EXHIBIT 10.21
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of April 2, 1998 (the
"Agreement"), between the entities listed on Schedule A attached hereto
(collectively referred to as the "Investor"), SETTONDOWN CAPITAL INTERNATIONAL
LTD. (the "Placement Agent") located at Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X.
Xxx X. 0000, Xxxxxx, Bahamas, a corporation organized under the laws of Bahamas,
and THE ASHTON TECHNOLOGY GROUP, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase up to (a)
$3,000,000 aggregate principal amount of the Company's Series D Convertible
Preferred Stock, (b) $2,000,000 aggregate principal amount of the Company's
Series E Convertible Preferred Stock, and (c) pursuant to the equity line of
credit established herein whereby the Company has the option of exercising its
"Put" rights upon the Investor for the purchase and sale of up to an additional
$13,000,000 of the Common Stock for a total aggregate purchase price of
$18,000,000 (the "Aggregate Purchase Price"); and
WHEREAS, the Company shall issue to the Placement Agent, in return for
services rendered, from time to time as provided herein, up to .15 of one share
of Series D Convertible Preferred Stock, .1 of one share of Series E Convertible
Preferred Stock, a Warrant to purchase 190,000 shares of Common Stock, and
20,000 shares of Common Stock; and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Bid Price" shall mean the closing bid price (as reported
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by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2 "Capital Shares" shall mean the Common Stock and any shares
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of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
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rights, or obligations that are convertible into, exchangeable for, or have any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any
security convertible into, or exchangeable for Capital Shares.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
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sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing: Date" shall mean with respect to a Closing for
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(i) the Initial Shares shall be deemed the Subscription Date; (ii) the Secondary
Shares shall be the Fifth Trading Day following the satisfaction of the
conditions set forth in Section 2.9; and (iii) the Put Shares shall be the fifth
Trading Day following the Put Date related to such Closing; provided all
conditions to such Closing have been satisfied on or before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the $18,000,000 up to which
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the Investor has agreed to provide to the Company in order to purchase the
Initial Shares, Secondary Shares, and Put Shares pursuant to the terms and
conditions of this Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on the
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earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Purchase Price of
$13,000,000, (y) the date this Agreement is terminated pursuant to Section 2.4,
or (z) the date occurring two years from the date of commencement of the
Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, par
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value $.01 per share.
Section 1.9 "Condition Satisfaction Date" shall have the meaning set
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forth in Section 7.2.
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
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costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11 "Effective Date" shall mean the date on which the SEC
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first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
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1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Floor Price" shall mean a Bid Price of One Dollar and
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Fifty Cents ($1.50) per share of Common Stock.
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Section 1.14 "Initial Shares" shall have the meaning set forth in
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Section 2.8.
Section 1.15 "Initial Shares Investment Amount" shall mean Three
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Million ($3,000,000) Dollars.
Section 1.16 "Investment Amount" shall mean the dollar amount to be
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invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.2
hereof.
Section 1.17 "Legend" See Section 8.1.
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Section 1.18 "Market Price" on any given date shall mean the average of
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the two lowest closing Bid Prices (as reported by Bloomberg L.P.) of the Common
Stock during the Valuation Period.
Section 1.19 "Material Adverse Effect" shall mean any effect on the
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business, Bid Price, operations, properties, prospects, or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Escrow Agreement, or the Warrant in any
material respect.
Section 1.20 "Maximum Put Amount" on any Put Date shall mean the amount
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indicated opposite the range in which the Closing Price is on such Put Date and
below the 30 Day Average Daily trading Volume on such Put Date, as set forth in
the Table below:
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Closing Price 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily
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Trading Volume Trading Volume Trading Volume Trading Volume
--------------- --------------- --------------- --------------
25,000-50,000 50,001-75,000 75,001-100,000 100,001-Above
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$1.50-$2.99 $200,000 $300,000 $400,000 $400,000
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$3.00-$6.00 $600,000 $750,000 $1,000,000 $1,250,000
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$6.01-$8.00 $750,000 $1,000,000 $1,250,000 $1,500,000
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$8.01-$10.00 $1,000,000 $1,250,000 $1,500,000 $1,750,000
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$10.01-$12.00 $1,250,000 $1,500,000 $1,750,000 $2,000,000
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$12.01-$14.00 $1,500,000 $1,750,000 $2,000,000 $2,000,000
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$14.01-Above $1,750,000 $2,000,000 $2,000,000 $2,000,000
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Section 1.21 "NASD" shall mean the National Association of Securities
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Dealers, Inc.
Section 1.22 "Outstanding" when used with reference to shares of Common
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Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
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then directly or indirectly owned or held by or for the account of the Company.
Section 1.23 "Person" shall mean an individual, a corporation, a
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partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.24 "Principal Market" shall mean the Nasdaq National Market,
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the Nasdaq Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.25 "Purchase Price" shall mean (a) with respect to the
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Initial Shares, an amount equal to the "Liquidation Preference" of each Initial
Share, as set forth in the Series D Convertible Preferred Stock Certificate of
Designation attached hereto as Exhibit A, (b) with respect to the Secondary
Shares, an amount equal to the "Liquidation Preference" of each Secondary Share,
as set forth in the Series E Convertible Preferred Stock Certificate of
Designation attached hereto as Exhibit B, and (c) with respect to Put Shares,
eighty five (85%) percent (the "Purchase Price Percentage") of the Market Price
upon a Put Date (or such other date on which the Purchase Price is calculated in
accordance with the terms and conditions of this Agreement).
Section 1.26 "Put" shall mean each occasion the Company elects to
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exercise its right to tender a Put Notice requiring the Investor to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.27 "Put Date" shall mean the Trading Day during the
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Commitment Period that a Put Notice to sell Common Stock to the Investor is
deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.28 "Put Notice" shall mean a written notice to the Investor
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setting forth the Investment Amount that the Company intends to sell to the
Investor and Compliance Certification from the Company as attached hereto as
Exhibit C.
Section 1.29 "Put Shares" shall mean all shares of Common Stock or
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other securities issued or issuable pursuant to a Put that has occurred or may
occur in accordance with the terms and conditions of this Agreement.
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Section 1.30 "Registrable Securities" shall mean any of the Initial
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Shares, Secondary Shares, Put Shares, and the Warrant Shares (i) in respect of
which the Registration Statement has not been declared effective by the SEC,
(ii) which have not been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) which have not been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(iv) the sales of which, in the opinion of counsel to the Company, are subject
to any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.31 "Registration Rights Agreement" shall mean the agreement
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regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on the
Subscription Date annexed hereto as Exhibit D.
Section 1.32 "Registration Statement" shall mean a registration
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statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement, and the Warrant
and in accordance with the intended method of distribution of such securities),
for the registration of the resale by the Investor of the Registrable Securities
under the Securities Act.
Section 1.33 "Regulation D" shall have the meaning set forth in the
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recitals of this Agreement.
Section 1.34 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.35 "Secondary Shares" shall have the meaning set forth in
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Section 2.9.
Section 1.36 "Secondary Shares Investment Amount" shall mean Two
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Million ($2,000,000) Dollars.
Section 1.37 "Section 4(2)" shall have the meaning set forth in the
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recitals of this Agreement.
Section 1.38 "Securities Act" shall have the meaning set forth in the
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recitals of this Agreement.
Section 1.39 "SEC Documents" shall mean the Form 10-KSB, Form 10-QSB's,
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Form 8-K's, Proxy Statements or the Confidential Private Placement Memorandum
dated September 18, 1997 of the Company as supplemented to the date hereof,
filed by the Company for a period of at twelve (12) months immediately preceding
the date hereof until such time the Company no
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longer has an obligation to maintain the effectiveness of a Registration
Statement as set forth in the Registration Rights Agreement.
