stockholders Agreement, shares of our common stock held by Mr. Priest and other former Epoch stockholders who are employees are subject to forfeiture. The loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could negatively impact our business, financial condition, results of operations and future prospects. As with other asset management businesses, our future performance depends to a significant degree upon the continued contributions of certain officers, portfolio managers and other key marketing, client service and management personnel. There is substantial competition for these types of skilled personnel. We will be effectively controlled by William W. Priest, our incoming Chief Executive Officer. For at least the first three years following the Acquisition, pursuant to the Stockholders Agreement, William W. Priest will have the right to cause stockholders of our company expected to hold a majority of our common stock outstanding to set the number of directors on our board of directors at seven and to vote for four persons selected by him for appointment to the board. Moreover, he will have the right to cause such stockholders to remove and/or replace any of these directors at any time. As a result William W. Priest will control our board of directors, and, therefore, our business, policies and affairs, including determinations with respect to acquisitions, dispositions, borrowings, issuances of common stock or other securities of the company, and the declaration and payment of dividends on the common stock. You may experience substantial dilution in the percentage of our outstanding shares you own if we are required pursuant to certain provisions in the Merger Agreement to issue additional shares of our common stock to the Epoch stockholders. Pursuant to the Merger Agreement, additional shares of our common stock will be issued to the former stockholders of Epoch if we in the future incur costs relating to taxes for periods prior to the effective time of the Acquisition of greater than $2 million. The maximum number of additional shares that may be issued to the former stockholders of Epoch pursuant to the relevant provisions of the Merger Agreement (assuming that our shares are trading at $1.50 per share at the time of issuance) is approximately 7.6 million shares, which would occur if we incur an amount of such costs equal to or in excess of $8 million. If our shares are trading at a price that is lesser than or greater than $1.50 per share, we will be required to issue a greater or lesser amount of shares, respectively. Negative performance of the securities markets could reduce our revenues. Epoch's results of operations will be affected by many economic factors, including the performance of the securities markets. Negative performance in the securities markets or certain segments of those markets or short-term volatility in the securities markets or segments thereof could result in investors withdrawing assets from the markets or decreasing their rate of investment, either of which could reduce our revenues. Because most of our anticipated revenues are to be based on the value of assets under management, a decline in the value of those assets would also adversely affect our revenues. In addition, in periods of slowing growth or declining revenues, profits and profit margins are adversely affected because certain expenses remain relatively fixed. In particular, approximately fifty percent (possibly more) of our assets under management are expected to be invested in equity securities of companies with market capitalizations between $200 million and $10 billion, often characterized as small or mid-sized companies. As a consequence, we are susceptible to the volatility associated with changes in the market for stocks that fall within these two capitalization classes. Poor investment performance of the assets managed by us could adversely affect our results of operations. Because Epoch will compete with many other asset management firms on the basis of asset classes offered and the investment performance of those asset classes, our success is dependent to a significant extent on the investment performance of the assets that we manage. Good performance stimulates new client accounts, which results in higher revenues for us. Conversely, poor performance tends to result in the loss or reduction of client accounts, with corresponding decreases in revenues. Epoch's business is dependent on investment advisory and subadvisory agreements that are subject to termination or non-renewal; therefore, we could lose any of our clients on very short notice. Substantially all of our anticipated revenues are to be derived pursuant to investment advisory and subadvisory agreements with our clients. In general, either party may terminate these agreements upon 30 days' notice. Any termination of or failure to renew these agreements could have a material adverse impact on us, particularly because many of our costs are relatively fixed. A single client is anticipated to account for a substantial portion of Epoch's business. As such, the failure of this client to open an account or the reduction or loss of business with this client could have an adverse impact on our business, financial condition and results of operations. Epoch's largest client is expected to account for more than 45% of total revenues during the next year, and we are therefore dependent to a significant degree on our ability to create and maintain a relationship with this client. There can be no assurance that Epoch will be successful in creating or maintaining client relationships. Any failure by Epoch to retain one or more large clients or establish profitable relationships with additional clients could have a material adverse effect on our business, financial condition and results of operations. Any event that negatively affects the asset management industry could have a material adverse effect on us. Any event affecting the asset management industry that results in a general decrease in assets under management or a significant general decline in the number of advisory clients or accounts could negatively impact our revenues. Our future growth and success depends in part upon the growth of the asset management industry. Epoch's business is subject to pervasive regulation with attendant costs of compliance and serious consequences for violations. Virtually all aspects of Epoch's business are subject to various laws and regulations. Violations of such laws or regulations could subject us and/or our employees to disciplinary proceedings or civil or criminal liability, including revocation of licenses, censures, fines or temporary suspension, permanent bar from the conduct of business, conservatorship or closure. Any such proceeding or liability could have a material adverse effect upon our business, financial condition, results of operations and business prospects. These laws and regulations generally grant regulatory agencies and bodies broad administrative powers, including, in some cases, the power to limit or restrict us from operating our business and, in other cases, the powers to place us under conservatorship or closure, in the event we fail to comply with such laws and regulations. Due to the extensive regulations and laws to which Epoch is subject, our management is required to devote substantial time and effort to legal and regulatory compliance issues. In addition, the regulatory environment in which Epoch operates is subject to change. Epoch may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. See " - Regulation." Potential misuse of assets and information in the possession of our portfolio managers and employees could result in costly litigation and liability for us and our clients. Our portfolio managers will handle a significant amount of assets, financial and personal information for our clients. Although we have implemented a policies to minimize the risk of fraudulent taking or misuse of assets and information, there can be no assurance that our policies will be adequate to prevent taking or misuse by our portfolio managers or employees. If our policies are ineffective in preventing the fraudulent taking or misuse of assets and information, we could be subject to costly litigation, which could consume a substantial amount of our resources and distract our management from the operation of our company and could also result in regulatory sanctions. Additionally, any such fraudulent actions could adversely affect some of our clients in other ways, and these clients could seek redress against us. Acquisitions, which may be part of our long-term business strategy, involve inherent risks that could compromise the success of the combined business and dilute the holdings of current stockholders. As part of our long-term business strategy, we may consider acquisitions of similar or complementary businesses. See " - Growth Strategy." If we are not correct when we assess the value, strengths, weaknesses, liabilities and potential profitability of acquisition candidates or if we are not successful in integrating the operations of the acquired businesses, the success of the combined business could be compromised. Any future acquisitions will be accompanied by the risks commonly associated with acquisitions. These risks include, among others, potential exposure to unknown liabilities of acquired companies and to acquisition costs and expenses, the difficulty and expense of integrating the operations and personnel of the acquired companies, the potential disruption to the business of the combined company and potential diversion of management's time and attention, the impairment of relationships with and the possible loss of key employees and clients as a result of the changes in management, potential future write-downs related to goodwill impairment in connection with acquisitions, and dilution to the stockholders of the combined company if the acquisition is made for stock of the combined company. In addition, asset classes, technologies or businesses of acquired companies may not be effectively assimilated into our business or have a positive effect on the combined company's revenues or earnings. The combined company may also incur significant expense to complete acquisitions and to support the acquired asset classes and businesses. Further, any such acquisitions may be funded with cash, debt or equity, which could have the effect of diluting the holdings or limiting the rights of stockholders. Finally, we may not be successful in identifying attractive acquisition candidates or completing acquisitions on favorable terms. Epoch's proposed business is vulnerable to systems failures that could have a material adverse effect on our business, financial condition and results of operations. Any delays or inaccuracies in securities pricing information or information processing could give rise to claims against us, which could have a material adverse effect on our business, financial condition and results of operations. Epoch is highly dependent on communications and information systems and on third party vendors for securities pricing information and updates from certain software. Epoch may suffer a systems failure or interruption, whether caused by an earthquake, fire, other natural disaster, power or telecommunications failure, unauthorized access, act of God, act of war or otherwise, and our back-up procedures and capabilities may not be adequate or sufficient to eliminate the risk of extended interruptions in operations. We may not be able to fund future capital requirements on favorable terms if at all. We cannot be certain that financing to fund Epoch's working capital or other cash requirements, if needed, will be available on favorable terms, if at all. Epoch's capital requirements will vary greatly from quarter to quarter depending on, among other things, capital expenditures, fluctuations in our operating results and financing activities. We believe that our current cash and cash equivalents and cash flows from operations will be sufficient to satisfy Epoch's cash requirements for the foreseeable future. However, if future financing is necessary, we may or may not be able to obtain financing on favorable terms, if at all. Further, any future equity financings could dilute the relative percentage ownership of the then existing holders of our common stock, and any future debt financings could involve restrictive covenants that limit our ability to take certain actions. Special Note Regarding Forward-Looking Statements Some of the statements under "Cautionary Statements," "Description of Business" and elsewhere in this Report constitute forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, those described under "Cautionary Statements" and elsewhere in this Report. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward-looking statements after the date of this Report. Directors and Executive Officers After the Acquisition The following table sets forth information regarding the members of J Net's board of directors and its executive officers. The directors listed below will serve until the next annual meeting of the J Net stockholders. Name Age Position _______________________ ___ ______________________________________ William W. Priest 62 Chief Executive Officer(1), Director Allan R. Tessler 67 Chairman of the Board Eugene M. Freedman 72 Director David R. Markin 73 Director Jeffrey L. Berenson 53 Director Timothy T. Taussig 47 President & Chief Operating Officer J. Philip Clark 51 Executive Vice President - Client Management Mark E. Wilson 45 Chief Financial Officer Alan J. Hirschfield 68 Director(2) Robert L. McDonald, Sr. 84 Director(2) _____________________ (1) Mr. Priest has agreed to join J Net as our Chief Executive Officer commencing on or about June 17, 2004. (2) Messrs. Hirschfield and McDonald, Sr. each resigned as directors of J Net effective at the closing of the Acquisition. The principal occupations for the past five years (and, in some instances, for prior years) of each of J Net's directors and officers other than Messrs. Priest, Berenson and Taussig are set forth in J Net's Annual Report on Form 10-K for the year ended June 30, 2003, filed with the SEC on September 29, 2003. The principal occupations for the past five years of Messrs. Priest, Berenson, Taussig and Clark are the following: William W. Priest has agreed to join J Net as our Chief Executive Officer on or about June 17, 2004. He was appointed as a member of our board of directors at the closing of the Acquisition. Mr. Priest was a member of the management committee and portfolio manager with Steinberg Priest & Sloane Capital Management, LLC from March 2001 through May 2004. Until February 2001 and for many prior years, Mr. Priest was chief executive officer and ultimately chairman of Credit Suisse Asset Management Americas. Mr. Priest currently serves on the board of directors of 62 mutual funds as part of the Credit Suisse Asset Management fund complex. Jeffrey L. Berenson was appointed as member of our board of directors at the closing of the Acquisition. Mr. Berenson is President and Chief Executive Officer of Berenson & Company, a private investment banking firm in New York City that he co-founded in 1990. From 1978 until founding Berenson & Company, Mr. Berenson was an employee of Merrill Lynch & Company, and served at various times as head of Merrill Lynch's Mergers and Acquisitions Group and co-head of its Merchant Banking unit. Mr. Berenson has been a director of Patina Oil & Gas Corporation since December 2002. Mr. Berenson serves as a member of the National Council of Environmental Defense and is also a member of the International Conservation Committee of the Wildlife Conservation Society. Timothy T. Taussig became J Net's President and Chief Operating Officer at the closing of the Acquisition. Before joining Epoch, since January 2003, Mr. Taussig was chief operating officer of Trident Investment Management, responsible for the firm's business management, operations, and marketing. Until February 2001 and for many prior years, Mr. Taussig was a Managing Director and Member of the Global Executive Committee for Credit Suisse Asset Management and Co-Head of Asset Gathering for Credit Suisse Asset Management Americas, where his management responsibilities included marketing, client services and e-commerce strategy across distribution channels. J. Philip Clark became J Net's Executive Vice President - Client Management at the closing of the Acquisition. Before joining Epoch, since 1986, Mr. Clark was employed by Sanford C. Bernstein & Co., now part of Alliance Capital. His most recent responsibilities included being National Managing Director of the private client business. Board Composition and Committees Pursuant to the Stockholders Agreement, the total number of members of the board of directors will be increased from five to seven. William W. Priest has the right to nominate four members of J Net's board of directors at any annual meeting. Both Mr. Priest and Jeffrey L. Berenson were appointed to the board of directors at the closing of the Acquisition, with Messrs. Alan J. Hirschfield and Robert L. McDonald, Sr. resigning at such time. All directors hold office until the next annual meeting of stockholders, which is expected to occur in late summer 2004, and the election and qualification of their successors. A majority of the directors are considered "independent" under the SEC's new independence standards. Officers are elected annually by the board of directors and serve at the discretion of the board. Director Compensation Directors who are not salaried employees of the Company receive annual fees of $32,000. In addition, a director who serves as a member of the Compensation Committee and/or Audit Committee is entitled to receive $10,800 and $7,200, respectively, per year. In the future, the Company may use a combination of cash, restricted stock grants and/or stock options to compensate outside directors in lieu of cash compensation. Mr. Tessler has not received any salary from the Company for his services as Chief Executive Officer. In connection with identifying, structuring and negotiating the Acquisition as well as his past performance as Chief Executive Officer, on May 27, 2004 the Compensation Committee recommended and the board granted Mr. Tessler a restricted stock grant of 200,000 shares of our common stock. The shares are subject to the transfer restrictions described under "Stockholders Agreement - Transfer Restrictions." Executive Compensation The executive compensation for J Net's most recently completed fiscal year is set forth in J Net's Annual Report on Form 10-K for the year ended June 30, 2003, filed with the SEC on September 29, 2003. Indebtedness of Directors and Executive Officers None of J Net's directors or officers or their respective associates or affiliates is indebted to J Net. Family Relationships There are no family relationships among J Net's directors and executive officers. Legal Proceedings with Affiliates As of the date of this Report, there is no material proceeding to which any director, officer, affiliate or stockholder of J Net is a party adverse to J Net. Accounting Treatment of the Acquisition The Company is evaluating the proper accounting treatment for the Acquisition. It will be treated as either (i) an acquisition of a contract and other intangibles, in which case the Company's financial statements will be affected by the addition of intangible assets based upon the fair market value of the stock issued in the Acquisition which amount will be amortized over its anticipated useful life as prescribed by general accepted accounting principles or (ii) as a "reverse merger" in which no intangible assets would be recorded and the historical financial statements of Epoch (as limited as they are) will become the historical financial statements of the Company and the transaction would be recorded as if Epoch issued its capital stock for the acquisition of J Net's assets. Book Value Dilution Our net tangible book value as of March 31, 2004, was $6,846,000, or $.78 per share of common stock (as adjusted for certain subsequent events prior to the Acquisition). Net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. Assuming the issuance by us of 9,095,716 shares of common stock in the Acquisition (representing the Initial Consideration and the Escrow Consideration payable to the former stockholders of Epoch pursuant to the Merger Agreement, but excluding the Contingent Stock Consideration), our pro forma net tangible book value as of March 31, 2004, would have been $6,846,000, or $.38 per share of common stock. This represents an immediate dilution in pro forma net tangible book value to our existing stockholders. Item 7. Financial Statements and Exhibits (a) Financial Statements of Businesses Acquired.* (b) Pro Forma Financial Information.* (c) Exhibits. The exhibits listed in the following Exhibit Index are filed as part of this Report. Exhibit No. Description 2.1 Agreement of Merger and Plan of Reorganization, dated as of June 2, 2004, among J Net Enterprises, Inc., Epoch Acquisition Corp. and Epoch Investment Partners, Inc. 10.1 Stockholders Agreement, dated as of June 2, 2004, among J Net Enterprises, Inc. and certain of its stockholders. 10.2 Registration Rights Agreement, dated as of June 2, 2004, among J Net Enterprises, Inc. and certain of its stockholders. 99 Press Release dated June 3, 2004. * It is impracticable for the Company to provide the required financial statements and pro forma financial information as of the date hereof. The Company will file the required pro forma financial information no later than 60 days after the date this Report is required to be filed. Item 9. Regulation FD Disclosure On June 3, 2004 J Net issued a press release relating to the Acquisition. The information included in Item 9 of this Form 8-K, including the press release attached as Exhibit 99, is incorporated by reference into this Item 9 in satisfaction of the public disclosure requirements of Regulation FD. This information is "furnished" and not "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liabilities of that section. It may be incorporated by reference in another filing under the Securities Exchange Act of 1934 or the Securities Act of 1933 only if and to the extent such subsequent filing specifically references the information incorporated by reference herein. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: June 3, 2004 J NET ENTERPRISES, INC. /s/ Mark E. Wilson ______________________ Name: Mark E. Wilson Title: Chief Financial Officer INDEX TO EXHIBITS Exhibit No. Description 2.1 Agreement of Merger and Plan of Reorganization, dated as of June 2, 2004, among J Net Enterprises, Inc., Epoch Acquisition Corp. and Epoch Investment Partners, Inc. 10.1 Stockholders Agreement, dated as of June 2, 2004, among J Net Enterprises, Inc. and certain of its stockholders. 10.2 Registration Rights Agreement, dated as of June 2, 2004, among J Net Enterprises, Inc. and certain of its stockholders. 99 Press Release dated June 3, 2004. EX-2 2 ex21.txt Exhibit 2.1 Execution Version AGREEMENT AND PLAN OF MERGER by and among J NET ENTERPRISES, INC. EPOCH ACQUISITION CORP. and EPOCH INVESTMENT PARTNERS, INC. dated as of June 2, 2004 Table of Contents ARTICLE I THE MERGER Section 1.1 The Merger Section 1.2 Effective Time Section 1.3 Closing Section 1.4 Directors and Officers of the Surviving Corporation Section 1.5 Shareholders' Consent Section 1.6 Directors of Parent Section 1.7 Subsequent Actions ARTICLE II CONVERSION OF SECURITIES Section 2.1 Conversion of Capital Stock Section 2.2 Exchange of Certificates ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Section 3.1 Organization of the Company Section 3.2 Capital Structure Section 3.3 Subsidiaries Section 3.4 Title to Shares Section 3.5 Authority; Validity of Agreement; Board of Directors Approvals Regarding Transactions Section 3.6 Vote Required Section 3.7 No Conflicts Section 3.8 Consents and Approvals Section 3.9 Compliance with Laws; Government Regulation; Company Filings Section 3.10 Real Property Section 3.11 Absence of Undisclosed Liabilities Section 3.12 Contracts Section 3.13 Absence of Certain Changes Section 3.14 Legal Proceedings Section 3.15 Taxes Section 3.16 Employee Benefit Plans; ERISA Section 3.17 Technology Systems and Intellectual Property Section 3.18 Fund Filings, Etc Section 3.19 Investment Contracts and Clients Section 3.20 Books and Records Section 3.21 Bank Holding Company Act; FDIC Section 3.22 Brokers Section 3.23 No Other Representations ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Section 4.1 Organization of Parent and Merger Sub Section 4.2 Capital Structure Section 4.3 Subsidiaries Section 4.4 Title to Shares of Capital Stock of Merger Sub Section 4.5 Authority; Validity of Agreement; Board of Director Approvals Regarding Transactions Section 4.6 No Conflicts Section 4.7 Consents and Approvals Section 4.8 Compliance with Laws; Government Regulation Section 4.9 SEC Reports and Parent Financial Statements and Certifications; Internal Controls and Disclosure Controls Section 4.10 Books and Records Section 4.11 Real Property Section 4.12 Absence of Undisclosed Liabilities Section 4.13 Contracts Section 4.14 Absence of Certain Changes Section 4.15 Legal Proceedings Section 4.16 Taxes Section 4.17 Employee Benefit Plans: ERISA Section 4.18 Technology Systems and Intellectual Property Section 4.19 Insurance Section 4.20 Affiliate Transactions Section 4.21 Brokers Section 4.22 Share Ownership Section 4.23 Merger Sub's Operations Section 4.24 No Other Representations ARTICLE V COVENANTS Section 5.1 Interim Operations Section 5.2 Access and Confidentiality Section 5.3 Reasonable Best Efforts Section 5.4 [Intentionally Omitted] Section 5.5 [Intentionally Omitted] Section 5.6 Transfer of Shareholders' Shares Section 5.7 Publicity Section 5.8 Notification of Certain Matters Section 5.9 Merger Sub Compliance Section 5.10 Advisory Agreements Section 5.11 Tax Matters ARTICLE VI CONDITIONS Section 6.1 Conditions to Each Party's Obligation to Effect the Merger Section 6.2 Conditions to Parent's and Merger Sub's Obligations to Effect the Merger Section 6.3 Conditions to Company's Obligations to Effect the Merger ARTICLE VII TERMINATION Section 7.1 Termination Section 7.2 Effect of Termination ARTICLE VIII DEFINITIONS AND INTERPRETATION Section 8.1 Definitions Section 8.2 Interpretation ARTICLE IX MISCELLANEOUS Section 9.1 Fees and Expenses Section 9.2 Amendment and Modification Section 9.3 Nonsurvival of Representations and Warranties Section 9.4 Notices Section 9.5 Counterparts Section 9.6 Entire Agreement; No Third Party Beneficiaries Section 9.7 Severability Section 9.8 Governing Law Section 9.9 Enforcement Section 9.10 Time of Essence Section 9.11 Extension; Waiver Section 9.12 Assignment Exhibit I Merger Consideration Annex A Certificate of Incorporation of the Surviving Company Annex B Forms of Opinion Annex C Form of Stockholders Agreement Annex D Form of Registration Rights Agreements AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of June 2, 2004, by and among J Net Enterprises, Inc., a Nevada corporation ("Parent"), Epoch Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and Epoch Investment Partners, Inc., a Delaware corporation (the "Company"). Certain capitalized terms used in this Agreement have the meanings ascribed to them in Article VIII. WHEREAS, the Board of Directors