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SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
THE ASHTON TECHNOLOGY GROUP, INC.
AND
OPTIMARK INNOVATIONS INC.
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DATED AS OF FEBRUARY 4, 2002
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TABLE OF CONTENTS
1. Purchase and Sale of the Purchased Securities.................................................1
1.1. Sale and Issuance of Common Stock......................................................1
1.2. Closing................................................................................1
2. Representations and Warranties of the Company.................................................2
2.1. Organization, Good Standing and Qualification..........................................2
2.2. Capitalization and Voting Rights.......................................................2
2.3. Subsidiaries...........................................................................4
2.4. Authorization..........................................................................4
2.5. Valid Issuance of Common Stock.........................................................4
2.6. Third Party Consents...................................................................5
2.7. Offering...............................................................................5
2.8. Litigation.............................................................................5
2.9. Proprietary Information and Employee Stock Purchase Agreements.........................5
2.10. Patents and Trademarks.................................................................6
2.11. Compliance with Other Instruments......................................................6
2.12. Agreements; Actions....................................................................7
2.13. Related-Party Transactions.............................................................8
2.14. Permits................................................................................8
2.15. Environmental and Safety Laws..........................................................8
2.16. Manufacturing and Marketing Rights.....................................................9
2.17. Disclosure.............................................................................9
2.18. Registration Rights....................................................................9
2.19. Corporate Documents....................................................................9
2.20. Title to Real Property and Assets......................................................9
2.21. Financial Statements...................................................................9
2.22. Reports...............................................................................10
2.23. Changes...............................................................................11
2.24. Employee Benefit Plans................................................................12
2.25. Tax Returns, Payments and Elections...................................................12
2.26. Insurance.............................................................................13
2.27. Minute Books..........................................................................13
2.28. Labor Agreements and Actions..........................................................13
2.29. Employees.............................................................................14
2.30. Real Property Holding Company.........................................................14
2.31. Use of Proceeds.......................................................................14
2.32. Company's Expenses....................................................................14
2.33. ATG's Non-registration with Pennsylvania Securities Commission........................14
2.34. Lock-Up Letters.......................................................................14
2.35. Approvals in Connection with investment by Kingsway Security Holdings Limited.........15
2.36. eVWAP System Approvals................................................................15
2.37. D&O Insurance.........................................................................15
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3. Representations and Warranties of the Investor...............................................15
3.1. Authorization.........................................................................15
3.2. Purchase Entirely for Own Account.....................................................15
3.3. Investment Experience.................................................................15
3.4. Accredited Investor...................................................................16
3.5. Restricted Securities.................................................................16
3.6. Broker-Dealer.........................................................................16
3.7. Share Ownership.......................................................................16
3.8. Legends...............................................................................16
4. Conditions of Investor's Obligations at Closing..............................................16
4.1. Representations and Warranties........................................................16
4.2. Performance...........................................................................17
4.3. Absence of Changes....................................................................17
4.4. Notices, Consents, Permits, and Waivers...............................................17
4.5. Compliance Certificate................................................................18
4.6. Legal Investment; Orders..............................................................18
4.7. Qualifications........................................................................19
4.8. Proceedings and Documents.............................................................19
4.9. Proprietary Information...............................................................19
4.10. Board of Directors....................................................................19
4.11. Opinion of Company Counsel............................................................19
4.12. Investors' Rights Agreement...........................................................19
4.13. Senior Secured Convertible Note.......................................................19
4.14. Secretary's Certificate...............................................................19
4.15. Employee Matters......................................................................20
4.16. Resignation of Directors..............................................................20
4.17. Due Diligence.........................................................................20
4.18. Settlement of eMC Arbitration.........................................................21
4.19. Settlement of NASD investigation of Croix.............................................21
4.20. Certificate of Retirement of Series F Convertible Preferred Stock.....................21
4.21. Certificate of Dissolution of eMC; Evidence of Tax Status.............................21
4.22. Financing.............................................................................21
4.23. Bankruptcy, etc.......................................................................21
4.24. Absence of Liabilities................................................................22
4.25. Qualification of ATG in Pennsylvania..................................................22
4.26. Resolution of Dispute with UTTC Minority Stockholders.................................22
4.27. Evidence of Filing of CroixNet ATS with the SEC.......................................22
4.28. Change Conversion to Inactive Status of ATG...........................................22
4.29. Non-Compete...........................................................................22
4.30. ▇▇▇▇ Registration Rights..............................................................22
5. Conditions of the Company's Obligations at Closing...........................................23
5.1. Representations and Warranties........................................................23
5.2. Payment of Purchase Price.............................................................23
5.3. Investor Documents....................................................................23
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5.4. Qualifications........................................................................23
6. Miscellaneous................................................................................23
6.1. Survival of Warranties................................................................23
6.2. Indemnification.......................................................................23
6.3. Successors and Assigns................................................................25
6.4. Governing Law.........................................................................25
6.5. Titles and Subtitles..................................................................25
6.6. Notices...............................................................................26
6.7. Publicity.............................................................................26
6.8. Securities Laws.......................................................................26
6.9. Finder's Fee..........................................................................26
6.10. Expenses..............................................................................26
6.11. No Solicitation.......................................................................27
6.12. Termination and Effect................................................................29
6.13. Covenants of the Company..............................................................30
6.14. Mutual Covenant.......................................................................31
6.15. Amendments and Waivers................................................................31
6.16. Severability..........................................................................31
6.17. Aggregation of Stock..................................................................31
6.18. Entire Agreement......................................................................31
6.19. Counterparts. ........................................................................31
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EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A - Form of Common Stock Certificate
EXHIBIT B - Assets
EXHIBIT C - ▇▇▇▇ of Sale
EXHIBIT D - Identified Stockholders
EXHIBIT E-1 - Opinion of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel
to the Company
EXHIBIT E-2 - Opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., general counsel
to the Company
EXHIBIT F - Form of Investors' Rights Agreement
EXHIBIT G - Form of Senior Secured Convertible Note
EXHIBIT H - Form of Pledge And Security Agreement
EXHIBIT I - Form of Lock-Up Letter (to be delivered at signing)
EXHIBIT J - Form of Amendment to Certificate of Incorporation
EXHIBIT K - Form of Insurance Broker Engagement Letter
EXHIBIT L - Side Letter (to be delivered at signing)
SCHEDULES OF EXCEPTIONS
Section 2.1 - Organization, Good Standing and Qualification
Section 2.2(d) - Proforma Capitalization
Section 2.3(a) - Subsidiaries Ownership
Section 2.3(b) - Joint Ventures
Section 2.6 - Third Party Consents
Section 2.8 - Litigation
Section 2.10 - Patents and Trademarks
Section 2.11 - Compliance with Other Instruments
Section 2.12(a)- Agreements with Officers, Directors and Affiliates
Section 2.12(b)- Obligations
Section 2.12(c)- Indebtedness
Section 2.12(f)- Indebtedness of Employees, Officers and Directors
Section 2.13 - Related Party Transactions
Section 2.16 - Manufacturing and Marketing Rights
Section 2.18 - Registration Rights
Section 2.20 - Title to Real Property and Assets
Section 2.23 - Absence of Certain Changes
Section 2.24 - Employee Benefit Plans
Section 2.28 - Labor Agreements and Action
Section 2.29 - Employees
Section 4.3 - Absence of Changes
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THE ASHTON TECHNOLOGY GROUP, INC.
SECURITIES PURCHASE AGREEMENT
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This SECURITIES PURCHASE AGREEMENT (as amended, restated,
supplemented or modified from time to time and including all exhibits and
schedules hereto, the "Agreement"), is made as of the 4th day of February, 2002,
by and between THE ASHTON TECHNOLOGY GROUP, INC., a Delaware corporation (the
"Company"), and OPTIMARK INNOVATIONS INC., a Delaware corporation (the
"Investor"). The Company and the Investor are sometimes hereinafter referred to
individually as a "Party" and collectively as the "Parties".
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the Purchased Securities.
1.1. Sale and Issuance of Common Stock.
(a) [Intentionally Omitted]
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the Closing (as hereinafter defined) and the
Company agrees to sell and issue to the Investor at the Closing, six hundred
thirty-three million four hundred forty-three thousand six hundred (633,443,600)
shares of the Company's Common Stock (as hereinafter defined) (the "Purchased
Securities"), for the purchase price of TWENTY-SEVEN MILLION TWO HUNDRED SEVENTY
TWO THOUSAND SEVEN HUNDRED TWENTY SEVEN DOLLARS ($27,272,727) (the "Purchase
Price").
