EXHIBIT 10.38
SHORT-TERM LOAN AND SECURITY AGREEMENT
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THIS SHORT-TERM LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
this 18th day of February, 1997, by and between THE ASHTON TECHNOLOGY GROUP,
INC., a Delaware corporation ("Borrower"), and COMPUTER SCIENCE INNOVATIONS,
INC., a Florida corporation having its principal office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender"), hereinafter collectively referred to as the
"Parties." Additionally, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer of
Borrower, joins this Agreement for the sole purpose of Article 6(D) herein.
1. THE SHORT-TERM LOAN.
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(A) Terms.
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Upon the execution of this Agreement and the satisfaction of the
conditions precedent set forth in Article 4 herein, the Lender agrees to lend
the Borrower the sum of Five Hundred Thousand Dollars ($500,000.00) to be
secured by a promissory note (hereinafter, the "Note"), repayable with interest,
substantially in the form of Exhibit "A" attached and incorporated herein by
reference, and the execution on even date herewith by the Borrower of that
certain stock pledge agreement (hereinafter "Stock Pledge Agreement") in which
Borrower pledges all of its rights, title and interest in a percentage of the
common stock of Computer Science Innovations, Inc. that Borrower now owns. The
Stock Pledge Agreement is attached and incorporated herein by reference as
Exhibit "B."'
The loan is for a fixed term of nine (9) months. Interest on the loan
shall accrue at the rate of Eight and One-Quarter Percent (8.25%). The Note is
payable in full with accrued interest on or before November 18, 1997.
(B) Payment and Additional Terms.
----------------------------
All payments of principal and interest on the Note payable by Borrower
to Lender under this Agreement shall be made in lawful money of the United
States of America, in immediately available funds. Payment shall be credited
first to interest on the unpaid principal balance and then to principal on the
loan and all other amounts payable by Borrower to the Lender under this
Agreement. The interest on the Note shall be calculated on the basis of actual
days elapsed in a year of 360 days. If any payment of principal or interest on
the Note falls due on a Saturday, Sunday or bank holiday, then such due date
shall be extended to the next succeeding full business day of Lender and
interest shall be payable during such extension. The Borrower shall have the
right of prepayment of the Note at any time without penalty.
2. GRANT OF SECURITY INTEREST.
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(A) Grant of Security Interest.
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To secure the Borrower's prompt, punctual, and faithful performance of
all of the Borrower's liabilities herein, the Borrower hereby grants to the
Lender a continuing security interest in and to, and pledges to the Lender,
pursuant to the Stock Pledge Agreement, the following (hereinafter the
"Collateral"):
All rights, title and interest in Six Hundred Ninety-Seven
Thousand Eight Hundred Seventy-One (697,871) Class A Shares and
One Million Twenty-One Thousand Three Hundred Eighty-One
(1,021,381) Class B Shares of the common stock of Computer
Science Innovations, Inc. currently owned by and in the
possession of Borrower.
The Collateral shall be held in escrow, pursuant to the terms and
conditions of an Escrow Agreement, attached and incorporated herein by reference
as Exhibit "C."
(B) Duration of Security Interest.
-----------------------------
The grant of a security interest shall continue in full force and
effect applicable to all liabilities herein until all liabilities of the Note
are paid and the security interest granted herein is specifically terminated in
writing by a duly authorized officer of the Lender.
3. BORROWER'S REPRESENTATIONS AND WARRANTIES.
-----------------------------------------
Borrower represents and warrants that:
(A) Incorporation and General Authority.
-----------------------------------
Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly licensed or
qualified and in good standing as a foreign corporation in all states wherein
the nature of the property owned or business transacted makes such licensing or
qualification necessary, and is entitled to own its properties and assets, and
to carry on its business, as, and in the places where, such properties and
assets are now owned or operated or such business is now conducted or presently
proposed to be conducted. Non-material violations of this representation which
do not affect the Borrower's capacity to perform its obligations under the terms
of this Agreement, shall not be considered as a default pursuant to the terms of
paragraph 7D hereof.
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(B) Litigation.
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There is not now pending or threatened against Borrower any action or
other proceedings or any claim which may materially and adversely affect
Borrower's ability to perform its obligations herein, nor do any of the
executive or managing personnel of Borrower know of any facts that may give rise
to any such litigation, proceeding or claim.
(C) Authority for Agreement.
-----------------------
Borrower has all requisite power and authority to undertake the
obligations, to enter into this Agreement, and to perform each of its
obligations contained in this Agreement; and this Agreement will constitute a
valid and legally binding obligation of Borrower enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, reorganization, insolvency, or other laws affecting creditors'
rights generally.
Borrower has obtained formal approval from its Board of Directors
through a Board Resolution to undertake the obligations herein and to pledge the
Collateral as security for the Note.
(D) No Defaults or Restrictions.
---------------------------
The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement in accordance with the terms of
this Agreement will not violate any existing law or statute or violate any
existing term or provision of any order, writ, judgment, injunction or decree of
any court or any other governmental department, commission, board, bureau,
agency or instrumentality applicable to Borrower, or conflict with or result in
a breach of any of the terms, conditions or provisions of the Articles of
Incorporation, Bylaws, or other organizational documents of Borrower, or any
agreement to which Borrower is a party, or by which any of its properties are
bound, or constitute an event that might permit an earlier termination of or
otherwise materially affect any such agreement, or result in the creation or
imposition of a lien ' charge or encumbrance upon any of the property or assets
of Borrower pursuant to the terms of any pledge, mortgage, security agreement,
assignment, or any other instrument to which Borrower is a party or by which it
may be bound.