of each of Parent, Merger Sub and the Company has approved, and deems it advisable and in the best interests of its respective shareholders to consummate, the Merger upon the terms and subject to the conditions set forth herein; WHEREAS, in furtherance thereof, the Board of Directors of each of Merger Sub and the Company have approved this Agreement and the Merger in accordance with the General Corporation Law of the State of Delaware (as amended from time to time, the "DGCL") and upon the terms and subject to the conditions set forth herein, and the Board of Directors of Parent has approved this Agreement and the Merger in accordance with the General Corporation Law of the State of Nevada (as amended from time to time, the "NGCL") and upon the terms and subject to the conditions set forth herein; WHEREAS, the Company Board of Directors has determined that the consideration to be paid for each Share in the Merger is fair to the holders of such Shares and has resolved to recommend that the holders of such Shares approve this Agreement and each of the Transactions upon the terms and subject to the conditions set forth herein; WHEREAS, for federal income tax purposes, it is intended by Parent, Merger Sub and the Company that the Merger shall qualify as a "reorganization" within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a plan of "reorganization"; and WHEREAS, the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger; NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE MERGER Section 1.1 The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, the Company and Merger Sub shall consummate a merger pursuant to which (a) Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease, (b) the Company shall be the successor or surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware, and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in Section 1.4. Pursuant to the Merger, (x) the certificate of incorporation of the Company shall be amended in its entirety to read as set forth in Annex A, and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by Applicable Law and such certificate of incorporation, and (y) the by-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until thereafter amended as provided by Applicable Law, by such certificate of incorporation or by such bylaws. The Merger shall have the effects specified in the DGCL. Section 1.2 Effective Time. Parent, Merger Sub and the Company shall cause a certificate of merger to be executed and filed on the Closing Date (or on such other date as Parent and the Company may agree) with the Secretary of State of Delaware as provided in the DGCL. The Merger shall become effective on the date on which such certificate of merger is duly filed with the Secretary of State of the State of Delaware or such other time as is agreed upon by the parties and specified in such certificate of merger. Section 1.3 Closing. The closing of the Merger shall take place at 10:00 a.m. on a date to be agreed upon by the parties, and if such date is not agreed upon by the parties, the Closing shall occur on the business day after satisfaction or waiver of all of the conditions set forth in Article VI, at such place as the parties shall determine. Section 1.4 Directors and Officers of the Surviving Corporation. The directors of the Company and the officers of the Company at the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and the by-laws of the Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the Company Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by Applicable Law. Section 1.5 Shareholders' Consent. (a) The Company, acting through its Board of Directors, shall, in accordance with Applicable Law: (i) recommend that the Shareholders shall approve the Merger and the adoption of this Agreement as of the date hereof, (ii) obtain from the Shareholders their unanimous written consent to the Merger and the adoption of this Agreement as of the date hereof and shall take all other action required by Applicable Law to effect the Merger. (b) Parent, in its capacity as the sole shareholder of Merger Sub, hereby approves and consents to the Merger and the adoption of this Agreement as of the date hereof. Section 1.6 Directors of Parent. Parent shall procure, prior to the Effective Time, the resignation of two directors from the Parent Board of Directors, effective as of the Effective Time. Parent shall take all actions required under Applicable Law and the articles of incorporation and by-laws of Parent to allow the nomination of two persons designated by the Company to fill the vacancies on the Parent Board of Directors and the election, effective immediately after the Effective Time, to the Parent Board of Directors of such nominees by the Parent Board of Directors or by written consent signed by a majority of the stockholders of Parent (without a meeting and without notice). Section 1.7 Subsequent Actions. If at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Merger Sub acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Merger Sub, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. ARTICLE II CONVERSION OF SECURITIES Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without any further action on the part of the holders of any Shares or holders of Merger Sub Common Stock: (a) Merger Sub Common Stock. Each issued and outstanding share of Merger Sub Common Stock shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. (b) Cancellation of Treasury Stock. Each Share owned by the Company as treasury stock shall be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Shares. Each issued and outstanding Share (other than Shares to be cancelled in accordance with Section 2.1(b) and other than any Dissenting Shares) shall be converted into the right to receive the consideration specified in Exhibit I attached to this Agreement (the "Merger Consideration"), upon surrender of the certificate formerly representing such Share in the manner provided in Section 2.2. From and after the Effective Time, all such converted Shares shall no longer be outstanding and shall be deemed to be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect to such shares except the right to receive the Merger Consideration therefor, without interest, upon the surrender of such certificate in accordance with Section 2.2 or the right, if any, to receive payment from the Surviving Corporation of the "fair value" of such Shares as determined in accordance with Section 262 of the DGCL. (d) No Fractional Shares. No fraction of a share of capital stock of Parent shall be issued by virtue of the Merger. Section 2.2 Exchange of Certificates. (a) At the Closing, Parent shall issue and deliver to each Shareholder one or more share certificates representing the aggregate number of shares of Parent Common Stock constituting the Per Share Initial Stock Consideration that such Shareholder has a right to receive (rounded up to the nearest whole share) upon the delivery by such Shareholder, free and clear of any liens, of one or more certificates representing all of the Shares owned by such Shareholder, duly endorsed in blank or accompanied by stock powers or other instruments of transfer fully executed in blank, and bearing or accompanied by all requisite stock transfer stamps. (b) Transfer Books; No Further Ownership Rights in the Shares. At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the Shares on the records of the Company. From and after the Effective Time, the holders of certificates evidencing ownership of the Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by Applicable Law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the Company Disclosure Letter prepared and signed by the Company and delivered to Parent simultaneously with the execution hereof, the Company represents and warrants to Parent and Merger Sub that all of the statements contained in this Article III are true and correct as of the date of this Agreement (or, if made as of a specified date, as of such date), and (except for any statement made as of a specified date) will be true and correct as of the Closing Date as though made on the Closing Date. Each exception set forth in the Company Disclosure Letter and each other response to this Agreement set forth in the Company Disclosure Letter is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement and relates only to such section, except to the extent that one portion of the Company Disclosure Letter specifically refers to another portion thereof, identifying such other portion by section reference or similar specific cross reference. Section 3.1 Organization of the Company. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority to carry on the Company Business and to own, lease and operate all of its properties and assets, as now conducted, owned, leased or operated. The Company is duly qualified to do business in each jurisdiction in which the nature of the Company Business or the character or location of the properties and assets owned, leased or operated by it makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company has made available to Parent complete and correct copies of its certificate of incorporation and by-laws, each as amended to the date of this Agreement. Section 3.2 Capital Structure. The authorized capital stock of the Company is 3,000 Shares, of which 1,000 Shares are issued and outstanding. All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except where provided by this Agreement, there are no outstanding options, warrants, calls, conversion or other rights, preemptive or similar rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any Shareholder is a party or by which any of them is bound, obligating the Company or any Shareholder to issue, deliver, purchase or sell, or cause to be issued, delivered, purchased or sold, any shares of capital stock of the Company or obligating the Company or any Shareholder to issue, grant or enter into any such option, warrant, call, conversion or other right, commitment, agreement, arrangement or undertaking, and no authorization therefor has been given. The Company has no outstanding Voting Debt. Section 3.3 Subsidiaries. The Company has no Subsidiaries. Section 3.4 Title to Shares. The Shareholders are the record and beneficial owners of all the issued and outstanding Shares, free and clear of all Encumbrances, except for any Encumbrances created by this Agreement. Section 3.5 Authority; Validity of Agreement; Board of Directors Approvals Regarding Transactions. (a) Authority; Validity of Agreement. The Company has the corporate power and authority to execute and deliver this Agreement and to take all actions necessary or appropriate to consummate the Transactions. The execution and delivery of this Agreement and the consummation of the Transactions have been duly and validly approved by all requisite corporate action on the part of the Company, and no other corporate action on the part of the Company is necessary to authorize the execution and delivery of this Agreement or to consummate the Transactions. This Agreement has been duly and validly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or court of equity and by bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights and remedies generally. (b) Board of Directors Approvals Regarding Transactions. The Company Board of Directors, at a meeting duly called and held, has (i) unanimously determined that each of the Agreement and the Merger are fair to and in the best interests of the Shareholders, (ii) approved the Transactions, (iii) resolved to recommend that the Shareholders approve and adopt this Agreement and the Merger, and none of the aforesaid actions by the Company Board of Directors has been amended, rescinded or modified. No state takeover statute or control share acquisition statute is applicable to the Merger or the other Transactions. Section 3.6 Vote Required. The affirmative vote or written consent of the holders of a bare majority of the outstanding Shares is the only vote or written consent of the holders of any class or series of the Company's capital stock necessary to approve the Merger. No vote or written consent of any class or series of the Company's capital stock is necessary to approve any of the Transactions other than the Merger. Section 3.7 No Conflicts. The execution, delivery and performance of this Agreement by the Company will not result in (a) any conflict with or breach of the certificate of incorporation or by-laws of the Company or (b) assuming that the Consents referred to in Section 3.8 hereof are duly obtained, (i) any violation of any Applicable Law or (ii) any violation or breach of or constitute (with or without due notice or lapse of time or both) a default under any Contract to which the Company is a party or (c) the creation or imposition of any material Encumbrance (other than any Encumbrance created by or resulting from the actions of Parent, Merger Sub or any of their respective Affiliates), except, in the case of clauses (b) and (c), any Permitted Encumbrance or any such violation, breach, conflict, default or Encumbrance which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 3.8 Consents and Approvals. Except for Consents which, if not made or obtained, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, no Consents with any Governmental Authority or third party are necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the Transactions. Section 3.9 Compliance with Laws; Government Regulation; Company Filings. (a) Permits; Compliance with Applicable Law. The Company holds all licenses, franchises, permits, orders, approvals and authorizations (collectively, "Permits") necessary for the Company Business. All such Permits are in full force and effect and are not subject to any suspension, modification or revocation or proceedings related thereto. The Company is not in material violation of any Applicable Law relating to the Company or any of its assets, properties or operations and the Company has not received written notice asserting any such material violation by the Company. (b) The Advisers Act. The Company is, and at all times required by the Advisers Act since its incorporation has been, duly registered as an investment adviser under the Advisers Act. The Company is, and at all times required by Applicable Law (other than the Advisers Act) since its incorporation has been, duly registered, licensed or qualified as an investment adviser in each state or any other jurisdiction where the conduct of its business required such registration, licensing or qualification, except for any such failure to be so registered, licensed or qualified that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (c) Company Filings. The Company has filed all material registrations, reports, statements, notices and other material filings (including all filings on Form ADV) required to be filed with the SEC and any other Governmental Authority (other than a Taxing Authority) by the Company, including all material amendments or supplements to any of the above (the "Filings") since its incorporation. The Filings complied in all material respects, where applicable, with the requirements of Applicable Laws. The Company has made available to Parent complete and correct copies of (i) all Filings made since its incorporation, (ii) all audit or inspection reports received by the Company from the SEC or any other Governmental Authority (other than a Taxing Authority) since its incorporation and all written responses thereto made by the Company since its incorporation, (iii) copies of all inspection reports provided to the Company by the SEC or any other Governmental Authority (other than a Taxing Authority) since its incorporation and (iv) all correspondence relating to any investigation by the SEC or any other Governmental Authority (other than a Taxing Authority) since its incorporation provided to the Company by the SEC or such other Governmental Authority (other than a Taxing Authority). (d) Government Examinations. Except for normal examinations conducted by any Governmental Authority in the regular course of the Company Business, since the Company's incorporation, (i) no Governmental Authority has initiated any material administrative proceeding or investigation into the Company Business or Company's operations and (ii) the Company has not received any written notice of any unresolved violation or exception by any Governmental Authority with respect to any report or statement by any Governmental Authority relating to any examination of the Company. (e) Agreements with Governmental Authorities. The Company is not subject to any material cease-and-desist or other order issued by, or is a party to any material written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any material order or directive issued by, or is a recipient of any supervisory letter from or has adopted any board resolutions at the request of, any Governmental Authority that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business (each, whether or not set forth in the Company Disclosure Letter, a "Company Regulatory Agreement"), nor has the Company ever been advised since its conception by any Governmental Authority that it is considering issuing or requesting any such Company Regulatory Agreement. (f) Code of Ethics, Etc. The Company has adopted a formal code of ethics (to the extent required under applicable law) and a written policy regarding insider trading. Such code and policy comply, in all material respects, to the extent applicable thereto, with Section 204A of the Advisers Act, respectively. The policies of the Company with respect to avoiding conflicts of interest are as set forth in their most recent Form ADV (or incorporated by reference therein) (as applicable). As of the date hereof and to the knowledge of the Company, there have been no material violations or allegations of material violations of such policies that have occurred or been made. (g) Disqualification, Etc. Neither the Company nor, to the Company's knowledge, any person "associated" (as defined under the Advisers Act) with any Company, has for a period not less than five years prior to the date hereof been convicted of any crime or is or has been subject to any disqualification that would be a basis for denial, suspension or revocation of registration of an investment adviser under Section 203(e) of the Advisers Act or Rule 206(4)-4(b) thereunder or for disqualification as an investment adviser for any Registered Investment Company pursuant to Section 9(a) of the Investment Company Act, and to the Company's knowledge there is no basis for, or proceeding or investigation that is reasonably likely to become the basis for, any such disqualification, denial, suspension or revocation. Section 3.10 Real Property. Section 3.10 of the Company Disclosure Letter sets forth a complete list and the location of all Real Property owned or leased by the Company. Complete and correct copies of (i) all leases, deeds, title insurance policies and surveys relating to such Real Property and (ii) all documents evidencing all Encumbrances (other than Permitted Encumbrances) upon such Real Property have heretofore been furnished to Parent. Section 3.10 of the Company Disclosure Letter lists each material item of tangible personal property leased by the Company. The Company has valid and subsisting leasehold interests in the Real Property and tangible personal property listed on Section 3.10 of the Company Disclosure Letter as leased by it subject to no Encumbrance, except for Permitted Encumbrances. Each such tangible asset has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purpose for which it is currently used. The Company owns or has the right to use all of the properties and assets used in and which are necessary to the conduct of the Company Business as presently conducted. Section 3.11 Absence of Undisclosed Liabilities. The Company is not subject to any liabilities or obligations (whether absolute, accrued, contingent or otherwise) except obligations and liabilities that (a) were incurred in the ordinary course of business since the incorporation of the Company and (b) would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 3.12 Contracts. (a) Section 3.12 of the Company Disclosure Letter lists all Contracts in existence as of the date hereof, the annual revenue or cost to the Company, taken as a whole, of which exceeds $100,000 or which are not cancelable by the Company on notice of 60 days or less without penalty, complete copies of which, including all amendments and supplements thereto, have been made available to Parent. (b) No breach, default or event which constitutes or would (with the passage of time, notice or both) constitute a breach or default under any material Contract of the Company has occurred, or, assuming receipt of the appropriate Consents, will occur as a result of this Agreement or the performance by the Company of any of its covenants or obligations hereunder; and each such Contract is valid and binding on the Company and, assuming due authorization, execution and delivery by the other parties thereto, each such Contract is in full force and effect and is enforceable against the Company in accordance with its terms. (c) There are no agreements of the Company containing an unexpired covenant not to compete or similar restriction applying to the Company. There are no existing defaults (or circumstances or events that, with the giving of notice or lapse of time or both would become defaults) of the Company (or, to the knowledge of the Company, any other party thereto) under any such Contract, except for such defaults which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 3.13 Absence of Certain Changes. Since its incorporation date, except as permitted under this Agreement, the Company has conducted the Company Business in the ordinary course of business consistent with past practices, and there has not been (a) any change in its working capital, financial condition, results of operation or assets or liabilities which would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (b) any declaration, payment or setting aside for payment of any dividend or other distribution in respect of the capital stock of the Company, (c) any change in accounting methods or practices or (d) any agreement with respect to any of the foregoing. Section 3.14 Legal Proceedings. There are no Proceedings, claims, inquiries, actions or investigations pending or, to the knowledge of the Company, threatened in writing against the Company or any of its properties or assets which (i) would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or (ii) challenge the validity of the transactions contemplated by this Agreement. Section 3.15 Taxes. (a) The Company has (i) timely filed all income and other material Tax Returns required to be filed by it on or prior to the date of this Agreement and all such returns are true, correct and complete in all material respects and (ii) duly paid or made provisions for the payment of all material Taxes that have been incurred or are due or claimed to be due from it by any Taxing Authority other than Taxes which are not yet delinquent or are being contested in good faith. No federal, state, local or foreign audits, examinations, investigations or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns filed by or on behalf of the Company. (b) There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company. (c) The Company is not a party to any tax sharing, tax indemnity or other agreement or arrangement with any Person. (d) The Company has not taken or agreed to take any action, or failed to take any action, that is reasonably likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. The Company has no plan or intention to take (or fail to take) any action that could result in the Merger not qualifying as a reorganization within the meaning of Section 368(a) of the Code. Section 3.16 Employee Benefit Plans; ERISA. Except as set forth on Section 3.16 of the Company Disclosure Letter, the Company has (a) no material bonus, deferred compensation, incentive compensation, stock purchase, option, employment, consulting, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit-sharing, pension or retirement plan, program, agreement or arrangement, and (b) no other "employee benefit plan" (within the meaning of Section 3(3) of ERISA), whether formal or informal, written or oral and whether legally binding or not, that is maintained or contributed to or was maintained or contributed to at any time by the Company or any Company ERISA Affiliate for the benefit of any employee, former employee or consultant of the Company as to which the Company has any liability. Section 3.17 Technology Systems and Intellectual Property. (a) The Company owns or has the right to use all components of the Company Technology Systems that are reasonably necessary to the normal operations of the Company Business as currently conducted. The consummation of the Transactions will not materially alter or impair the ownership or right of the Surviving Corporation to use the components of the Company Technology Systems. (b) The Company owns the Company Intellectual Property free and clear of any Encumbrances other than Permitted Encumbrances. No Company Intellectual Property application or registration owned by the Company is the subject of any pending, existing or threatened opposition, interference, cancellation proceeding or other similar legal or governmental proceeding before any Governmental Authority. The conduct of the Company Business does not infringe in any material respect upon any intellectual property right owned or controlled by any third party. There are no material claims, proceedings or actions pending or, to the knowledge of the Company, threatened, and the Company has not received any notice of any claim or suit (i) alleging that the activities of the Company infringe upon or constitute the unauthorized use of the proprietary rights of any third party or (ii) challenging the ownership, use, validity or enforceability of any Company Intellectual Property owned or controlled by the Company, and, to the knowledge of the Company, no valid basis for any such claim or suit exists. To the knowledge of the Company, no third party is infringing upon any Company Intellectual Property owned by the Company and no such claims have been made by the Company. Section 3.18 Fund Filings, Etc. (a) The Company does not currently nor has it ever since inception provided Investment Advisory Services or Brokerage Services that are sponsored by the Company and/or for which the Company acts as a general partner, managing member or in a similar capacity to an Investment Company. (b) Each of the Company's officers, and employees which is or who are required to be registered as an investment adviser, a broker-dealer, a registered representative, a sales person or in any commodities-related capacity with the SEC, the securities commission, the National Futures Association, NASD, Inc. or any state or any SRO is duly registered as such and such registration is in full force and effect, except where the failure to be so registered or to have such registration in full force and effect would, individually or in the aggregate, not have a Company Material Adverse Effect. (c) There are no proceedings pending (or, to the knowledge of the Company, threatened, nor to the knowledge of the Company has any event occurred or does any condition exist that is reasonably likely to form the basis for any proceeding) that is reasonably likely to result in the revocation, cancellation or suspension, or any adverse modification, of any permit, license, certificate of authority, order or approval having a Company Material Adverse Effect, and the execution and delivery of this Agreement and the consummation of any transactions contemplated hereby will not result in any such revocation, cancellation, suspension or modification which, individually or in the aggregate, would have a Company Material Adverse Effect. (d) Since the Company's inception, there has existed no "out of balance" condition, pricing error or similar condition with respect to any customer account maintained by the Company, except for such conditions, individually or in the aggregate, as have since been rectified and have not had and would not have a Company Material Adverse Effect and, for the purposes of Section 6.2(a) in the case of any such event occurring after the date hereof, that is material to the Company. (e) The Company holds no registrations and licenses as (i) a broker-dealer under the Exchange Act or under any similar state or foreign laws, (ii) a futures commission merchant, commodities trading adviser, commodity pool operator or introducing broker under the Commodities and Futures Trading Act or under any similar state or foreign laws, (iii) an investment adviser under the Advisers Act or under any similar state or foreign laws (other than as set forth in Section 3.18 of the Company Disclosure Letter), (iv) a bank or trust company or (v) an insurance company. (f) The Company holds no memberships in and has not been granted trading privileges by any securities exchanges, commodities exchanges, boards of trade and similar organizations. Section 3.19 Investment Contracts and Clients. As of the date hereof, the Company does not provide, and since its inception has not provided, Investment Advisory Services or other services pursuant to Investment Contracts. Section 3.20 Books and Records. The books, records and accounts of the Company are maintained, in all material respects, in accordance with the requirements of Section 13(b)(2) of the Exchange Act (regardless of whether the Company is subject to that section), including the maintenance of a system of internal controls that provides reasonable assurance that (i) transactions are executed with management's authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of the Company and to maintain accountability for the Company's consolidated assets; (iii) access to the Company's assets is permitted only in accordance with management's authorization; (iv) the reporting of the Company's assets is compared with existing assets at reasonable intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. Section 3.21 Bank Holding Company Act; FDIC. The Company does not own or "control" (as defined in Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended, and the rules and regulations promulgated thereunder (the "BHCA")) a "bank" (as defined in Section 2(c) of the BHCA) or a "bank holding company" (as defined in Section 2(a)(i) of the BHCA). The Company is not an "insured depository institution" under the Federal Deposit Insurance Act. Section 3.22 Brokers. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, the Company in connection with this Agreement or the Transactions. Section 3.23 No Other Representations. Except for the representations and warranties contained in this Article III, neither the Company nor any other person or entity acting on behalf of the Company, makes any other representation or warranty, express or implied, with respect to the Company, the Company Business or the Transactions. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Except as set forth in the Parent Disclosure Letter prepared and signed by Parent and delivered to the Company simultaneously with the execution hereof, Parent and Merger Sub represent and warrant to the Company that all of the statements contained in this Article IV are correct and complete as of the date of this Agreement (or, if made as of a specified date, as of such date), and (except for any statement made as of a specified date) will be true and correct as of the Closing Date as though made on the Closing Date. Each exception set forth in the Parent Disclosure Letter and each other response to this Agreement set forth in the Parent Disclosure Letter is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement and relates only to such section, except to the extent that one portion of the Parent Disclosure Letter specifically refers to another portion thereof, identifying such other portion by section reference or similar specific cross reference. Section 4.1 Organization of Parent and Merger Sub. Each of Parent and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of its incorporation. Each of Parent and Merger Sub has the requisite corporate power and authority to carry on its business and to own, lease and operate all of its properties and assets, as now conducted, owned, leased or operated. Each of Parent and Merger Sub is duly qualified to do business in each jurisdiction in which the nature of its business or the character or location of the properties and assets owned, leased or operated by it makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Each of Parent and Merger Sub has made available to the Company complete and correct copies of its articles of incorporation or certificate of incorporation, as applicable, and by-laws, each as amended to the date of this Agreement and minutes (whether in draft or final form) of all meetings of their boards of directors or any committees thereof since January 1, 2000. Section 4.2 Capital Structure. The authorized capital stock of Parent is 60,000,000 shares of common stock, par value $0.01, of which 8,539,0211 shares are issued and outstanding, and 1,000,000 shares of preferred stock, par value $1.00, of which none are issued and outstanding, and 150,000 shares of preferred stock were designated as "Series A Junior Preferred Stock" and reserved for issuance upon exercise of the rights issued pursuant to that certain Rights Agreement, dated as of July 11, 1994, by and between Parent and Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights Agreement"). The authorized capital stock of Merger Sub is 100 shares of common stock, par value $0.01, of which 100 shares are issued and outstanding. All of the issued and outstanding shares of capital stock of each of Parent and Merger Sub have been duly authorized and validly issued and are fully paid and nonassessable. Except where provided by this Agreement, there are no outstanding options, warrants, calls, conversion or other rights, preemptive or similar rights, commitments, agreements, arrangements or undertakings of any kind to which any of Parent or Merger Sub is a party or by which either of them is bound, obligating Parent or Merger Sub to issue, deliver, purchase or sell, or cause to be issued, delivered, purchased or sold, any shares of capital stock of Parent or Merger Sub or obligating Parent or Merger Sub to issue, grant or enter into any such option, wan-ant, call, conversion or other right, commitment, agreement, arrangement or undertaking, and no authorization therefor has been given. Each of Parent and Merger Sub has no outstanding Voting Debt. Section 4.3 Subsidiaries. The authorized capital stock of each Subsidiary of Parent (other than Merger Sub) and the number of issued and outstanding shares of each such Subsidiary are set forth in Section 4.3 of the Parent Disclosure Letter. All such issued and outstanding shares are owned directly or indirectly by Parent, free and clear of all Encumbrances and have been duly authorized and validly issued and are fully paid and non-assessable. Each such Subsidiary (a) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its state of organization; (b) has full corporate or limited liability company power and authority to carry on its business as it is now being conducted and to own the properties and assets it now owns; and (c) is duly qualified or licensed to do business as a foreign corporation or limited liability company in good standing in each jurisdiction in which the failure to be so qualified or licensed would reasonably be expected to have a Parent Material Adverse Effect. No Subsidiary of parent has any outstanding Voting Debt. Section 4.4 Title to Shares of Capital Stock of Merger Sub. Parent is the record and beneficial owner of all the issued and outstanding shares of capital stock of Merger Sub, free and clear of all Encumbrances, except for any Encumbrances created by this Agreement. Section 4.5 Authority; Validity of Agreement; Board of Director Approvals Regarding Transactions. (a) Authority Validity of Agreements. Each of Parent and Merger Sub has the corporate power and authority to execute and deliver this Agreement and to take all actions necessary or appropriate to consummate the Transactions. The execution and delivery of this Agreement and the consummation of the Transactions have been duly and validly approved by all requisite corporate action on the part of each of Parent and Merger Sub, and no other corporate action on the part of Parent or Merger Sub is necessary to authorize the execution and delivery of this Agreement or to consummate the Transactions. This Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and, assuming due and valid authorization, execution and delivery by the Company, constitutes a valid and binding obligation of each of Parent and Merger Sub enforceable against each of Parent and Merger Sub in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or court of equity and by bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights and remedies generally. (b) Board of Directors Approvals Regarding Transactions. The Merger Sub Board of Directors, at a meeting duly called and held, has (i) unanimously determined that each of the Agreement and the Merger are fair to and in the best interests of Parent as the sole shareholder of Merger Sub, (ii) approved the Transactions, (iii) resolved to recommend that Parent as the sole shareholder of Merger Sub approve and adopt this Agreement and the Merger, and none of the aforesaid actions by the Merger Sub Board of Directors has been amended, rescinded or modified. Parent Board of Directors, at a meeting duly called and held, has (i) unanimously determined that each of the Agreement and the Merger are fair to and in the best interests of Parent as the sole shareholder of Merger Sub, (ii) approved the Transactions, (iii) resolved that Parent as the sole shareholder of Merger Sub approve and adopt this Agreement and the Merger, and none of the aforesaid actions by Parent Board of Directors has been amended, rescinded or modified. No state takeover statute or control share acquisition statute is applicable to the Merger or the other Transactions. Section 4.6 No Conflicts. The execution, delivery and performance of this Agreement by each of Parent and Merger Sub (including, without limitation, the issuance of the Merger Consideration) will not result in (a) any conflict with or breach of the certificate of incorporation or articles of incorporation, as applicable, or by-laws of Parent or Merger Sub or (b) assuming that the Consents referred to in Section 4.7 hereof are duly obtained, (i) any violation of any Applicable Law or (ii) any violation or breach of or constitute (with or without due notice or lapse of time or both) a default under any Contract to which Parent or Merger Sub is a party or (c) the creation or imposition of any material Encumbrance (other than any Encumbrance created by or resulting from the actions of the Company or any of its Affiliates), except, in the case of clauses (b) and (c), any Permitted Encumbrance or any such violation, breach, conflict, default or Encumbrance which would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Section 4.7 Consents and Approvals. Except for Consents which, if not made or obtained, would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, no Consents with any Governmental Authority or third party (including any consents of holders of shares of Parent capital stock) are necessary in connection with the execution and delivery by Parent or Merger Sub of this Agreement and the consummation of the Transactions. Section 4.8 Compliance with Laws; Government Regulation. (a) Permits; Compliance with Applicable Law. Parent holds all Permits necessary for the Parent Business. All such Permits are in full force and effect and are not subject to any suspension, modification or revocation or proceedings related thereto. Neither Parent nor any of its Subsidiaries is, and at all times since January 1, 2000 has been, in material violation of any Applicable Law relating to Parent or any of its Subsidiaries or any of their respective assets, properties or operations, and neither Parent nor any of its Subsidiaries has received written notice asserting any such material violation by Parent nor any of its Subsidiaries. (b) Investment Company. Parent is not, and at all times since January 1, 2000 except as set forth in Section 4.8(c) of the Parent Disclosure Letter has not been, and upon the consummation of the Transactions will not be, subject to registration as an "investment company" under the Investment Company Act of 1940, as amended. (c) Government Examinations. Except as set forth in Section 4.8(c) of the Parent Disclosure Letter and for normal examinations conducted by any Governmental Authority in the regular course of the Parent Business, since January 1, 2000, (i) no Governmental Authority has initiated any administrative proceeding or, to the knowledge of Parent, investigation into the Parent Business or operations of Parent or any of its Subsidiaries and (ii) neither Parent nor any of its Subsidiaries has received any written notice of any unresolved violation or exception by any Governmental Authority with respect to any report or statement by any Governmental Authority relating to any examination of Parent or any of its Subsidiaries. (d) Disqualification, Etc. Neither Parent nor, to Parent's knowledge, any person "associated" (as defined under the Advisers Act) with Parent, has for a period not less than five years prior to the date hereof been convicted of any crime or is or has been subject to any disqualification that would be a basis for denial, suspension or revocation of registration of an investment adviser under Section 203(e) of the Advisers Act or Rule 206(4)-4(b) thereunder or for disqualification as an investment adviser for any Registered Investment Company pursuant to Section 9(a) of the Investment Company Act, and to Parent's knowledge there is no basis for, or proceeding or investigation that is reasonably likely to become the basis for, any such disqualification, denial, suspension or revocation. Section 4.9 SEC Reports and Parent Financial Statements and Certifications; Internal Controls and Disclosure Controls. (a) SEC Reports and Parent Financial Statements. Parent has filed with the SEC, and has heretofore made available to the Company, complete and correct copies of, the Parent SEC Documents. As of their respective dates or, if amended, as of the date of the last such amendment filed prior to the date hereof, the Parent SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act, the Securities Act, and the Sarbanes-Oxley Act, as the case may be. Other than the Public Parent Subsidiary, no subsidiary of Parent, was in the last five years or, is required to file any forms, reports, schedules, statements or other documents with the SEC under the Exchange Act, the Securities Act or the Sarbanes-Oxley Act. The Parent Financial Statements have been prepared from, and are in accordance with, the books and records of Parent and its consolidated Subsidiaries, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited consolidated quarterly financial statements, as permitted by the instructions to Form 10Q promulgated pursuant to the Exchange Act) applied on a consistent basis during the period involved (except as may be stated in the notes thereto) and fairly present the consolidated financial position and the consolidated results of operations and cash flows (and changes in financial position, if any) of Parent and its consolidated Subsidiaries as of the times and for the periods referred to therein. (b) Certifications. No executive officer of Parent has failed in any respect to make the certifications required of such executive officer under Section 302 and Section 906 of the Sarbanes-Oxley Act. (c) Disclosure Controls and Procedures. Parent has in place the "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) required in order for the principal executive officer and principal financial officer of Parent to engage in the review and evaluation process mandated by the Exchange Act. Parent's "disclosure controls and procedures" are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to Parent's management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of Parent required under the Exchange Act with respect to such reports. (d) Off-Balance Sheet Arrangements. Section 4.9(d) of the Parent Disclosure Letter describes, and Parent has delivered to the Company complete and correct copies of all documents governing, all "off balance sheet arrangements" (as defined by item 303(a)(4) of Regulation S-K promulgated by the SEC) in respect of Parent or any of its Controlled Affiliates. Section 4.10 Books and Records. The books, records and accounts of the Parent and each of its Subsidiaries are maintained, in all material respects, in accordance with the requirements of Section 13(b)(2) of the Exchange Act (regardless of whether the Parent or its Subsidiaries are subject to that section), including the maintenance of a system of internal controls that provides reasonable assurance that (i) transactions are executed with management's authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of the Parent and to maintain accountability for the Parent's consolidated assets; (iii) access to the Parent's assets is permitted only in accordance with management's authorization; (iv) the reporting of the Parent's assets is compared with existing assets at reasonable intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. Section 4.11 Real Property. Section 4.11 of the Parent Disclosure Letter sets forth a complete list and the location of all Real Property owned or leased by Parent. Complete and correct copies of (i) all leases, deeds, title insurance policies and surveys relating to such Real Property and (ii) all documents evidencing all Encumbrances (other than Permitted Encumbrances) upon such Real Property have heretofore been furnished to the Company. Section 4.11 of the Parent Disclosure Letter lists each material item of tangible personal property leased by Parent. Each of Parent and its Subsidiaries has (a) valid and subsisting leasehold interests in the Real Property and tangible personal property listed on Section 4.11 of the Parent Disclosure Letter as leased by it and (b) legal and beneficial ownership of all of its tangible personal property included in the Parent Financial Statements dated as of March 31, 2004 (except for properties disposed of since such date in the ordinary course of business), in each case subject to no Encumbrance, except for Permitted Encumbrances. Each such tangible asset has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purpose for which it is currently used. Parent or its Subsidiaries own or have the right to use all of the properties and assets used in and which are necessary to the conduct of the Parent Business as presently conducted. Section 4.12 Absence of Undisclosed Liabilities. Neither Parent nor any of its Subsidiaries is subject to any liabilities or obligations (whether absolute, accrued, contingent or otherwise) except (a) obligations and liabilities reflected or reserved in the audited consolidated balance sheet included in the most recent Parent Financial Statements or (b) obligations and liabilities incurred in the ordinary course of business since the date of the audited consolidated balance sheet included in the most recent Parent Financial Statements that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Section 4.13 Contracts. Section 4.13 of the Parent Disclosure Letter lists all Contracts in existence as of the date hereof the annual revenue or cost to Parent or its Subsidiaries, taken as a whole, of which exceeds $l00,000 or which are not cancelable by Parent or any of its Subsidiaries on notice of 60 days or less without penalty (other than real property leases, labor or employment-related agreements and intellectual property licenses, which are provided for in Sections 4.11, 4.17 and 4.18, respectively), complete copies of which, including all amendments and supplements thereto, have been made available to the Company. (b) No breach, default or event which constitutes or would (with the passage of time, notice or both) constitute a breach or default under any such Contract, has occurred, or, assuming receipt of the appropriate Consents, will occur as a result of this Agreement or the performance by each of Parent and Merger Sub of any of its covenants or obligations hereunder; and each such Contract is valid and binding on Parent or, any Subsidiary of Parent that is a party thereto, and, assuming due authorization, execution and delivery by the other parties thereto, each such Contract is in full force and effect and is enforceable against Parent or any such Subsidiary, as the case may be, in accordance with its terms. (c) There are no agreements of Parent or any of its Subsidiaries containing an unexpired covenant not to compete or similar restriction applying to Parent or any such Subsidiary. There are no existing defaults (or circumstances or events that, with the giving of notice or lapse of time or both would become defaults) of Parent or any of its Subsidiaries (or, to the knowledge of Parent, any other party thereto) under any such Contract, except for such defaults which would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Section 4.14 Absence of Certain Changes. Since June 30, 2003, except as permitted under this Agreement, each of Parent and its Subsidiaries has conducted the Parent Business in the ordinary course of business consistent with past practices, and there has not been (a) any change in its working capital, financial condition, results of operation or assets or liabilities which would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, (b) any purchase or redemption or other acquisition by Parent or any of its Subsidiaries of any shares of capital stock of Parent or any of its Subsidiaries, (c) any declaration, payment or setting aside for payment of any dividend or other distribution in respect of the capital stock of Parent or any of its Subsidiaries, (d) any change in accounting methods or practices or any significant change in any of its Internal Controls or in other factors that could significantly affect any of its Internal Controls or (e) any agreement with respect to any of the foregoing. Section 4.15 Legal Proceedings. There are no Proceedings, claims, inquiries, actions or investigations pending or, to the knowledge of Parent, threatened in writing against Parent or any of its Subsidiaries or any of their respective properties or assets which (i) would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect or (ii) challenge the validity of the Transactions. Section 4.16 Taxes. (a) Each of Parent and its Subsidiaries has (i) timely filed all income and other material Tax Returns required to be filed by it on or prior to the date of this Agreement and all such returns are true, correct and complete in all material respects and (ii) duly paid or made provisions for the payment of all material Taxes that have been incurred or are due or claimed to be due from it by any Taxing Authority other than Taxes which are not yet delinquent or are being contested in good faith. No federal, state, local or foreign audits, examinations, investigations or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns filed by or on behalf of Parent or any of its Subsidiaries. (b) There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against Parent or any of its Subsidiaries. (c) Neither Parent nor any of its Subsidiaries is a party to any tax sharing, tax indemnity or other agreement or arrangement with any Person. (d) Neither Parent nor any of its Subsidiaries has taken or agreed to take any action, or failed to take any action, that is reasonably likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Neither Parent nor any of its Subsidiaries has any plan or intention to take any action (or fail to take any action) that could result in the Merger not qualifying as a reorganization within the meaning of Section 368(a) of the Code. Section 4.17 Employee Benefit Plans: ERISA. (a) Section 4.17(a) of the Parent Disclosure Letter sets forth a true and complete list of each bonus, deferred compensation, incentive compensation, stock purchase, option and other equity compensation, employment, consulting, retention, severance or termination pay, surgical, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit-sharing, stock bonus, pension or retirement plan, fund, program, agreement or arrangement, and each other "employee benefit plan" (within the meaning of Section 3(3) of ERISA), whether formal or informal, written or oral and whether legally binding or not, that is sponsored, maintained or contributed to or was sponsored, maintained or contributed to at any time by Parent, any of its Subsidiaries or any Parent ERISA Affiliate for the benefit of any employee, former employee, consultant or director of Parent or any of its Subsidiaries or as to which Parent or such Subsidiary has any liability (a "Plan"). (b) With respect to each Plan, Parent has made available to the Company true and complete copies of each of the following documents: (i) a copy of the Plan (including all amendments thereto) or if the Plan is not a written Plan, a description thereof; (ii) a copy of any annual report required under ERISA or other Applicable Law with respect to each such Plan for the most recently completed plan year; (iii) a copy of any actuarial report required under ERISA or other Applicable Law with respect to each such Plan for the recently completed plan year; (iv) a copy of the most recent summary plan description; (v) if the Plan is funded through a trust or any third party funding vehicle, a copy of the trust or other funding agreement (including all amendments thereto) and the most recent financial statement related thereto; (vi) all contracts relating to any Plan with respect to which Parent or any of its Subsidiaries has any material liability; and (vii) the most recent determination letter received from the Internal Revenue Service with respect to each Plan that is intended to be qualified under Section 401 of the Code. (c) (i) No Plan is a "multiemployer plan," as such term is defined in Section (3)(37) of ERISA and no Plan is subject to Title IV of ERISA; (ii) each Plan has been operated and administered in all respects in accordance with the requirements of all Applicable Law except for any such failure that could not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect; (iii) each of the Plans intended to be "qualified" within the meaning of Section 40 1(a) of the