Section 1.40 "Series D Convertible Preferred Stock" shall mean the
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Series D Convertible Preferred Stock, $0.01 par value, of the Company with all
of the rights and preferences contained in the Series D Convertible Preferred
Stock Certificate of Designation, and this Agreement.
Section 1.41 "Series E Convertible Preferred Stock" shall mean the
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Series E Convertible Preferred Stock, $0.01 par value, of the Company with all
of the rights and preferences contained in the Series E Convertible Preferred
Stock Certificate of Designation, and this Agreement.
Section 1.42 "Subscription Date" shall mean the date on which this
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Agreement is executed and delivered by the parties hereto.
Section 1.43 "Trading Cushion" shall mean the mandatory fifteen (15)
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Trading Days between Put Dates.
Section 1.44 "Trading Day" shall mean any day during which the New York
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Stock Exchange shall be open for business.
Section 1.45 "Valuation Event" shall mean an event in which the Company
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at any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares; issues any additional Capital Shares
("Additional Capital Shares"), otherwise than as provided in the foregoing
Subsections (a) and (b) above, at a price per share less, or for other
consideration lower, than the Bid Price in effect immediately prior to such
issuance, or without consideration;
(c) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(d) issues any securities convertible into or exchangeable for Capital
Shares and the consideration per share for which Additional Capital Shares may
at any time thereafter be issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than the Bid Price in effect immediately
prior to such issuance;
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(e) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
subsections (a) through (e); or
(f) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Subsections (a)
through (f) hereof, inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a Material Adverse Effect upon
the rights of the Investor at the time of a Put or exercise of the Warrant.
Section 1.46 "Valuation Period" shall mean with respect to the Purchase
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Price on any Put Date, the three (3) Trading Days immediately preceding and the
three (3) Trading Days following the Trading Day on which an Put Notice is
deemed to be delivered, as well as the Trading Day on which such notice is
deemed to be delivered; provided, however, that if a Valuation Event occurs
during a Valuation Period, a new Valuation Period shall begin on the Trading Day
immediately after the occurrence of such Valuation Event and end on the seventh
Trading Day thereafter.
Section 1.47 "Warrant" shall have the meaning set forth in Section 2.5
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and be substantially in the form of Exhibit E.
Section 1.48 "Warrant Shares" shall mean all shares of Common Stock or
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other securities issued or issuable pursuant to exercise of the Warrant.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments.
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(a) Puts. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Put Date the
Company may make a Put by the delivery of a Put Notice in the form attached
hereto as Exhibit C. The number of Put Shares that the Investor shall receive
pursuant to such Put shall be determined by dividing the Investment Amount
specified in the Put Notice by the Purchase Price on such Put Date, which number
of shares shall not exceed the Maximum Put Amount on such date.
(b) Maximum Aggregate Purchase of Common Stock. Unless the Company
obtains Shareholder approval pursuant to the applicable corporate governance
rules of the Nasdaq Stock Market, the Investor may not be compelled to make a
purchase which results in the issuance to the Investor of more than 19.99% of
the shares of Common Stock (measured at the time of such
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purchase) as a result of the transactions contemplated by this Agreement,
including the conversion of the Series D and Series E Convertible Preferred
Stock, the exercise of any Puts.
(c) Restrictions. In the event of any merger, reorganization,
acquisition, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, or any one time charge the Company expects
to incur for any reason, the Trading Cushion shall be adjusted to mean the
mandatory ten Trading Days between Put Dates, and the Purchase Price Percentage
shall be reduced to eighty (80%) percent.
Section 2.2 Mechanics.
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(a) Put Notice. At any time during the Commitment Period, the Company
may deliver a Put Notice to the Investor, subject to the conditions set forth in
Section 2.4, provided, however, the Investment Amount for each Put as designated
by the Company in the applicable Put Notice shall not be less than $50,000 nor
more than the Maximum Put Amount on the Put Date.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 12:00 noon Eastern Time, or (ii)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered, on a day that
is not a Trading Day.
Section 2.3 Closings. On each Closing Date for a Put (i) the Company
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shall deliver to the Escrow Agent one or more certificates, at the Investor's
option, representing the Put Shares to be purchased by the Investor pursuant to
Section 2.1 herein, registered in the name of the Investor or, at the Investor's
option, and (ii) the Investor shall deliver to escrow the Investment Amount
specified in the Put Notice by wire transfer of immediately available funds to
the Escrow Agent on or before the Closing Date. In addition, on or prior to the
Closing Date, each of the Company and the Investor shall deliver to the Escrow
Agent all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein. Payment of funds to
the Company and delivery of the certificates to the Investor shall occur out of
escrow in accordance with the conditions set forth above and those contained in
the Escrow Agreement referred to in Section 7.2(n); provided, however, that to
the extent the Company has not paid the fees, expenses, and disbursements of the
Investor's counsel in accordance with Section 13.7, the amount of such fees,
expenses, and disbursements shall be paid in immediately available funds, at the
direction of the Investor, to Investor's counsel with no reduction in the number
of Put Shares issuable to the Investor on such Closing Date.
Section 2.4 Termination of Investment Obligation. The obligation of the
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Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or
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suspension of the effectiveness of the Registration Statement for an aggregate
of twenty (20) Trading Days during the Commitment Period, for any reason other
than deferrals or suspensions in accordance with the Registration Rights
Agreement as a result of corporate developments subsequent to the Subscription
Date that would require such Registration Statement to be amended to reflect
such event in order to maintain its compliance with the disclosure requirements
of the Securities Act or (ii) the Company shall at any time fail to comply with
the requirements of Section 6.3, 6.4 or 6.6.
Section 2.5 The Warrant.
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(a) On the Subscription Date, the Company will issue to the Investor a
warrant exercisable beginning on the Subscription Date and then exercisable any
time over the five-year period thereafter, to purchase an aggregate of 250,000
Warrant Shares at the Exercise Price (as defined in the Warrant). The Warrant
shall be delivered by the Company to the Escrow Agent, and delivered to the
Investor pursuant to the terms of this Agreement and the Escrow Agreement. The
Warrant Shares shall be registered for resale pursuant to the Registration
Rights Agreement.
(b) On the Closing Date for the Secondary Shares the Company will
issue to the Investor a Warrant exercisable beginning on the Closing Date for
the Secondary Shares and then exercisable any time over the five-year period
thereafter, to purchase 50,000 Warrant Shares at the Exercise Price (as defined
in the Warrant) per $1,000,000 funded. The Warrant shall be delivered by the
Company to the Escrow Agent, and delivered to the Investor pursuant to the terms
of this Agreement and the Escrow Agreement. The Warrant Shares shall be
registered for resale pursuant to the Registration Rights Agreement.
Section 2.6 Additional Shares. In the event that (a) the Investor has
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shares of Common Stock which are salable through the use of a prospectus, or
within five Trading Days of any Put Notice or Conversion Notice, the Company
gives notice to the Investor of an impending blackout or suspension of the
Registration Statement, and (b) the Bid Price on the Trading Day immediately
preceding such "blackout period" (the "Old Bid Price") is greater than the Bid
Price on the first Trading Day following such blackout or suspension period (the
"New Bid Price"), the Investor may sell its Registrable Securities at the New
Bid Price pursuant to an effective Registration Statement, the Company shall
issue to the Investor a number of additional shares equal to the difference
between (y) the product of the number of Registrable Securities held by the
Investor during such blackout or suspension period that are not otherwise freely
tradable and the Old Bid Price, divided by the New Bid Price, less the number of
Registrable Securities held by the Investor during such blackout or suspension
period that are not otherwise freely tradable.
Section 2.7 Liquidated Damages.