1.2. Closing. The purchase and sale of the Purchased Securities
shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Four Stamford Plaza, ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10 A.M., on February 15, 2002, or if the
conditions to Closing set forth in Sections 4 and 5 hereof shall not have been
satisfied at such date, at such other time and place as the Company and the
Investor mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to the
Investor one or more Common Stock certificates in substantially the form of
Exhibit A representing the Common Stock being purchased under this Agreement
against payment of the Purchase Price therefor by wire transfer of immediately
available funds and assignment or transfer of the assets set forth on Exhibit B
hereto (the "Assets"). In connection with the payment by Investor of a portion
of the Purchase Price by assignment of the Assets, the Investor shall provide
the Company at the Closing with evidence of good title to the Assets and a ▇▇▇▇
of Sale in the form of Exhibit C hereto (the "▇▇▇▇ of Sale"), together with
other instruments reasonably requested by the Company in form and substance
mutually acceptable to the parties in their reasonable discretion.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that, except as set forth on a Schedule
of Exceptions (the "Schedule of Exceptions") furnished to the Investor and
special counsel for the Investor, specifically identifying the relevant
subparagraph hereof:
2.1. Organization, Good Standing and Qualification. Except as set
forth in Section 2.1 of the Schedule of Exceptions, the Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation and
has all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. Except as set forth in Section 2.1 of
the Schedule of Exceptions, the Company and each of its Subsidiaries is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties. For purposes hereof, "Subsidiary" means, with respect to
any person or entity, any entity, whether incorporated or unincorporated, of
which at least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board of directors
or other persons or entities performing similar functions is directly or
indirectly owned or controlled by such person or entity or by one or more of its
Subsidiaries or by such person or entity and one or more of its Subsidiaries.
2.2. Capitalization and Voting Rights. The authorized capital of
the Company is 103,000,000 shares, consisting of (i) 100,000,000 authorized
shares of common stock, par value $0.01 per share ("Common Stock"), of which
68,162,250 shares are issued and outstanding, and (ii) 3,000,000 authorized
shares of preferred stock, par value $.01 per share ("Preferred Stock"), of
which (x) 590,000 shares are designated "Series B Convertible Preferred Stock",
of which 44,000 shares are issued and outstanding and (y) 20,000 shares are
designated "Series F Convertible Preferred Stock", of which no shares are issued
and outstanding. There are no other classes or series of capital stock of the
Company authorized or issued and outstanding.
(a) Each of the stockholders of the Company specified on
Exhibit D hereto (each, a "Identified Stockholder" and collectively, the
"Identified Stockholders") own the number of outstanding shares of Common Stock
or Preferred Stock specified therein.
(b) The outstanding shares of Common Stock and Preferred Stock
are duly and validly authorized and issued, fully paid and nonassessable, and
were issued in accordance with the registration or qualification provisions of
the Securities Act of 1933, as amended (the "Act") and any relevant state
securities laws or pursuant to valid exemptions therefrom.
(c) Except for (i) the rights provided in Section 3.2 of the
Investors' Rights Agreement (as hereinafter defined), (ii) currently outstanding
options to purchase 6,718,067 shares of Common Stock granted to employees
pursuant to the Company's 1998 , 1999 and 2000 Stock Option Plans (collectively,
the "Option Plan") and currently outstanding options to purchase 291,250 shares
of Common Stock granted to
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Persons outside of the Option Plan, there are not outstanding any options,
warrants, puts, calls, rights (including conversion or preemptive rights and
rights of first refusal), proxy or stockholder agreements, or agreements of any
kind for the purchase or acquisition from, sale to or exchange with, the Company
or any of its Subsidiaries of any shares of any class or series of capital stock
of the Company or any of its Subsidiaries or other restrictions on the incidents
of ownership or transfer of any such shares of capital stock created by statute
(other than Federal and state securities laws), the charter documents of the
Company or any of its Subsidiaries or any agreement to which the Company or any
of its Subsidiaries is a party, by which any of them is bound or of which any of
them has knowledge. In addition to the aforementioned options, the Company has
reserved (t) an additional 264,000 shares of its Common Stock issuable upon
conversion of its Series B convertible preferred stock, (u) an additional
3,430,219 shares of its Common Stock for purchase upon exercise of publicly
tradable warrants, (v) an additional 52,635,937 shares of its Common Stock for
receipt upon conversion of the Secured Convertible Note (as hereinafter defined)
in favor of RGC International Investors, LDC, (w) an additional 4,372,394 shares
of its Common Stock for purchase upon exercise of options to be granted in the
future under the Option Plan, (x) an additional 2,116,524 shares of its Common
Stock for purchase upon exercise of outstanding options, warrants, puts, calls,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or agreements of any kind for the purchase or
acquisition from, sale to or exchange with, the Company or any of its
Subsidiaries of any shares of capital stock of the Company or any of its
Subsidiaries, (y) an additional 3,888,889 shares of its Common Stock for
purchase by ▇▇▇▇▇▇▇ Drive LLC under the ▇▇▇▇▇▇▇ Agreement (as defined in Section
4.4(b) hereof), and (z) an additional 55,344,360 shares of its Common Stock for
receipt upon conversion of the Senior Secured Convertible Note (as hereinafter
defined) in favor of the Investor. Neither the Company nor any Subsidiary is a
party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security of the Company or any Subsidiary, or by a director
of the Company or any Subsidiary.
(d) The pro forma capitalization of the Company after giving
effect to the transactions contemplated by this Agreement is illustrated on
Section 2.2(d) of the Schedule of Exceptions and reflects that the Purchased
Securities to be purchased by the Investor pursuant to the terms of this
Agreement shall constitute (i) eighty percent (80%) of the issued and
outstanding shares of capital stock of the Company on a Fully Diluted Basis as a
result of the purchase of the Purchased Shares pursuant to Section 1.1(b) hereof
and (ii) seven percent (7%) of the issued and outstanding shares of capital
stock of the Company on a Fully Diluted Basis as a result of the conversion, if
any, pursuant to the Senior Secured Convertible Note. For purposes of this
Agreement, "Fully Diluted Basis" means issued and outstanding shares of Common
Stock plus (i) shares of any class or series of capital stock of the Company or
any of its Subsidiaries that votes together with
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the Common Stock, (ii) shares of Common Stock issuable pursuant to or upon the
conversion or exercise of all rights set forth in agreements (written or oral),
plans, warrants, puts, calls, options, convertible securities or other
commitments or securities convertible into, exchangeable or exercisable for,
shares of Common Stock or any class or series of capital stock of the Company or
any of its Subsidiaries that votes together with the Common Stock and (iii)
shares of Common Stock reserved for issuance pursuant to options granted under
the Option Plan.
2.3. Subsidiaries. The Company has seven (7) Subsidiaries: (i)
Universal Trading Technologies Corporation, a Delaware corporation "UTTC"); (ii)
NextExchange, Inc., a Delaware corporation and wholly-owned Subsidiary of UTTC
("NextExchange"); (iii) Croix Securities, Inc., a Delaware corporation and
wholly-owned Subsidiary of UTTC ("Croix"); (iv) REB Securities, Inc., a Delaware
corporation and wholly-owned Subsidiary of UTTC ("REB"); (v) ATG Trading, LLC, a
Delaware limited liability company ("ATG"); (vi) Ashton Technology Canada, Inc.,
a corporation subsisting under the laws of Canada ("Ashton Canada"); and (vii)
Electronic Market Center, Inc., a Delaware corporation ("eMC"). In addition, the
Company owns forty-seven percent (47%) of the issued and outstanding shares of
capital stock of Kingsway ATG Asia, Ltd., a company organized under the laws of
the British Virgin Islands ("KAA").
(a) Except as set forth in Section 2.3(a) of the Schedule of
Exceptions, the Company (or a Subsidiary of the Company in which the Company
owns all of the outstanding capital stock of such Subsidiary), owns all of the
outstanding capital stock of each of its Subsidiaries and no other entity or
individual holds the right to purchase any capital stock of any of its
Subsidiaries or any securities convertible into capital stock of any of its
Subsidiaries.
(b) The Company and each of its Subsidiaries does not
presently own or control, directly or indirectly, any interest in any other
corporation, association, or other business entity. Except as set forth in
Section 2.3(b) of the Schedule of Exceptions, the Company and each of its
Subsidiaries is not a participant in any joint venture, partnership, or similar
arrangement.
2.4. Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Investors'
Rights Agreement, the performance of all obligations of the Company hereunder
and thereunder, and the authorization, issuance (or reservation for issuance),
sale and delivery of the Common Stock being sold hereunder has been taken or
will be taken prior to the Closing, and this Agreement and the Investors' Rights
Agreement constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Investors' Rights Agreement may be
limited by applicable federal or state securities laws.