Code is so qualified and no Plan has an accumulated or waived funding deficiency within the meaning of Section 412 of the Code; (iv) each Plan intended to satisfy the requirements of Section 501 (c)(9) of the Code has satisfied such requirements; (v) neither Parent, any of its Subsidiaries, any Parent ERISA Affiliate, any Plan, any trust created thereunder, nor any trustee or administrator thereof has engaged in a transaction in connection with which Parent, any of its Subsidiaries, any Parent ERISA Affiliate, any Plan, any such trust, or any trustee or administrator thereof, or any party dealing with any Plan or any such trust could be subject to either a civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4975 or 4976 of the Code; (vi) neither Parent, any of its Subsidiaries nor a Parent ERISA Affiliate has incurred, directly or indirectly, any liability (including any material contingent liability) pursuant to Title IV of ERISA that has not been satisfied in full and no condition exists that presents a material risk to Parent, any such Subsidiary, or any Parent ERISA Affiliate of incurring such liability or contingent liability; and (vii) neither Parent, any of its Subsidiaries nor any Parent ERISA Affiliate made, or was required to make, contributions to any plan subject to Title IV of ERISA (a "Title IV Plan") during the six year period ending on the last day of the most recent Title IV Plan year ended prior to the Closing Date. (d) No Plan provides benefits, including, without limitation, death, surgical, hospitalization, or medical benefits (whether or not insured), with respect to current or former employees of Parent or any of its Subsidiaries for periods extending beyond their retirement or other termination of service other than (i) coverage required to be provided under Applicable Law, (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on the books of Parent or any of its Subsidiaries or a Parent ERISA Affiliate or (iv) benefits the full cost of which is borne by the current or former employee (or his beneficiary). (e) There are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Plans by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan. (f) The consummation of the Transactions will not, either alone or in combination with another event, (i) entitle any current or former employee, director or officer of Parent or any of its Subsidiaries to severance pay, unemployment compensation or any other similar payment, or (ii) accelerate the time of payment or vesting or increase the amount of compensation due any such employee. (g) No amounts payable under the Plans will fail to be deductible for federal income tax purposes by virtue of section 280G of the Code. Section 4.18 Technology Systems and Intellectual Property. (a) Parent and its Subsidiaries, taken as a whole, own or have the right to use all components of the Parent Technology Systems that are reasonably necessary to the normal operations of the Parent Business. The consummation of the Transactions will not materially alter or impair the ownership or right of Parent and its Subsidiaries, taken as a whole, to use the components of the Parent Technology Systems. (b) Parent and its Subsidiaries, taken as a whole, own the Parent Intellectual Property free and clear of any Encumbrances other than Permitted Encumbrances. No Parent Intellectual Property application or registration owned by Parent or any of its Subsidiaries is the subject of any pending, existing or threatened opposition, interference, cancellation proceeding or other similar legal or governmental proceeding before any Governmental Authority. The conduct of the Parent Business does not infringe in any material respect upon any intellectual property right owned or controlled by any third party. There are no material claims, proceedings or actions pending or, to the knowledge of Parent, threatened, and neither Parent nor any of its Subsidiaries has received any notice of any claim or suit (i) alleging that the activities of Parent or any of its Subsidiaries infringe upon or constitute the unauthorized use of the proprietary rights of any third party or (ii) challenging the ownership, use, validity or enforceability of any Parent Intellectual Property owned or controlled by Parent or any of its Subsidiaries, and, to the knowledge of Parent, no valid basis for any such claim or suit exists. To the knowledge of Parent, no third party is infringing upon any Parent Intellectual Property owned by Parent or any of its Subsidiaries and no such claims have been made by Parent or any of its Subsidiaries. Section 4.19 Insurance. All insurance policies and indemnity bonds of Parent or any of its Subsidiaries in effect as of the date hereof are listed in Section 4.19 of the Parent Disclosure Letter. Each such insurance policy or bond is in full force and effect, and neither Parent nor any of its Subsidiaries has received written notice from any insurer or agent of any intent to cancel any such insurance policy or bond. Section 4.20 Affiliate Transactions. Section 4.20 of the Parent Disclosure Letter sets forth a correct and complete list of all Contracts in effect as of the date hereof between Parent or any of its Subsidiaries, on the one hand, and any Affiliate of Parent or any of its Subsidiaries or officer, director or shareholder of Parent or any of its Subsidiaries or any such Affiliate, on the other hand. A complete and correct copy of each such Contract has been made available to the Company. Neither Parent nor any if its Subsidiaries has any personal loan outstanding, and since July 30, 2002 has not extended or maintained credit, or arranged for the extension of credit, to any director or executive officer (within the meaning of Section 402 of the Sarbanes-Oxley Act). Section 4.21 Brokers. Other than Ryan Beck & Co., the fees and expenses of which will be paid by Parent, no broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, Parent or any of its Subsidiaries in connection with this Agreement or the Transactions. Section 4.22 Share Ownership. None of Parent, Merger Sub or any of their respective Affiliates or Associates beneficially owns any Shares. Section 4.23 Merger Sub's Operations. Merger Sub was formed solely for the purpose of engaging in the Transactions and has not engaged in any business activities or conducted any operations other than in connection with the Transactions. Section 4.24 No Other Representations. Except for the representations and warranties contained in this Article IV, neither Parent, Merger Sub nor any other person or entity acting on their behalf, makes any other representation or warranty, express or implied, with respect to Parent or any of its Subsidiaries, the Parent Business or the Transactions. ARTICLE V COVENANTS Section 5.1 Interim Operations. (a) Interim Operations of the Company. The Company covenants and agrees that prior to the Effective Time, except (1) as expressly contemplated by this Agreement, (2) as set forth in Section 5.1 of the Company Disclosure Letter, or (3) as agreed in writing by Parent, after the date hereof, the Company Business shall be conducted only in the usual, regular and ordinary course and substantially in the same manner as heretofore conducted, and the Company shall use its best efforts to preserve its business organization intact. (b) Interim Operations of Parent. Parent covenants and agrees that prior to the Effective Time, except (1) as expressly contemplated by this Agreement, (2) as set forth in Section 5.1 of the Parent Disclosure Letter, or (3) as agreed in writing by the Company, after the date hereof, the Parent Business shall be conducted only in the usual, regular and ordinary course and substantially in the same manner as heretofore conducted, and each of Parent and its Subsidiaries shall use its best efforts to preserve its business organization intact. Section 5.2 Access and Confidentiality. (a) The Company. The Company shall afford to the officers, employees, accountants, counsel, and other representatives of Parent, full access during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, the Company shall furnish promptly to Parent all information concerning its business, properties and personnel as Parent may reasonably request. Until the Effective Time, unless otherwise required by Applicable Law, Parent shall hold any such information which is nonpublic in confidence. (b) Parent. Parent shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel, and other representatives of the Company, full access during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, Parent shall (and shall cause each of its Subsidiaries to) furnish promptly to the Company (i) a copy of each Parent SEC Document filed or received by it during such period, and (ii) all other information concerning its business, properties and personnel as the Company may reasonably request. Access shall include the right to conduct such environmental studies as the Company, in its discretion, shall deem appropriate. Until the Effective Time, unless otherwise required by Applicable Law, the Company shall hold any such information which is nonpublic in confidence. Section 5.3 Reasonable Best Efforts. (a) Prior to the Closing, upon the terms and subject to the conditions of this Agreement, Parent, Merger Sub and the Company agree to use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable (subject to any Applicable Law) to consummate and make effective the Merger and the other Transactions as promptly as practicable including (i) the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the other Transactions and the taking of such actions as are necessary to obtain any requisite approvals, consents, orders, exemptions or waivers by any third party or Governmental Authority, and (ii) the satisfaction of the other parties' conditions to Closing. In addition, no party hereto shall take any action after the date hereof that would reasonably be expected to materially delay the obtaining of, or result in not obtaining, any permission, approval or consent from any Governmental Authority necessary to be obtained prior to Closing. (b) Prior to the Closing, each party shall promptly consult with the other parties hereto with respect to, provide any necessary information with respect to, and provide the other parties (or their respective counsel) with copies of, all filings made by such party with any Governmental Authority or any other information supplied by such party to a Governmental Authority in connection with this Agreement, the Merger and the other Transactions. Each party hereto shall promptly inform the other of any communication from any Governmental Authority regarding any of the Transactions. If any party hereto or Affiliate thereof receives a request for additional information or documentary material from any such Governmental Authority with respect to any of the Transactions, then such party shall endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other parties, an appropriate response in compliance with such request. To the extent that transfers, amendments or modifications of permits (including environmental permits) are required as a result of the execution of this Agreement or consummation of any of the Transactions, each party shall use its best efforts to effect such transfers, amendments or modifications. (c) Notwithstanding the foregoing, nothing in this Agreement shall be deemed to require any party to commence any litigation against any entity in order to facilitate the consummation of any of the Transactions or to defend against any litigation brought by any Governmental Authority seeking to prevent the consummation of any of the Transactions. Section 5.4 [Intentionally Omitted] Section 5.5 [Intentionally Omitted] Section 5.6 Transfer of Shareholders' Shares. The Company hereby waives any rights the Company may have under any agreement or otherwise to object to the transfer to Merger Sub or Parent of any or all Shares held by the Shareholders and hereby covenants not to consent to the transfer of any Shares held by the Shareholders to any other Person unless (i) the Company will have obtained the specific, prior written consent of Parent with respect to any such transfer or (ii) this Agreement will have been terminated pursuant to Article VII. Section 5.7 Publicity. The initial press release with respect to the execution of this Agreement shall be a joint press release acceptable to Parent and the Company. Thereafter, until the Closing Date, or the date the Transactions are terminated or abandoned pursuant to Article VII, neither the Company, Parent nor any of their respective Affiliates shall issue or cause the publication of any press release or other announcement with respect to the Merger, this Agreement or the other Transactions without prior consultation with each other party, except as may be required by Applicable Law or by any listing agreement with a national securities exchange or trading market. Section 5.8 Notification of Certain Matters. Each party shall give prompt notice to the other parties of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time, and (ii) any material failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 5.9 Merger Sub Compliance. Parent shall cause Merger Sub to comply with all of its obligations under or related to this Agreement. Section 5.10 Advisory Agreements. (a) As soon as reasonably practicable following the date hereof (unless otherwise performed prior hereto), the Company shall send a notice to each Client informing such Client of the Merger and either: (i) (A) informing such Client that SPS intends to assign such Client's investment advisory agreement to the Company and that the Company intends to continue to provide investment advisory services to such Client in accordance with the Client's investment advisory agreement with SPS, (B) requesting such Client to consent to such assignment and (C) informing such Client that the consent of such Client will be deemed to have been granted if such Client continues to accept such investment advisory services for a period of at least thirty (30) days after the sending of such notice unless such Client requests the termination of such investment advisory services (the "Negative Consent Notice") or (ii) requesting such Client deliver an instruction to SPS and the Company regarding the transfer of such Client's account to the Company and informing such Client of any other actions required to transfer the management of such Client's investment advisory account to the Company (the "Affirmative Consent Notice"). (b) The parties hereto agree that a Client's consent shall be deemed given for all purposes hereunder (and that such Client shall be a "Consenting Client" for purposes of Exhibit I hereto), (A) in the case of any Client that received the Negative Consent Notice, (i) if the written consent requested in such notice is received or (ii) if the written consent requested in such notice is not received within thirty (30) days of the sending of such notice to the Client, unless such Client shall have affirmatively stated to the Company that it does not so consent or that it intends to terminate its investment advisory account with the Company, (B) in the case of any Client that received the Affirmative Consent Notice, upon receipt of the instruction requested by such notice by either the Company or SPS from such Client and (C) in the case of any Client that received either the Negative Consent Notice or the Affirmative Consent Notice, (i) upon such Client entering into an investment advisory agreement with the Company, (ii) upon such Client otherwise affirmatively consenting in writing to the assignment of its investment advisory agreement from SPS to the Company or (iii) upon such Client otherwise providing evidence showing its clear intention to transfer its investment advisory account from SPS to the Company. (c) Without limiting the foregoing, with respect to each Client that is an Investment Company but not registered as an investment company under the Investment Company Act, the Company shall use its reasonable best efforts to obtain in accordance with the constituent documents of such Investment Company and applicable law, as promptly as practicable following the date hereof, the consent and approval (as applicable) of any governing body of such Investment Company and of its investors required by such constituent documents and applicable law of either (a) the continuation of each Investment Contract between the Company and such Investment Company to the assignment or deemed assignment of such Investment Contract as a result of the Merger (to the extent any such agreement may continue in effect following the Merger with such consent) or (b) a new Investment Contract and a replacement of any other existing agreement between the Company and such Investment Company, to the extent the existing advisory agreement and/or any other such existing agreement will terminate as a result of the Merger) (in each case to be in effect as of, and subject to, the Closing) on terms substantially identical (and identical with respect to fee rates) to the terms of the Company's existing Investment Contract and other applicable agreement with such Investment Company. The manner of consent and approval solicited with respect to each such Investment Company that is not a Registered Investment Company shall be reasonably acceptable to Parent, and all solicitation and related materials distributed in connection with the consents and approvals described in this paragraph shall be in form and substance reasonably acceptable to Parent and Parent shall be provided a reasonable opportunity to review all such solicitation and related materials prior to distribution and to have its reasonable comments reflected therein. Section 5.11 Tax Matters. Parent and the Company shall use reasonable best efforts to cause the Merger to qualify as a "reorganization" within the meaning of Section 3 68(a) of the Code. This Agreement is intended to constitute a "plan of reorganization" within the meaning of Treas. Reg. Section 1.368-2(g). Parent shall not take or fail to take, and shall cause its Affiliates (including after the Effective Time, the Company) not to take or fail to take, any action that could result in the Merger not qualifying as a reorganization within the meaning of Section 368(a) of the Code. Parent shall not take or fail to take, and shall cause its Affiliates (including after the Effective Time, the Company) not to take or fail to take, any position on any Federal, state or local income Tax Return or franchise Tax Return, or any other reporting position, that is inconsistent with the treatment of the Merger as a reorganization within the meaning of Section 368(a) of the Code, or any of the representations set forth in Section 4.16(d) hereof, unless otherwise required by a decision of the Tax Court or a judgment, decree or other order by any court of competent jurisdiction, which has become final or non-appealable, or by applicable state or local income or franchise Tax law. ARTICLE VI CONDITIONS Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any and all of which may be waived in whole or in part by the Company, Parent or Merger Sub, as the case may be, to the extent permitted by Applicable Law: (a) Shareholder Approval. This Agreement shall have been approved and adopted by the unanimous vote of the holders of the Shares; and (b) No Legal Prohibition, Etc. No order, injunction, judgment or decree issued by any court or other Governmental Authority or other legal restraint or prohibition preventing the consummation of the Merger or the Transactions shall be in effect, no Proceeding initiated by any Governmental Authority shall be pending or threatened that seeks (i) to restrain, enjoin or otherwise prevent or prohibit the consummation of the Merger or the Transactions or (ii) to recover any material damages or other material relief as a result of the consummation of the Merger or the Transactions, and no law shall have been enacted, entered, promulgated or enforced by any court or Governmental Authority that prohibits, restricts or makes illegal the consummation of the Merger or the Transactions. Section 6.2 Conditions to Parent's and Merger Sub's Obligations to Effect the Merger. The obligations of Parent and Merger Sub to consummate the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by Parent and Merger Sub, to the extent permitted by Applicable Law: (a) Representations and Warranties. The representations and warranties of the Company set forth in Article III shall be true in all material respects on the date of this Agreement and as of the Effective Time; (b) Covenants. The Company shall have complied in all material respects with its obligations under the terms of this Agreement; (c) Stockholders Agreement. The Stockholders Agreement, by and among the Shareholders and the other parties thereto, substantially in the form of Annex C hereto (the "Stockholders Agreement"), shall have been duly executed and delivered by the Shareholders; (d) Registration Rights Agreement. The Registration Rights Agreement, by and among the Shareholders and the other parties thereto, substantially in the form of Annex D hereto (the "Registration Rights Agreement"), shall have been duly executed and delivered by the Shareholders; and (e) Consent. The Company shall have received and delivered to Parent an Affirmative Consent Notice from CI Mutual Funds Inc. Section 6.3 Conditions to Company's Obligations to Effect the Merger. The obligations of the Company to consummate the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Company, to the extent permitted by Applicable Law: (a) Representations and Warranties. The representations and warranties of each of Parent and Merger Sub set forth in Article IV shall be true in all material respects on the date of this Agreement and as of the Effective Time; (b) Covenants. Each of Parent and Merger Sub shall have complied in all material respects with its obligations under the terms of this Agreement; (c) Opinion. The Company shall have received the legal opinion of McDonald, Carano, Wilson, McCune, Bergin, Frankovich & Hicks LLP, Nevada counsel to Parent, substantially in the form attached hereto as Annex B; (d) Stockholders Agreement. The Stockholders Agreement shall have been duly executed and delivered by each party thereto other than the Shareholders; and (e) Registration Rights Agreement. The Registration Rights Agreement shall have been duly executed and delivered by each party thereto other than the Shareholders. ARTICLE VII TERMINATION Section 7.1 Termination. The Transactions may be terminated or abandoned at any time prior to the Effective Time, whether before or after shareholder approval thereof: (a) By the mutual written consent of Parent and the Company. (b) By either of the Company or Parent: (i) if any Governmental Authority shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the consummation of the Merger or the Transactions; or (ii) if the Closing has not occurred on or before the Business Day following the date of this Agreement. (c) By the Company if Parent or Merger Sub shall have breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which breach cannot be or has not been cured within one Business Day after the giving of written notice by the Company to Parent or Merger Sub, as applicable. (d) By Parent if the Company shall have breached in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach cannot be or has not been cured within one Business Day after the giving of written notice by Parent to the Company. Section 7.2 Effect of Termination. In the event of the termination or abandonment of the Transactions by any party hereto pursuant to the terms of this Agreement, (i) written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination or abandonment of the Transactions is made, and (ii) this Agreement shall immediately become void and there shall be no liability on the part of Parent, Merger Sub or the Company except (A) for fraud or for breach of this Agreement prior to such termination or abandonment of the Transactions and (B) as set forth in (1) the last sentence of each of Section 5.2(a) and Section 5.2(b), (2) this Section 7.2, and (3) Section 9.1 and the remainder of Article IX (other than Section 9.3) to the extent applicable to each surviving section. ARTICLE VIII DEFINITIONS AND INTERPRETATION Section 8.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context clearly requires otherwise: "Advisers Act" shall mean the Investment Advisers Act of 1940, as amended, and the rules and regulations of the SEC thereunder. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. "Affirmative Consent Note" shall have the meaning set forth in Section 5.10. "Agreement" or "this Agreement" shall mean this Agreement and Plan of Merger, together with the Exhibits and Appendices hereto and the Disclosure Letters. "Applicable Law" shall mean any domestic or foreign federal, state or local statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment or decree applicable to the parties or any of their respective Affiliates or any of the properties or assets of any such Person, as the case may be. "Associate" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. "Base Date" means April 30, 2004. "BHCA" shall have the meaning set forth in Section 3.23. "Brokerage Services" shall mean acting as a broker-dealer within the meaning of the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banks in the State of Delaware are generally closed for regular banking business. "Client List" means the list of clients attached as Exhibit I to the Company Disclosure Letter. "Client" means any Person listed on the Client List. "Closing" shall mean the closing referred to in Section 1.3. "Closing Date" shall mean the date on which the Closing occurs. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall have the meaning set forth in the introductory paragraph to this Agreement. "Company Board of Directors" shall mean the board of directors of the Company. "Company Business" shall mean the business of the Company in rendering investment advisory, investment management and related services for compensation. "Company Disclosure Letter" shall mean the letter of even date herewith prepared and signed by the Company and delivered to Parent simultaneously with the execution hereof. "Company ERISA Affiliate" shall mean any trade or business, whether or not incorporated, that together with the Company would be deemed a "single employer" within the meaning of Section 4001(b) of ERISA. "Company Intellectual Property" shall mean all material domestic and foreign copyrights, patents, proprietary models, processes, formulas and databases, client lists, service marks, Software, know-how, trade names, trademarks and trade secrets, which are used by the Company for the Company Business, all registrations or applications for registration of any of the foregoing and all licenses and agreements pursuant to which the Company has acquired rights in or to any of the foregoing. "Company Regulatory Agreement" shall have the meaning set forth in Section 3.21. "Company's knowledge" or" knowledge of the Company" shall mean the knowledge that the directors and officers of the Company and the employees, if any, of the Company having responsibility for the particular subject matter at issue have or would possess after reasonable investigation and inquiry. "Company Material Adverse Effect" shall mean any effect (a) that is material and adverse to the business, assets, revenues, financial condition, results of operations or assets under management of the Company, or (b) which is reasonably likely to prevent the Company from consummating the transactions contemplated by this Agreement; provided that declines in U.S. or global securities markets, currency fluctuations or industry or economic conditions in general, or changes in the asset management industry generally, shall be excluded from any determination as to the occurrence of a Company Material Adverse Effect. "Company Technology Systems" shall mean all material electronic data processing, information, record-keeping, communications, telecommunications, portfolio trading and computer systems (including Software) which are used in the Company Business, excluding commercially available off-the-shelf software. "Consent" shall mean any filings, notices, consents or approvals (including negative consents) from any Governmental Authority or third party that are necessary in connection with (a) the execution and delivery of this Agreement and (b) the consummation of the Transactions. "Contract" shall mean any agreement, indenture, undertaking, debt instrument, contract, guarantee, loan, note, mortgage, arrangement, license, lease or other commitment relating to the ownership of or use by any Person of any of its properties or assets or relating to the conduct of its businesses to which such Person is a party at any specified date, including, in the case of Contracts of the Company, any Investment Management Agreement. "Control" or "Controlled" means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise. For purposes of this definition, a general partner or managing member of a Person shall always be considered to Control such Person. "DGCL" shall have the meaning set forth in the recitals to this Agreement. "Disclosure Letters" shall mean the Company Disclosure Letter and the Parent Disclosure Letter. "Dissenting Shares" shall mean any Shares as to which the holder thereof has demanded appraisal with respect to the Merger in accordance with Section 262 of the DGCL and as of the Effective Time has neither effectively withdrawn nor lost his right to such appraisal. "Effective Time" shall mean the date on which the certificate of merger referred to in Section 1.2 is duly filed with the Secretary of State of the State of Delaware or such other time as is agreed upon by the parties and specified in such certificate of merger. "Encumbrance" shall mean any mortgage, pledge, hypothecation, rights of others, claim, security interest, encumbrance, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, charge, easement encroachments or other conditions, commitments, restrictions or limitations of any nature whatsoever. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Escrow Consideration" shall have the meaning set forth in Exhibit I. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the SEC thereunder. "GAAP" shall mean generally accepted accounting principles as used in the United States of America as in effect at the time any applicable financial statements were prepared or any act requiring the application of GAAP was performed. "Governmental Authority" shall mean any government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC or any other government authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any governmental or non-governmental self-regulatory organization, agency or authority. "Indemnified Person" shall mean each present and former officer and director of the Company, Parent or any of Parent's Subsidiaries as of the Effective Time. "Internal Controls" shall have the meaning set forth in Section 4.10(b). "Investment Advisory Services" shall mean acting as an investment advisor within the meaning of the Advisers Act. "Investment Company" shall have the meaning provided in the Investment Company Act; provided, however that for purposes of this Agreement the term Investment Company shall include persons that would be an investment company, as defined in the Investment Company Act, but for the exemption contained in Section 3(c)(i), the final clause of Section 3(c)(3) or Section 3(c)(7) of the Investment Company Act. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder. "Investment Contract" shall mean each contract or agreement in effect on the date hereof to which the Company is a party pursuant to which the Company provides to any Client investment advisory, distribution, brokerage, trust, other fiduciary or administrative services. "Investment Management Agreements" shall mean all agreements and arrangements for the performance of investment advisory, investment management or investment sub-advisory services for any Client. "IRS" shall mean the Internal Revenue Service. "Merger" shall mean the merger of Merger Sub into the Company referred to in Section 1.1. "Merger Consideration" shall have the meaning set forth in Section 2.1(c). "Merger Sub" shall have the meaning set forth in the introductory paragraph to this Agreement. "Merger Sub Common Stock" shall mean common stock, par value 0.01 per share, of Merger Sub. "Negative Consent Notice" shall have the meaning set forth in Section 5.10. "NGCL" shall have the meaning set forth in the recitals to this Agreement. "Parent" shall have the meaning set forth in the introductory paragraph to this Agreement. "Parent Business" shall mean the business conducted by Parent or its Subsidiaries as of March 31, 2004. "Parent Common Stock" shall mean shares of common stock par value $0.01 per share, of Parent. "Parent Disclosure Letter" shall mean the disclosure schedule of even date herewith prepared and signed by Parent and Merger Sub and delivered to the Company simultaneously with the execution hereof. "Parent ERISA Affiliate" shall mean any trade or business, whether or not incorporated, that together with Parent or any of its Subsidiaries would be deemed a "single employer" within the meaning of Section 400 1(b) of ERISA. "Parent Financial Statements" shall mean the consolidated financial statements of Parent and its consolidated subsidiaries included in the Parent Group SEC Documents. "Parent Intellectual Property" shall mean all material domestic and foreign copyrights, patents, proprietary models, processes, formulas and databases, client lists, service marks, Software, know-how, trade names, trademarks and trade secrets, which are used by Parent or any of its Subsidiaries for the Parent Business, all registrations or applications for registration of any of the foregoing and all licenses and agreements pursuant to which Parent or any of its Subsidiaries has acquired rights in or to any of the foregoing. "Parent Material Adverse Effect" shall mean any effect (a) that is material and adverse to the business, assets, financial condition or results of operations of Parent, Merger Sub or their Affiliates, taken as a whole, or (b) which is reasonably likely to prevent Parent or Merger Sub from consummating the Transactions; provided that declines in U.S. or global securities markets, currency fluctuations or industry or economic conditions in general shall be excluded from any determination as to the occurrence of a Parent Material Adverse Effect. "Parent Option" shall mean an option to purchase shares of Parent Common Stock. "Parent SEC Documents" shall mean each form, report, schedule, statement, certification and other document required to be filed by Parent since January 1, 2001 under the Exchange Act, the Securities Act, and the Sarbanes-Oxley Act (including without limitation all certifications and statements required by Rule 13 a14 or 15d-14 under the Exchange Act and Section 906 of the Sarbanes-Oxley Act), including any amendment to such document, whether or not such amendment is required to be so filed. "Parent Technology Systems" shall mean all material electronic data processing, information, record-keeping, communications, telecommunications, portfolio trading and computer systems (including Software) which are used in the Parent Business, excluding commercially available off-the-shelf software. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "Permits" has the meaning set forth in Section 3.9. "Permitted Encumbrances" shall mean, as to any Person, all Encumbrances which are: (1) for Taxes or assessments that are not yet due and payable or which are being contested in good faith and by appropriate proceedings; (2) Encumbrances or pledges to secure payments of workmen's compensation and other payments, unemployment and other insurance, old-age pensions or other social security obligations, or the performance of bids, tenders, leases, contracts, public or statutory obligations, surety, stay or appeal bonds, or other similar obligations arising in the ordinary course of business; (3) workmen's, repairmen's, warehousemen's, vendors' or carriers' Encumbrances or other similar Encumbrances arising in the ordinary course of business or deposits or pledges to obtain the release of any such Encumbrances; (4) statutory landlords' Encumbrances under leases to which such Person is a party; (5) any Encumbrance constituting a renewal, extension or replacement of an Encumbrance constituting a Permitted Encumbrance; (6) leases or subleases granted to other Persons not materially interfering with the conduct of the Business; (7) zoning restrictions, easements, rights of way, licenses and restrictions on the use of Real Property or minor irregularities in title thereto; (8) statutory or common law Encumbrances (such as rights of setoff) on deposit accounts of such Person; (9) Encumbrances set forth, described in or established by any Contract pursuant to which such Person has leased, licensed or obtained an ownership interest or any other right to use any property of another Person; (10) Encumbrances which do not materially impair the use of the asset or property to which it relates; and (11) Encumbrances disclosed in any Disclosure Letter hereto delivered in connection with the execution and delivery hereof or in the text accompanying the Parent Financial Statements. "Plan" has the meaning set forth in Section 4.17(a). "Per Share Initial Stock Consideration" shall have the meaning set forth in Exhibit I. "Person" shall mean a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity or organization. "Proceeding" means any civil, criminal, arbitral, administrative or other proceeding, investigation or dispute with any Governmental Authority in relation to the business, assets or affairs of Parent or any of its Subsidiaries. "Real Property" shall mean all real property, appurtenances thereto, fixtures and improvements, rights in connection therewith, or any interest therein, including, without limitation, leasehold estates. "Registration Rights Agreement" shall have the meaning set forth in Section 6.2(d). "Sarbanes-Oxley Act" shall mean the Sarbanes-Oxley Act of 2002, as amended, and any law enacted or promulgated pursuant or relating thereto. "SEC" shall mean the United States Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder. "Senior Manager" shall mean members of senior management of Parent or its Subsidiaries. "Shareholder Agreement" shall have the meaning set forth in Section 6.2(c). "Shareholders" shall mean William W. Priest, Berenson Epoch LLC, Timothy T. Taussig, J Philip/Deborah K Clark Trust u/a 10/06/1994 and David Pearl. "Shares" shall mean shares of common stock, par value $0.01, issued by the Company. "SPS" means Steinberg Priest & Sloane Capital Management, LLC, a Delaware limited liability company. "SRO" shall mean any governmental or non-governmental self-regulatory organization. "Subsidiary" of a Person shall mean an Affiliate of such Person of which fifty percent (50%) or more of the voting stock (or of any general partnership or other voting or controlling equity interest in the case of a Person that is not a corporation) is beneficially owned by the Person directly or indirectly through one or more other Persons. "Surviving Corporation" shall mean the successor or surviving corporation in the Merger. "Tax" or "Taxes" shall mean all taxes, charges, fees, duties, levies, penalties or other assessments imposed by any federal, state, local or foreign governmental authority income, gross receipts, excise, property, sales, gain, use, license, custom duty, unemployment, capital stock, transfer, franchise, payroll, withholding, social security, minimum estimated, and other taxes, and shall include interest, penalties or additions attributable thereto. "Tax Return" shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Taxing Authority" shall mean the IRS and any other domestic or foreign Governmental Authority responsible for the administration of any Taxes. "Title IV Plan" has the meaning set forth in Section 4.17(c). "Transactions" shall mean the transactions provided for or contemplated by this Agreement, including the Merger. "Voting Debt" shall mean indebtedness having general voting rights and debt convertible into securities having such rights. Section 8.2 Interpretation. When a reference is made in this Agreement to a section or article, such reference shall be to a section or article of this Agreement unless otherwise clearly indicated to the contrary. Whenever the words "include," "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified. The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. A reference to any party to this Agreement or any other agreement or document shall include such party's successors and permitted assigns. A reference to any legislation or to any provision of any legislation shall include any modification or re-enactment thereof, any legislative provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. ARTICLE IX MISCELLANEOUS Section 9.1 Fees and Expenses. Unless this Agreement is terminated pursuant to Section 7.1(d) or except as specifically provided to the contrary in this Agreement, whether or not the Merger is consummated, all costs and expenses incurred by any party hereto or any Shareholder (to the extent the costs of such Shareholders do not in the aggregate exceed $70,000) in connection with this Agreement and the consummation of the Transactions by the Company, the Shareholders and Parent shall be paid by Parent. Section 9.2 Amendment and Modification. Subject to Applicable Law, this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of the Shareholders contemplated hereby, by written agreement of the parties hereto, by action taken by their respective Boards of Directors, at any time prior to the Closing Date with respect to any of the terms contained herein. Section 9.3 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Effective Time. The foregoing sentence shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. Section 9.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by an overnight courier service, such as Federal Express, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Merger Sub, to: J Net Enterprises, Inc. 4020 Lake Creek Drive, #100 Wilson, Wyoming 83014 Attention: Allan R. Tessler Telephone No.: (307) 739-8603 Telecopy No.: (307) 734-2719 with a copy (which shall not constitute notice) to: Greenberg Traurig, LLP 200 Park Avenue, 15th Floor New York, New York 10166 Attention: Alan I. Annex, Esq. Telephone No.: (212) 801-9200 Telecopy No.: (212) 801-6400 and (b) if to the Company, to: Epoch Investment Partners, Inc. 667 Madison Avenue New York, NY 10021 Attention: William W. Priest Telephone No.: (212) 303-7203 Telecopy No.: (212) 317-1265 with a copy (which shall not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Russell G. D'Oench, III Telephone No.: (212) 735-3000 Telecopy No.: (212) 735-2000 Section 9.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties. Section 9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement, the Stockholder Agreement and the Registration Rights Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) are not intended to confer upon any person other than the parties hereto and thereto any rights or remedies hereunder. Section 9.7 Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. Section 9.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof Section 9.9 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the Transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or any of the Transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware. Section 9.10 Time of Essence. Each of the parties hereto hereby agrees that, with regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. Section 9.11 Extension; Waiver. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. Section 9.12 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. [Signature page follows] IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. J NET ENTERPRISES, INC. By /s/ Allan R. Tessler ________________________ Name: Allan R. Tessler Title: Chief Executive Officer EPOCH ACQUISITION CORP. By /s/ Allan R. Tessler _____________________ Name: Allan R. Tessler Title: Chief Executive Officer EPOCH INVESTMENT PARTNERS, INC. By /s/ William W. Priest ________________________ Name: William W. Priest Title: President Exhibit I Merger Consideration ____________________ The Merger Consideration shall include (a) the Per Share Initial Stock Consideration, (b) the Per Share Escrow Consideration and (c) the Per Share Contingent Stock Consideration. Capitalized terms have the meaning set forth either in Section 6 of this Exhibit or the Agreement. 1. Per Share Initial Stock Consideration. ______________________________________ (a) The Per Share Initial Stock Consideration shall be delivered at the Closing to each Shareholder as provided in Section 2.2(a) of this Agreement. (b) A number of shares of Parent Common Stock equal to the excess, if any, of the number of Eligible Shares over the Pro Forma Company Shares at the Effective Time shall be issued to each Shareholder pro rata in proportion to the number of Shares delivered by such Shareholder pursuant to Section 2.2(a) and held by the Company in escrow until the determination of the Per Share Escrow Consideration and the delivery thereof to each Shareholder following the Escrow Resolution Date. Each such Shareholder shall have the right to vote and receive dividends in respect of such shares held in escrow by Parent. 2. Per Share Escrow Consideration. _______________________________ (a) At least five Business Days prior to the Escrow Resolution Date, Parent shall provide a notice to each Shareholder of the time, date and location of a closing at which Parent will transfer Parent Common Stock representing the Per Share Escrow Consideration, such date to be no greater than 15 Business Days following the Escrow Resolution Date. (b) At such closing, Parent shall deliver to each Shareholder one or more share certificates representing the aggregate number of shares of Parent Common Stock constituting the Per Share Escrow Consideration that such Shareholder has a right to receive (rounded up to the nearest whole share), provided that such Shareholder previously made the delivery required by Section 2.2(a). (c) Any of the Eligible Shares not delivered as part of the Per Share Initial Stock Consideration or the Per Share Escrow Consideration shall be promptly cancelled by the Company following the delivery of the Per Share Escrow Consideration. 3. Per Share Contingent Stock Consideration. _________________________________________ (a) In the event that the Tax Loss Amount is greater than $0, promptly (and in any event within 10 Business Days) following the determination of the Tax Loss Amount (but in all cases following the Escrow Resolution Date), Parent shall provide a notice to each Shareholder informing such Shareholder of the time, date and location of a closing at which Parent will issue the Per Share Contingent Stock Consideration, such date to be no more than 15 Business Days following the date of such notice. (b) At such closing, Parent shall issue and deliver to each Shareholder one or more share certificates representing the aggregate number of shares of Parent Common Stock constituting the Per Share Contingent Stock Consideration that such Shareholder has a right to receive (rounded up to the nearest whole share), provided that such Shareholder previously made the delivery required by Section 2.2(a). 4. Adjustment Upon Changes in Capitalization. In the event of any change __________________________________________ in the outstanding shares of Parent by reason of stock dividends, split-ups, recapitalizations, combinations, exchanges of shares and the like, the term "shares of Parent Common Stock" shall refer to and include the securities received or resulting therefrom and the terms and provisions of this Agreement shall be appropriately adjusted so that each shareholder will thereafter continue to have and be subject to, to the greatest extent practicable, the same rights and obligations he, she or it had been subject to prior to such change. 5. Calculation Procedures. This Section is intended for illustration ______________________ purposes only based on the assumptions set forth herein. (a) Calculation of Per Share Initial Stock Consideration: ____________________________________________________ i. Calculate Adjusted AUM as of the Effective Time. For purposes of illustration only, assume that the Adjusted AUM as of the Effective Time is $647,220,329. ii. Calculate the AUM Credit Percentage as of the Effective Time and Target AUM. For purposes of illustration only, assume that the Target AUM is $842,125,691. The AUM Credit Percentage is the Adjusted AUM divided by the Target AUM multiplied by .925, or 83.09%. (647,220,329/(842,125,691*.925)). iii. Calculate the Implied Company Ownership Percentage as of the Effective Time. The Implied Company Ownership Percentage is The AUM Credit Percentage as of the Effective Time multiplied by .51, or 42.37%. (83.09*.51). iv. Calculate the Pro Forma Total Shares as of the Effective Time. The Pro Forma Total Shares is the number of Non-Company Shares divided by one minus the Implied Company Ownership Percentage. For purposes of illustration only, assume that the number of Non-Company Shares is 8,739,021. The Pro Forma Total Shares is 15,165,174. (8,739,021/(1-.4237)). v. Calculate the Pro Forma Company Shares as of the Effective Time. The Pro Forma Company Shares is the Pro Forma Total Shares less the Non-Company Shares. The Pro-Forma Company Shares is 6,426,153. (15,165,174 less 8,739,021). vi. Calculate the Per Share Initial Stock Consideration. The Per Share Initial Consideration is the Pro Forma Company Shares as of the Effective Time divided by the number of Company Shares outstanding as of the Effective Time. For purposes of illustration only, assume that the number of Company Shares outstanding as of the Effective Time is 1,000. The Per Share Initial Consideration is 6,426.153. (6,426,153/1,000). (b) Calculation of Per Share Escrow Consideration: ______________________________________________ i. Calculate Adjusted AUM as of the Escrow Resolution Date. For purposes of illustration only, assume that the Adjusted AUM is $842,125,691. ii. Calculate the AUM Credit Percentage as of the Escrow Resolution Date. See Section 5(a)(ii) above. The percentage, however, cannot exceed 1. The AUM Credit Percentage is 1. (842,125,691/(842,125,691*.925), not to exceed 1). iii. Calculate the Implied Company Ownership Percentage as of the Escrow Resolution Date. See Section 5(a)(iii) above. The Implied Company Ownership Percentage is 51%. (.51 * 1). iv. Calculate the Pro Forma Total Shares as of the Escrow Resolution Date. See Section 5(a)(iv). The Pro Forma Total Shares is 17,834,737. (8,739,021/(1-.51)) v. Calculate the Pro Forma Company Shares as of the Escrow Resolution Date. See Section 5(a)(v). The Pro Forma Company Shares is 8,887,552. (17,834,737 less 8,739,021). vi. Calculate the Total Escrow Stock Consideration. The Total Escrow Stock Consideration is the Pro Forma Company Shares at the Escrow Resolution Date less such Shares at the Effective Time, or 2,669,562. (8,739,021 less 6,426,153). vii. Calculate the Per Share Escrow Consideration. The Per Share Escrow Consideration is the Total Escrow Consideration divided by the number of Company Shares outstanding as of the Effective Time, or 2,669.562. (2,669/1,000). (c) Calculation of Per Share Contingent Stock Consideration: i. Calculate the Pre-Closing Value of Parent. For purposes of illustration only, assume that the Pre-Closing Value of Parent is $13,099,792. ii. Calculate the Pre-Tax Liability Value of Parent. For purposes of illustration only, assume that that the Pre-Tax Liability Value of Parent is $34,956,084. iii. Calculate the Pre-Closing Value of the Company. The Pre-Closing Value of the Company is the Pre-Closing Value of the Parent multiplied by the Implied Company Ownership Percentage at the Escrow Resolution Date divided by the Implied Parent Ownership Percentage at the Escrow Resolution Date. The Implied Parent Ownership Percentage is 1 less the Implied Company Ownership Percentage. The Pre-Closing Value of the Company is $13,634,478. (13,099,792 * (51/49)). iv. Calculate the Pre-Tax Liability Value of the Company. The Pre-Tax Liability Value of Liability of the Company is the Pre Tax Liability of the Parent multiplied by the Implied Company Ownership Percentage at the Escrow Resolution Date divided by the Implied Parent Ownership Percentage at the Escrow Resolution Date, or $36,382,863. (34,956,084 * (.51/.49)). v. Calculate the Adjusted Value of Parent. The Adjusted Value of Parent is the average of the Pre-Closing Value of Parent and Pre-Tax Liability of Parent less the Tax Loss Amount. For purposes of illustration only, assume that the Tax Loss Amount is $6,000,000. The Adjusted Value of Parent is $18,027,938. ((13,099,792 + 34,956,084)/2) - 6,000,000). vi. Calculate the Adjusted Ownership Percentage. The Adjusted Ownership Percentage is the Value of the Company divided by the sum of the Value of the Company and the Adjusted Value of Parent. The Value of the Company is the average of the Pre-Closing Value of the Company and the Pre-Tax Liability Value of the Company, or $25,008,670. ((13,634,478 + 36,382,863)/2). The Adjusted Ownership Percentage is 58.11%. (25,008,670/(25,008,670 + 18,027,938). vii. Calculate the Implied Pro-Forma Total Shares. The Implied Pro-Forma Total Shares is the Non-Company Shares divided by 1 less the Adjusted Ownership Percentage, or 20,861,943. (8,739,021/1-.5811). viii. Calculate the Contingent Stock Consideration. The Contingent Stock Consideration is the Implied Pro-Forma Total Shares over the Pro Forma Total Shares at the Escrow Resolution Date, or 3,027,207. (20,861,943 less 17,834,737). ix. Calculate the Per Share Contingent Stock Consideration. The Per Share Escrow Consideration is the Contingent Stock Consideration divided by the number of Company Shares outstanding as of the Effective Time, or 3,027.207. (3,027,207/1,000). 