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(a) In the event the Company does not deliver unlegended Common Stock
as set forth in Article IX below, within five (5) calendar days of surrender by
the Investor of the
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Common Stock certificate as is set forth in Article IV below, (such date of
receipt is referred to as the "Receipt Date"), the Company shall pay to the
Investor, in immediately available funds, upon demand, as liquidated damages for
such failure and not as a penalty, for each 500 shares of Common Stock to be so
delivered by the Investor as set forth above, $500 for each of the first ten
(10) days and $1,000 per day thereafter that the unlegended shares of Common
Stock are not delivered, which liquidated damages shall run from the sixth
calendar day after the Receipt Date. Any and all payments required pursuant to
this paragraph shall be payable only in cash. The parties hereto acknowledge and
agree that the sum payable pursuant to the Registration Rights Agreement and as
set forth above, and the obligation to issue Registrable Securities under
Section 2.6 above shall constitute liquidated damages and not penalties.
(b) In the event the Company fails to deliver shares of Common Stock
upon conversion of the Series D or E Convertible Preferred Stock the Company
will be subject to liquidated damages as set forth in Section 4.19 below. The
parties further acknowledge that (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, and (b) the parties
are sophisticated business parties and have been represented by sophisticated
and able legal and financial counsel and negotiated this Agreement at arm's
length.
(c) The parties agree that the payment of liquidated damages pursuant
to the terms forth herein, and in the two Certificate of Designations, shall not
relieve the Company of the necessity to perform its duties as set forth in this
Agreement and all related documents.
Section 2.8 Initial Shares Purchase.
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(a) The Company agrees to sell and the Investor agrees to purchase
$3,000,000 aggregate principal amount of Series D Convertible Preferred Stock on
the Subscription Date (the "Initial Shares"). The number of shares of Common
Stock issuable upon conversion of the Initial Shares shall be determined by
dividing $3,000,000 by the conversion formula contained in the Series D
Convertible Preferred Stock Certificate of Designation. This Section 2.8(a) is
specifically subject to the covenants set forth in Section 6.14 herein.
(b) The Initial Shares shall be purchased by the Investors upon the
completion of each of the following conditions:
(i) the execution and delivery by the Company, and the Investor,
of this Agreement, and all Exhibits and Attachments hereto;
(ii) delivery into escrow by the Company, on the Subscription
Date, of the Warrant;
(iii) delivery into escrow by the Company of the original
Series D Convertible Preferred Stock Certificate, as more fully set
forth in the Escrow Agreement;
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(iv) delivery into escrow by Investor of good cleared funds
as payment for the Initial Shares, as more fully set forth in the
Escrow Agreement attached hereto as Exhibit F;
(v) all representations and warranties of the Investor and
of the Company contained herein being true and correct as of the
Subscription Date;
(vi) receipt of opinion of counsel of the Company as set
forth in this Agreement;
(vii) the filing of a Certificate of Designation for the
Series D Convertible Preferred Stock, and any amendments thereto;
(viii) payment of fees as set forth in Section 13.7 below; and
(ix) letter from Company counsel detailing conversation with
Nasdaq representative concerning interpretation of the "20% Rule"
substantially in the form of Exhibit G attached hereto.
Section 2.9 Secondary Shares Purchase.
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(a) The Company agrees to sell and the Investor agrees to purchase
$2,000,000 aggregate principal amount of Series E Convertible Preferred Stock
(the "Secondary Shares"). The number of shares of Common Stock issuable upon
conversion of the Secondary Shares shall be determined by dividing $2,000,000 by
the conversion formula contained in the Series E Convertible Preferred Stock
Certificate of Designation.
(b) The Secondary Shares shall be purchased by the Investors within
five Trading Days after the completion of each of the following conditions:
(i) the Investor shall have received certification that the
Company has obtained shareholder approval for the Company's issuance of
more than twenty (20%) percent of its Common Stock in connection with
the transactions contemplated hereby;
(ii) the execution and delivery by the Company, and the
Investor, of this Agreement, and all Exhibits and Attachments hereto;
(iii) delivery into escrow by the Company of the original
Series E Convertible Preferred Stock, as more fully set forth in the
Escrow Agreement attached hereto as Exhibit F;
(iv) delivery into escrow by Investor of good cleared funds
as payment for the Secondary Shares, as more fully set forth in the
Escrow Agreement attached hereto as Exhibit F;
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(vi) the Investor shall have received an opinion of counsel of the
Company as set forth in this Agreement;
(vii) the Investor shall have received a copy of the filed Certificate of
Designation for the Series E Convertible Preferred Stock, and any amendments
thereto;
(viii) the Investor shall have received a letter from Company counsel
detailing conversation with Nasdaq representative concerning interpretation of
the "20% Rule", substantially in the form of Exhibit G attached hereto;
(ix) The Company shall have filed with the SEC a Registration Statement
with respect to the resale of the Registrable Securities in accordance with the
terms of the Registration Rights Agreement;
(x) The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Secondary Shares, or shall
have the availability of exemptions therefrom. The sale and issuance of the
Secondary Shares shall be legally permitted by all laws and regulations to which
the Company is subject;
(xi) The representations and warranties of the Company shall be true and
correct in all material respects as of the Closing Date for the Secondary Shares
as though made at each such time (except for representations and warranties
specifically made as of a particular date) with respect to all periods, and as
to all events and circumstances occurring or existing to and including the
Closing Date for the Secondary Shares, except for any conditions which have
temporarily caused any representations or warranties herein to be incorrect and
which have been corrected with no continuing impairment to the Company or the
Investor;
(xii) The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this
Agreement, the Registration Rights Agreement and the Warrant to be performed,
satisfied or complied with by the Company at or prior to the Closing Date for
the Secondary Shares;
(xiii) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits or
directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement;
(xiv) Since the date of filing of the Company's most recent SEC Document,
no event that had or is reasonably likely to have a Material Adverse Effect has
occurred;
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(xv) The trading of the Common Stock is not suspended by the SEC or the
Principal Market, and the Common Stock shall have been approved for listing or
quotation on and shall not have been delisted from the Principal Market. The
issuance of shares of Common Stock with respect to the Closing for the Secondary
Shares, shall not violate the shareholder approval requirements of the Principal
Market. The Company shall not have received any notice threatening the listing
of the Common Stock on the Principal Market;
(xvi) On the Closing Date for the Secondary Shares, the number of
Secondary Shares then to be purchased by the Investor will not exceed the number
of such shares which, when aggregated with all other shares of Common Stock then
owned by the Investor beneficially or deemed beneficially owned by the Investor,
would result in the Investor owning more than 4.99% of all of such Common Stock
as would be outstanding on such Closing Date, as determined in accordance with
Rule 13d-3 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section, in the event that the amount of Common Stock
outstanding as determined in accordance with Rule 13d-3 of the Exchange Act and
the regulations promulgated thereunder is greater on the Closing Date for the
Secondary Shares than on the Subscription Date, the amount of Common Stock
outstanding on the Subscription Date shall govern for purposes of determining
whether the Investor, when aggregating all purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares, would own more than
4.99% of the Common Stock following such Closing. Then, in such event, the
Company would reduce that number of Secondary Shares so issuable so that it
would not exceed the aforementioned 4.99% limitation. Investor shall notify the
Company as soon as possible, but in any event within three (3) business days of
receiving a notice of the aforementioned conditions, if Investor believes
Investor's purchase of the Secondary Shares would result in Investor exceeding
the 4.99% limitation described above;
(xvii) The Bid Price equals or exceeds the Floor Price on the Trading Day
immediately preceding the completion of all the conditions set forth in this
Section 2.9(b) (as adjusted for stock splits, stock dividends, reverse stock
splits, and similar events);
(xviii) The average trading volume for the Common Stock over the previous
thirty (30) Trading Days exceeds 25,000 shares per Trading Day;
(xix) Payment offers as set forth in Section 13.7 below; and
(xx) On the Closing Date for the Secondary Shares, the Investor shall
have received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section, including, without limitation, a certificate in substantially
the form and substance of Exhibit C hereto, executed in either case by an
executive officer of the Company and to the effect that all
13
the conditions to such Closing shall have been satisfied as at the date of
each such certificate.