2.5. Valid Issuance of Common Stock. The Common Stock that is being
purchased by the Investor hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and will
be free of any liens, claims, charges, encumbrances, or restrictions on transfer
other than restrictions on transfer
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under this Agreement, the Investors' Rights Agreement and under applicable state
and federal securities laws.
2.6. Third Party Consents. Except as set forth in Section 2.6 of
the Schedule of Exceptions, no consent, waiver, notification, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any (i) federal, state or local governmental authority, or (ii) any
party to any agreement to which the Company or any of its Subsidiaries is a
party, is required by the Company or any of its Subsidiaries in connection with
the consummation of the transactions contemplated by this Agreement, except, if
required, filings or qualifications under applicable federal securities laws and
blue-sky laws, which filings or qualifications, if required, will have been
timely filed or obtained either before or after the sale of the Purchased
Securities.
2.7. Offering. Subject in part to the truth and accuracy of the
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Common Stock as contemplated by this Agreement are
exempt from the registration requirements of the Act or applicable blue-sky
laws, and neither the Company, nor any of its Subsidiaries, or any authorized
agent acting on the Company's or any of its Subsidiaries behalf will take any
action hereafter that would cause the loss of such exemption.
2.8. Litigation. Except as set forth in Section 2.8 of the Schedule
of Exceptions, there is no action, suit, proceeding or investigation pending or
currently threatened against the Company or any of its Subsidiaries that
questions the validity of this Agreement, or the Investors' Rights Agreement, or
the right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition or affairs of the Company or any of its Subsidiaries, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company or any of its Subsidiaries aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the employees of the
Company or any of its Subsidiaries, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers. Neither the Company nor any of its Subsidiaries is a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries currently
pending or that the Company or any of its Subsidiaries intends to initiate.
2.9. Proprietary Information and Employee Stock Purchase
Agreements. Each employee, officer and consultant of the Company and each of its
Subsidiaries has executed (i) a Non-Disclosure and Protection of Confidential
Customer Information Agreement and/or (ii) Employment Terms & Conditions with
Respect to Intellectual Capital, Termination and Employee Service Agreement in
the form provided to special counsel to the Investor. Neither the Company nor
any of its Subsidiaries, after
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reasonable investigation, is aware that any of its employees, officers or
consultants are in violation thereof, and the Company and each of its
Subsidiaries will use its reasonable best efforts to prevent any such violation.
2.10. Patents and Trademarks. Except as set forth in Section 2.10
of the Schedule of Exceptions, the Company and each of its Subsidiaries has
sufficient title and ownership of all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. The Schedule
of Exceptions contains a complete list of patents and pending patent
applications of the Company and each of its Subsidiaries. Except as set forth in
Section 2.10 of the Schedule of Exceptions, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company or any of its Subsidiaries bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. Except as set
forth in Section 2.10 of the Schedule of Exceptions, neither the Company nor any
of its Subsidiaries received any communications alleging that it has violated
or, by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. Neither the Company nor any of
its Subsidiaries is aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or such Subsidiary or that would
conflict with the business of the Company and its Subsidiaries as proposed to be
conducted. Neither the execution nor delivery of this Agreement, or the
Investors' Rights Agreement, nor the carrying on of the business of the Company
and its Subsidiaries by the employees of the Company and its Subsidiaries, nor
the conduct of the business of the Company and its Subsidiaries as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
Neither the Company nor any of its Subsidiaries believes that it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment.
2.11. Compliance with Other Instruments. Except as set forth in
Section 2.11 of the Schedule of Exceptions, neither the Company nor any of its
Subsidiaries is in violation or default of any provision of its certificate of
incorporation or bylaws, or of any instrument, judgment, order, writ, decree or
contract to which it is a party or by which it is bound, or, to the best of its
knowledge, of any provision of any federal or state statute, rule or regulation
applicable to it. The execution, delivery and performance of this Agreement and
the Investors' Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of
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the Company or any of its Subsidiaries, or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material agreement, permit,
license, authorization, or approval applicable to the Company or any of its
Subsidiaries, its business or operations or any of its assets or properties.
Except as set forth in Section 2.11 of the Schedule of Exceptions, the
execution, delivery and performance of this Agreement and the Investors' Rights
Agreement, and the consummation of the transactions contemplated hereby and
thereby, will not trigger any options, warrants, puts, calls, or other rights of
any kind (including conversion or preemptive rights and rights of first
refusal), for the purchase or acquisition from, sale to or exchange with, the
Company or any of its Subsidiaries of any shares of any class or series of
capital stock of the Company or any of its Subsidiaries or other restrictions on
the incidents of ownership or transfer of any such shares of capital stock
created by statute (other than Federal and state securities laws).
2.12. Agreements; Actions.
(a) Except for agreements set forth in Section 2.12(a) of the
Schedule of Exceptions, or otherwise explicitly contemplated hereby and by the
Investors' Rights Agreement, there are no agreements, understandings or proposed
transactions between the Company or any of its Subsidiaries and any of its
respective officers, directors, affiliates, or any affiliate thereof.
(b) Except as set forth in Section 2.12(b) of the Schedule of
Exceptions, there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
or any of its Subsidiaries is a party or by which it is bound that may involve
(i) obligations (contingent or otherwise) of, or payments to the Company or any
of its Subsidiaries in excess of, $25,000, or (ii) the license of any patent,
copyright, trade secret, software or other proprietary right to or from the
Company or any of its Subsidiaries, excluding software used in the ordinary
course of the business of the Company or any of its subsidiaries or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the products or services of the Company or any of its Subsidiaries, or (iv)
indemnification by the Company or any of its Subsidiaries with respect to
infringements of proprietary rights.
(c) Except as set forth in Section 2.12(c) of the Schedule of
Exceptions, neither the Company nor any of its Subsidiaries has (i) declared or
paid any dividends or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (ii) incurred any indebtedness for
money borrowed or any other liabilities individually in excess of $25,000 or, in
the case of indebtedness and/or liabilities individually less than $25,000, in
excess of $100,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the
-7-
Company has reason to believe are affiliated therewith) shall be aggregated for
the purpose of meeting the individual minimum dollar amounts of such
subsections.
(e) Neither the Company nor any of its Subsidiaries is a party
to, or bound by, any contract, agreement or instrument, or subject to any
restriction under its certificate of incorporation or bylaws that adversely
affects its business as now conducted or as proposed to be conducted, its
properties or its financial condition.
(f) Except as set forth in Section 2.12(f) of the Schedule of
Exceptions, neither the Company nor any of its Subsidiaries has engaged in the
past three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of it with or
into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of its assets or
a transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company or any of its Subsidiaries is disposed
of, or (iii) regarding any other form of acquisition, liquidation, dissolution
or winding up of the Company or any of its Subsidiaries.
2.13. Related-Party Transactions. Except as set forth in Section
2.13 of the Schedule of Exceptions, no employee, officer, or director of the
Company or any of its Subsidiaries, or member of his or her immediate family, is
indebted to the Company or any of its Subsidiaries, nor is the Company or any of
its Subsidiaries indebted (or committed to make loans or extend or guarantee
credit) to any of them. None of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company or any of
its Subsidiaries is affiliated or with which the Company or any of its
Subsidiaries has a business relationship, or any firm or corporation that
competes with the Company or any of its Subsidiaries, except that employees,
officers, or directors of the Company and its Subsidiaries and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company and its Subsidiaries. No member of the immediate family of any
officer or director of the Company or any of its Subsidiaries is directly or
indirectly interested in any contract with the Company or any of its
Subsidiaries.
2.14. Permits. The Company and each of its Subsidiaries has all
franchises, permits, licenses, and any similar authority necessary for the
conduct of its business as now or as proposed to be conducted by it, the lack of
which could reasonably be expected to materially and adversely affect the
business, properties, or financial condition of it, and the Company and each of
its Subsidiaries believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
Neither the Company nor any of its Subsidiaries is in default under any of such
franchises, permits, licenses, or other similar authority, except for such
defaults that, individually or in the aggregate, would not reasonably be
expected to materially and adversely affect the business, properties or
financial condition of it.
2.15. Environmental and Safety Laws. To the best of its knowledge,
neither the Company nor any of its Subsidiaries is in violation of any
-8-
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
2.16. Manufacturing and Marketing Rights. Except as set forth in
Section 2.16 of the Schedule of Exceptions, neither the Company nor any of its
Subsidiaries has granted rights to manufacture, produce, assemble, license,
market, or sell its products and/or services to any other person and is not
bound by any agreement that affects its exclusive right to develop, manufacture,
assemble, distribute, market or sell its products and/or services.
