<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File #1-11747
-------
THE ASHTON TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-6650372
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1900 Market Street, Suite 701
Philadelphia, Pennsylvania 19103
(Address of Principal Executive Offices) (Zip Code)
(215) 751-1900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
-----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the last practical date.
Common Stock $.01 par value 23,619,095
(Title of Class) (No. of Shares Outstanding
as of June 30, 1999)
<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1999 and March 31, 1999............................................. 4
Consolidated Statements of Operations -
For the Three Months Ended June 30, 1999 and 1998.......................................................... 5
Consolidated Statements of Cash Flows -
For the Three Months Ended June 30, 1999 and 1998.......................................................... 6
Notes to Consolidated Financial Statements................................................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................... 11
Part II - Other Information
Item 1. Legal Proceedings....................................................................................... 15
Item 2. Changes in Securities and Use of Proceeds............................................................... 15
Item 3. Quantitative and Qualitative Disclosure of Market Risk.................................................. 15
Item 4. Submission of Matters to a Vote of Security Holders..................................................... 15
Item 5. Other Information....................................................................................... 15
Item 6. Exhibits and Reports on Form 8-K........................................................................ 15
Signatures....................................................................................................... 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company to differ materially from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such risks, uncertainties and other important factors
include, among others: dependence on arrangements with self-regulatory
organizations; dependence on proprietary technology; ability to successfully
activate the VTS(TM); technological changes and costs of technology; industry
trends; competition; ability to develop markets; changes in business strategy or
development plans; availability, terms and deployment of capital; availability
of qualified personnel; changes in government regulation; general economic and
business conditions; and other factors referenced in this Form 10-Q. Such
forward-looking statements speak only as of the date of this Form 10-Q. For
discussion of the factors that might cause performance of the Company to differ
with actual results, see Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Company's other periodic
reports and registration statements filed with the Securities Exchange
Commission (the "SEC" or "Commission"). The Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
The Ashton Technology Group, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1999
(Audited) (Unaudited)
----------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................... $2,667,347 10,426,042
Accounts receivable and prepayments.......................................... 308,249 1,026,383
Current portion of notes receivable.......................................... 112,499 114,051
----------------- -----------------
Total current assets.................................................... 3,088,095 11,566,476
Notes receivable, net of current portion..................................... 717,284 697,619
Property and equipment, net of accumulated depreciation...................... 1,017,179 1,665,290
Investments and Exchange Membership.......................................... 196,900 196,900
Capitalized software development costs....................................... 95,354 47,677
Intangible assets............................................................ 58,563 48,803
Other assets................................................................. 480,362 258,865
----------------- -----------------
Total Assets........................................................ $5,653,737 14,481,630
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses........................................ $ 675,841 625,217
Other liabilities............................................................ 532,918 712,945
----------------- ---------------
Total current liabilities............................................... 1,208,759 1,338,162
Minority Interest............................................................ --- 7,500,000
Stockholders' equity:
Preferred Stock - shares authorized: 3,000,000
250,000 shares designated as Series A - (liquidation preference $10 per
share); shares issued and outstanding; 125,219 and 65,063.................. 1,252,188 650,628
590,000 shares designated as Series B - (liquidation preference $10 per
share); shares issued and outstanding; 417,500 and 167,700................. 4,175,000 1,677,000
10 shares designated as Series D $.01 par value - (liquidation preference
equals stated value); shares issued and outstanding; none.................. --- ---
10 shares designated as Series E $.01 par value - (liquidation preference
$1,000,000 per share); shares issued and outstanding; none................. --- ---
Common Stock - par value: $.01; shares authorized: 60,000,000;
Shares issued and outstanding; 20,569,172 and 23,619,095.................. 205,692 236,191
Additional paid-in capital................................................... 39,133,830 46,025,426