(E) Operation of Business.
---------------------
Borrower's businesses are being operated and maintained in an ordinary
and customary manner and in compliance with all statutes, rules, regulations and
ordinances. Non-material violations of this representation which do not affect
the Borrower's capacity to perform its obligations under the terms of this
Agreement, shall not be considered as a default pursuant to the terms of
paragraph 7D hereof.
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(F) Authorization for Business.
--------------------------
Borrower has obtained all required permits, authorizations and
licenses, without unusual restrictions or limitations, to conduct the businesses
in which Borrower is presently engaged, all of which are in full force and
effect. Non-material violations of this representation which do not affect the
Borrower's capacity to perform its obligations under the terms of this
Agreement, shall not be considered as a default pursuant to the terms of
paragraph 7D hereof.
(G) Title to Collateral.
-------------------
Borrower has good and marketable title to all property which Borrower
has given or has agreed to give a security interest to the Lender; and there are
no pledges, assignments, liens or other encumbrances of any kind upon such
property. All of the Collateral is owned by Borrower free and clear of all
liabilities, obligations, security interests and encumbrances. The Borrower will
warrant and defend the Collateral against the claims and demands of all persons
not a party to this Agreement.
(H) Use of Proceeds.
---------------
Borrower will apply the proceeds from the loan described herein as
working capital in its ordinary course of business. Borrower does not now own
any "margin securities" as such term is defined in Regulation G of the Board of
Governors of the Federal Reserve System. Borrower will not use any part of the
proceeds from said loans herein directly or indirectly, to purchase or carry any
such margin securities or to reduce or retire any indebtedness originally
incurred to purchase any such margin securities.
4. CONDITIONS PRECEDENT.
--------------------
The effectiveness of this Agreement and the obligations of the Lender to
consummate any of the transactions contemplated hereby shall be subject to the
satisfaction of the following conditions precedent, at or prior to the time of
the Closing Date:
(A) Documents and Instruments.
-------------------------
The Lender shall have received all the instruments, documents, and
property contemplated to be delivered by the Borrower hereunder, and the same
shall be in full force and effect. All of the instruments and documents referred
to herein are collectively referred to as the "Security Documents."
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(B) Correctness of Warranties.
-------------------------
All representations and warranties contained herein or otherwise made
to the Lender in connection herewith shall be true and correct.
(C) Expenses of Lender.
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The Borrower promises to reimburse the Lender promptly for all
reasonable out of pocket expenses of every nature which the Lender may incur in
connection with this Agreement, the Note, any other Security Documents,
documentary stamp tax, all recording fees, and for all legal fees incurred in
preparation for the transaction contemplated herein. Such expenses shall be paid
at closing or in a reasonable time thereafter upon receipt of written invoices.
The Borrower shall also pay reasonable post-closing expenses incurred by the
Lender on behalf of the Borrower, including but not limited to, preparation of
documents to terminate the loan and release the security therefrom. Furthermore,
the Borrower shall be liable for postclosing collection expenses, including, but
not limited to, expenses related to the repossession of the Collateral and to
the collection of obligations of the Borrower hereunder, including reasonable
attorneys' fees, including appellate proceedings, post-judgment proceedings and
bankruptcy proceedings. It is expressly agreed that in the event the Borrower
shall fail to pay such expenses within ten (10) days after demand, said non-
payment shall constitute a default of this Agreement.
5. BORROWER'S AFFIRMATIVE COVENANTS.
--------------------------------
The Borrower covenants and agrees that from the date hereof and until
payment in full of the principal of and interest on the Note, and all other
indebtedness to the Lender under this Agreement, unless the Lender shall
otherwise consent in writing, it will provide as follows:
(A) Pay Indebtedness to Lender and Perform Other Covenants.
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The Borrower shall:
(i) make full and timely payments of the principal of and
interest on the Note, and all other indebtedness of the Borrower to the Lender,
whether now existing or hereafter arising;
(ii) fully comply with all the terms and covenants contained in
each of the instruments and documents given to the Lender pursuant to this
Agreement or of the times and places and in the manner set forth herein; and
(iii) at all times maintain the liens and security interest
provided for under or pursuant to this Agreement as valid and perfected liens
and security interests on the property intended to be covered thereby.
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(B) Further Assurances.
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The Borrower shall, at its sole cost and expense, upon the request of
the Lender, duly execute and deliver or cause to be duly executed and delivered
to the Lender such further instruments and to and cause to be done such further
acts that may be necessary or proper in the opinion of the Lender to carry out
more effectively the intent and purpose of this Agreement.
(C) Continuing Contractual Work.
---------------------------
The Borrower shall continue to perform its obligations under existing
contracts for sales and services under its ordinary course of business with the
Lender and specifically, Borrower acknowledges and agrees to pay Lender promptly
within invoice terms, which are Net 30, but in no event later than ninety (90)
days of the date of Lender's invoice for work pertaining to contract
performance. Failure by Borrower to pay Lender within said ninety (90) days
shall constitute a breach of this Agreement.