2.17. Disclosure. The Company and each of its Subsidiaries has
fully provided the Investor with all the information that the Investor has
requested for deciding whether to purchase the Common Stock and has not omitted
any information that the Company and its Subsidiaries reasonably believes is
material to enable the Investor to make such decision. Neither this Agreement or
the Investors' Rights Agreement, nor any other statements or certificates or
information made, delivered or provided by or on behalf of the Company or its
Subsidiaries in connection with such decision contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
2.18. Registration Rights. Except as set forth in Section 2.18 of
the Schedule of Exceptions and as provided in the Investors' Rights Agreement,
neither the Company nor any of its Subsidiaries has granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.19. Corporate Documents. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the form
of which amendments has been approved by the Investor), the certificate of
incorporation and Bylaws of the Company and each of its Subsidiaries are in the
form previously provided to special counsel for the Investor.
2.20. Title to Real Property and Assets. Except as set forth in
Section 2.20 of the Schedule of Exceptions, the Company and each of its
Subsidiaries owns its real property and assets free and clear of all mortgages,
liens, loans and encumbrances, except (i) liens for taxes which have not yet
become due and (ii) such encumbrances and liens that arise in the ordinary
course of business and do not materially impair its ownership or use of such
real property or assets. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company and its
Subsidiaries are in good operating condition and repair and are reasonably fit
and usable for the purposes for which they are being used. With respect to the
property and assets it leases, the Company and each of its Subsidiaries is in
compliance with such leases and holds a valid leasehold interest free of any
liens, claims or encumbrances.
2.21. Financial Statements. The Company has delivered to the
Investor its audited consolidated financial statements (balance sheet and profit
and loss statement, statement of stockholders' equity and statement of cash
flows, including notes
-9-
thereto) at March 31, 2001 and for the fiscal year then ended, and its
unaudited, reviewed, consolidated financial statements (balance sheet and profit
and loss statement) as at and for the three-month period ended June 30, 2001 and
the six-month period ended September 30, 2001 (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated and with each other, except that reviewed unaudited Financial
Statements may not contain all footnotes required by generally accepted
accounting principles. The Financial Statements fairly present the financial
condition and operating results of the Company and its Subsidiaries as of the
dates, and for the periods, indicated therein, subject in the case of reviewed
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, neither the Company nor any of its
Subsidiaries has any material liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
September 30, 2001 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
both cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company or any of its Subsidiaries. Except
as disclosed in the Financial Statements, neither the Company nor any of its
Subsidiaries is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company and each of its Subsidiaries maintains
and will continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
2.22. Reports.
(a) The Company has made available to the Investor each
registration statement, report, proxy statement or information statement filed
by it since March 31, 2001 (the "Audit Date") and prior to the date hereof,
including (i) the Company's Annual Report on Form 10-K for the year ended March
31, 2001, together with all amendments thereto filed prior to the date hereof,
and (ii) the Company's Quarterly Reports on Form 10-Q for the three months ended
June 30, 2001 and September 30, 2001, together with amendments thereto filed
with the Securities and Exchange Commission (the "SEC") prior to the date
hereof, each in the form (including exhibits, annexes and any amendments
thereto) filed with the SEC (collectively, including any such reports filed
subsequent to the date hereof, the "Reports"). As of their respective filing
dates, the Reports did not, and any Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. As of their respective filing dates, the Reports did not, and
any Reports filed with the SEC subsequent to the date hereof will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. Each of
the consolidated balance sheets included in or incorporated by reference into
any Reports filed with the SEC after the date hereof (including the related
notes and schedules) will fairly present in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of operations and comprehensive
-10-
loss, statements of changes in stockholders' equity and statements of cash flows
included in or incorporated by reference into any such Reports (including any
related notes and schedules) will fairly present in all material respects the
results of operations, retained earnings and cash flows, as the case may be, of
Company and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to the absence of complete notes and to normal,
recurring, year-end audit adjustments that will not be material in amount or
effect), in each case in accordance with GAAP consistently applied during the
periods involved, except as may be noted therein.
(b) The Company has filed with the SEC all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(c) The Company has filed with the National Association of
Securities Dealers (the "NASD") all reports required to be filed by the rules
promulgated by the NASD (the "NASD Rules"), including all filings required for
listing on the Nasdaq Over the Counter Bulletin Board.
2.23. Changes. Except as set forth in Section 2.23 of the Schedule
of Exceptions or disclosed in the Company's Current Report of Form 8-K, filed on
January 17, 2002, since September 30, 2001 there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company and its Subsidiaries from that reflected in
the Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company or any of its
Subsidiaries (as such business is presently conducted and as it is proposed to
be conducted);
(c) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any of its
Subsidiaries, except in the ordinary course of business and that is not material
to the assets, properties, financial condition, operating results or business of
the Company or any of its Subsidiaries (as such business is presently conducted
and as it is proposed to be conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its Subsidiaries, or any of its
respective assets or properties, is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee;
-11-
(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company or any of its Subsidiaries; and the Company and each of
its Subsidiaries, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company or any of its
Subsidiaries;
(j) any mortgage, pledge, transfer of a security interest in,
or lien, created by the Company or any of its Subsidiaries, with respect to any
of its material properties or assets, except liens for taxes not yet due or
payable;
(k) any loans or guarantees made by the Company or any of its
Subsidiaries to or for the benefit of its employees, officers or directors, or
any members of their immediate families, other than travel advances and other
advances made in the ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) to the Company's or any of its Subsidiaries' knowledge,
any other event or condition of any character that might reasonably be expected
to materially and adversely affect the assets, properties, financial condition,
operating results or business of the Company or any of its Subsidiaries (as such
business is presently conducted and as it is proposed to be conducted);
(n) any operations conducted by ATG; or
(o) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.23.
2.24. Employee Benefit Plans. Except as set forth on Section 2.24
of the Schedule of Exceptions, neither the Company nor any of its Subsidiaries
has any Employee Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974.
2.25. Tax Returns, Payments and Elections. The Company and each of
its Subsidiaries has filed all tax returns and reports as required by law. These
returns and reports are true and correct in all material respects. The Company
and each of its Subsidiaries has paid all taxes and other assessments due,
except those contested by it in good faith that are listed in the Schedule of
Exceptions. The provision for taxes of the Company and its Subsidiaries as shown
in the Financial Statements is adequate for taxes due or accrued as of the date
thereof. Neither the Company nor any of its Subsidiaries has elected pursuant to
the Internal Revenue Code of 1986, as amended (the "Code"), to be
-12-
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 1362(a) or Section 341(f) of the Code, nor has it made any other
elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation or amortization) that would have a material
effect on the Company or any of its Subsidiaries, its financial condition, its
business as presently conducted or proposed to be conducted or any of its
properties or material assets. Neither the Company nor any of its Subsidiaries
has ever had any tax deficiency proposed or assessed against it and has not
executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of the Company's or any of
its Subsidiaries' federal income tax returns and none of the Company's or any of
its Subsidiaries' state income or franchise tax or sales or use tax returns has
ever been audited or the subject of inquiry by governmental authorities. Since
the date of the Financial Statements, the Company and each of its Subsidiaries
has made adequate provisions on its books of account for all taxes, assessments
and governmental charges with respect to its business, properties and operations
for such period. The Company and each of its Subsidiaries has withheld or
collected from each payment made to each of its employees, the amount of all
taxes (including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositaries.
2.26. Insurance. The Company and each of its Subsidiaries has in
full force and effect fire and casualty insurance policies, with extended
coverage, sufficient in amount (subject to reasonable deductibles) to allow it
to replace any of its properties that might be damaged or destroyed. The Company
has in full force and effect directors' and officers' insurance in an amount not
less than five million dollars ($5,000,000), along with products liability,
errors and omissions and such other insurance of the types and in amounts
customary for companies similarly situated.
2.27. Minute Books. The minute books of the Company and each of its
Subsidiaries provided to the Investor contain a complete summary of all meetings
of directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
2.28. Labor Agreements and Actions. Neither the Company nor any of
its Subsidiaries is bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the Company's or any of its Subsidiaries' knowledge, has sought to
represent any of the employees, representatives or agents of the Company or any
of its Subsidiaries. There is no strike or other labor dispute involving the
Company or any of its Subsidiaries pending, or to the Company's or any of its
Subsidiaries' knowledge, threatened, that could reasonably be expected to have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company or any of its Subsidiaries (as
such business is presently conducted and as it is proposed to be conducted), nor
is the Company or any of its Subsidiaries aware of any labor organization
activity involving its employees. Except as set forth in Section 2.28 of the
Schedule of Exceptions, the employment of each officer
-13-
and employee of the Company and each of its Subsidiaries is terminable at the
will of the Company or such Subsidiary. To the best of its knowledge, the
Company and each of its Subsidiaries has complied in all material respects with
all applicable state and federal equal employment opportunity and other laws
related to employment.