Deferred consulting expense.................................................. (285,208) (135,989)
Accumulated deficit.......................................................... (40,036,524) (42,809,788)
----------------- ---------------
Total stockholders' equity................................................... 4,444,978 5,643,468
----------------- ---------------
Total Liabilities and Stockholders' Equity.......................... $ 5,653,737 14,481,630
================= ===============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
The Ashton Technology Group, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
Revenues....................................................... $ 443,562 $ 794,101
-------------- --------------
Costs and expenses:
Costs of revenues............................................. 34,000 31,250
Development costs............................................. 47,677 47,677
Depreciation and amortization................................. 92,776 137,669
Non-cash compensation charges................................. 144,531 149,219
Selling, general and administrative........................... 1,973,232 3,289,254
-------------- --------------
Total costs and expenses.................................. 2,292,216 3,655,069
-------------- --------------
Loss from operations........................................... (1,848,654) (2,860,968)
Interest income............................................... 35,468 87,930
-------------- --------------
Net loss....................................................... $ (1,813,186) $ (2,773,038)
============== ==============
Beneficial conversion feature of Preferred Stock............... (3,875,984) ---
Dividends in arrears on Preferred Stock........................ (385,793) (109,537)
-------------- --------------
Net loss applicable to Common Stock............................ $ (6,074,963) $ (2,882,575)
============== ==============
Net loss per common share...................................... $ (.72) $ (.13)
============== ==============
Weighted average number of common shares outstanding........... 8,422,261 22,141,287
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
The Ashton Technology Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------
1998 1999
------------------ ------------------
<S> <C> <C>
Net loss........................................................ (1,813,186) (2,773,038)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................. 140,453 185,346
Non-cash compensation charges.................................. 144,531 149,219
Changes in operating assets and liabilities
Increase in accounts receivable and prepayments................ (112,877) (718,134)
Increase in notes receivable................................... (380,000) ---
Increase in stock subscriptions receivable..................... (1,645,000) ---
Decrease in other assets....................................... 6,276 221,497
Decrease in accounts payable and accrued expenses (1,393,915) (50,624)
Increase in other liabilities --- 180,027
------------------ ------------------
Net cash used in operating activities........................ (5,053,718) (2,805,707)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets....................................... (192,907) (776,065)
Cash received from notes receivable............................ 24,940 18,113
Capitalized software development costs......................... (61,375) ---
------------------ ------------------
Net cash used in investing activities........................ (229,342) (757,952)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance costs for Common Stock................................ --- (300,000)
Proceeds from issuance of Common Stock......................... --- 3,000,000
Proceeds from exercise of warrants to purchase Common Stock.... --- 1,729,272
Issuance costs for Preferred Stock............................. (710,000) ---
Proceeds from issuance of Preferred Stock...................... 6,275,000 ---
Proceeds from issuance of Gomez Preferred Stock................ --- 5,500,000
Issuance costs for Gomez Preferred Stock....................... --- (606,918)
Proceeds from issuance of UTTC(TM) Preferred Stock............. --- 2,000,000
------------------ ------------------
Net cash provided by financing activities.................... 5,565,000 11,322,354
------------------ ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS....................... 281,940 7,758,695
Cash and cash equivalents, beginning of year.................... 815,680 2,667,347
------------------ ------------------
Cash and cash equivalents, end of year.......................... 1,097,620 10,426,042
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements included herein have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The accompanying consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. Such adjustments
are of a normal recurring nature. Certain amounts in prior periods have been
reclassified for comparative purposes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
These consolidated financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the registrant's
Annual Report on Form 10-KSB for the year ended March 31, 1999. The results for
the three months ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2000.
The consolidated financial statements include the accounts of The Ashton
Technology Group, Inc. ("ATG(TM)" or "Ashton") and its subsidiaries, Universal
Trading Technologies Corporation ("UTTC(TM)"), Gomez Advisors, Inc. ("Gomez"),
ATG(TM) International ("International"), and Electronic Market Center, Inc.
("EMC"), (collectively, the "Company"). ATG(TM) owns 100% of the voting equity
of each of its subsidiaries, with the exception of UTTC(TM) and Gomez, of which
ATG(TM) owns approximately 93% and 70%, respectively, of the voting equity.