ARTICLE III
Representations and Warranties of Investor
The Investor represents and warrants to the Company that:
Section 3.1 Organization and Authorization. Investors are duly incorporated
------------------------------
or organized and validly existing in the country of their incorporation or
organization and have all requisite power and authority to purchase and hold the
securities issuable hereunder. The decision to invest and the execution and
delivery of this Agreement by the Investors, the performance by the Investors of
their obligations hereunder and the consummation by the Investors of the
transactions contemplated hereby have been duly authorized and requires no other
proceedings on the part of the Investors. The undersigned has all right, power
and authority to execute and deliver this Agreement on behalf of the Investors.
This Agreement has been duly executed and delivered by the Investors and,
assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Investors, enforceable against the Investors in accordance with its terms.
Section 3.2 Evaluation of Risks. Investors have such knowledge and
-------------------
experience in financial and business matters as to be capable of evaluating the
merits and risks of, and bearing the economic risks entailed by, an investment
in the Company and of protecting its interests in connection with this
transaction. It recognizes that its investment in the Company involves a high
degree of risk.
Section 3.3 Independent Counsel. Investors acknowledge that they have
-------------------
been advised to consult with their own attorney regarding legal matters
concerning the Company and to consult with its tax advisor regarding the tax
consequences of acquiring the securities issuable hereunder.
Section 3.4 No Registration. The Investor understands that the securities
---------------
issuable hereunder have not been registered under the Act or any other
securities laws but are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of Federal and State securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Investors set forth herein in order to determine the applicability of such
exemptions and the suitability of Investors to acquire the securities hereunder.
Section 3.5 Investment Intent. The Investor is entering into this Agreement
-----------------
solely for its own account and the Investor has no present arrangement (whether
or not legally binding) at any time to sell the Initial Shares, Secondary
Shares, or Put Shares to or through any person or entity. Investors understand
and agree that they may bear the economic risk of its investment in the
Securities for an indefinite period of time.
14
Section 3.6 Conversion Holding Period/Conversion Limits.
-------------------------------------------
(a) The Investor agrees that it shall not exercise its conversion rights
granted in the Certificate of Designation for the Series D Convertible Preferred
Stock (the "Holding Period") until the earlier of (i) sixty (60) days after the
Subscription Date; or (ii) upon the effectiveness of the Registration Statement.
(b) The Investor agrees that the Series D and Series E Convertible
Preferred Stock is convertible in minimum increments of $50,000 principal face
value.
Section 3.7 Transfer Restrictions Regarding the Series D or E Convertible
-------------------------------------------------------------
Preferred Stock. Upon conversion of any part or all of the Series D Convertible
---------------
Preferred Stock at any time after the Holding Period, or upon conversion of any
part or all of the Series E Convertible Preferred Stock at any time after the
Closing Date for the Secondary Shares, if the holder of the Series D or E
Convertible Preferred Stock being converted makes the certification, pursuant to
the Notice of Conversion attached hereto as Exhibit H, that such holder has
complied with all of the requirements as set forth herein, then the Company
shall cause the Transfer Agent to deliver the underlying Common Stock (the
"Underlying Shares") upon such conversion without a restrictive legend or stop
transfer instructions, otherwise the Underlying Shares shall be considered
restricted securities and certificates representing such shares shall contain
restrictive legends and stop transfer instructions will be placed with the
Company's transfer agent regarding such shares.
Section 3.8 Registration Rights. The parties have entered into a
-------------------
Registration Rights Agreement (Exhibit D).
Section 3.9 No Advertisements. The Investor is not entering into this
-----------------
Agreement as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
Section 3.10 Sophisticated Investor. The Investor is a sophisticated
----------------------
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.11 Not an Affiliate. The Investor is not an officer, director
----------------
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
ARTICLE IV
Representations and Warranties of the Company
15
Except as stated on the Disclosure Schedule attached hereto as Schedule
B (the "Disclosure Schedule"), the Company hereby represents and warrants to,
and covenants with, the Investors that the following are true and correct as of
the date hereof and as of the Closing Date:
Section 4.1 Organization; Qualification. The Company is a corporation
---------------------------
duly organized and validly existing under the laws of the State of Delaware and
is in good standing under such laws. The Company has all requisite corporate
power and authority to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the ownership of
its property or the nature of its business requires such qualification, except
where failure to so qualify would not have a material adverse effect on the
Company.
Section 4.2 Capitalization. The authorized capital stock of the Company
--------------
consists of 20,000,000 shares of Common Stock, $0.01 par value per share, of
which 8,843,571 are outstanding, 1,000,000 shares of non-voting Preferred Stock,
$0.01 par value, of which 250,000 have been designated Series A Convertible PIK
Preferred Stock (all of which are outstanding), 550,000 have been designated
Series B Convertible Preferred Stock (460,000 of which are outstanding), 55,000
have been designated Series C Convertible Preferred Stock (all of which are
outstanding) and pursuant to the transactions contemplated by this Agreement,
ten of which will be designated Series D Preferred Stock (3 of which will be
outstanding upon the consummation of the Closing for the Initial Shares) and ten
of which will be designated Series E Preferred Stock. All issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. On February 11, 1997, the Board of Directors of
the Company rescinded an earlier resolution authorizing an increase of the
number of authorized shares of Common Stock from 20,000,000 to 40,000,000 and
the number of the authorized shares of Preferred Stock from 1,000,000 to
2,000,000, and authorized, subject to the approval of the stockholders of the
Company, the increase of the number of authorized shares of Common Stock from
20,000,000 to 60,000,000 and the number of the authorized shares of Preferred
Stock from 1,000,000 to 3,000,000.
Section 4.3 Authorization. The Company has all requisite corporate
-------------
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the securities
issuable hereunder and the performance of the Company's obligations hereunder
have been taken. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in of this Agreement. Upon their issuance and delivery
pursuant to this Agreement, the securities will be validly issued, fully paid
and nonassessable and will be free of any liens or encumbrances other than those
created hereunder or by the actions of the Investors; provided, however, that
-------- -------
the
16
securities are subject to restrictions on transfer under state and/or federal
securities laws. The issuance and sale of the securities hereunder will not give
rise to any preemptive right or right of first refusal or right of participation
on behalf of any person.
Section 4.4 No Conflict. The execution and delivery of this Agreement
-----------
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default, or give rise to a
right of termination, cancellation or acceleration of any material obligation or
to a loss of a material benefit, under, any provision of the Articles of
Incorporation, and any amendments thereto, Bylaws, Stockholders Agreements and
any amendments thereto of the Company or any material mortgage, indenture, lease
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets and which would have a material adverse
effect on the Company's business and financial condition.
Section 4.5 No Undisclosed Liabilities or Events. The Company has no
------------------------------------
liabilities or obligations other than those disclosed in (i) the Form 10 KSB,
Form 10 QSBs, Form 8-Ks, or Proxy Statement filed by the Company for a period of
at twelve (12) months immediately preceding the date hereof (the "SEC Filings"),
(ii) the Confidential Private Placement Memorandum dated September 18, 1997 of
the Company as supplemented to the date hereof (the "Private Placement
Documents," together with the SEC Filings are referred to as the "Reports"),
(iii) this Agreement or (iv) those incurred in the ordinary course of the
Company's business since October 1, 1997, and, in each case, which individually
or in the aggregate, do not or would not have a material adverse effect on the
properties, business, condition (financial or otherwise), results of operations
or prospects of the Company. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, condition (financial or
otherwise), results of operations or prospects, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
Section 4.6 No Default. The Company is not in default in the
----------
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of the
Exhibits or attachments hereto, including the conversion provision of the Series
D or E Convertible Preferred Stock, will conflict with or result in the breach
or violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage, deed of trust
or other material agreement applicable to the Company or instrument to which the
Company is a party or by which it is bound or any statute or the Memorandum or
Articles of the Company, or any decree, judgment, order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Company or
its properties, or the Company's listing agreement for its Common Stock, in each
case which default, lien or charge is likely to cause a material adverse effect
on the Company's business and financial condition.