2.29. Employees. To the knowledge of the Company and its
Subsidiaries, no employee of the Company or any of its Subsidiaries, nor any
consultant with whom the Company or any of its Subsidiaries has contracted, is
in violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company or any of its Subsidiaries; and
to the knowledge of the Company and each of its Subsidiaries the continued
employment by the Company and each of its Subsidiaries of their present
employees, and the performance of the contracts of the Company and each of its
Subsidiaries with its independent contractors, will not result in any such
violation except for such violations which, individually or in the aggregate,
would not reasonably be expected to materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company or
any of its Subsidiaries (as such business is presently conducted and as it is
proposed to be conducted). Neither the Company nor any of its Subsidiaries has
received any notice alleging that any such violation has occurred. Except as set
forth in Section 2.29 of the Schedule of Exceptions, no employee of the Company
or any of its Subsidiaries has been granted the right to continued employment by
the Company or any of its Subsidiaries or to any material compensation following
termination of employment with the Company. Neither the Company nor any of its
Subsidiaries is aware that any officer or key employee intends to terminate his
or her employment with the Company or any of its Subsidiaries, nor does the
Company or any of its Subsidiaries have a present intention to terminate the
employment of any officer or key employee.
2.30. Real Property Holding Company. Neither the Company nor any of
its Subsidiaries is a real property holding company within the meaning of
Section 897 of the Code.
2.31. Use of Proceeds. The Company will use the Purchase Price
proceeds to fund working capital.
2.32. Company's Expenses. The Company's expenses and legal fees in
connection with the consummation of the transactions contemplated by this
Agreement do not exceed one hundred fifty thousand dollars ($150,000), excluding
amounts reimbursed to the Investor pursuant to Section 6.10 below.
2.33. ATG's Non-registration with Pennsylvania Securities
Commission. At no time has ATG conducted a public securities business or
effected transactions with or for an entity other than a registered
broker-dealer.
2.34. Lock-Up Letters. On or before the date of signing of this
Agreement, the Investor shall have received from each of the executive officers
and
-14-
directors of the Company an executed lock-up letter ("Lock-Up Letter") in the
form attached hereto as Exhibit I.
2.35. Approvals in Connection with investment by Kingsway Security
Holdings Limited. The Company has obtained, and caused Croix and REB to obtain,
all necessary approvals with respect to the recent investment in the Company by
Kingsway Security Holdings Limited, a British Virgin Islands company ("KSHL")
and wholly-owned subsidiary of Kingsway International Holdings Limited, a
Bermuda company ("▇▇▇▇").
2.36. eVWAP System Approvals. The Company believes, to the best of
its knowledge, that at the time of expiration of the SEC's approval of the eVWAP
Trading System (the "eVWAP System") pilot program in November, 2002, the SEC
will extend the eVWAP System pilot program or will grant permanent approval to
the Company to operate the eVWAP System.
2.37. D&O Insurance. The Company's directors' and officers'
insurance policy (a copy of which has been provided to the Investor) (i) has a
current annual premium amount of $225,000, (ii) has an "Additional Premium
Amount" (as defined in the policy) equal to no more than seventy-five percent
(75%) of the full annual premium for purchase of a one (1) year "Discovery
Period" (as defined in the policy) and (iii) is in full force and effect. The
Company has paid in full the premium for the current annual policy period.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
3.1. Authorization. The Investor has full power and authority to
enter into this Agreement and the Investors' Rights Agreement, and each such
agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms.
3.2. Purchase Entirely for Own Account. This Agreement is made with
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Purchased Securities to be received by the Investor will be
acquired for investment for the Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Investor further represents that the Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Purchased Securities.
3.3. Investment Experience. The Investor acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such
-15-
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Common Stock.
3.4. Accredited Investor. The Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect
3.5. Restricted Securities. The Investor understands that the
Purchased Securities it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act, only in certain limited circumstances. In
this connection, the Investor represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
3.6. Broker-Dealer. Neither the Investor nor any of its
subsidiaries is a registered broker-dealer pursuant to the NASD Rules.
3.7. Share Ownership. Neither the Investor nor any of its
subsidiaries, individually or in the aggregate, beneficially or of record owns,
or within the past three years has owned, fifteen percent (15%) or more of the
outstanding shares of the Company's Common Stock.
3.8. Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any other legends required by applicable state blue-sky
laws.
4. Conditions of Investor's Obligations at Closing. The obligations of
the Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against the Investor if it does not
consent in writing thereto:
4.1. Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
-16-
4.2. Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
4.3. Absence of Changes. Except as set forth in Section 4.3 of the
Schedule of Exceptions or as disclosed in the Reports filed with the SEC and
made available to the Investor prior to the date hereof, there shall have been
no changes which, individually or in the aggregate, would reasonably be expected
to materially and adversely affect the assets, properties, financial condition,
operating results or business of the Company or any of its Subsidiaries (as such
business is presently conducted and as it is proposed to be conducted).
4.4. Notices, Consents, Permits, and Waivers. The Company shall
have complied with any and all notice requirements, and obtained any and all
consents, permits and waivers, necessary or appropriate for consummation by it
of the transactions contemplated by this Agreement and the Investors' Rights
Agreement, including, without limitation, each of the following:
(a) approval of the stockholders of the Company at a special
meeting duly called at which a quorum was present, to amend the certificate of
incorporation of the Company to (i) provide for authorized shares of Common
Stock sufficient to consummate the transactions contemplated hereby and (ii) add
Article EIGHTH in the form attached hereto as Exhibit J;
(b) amendment of that certain Securities Purchase Agreement
between the Company and ▇▇▇▇▇▇▇ Drive LLC, dated February 9, 2001, as amended on
July 10, 2001 (the "▇▇▇▇▇▇▇ Agreement"), to provide for the elimination of any
"Minimum Commitment Amount" (as defined in the ▇▇▇▇▇▇▇ Agreement) and penalty
for the failure to issue and deliver "Put Shares" (as defined in the ▇▇▇▇▇▇▇
Agreement) having an aggregate "Purchase Price" (as defined in the ▇▇▇▇▇▇▇
Agreement) equal to or exceeding the Minimum Commitment Amount;
(c) (i) re-structuring, on terms and conditions acceptable to
the Investor, of the 9% Secured Convertible Note, dated as of July 13, 2001, of
the Company in the principal amount of $5,111,526 (the "▇▇▇▇ ▇▇▇▇ Note") in
favor of RGC International Investors, LDC ("RGC"), due August 18, 2003,
including subordination of not less than seventy percent (70%) of all
obligations arising thereunder to the obligations arising under the Senior
Secured Convertible Note, (ii) termination of the Security Agreement, dated as
of July 13, 2001, by and among Ashton, UTTC and RGC, and the release of all
liens, security instruments and any encumbrances upon the assets of the Company
and any of its Subsidiaries arising thereunder, and (iii) execution of an
intercreditor agreement, on terms and conditions acceptable to the Investor,
between RGC and the Investor covering their respective obligations to each other
with respect to the ▇▇▇▇ ▇▇▇▇ Note and the Senior Secured Convertible Note;
(d) waiver, on terms and conditions acceptable to the
Investor, of the rights of 3690822 Canada Inc. ("3690822") to put its shares of
Ashton
-17-
Canada to the Company, pursuant to Section 5.5 of that certain Unanimous
Shareholder Agreement, dated as of December 20, 1999, by and among the Company,
3690822 and Ashton Canada;
(e) waiver, on terms and conditions acceptable to the
Investor, of the rights of ▇▇ ▇▇▇▇▇▇ Group Ltd. (formerly known as Kingsway
Electronic Services Limited), a British Virgin Island company and subsidiary of
▇▇▇▇ ("Kingsway") to put its shares of KAA to the Company, pursuant to Section
11.4 of that certain Joint Venture Agreement, dated as of December 16, 1999, as
amended by that certain Amendment No. 1 dated January 13, 2000, by and between
the Company and Kingsway;
(f) consent of the NASD to the change in control of the
Company by each of Croix and REB pursuant to NASD Rule 1017, on terms and
conditions acceptable to the Investor;
(g) notice to the Philadelphia Stock Exchange of a change in
control of the Company by each of Croix, REB and ATG, on terms and conditions
acceptable to the Investor;
(h) waiver by each of the "Participants" (as defined in the
Deferred Compensation Plan), on terms and conditions acceptable to the Investor,
of (I) the acceleration of the "Vesting Date" (as defined in the Deferred
Compensation Plan) of each of the Participants in the Company's Executive
Deferred Compensation Plan dated as of July 1, 1999 (the "Deferred Compensation
Plan"), caused by a "Change of Control" (as defined in the Deferred Compensation
Plan) and (II) any existing obligation of the Company arising thereunder,
including, without limitation, to make any payments, including, without
limitation, premium payments on behalf of any Participant thereunder.