6. Defined Terms _____________ "Adjusted AUM" means (a) for any Client as of a particular date, the amount of assets under management by SPS for such Client as of the Base Date, as adjusted to reflect net cash flow (additions, withdrawals and reinvestments), new accounts and terminated accounts from and after the Base Date (it being understood that (i) such adjustment is intended to exclude any increase or decrease in assets under management due to market appreciation or depreciation or currency fluctuations from and after the Base Date and (ii) no adjustment shall be made for any withdrawals or terminations resulting from the transfer of such Client's assets under management from SPS to the Company) and (b) for any other Consenting Client as of a particular date, the aggregate of net cash flow (additions, withdrawals and reinvestments) to investment advisory accounts of such other Consenting Clients with the Company from and after the Base Date. "Adjusted Ownership Percentage" means a percentage, expressed as a fraction the numerator of which is the Value of the Company and the denominator of which is the sum of the Value of the Company and the Adjusted Value of Parent. "Adjusted Value of Parent" shall mean the excess of (a) the average of the Pre-Closing Value of Parent and the Pre-Tax Liability Value of Parent over (b) the Tax Loss Amount. "AUM Credit Percentage" means, with respect to any date or time, a percentage, not to exceed 100%, calculated by dividing the aggregate Adjusted AUM of all Consenting Clients as of such date or time by the product of the Target AUM multiplied by 0.925. "Base Date" means April 30, 2004. "Consenting Client" means, as of any date, (a) any Client that has provided consent in accordance with Section 5.10 of this Agreement on or prior to such date and (b) any other Person that is an investment advisory client of the Company as of such date. "Contingent Stock Consideration" shall mean the excess of the Implied Pro-Forma Total Shares over the Pro Forma Total Shares at the Escrow Resolution Date. "Eligible Shares" means a number of shares of Parent Common Stock as is equal to the product of the number of issued and outstanding shares of Parent Common Stock as of the Effective Time multiplied by a fraction the numerator of which is 51 and the denominator of which is 49. "Escrow Resolution Date" a Business Day specified in a written notice from the Company to Parent that is at least 45 calendar days, and not more than 120 calendar days, following the Effective Time. "Implied Company Ownership Percentage" means, with respect to any date or time, a percentage equal to 0.51 times the AUM Credit Percentage as of such date or time. "Implied Parent Ownership Percentage" means, with respect to any date or time, one minus the Implied Company Ownership Percentage as of such date or time. "Implied Pro-Forma Total Shares" means the number of shares of Parent Common Stock equal to the number of Non-Company Shares divided by one less the Adjusted Ownership Percentage. "Non-Company Shares" means the shares of Parent Common Stock issued and outstanding immediately prior to the Effective Time other than shares owned by Parent as treasury stock. "Per Share Contingent Stock Consideration" means the number of shares of Parent Common Stock as is equal to the Contingent Stock Consideration divided by the number of Shares issued and outstanding as of the Effective Time (other than any Share to be cancelled in accordance with Section 2.1(b)). "Per Share Escrow Consideration" means the number of shares of Parent Common Stock as is equal to the Total Escrow Consideration divided by the number of Shares issued and outstanding as of the Effective Time (other than any Share to be cancelled in accordance with Section 2.1(b)). "Per Share Initial Stock Consideration" means the number of shares of "Parent Common Stock as is equal to the Pro Forma Company Shares as of the Effective Time divided by the number of Shares issued and outstanding as of the Effective Time (other than any Share to be cancelled in accordance with Section 2.1(b)). "Pre-Closing Value of Parent" means the product of (a) the average closing bid price per share of Parent Company Stock on a recognized list for over-the-counter securities for the ten consecutive trading days ending on April 30, 2004 multiplied by (b) the number of Non-Company Shares. "Pre-Closing Value of the Company" shall mean the product of the Pre-Closing Value of Parent multiplied by a fraction, the numerator of which is the Implied Company Ownership Percentage as of the Escrow Resolution Date and the denominator of which is the Implied Parent Ownership Percentage as of the Escrow Resolution Date. "Pre-Tax Liability Value of the Company" shall mean the product of the Pre-Tax Liability Value of Parent multiplied by a fraction, the numerator of which is the Implied Company Ownership Percentage as of the Escrow Resolution Date and the denominator of which is the Implied Parent Ownership Percentage as of the Escrow Resolution Date. "Pre-Tax Liability Value of Parent" means the product of (a) the average closing bid price per share of Parent Company Stock on a recognized list for over-the-counter securities (or, if Parent is traded on a national securities exchange, the average closing price per share on Parent Company Stock on the exchange on which Parent Company Stock is primarily traded) for the ten consecutive trading days ending on the Tax Liability Resolution Date multiplied by (b) the number of Non-Company Shares. "Pro Forma Company Shares" means, with respect to any date or time, a number of shares equal to the excess of the number of Pro Forma Total Shares as of such date or time over the number of Non-Company Shares. "Pro Forma Total Shares" means, with respect to any date or time, a number of shares equal to the quotient of (a) the number of Non-Company Shares divided by (b) one minus the Implied Company Ownership Percentage as of such date or time. "Target AUM" means the aggregate assets under management of the Clients with SPS as of the Base Date. "Tax Liability Resolution Date" means the date on which, in the good faith judgment of Parent, all issues regarding pre-closing tax liabilities of Parent are finally resolved. "Tax Loss Amount" means the excess, if any, of the total amount of any losses incurred by Parent after the Effective Time relating to Taxes for any period ending on or prior to the Effective Time over $2 million, provided that such excess shall not exceed $6 million. "Total Escrow Consideration" means that number of shares of Parent Common Stock as is equal to the excess, if any, of the number of Pro Forma Company Shares at the Escrow Resolution Date over the number of Pro Forma Company Shares at the Effective Time. "Value of the Company" shall mean the average of the Pre-Closing Value of the Company and the Pre-Tax Liability Value of the Company. EX-10 3 ex101.txt Exhibit 10.1 Execution Version ========================================================================== J NET ENTERPRISES, INC. STOCKHOLDERS AGREEMENT Dated as of June 2, 2004 ========================================================================== TABLE OF CONTENTS _________________ ARTICLE I VESTING OF EMPLOYEE-OWNER SHARES Section 1.1. Vesting Schedule Section 1.2. Unvested Shares Subject to Call Right ARTICLE II LIMITATIONS ON TRANSFER OF SHARES Section 2.1. Transfers Generally Section 2.2. Transfers Following Death or Disability Section 2.3. Transfers with the Consent of Board of Directors Section 2.4. Compliance with Law and Regulations Section 2.5. Legend on Certificates; Entry of Stop Transfer Orders Section 2.6. Certificates to be Held by Parent Section 2.7. Transfers in Violation of Agreement Void ARTICLE III VOTING AGREEMENT Section 3.1. Nomination Rights Section 3.2. CEO Agreement Section 3.3. Form ADV Section 3.4. Termination of Voting Provisions Section 3.5. Proxy ARTICLE IV RIGHT TO PURCHASE SHARES Section 4.1. Right of Parent to Purchase Shares in case of Harmful Activity Section 4.2. Notice of Harmful Activity Section 4.3. Procedures for Purchase of Initial Shares ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1. Representations and Warranties of the Shareholders Section 5.2. Representations and Warranties of Parent ARTICLE VI DEFINITIONS ARTICLE VII MISCELLANEOUS Section 7.1. Notices Section 7.2. Term of the Agreement Section 7.3. Amendments; Waivers Section 7.4. Adjustment Upon Changes in Capitalization Section 7.5. Disinterested Board Members to Make Determinations Section 7.6. Severability Section 7.7. Representatives, Successors and Assigns Section 7.8. Governing Law Section 7.9. Specific Performance Section 7.10. Submission to Jurisdiction; Waiver of Immunity Section 7.11. Power of Attorney Section 7.12. Further Assurances Section 7.13. Execution in Counterparts Section 7.14. Entire Agreement Schedule I STOCKHOLDERS AGREEMENT ______________________ This STOCKHOLDERS AGREEMENT (this "Agreement") is dated as of June 2, 2004, by and among (i) J Net Enterprises, Inc., a Nevada corporation ("Parent"), (ii) the persons listed on Schedule I hereto (the "Non-Employee Owners), (iii) the Employee Owners (as defined herein) listed on Schedule II hereto and (iv) the Family Affiliates (as defined herein) listed on Schedule III hereto (the Non-Employee Owners, the Employee Owners and the Family Affiliates collectively, the "Shareholders"). Capitalized terms used herein have their respective meanings set forth in Article VI of this Agreement. W I T N E S S E T H: _ _ _ _ _ _ _ _ _ _ WHEREAS, Parent, Epoch Acquisition Corp., a Delaware corporation ("Merger Sub") and a wholly-owned direct subsidiary of Parent, and Epoch Investment Partners, Inc., a Delaware corporation ("Epoch"), hereto have entered into a Merger Agreement, dated as of the date hereof (the "Merger Agreement"), pursuant to which Merger Sub will merge with and into Epoch, with Epoch surviving as a wholly-owned direct subsidiary of Parent, and Berenson and the Employee Owners and their Family Affiliates, as the sole shareholders of Epoch, will receive shares of common stock, par value $0.01 (the "Common Stock") of Parent in exchange for their shares of Epoch (the "Merger"); WHEREAS, as a result of the Merger, Berenson and the Employee Owners and their Family Affiliates will have the right to receive a majority of the issued and outstanding Common Stock, subject to certain adjustments following the date hereof; WHEREAS, Parent, the Employee Owners and their Family Affiliates and the Non-Employee Owners desire to enter into certain agreements with respect to the Transfer and voting of their Common Stock and various other matters in order to continue harmonious relationships among themselves with respect to the conduct of the business and affairs of Parent; and WHEREAS, it is a condition precedent to the closing under the Merger Agreement that the parties hereto enter into this Agreement. NOW THEREFORE, in consideration of the premises and of the mutual agreements, covenants and provisions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I VESTING OF EMPLOYEE-OWNER SHARES Section 1.1 Vesting Schedule. The Initial Shares of each Employee Owner and his or her Family Affiliates shall vest and not be subject to Parent's right of purchase pursuant to Section 1.2 on the following schedule: (a) 12.5% of the Initial Shares shall be vested on the date hereof; (b) 25% of the Initial Shares shall be vested on the first anniversary of the date hereof; (c) 50% of the Initial Shares shall be vested on the second anniversary of the date hereof; and (d) 100% of the Initial Shares shall be vested on third anniversary of the date hereof. Section 1.2. Unvested Shares Subject to Call Right. Each Employee Owner and his or her Family Affiliates agrees that upon termination of such Employee Owner's employment with Parent, the unvested Initial Shares held by such Employee Owner and Family Affiliates will be subject to the right of Parent to purchase such Initial Shares in accordance with the procedures in Section 4.3. ARTICLE II LIMITATIONS ON TRANSFER OF SHARES Section 2.1. Transfers Generally. Each Shareholder agrees that, in addition to any restrictions imposed by law, no Shareholder shall Transfer any Initial Shares Owned by such Shareholder, except that: (a) Subject to Sections 2.1(c), each Employee Owner together with his or her Family Affiliates may in the aggregate Transfer (1) on and after June 2, 2007 and prior to June 2, 2008, a number of Initial Shares not to exceed 12.5% of the aggregate Starting Amount of Shares Owned by such Employee Owner and Family Affiliates, (2) on and after June 2, 2008 and prior to June 2, 2009, a number of Initial Shares not to exceed 12.5% of the aggregate Starting Amount of Shares Owned by such Employee Owner and Family Affiliates, (3) on and after June 2, 2009 and prior to June 2, 2010, a number of Initial Shares not to exceed 25% of the aggregate Starting Amount of Shares Owned by such Employee Owner and Family Affiliates and (4) on and after June 2, 2010, any number of Initial Shares, provided that, in the case of each of the preceding clauses (1) through (4): (i) Prior to the first anniversary of the Employment Termination Date of any Employee Owner, neither such Employee Owner nor his or her Family Affiliates may Transfer Initial Shares if, as a result of such Transfer, such Employee Owner and Family Affiliates would in the aggregate Own less than that number of Initial Shares that is equal to 30% of the aggregate Starting Amount of Shares Owned by such Employee Owner and Family Affiliates; and (ii) Any Initial Shares in respect of which Parent has exercised its right of purchase pursuant to Article IV hereof may only be Transferred in accordance with Article IV. Any number of Initial Shares eligible to be Transferred in any annual period under this Section 2.1(a) but not so Transferred may be Transferred in any future annual period without any restriction imposed by this Section 2.1(a). (b) Subject to Section 2.1(c), each Non-Employee Owner may Transfer any Initial Shares on and after the third anniversary of the date hereof. (c) Notwithstanding Sections 2.1(a) or 2.1(b), no Shareholder may Transfer Initial Shares during the pendency of any dispute between Parent and such Shareholder regarding the obligations under this Agreement of such Shareholder. Section 2.2. Transfers Following Death or Disability. Notwithstanding any other provisions of this Agreement, (a) upon the death or Disability of any Employee Owner, such Employee Owner (or his or her estate) and his or her Family Affiliates may Transfer any Initial Shares that, prior to the date of such event, had become vested in accordance with Section 1.2 hereof free of any provisions of this Agreement and (b) upon the death or Disability of any other Shareholder, such other Shareholder (or his or her estate) may Transfer Initial Shares free of any provisions of this Agreement. Section 2.3. Transfers with the Consent of Board of Directors. Notwithstanding any other provisions of this Agreement, a Shareholder may Transfer any number of vested Initial Shares at any time with the prior written consent of the Board of Directors, which consent may be withheld or delayed, or granted on such terms and conditions as it may determine, in its sole discretion. Section 2.4. Compliance with Law and Regulations. Each Shareholder agrees that any Transfer of Initial Shares by such Shareholder shall be in compliance with any applicable federal and state securities laws, and any applicable law, rule or regulation of the Commission or any other governmental agency having jurisdiction. Section 2.5. Legend on Certificates; Entry of Stop Transfer Orders. (a) Each Shareholder agrees that each outstanding certificate representing any Initial Shares that are subject to this Agreement shall bear an endorsement noted conspicuously on each such certificate reading substantially as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933. No transfer of such securities may be made without an opinion of counsel, reasonably satisfactory to Parent, that such transfer may properly be made without registration under the Securities Act of 1933 or that such securities have been so registered under a registration statement which is in effect at the date of such transfer. The securities represented by this certificate are subject to the provisions of an agreement dated as of June 2, 2004 among Parent and certain persons listed on the signature pages to such agreement, a copy of which is on file at the principal executive office of Parent, and such securities may be sold, assigned, pledged or otherwise transferred only in accordance with such agreement." (b) Each Shareholder agrees to the entry of stop transfer orders against the transfer of legended certificates representing shares of Common Stock except in compliance with this Agreement. (c) Each Shareholder that Owns Initial Shares issued prior to the date of this Agreement agrees to submit or cause the submission of any share certificates representing such Initial Shares to Parent for the application of the endorsement provided in Section 2.5(a) to each such certificate. Section 2.6. Certificates to be Held by Parent. (a) Each Shareholder agrees that the certificates representing such Shareholder's Initial Shares shall be held in custody by Parent at its principal office. Subject to Section 2.6(c), Parent shall, upon the request of any such Shareholder or the estate of any Shareholder, as the case may be, in writing addressed to the Secretary of Parent or any officer designated by the Secretary (which request shall include a representation by such Shareholder or estate thereof that such Shareholder is then permitted to Transfer a specified number of Initial Shares under the provisions of this Agreement), promptly release from custody the certificates representing such specified number of such Shareholder's Initial Shares which are then intended and permitted to be Transferred under the provisions of this Agreement. Unless the Initial Shares represented by such certificates have been registered under the Securities Act of 1933, each Shareholder agrees such certificates shall bear an endorsement noted conspicuously on each such certificate reading substantially as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933. No transfer of such securities may be made without an opinion of counsel, reasonably satisfactory to Parent, that such transfer may properly be made without registration under the Securities Act of 1933 or that such securities have been so registered under a registration statement which is in effect at the date of such transfer." Upon delivery of the opinion of counsel described in such legend by a Shareholder, Parent shall issue to such Shareholder a new certificate evidencing such Initial Shares without the legend required by this section endorsed thereon. (b) During the time Parent has possession of any Shareholder's Initial Shares, such Shareholder shall retain all rights to receive and retain dividends, to vote such Initial Shares, subject to the terms of this Agreement, and to execute consents, waivers or releases and otherwise to act in respect thereto in all corporate matters. (c) Parent agrees to use ordinary care, and shall not be liable for any matter requiring the exercise of greater than ordinary care, in the safekeeping of the Initial Shares. Section 2.7. Transfers in Violation of Agreement Void. Any attempted Transfer of Initial Shares not made in accordance with the provisions of this Agreement shall be void, and Parent shall not register, or cause or permit the registry, of Common Stock Transferred in violation of this Agreement. ARTICLE III VOTING AGREEMENT, ETC. Section 3.1. Nomination Rights. Each of the Shareholders hereby agree to use, at all times and as promptly as practicable, their respective reasonable best efforts and to take or cause the taking of all necessary or desirable actions within their respective powers (including, but not limited to, the voting of all Common Stock and other securities respectively owned by them or over which they hold a proxy, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), to effectuate and carry out the following provisions: (a) Epoch Nomination Rights. The board of directors of Parent will at all times include four (4) directors selected by Priest (the "Epoch Directors"), provided at least two such Epoch Directors are not current or former shareholders or officers of Epoch. Pursuant to the Merger Agreement, two such persons, Priest and Jeffrey Berenson, will be appointed to the board of directors at the Effective Time. Priest's current intention is for the additional initial Epoch Directors to be appointed at or after the first shareholders meeting occurring after the date hereof. Priest shall have the right at any time to select a person to fill a vacancy amongst or to remove and/or replace any existing Epoch Director. In the event of the death or permanent incapacity of Priest, Priest's rights under this Section 3.1(a) may be exercised by a majority of the remaining Epoch Directors. (b) Current Directors. Each of Allan Tessler, David Markin and Eugene Freedman (the "Current Directors") shall continue to serve as a member of the board of directors of Parent and shall be re-nominated and re-elected as a director so long as each them is willing and able to serve as a director. In the event that any Current Director shall cease to be a member of the board of directors of Parent, the remaining Current Directors may select a replacement to fill such vacancy. (c) Size of Board. Parent shall at all times be managed by or under the direction of a board of directors, which shall consist of not more than seven (7) members. (d) Approval of Certain Matters. The by-laws of Parent shall be amended to provide, and shall continue to provide, that all decisions regarding the following matters shall be approved by a two-thirds majority of the board of directors of Parent: (i) subject to Section 3.2 below, compensation of Priest as an officer or employee of Parent Group, (ii) issuance of additional equity interests to any Employee Owner (other than pursuant to the Merger Agreement) and (iii) any amendment or modification of this Agreement. Section 3.2. CEO Agreement. Parent hereby covenants to enter into with Priest, prior to the third anniversary of the date hereof, a contractual employment arrangement including compensation and severance provisions as is customary for chief executive officers of peer group companies, provided that any such arrangement shall not become effective until the third anniversary hereof. Such arrangement need only be approved by a simple majority of the board of directors of Parent. Section 3.3. Form ADV. The obligation of any Shareholder to vote for any person to serve as a director of Parent shall not apply to any person whose appointment would cause Parent or any its affiliates registered under the Investment Advisers Act as an investment adviser to provide (i) an affirmative answer to any question of Item 11 of Part I of Form ADV or (ii) any disclosure to investment advisory clients or prospective clients under Rule 206(4)-4 of the Investment Advisers Act. Section 3.4. Termination of Voting Provisions. Notwithstanding any other provisions of this Agreement, the provisions of this Article III, and the obligation of any Shareholder to vote in accordance with Section 3.1, shall terminate on the third anniversary of the date of this Agreement, provided that the obligations of each Employee Owner and his or her Family Affiliates to vote in accordance with Section 3.1(a) and, unless waived in writing by Priest, Section 3.1(c) shall continue as long as such Employee Owner or his or her Family Affiliates continue to hold any Initial Shares and Priest continues to be employed by Parent Group. Section 3.5. Proxy. Each Shareholder, with respect to all Initial Shares, does hereby irrevocably constitute and appoint Priest with full power of substitution, as his or its true and lawful attorney and proxy, for and in his or its name, place and stead, to vote each of such Initial Shares as his or its proxy, at the any annual, special or adjourned meeting of the shareholders (or in any action by written consent of the shareholders) of Parent following the Effective Time (including the right to sign his or its name, as stockholder, to any consent, certificate or other document relating to Parent that may be permitted or required by applicable law) to effect the actions required by Section 3.1 of this Agreement. THE SHAREHOLDERS ACKNOWLEDGE THAT THE COMPANY IS ENTERING THE MERGER AGREEMENT IN RELIANCE UPON THIS AGREEMENT AND INTENDS THIS PROXY TO BE IRREVOCABLE AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY THE SHAREHOLDER WITH RESPECT TO THE INITIAL SHARES. NOTWITHSTANDING THE FOREGOING, THIS PROXY SHALL BE AUTOMATICALLY REVOKED AS TO ANY SHAREHOLDER WITHOUT ANY FURTHER ACTION ON THE PART OF SUCH SHAREHOLDER UPON THE TERMINATION OF SUCH SHAREHOLDER'S VOTING OBLIGATIONS PURSUANT TO SECTION 3.4 OF THIS AGREEMENT. The Shareholder further agrees to cause all Initial Shares controlled by him beneficially and of record to be voted in accordance with the foregoing. The Shareholder hereby acknowledges both receipt of a copy of the Merger Agreement and that such Shareholder understands the contents thereof. ARTICLE IV RIGHT TO PURCHASE SHARES Section 4.1 Right of Parent to Purchase Shares in case of Harmful Activity. i. If, on or prior to the first anniversary of the Employment Termination Date of any Employee Owner (including during such Employee Owner's employment with Parent), the Board of Directors determines in its good faith judgment that such Employee Owner has engaged in Harmful Activity, Parent shall have the right to purchase, at any time or from time to time, from such Employee Owner (or, to the extent an Employee Owner does not Own sufficient shares of Common Stock to satisfy his or her obligations under this Section 4.1, to purchase from his or her Family Affiliates pro rata in accordance with the number of Initial Shares Owned by such Family Affiliates on the Notice Date) a number of Initial Shares Owned by such Employee Owner equal to 30% of such Employee Owner and Family Affiliate's aggregate Starting Amount of Shares. The purchase price of each Initial Share (the "Purchase Price") purchased by Parent pursuant to this Section 4.1 shall equal $0.01 per share. Section 4.2. Notice of Harmful Activity. Prior to the first anniversary of such Employee Owner's Employment Termination Date (including during such Employee Owner's employment with Parent Group), (a) each Employee Owner agrees not to engage in Harmful Activity and (b) each Employee Owner who engages (or intends to engage) in Harmful Activity agrees (i) to notify Parent in writing in reasonable detail at least 30 days prior to engaging in such Harmful Activity, (ii) to respond to such questions and furnish such additional information as Parent may request with respect to such Harmful Activity and (iii) to update such written notice or inquiries promptly in the event of any circumstances that would cause any notices or responses to be inaccurate or incomplete. Section 4.3. Procedures for Purchase of Initial Shares. The Parent may exercise its right to purchase Initial Shares under Section 1.2 or Section 4.1 one or more times in accordance with the following procedures: (i) The Parent shall give notice to the Employee Owner and his or her Family Affiliates that Own the Initial Shares subject to such right of purchase not later than the close of business on the first anniversary of the Employment Termination Date of such Employee Owner (the "Notice Date"), advising such Employee Owner and Family Affiliate of Parent's election to exercise such right, stating the number of Initial Shares to be so purchased, the Purchase Price, closing arrangements and a closing date at which payment of the consideration for such Initial Shares will be made, which date shall be not less than five days nor more than 90 days after the Notice Date. (ii) On such closing date, Parent and such Employee Owner and Family Affiliates shall cause the Person holding the Initial Shares being so purchased to deliver the certificates representing such Initial Shares, properly endorsed for transfer by such Employee Owner or Family Affiliate or his, her or its attorney-in-fact, to Parent at its principal place of business and Parent shall deliver to such Employee Owner or Family Affiliate the consideration therefor. (b) If an Employee Owner or his or her Family Affiliate is unable to satisfy its obligations under this Section 4.3 to deliver Initial Shares to Parent for any reason, such Employee Owner or Family Affiliate shall be liable to Parent, as liquidated damages and not as a penalty, for an amount equal to the product of (i) the number of Initial Shares that should have been sold to Parent under this Section 4.3 but were not sold and (ii) the excess, if any, of the Market Value of such shares as of the Notice Date over the Purchase Price. (c) In the event such Employee Owner or Family Affiliate shall fail to cooperate reasonably with the provisions of this Section 4.3, Parent shall have the power and authority pursuant to Section 7.11 hereof to take as attorney-in-fact all actions required to be taken by such Employee Owner or Family Affiliate and to deliver any consideration payable to such Employee Owner or Family Affiliate to the address listed in Schedule I. ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1. Representations and Warranties of the Shareholders. Each Shareholder severally represents and warrants to Parent and to each other Shareholder that (a) in the case of a Shareholder who is not a natural person, such Shareholder is duly authorized to execute, deliver and perform this Agreement; (b) this Agreement has been duly executed by such Shareholder or his, her or its attorney-in-fact on behalf of such Shareholder and is a valid and binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms; (c) the execution, delivery and performance by such Shareholder of this Agreement does not violate or conflict with or result in a breach of or constitute (or with notice or lapse of time or both constitute) a default under any agreement to which such Shareholder is a party; and (d) such Shareholder has good and marketable title to the shares of Common Stock subject to this Agreement free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind, other than pursuant to this Agreement. Section 5.2. Representations and Warranties of Parent. The Parent represents and warrants to the Shareholders that (a) Parent is duly authorized to execute, deliver and perform this Agreement; (b) this Agreement has been duly authorized, executed and delivered by Parent and is a valid and binding agreement of Parent, enforceable against Parent in accordance with its terms; and (c) the execution, delivery and performance by Parent of this Agreement does not violate or conflict with or result in a breach by Parent of or constitute (or with notice or lapse of time or both constitute) a default by Parent under its Certificate of Incorporation or By-Laws, any existing applicable law, rule, regulation, judgment, order, or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over Parent or its property including the requirements of any securities exchange, or any agreement or instrument to which Parent is a party or by which Parent or its property may be bound. ARTICLE VI DEFINITIONS For purposes of this Agreement, the following terms shall have the following meanings: "Agreement" has the meaning set forth in the preamble to this Agreement. "Berenson" means Berenson Epoch LLC. "Board of Directors" means the Board of Directors of Parent or, to the extent expressly authorized by the Board of Directors to exercise the powers of the Board of Directors under this Agreement, (i) any committee of such Board of Directors or (ii) any board of directors or committee of any Subsidiary of Parent. "Business Day" means a day on which the principal national securities exchange on which shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the Borough of Manhattan, City and State of New York are not authorized or obligated by law or executive order to close. "Closing Price" means, on any day, the last sales price, regular way, per share of Common Stock on such day, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, as reported in the principal consolidated transaction reporting system covering securities listed or admitted to trading on the NYSE or, if shares of Common Stock are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system covering securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Quotation Bureau, Inc., or a similar reporting service designated by the Board of Directors. "Commission" means the Securities and Exchange Commission. "Common Stock" has the meaning set forth in the recitals to this Agreement. "Disability" means the inability of a person to perform his or her employment duties, obligations and responsibilities in all material respects for a continuous period of not less than one hundred and eighty (180) days by reason of any medically determinable physical or mental impairment as determined by the Board of Directors in good faith. "Effective Time" shall have the meaning given therefor in the Merger Agreement. "Employee Owner" means each of Priest, Timothy Taussig, Philip Clark and David Pearl. "Employment Termination Date" means, with respect to any Employee Owner, the date of termination of such Employee Owner's employment with Parent Group for any reason (whether or not terminated by action of Parent Group), as determined by the Board of Directors in its sole and absolute discretion. "Epoch" has the meaning set forth in the recitals to this Agreement. "Epoch Directors" has the meaning set forth in Section 3.1(b). "Family Affiliates" means, as the context requires, (a) the Persons listed on Schedule III hereto or (b) with respect to any Employee Owner, (i) the Persons listed on Schedule III hereto to whom such Employee Owner transferred shares of Epoch common stock prior to the Merger and (ii) any Person to whom such Employee Owner Transfers Initial Shares with the written consent of the Board of Directors in accordance with Section 2.3 and who agrees in writing to be subject to the terms and provisions of this Agreement as a Family Affiliate. "Harmful Activity" by an Employee Owner means for such Employee Owner to, directly or indirectly, either individually or as owner, partner, agent, employee, consultant or otherwise: (a) solicit, recruit or induce for employment, hire or otherwise engage in any capacity an individual who is, or has within the previous 12 months been, a shareholder, employee or officer of Parent Group or solicit, recruit or induce any such person to terminate his or her employment with Parent Group; or; (b) (A) interfere or attempt to interfere with Parent Group's relations with any person who is or during the 12 months prior to such Employee Owner's termination date was a client or, to the knowledge of such Employee Owner, is or was proposed to be a client or (B) solicit, assist others in soliciting or accept business from any such person, including without limitation, by offering to serve as such person's investment adviser or recommending that such person consider engaging another person to serve as such person's investment adviser; provided that (1) ownership of less than 5% of the publicly-held voting stock of any corporation shall not, in and of itself, cause an Employee Owner to be deemed an owner or partner of such corporation for purposes of this definition, (2) soliciting or accepting business from a client or prospective client of Parent Group for the management of a class of asset not then provided or proposed to be provided by the Parent Group within the next 12 months shall not constitute Harmful Activity and (3) the acceptance, by a firm that employs an Employee Owner, of business from any person who is or during the 12 months prior to such Employee Owner's termination date was a client of Parent Group or, to the knowledge of such Employee Owner, is or was proposed to be a client of Parent Group shall not constitute Harmful Activity if such Employee Owner did not and does not interfere or attempt to interfere with Parent Group's relations with such client and such Employee Owner did not and does not participate or assist in any way in the solicitation or provision of services to such client at such employer. "Initial Shares" means, at any time, with respect to (i) Berenson and each of the Employee Owners and Family Affiliates, the shares of Common Stock received by such person as a result of the Merger (including any shares received as Per Share Escrow Consideration or Per Share Contingent Consideration (as such terms are defined in the Merger Agreement) and currently Owned by such Person or, (ii) in the case of other Shareholder, the shares of Common Stock designated on Schedule I as such Shareholder's Initial Shares and currently Owned by such Person. "Investment Advisers Act" means the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder. "Market Value" means the average of the daily Closing Prices for the ten consecutive Business Days ending on the Business Day immediately prior to the date of determination. "Merger" has the meaning set forth in the recitals to this Agreement. "Merger Agreement" has the meaning set forth in the recitals to this Agreement. "Merger Sub" has the meaning set forth in the recitals to this Agreement. "Non-Employee Owners" has the meaning set forth in the recitals to this Agreement. "Notice Date" has the meaning set forth in Section 4.3. "NYSE" means the New York Stock Exchange, Inc. "Option Period" has the meaning set forth in Section 4.1(a). "Own" means to own of record or beneficially, whether directly or through any other Person. "Parent" has the meaning set forth in the preamble to this Agreement and any successors thereof, whether by operation of law or otherwise. "Parent Group" means Parent and its Subsidiaries. "Person" means any natural person or any firm, partnership, limited liability partnership, association, corporation, limited liability company, trust, business trust, governmental authority or other entity. "Priest" means William W. Priest. "Purchase Price" has the meaning set forth in Section 4.1(a). "Shareholders" has the meaning set forth in the first paragraph of this Agreement. "Starting Amount of Shares" means, with respect to Berenson or any Employee Owner and his or her Family Affiliates the aggregate number of Initial Shares received by such person in the Merger (including any shares received as Per Share Escrow Consideration or Per Share Contingent Consideration (as such terms are defined in the Merger Agreement)) or, in the case of any other Shareholder, the aggregate number of shares of Common Stock designated on Schedule I as such Shareholder's Initial Shares. "Subsidiary" means a corporation, limited liability company or other entity of which Parent, directly or indirectly, has the power, whether through the ownership of voting securities, equity interests, contract or otherwise, (i) to elect at least a majority of the members of such entity's board of directors or other governing body or (ii) in the absence of a governing body, to control the business affairs of such entity. "Transfer" means, with respect to any Initial Shares, directly or indirectly, (i) to sell, assign, transfer, pledge (including in margin transactions), convey, distribute, mortgage, encumber, hypothecate or otherwise dispose, whether by gift, for consideration or for no consideration and (ii) to grant any right to vote, whether by proxy, voting agreement, voting trust or otherwise. ARTICLE VII MISCELLANEOUS Section 7.1. Notices. (a) All notices, requests, demands, waivers and other communications to be given by any party hereunder shall be in writing and shall be (i) mailed by first-class, registered or certified mail, postage prepaid, (ii) sent by hand delivery or reputable overnight delivery service or (iii) transmitted by telecopy (provided that a copy is also sent by reputable overnight delivery service) addressed, in the case of any Shareholder, to him or her at the address set forth on Schedule I, II or III, as the case may be, or, in the case of Parent, to J Net Enterprises, Inc., c/o Epoch Investment Partners, Inc., 667 Madison Avenue, New York, NY 10021, Attention: Secretary, or, in each case, to such other address as may be specified in writing to the other parties hereto. (b) All such notices, requests, demands, waivers and other communications shall be deemed to have been given and received (i) if by personal delivery or telecopy, on the day of such delivery, (ii) if by first-class, registered or certified mail, on the fifth Business Day after the mailing thereof or (iii) if by reputable overnight delivery service, on the day delivered. Section 7.2. Term of the Agreement. (a) This Agreement shall become effective upon the occurrence of the Effective Time and shall terminate on the earliest to occur of (i) the first date on which there are no Shareholders who remain bound by its terms, (ii) the date on which Parent and all Shareholders who are then bound by its terms agree to terminate this Agreement and (iii) the tenth anniversary of the date hereof. (b) Unless this Agreement is theretofore terminated pursuant to Section 7.2(a) hereof, a Shareholder shall be bound by its terms until all Initial Shares Owned by such Shareholder are free of the provisions of Articles I, II, III and IV hereof. Section 7.3. Amendments; Waivers. (a) This Agreement may be amended or modified, and any provision in this Agreement may be waived, if such amendment, modification or waiver is approved by the Board of Directors, in accordance, if applicable, with any voting provisions set forth in the by-laws of Parent, provided that any amendment that would materially adversely affect any Shareholder (other than an amendment that, in the good faith judgment of the Board of Directors, is intended to cure any ambiguity or correct or supplement any provisions of this Agreement that may be incomplete or inconsistent with any other provision contained herein) must be approved by the Shareholders that Own a majority of the Initial Shares subject to this Agreement as of the date of such amendment or modification, provided, further, that, without the consent of any Person, the Board of Directors may permit any Person who executes and delivers a counterpart of this Agreement to become a party to this Agreement by amending Schedule I hereto. (b) The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the rights at a later time to enforce the same. No waiver by any party of the breach of any term contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such breach or the breach of any other term of this Agreement. Section 7.4. Adjustment Upon Changes in Capitalization. In the event of any change in the outstanding shares of Parent by reason of stock dividends, split-ups, recapitalizations, combinations, exchanges of shares and the like, the term "shares of Common Stock" shall refer to and include the securities received or resulting therefrom and the terms and provisions of this Agreement, including without limitation the terms "Initial Shares" and "Purchase Price," shall be appropriately adjusted so that each Shareholder will thereafter continue to have and be subject to, to the greatest extent practicable, the same rights and obligations he, she or it had been subject to prior to such change. Section 7.5. Disinterested Board Members to Make Determinations. In the event that any Shareholder breaches its obligations under this Agreement, then the Board of Directors shall have the exclusive right to make (on behalf of Parent) any and all determinations that may be necessary or appropriate under this Agreement, including without limitation, determinations relating to the exercise and enforcement of remedies hereunder. If a Shareholder who is also a member of the Board of Directors breaches his or her obligations under this Agreement, such Shareholder must refrain from exercising his or her vote at meetings of the Board and general meetings of Parent to give effect to this Section 7.5. Section 7.6. Severability. If the final determination of a court of competent jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. Section 7.7. Representatives, Successors and Assigns. Each Employee Owner shall cause his or her Family Affiliates to comply with the terms and provisions of this Agreement. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their respective legatees, legal representatives, successors and assigns; provided that Shareholders may not assign, delegate or otherwise transfer any of their rights or obligations under this Agreement except with the written consent of the Board of Directors. Section 7.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OR RULES THEREOF). Section 7.9. Specific Performance. Each of the parties hereto acknowledges that it will be impossible to measure in money the damage to Parent or the Shareholders if any party hereto fails to comply with the provisions of Article I, II, III or IV and each party hereto agrees that in the event of any such failure, neither Parent nor any Shareholder will have an adequate remedy at law. Therefore, Parent and each Shareholder, in addition to all of the other remedies which may be available, shall have the right to equitable relief, including, without limitation, the right to enforce specifically the provisions of Articles I, II, III and IV by obtaining injunctive relief against any violation thereof, or otherwise. All claims for specific performance of one or more provisions of this Agreement shall be resolved exclusively by litigation before a court of competent jurisdiction located in the State of New York. Section 7.10. Submission to Jurisdiction; Waiver of Immunity. Each Shareholder, for itself and its successors and assigns, hereby irrevocably waives (a) any objection, and agrees not to assert, as a defense in any legal or equitable action, suit or proceeding against such Shareholder arising out of or relating to this Agreement or any transaction contemplated hereby or the subject matter of any of the foregoing, that (i) it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable before or in said courts, (ii) the venue thereof may not be appropriate and (iii) the internal laws of the State of Nevada do not govern the validity, interpretation or effect of this Agreement, (b) any immunity from jurisdiction to which it might otherwise be entitled in any such action, suit or proceeding which may be instituted before any state or federal court in the State of New York in accordance with Section 7.9 and (c) any immunity from the maintaining of an action against it to enforce any judgment for money obtained in any such action, suit or proceeding and, to the extent permitted by applicable law, any immunity from execution. Section 7.11. Power of Attorney. (a) Each Shareholder hereby makes, constitutes and appoints the Secretary of Parent, and any successor thereof, with full power of substitution and resubstitution, his, her or its true and lawful attorney for his, her or its and in his, her or its name, place and stead and for his, her or its use and benefit, to execute and deliver all stock powers, instruments of assignment, endorsements and other documents necessary, appropriate, advisable or convenient to facilitate or consummate the sale of Initial Shares in accordance with Section 4.3. Each Shareholder authorizes such attorney-in-fact to take any further action which such attorney-in-fact shall consider necessary, appropriate, advisable or convenient in connection with any of the foregoing, hereby giving such attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite, appropriate, advisable or convenient to be done in and about the foregoing as fully as such Shareholder might or could do if personally present, and hereby ratifying and confirming all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. The power of attorney granted pursuant to this Section is a special power of attorney coupled with an interest and, until terminated in accordance with Section 7.2, is irrevocable. Section 7.12. Further Assurances. Each Shareholder agrees to execute such additional documents and take such further action as may be requested by Parent to effect the provisions of this Agreement. Section 7.13. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument. Section 7.14. Entire Agreement. This Agreement, including the Schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. J NET ENTERPRISES, INC. By: /s/ Allan R. Tessler ____________________ Name: Allan R. Tessler Title: Chief Executive Officer Employee Owners _______________ /s/ William W. Priest _______________________________ William W. Priest /s/ J. Philip Clark _______________________________ J. Philip Clark /s/ Timothy Taussig _______________________________ Timothy Taussig /s/ David Pearl _______________________________ David Pearl Non-Employee Owners ___________________ BERENSON EPOCH LLC By: /s/ Berenson & Company, Inc., its managing member _________________________________________________ Name: Steven Wayne Title: Secretary and Treasurer /s/ Allan Tessler _______________________________ Allan Tessler /s/ David Markin _______________________________ David Markin Family Affiliates _________________ J PHILIP/DEBORAH K CLARK TRUST U/A 10/06/1994 By: /s/ J. Philip Clark ____________________ Name: J. Philip Clark Title: Trustee Schedule I Non-Employee Owners ___________________ Name Address Initial Shares ____________________ _____________________ ______________ Allan Tessler 1100 Pine Siskin Jackson, WY 83001 673,557 David Markin Chairmans Club 220 E. Sunrise Palm Beach, FL 33480 510,320 Berenson Epoch LLC 667 Madison Avenue New York, NY 10021 [Shares received in Merger] Schedule II Employee Owners _______________ Name Address _________________________ __________________________________ William W. Priest Epoch Investment Partners, Inc. 667 Madison Avenue New York, NY 10021 J. Philip Clark Epoch Investment Partners, Inc. 667 Madison Avenue New York, NY 10021 Timothy Taussig Epoch Investment Partners, Inc. 667 Madison Avenue New York, NY 10021 David Pearl Epoch Investment Partners, Inc. 667 Madison Avenue New York, NY 10021 Schedule III Family Affiliates _________________ Name Address ______________________________ __________________________________ J Philip/Deborah K Clark Trust c/o J. Philip Clark U/A 10/06/1994 Epoch Investment Partners, Inc. 667 Madison Avenue New York, NY 10021 EX-10 4 ex102.txt Exhibit 10.2 REGISTRATION RIGHTS AGREEMENT _____________________________ This Registration Rights Agreement (this "Agreement") is made and entered into as of June 2, 2004, by and among J Net Enterprises, Inc., a Nevada corporation (the "Company"), and the holders listed on the signature pages hereto and their successors and assigns (individually, a "Holder" and collectively, the "Holders"). RECITALS WHEREAS, the Company, Epoch Investment Partners, Inc., a Delaware corporation ("Epoch"), and Epoch Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company ("Merger Sub"), have entered into an Agreement and Plan of Merger, dated as of June 2, 2004 (the "Merger Agreement"), which provides for the merger of Merger Sub with and into Epoch (the "Merger"); WHEREAS, in connection with the Merger, each Holder is to receive shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), as further described in the Merger Agreement; WHEREAS, the Company intends to issue the Common Stock to the Holders in the Merger without registration under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemptions provided by Section 4(2) of the Securities Act and applicable state securities laws; and WHEREAS, it is a condition precedent to the consummation of the Merger that the Company provide the Holders with the registration rights set forth herein. NOW, THEREFORE, intending to be legally bound and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: "Closing Date" shall mean the date upon which the Merger is consummated. "NASD" shall mean the National Association of Securities Dealers, Inc. "Nasdaq" shall mean the Nasdaq Stock Market Inc. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, each as amended or supplemented by any prospectus supplement relating to the terms of the offering of any portion of the Registrable Shares covered by such Registration Statement and by all other amendments and supplements to any such prospectus, and in each case including all material incorporated by reference therein. "Registrable Shares" shall mean the Shares, excluding (i) Shares for which a Registration Statement relating to the sale thereof shall have become effective under the Securities Act and which have been disposed of under such Registration Statement, (ii) Shares sold pursuant to Rule 144 under the Securities Act and (iii) Shares eligible for sale pursuant to Rule 144(k) under the Securities Act. "Registration Statement" shall mean any registration statement of the Company on an appropriate form filed under the Securities Act with the SEC for the offer and sale of any Registrable Shares, together with all amendments and supplements to such registration statement, including any pre- and post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Shares" shall mean the shares of Common Stock issued to any Holder in connection with the Merger, as appropriately adjusted on account of any stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. 