Also included in the consolidated financial statements are the accounts of
UTTC(TM)'s wholly-owned subsidiaries, REB Securities, Inc., Croix Securities,
Inc. and NextExchange, Inc. EMC was formed in June 1998, and International was
formed in July 1998. Croix Securities and NextExchange were formed in February
1999. The results of operations for these subsidiaries are included from the
date of formation. All significant intercompany accounts and transactions have
been eliminated.
2. Certain Transactions
On April 24, 1999, Gomez completed a private placement of 1,100,000 shares of
Redeemable Convertible Series B Preferred Stock ("Gomez Series B Preferred
Stock") for $5,500,000. The Gomez Series B Preferred Stock ranks senior to the
Gomez Series A Preferred Stock and pays cumulative dividends semi-annually at an
annual rate of 6% of its liquidation preference, payable in cash or additional
shares of Gomez Series B Preferred Stock until April 2002. At any time after
April 2002, and if an initial public offering registration statement has not
been filed with the SEC, holders of 67% of the outstanding shares of the Gomez
Series B Preferred Stock can request all such shares to be redeemed. Each
holder of shares of Gomez Series B Preferred Stock has the right to convert each
share of Gomez Series B Preferred Stock into one share of Gomez common stock.
Upon the consummation of an initial public offering, each share of Gomez Series
B Preferred Stock will automatically convert into one share of Gomez common
stock. The Gomez Series B Preferred Stock is presented as a component of
minority interest on the June 30, 1999 unaudited consolidated balance sheet at
its liquidation preference of $5,500,000.
On June 4, 1999, UTTC(TM) completed a private placement of 145,700 shares of
Series TK Convertible Preferred Stock ("UTTC(TM) Series TK Preferred Stock") and
warrants to purchase 200,000 shares of Ashton Common Stock at $10.00 per share.
Gross proceeds received by UTTC(TM) from the sale of the Series TK Preferred
Stock and the warrants amounted to $2,000,000. Between May 2001 and April 2004,
each share of UTTC(TM) Series TK Preferred Stock is convertible into ten shares
of UTTC(TM) common stock. Additionally, between May 1, 2001 and June 1, 2001,
holders of the UTTC(TM) Series TK Preferred Stock may exchange each share of
Series TK Preferred for 1.83 shares of Ashton Common Stock. The UTTC(TM) Series
TK Preferred Stock is presented as a component of minority interest on the June
30, 1999 unaudited consolidated balance sheet at its liquidation preference of
$2,000,000.
7
<PAGE>
3. Stockholders' Equity
On September 18, 1997, the Company commenced a private offering and exchange
offer pursuant to which it offered to certain investors (i) shares of its Series
A Convertible PIK Preferred Stock (with a liquidation preference of $10.00 per
share) (the "Series A Preferred"); (ii) shares of its Series B Convertible
Preferred Stock (with a liquidation preference of $10.00 per share) (the "Series
B Preferred"); and (iii) the opportunity to exchange (the "Exchange Offer") up
to 300,000 shares of its Series B Preferred for up to $3,000,000 of convertible
and non-convertible notes issued by UTTC(TM) (the "UTTC(TM) Notes"). The Series
A Preferred pays cumulative dividends semi-annually at an annual rate of $0.50
per share and is payable in cash or additional shares of Series A Preferred
until February 15, 2000. Each holder of shares of Series A Preferred has the
right to convert each share of Series A Preferred into: (i) ten shares of
Common Stock; and (ii) one two-year warrant to purchase three shares of the
Common Stock, par value $0.01 per share, of UTTC(TM) common stock (the "UTTC(TM)
common stock"), with an exercise price of $0.75 per share, subject to
adjustment. The Series B Preferred pays cumulative dividends semi-annually at
an annual rate of $0.90 per share. Each holder of shares of Series B Preferred
has the right to convert each share of Series B Preferred into: (i) six shares
of Common Stock; and (ii) one two-year warrant to purchase two shares of
UTTC(TM) common stock, with an exercise price of $0.75 per share, subject to
adjustment. During the quarter ended June 30, 1999, 61,056 shares of Series A
Preferred and 249,800 shares of Series B Preferred were converted into 2,100,358
shares of Common Stock.