(i) notice to SunGard Institutional Brokerage Inc. ("SunGard")
of a change in control of the Company by UTTC, pursuant to Section 27(b) of that
certain Strategic Alliance Agreement, dated as of August 12, 1999, by and
between SunGard and UTTC, on terms and conditions acceptable to the Investor;
(j) notice to Interactive Data Corporation ("Interactive
Data") of a change in control of the Company, pursuant to Section 11(c) of that
certain Services Agreement, dated as of October 25, 2000, by and between
Interactive Data and UTTC, on terms and conditions acceptable to the Investor;
4.5. Compliance Certificate. The General Counsel of the Company
shall deliver to the Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1, 4.2, 4.3, 4.10, 4.15, 4.16,6.8 and 6.13(e)
have been fulfilled.
4.6. Legal Investment; Orders. The sale and issuance of the
Purchased Securities to be issued and sold at Closing shall be legally permitted
by all laws and regulations to which the Investor and the Company are subject.
No court or other governmental entity or authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, law,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in
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effect and restrains, enjoins or otherwise prohibits consummation of the
issuance of the Purchased Securities or any of the other transactions
contemplated by this Agreement or the Investors' Rights Agreement (collectively,
an "Order"), and no governmental entity or any other third party shall have
instituted any proceeding or threatened to institute any proceeding seeking any
such Order or questioning the legality, validity or appropriateness of any such
issuance or transaction.
4.7. Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
4.8. Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor's special counsel, and they shall have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.
4.9. Proprietary Information. Each employee of and consultant to
the Company shall have entered into a Proprietary Information and Inventions
Agreement in the form previously provided to special counsel for the Investor.
4.10. Board of Directors. The Company shall have taken all
necessary corporate action to appoint the number of directors to the Company's
Board of Directors to meet the Board of Directors composition requirement set
forth in Section 3.5 of the Investors' Rights Agreement. The directors of the
Company shall be appointed by the Investor and elected by the Board of Directors
at Closing.
4.11. Opinion of Company Counsel. The Investor shall have received
from Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel for the Company, and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, General Counsel to the Company, opinion, dated as of the Closing,
in the forms attached hereto as Exhibits E-1 and E-2.
4.12. Investors' Rights Agreement. The Company, the Identified
Shareholders (as defined in the Investors' Rights Agreement) and the Investor
shall have entered into the Investors' Rights Agreement (the "Investors' Rights
Agreement") in the form attached as Exhibit F.
4.13. Senior Secured Convertible Note. The Company shall have
executed the $2,727,273 Senior Secured Convertible Note (the "Senior Secured
Convertible Note") in the form attached as Exhibit G. The Company shall have
executed the Pledge and Security Agreement in favor the Investor (the "Security
Agreement") in the form attached as Exhibit H.
4.14. Secretary's Certificate. The Investor shall have received a
recent good standing certificate from the Secretary of State of the states of
Delaware and New York, and a certificate of the Secretary of the Company
certifying as to (i) the Certificate of Incorporation of the Company as amended
and in effect as of the Closing,
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(ii) the Bylaws of the Company as amended and in effect as of the Closing, (iii)
the resolutions of the Board of Directors of the Company, authorizing and
approving all matters in connection with the transactions contemplated by this
Agreement and the Investors' Rights Agreement and (iv) the duly elected officers
of the Company and the incumbency of each.
4.15. Employee Matters.
(a) Employment Agreements. All senior management and key
employees of the Company and its Subsidiaries shall be bound by employment,
confidentiality, non-compete, non-solicitation and work product agreements in
form and substance satisfactory to the Investor.
(b) ▇▇. ▇▇▇▇▇▇▇▇▇▇▇. The Company shall cause ▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ to resign as an officer and director of the Company and any of its
Subsidiaries and enter into a written termination and release agreement covering
the Company and its Subsidiaries, on terms and conditions acceptable to the
Investor.
(c) ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇. In connection with ▇▇. ▇▇▇▇▇'▇
resignation as an officer and director of the Company and any of its
Subsidiaries, the Company and ▇▇. ▇▇▇▇▇ shall enter into a written termination
and release agreement covering the Company and its Subsidiaries, on terms and
conditions acceptable to the Investor.
(d) Amended Employment Agreements. The Company and ▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ shall enter into an amendment of his existing employment agreement, on
terms and conditions acceptable to the Investor.
(e) New Employment Agreements. The Company shall enter into
written employment agreements, on term and conditions acceptable to the
Investor, with each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇.
(f) Deferred Compensation Plan. The Company and each of the
"Participants" (as such term is defined in the Deferred Compensation Plan) shall
enter into a written agreement, on terms and conditions acceptable to the
Investor, terminating the Deferred Compensation Plan.
4.16. Resignation of Directors. Messrs. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and K. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall resign as members of the Board of
Directors of the Company.
4.17. Due Diligence. The Investor shall have completed and be
satisfied, in its sole discretion, with its confidential due diligence review of
the assets, properties, financial condition, operating results or business of
the Company and each of its Subsidiaries (as such business is presently
conducted and as it is proposed to be conducted).
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4.18. Settlement of eMC Arbitration. The Investor shall have
received from the Company evidence satisfactory to the Investor in its sole
discretion, of the resolution of all matters associated with the obligations of
the Company and eMC arising under that certain Arbitrator's Award, dated as of
January 14, 2002 in the amount of $510,750 awarded to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("eMC
Employee") in connection with the claims of improper failure and refusal of the
Company, upon termination of the eMC Employee's employment with eMC, to pay him
severance and other amounts and benefits due under an employment agreement with
him dated April 18, 2000, brought by the eMC Employee against the Company
pursuant to American Arbitration Association Case No. 13 116 00473 01.
4.19. Settlement of NASD investigation of Croix. The Investor shall
have received from the Company evidence satisfactory to the Investor in its sole
discretion, of the resolution of all matters associated with investigation by
the NASD of Croix, pursuant to that certain letter from the NASD to Croix, dated
as of November 9, 2001.
4.20. Certificate of Retirement of Series F Convertible Preferred
Stock. The Investor shall have received from the Company evidence of the filing
of a Certificate of Retirement of the Series F Convertible Preferred Stock of
the Company with the Secretary of State of the State of Delaware.
4.21. Certificate of Dissolution of eMC; Evidence of Tax Status.
The Investor shall have received from the Company evidence of the filing of a
Certificate of Dissolution of eMC with the Secretary of State of the State of
Delaware and any other jurisdiction where eMC was qualified to do business as a
foreign corporation. In addition, the Investor shall have received from the
Company evidence of tax clearance of eMC for all taxes in all jurisdictions
where eMC was obligated to file tax returns.
4.22. Financing. The Investor shall have obtained, on terms and
conditions reasonably satisfactory to the Investor, financing or capital
contributions sufficient to pay the Purchase Price.
4.23. Bankruptcy, etc. Neither the Company nor any of its
Subsidiaries shall have dissolved or liquidated or taken an equivalent action
nor shall an involuntary petition have been filed under any federal or state
bankruptcy, reorganization, insolvency, moratorium or similar statute against
the Company or any of its Subsidiaries, or a custodian, receiver, trustee,
assignee for the benefit of creditors or other similar official have been
appointed to take possession, custody, or control of the property of the Company
or any of its Subsidiaries; nor shall the Company or any of its Subsidiaries
have admitted in writing its inability to pay any of its debts as they mature,
or have filed any petition or action for relief relating to any bankruptcy,
reorganization, insolvency or moratorium law, or any other similar law or laws
for the relief of, or relating to, debtors; nor shall the Company or any of its
Subsidiaries have made a general assignment for the benefit of creditors or
entered into an agreement of composition with its creditors.
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4.24. Absence of Liabilities. Neither the Company nor any of its
Subsidiaries shall have any liabilities (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liabilities for taxes ("Liabilities") other than (i)
Liabilities individually in excess of $25,000, or, in the case of indebtedness
and/or Liabilities individually less than $25,000, in excess of $100,000 in the
aggregate, in either case as disclosed in Section 2.12(c) of the Schedule of
Exceptions, or (ii) Liabilities (of any amount) incurred since January 31, 2002
in the ordinary course of conducting the Company's business.