17
Section 4.7 Absence of Events of Default. Except as set forth in the
----------------------------
Reports, the Disclosure Schedule and this Agreement, no Event of Default, as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (as so defined), has occurred and is continuing,
which would have a material adverse effect on the Company's business,
properties, prospects, financial condition or results of operations.
Section 4.8 Governmental Consent, etc. Except as set forth in the
-------------------------
Disclosure Schedule, no consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the securities hereunder, or the
consummation of any other transaction contemplated hereby.
Section 4.9 Intellectual Property Rights. Except as disclosed in the
----------------------------
Reports, the Company has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct its business as presently conducted in the
Reports, except where failure to have any such intellectual property would not
cause a material adverse effect on the business and financial condition of the
Company. To the Company's knowledge, neither the Company nor its products is
infringing or will infringe any trademark, trade name, patent right, copyright,
license, trade secret or other similar right of others currently in existence;
and there is no claim being made against the Company regarding any trademark,
trade name, patent, copyright, license, trade secret or other intellectual
property right which could have a material adverse effect on the business or
financial condition of the Company.
Section 4.10 Material Contracts. Except as set forth in the Reports and
------------------
the Disclosure Schedule, the agreements to which the Company is a party
described in the Reports are valid agreements, in full force and effect the
Company is not in material breach or material default under any of such
agreements, except where such breach or default would not cause a material
adverse effect on the business and financial condition of the Company.
Section 4.11 Litigation. Except as disclosed in the Reports and the
----------
Disclosure Schedule, there is no action, proceeding or investigation pending, or
to the Company's knowledge threatened, against the Company which might result,
either individually or in the aggregate, in any material adverse change in the
business, prospects, financial conditions or operations of the Company. The
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.
Section 4.12 Title to Assets. Except as set forth in Reports, the
---------------
Company has good and marketable title to all properties and material assets
described in the Reports as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Company.
18
Section 4.13 Subsidiaries. Except as disclosed in the Reports, the
------------
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
Section 4.14 Required Governmental Permits. Except as set forth in the
-----------------------------
Reports, the Company is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect.
Section 4.15 Listing. The Company's Common Stock is listed on the
-------
NASDAQ Small Cap Stock Market or other organized United States market or
Quotation system. Except as set forth in the Reports and the Disclosure
Schedule, the Company has not received any notice, oral or written, regarding
continued listing and, as long as the Securities are outstanding, the Company
will take no action which would impact their continued listing or eligibility of
the Company for such listing.
Section 4.16 Other Outstanding Securities/Financing Restrictions. Other
---------------------------------------------------
than warrants and options to acquire shares of Common Stock as disclosed in the
Reports, there are no other outstanding securities, debt or equity presently
convertible into Common Stock. Except as disclosed in the Reports, the Company
has no outstanding restricted shares, or shares of Common Stock sold under
Regulation S, Regulation D or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
Section 4.17 Restrictions on Future Financings. The Company agrees that
---------------------------------
it will not enter into any other equity financing transaction which would (i)
cause the Common Stock of the Company, other than that issued pursuant to this
Agreement to become registered and freely tradeable before at least one hundred
and eighty (180) days following the Subscription Date, or (ii) until the earlier
of (x) 85% of the Series D and E Convertible Preferred Stock has been converted,
or (y) Investor gives written approval for such additional financing, which
approval shall not be unreasonably withheld.
Section 4.18 Use of Proceeds. The Company represents that the net
---------------
proceeds from this offering will be used for working capital purposes and/or
general corporate purposes. However, in no event shall the net proceeds from
this offering be used by the Company for the payment (or loaned to any such
person for the payment) of any judgment, or other liability, incurred by any
executive officer, officer, director, or employee of the Company.
Section 4.19 Further Representations and Warranties of the Company. For
-----------------------------------------------------
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees as
follows:
19
(i) It will use its best efforts to maintain the listing of
its Common Stock on the NASDAQ Small Cap Stock Market or other
organized United States market or quotron systems.
(ii) It will permit the Investor to exercise its right to
convert the Series D or E Convertible Preferred Stock by telecopying an
executed and completed Notice of Conversion to the Company and
delivering the original Notice of Conversion and the certificate
representing the Series D or E Convertible Preferred Stock to the
Company by express courier. Each business date on which a Notice of
Conversion is telecopied to and received by the Company in accordance
with the provisions hereof shall be deemed a conversion date (the
"Conversion Date"). The Company will transmit the certificates
representing shares of Common Stock issuable upon conversion of any
Series D or E Convertible Preferred Stock (together with the
certificates representing the Series D or E Convertible Preferred Stock
not so converted) to the Investor via express courier, by electronic
transfer or otherwise within five business days after the conversion
date if the Company has received the original Notice of Conversion and
Series D or E Convertible Preferred Stock certificate being so
converted by such date. In addition to any other remedies which may be
available to the Investor, in the event that the Company fails for any
reason to effect delivery of such shares of Common Stock within such
three business day period, the Investor will be entitled to revoke the
relevant Notice of Conversion by delivering a notice to such effect to
the Company whereupon the Company and the Investor shall be restored to
their respective positions immediately prior to delivery of such Notice
of Conversion. The Notice of Conversion and Series D or E Convertible
Preferred Stock representing the portion so converted shall be
delivered as follows:
To the Company:
The Ashton Technology Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Fax: (000) 000-0000
In the event that the Common Stock issuable upon conversion of the
Series D or E Convertible Preferred Stock is not delivered within five (5)
business days of receipt by the Company of a valid Conversion Notice and the
Series D or E Convertible Preferred Stock to be converted, the Company shall pay
to the Investor, in immediately available funds, upon demand, as liquidated
damages for such failure and not as a penalty, for each $100,000 of Series D or
E Convertible Preferred Stock sought to be converted, $500 for each of the first
ten (10) days and $1,000 per day thereafter that the Conversion Shares are not
delivered, which liquidated damages shall run from the sixth (6th) business day
after the Conversion Date up until the time that either the Notice of Conversion
is revoked or the Common Stock has been delivered, at which time liquidated
damages shall cease. Any and all payments required pursuant to this paragraph
shall be payable only in cash immediately.
20
Section 4.20 SEC Filings/Full Disclosure. For a period of at least
---------------------------
twelve (12) months immediately preceding this offer and sale, none of the
Company's filings with the Securities and Exchange Commission (as they may have
been amended or supplemented as provided in the Reports) contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading as of the date of such
filing (or in such amendment or supplement, as the case may be). The Company has
timely, subject to permitted extensions, filed all requisite forms, reports and
exhibits thereto with the Securities and Exchange Commission.
Section 4.21 Full Disclosure. There is no fact known to the Company
---------------
(other than general economic conditions known to the public generally) that has
not been disclosed in writing to the Investor that (i) could reasonably be
expected to have a material adverse effect on the financial condition or in the
earnings, business affairs, business prospects, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
Section 4.22 Opinion of Counsel. Investor shall receive an opinion
------------------
letter from counsel to the Company (updated where applicable) prior to each
Closing for the Initial Shares and Secondary Shares, and prior to the Closing
Date of the first Put by the Company to the effect that:
(i) The Company is incorporated and validly existing in the
jurisdiction of its incorporation. The Company and/or its subsidiaries
are duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions where, to such counsel's knowledge,
the Company and/or its subsidiaries owns or leases properties,
maintains employees or conducts business, except for jurisdictions in
which the failure to so qualify would not have a material adverse
effect on the Company, and has all requisite corporate power and
authority to own its properties and conducts its business.