On April 3, 1998 (the "Subscription Date"), the Company entered into the Private
Equity Line of Credit Agreement (the "Private Equity Agreement") with a group of
accredited investors (the "Private Equity Investors") which provided for an
aggregate commitment of $18,000,000 to the Company. On the Subscription Date,
the Private Equity Investors purchased three shares of Series D Convertible
Preferred Stock (the "Series D Preferred"), with a liquidation preference of
$1,000,000 per share, for an aggregate purchase price of $3,000,000. On July
15, 1998, the Private Equity Investors also purchased two shares of Series E
Convertible Preferred Stock (the "Series E Preferred") with a liquidation
preference of $1,000,000 per share for an aggregate purchase price of
$2,000,000. The conversion price of the Series D Preferred was equal to 75% of
the average closing bid price per share over the five days preceding the
conversion date (the "Market Price"). The conversion price of the Series E
Preferred was equal to 80% of the Market Price. Each share of the Series D
Preferred and Series E Preferred (i) ranked pari passu with the other authorized
preferred stock of the Company and (ii) was entitled to a cumulative dividend of
8% per annum on its respective liquidation preference. During the fiscal year
ended March 31,1999 all of the outstanding 3.174 shares of the Series D
Preferred were converted into 2,863,521 shares of Common Stock, and the
outstanding 2.1 shares of the Series E Preferred were converted into 1,567,058
shares of Common Stock.
Also on the Subscription Date, the Private Equity Investors received warrants to
purchase up to an aggregate of 250,000 shares of Common Stock and on July 15,
1998, received additional warrants to purchase up to an aggregate of 100,000
shares of Common Stock. The warrants, which were exercisable for a period of
five years, were exercised in May 1999. As a result of the exercise, the
Company received gross proceeds of $1,527,750 and issued 350,000 shares of
Common Stock.
Following the purchase of the Series E Preferred and subject to the satisfaction
of certain other conditions, the Company may from time to time Put to the
Private Equity Investors shares of the Common Stock for an aggregate Put price
of $13,000,000. The Put price per share is equal to 85% of the average of the
lowest bid prices of such Common Stock over the seven day period beginning three
days before and ending three days after the Company gives notice of a Put. The
Private Equity Investors are not obligated to purchase any Put shares unless,
among other things, (i) the Registration Statement is effective, (ii) the
Company is listed and its Common Stock is trading on a national exchange or
quotation system, (iii) the closing bid price of the Common Stock on the day
immediately preceding such purchase is at least $1.50 per share, and (iv) the
Common Stock has traded at an average volume of at least 25,000 shares a day for
the thirty trading days preceding such purchase. During the fiscal year ended
March 31, 1999, the Company exercised six Puts to the Private Equity Investors
in the aggregate amount of $7,250,000, and issued 4,810,788 shares of Common
Stock in connection with the Puts. During the quarter ended June 30, 1999, the
Company exercised two Puts to the Private Equity Investors in the aggregate
amount of $3,000,000, and issued 393,810 shares of Common Stock in connection
with those Puts.
During the three months ended June 30, 1999, 100,000 warrants that were issued
in January 1998 to investors in the Series C Convertible Preferred Stock
("Series C Preferred") were exercised. As a result of this exercise, the
Company received gross proceeds of $171,282 and issued 100,000 shares of Common
Stock. Additionally, warrants that were
8
<PAGE>
issued to the underwriters of the Company's initial public offering in May 1996
were exercised on a cashless basis during the three months ended June 30, 1999.
As a result of this exercise, 100,555 shares of Common Stock were issued.