2. Registration. (a) Demand Registrations. At any time after December 2, 2004, each of William W. Priest and Berenson Epoch LLC (collectively, the "Lead Holders") may each make up to two (2) written requests (provided in each case such Lead Holder has not registered Registrable Shares pursuant to this Section 2 within 120 days prior to such request) to the Company for registration with the SEC under and in accordance with the provisions of the Securities Act of the Registrable Shares (a "Demand Registration"). Within ten (10) days after receipt of such request, the Company shall give written notice of such requested registration to all other Holders of Registrable Shares and will include in such registration all Registrable Shares with respect to which the Company has received written requests for inclusion within thirty (30) days after the Company gives such notice. Unless expressly agreed to by the participating Lead Holder, no securities of the Company or of any other person other than Registrable Shares shall be included in a Demand Registration except pursuant to the exercise of any piggyback registration rights granted on or prior to the date hereof. Except as otherwise provided herein, a registration will not count as a Demand Registration until it has become effective and the Holders of the Registrable Shares included in such registration are legally permitted to sell all of their Registrable Shares that are requested to be so included unless the participating Lead Holder fails to take such actions as are required on his or its part to cause the registration to become effective, in which case such registration shall count as a Demand Registration. (b)"Piggy-Back" Registrations. If at any time after December 2, 2004, the Company shall file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with an acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then the Company shall send to each Holder who has a right to have Registrable Shares covered by a Registration Statement pursuant to this Agreement written notice of such determination and, if within fifteen (15) days after the date of such notice, such Holder shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Shares such Holder requests to be registered, except that if, in connection with any underwritten public offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Shares with respect to which such Holder has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Shares shall be made pro rata among Holders seeking to include Registrable Shares, in proportion to the number of Registrable Shares sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Shares unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Shares; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Shares shall be made pro rata with holders of other securities having the right to include such securities in the Registration Statement. If an offering in connection with which a Holder is entitled to registration under this Section 2 is an underwritten offering, then each Holder whose Registrable Shares are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Shares in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering. (c) Registration Procedures. In connection with the foregoing registration, the Company will as expeditiously as possible and at its expense: (i) cause the Registration Statement to become or be declared effective as soon as practicable after such filing and to remain effective until the earlier of two years or until all Registrable Shares covered thereby have been sold; (ii) prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective, and otherwise as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by such Registration Statement in accordance with the intended methods of disposition by the holders of the Registrable Shares set forth in such Registration Statement; (iii) furnish to a single designated representative of all of the holders of Registrable Shares (the "Representative") and the underwriters, if any, of the Registrable Shares such number of copies of such Registration Statement, each amendment and supplement thereto, the prospectus included in such Registration Statement (including each preliminary prospectus) and such other documents as such Representative or underwriters may reasonably request in order to facilitate the disposition of the Registrable Shares of the holders or the sale of such Registrable Shares by such underwriters; (iv) cause all Registrable Shares to be listed on each securities exchange on which similar securities issued by the Company are then listed; (v) provide a transfer agent and registrar for all Registrable Shares; (vi) notify the Representative, promptly after it shall receive notice thereof, of the time when such Registration Statement has become effective or a supplement to any prospectus forming a part of such Registration Statement has been filed; (vii) notify the Representative of any request by the SEC for the amending or supplementing of such Registration Statement or prospectus or for additional information; (viii) prepare and promptly file with the SEC and immediately notify the Representative of the filing of such amendment or supplement to such Registration Statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; and (viii) prior to the filing of any Registration Statement or prospectus or any amendment or supplement to such Registration Statement or prospectus, furnish a copy thereof to a designated counsel for the Representative and refrain from filing any such Registration Statement, prospectus, amendment or supplement to which such counsel to the Representative shall have reasonably objected in a timely manner on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or the rules and regulations thereunder, unless, in the case of an amendment or supplement, in the opinion of counsel for the Company the filing of such amendment or supplement is reasonably necessary to protect the Company from any liabilities under any applicable federal or state law and such filing will not violate applicable laws. 3. State Securities Laws. Subject to the conditions set forth in this Agreement, the Company shall, in connection with the filing of any Registration Statement hereunder, file such documents as may be necessary to register or qualify the Registrable Shares under the securities or blue sky laws of such states as any Holder may reasonably request, and the Company shall use reasonable efforts to cause such filings to become effective; provided, however, that the Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any such state in which it is not then qualified or to file any general consent to service of process in any such state. Once effective, the Company shall use reasonable efforts to keep such filings effective until the date on which such Registration Statement ceases to be effective. The Company shall notify counsel of the Holders of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Shares for sale under the securities or blue sky laws of any jurisdiction or the initiation of any threat of any proceeding for such purpose. 4. Registration Expenses. The Company shall bear all expenses incurred by the Company or the Holders (except for brokerage commissions and transfer taxes incurred by any such Holder) in connection with any registration of the Registrable Shares pursuant to this Agreement, including, without limitation: (a) all SEC and NASD registration and filing fees; (b) all fees and expenses incurred in connection with compliance with state securities or blue sky laws; (c) the fees and expenses incurred by the Company in connection with the listing of the Common Stock (including the Registrable Shares) on, and compliance with the rules of, a national securities exchange or Nasdaq; (d) all expenses of any persons in preparing, word processing, printing and distributing any Registration Statement, Prospectus, certificates and other documents relating to the performance of and compliance with this Agreement; and (e) the fees and disbursements of counsel and the accountants of the Company. 5. Covenants of the Company. The Company hereby agrees, if and whenever the Company is required by the provisions of this Agreement to effect the registration of Registrable Shares under the Securities Act, that it will: (a) make available to each Holder, any underwriter participating in any disposition pursuant to a Registration Statement, and any attorney, accountant or other agent or representative retained by any such Holder or underwriter (each an "Inspector"), all financial and other records, pertinent corporate documents and properties of the Company, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors, employees, agents, accountants and auditors to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; (b) in connection with an underwritten offering, cause its counsel to deliver an opinion to the underwriters in customary form and updates thereof, its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters, and its independent public accountants to provide a comfort letter to the underwriters in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings and updates thereof; (c) enter into any reasonable underwriting agreement required by the proposed underwriter or underwriters for the Holders, if any, and take all other actions as any Holder may reasonably request in order to facilitate the disposition of the Registrable Shares pursuant to a Registration Statement; and (d) during the period when any Prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 6. Covenants of the Holders. Each Holder hereby agrees (i) to cooperate with the Company and to furnish to the Company all such information concerning its plan of distribution and its ownership interests with respect to its Registrable Shares in connection with the preparation of a Registration Statement and any filings with any state securities commissions as the Company may reasonably request, and (ii) to deliver or cause delivery of the Prospectus contained in such Registration Statement to any purchaser of the Registrable Shares covered by such Registration Statement from the Holder. 7. Indemnification. (a) The Company hereby agrees to indemnify each Holder, each underwriter (as defined in the Securities Act) and their respective officers, directors, employees, agents, representatives and affiliates, and each person or entity, if any, that controls such Holder or underwriter within the meaning of the Securities Act (each an "Indemnitee"), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including, without limitation, reasonable fees, expenses and disbursements of attorneys), joint or several, arising out of or based upon, (i) any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company and relating to any action or inaction required of the Company in connection with any Registration Statement or Prospectus, (ii) any untrue or alleged untrue statement of a material fact contained in any Registration Statement or any Prospectus, or (iii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable to such Indemnitee or any other person to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof), cost or expense arises out of or is based upon (A) an untrue statement or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact made in such Registration Statement or Prospectus in reliance upon and in conformity with written information regarding such Indemnitee, its plan of distribution or its ownership interests, which was furnished to the Company by or on behalf of such Indemnitee expressly for use therein unless such statement or omission was corrected in a writing delivered to the Company prior to the date of the final Prospectus (as supplemented or amended, as the case may be), or (B) the failure by such Indemnitee to deliver or cause to be delivered the most current Prospectus furnished by the Company to such Indemnitee to any purchaser of the Registrable Shares covered by such Registration Statement through no fault of the Company. (b) Each Holder hereby agrees, severally and not jointly, to indemnify each other Holder (and the officers, directors, employees, agents, representatives and affiliates of each such Holder), the Company, its officers, directors, employees, agents, representatives and affiliates, and each person or entity, if any, that controls the Company within the meaning of the Securities Act, against any and all losses, claims, damages, actions, liabilities, costs and expenses (including, without limitation, reasonable fees, expenses and disbursements of attorneys), arising out of or based upon (i) any untrue statement or alleged untrue statement of material fact or an omission or alleged omission to state a material fact made in such Registration Statement or Prospectus in reliance upon and in conformity with written information regarding such Holder, its plan of distribution or its ownership interests, which was furnished to the Company by or on behalf of such Holder expressly for use therein unless such statement or omission was corrected in a writing delivered to the Company prior to the date of the final Prospectus (as supplemented or amended, as the case may be), or (ii) the failure by such Holder to deliver or cause to be delivered the most current Prospectus furnished by the Company to the Holder to any purchaser of the Registrable Shares covered by such Registration Statement through no fault of the Company. (c) In the event the Company, any Holder or other person receives a complaint, claim or other notice of any liability or action, giving rise to a claim for indemnification under paragraph (a) or (b) above, the person claiming indemnification under such paragraph shall promptly notify the person against whom indemnification is sought of such complaint, claim, notice or action, and the indemnifying party shall have the right to investigate and defend any such loss, claim, damage, action or liability; provided that the failure to promptly give notice shall not relieve the indemnifying party from any liability except to the extent that it is materially prejudiced by the failure or delay of the indemnified party in giving such notice. If any such complaint, claim or other notice of any liability or action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party shall not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel shall be at the expense of the indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties different from or in addition to those available to the indemnifying party or parties, (iii) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action or has failed to employ counsel reasonably satisfactory to such indemnified party, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party. The indemnifying party shall not, unless there exists a conflict of interest among the indemnified parties, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any time for all such indemnified parties. All such fees, disbursements and other charges shall be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 7 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding, (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party and (iii) does not commit the indemnified party to take, or to forbear to take, any action. If a settlement is reached with such consent or if a final judgment is entered for the plaintiff, the indemnifying party agrees to indemnify any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) The agreements contained in this Section 7 and Section 8 below shall survive the sale of the Registrable Shares pursuant to a Registration Statement and shall remain in full force and effect regardless of the termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 8. Contribution. If the indemnification provided for in Section 7 is unavailable to an indemnified party with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the indemnified party harmless as contemplated therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Indemnitee, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each of the Holders agrees that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 8, no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds from the sale of Registrable Shares exceeds the amount of any damages that the Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. 9. Suspension of Registration Statement. (a) The Company shall immediately notify counsel of the Holders of, and confirm in writing, the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement with respect to such Holder's Registrable Shares or the initiation of any proceedings for that purpose. The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of such Registration Statement as soon as practicable. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation under this Agreement to cause a Registration Statement and any filings with any state securities commission to become effective or to amend or supplement a Registration Statement or Prospectus included therein shall be suspended (i) in the event and during such period as unforeseen circumstances exist that would require additional disclosure of material information that would make it impractical or unadvisable, in the determination of the Board of Directors of the Company, to cause the Registration Statement or such filings to become effective or to amend or supplement the Registration Statement or Prospectus included therein, or (ii) the effectiveness of the Registration Statement or such filings or an amendment of or supplement to the Registration Statement or Prospectus included therein could, in the good faith determination of the Board of Directors of the Company, interfere with a proposed financing, acquisition or reorganization, the conduct or outcome of any litigation or would require the disclosure of information that the Company has a bona fide purpose for preserving as confidential (each, a "Suspension Event"); provided, however, that, unless otherwise required by applicable law, there shall not be more than three (3) Suspension Events in any 12-month period; and provided further that no Suspension Event shall exceed sixty (60) days. The Company shall notify counsel to the Holders in writing of the existence and, to the extent possible under applicable law, nature of any Suspension Event. (c) Each Holder agrees that, following the effectiveness of any Registration Statement relating to the Registrable Shares of such Holder, such Holder will not effect any sales of the Registrable Shares pursuant to such Registration Statement or any filings with any state securities commissions at any time after such Holder has received written notice from the Company to suspend sales as a result of the occurrence or existence of any Suspension Event or so that the Company may correct or update such Registration Statement or filing in accordance with Section 2(f). Such Holder may recommence effecting sales of the Registrable Shares pursuant to such Registration Statement or filing upon further notice to such effect from the Company which notice shall be given by the Company promptly after the conclusion of any such Suspension Event. 10. Market Stand-Off. Each Holder whose Registrable Shares are covered by a Registration Statement filed pursuant to Section 2 agrees, if requested by the Company in the case of a Company-initiated nonunderwritten offering, or if requested by the managing underwriter or underwriters in a Company-initiated underwritten offering, not to effect any public sale or distribution of any of the securities of the Company, including a sale pursuant to Rule 144 under the Securities Act, (except as part of such Company-initiated offering) during the 45-day period beginning on the date of commencement of such Company-initiated offering (the "Holdback Period"), to the extent timely notified in writing by the Company or the managing underwriter or underwriters. 11. Compliance with Rule 144. The Company will use its best efforts to file with the SEC such information as is required under the Exchange Act, for so long as there are Holders of Registrable Shares and to take all action as may be required as a condition to the availability of Rule 144 under the Securities Act. The Company shall use its best efforts to facilitate and expedite transfers of Registrable Shares pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Shares. 12. Rule 144A Information. The Company shall, upon written request of any Holder, provide to such Holder in connection with a transfer of Registrable Shares, such financial and other information as is available to the Company or can be obtained by the Company without material expense and as such Holder may reasonably determine is required to permit such transfer to comply with the requirements of Rule 144A under the Securities Act. 13. Transferability. The registration rights set forth in this Agreement are transferable to each transferee of Registrable Shares. Each subsequent Holder of Registrable Shares must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement. 14. Representations and Warranties of the Company. The Company hereby represents and warrants to the Holders as follows: (a) the Company has full corporate power and authority to enter into this Agreement and perform its obligations hereunder; (b) this Agreement has been duly authorized, executed and delivered by the Company; and (c) the execution, delivery and performance of this Agreement by the Company does not and the performance is not expected to violate (i) the Company's charter or by- laws, (ii) any laws, rules or regulations of the United States or any state or other jurisdiction applicable to the Company or its assets or properties, or (iii) except for the approvals, consents, waivers and filings specifically described herein, require the Company to obtain any approval, consent or waiver of, or to make any filing with, any person that has not been obtained or made. 15. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof, may be given at any time by mutual agreement in writing of the Company and the Holders of at least a majority of the Registrable Shares then outstanding. Notwithstanding the foregoing, any Holder may enter into any written amendment, modification or supplement to this Agreement, and waive or consent in writing to any departure from the provisions hereof, at any time, whether or not any other Holder is a party to such amendment, modification, supplement, waiver or consent, but any such action will be effective only as against the parties to that written document. 16. Miscellaneous. (a) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and sufficient if delivered in person, by cable, telegram or facsimile (with confirmation of receipt), or sent by mail (registered or certified mail, postage prepaid, return receipt requested) or overnight courier (prepaid) to the respective parties as follows: If to Parent: J Net Enterprises, Inc. 4020 Lake Creek Drive, #100 Wilson, Wyoming 83014 Attn: Allan R. Tessler Telecopy No.: (307) 734-2719 With a copy to: Greenberg Traurig, LLP 200 Park Avenue, 15th Floor New York, New York 10166 Attn: Alan I. Annex, Esq. Telecopy No.: (212) 801-6400 If to the Holders: c/o Epoch Investment Partners, Inc. 667 Madison Avenue New York, New York 10021 Attn: Secretary With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attn: Russell G. G'Oench, III Telecopy No.: (212) 735-2000 or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective upon receipt. (b) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, including, without limitation, subsequent Holders of Registrable Shares. The Company may not assign its rights or obligations hereunder without the prior written consent of at least a majority of the Registrable Shares then outstanding, other than by operation of law pursuant to a merger or consolidation to which the Company is a party; provided that such successor to the Company by merger or consolidation specifically agrees to be bound by the terms hereof. (c) Counterparts. This Agreement may be executed in several counterparts each of which shall be an original and all of which together shall constitute one and the same agreement. (d) Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to its rules of conflict of laws. (e) Severability. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. (f) Entire Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter hereof, and supersedes all prior negotiations and understandings between the parties with respect to such subject matter. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. COMPANY: J NET ENTERPRISES, INC. By: /s/ Allan R. Tessler ____________________ Name: Allan R. Tessler Title: Chief Executive Officer HOLDERS: /s/ William W. Priest ________________________________ William W. Priest /s/ Timothy T. Taussig ________________________________ Timothy T. Taussig /s/ David Pearl ________________________________ David Pearl BERENSON EPOCH LLC By: /s/ Berenson & Company, Inc., its managing member _____________________________ Name: Steven Wayne Title: Secretary and Treasurer J PHILIP/DEBORAH K CLARK TRUST U/A 10/06/1994 By: /s/ J. Philip Clark _____________________________ Name: J. Philip Clark Title: Trustee EX-99 5 ex99.txt Exhibit 99 J Net Enterprises Acquires Epoch Investment Partners, Inc. NEW YORK--(BUSINESS WIRE)--June 3, 2004--J Net Enterprises, Inc. (OTCBB:JNEI) today announced the acquisition of Epoch Investment Partners, Inc. ("Epoch"), an investment advisory and investment management business. The acquisition was effected pursuant to an agreement and plan of merger, whereby Epoch was merged with and into a wholly-owned subsidiary of J Net Enterprises, Inc. ("J Net"), with Epoch surviving and the shareholders of Epoch receiving the right, based on the satisfaction of certain conditions by Epoch, to receive approximately 51% of the common stock of J Net. J Net intends to carry on Epoch's investment advisory and investment management business as J Net's primary line of business and anticipates altering its name at a later date to reflect the company's principal line of business. Epoch expects to have in excess of $800 million of assets under management shortly after the closing of the transaction. Epoch was recently formed and co-founded by Mr. William W. Priest. Mr. Priest has over 35 years of experience in the investment advisory business and most recently served as co-managing partner of Steinberg, Priest & Sloane Capital Management, LLC ("SPSCM") and, prior to that, as Chairman and CEO of Credit Suisse Asset Management ("CSAM") Americas and as CEO of its predecessor firm BEA Associates, which he co-founded in 1972. During his tenure at BEA Associates and CSAM Americas, Mr. Priest developed the firm into a well-recognized investment manager with over $100 billion in assets under management. In addition to Mr. Priest, Epoch's co-founders are Timothy Taussig, former Managing Director, Member of the Global Executive Committee for CSAM and Co-Head of Global Marketing for CSAM worldwide; J. Philip Clark, former Managing Director of Sanford C. Bernstein & Co.'s private client and institutional asset management businesses; David Pearl, Managing Director and Senior Portfolio Manager at SPSCM; and Berenson Epoch LLC, an affiliate of the New York investment banking firm Berenson & Company. Timothy Taussig, J. Philip Clark and David Pearl shall be part of Epoch's core management and investment teams. Allan R. Tessler, Chairman of J Net stated, "We have been interested in finding a way to participate in the investment management industry for some time. We believe Bill Priest, with over 35 years of achievement, experience and an excellent reputation in this industry is the ideal person to lead this effort." William W. Priest, J Net's new CEO designate and President of Epoch said, "In my experience, it is rare to find a Board of Directors that recognizes the same opportunity in the investment management industry as we did in founding Epoch. Allan Tessler's enthusiasm and willingness to continue as Chairman will greatly facilitate the development of this opportunity." Mr. Priest continued, "It is our aspiration to create a global asset management firm with accomplished and experienced professionals that combines in-house research and insight with a dedication to serving the informed investor. All our key professionals have both achievement and extensive experience in their respective fields of expertise." The investment banking firm of Ryan Beck & Co. served as financial advisor to the Board of Directors of J Net in connection with this transaction. Additional details with respect to the acquisition and Epoch's business can be found in a Current Report on a Form 8-K dated June 2, 2004 to be filed by J Net. Safe Harbor Statement: This press release may contain forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Additional discussion of factors that could cause actual results to differ materially from management's projections, estimates and expectations is contained in the Company's SEC filings. The Company undertakes no duty to update its forward-looking statements, including its earnings outlook. # # # Contact: Epoch Investment Partners, Inc. J. Philip Clark (212) 303-7200 J Net Enterprises, Inc. Linda Crump (972) 665-1313 -----END PRIVACY-ENHANCED MESSAGE-----