In the event the Lender, at the time of execution of this Agreement,
has outstanding on its books any accounts receivable from Borrower that are
ninety (90) days or more past due, Lender is authorized to and shall pay said
past due amount from the loan proceeds. For example, if on the day of loan
closing, $150,000.00 in 90-day plus receivables to Lender are outstanding,
$150,000.00 of the $500,000.00 loan proceeds shall be paid to Lender, not as a
prepayment of principal, but to satisfy said receivables, and the outstanding
balance of the Note shall remain at $500,000.00.
Notwithstanding the above, the Lender specifically acknowledges and
agrees that UTS Invoice #13, dated November 22, 1996, in the amount of
$100,419.07, and ATED Invoice #11, dated November 22, 1996, in the amount of
$26,255.86, shall not be deemed a default hereunder unless payment on said
invoices is not received by April 22, 1997.
Further, the Parties agree that nothing contained herein shall limit
the Borrower's ability to raise good faith disputes as to the invoices received
from the Lender. Any good faith dispute by Borrower shall not be deemed a
default hereunder. Borrower shall have thirty (30) days from the date of invoice
to raise a good faith dispute regarding said invoice. Failure by the Borrower to
raise a good faith dispute within thirty (30) days of invoice shall be deemed an
acknowledgment that said invoice is valid, due and payable.
Borrower specifically acknowledges and agrees that amounts due under
UTS Invoice #13, dated November 22, 1996; #14, dated December 27, 1996; and #15,
dated January 24, 1997, and ATED Invoice #11, dated November 22, 1996; #12,
dated December 27, 1996; and #13, dated January 24, 1997; are not in dispute and
are due and payable.
In the event any good faith dispute arises on any specific invoices
not referenced
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above, Borrower acknowledges and agrees that the liability on the specific
invoices identified herein remain due and payable pursuant to the terms
contained in this paragraph.
6. BORROWER'S NEGATIVE COVENANTS.
-----------------------------
Borrower covenants and agrees that from the date hereof and until payment
in full of the principal of and interest on the Note, and all other indebtedness
to the Underwriter under this Agreement, unless the Lender shall otherwise
consent in writing, it will not, either directly or indirectly:
(A) Use of Proceeds.
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Utilize the proceeds of the Note for any purpose other than as
necessary business working capital;
(B) Additional Encumbrances on Collateral.
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Create, incur, assume or suffer to exist any mortgage, pledge,
security interest, encumbrance, lien, or charge of any kind upon any of the
Collateral referenced herein, except:
(i) mortgages, liens, pledges and security interests in favor
of the Lender.
(C) Exercise Shareholder Voting Rights of Borrower.
----------------------------------------------
As long as the terms of this Agreement and the Note have not been
breached or are not in default, the Borrower shall have all rights in the
pledged Shares except for the following:
(i) the right to possession;
(ii) the right to exercise its vote on any matters related to
the terms and conditions of this Agreement;
(iii) the right to exercise its vote on any matters related to
the terms and conditions of the Note; and
(iv) increasing, decreasing, removing or filling vacancies on
the Board of Directors of the Lender.
(D) Exercise Board of Directors Voting Rights of Borrower.
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At the time of execution of this Agreement, the Chief Executive
Officer of Borrower is one of three (3) members of the Board of Directors of
Lender. Borrower acknowledges and agrees that a conflict of interest shall exist
in the event any matters or issues related to the terms and conditions of this
Agreement, or the Note, and because of such conflict of interest, the Chief
Executive Officer of Borrower shall not vote on said matters or issues.
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(E) Anti-Dilution.
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During the term of this Agreement and Note, and any extensions
thereto, the Borrower shall not issue, nor cause to be issued any additional
shares of Stock in the Lender.
(F) Breach of Covenants.
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Any action taken by Borrower in contravention of these covenants shall
be deemed null and void and of no force and effect, and shall also constitute a
breach of this Agreement.
7. EVENT OF DEFAULT.
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The Note shall be immediately due and payable in full if one or more of the
following- described events of default shall occur:
(A) The Borrower (a) shall file a petition for adjudication as a
bankrupt; (b) shall file a petition or answer seeking reorganization or an
arrangement under any bankruptcy or similar statute of the United States of
America or any subdivision thereof or of any foreign jurisdiction; (c) shall
consent to the filing of a petition in any such bankruptcy or reorganization
proceeding; (d) shall consent to the appointment of a receiver or trustee or
officer performing similar functions with respect to any substantial part of its
property; (e) shall make a general assignment for the benefit of its creditors;
or (f) shall execute a consent to any other type of insolvency proceeding (under
the Bankruptcy Act or otherwise) or any informal proceeding for the dissolution
or liquidation of, or settlement of, claims against or winding up of affairs of
the Borrower; or
(B) The appointment of a receiver or trustee or officer performing
similar functions for the Borrower or for any of its assets, or the filing
against the Borrower of a petition for adjudication as a bankrupt or insolvent
or for reorganization under any bankruptcy or similar laws of the United States
of America or of any state thereof or of any foreign jurisdiction, or the
institution against the Borrower of any other type of insolvency proceeding
(under the Bankruptcy Act or otherwise) or of any formal or informal proceeding
for the dissolution or liquidation of, settlement of claims against or winding
up of affairs of, the Borrower, and the failure to have such appointment vacated
or such petition or proceeding dismissed within thirty (30) days after such
appointment, filing or institution.