(ii) To such counsel's knowledge, there is no action,
proceeding or investigation pending, or threatened against the Company
which might result, either individually or in the aggregate, in any
material adverse change in the business or financial condition of the
Company, except as has been described in the Reports.
(iii) To such counsel's knowledge, the Company is not a party
to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality, except as has been described in the Reports.
(iv) To such counsel's knowledge, there is no action, suit,
proceeding or investigation by the Company currently pending, except as
has been described in the Reports.
21
(v) The Initial Shares and Secondary Shares which shall be
issued, have been duly authorized and, when the Series D or E
Convertible Preferred Stock Certificate has been duly executed and
delivered in the manner provided in this Agreement and paid for in
accordance with this Agreement, will be validly issued under the laws
of the Company's state of incorporation.
(vi) This Agreement, the issuance of the securities hereunder,
and upon conversion and exercise of the Series D or E Convertible
Preferred Stock, have been duly approved by all required corporate
action and that all such securities, upon execution and delivery of the
certificate evidencing such security in the manner provided in the
Private Equity Line Of Credit Agreement or the certificate evidencing
the Warrant (the "Warrant Certificate") and payment therefor in the
accordance with the Private Equity Line Of Credit Agreement or the
Warrant Certificate, shall be validly issued and outstanding, fully
paid and nonassessable.
(vii) The issuance of the Initial Shares, Secondary Shares,
and Put Shares will not violate the applicable listing agreement
between the Company and any securities exchange or market on which the
Company's securities are listed.
(viii) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, $0.01 par value per share, of which
8,843,571 are outstanding, 1,000,000 shares of non-voting Preferred
Stock, $0.01 par value, of which 250,000 have been designated Series A
Convertible PIK Preferred Stock (all of which are outstanding), 550,000
have been designated Series B Convertible Preferred Stock (460,000 of
which are outstanding), 55,000 have been designated Series C
Convertible Preferred Stock (all of which are outstanding) and pursuant
to the transactions contemplated by this Agreement, ten of which will
be designated Series D Preferred Stock (3 of which will be outstanding
upon the consummation of the Closing for the Initial Shares) and ten of
which will be designated Series E Preferred Stock. All issued and
outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. On February 11,
1997, the Board of Directors of the Company rescinded an earlier
resolution authorizing an increase of the number of authorized shares
of Common Stock from 20,000,000 to 40,000,000 and the number of the
authorized shares of Preferred Stock from 1,000,000 to 2,000,000, and
authorized, subject to the approval of the stockholders of the Company,
the increase of the number of authorized shares of Common Stock from
20,000,000 to 60,000,000 and the number of the authorized shares of
Preferred Stock from 1,000,000 to 3,000,000.
(ix) The Common Stock is registered pursuant to Section 12(b)
or Section 12(g) of the Securities Exchange Act of 1934, as amended,
and, to such counsel's knowledge, the Company has timely, subject to
permitted extensions, filed all the reports (without confirming as to
the completeness or accuracy of such reports) required to be filed
pursuant to Sections 13(a) or 15(d) of such Act for a period of at
least twelve months preceding the date hereof.
22
(x) The Company has the requisite corporate power and
authority to enter into the Agreement, Registration Rights Agreement,
the Escrow Agreement and the Warrant Certificate and to sell and
deliver the Initial Shares, Secondary Shares, and Put Shares and the
Common Stock to be issued upon the conversion or exercise, as the case
may be, as described in the Agreement, the applicable Certificate of
Designation, or the Warrant Certificate; each of the Agreement,
Registration Rights Agreement, the Escrow Agreement and the Warrant
Certificate has been duly and validly authorized by all necessary
corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery
of each of the Agreement, Registration Rights Agreement, the Escrow
Agreement or the Warrant Certificate by the Company or the consummation
of the transactions contemplated thereby; each of the Agreement,
Registration Rights Agreement, the Escrow Agreement and the Warrant
Certificate has been duly and validly executed and delivered by and on
behalf of the Company, and is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as (i)
enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other laws affecting creditors rights generally, (ii) to
compliance with federal, state and foreign securities laws and (iii) to
provisions providing for indemnification or contribution, in each case,
as to which no opinion is expressed.
(xi) To such counsel's knowledge, the execution, delivery and
performance of the Agreement, the Registration Rights Agreement, the
Escrow Agreement and the Warrant Certificate by the Company and the
performance of its obligations thereunder do not and will not
constitute a breach or violation of any of the terms and provisions of,
or constitute a default under or conflict with or violate any provision
of (i) the Company's Certificate of Incorporation or By-Laws, (ii) any
indenture, mortgage, deed of trust, agreement or other instrument to
which the Company is a party or by which it or any of its property is
bound, (iii) any applicable statute or regulation, (iv) or any
judgment, decree or other order of any court or governmental body
having jurisdiction over the Company or any of its property.
It is expressly understood and confirmed with the Investors that
counsel has relied on the certificates of officers of the Company with respect
to the disclosure regarding the Company. The Investor shall only be entitled to
receive this opinion of counsel on one occasion during each ninety (90) day
period following the Closing Date of the first Put. For example, the Investor
shall not be entitled to receive an opinion of Company counsel in the event the
Closing Date for a subsequent Put is within ninety (90) days after the Closing
Date for the preceding Put. However, the Investor is entitled to an opinion of
Company counsel in the event the Closing Date for the second Put is more than
ninety (90) days after the first Put.
Section 4.23 Opinion of Counsel. The Company will obtain for the
------------------
Investor, at the Company's expense, any and all opinions of counsel which may be
required in order to convert, exercise or sell the securities issuable
hereunder, including, but not limited to, obtaining for the
23
Investors, at the Company's expense an opinion of counsel, subject only to
receipt of a Notice of Conversion in the Form of Exhibit H, duly executed by the
Investor which shall be satisfactory to the Transfer Agent, directing the
Transfer Agent to remove the self-liquidating legend. Such draft of opinion of
counsel shall be received by the Investor on or before the Subscription Date.
Section 4.24 Mandatory Conversion. In the event the Series D or E
--------------------
Convertible Preferred Stock has not been converted two (2) years from the
applicable date of issuance, the Series D or E Convertible Preferred Stock shall
automatically be converted as if the Investor voluntarily elected such
conversion in accordance with the procedure, terms and conditions set forth in
this Agreement.
Section 4.25 Dilution. The Company is aware and acknowledges that
--------
conversion of the Series D or E Convertible Preferred Stock, issuance of Common
Stock hereunder, and the exercise of the Warrants could cause dilution to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.
ARTICLE V
Representations and Warranties of the Company and Investor
Each of the Investor and the Company represent to the other the
following with respect to itself:
Section 5.1 Private Equity Line Of Credit Agreement. This Agreement has
---------------------------------------
been duly authorized, validly executed and delivered on behalf of the Company
and each of the Investors and is a valid and binding agreement in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally.
Section 5.2 Non-contravention. The execution and delivery of this
-----------------
Agreement along with all Exhibits and Attachments, and the consummation of the
issuance of the securities and the transactions contemplated by this Agreement
do not and will not conflict with or result in a breach by the Company or
Investor of any of the terms or provisions of, or constitute a default under,
the articles of incorporation or by-laws of the Company or Investor, or any
indenture, mortgage, deed of trust of other material agreement or instrument to
which the Company or Investor is a party or by which it or any of its properties
or assets are bound, or any existing applicable law, rule or regulation or any
applicable decree, judgment or order of any court, Federal or State regulatory
body, administrative agency or other governmental body having jurisdiction over
the Company or Investor or any of its properties or assets.
Section 5.3 Approvals. Neither the Company nor Investor is aware of any
---------
authorization, approval or consent of any governmental body which is legally
required for the issuance and sale of the securities.