4.25. Qualification of ATG in Pennsylvania. The Investor shall have
received from the Company evidence satisfactory to the Investor in its sole
discretion that ATG has had its broker-dealer application received and approved
by the Pennsylvania Securities Commission.
4.26. Resolution of Dispute with UTTC Minority Stockholders. The
Investor shall have received from the Company evidence satisfactory to the
Investor in its sole discretion, of the resolution of all matters associated
with the October 31, 2001 offer to minority stockholders of UTTC to exchange
certain shares of UTTC common stock for shares of the Company's common stock.
4.27. Evidence of Filing of CroixNet ATS with the SEC. The Investor
shall have received from the Company evidence satisfactory to the Investor in
its sole discretion, of the filing by Croix of an Initial Operation Report as an
Alternative Trading System ("ATS") with the SEC as required by Regulation ATS
under the Exchange Act.
4.28. Change Conversion to Inactive Status of ATG. The Investor
shall have received from the Company evidence satisfactory to the Investor in
its sole discretion, of (i) the receipt by the Company or ATG, of all necessary
approvals and (ii) all necessary notifications filed by the Company or ATG, in
connection with ATG's suspension of trading on the Philadelphia Stock Exchange
and its move to inactive membership status effective January 7, 2002, as well as
the Company's withdrawal of all but approximately $70,000 of net capital from
ATG.
4.29. Non-Compete. The Investor, OptiMark, Inc., and the Company
shall have entered into an agreement, on terms and conditions mutually
acceptable to the Parties, including, without limitation, term and scope of
covenant, pursuant to which the Investor and OptiMark, Inc. shall agree to
refrain from providing products and/or services to third Persons that compete
with the products and/or services currently offered by the Company.
4.30. ▇▇▇▇ Registration Rights. The Company, ▇▇▇▇ and its
affiliates, including, without limitation, Kingsway and KSHL, shall have entered
into a written registration rights agreement, on terms and conditions acceptable
to Investor in its reasonable discretion, covering registration rights,
including demand registration rights, for
-22-
shares of capital stock of the Company held by ▇▇▇▇ and its affiliates,
including, without limitation, Kingsway and KSHL.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investor:
5.1. Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
5.2. Payment of Purchase Price. The Investor shall have delivered
the Purchase Price, including the assignment of certain assets pursuant to that
certain ▇▇▇▇ of Sale and Assignment, dated as of the date hereof (the "▇▇▇▇ of
Sale").
5.3. Investor Documents. The Investor shall have delivered to the
Company the documents evidencing the Investor's incorporation in Delaware on
December 28, 2001 and its capitalization on December 31, 2001. The Investor has
made available to the Company (i) a list of assets transferred to the Investor
in connection with its capitalization on December 31, 2001 and (ii) a current
report on Form 8-K filed by OptiMark Holdings, Inc. in connection with the
capitalization of the Investor on December 31, 2001.
5.4. Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6. Miscellaneous.
6.1. Survival of Warranties. The warranties, representations and
covenants of the Company and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
6.2. Indemnification.
(a) Company Breach. In the event the Company breaches (or in
the event any third party alleges facts that, if true, would mean the Company
has breached) any of its representations, warranties, and covenants contained
herein or in any of the exhibits hereto, then the Company agrees to indemnify
the Investor from and against the entirety of any actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, taxes,
-23-
liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses, including indirect, consequential and punitive
damages (collectively "Adverse Consequences"), the Investor may suffer through
and after the date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(b) Matters Involving Third Parties.
(i) If any third party shall notify the Investor (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the Company (the
"Indemnifying Party") under this Section 6.2, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence acceptable to
the Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 6.2(b)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party, and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnified
Party.
(iv) In the event any of the conditions in Section
6.2(b)(ii) above is or becomes unsatisfied, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the
-24-
Third Party Claim in any manner it may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying Party
in connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' fees and expenses), and
(C) the Indemnifying Party will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest extent provided
in this Section 6.2.
(c) S-3 Prospectus Violations of Regulation S-X of the Act. In
the event that the Company incurs Adverse Consequences in connection with claims
arising from the failure of the Company to satisfy the requirements of (i)
Regulation S-X promulgated under the Act, due to the Company's improper
incorporation by reference to its Annual Report on Form 10-K for the year ended
March 31, 2000, rather than for the year ended March 31, 2001, which caused the
Company's registration statement on Form S-3 to violate the applicable form
requirements of a registration statement on Form S-3, or (ii) Statement of
Financial Accounting Standard No. 5, Accounting for Contingencies, promulgated
by the Financial Accounting Standards Board, then the Investor shall be entitled
to be indemnified and paid a dollar amount equal to the product of (A) the
quotient of (x) the percentage of the outstanding Common Stock then owned by the
Investor, divided by (y) one minus the percentage of the outstanding Common
Stock then owned by the Investor, multiplied by (B) the total amount of the
Adverse Consequences to the Company in connection with such claim or claims.
(d) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any party may have with respect to
the transactions contemplated by this Agreement and any rights any party may
have under any other agreement, document or instrument, including, without
limitation, the Investors' Rights Agreement.
6.3. Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the Parties (including
transferees of any Purchased Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the Parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.4. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York.
6.5. Titles 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.
-25-
6.6. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the Party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the Party to be notified at the address
indicated for such Party on the signature page hereof, or at such other address
as such Party may designate by ten (10) days' advance written notice to the
other Parties.
6.7. Publicity. No press releases shall be issued by a Party before
the Closing without the prior review and written consent of the other Party.
Thereafter, the Parties shall consult with each other, in advance, with regard
to the terms of all proposed press releases, public announcements and other
public statements (other than information contained in Reports required to be
filed with the SEC) with respect to the transactions contemplated hereby. Except
as may be required by applicable law, court process or by obligations pursuant
to any listing agreement or similar arrangement with any national securities
exchange or automated quotation system, neither Party shall issue any press
release, public announcement or other public statement (except as aforesaid)
with respect to the transactions contemplated hereby without the prior consent
of the other Party, which consent shall not be unreasonably withheld.
6.8. Securities Laws. Each Party acknowledges that the United
States securities laws and other laws prohibit any person who has material,
non-public information concerning a Party, or any of their respective
affiliates, from purchasing or selling any of the securities of such party, and
from communicating such information to any person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
6.9. Finder's Fee. Each Party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
6.10. Expenses. Each Party shall bear its own expenses and legal
fees in connection with the consummation of this transaction; provided, however,
that the Company shall, at Closing, reimburse the Investor for the Investor's
reasonable out-of-pocket expenses and the reasonable fees and expenses of
special counsel to the Investor; and provided further, that the Company's
expenses and legal fees in connection with the consummation of this transaction
shall not exceed one hundred fifty thousand dollars ($150,000), excluding
amounts reimbursed to the Investor. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or the Investors'
Rights Agreement, the prevailing Party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such Party may be entitled.
-26-
6.11. No Solicitation.
(a) Neither the Company nor any of its Subsidiaries shall, nor
shall the Company or any of its Subsidiaries authorize or permit any of its
respective officers, directors or employees, or any investment bankers,
financial advisors, attorneys, accountants or other representatives retained by
any of them to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing non-public information), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to an "Acquisition Proposal"
(as hereinafter defined) or (ii) participate in any discussions or negotiations
regarding an Acquisition Proposal; provided, however, that if, at any time prior
to the Closing the Board of Directors of the Company determines in good faith,
based upon the advice of outside counsel, that failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties to the
Company's stockholders under applicable law, the Company in response to a
written Acquisition Proposal that (x) was unsolicited or that did not otherwise
result from a breach of this Section 6.11, and (y) is reasonably likely to lead
to a "Superior Proposal" (as hereinafter defined), may (I) furnish non-public
information with respect to the Company and its Subsidiaries to the person who
made such Acquisition Proposal pursuant to a customary confidentiality agreement
and (II) participate in negotiations regarding such Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any of the Company's or any
of its Subsidiaries' respective officers, directors or employees, or any
investment bankers, financial advisors, attorneys, accountants or other
representatives retained by any of them, whether or not acting on behalf of the
Company or any of its Subsidiaries, shall be deemed to be a breach of this
Section 6.11(a) by the Company.