(C) Failure of the Borrower to make payment of any principal,
interest, or payment within twenty (20) days of its due date to the Lender under
the Note, or any of the corresponding Security Documents.
(D) Default in the performance of any other liability, obligation or
covenant of the Borrower to the Lender under the Security Documents, and the
continuance thereof for twenty (20) days after written notice to the Borrower
from the Lender.
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(C) Waiver of Default.
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The Lender at any time may waive any default or any event of default
which shall have occurred and any of its consequences, in which case the Parties
hereto shall be restored to their former positions and rights and obligations
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon, and no such waiver shall
be effective unless it is in a written document executed by a duly authorized
officer.
8. LENDER'S REMEDIES FOR DEFAULT.
-----------------------------
Upon the occurrence of an Event of Default and acceleration of the
indebtedness of the Borrower to the Lender, the Lender shall have the following
remedies:
(A) Action for Enforcement.
----------------------
In case any one or more Events of Default shall occur and be
continuing, the Lender may proceed to protect and enforce its rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenants, agreement or other provision contained herein or
in any Security Document, or to enforce the payment of the Note or any other
legal or equitable right or remedy.
(B) Forfeiture of Security Interest.
-------------------------------
The Lender may take possession of the Collateral after default and
exercise all rights, title and interest in said Collateral. Borrower expressly
waives any rights or interest it may have regarding repossession of the
Collateral and acknowledges and agrees that the Collateral shall be forfeited
upon an Event of Default.
(C) Rights and Remedies Under Escrow Agreement.
------------------------------------------
The Lender shall have all rights given to it under the Escrow
Agreement entered into on even date herewith. Under same, the Lender may take
possession of the escrowed shares (as defined therein), which right of
possession shall entitle them to all rights, including voting, incident to
common stock ownership.
(D) Rights and Remedies Cumulative.
------------------------------
No right or remedy herein conferred upon the Lender is intended to be
exclusive of any other right or remedy contained herein, in the Note, Security
Documents or in any instrument or document delivered in connection with or
pursuant to this Agreement, and every such right or remedy shall be cumulative
and shall be in addition to every other such right or remedy contained herein
and therein or now or hereafter existing at law or in equity or by statute or
otherwise.
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(E) Rights and Remedies Not Waived.
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No course of dealing between the Borrower and the Lender or any
failure or delay on the part of the Lender in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of the Lender and
no single or partial exercise of any rights or remedies hereunder shall operate
as a waiver or preclude the exercise of any other rights or remedies hereunder.
9. MISCELLANEOUS.
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(A) Waivers.
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The Borrower waives presentment, demand, protest, notice of default,
nonpayment, partial payments and all other notices and formalities relating to
this Agreement other than notices specifically required hereunder. The Borrower
consents to and waives notice of the granting of indulgences or extensions of
time of payment, the taking or releasing of security, the addition or release of
persons primarily or secondarily liable on or with respect to liabilities of the
Borrower to the Lender, all in such manner and at such time or times as the
Lender may deem advisable. No act or omission of the Lender shall in any way be
implied or affect any of the indebtedness or liabilities of the Borrower to the
Lender or rights of the Lender in any security. No delay by the Lender to
exercise any right, power or remedy hereunder or under any security agreement,
and no indulgence given to the Borrower in case of any default, shall impair any
such right, power or remedy or be construed as having created a course of
dealing or performance contrary to the specific provisions of this Agreement or
as a waiver of any default by the Borrower or any acquiescence therein or as a
violation of any of the terms or provisions of this Agreement. The Lender shall
have the right at all times to enforce the provisions of this Agreement and all
other documents executed in connection herewith in strict accordance with their
terms, notwithstanding any course of dealing or performance by the Lender in
refraining from so doing at any time. No course of dealing between the Borrower
and the Lender shall operate as a waiver of any of the Lender's rights.
(B) Governing Law; Benefit.
----------------------
This Agreement and all rights hereunder shall be governed by the laws
of the State of Florida. This Agreement shall bind and inure to the benefit of
Borrower and Lender, and the terms "Borrower," and "Lender", respectively, as
used in this Agreement shall include, the respective Parties and their
respective successors and assigns. It is agreed that venue shall be in Brevard
County, Florida.
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(C) Notices.
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Any notice or demand to be given hereunder shall be duly given if
delivered or mailed as follows:
To the Borrower:
The Ashton Technology Group, Inc.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, CEO
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esquire
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
To the Lender:
Computer Science Innovations, Inc.
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & Wattwood, P.A.
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(D) Titles.
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Titles to the sections of this Agreement are solely for the
convenience of the Parties hereto and are not an aid in the interpretation of
this Agreement or any part thereof.
(E) Counterparts.
------------
This Agreement may be executed in any number of counterparts and by
the Parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same Agreement.
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(F) Entire Agreement.
----------------
This Agreement constitutes the entire agreement between the Parties
with the exception of the Promissory Note, Stock Pledge Agreement, and Escrow
Agreement and shall not be amended or modified in any respect without the
express written consent of the Parties to be affected.