At the time of issuance, the Series A, Series B, Series C, Series D, and Series
E Preferred Stocks were convertible at prices below the market value of the
underlying Common Stock. The beneficial conversion feature represented by the
intrinsic value is calculated as the difference between the conversion price and
the market price of the underlying Common Stock multiplied by the number of
shares to be issued upon conversion. The beneficial conversion feature was
fully recognized as a return to the preferred stockholders when the shares
became convertible, or at the time of issuance. The accumulated beneficial
conversion feature amounts to $1,643,900, $2,695,436, $349,943, $1,180,549, and
$607,087 for the Series A, Series B, Series C, Series D, and Series E Preferred,
respectively, and is included as a component of the accumulated deficit on the
unaudited consolidated balance sheets at March 31, 1999 and June 30, 1999.
4. Related Party Transactions
The Company utilizes the Dover Group, Inc. ("Dover") for consulting services
related to the Company's financings and product development efforts. Fredric W.
Rittereiser, the Company's Chairman and Chief Executive Officer, is the sole
shareholder, director and officer of Dover. The Company paid consulting fees
to Dover amounting to $45,000 in each of the three-month periods ended June 30,
1999 and 1998.
In 1997, the Company retained Adirondack Capital, LLC ("Adirondack") to provide
investment banking and financial advisory services. K. Ivan F. Gothner, a
member of the Company's Board of Directors, is the Managing Director of
Adirondack. The Company paid consulting fees to Adirondack amounting to $30,000
in each of the three-month periods ended June 30, 1999 and 1998. In April 1999,
Gomez paid a fee of $50,000 to Adirondack for its assistance in structuring the
private placement of the Gomez Series B Preferred Stock. Additionally, the
Company paid Adirondack $150,000 in the three months ended June 30, 1999
pursuant to the Private Equity Line of Credit Agreement, and $200,000 in the
three months ended June 30, 1998 in connection with the sale of the Series C
Preferred, the Series D Preferred and the Series E Preferred. Effective April
1, 1999, Mr. Gothner began receiving a monthly board retainer.
During 1998, the Company retained Richard Butler, a member of the Company's
Board of Directors, to provide strategic marketing services. For the three
months ended June 30, 1998 the Company paid $22,500 in consulting fees to
Richard Butler under that arrangement. Effective April 1, 1999, the arrangement
was terminated, and Mr. Butler began receiving a monthly board retainer.
5. Segment Information
Summarized financial information, excluding intercompany transactions, by
business segment is as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revenues:
Gomez.............................. $ 387,102 $ 794,101
Trading systems.................... --- ---
------------ ------------
387,102 794,101
Loss from operations:
Gomez.............................. (92,618) (823,419)
Trading systems.................... (1,756,036) (2,037,549)
------------ ------------
1,848,654 (2,860,968)
Interest income:
Gomez.............................. --- 26,379
Trading systems.................... 35,468 61,551
------------ ------------
35,468 87,930
Depreciation and amortization:
Gomez.............................. 17,081 22,000
Trading systems.................... 123,372 163,346
------------ ------------
140,453 185,346
Non-cash compensation charges
Gomez.............................. --- ---
Trading systems.................... 144,531 149,219
------------ ------------
144,531 149,219
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
March 31, June 30,
1999 1999
------------- -------------
<S> <C> <C>
Balance Sheet:
Current assets
Gomez............................. $ 290,849 $ 4,338,758
Trading systems................... 2,797,246 7,227,718
------------- -------------
3,088,095 11,566,476
Total assets
Gomez............................. 1,090,761 5,674,685
Trading systems................... 4,562,976 8,806,945
------------- -------------
5,653,737 14,481,630
Minority interest
Gomez............................. --- 5,500,000
Trading systems................... --- 2,000,000
------------- -------------
--- 7,500,000
Preferred Stock
Gomez............................. --- ---
Trading systems................... 5,427,188 2,327,628
------------- -------------
5,427,188 2,327,628
Total stockholders equity
Gomez............................. 388,801 (1,015,157)
Trading systems................... 4,056,177 6,658,625
------------- -------------
4,444,978 5,643,468
</TABLE>
6. Recently Adopted Accounting Standards
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No.98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. The Company has adopted SOP
No. 98-1 effective April 1, 1999. Adoption of this Statement has not had a
material impact on the Company's consolidated financial position or results of
operations.