(b) The Board of Directors of the Company shall not (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to the
Investor, its approval or recommendation of this Agreement or the transactions
contemplated hereby, unless there is a Superior Proposal outstanding, (ii)
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal that is not a Superior Proposal or (iii) cause the Company or any of
its Subsidiaries to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement with respect to an Acquisition Proposal
that is not a Superior Proposal unless the Board of Directors of the Company
shall have (x) determined in good faith based upon the advice of outside
counsel, that failure to do so would be reasonably likely to constitute a breach
of its fiduciary duties to the Company's stockholders under applicable law, and
(y) terminated this Agreement in accordance with its terms.
(c) Nothing contained in this Section 6.11 shall prohibit the
Company or any of its Subsidiaries from at any time taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act; provided, however, that neither the Company nor its Board of
Directors shall, except
-27-
as permitted by Section 6.11(b) above, propose to approve or recommend, an
Acquisition Proposal.
(d) The Company shall promptly (but in any event within one
day) advise the Investor orally and in writing of any Acquisition Proposal or
any inquiry regarding the making of an Acquisition Proposal including any
request for information, the material terms and conditions of such request,
Acquisition Proposal or inquiry and the identity of the person making such
request, Acquisition Proposal or inquiry. The Company will, to the extent
reasonably practicable, keep the Investor fully informed of the status and
details (including amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry.
(e) For purposes of this Section 6.11, the following terms
shall have the following meanings:
(i) an "Acquisition Proposal" means any inquiry, proposal
or offer relating to any direct or indirect acquisition or purchase, in one
transaction or a series of related transactions, of all or substantially all of
the assets of the Company, or all or any portion of the shares of capital stock
or other voting securities of the Company which would result in the acquiror
owning a majority of the outstanding shares of capital stock or other voting
securities of the Company (including any acquisition structured as a merger,
consolidation or share exchange).
(ii) a "Superior Proposal" means an Acquisition Proposal
that (x) the Board of Directors of the Company, in good faith based on advice of
outside legal counsel and of an investment banker, determines to be more
favorable than the Acquisition Proposal with which the Superior Proposal is
being compared, and (y) is already financed or is readily financeable.
(f) The Company agrees to pay the Investor a fee in
immediately available funds equal to $1,250,000 promptly, but in no event later
than five (5) business days, after this Agreement is terminated as a result of
the occurrence of any of the events set forth below (a "Triggering Event"):
(i) The Board of Directors of the Company shall have
withdrawn or materially modified its approval or recommendation of this
Agreement or the transactions contemplated hereby, including, without
limitation, its recommendation to stockholders that they approve an amendment to
the certificate of incorporation of the Company to increase the number of
authorized shares of Common Stock to provide sufficient authorized but unissued
shares of Common Stock to consummate the Closing, for any reason other than (x)
the determination in good faith, based upon the advice of outside counsel, that
its approval or recommendation of this Agreement or the transactions
contemplated hereby would be reasonably likely to constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law, or (y) the
occurrence of any event which would have a material adverse effect on the
Company and its Subsidiaries taken as a whole; or
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(ii) This Agreement and the transactions contemplated
hereby, including, without limitation, the amendment to the certificate of
incorporation of the Company to increase the number of authorized shares of
Common Stock to provide sufficient authorized but unissued shares of Common
Stock to consummate the Closing, shall not have been approved by the requisite
vote of the stockholders of the Company in circumstances where (x) a Superior
Proposal has been publicly announced or (y) any person or group (as defined in
Section 13(d)(3) of the Exchange Act), other than the Investor or its
affiliates, shall have become the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least fifteen percent (15%) of the
outstanding shares of Common Stock or any person or group shall have commenced,
or shall have publicly announced an intention to commence, a tender or exchange
offer for at least thirty five percent (35%) of the outstanding shares of Common
Stock as an element of a Superior Proposal.
6.12. Termination and Effect.
(a) This Agreement may be terminated at any time prior to
Closing, whether before or after approval of the matters presented in connection
with the transactions contemplated by this Agreement by the stockholders of the
Company:
(i) by mutual consent of the Company and the Investor;
(ii) by either the Company or the Investor if there has
been a material breach of any representation, warranty, covenant or agreement on
the part of the other set forth in this Agreement, which breach has not been
cured within five (5) business days following receipt by the breaching party of
notice of such breach, or if any permanent injunction or other order of a court
or other competent authority preventing the consummation of the transactions
contemplated by this Agreement shall have become final and non-appealable;
(iii) by either the Company or the Investor, so long as
such party has not materially breached its obligations hereunder, if the Closing
has not occurred on or before March 31, 2002;
(iv) by the Investor in the event that a Triggering Event
has occurred under Section 6.11(f); or
(v) by either the Company or the Investor if any required
approval of the stockholders of the Company shall not have been obtained by
reason of (i) the failure to obtain the requisite vote upon a vote held at a
special meeting of stockholders duly called or at any adjournment thereof, or
(ii) the failure to obtain a quorum.
(b) In the event of termination of this Agreement pursuant to
Section 6.12(a), the transactions contemplated hereby shall be deemed abandoned
and this Agreement shall immediately become void, without liability on the part
of any party hereto, except as provided in Sections 6.4, 6.8, 6.10, 6.11(f) and
6.12(c).
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(c) If the Investor shall have terminated this Agreement
pursuant to Section 6.12(a)(ii) as a result of the breach by the Company of its
obligations under Section 6.11, then in addition to any other rights and
remedies of the Investor under the Agreement at law or equity, the Company shall
be obligated to pay the Investor, as liquidated damages and not as a penalty,
$1,500,000 in immediately available funds not later than two (2) business days
after this Agreement is terminated. The Company and the Investor acknowledge and
agree that (i) the actual harm suffered by the Investor in the event of any
breach by the Company of Section 6.11 would be difficult to accurately ascertain
and (ii) the foregoing amount is a reasonable estimate of the actual damages
that the Investor would suffer in the event of such a breach.
6.13. Covenants of the Company.
(a) On or after the date hereof and prior to the earlier of
the Closing or the termination of this Agreement in accordance with its terms,
the Company (i) shall not take, or permit or cause any of its Subsidiaries to
take, any action or enter into any transaction outside the ordinary course of
the business of the Company or any of its Subsidiaries, as the case may be,
without the Investor's prior written consent, (ii) shall take, and cause its
Subsidiaries to take, all necessary corporate action to comply with their
respective obligations under, and satisfy all conditions set forth in, Article
IV of this Agreement and (iii) shall take, or cause it or its Subsidiaries to
take, all actions and do, or cause it or its Subsidiaries to do, and to assist
and cooperate with the Investor in doing, all things, in each case, necessary or
appropriate to permit the consummation of all transactions and obligations
contemplated by or referred to in this Agreement.
(b) Without the prior written consent of the Investor, the
Company will not (i) amend the terms of any Lock-Up Letter, (ii) waive any of
the obligations imposed on the executive officers and directors who are
signatories thereto (the "Lock-Up Parties"), (iii) release any Lock-Up Party
from its obligations under a Lock-Up Letter, or (iv) authorize the Company's
transfer agent to record the transfer of any shares of capital stock of the
Company held by any Lock-Up Party.
(c) In connection with compliance with Section 4.4(a) of this
Agreement, the Company will take all necessary corporate action to amend its
Certificate of Incorporation, including: (i) establishing a date for the special
meeting of shareholders of the Company; (ii) preparing and distributing proxy
statements for such meeting; and (iii) using best efforts to obtain shareholder
approval of the transactions contemplated by this Agreement.
(d) In connection with the operation of CroixNet as an ATS,
the Company shall comply, or cause Croix to comply, at all times with Regulation
ATS under the Exchange Act.
(e) Prior to expiration or earlier termination of the
Company's current directors' and officers' insurance policy, the Company shall
(i) engage the Investor's insurance broker by completing the engagement
agreement in the form attached as Exhibit K hereto and (ii) secure claims
coverage, including claims arising in
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connection with the approval of the transactions contemplated by this Agreement,
for a "tail" period following expiration of the Company's current directors' and
officers' insurance policy of not less than one year or, if longer, a period
covered by a policy premium not to exceed $200,000.
6.14. Mutual Covenant. Each of the Parties shall perform its
respective obligations under the side letter agreement attached hereto as
Exhibit K.
6.15. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
6.16. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
6.17. Aggregation of Stock. All shares of the Common Stock held or
acquired by affiliated entities of Investor or related persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
6.18. Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement between the Parties and neither Party
shall be liable or bound to the other Party hereto in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
6.19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties have executed this Stock
Purchase Agreement as of the date first above written.
THE COMPANY:
THE ASHTON TECHNOLOGY GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: EVP and General Counsel
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTOR:
OPTIMARK INNOVATIONS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Address:
c/o OptiMark Holdings, Inc.
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