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IN WITNESS WHEREOF, the Parties have executed this Agreement the day and
year first above written.
Attest: THE ASHTON TECHNOLOGY GROUP, INC.,
a Delaware corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------- ------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ (Name) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (Name)
------------------------ --------------------------
Secretary (Title) President & CEO (Title)
------------------------ --------------------------
(SEAL) "Borrower"
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------- ----------------------------------
Witness ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Witness
Attest: COMPUTER SCIENCE INNOVATIONS,
INC., a Florida corporation
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------- ------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Name) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Name)
------------------------ ---------------------------
President - CSI (Title) President (Title)
------------------------ ---------------------------
(SEAL) "Lender"
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EXHIBIT "A"
PROMISSORY NOTE
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$500,000.00 Date: February 18, 1997
FOR VALUE RECEIVED, the undersigned, THE ASHTON TECHNOLOGY GROUP, INC., a
Delaware corporation, (the "Maker") promises to pay to the order of COMPUTER
SCIENCE INNOVATIONS, INC., a Florida corporation, its successors and assigns
(the "Lender" or "Holder") located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or
elsewhere as directed from time to time in writing by the Holder hereof, the
principal sum of Five Hundred Thousand Dollars ($500,000.00), together with
interest thereof at the rate of eight and one-quarter percent (8.25%) per annum,
in lawful money of the United States of America, payable as follows:
(a) Interest shall accrue from the period of February 18, 1997, until
November 18, 1997, on the principal amount at an annual rate of Eight
and One-Quarter Percent (8.25%); and
(b) The principal sum of Five Hundred Thousand Dollars ($500,000.00),
and all accrued interest thereon shall be due on November 18, 1997.
Repayment of this Note is secured by certain shares of Class A and Class B
Common stock of Computer Science Innovations, Inc., held in escrow pursuant to
the terms of an Escrow Agreement dated of even date herewith.
Payment not received within said twenty (20) days of the due date shall be
deemed a default under this Note. If the undersigned defaults in the payment
hereunder, the Note shall bear interest at the rate of 15% ("default rate") on
the amount then due and payable. Upon default for non-payment of the Note, the
entire unpaid principal balance of this obligation, together with accrued
interest, shall, at the Holders election, become immediately due and payable.
Additionally, repayment of this Note is secured by a Short-Term Loan and
Security Agreement (the "Short-Term Loan Agreement'). It is expressly agreed
that all of the covenants, conditions and agreements of the Maker hereof under
said Short-Term Loan Agreement are made a part of this Note and shall be
included in the interpretation of this Note. Upon the occurrence of default in
the performance or observation of any term, agreement, or condition specified in
the Short-Term Loan Agreement, other than for non-payment on the Note, Maker
shall have twenty (20) days from the date of written notice of default to cure
said default.
In the event said default is not cured within the twenty (20) day period,
the entire unpaid principal balance of this obligation, together with accrued
interest, shall, at the Holders election, become immediately due and payable.
-14-
Maker shall have the privilege to prepay the indebtedness evidenced hereby,
in whole or in part at any time. Partial prepayments shall first be applied
against accrued interest then due and owing, and thereafter against principal.
Any partial prepayment shall not postpone the due date or change the amount of
any subsequent payment.
All persons or entities now or at anytime liable for payment of this Note
hereby waive presentment, protest, notice of protest and dishonor. The Maker
and all persons/entities liable hereunder expressly consent to any extensions or
renewals, in whole or in part, and all delays in timely payment or other
performance which Holder may grant at any time and from time to time without
limitation and without any notice or further consent of the undersigned.
The remedies of Holder provided herein, or in the Short-Term Loan
Agreement, shall be cumulative and concurrent and may be pursued singularly,
successively, or together, at the sole discretion of Holder and may be exercised
as often as the occasion therefore shall arise.
In the event this Note is placed in the hands of an attorney for collection
by civil action the prevailing party shall be entitled to an award of its
reasonable attorneys' fees and costs, including those on appeal.
This Promissory Note is to be construed and enforced according to the laws
of the State of Florida or, if Holder elects the benefit thereof, applicable
Federal pre-emption laws.
Attest: THE ASHTON TECHNOLOGY GROUP, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------ ---------------------------------
Secretary (Seal) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (Name)
------------------------------
President & CEO (Title)
------------------------------
"Maker"
-15-
EXHIBIT "B"
STOCK PLEDGE AGREEMENT
----------------------
THIS PLEDGE AGREEMENT ("Agreement") is made this 18th day of February,
1997, by and between THE ASHTON TECHNOLOGY GROUP, INC., a Delaware corporation
("Pledgor") and COMPUTER SCIENCE INNOVATIONS, INC., a Florida corporation with
its principal place of business in Melbourne, Florida, ("Secured Party"),
collectively referred to as the "Parties."