Section 5.4 Indemnification. Each of the Company and the Investors
---------------
agree to indemnify the other and to hold the other harmless from and against any
and all losses, damages,
24
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the
-------------------
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
---------------------------
Company has authorized and reserved and the Company shall continue to reserve
and keep available at all times, free of preemptive rights, shares of Common
Stock for the purpose of enabling the Company to satisfy any obligation to issue
the Initial Shares, Secondary Shares, and the Warrant Shares, such amount of
shares of Common Stock to be reserved shall be calculated based upon the minimum
Purchase Price therefor under the terms of this Agreement and the Warrant
respectively. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered hereunder and the number of shares so reserved shall
be increased or decreased to reflect potential increases or decreases in the
Common Stock that the Company may thereafter be so obligated to issue by reason
of adjustments to the Warrant. The Company represents that it presently does not
have a sufficient number of authorized shares of Common Stock for the purpose of
enabling the Company to satisfy the obligation to issue the Put Shares but
represents that it has filed a preliminary proxy statement with the SEC seeking
shareholder approval seeking to increase the number of authorized shares of
Common Stock to 60,000,000. The Company agrees that it will file a final proxy
statement with the SEC within fifteen (15) days after the Subscription Date, and
present same to its shareholders within thirty (30) days after the execution of
this Agreement.
Section 6.3 Listing of Common Stock. The Company hereby agrees to
-----------------------
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Initial Shares, Secondary Shares, Put Shares and the Warrant
Shares. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such application
the Put Shares and the Warrant Shares, and will take such other action as is
necessary or desirable in the opinion of the investor to cause the Common Stock
to be listed on such other Principal Market as promptly as possible. The Company
will take all action to continue the listing and trading of its Common Stock on
the Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
Section 6.4 Exchange Act Registration. The Company will cause its
-------------------------
Common Stock to continue to be registered under Section 12(b) of the Exchange
Act, will use its best efforts to
25
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
-------
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth in Article IX.
Section 6.6 Corporate Existence. The Company will take all steps
-------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company will deliver to the
------------------------
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Notice of Certain Events Affecting Registration; Suspension
-----------------------------------------------------------
of Right to Make a Put. The Company will immediately notify the Investor upon
----------------------
the occurrence of any of the following events in respect of a registration
statement or related prospectus relating to an offering of Registrable
Securities, (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
registration statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.9 Expectations Regarding Put Notices. Within ten (10) days
----------------------------------
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable
26
expectations as to the dollar amount it intends to raise during such calendar
quarter, if any, through the issuance of Put Notices. Such notification shall
constitute only the Company's good faith estimate and shall in no way obligate
the Company to raise such amount, or any amount, or otherwise limit its ability
to deliver Put Notices. The failure by the Company to comply with this provision
can be cured by the Company's notifying the Investor, in writing, at any time as
to its reasonable expectations with respect to the current calendar quarter.
Section 6.10 Consolidation; Merger. The Company shall not, at any time
---------------------
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.11 Issuance of Put Shares and Warrant Shares. The sale of the
-----------------------------------------
Put Shares and the issuance of the Warrant Shares pursuant to exercise of the
Warrant shall be made in accordance with the provisions and requirements of
Section 4(2) of the Securities Act, or Regulation D and any applicable state
securities law. Issuance of the Warrant Shares pursuant to exercise of the
Warrant shall be made in accordance with the provisions and requirements under
the Securities Act and any applicable state securities law.
Section 6.12 Legal Opinion on Subscription Date. The Company's
----------------------------------
independent counsel shall deliver to the Investor upon execution of this
Agreement an opinion in the form of Exhibit I annexed hereto.
Section 6.13 Exercise of Series D or Series E Convertible Preferred
------------------------------------------------------
Stock. The Company agrees that it will permit the Investors to exercise their
-----
right to convert the Series D or Series E Convertible Preferred Stock by
telecopying an executed and completed Notice of Conversion to the Company and
delivering the original Notice of Conversion and the certificate representing
the Series D or E Convertible Preferred Stock to the Company by express courier.
Each business date on which a Notice of Conversion is telecopied to and received
by the Company in accordance with the provisions hereof shall be deemed a
conversion date (the "Conversion Date"). The Company will transmit the
certificates representing shares of Common Stock issuable upon conversion of any
Series D or E Convertible Preferred Stock (together with the certificates
representing the Convertible Preferred Stock not so converted) to the Investor
via express courier, by electronic transfer or otherwise within three business
days after the conversion date if the Company has received the original Notice
of Conversion and Series D or E Convertible Preferred Stock certificate being so
converted by such date. In addition to any other remedies which may be available
to the Investors, in the event that the Company fails for any reason to effect
delivery of such shares of Common Stock within such three business day period,
the Investors will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company and the
Investors shall each be restored to their respective positions immediately prior
to delivery of such Notice of Conversion.
27
The Notice of Conversion and Series D or E Convertible Preferred Stock
representing the portion of the shares converted shall be delivered as follows:
To the Company:
The Ashton Technology Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Fax: (000) 000-0000
In the event that the Common Stock issuable upon conversion of the
Series D or E Convertible Preferred Stock is not delivered within five (5)
business days of receipt by the Company of a valid Conversion Notice and the
Series D or E Convertible Preferred Stock to be converted, the Company shall pay
to the Investors, in immediately available funds, upon demand, as liquidated
damages for such failure and not as a penalty, for each $100,000 of Series D or
E Convertible Preferred Stock sought to be converted, $500 for each of the first
ten (10) days and $1,000 per day thereafter that the Conversion Shares are not
delivered, which liquidated damages shall run from the sixth (6th) business day
after the Conversion Date up until the time that either the Notice of Conversion
is revoked or the Common Stock has been delivered, at which time liquidated
damages shall cease. Any and all payments required pursuant to this paragraph
shall be payable only in cash immediately.
Section 6.14 Reserve. The Company agrees to reserve One Million
-------
($1,000,000) Dollars of the Initial Shares Investment Amount in the form of cash
or short term government securities until the earlier of (a) the Company
receives shareholder approval for the issuance of more than twenty (20%) percent
of the outstanding Common Stock in connection with the transactions contemplated
hereby, or (b) the Company is able to increase the currently issued and
outstanding Common Stock by a minimum of 4,000,000 shares via the conversion
into Common Stock of any currently outstanding Convertible Preferred Stock
(except those issuable hereunder). In the event the conditions set forth in
Section 6.14(a) or (b) are not fulfilled by the Company within ninety (90) days
after the Subscription Date, and not waived by the Investor in writing, the
Company shall immediately thereafter wire transfer the One Million Dollars, plus
a premium of ten (10%) and any and all interest due and owing, to the Investor.
In the event the Company fails to wire transfer this amount to the Investor by
the end of business on the ninety fifth day following the Subscription Date, the
Company shall pay to the Investor, in immediately available funds, upon demand,
as liquidated damages for such failure, and not as a penalty, $5,000 for each of
the first ten days late, and $10,000 for every day late thereafter, which
liquidated damages shall run from the ninety sixth day following the
Subscription Date.
ARTICLE VII
Conditions to Delivery of Puts and Conditions to Closing
28
Section 7.1 Conditions Precedent to the Obligation of the Company to
--------------------------------------------------------
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
---------------------------
and sell the Put Shares to the Investor incident to each Closing is subject to
the satisfaction, or waiver by the Company, at or before each such Closing, of
each of the conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
-----------------------------------------------------------
a Put Notice and the Obligation of the Investor to Purchase Put Shares. The
----------------------------------------------------------------------
right of the Company to deliver a Put Notice and the obligation of the Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction or waiver by the Investor, on (i) the date of delivery of
such Put Notice and (ii) the applicable Closing Date (each a "Condition
Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
the Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
the Registration Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to the first Put
Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Put Shares,
or shall have the availability of exemptions therefrom. The sale and issuance of
the Put Shares shall be legally permitted by all laws and regulations to which
the Company is subject.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all
29
events and circumstances occurring or existing to and including each Condition
Satisfaction Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Registration Rights Agreement and
the Warrant to be performed, satisfied or complied with by the Company at or
prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock (including, without limitation, the Put Shares) is
not suspended by the SEC or the Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening the
listing of the Common Stock on the Principal Market.