In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of Start-Up
Activities, which requires all costs associated with pre-opening, pre-operating,
organization activities to be expensed as incurred. The Company has adopted SOP
No. 98-5 beginning April 1, 1999. Adoption of this Statement has not had a
material impact on the Company's consolidated financial position or results of
operations.
7. Net Loss per Share
Net loss per share is calculated following SFAS No 128, Earnings per Share.
SFAS 128 requires companies to present basic and diluted earnings per share.
Basic earnings per share excludes any dilutive effect of outstanding stock
options whereas diluted earnings per share includes the effect of such items.
There is no difference between basic and diluted earnings per share because the
effect of the Company's common share equivalents would be anti-dilutive.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is engaged in the development and commercialization of on-line
transaction systems for participants in the U.S. and international financial
markets. The Company was founded in 1994 to take advantage of commercial
opportunities through the application of advanced telecommunication and
computing technologies to the area of financial and electronic commerce ("e-
commerce"). The Company is currently organized as a parent company, which has
four subsidiaries:
. Universal Trading Technologies Corporation ("UTTC(TM)") and its
three subsidiaries:
REB Securities, Inc. ("REB")
Croix Securities, Inc. ("Croix")
NextExchange, Inc. ("NextExchange")
. Gomez Advisors, Inc. ("Gomez")
. Electronic Market Center, Inc. ("EMC")
. ATG(TM) International, Inc. ("International")
For the quarters ended June 30, 1999 and 1998, Gomez generated all of the
Company's revenues. Gomez provides information and research to individuals and
businesses that want to effectively and efficiently transact e-commerce online.
In March 1999, the SEC approved the Philadelphia Stock Exchange's ("PHLX")
proposed rule change allowing the Company to begin to implement the VTS(TM)
trading system. Company personnel and PHLX staff have completed preparatory
system launch sessions and joint, full-scale production testing of the VTS(TM)
and PHLX systems. In the next fiscal quarter, Ashton plans to begin a
controlled, live trading period of the VTS(TM) on the PHLX with a group of
institutional customers involving a limited number of securities. At the
conclusion of this period, the Company plans to expand the number of users and
securities. The Company's limited operating history and dependence upon the
operation of its VTS(TM) make the prediction of future operating results
difficult. Although the Company has undertaken initiatives to activate its
VTS(TM) and develop additional sources of revenue, there can be no assurance
that the VTS(TM) will become operational or the Company will generate the
anticipated revenues.
The Company intends to continue to increase its investments in research and
development, sales and marketing and related infrastructure. Such increases
will be dependent upon factors including, but not limited to, operation of the
VTS(TM), success in hiring the appropriate personnel, market acceptance of the
Company's products, and development of a revenue stream from the Company's
products. Due to the anticipated increases in the Company's operating expenses,
the Company's operating results will be materially and adversely affected while
revenue is not generated from the Company's transaction products.
At June 30, 1999, the Company's consolidated total assets were $14,481,630
compared to $5,653,737 at March 31, 1999. Current assets at June 30, 1999
totaled $11,566,476 and current liabilities were $1,338,162. Stockholders'
equity at June 30, 1999 increased to $5,643,468 from $4,444,978 at March 31,
1999 due to exercise of warrants for 550,555 shares of Common Stock, and the
issuance of 393,810 shares of Common Stock for $3,000,000. The increase in
stockholders' equity resulting from the issuance of Common Stock was partially
offset by the net loss of $2,773,038 and net issuance costs of approximately
$900,000.
Results of Operations
The net loss applicable to Common Stock totaled $2,882,575 or $.13 per share for
the three months ended June 30, 1999, and $6,074,963 or $.72 per share for the
three months ended June 30, 1998. The Company incurred a net loss of
$2,773,038, or $.13 per share for the three months ended June 30, 1999, compared
to a net loss of $1,813,186, or $.22 per share for the three months ended June
30, 1998.