In order to secure performance of the obligations of Pledgor pursuant to
that certain Short-Term Loan and Security Agreement ("Short-Term Loan
Agreement") by and among the Parties of approximate even date herewith, the
Parties hereby agree as follows:
1. SECURITY INTEREST AND COLLATERAL.
--------------------------------
The Pledgor hereby grants Secured Party a security interest (herein called
the "Security Interest") in the capital stock set forth on Appendix A attached
hereto, together with all proceeds of and other rights in connection with such
capital stock (hereinafter called the "Pledged Stock"), said Pledged Stock shall
be held in escrow pursuant to that certain Escrow Agreement of even date
herewith by and between The Ashton Technology Group, Inc., Computer Science
Innovations, Inc., and ▇▇▇▇▇▇▇ & Wattwood, P.A.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------
The Pledgor represents, warrants and agrees that:
(A) Pledgor will duly endorse, in blank, each and every certificate
constituting the Pledged Stock by signing on such instrument or by signing a
separate document of assignment or transfer, in form and substance acceptable to
Secured Party.
(B) Pledgor will surrender all rights, title and interest in the
Pledged Stock in the event of a default under the Short-Term Loan Agreement as
defined therein.
(C) Pledgor is the owner of the Pledged Stock free and clear of all
liens, encumbrances, security interests and restrictions, except for the
Security Interest and will not convey, sell or transfer in any manner any
interest in the Stock during the term of this Agreement.
(D) Pledgor will keep the Pledged Stock free and clear of all liens,
encumbrances, security interests and restrictions, except for the Security
Interest.
(E) Pledgor will pay, when due, all taxes and other governmental
charges levied or assessed upon or against the Pledged Stock.
-16-
(F) Pledgor represents and warrants that it has the full authority of
its Board of Directors to encumber and pledge the Pledged Stock as collateral to
secure performance of the obligations of Pledgor pursuant to that certain Short-
Term Loan Agreement.
3. EXERCISE SHAREHOLDER VOTING RIGHTS OF BORROWER.
----------------------------------------------
As long as the terms of this Agreement and the Note have not been breached
or are not in default, the Borrower shall have all rights in the pledged Shares
except for the following:
(i) the right to possession;
(ii) the right to exercise its vote on any matters related to the
terms and conditions of this Agreement;
(iii) the right to exercise its vote on any matters related to the
terms and conditions of the Note; and
(iv) the right to increase, decrease, remove or fill vacancies on the
Board of Directors of the Lender.
4. EXERCISE BOARD OF DIRECTORS VOTING RIGHTS OF BORROWER.
-----------------------------------------------------
At the time of execution of this Agreement, the Chief Executive Officer of
Borrower is one of three (3) members of the Board of Directors of Lender.
Borrower acknowledges and agrees that a conflict of interest shall exist in the
event any matters or issues related to the terms and conditions of this
Agreement, or the Note, and because of such conflict of interest, the Chief
Executive Officer of Borrower shall not vote on said matters or issues.
5. ANTI-DILUTION.
-------------
During the term of this Agreement and Note, and any extensions thereto, the
Borrower shall not issue, nor cause to be issued any additional shares of Stock
in the Lender.
6. EVENTS OF DEFAULT.
-----------------
For purposes of this Agreement, "Event of Default" shall mean a default as
defined in the Short-Term Loan Agreement, the terms of which are incorporated
herein by this reference, or a breach of a representation, covenant or warranty
set forth in this Agreement.
-17-
7. REMEDIES UPON EVENT OF DEFAULT.
------------------------------
Upon the occurrence of an Event of Default, Secured Party may exercise any
or all of the following rights or remedies, together with all other rights or
remedies provided hereunder, or under applicable law; provided that no exercise
of any one or more of such rights or remedies shall preclude Secured Party from
exercising any other rights or remedies at the same time or at any other time:
(A) Exercise any or all of the rights or remedies of a secured party
under the Uniform Commercial Code with respect to the Pledged Shares, including,
but not limited to, the right to sell the Pledged Stock in a private or public
sale;
(B) Exercise all voting powers with respect to the Pledged Shares
while proceeding to exercise the remedies of a secured party referenced in
subsection 7(A) hereof;
(C) Exercise all of the remedies provided in the Short-Term Loan
Agreement;
(D) Exercise all of the remedies provided in the Escrow Agreement,
including but not limited to taking possession and acquiring all incidents of
ownership of the Pledged Stock.
(E) For purposes of this Agreement, ten (10) days notice to Pledgor
shall be deemed commercially reasonable.
7. RELEASE.
-------
The Secured Party agrees that it shall release all of the Pledged Stock
from the terms of this Agreement provided that simultaneously with such release
the obligations of the Short-Term Loan Agreement are performed in full.
-18-
8. MISCELLANEOUS.
-------------
This Agreement can be waived, modified, amended, terminated or discharged,
and the Security Interest can be released, only explicitly in a writing signed
by the Secured Party. The Secured Party shall not have any responsibility for
(i) ascertaining or taking any action with respect to exchanges, tenders or
other matters relative to any Pledged Stock, whether or not the Secured Party is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve such rights against any parties with respect to any Pledged Stock.