(h) 4.99% Percent Limitation. On each Closing Date, the number of Put
Shares then to be purchased by the Investor will not exceed the number of such
shares which, when aggregated with all other shares of Common Stock then owned
by the Investor beneficially or deemed beneficially owned by the Investor, would
result in the Investor owning more than 4.99% of all of such Common Stock as
would be outstanding on such Closing Date, as determined in accordance with Rule
13d-3 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Rule 13d-3 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether the Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement and, if any, Warrant Shares, would
own more than 4.99% of the Common Stock following such Closing. Then, in such
event, the Company would reduce that number of Put Shares so issuable so that it
30
would not exceed the aforementioned 4.99% limitation. Investor shall notify the
Company as soon as possible, but in any event within three (3) business days of
receiving a Put Notice, if Investor believes Investor's purchase of the Put
Shares specified in the Put Notice would result in Investor exceeding the 4.99%
limitation described above.
(i) Minimum Bid Price. The Bid Price equals or exceeds the Floor Price
during the applicable Valuation Period (as adjusted for stock splits, stock
dividends, reverse stock splits, and similar events).
(j) Minimum Average Trading Volume. The average trading volume for the
Common Stock over the previous thirty (30) Trading Days exceeds 25,000 shares
per Trading Day.
(k) No Knowledge. The Company has no knowledge of any event more likely
than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen Trading Days following the Trading Day on which such Notice
is deemed delivered).
(l) Trading Cushion. The Trading Cushion shall have elapsed since the
next preceding Put Date.
(m) Escrow Agreement. The parties hereto shall have entered into a
mutually acceptable escrow agreement for the Purchase Prices due hereunder.
(n) Other. On each Condition Satisfaction Date, the Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2, including, without limitation, a certificate in
substantially the form and substance of Exhibit C hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
ARTICLE VII
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1 Due Diligence Review. The Company shall make available for
--------------------
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably
31
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information
----------------------------------------
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor (including, without
limitation, in connection with the giving of the Adjustment Period Notice
pursuant to Section 2.4) unless prior to disclosure of such information the
Company identifies such information as being non-public information and provides
the Investor, such advisors and representatives with the opportunity to accept
or refuse to accept such non-public information for review. The Company may, as
a condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in-light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX
Legends
32
Section 9.1 Legends. Unless otherwise provided below, each certificate
-------
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit J hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one or more
certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered, provided that (i) the Registration
Statement shall then be effective, (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement. The requirements set forth in subsection
9.1(a)(ii) and 9.1(a)(iii) shall only apply in the event the Company registers
the Common Stock pursuant to a Form S-3 registration statement pursuant to the
Registration Rights Agreement. In the event the Company registers the Common
Stock by means of a registration statement other than a Form S-3 registration
statement, than only the condition in subsection 9.1 (a)(i) herein shall apply.
33
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities.
Any of the notices referred to above in this Section 9.1 may be sent by
facsimile to the Company's transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
----------------------------------------------
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article shall affect
---------------------
in any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
ARTICLE X
Choice of Law/Jurisdiction
Section 10.1 Choice of Law; Venue; Jurisdiction. This Agreement will be
----------------------------------
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the U. S. District Court sitting in the Southern District of the State of New
York or the state courts of the State of New York sitting in Manhattan in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
ARTICLE XI
Assignment; Termination
34
Section 11.1 Assignment. Neither this Agreement nor any rights of the
----------
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common Stock held by such person, and (b) upon the prior written consent of
the Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Agreement may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor) who agrees
to make the representations and warranties contained in Article III and who
agrees to be bound by the covenants of Article V.
Section 11.2 Termination. This Agreement shall terminate five and
-----------
one-half (5-1/2) years after the Subscription Date; provided, however, that the
provisions of Articles III, IV, V, VI, VII, VIII, IX, X, XI, and XII shall
survive the termination of this Agreement.
ARTICLE XII
Notices
Section 12.1 Notices. All notices, demands, requests, consents,
-------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to The Ashton Technology Group, Inc.:
The Ashton Technology Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Fax: (000) 000-0000
Tele:
If to the Investor, at the address listed on Schedule A.
35
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 12.1 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
ARTICLE XIII
Miscellaneous
Section 13.1 Counterparts/Facsimile/Amendments. This Agreement may be
---------------------------------
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 Entire Agreement. This Agreement, the Exhibits or
----------------
Attachments hereto, which include, but are not limited to the Warrant, the
Escrow Agreement, and the Registration Rights Agreement set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Attachments
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
Section 13.3 Survival; Severability. The representations, warranties,
----------------------
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision, provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 Title and Subtitles. The titles and subtitles used in this
-------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 Reporting Entity for the Common Stock. The reporting
-------------------------------------
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 13.6 Replacement of Certificates. Upon (i) receipt of evidence
---------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form
36
and amount to the Company or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 13.7 Fees and Expenses. Each of the parties shall pay its own
-----------------
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay on the
Subscription Date (i) the sum of Thirty Thousand ($30,000) Dollars out of the
proceeds received by the Company on the Subscription Date to Xxxxxxxxx,
Xxxxxxxxx & Xxxx, LLP for legal, administrative, and escrow fees, and (ii) to
the Placement Agent (A) One Hundred Fifty Thousand ($150,000) Dollars, (B) .15
of a share of Series D Preferred Stock, (C) a Warrant to purchase one hundred
ninety thousand (190,000) shares of Common Stock upon the same terms as the
Warrants issued pursuant to this Subscription Agreement and (D) 20,000 shares of
Common Stock to be included in the Registration Statement, for Placement Agent
fees, provided that the Company provides the Placement Agent with a copy of its
instructions (along with proof that same was sent to the transfer agent within
twenty four hours after the Subscription Date) to its transfer agent authorizing
the issuance of the Common Stock certificates, in which case the such
certificates of Common Stock shall be delivered to the Placement Agent as
promptly following the Subscription Date as possible, but in no event later than
five (5) business days following the Subscription Date. On the Closing Date for
the Secondary Shares the Company shall pay to the Placement Agent (i) five (5%)
percent of the proceeds, (ii) .1 of a share of Series E Preferred Stock, and
(iii) a Warrant to purchase sixty thousand (60,000) shares of Common Stock upon
the same terms as the Warrants issued pursuant to this Agreement. On each
Closing Date for a Put, the Company shall pay (i) one-half of one (.5%) percent
of the proceeds to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP for legal, administrative,
and escrow agent fees, and (ii) five (5%) percent of the proceeds to the
Placement Agent.
Section 13.8 Brokerage. Each of the parties hereto represents that it
---------
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.9 Confidentiality. If for any reason the transactions
---------------
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly
37
return to the other parties all schedules, documents, instruments, work papers
or other written information, without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herewith.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
38
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
Agreed to and Accepted on
this 2nd day of April, 1998
THE ASHTON TECHNOLOGY GROUP, INC.
By: /s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx
Executive Vice President
SETTONDOWN CAPITAL INTERNATIONAL LTD.
By: /s/ Xxxx Xxxxxx
--------------------------------
Xxxx Xxxxxx
DOMINION CAPITAL FUND, LTD.
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx, Agent
CANADIAN ADVANTAGE LIMITED PARTNERSHIP
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx, General Partner
EXCALIBUR LIMITED PARTNER
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx, Agent
39
SOVEREIGN PARTNERS LIMITED PARTNERSHIP
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx, Agent
40