Pledgor will reimburse Secured Party for all costs, expenses or disbursements of
any kind or nature whatsoever incurred in disposing of the collateral (including
reasonable attorneys fees). This Agreement shall be binding upon and inure to
the benefit of Pledgor and Secured Party and their respective successors and
assigns and shall take effect when signed by Pledgor and delivered to Secured
Party, and Pledgor waives notice of acceptance hereof by Secured Party. This
Agreement shall be governed by the internal laws of the State of Florida, and,
unless the context otherwise requires, all terms used herein which are defined
in Articles 1 and 9 of the Uniform Commercial Code, as in effect in said state,
shall have the meanings therein stated. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement. To the extent required by applicable law, the
rights and obligations of the Secured Party may be assigned to a licensed
professional, person, or other entity. This Agreement may be amended at any
time by written instrument executed by the Parties hereto.
IN WITNESS WHEREOF, the Parties hereto have executed this Stock Pledge
Agreement on the day and year first above written.
Attest: THE ASHTON TECHNOLOGY GROUP, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------- ---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ (Name) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (Name)
------------------------- ------------------------------
Secretary (Title) President & CEO (Title)
------------------------- ------------------------------
"Pledgor"
Attest: COMPUTER SCIENCE INNOVATIONS, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------- ---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Name) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Name)
------------------------- ------------------------------
President (Title) President (Title)
------------------------- ------------------------------
"Secured Party"
-19-
APPENDIX "A"
------------
To secure the Borrower's prompt, punctual, and faithful performance of all
of the Borrower's liabilities herein, the Borrower hereby grants to the Lender a
continuing security interest in and to, and pledges to the Lender, pursuant to
the Stock Pledge Agreement, the following:
All rights, title and interest in the common stock of Computer
Science Innovations, Inc. currently owned by and in the
possession of Borrower, presently consisting of Six Hundred
Ninety-Seven Thousand Eight Hundred Seventy-One (697,871) Class A
Shares and One Million Twenty-One Thousand Three Hundred Eighty-
One (1,021,381) Class B Shares.
-20-
EXHIBIT "C"
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT is entered into on this 18th day of February, 1997,
by and among THE ASHTON TECHNOLOGY GROUP, INC., a Delaware Corporation
(hereinafter referred to as "Pledgor"), COMPUTER SCIENCE INNOVATIONS, INC., a
Florida Corporation, (hereinafter referred to as "Corporation"), and ▇▇▇▇▇▇▇ &
Wattwood, P.A., hereinafter referred to as the "Escrow Agent."
WHEREAS, Pledgor is a party to that certain Short-Term Loan and Security
Agreement ("Short-Term Loan Agreement") of approximate even date herewith, and
incorporated herein by reference; and
WHEREAS, in order to more effectively implement the terms of the Short-Term
Loan Agreement, Pledgor is amenable to escrowing all of its shares of stock now
owned or subsequently acquired in Corporation. Pledgor has agreed to transfer
said common stock interest ("Stock") as additional security for payment by
Pledgor of that certain Promissory Note ("Note") being delivered pursuant to the
terms of that certain Short-Term Loan Agreement; and
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. The above recitals and all exhibits hereto are true and correct and
are incorporated herein by this reference.
2. Upon execution on even date herewith of the Short-Term Loan Agreement,
the Pledgor shall deliver to the Escrow Agent all Shares of the Stock
("Shares"), to be held in Escrow
-21-
pursuant to the terms and conditions of this Agreement.
3. The Pledgor further agrees Escrow Agent to transfer Shares
simultaneously, and in accordance with the terms of the to execute stock powers
of Short-Term Loan Agreement and this Escrow Agreement. attorney authorizing the
4. As long as the terms and Agreement and the Note have not been breached
or are not in default, the Pledgor shall have all conditions of the Escrow
rights in the escrowed Shares except the right to possession and the right to
exercise its vote on Agreement, Short-Term Loan any matters related to the terms
and conditions of the Short-Term Loan Agreement and the Note. Additionally,
Pledgor shall have no right to exercise its vote on any matters related to
increasing, decreasing, filling vacancies or removing Directors on the Board of
Corporation.
5. In the event of any Note) the Chief Executive Officer ("CEO") of
Corporation shall give the Pledgor and the Escrow default (as defined in the
Agent written notice of said default. After receipt of the notice, the Escrow
Agent is authorized Short Term Loan Agreement to transfer the Shares and may
take such other actions as are required to carry out the intent of or the the
Short-Term Loan Agreement, the Note, and this Escrow Agreement.
6. The Escrow Agent shall be transactions of the escrowed Shares in
accordance with the provisions of this Escrow Agreement liable only for the and
the Short-Term Loan Agreement, and any amendments and supplements thereto. The
Escrow safekeeping, transfer, and Agent shall not be liable or responsible for
any loss unless the same is caused by its gross other negligence or willful
malfeasance. The parties hereto further agree to release, indemnify and hold
harmless the Escrow Agent from and against any and all claims, losses, damages,
expenses, or other liabilities arising out of the performance of the duties of
Escrow Agent pursuant to this Escrow
-22-
Agreement.
7. In the event any dispute shall arise between the parties whereby the
Escrow Agent is in doubt as to his duties or liabilities under this Agreement,
the Escrow Agent, in its sole and absolute discretion, may continue to hold the
Shares held pursuant to this Escrow Agreement until the Pledgor and Corporation
mutually agree to the distribution thereof or until the Escrow Agent shall be
ordered to disburse same by judgment of a court of competent jurisdiction; or
the Escrow Agent may implead the escrowed Shares into the Registry of a Court of
competent jurisdiction, subject to distribution upon order of the Court. Upon
notifying the Pledgor and the Parties of the Short-Term Loan Agreement of such
action, all liability on the part of Escrow Agent shall fully cease and
terminate.
8. Notwithstanding the above, Pledgor and Corporation acknowledge that
the Escrow Agent shall not be precluded from providing continuing, legal
representation to Corporation on all matters unrelated to this specific Escrow
Agreement.
9. All parties agree that the Escrow Agent shall not be liable to any
party or person whomsoever except for willful breach of this Agreement or gross
negligence on the part of the Escrow Agent.
10. The Escrow Agent may resign at any time upon giving of thirty (30)
days written notice to Pledgor. If a Successor Escrow Agent is not appointed
within thirty (30) days after notice of resignation, the Escrow Agent may
petition any Court of competent jurisdiction to name a Successor Escrow Agent;
and the Escrow Agent herein shall be fully relieved of all liability under this
Agreement to any and all parties upon the transfer of the Escrow deposits to the
Successor
-23-
Escrow Agent.
11. This Escrow Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each party
and delivered to the other party.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement this
18th day of February, 1997.
Attest: THE ASHTON TECHNOLOGY GROUP, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------- -------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ (Name) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (Name)
---------------------- ----------------------------
Secretary (Title) President & CEO (Title)
---------------------- ----------------------------
(SEAL) "Pledgor"
Attest: COMPUTER SCIENCE INNOVATIONS, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------- -------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Name) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Name)
---------------------- ----------------------------
President (Title) President (Title)
---------------------- ----------------------------
(SEAL) "Corporation"
▇▇▇▇▇▇▇ & WATTWOOD, P.A.
_____________________________
Witness By: /s/___________________________
_______________________ (Name)
_______________________(Title)
_____________________________
Witness
"Escrow Agent"
-24-
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer
to ______________________________, or order, all right, title and interest in
One Million Twenty-One Thousand Three Hundred Eighty-One (1,021,381) Shares of
COMPUTER SCIENCE INNOVATIONS, INC. Class B Common stock, represented by
Certificate Number, _______ standing in the name of the undersigned on the books
of the Company.
The undersigned does hereby irrevocably constitute and appoint ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ESQ., to transfer said stock on the books of said Company, with full
power of substitution in the premises.
Dated this 18th day of February, 1997.
Attest: THE ASHTON TECHNOLOGY GROUP, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------ --------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, (Name) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (Name)
----------------------- -----------------------------
Secretary (Title) President & CEO (Title)
----------------------- ----------------------------
(SEAL)
-25-
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer
to _________________________________, or order, all right, title and interest in
Six Hundred Ninety-Seven Eight Hundred Seventy-One (697,871) Shares of COMPUTER
SCIENCE INNOVATIONS, INC. Class A Common stock, represented by Certificate
Number standing in the name of the undersigned on the books of the Company.
The undersigned does hereby irrevocably constitute and appoint ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ESQ., to transfer said stock on the books of said Company, with full
power of substitution in the premises.
Dated this 18th day of February, 1997.
Attest: THE ASHTON TECHNOLOGY GROUP, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------- ----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ (Name) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (Name)
------------------------ -------------------------------
Secretary (Title) President & CEO (Title)
------------------------ -------------------------------
(SEAL)
-26-
AFFIDAVIT OF LOST CERTIFICATE
STATE OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
I, ▇▇▇▇ ▇. ▇▇▇▇▇, the Executive Vice President/Secretary (title) of The
Ashton Technology Group, Inc. ("Ashton"), being duly sworn, deposes and says:
1. That Ashton is the owner of 5 certificate(s) representing the ownership
of 1,134,006 shares of Class A Common Stock of Computer Science Innovations,
Inc. ("CSI"), a Florida corporation, which is represented on the books of the
CSI as Stock Certificates No. 149, 150, 151, 153, and 154, dated
________________.
2. That Ashton is the owner of 4 certificate(s) representing the ownership
of 1,600,471 shares of Class B Common Stock of Computer Science Innovations,
Inc. ("CSI"), a Florida corporation, which is represented on the books of the
CSI as Stock Certificates No. 183, 185, 186 and 187, dated ________________.
3. That Ashton lost said Certificates.
4. That Ashton, through its Officers, has made a diligent effort to find
the Certificates and since the Certificates were not found, it is understood
that CSI will issue replacement Certificates to the undersigned.
5. That it is understood by the undersigned that if, after receiving
replacement Certificates, the original Certificates are found, that it will
surrender said Certificates to the Secretary of CSI to be canceled of record.
ASHTON TECHNOLOGY GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ (Name)
---------------------------
Executive VP/Secretary (Title)
---------------------------
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇ THIS 18th day of February, 1997, before me personally appeared ▇▇▇▇ ▇.
▇▇▇▇▇, the Executive Vice Pres. (title) of THE ASHTON TECHNOLOGY GROUP, INC., a
Delaware corporation, described in and who executed the foregoing instrument and
duly acknowledged to me that he executed the same as affidavit (title) as
aforesaid.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------
(Signature of Notary Public)
▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------
(Print, type or stamp Commissioned Name
of Notary Public)
Personally Known X OR Produced
-
Identification Type of Identification:___________