The Company's revenues totaled $794,101 for the three months ended June 30,
1999, and $443,562 for the three months ended June 30, 1998. The revenues in
both periods presented were generated entirely by Gomez. In the
11
<PAGE>
first quarter of fiscal 2000, $345,000, or 43% of Gomez's revenues were from
consulting and advisory engagements with clients seeking to improve the quality
of their Internet service offerings. This is a 58% increase from the first
quarter 1999, when $218,500 or 49% of Gomez's revenues were from such advisory
engagements. Advertising revenue for the three months ended June 30, 1999
increased 17% to $175,600 from $150,100 in the three months ended June 30, 1998.
For the three months ended June 30, 1999, Gomez generated $100,900 in site
revenues from lead generation and affiliate programs, and $136,800 in revenues
from sales of its GomezPro research services and products to e-commerce
businesses, which it began selling in March 1999. Lead generation accounted for
$24,400 in revenues in the three months ended June 30, 1998.
The costs of revenues represent expenses associated with the delivery of Gomez's
advisory services, and include the salaries for personnel providing the advisory
services. Costs of revenues for the three months ended June 30, 1999 were
$31,250 or 3.9% of revenues, compared to $34,000 or 7.7% of revenues for the
three months ended June 20, 1998. The decrease as a percent of total revenues
is primarily due to the decline in advisory revenues as a percent of the
Company's total revenues.
During the three months ended June 30, 1998, the Company capitalized system
development costs related to the VTS(TM) totaling $61,375. The Company has
ceased capitalization of computer software costs related to the VTS(TM), as the
application development stage is completed. Amortization of software
development costs totaled $47,677 for each of the three-month periods ended June
30, 1999 and 1998.
Depreciation and amortization expense includes depreciation of property and
equipment, comprised primarily of computer equipment. Depreciation for the
three months ended June 30, 1999 increased to approximately $137,669 from
$92,776 for the three months ended June 30, 1998 due to an increase in the
computer equipment purchased. Capital expenditures increased to $776,065 for
the three months ended June 30, 1999 compared to $192,907 in the same period
last year. The increase is primarily due to Gomez's purchase of computer
equipment and software to accommodate additional staff and to support the
increased traffic on their website and network servers. The level of capital
expenditures is expected to increase as the Company moves to implement operation
of the VTS(TM) and to develop additional trading systems.
In February 1998, the Company entered into a consulting agreement with
Continental Capital & Equity Corporation ("Continental") whereby the Company
issued 300,000 shares of Common Stock, with a fair value of $475,125, in
exchange for promotional services through February 1999. During August 1998,
the Company amended the consulting agreement with Continental whereby the
Company issued 250,000 additional shares of Common Stock, with a fair market
value of $416,657, in exchange for additional promotional services and a
reduction in cash payments required pursuant to the previous consulting
agreement. The Company recorded the deferred consulting expenses in 1998 and
1999 as a reduction to stockholders' equity. During the three months ended June
30, 1999, $149,219 was reflected as a non-cash compensation charge for the
amortization of deferred consulting expenses compared to $144,531 during the
three months ended June 30, 1998.
Selling, general and administrative expenses ("SG&A") totaled $3,289,254 and
$1,973,232 for the three-month periods ended June 30, 1999 and 1998,
respectively. For the period ended June 30, 1999, Gomez's SG&A totaled
$1,570,270, or 48% of the Company's total SG&A, compared to $446,436 or 23% in
the three months ended June 30, 1998. The increase in Gomez's SG&A was due
primarily to the growth in staff and related expenses incurred in building
Gomez's infrastructure, and increased advertising and marketing costs related to
introduction of new products and growth of the business. As of June 30, 1999,
Gomez had 46 employees compared to 12 employees as of June 30, 1998.
Excluding Gomez, the Company's SG&A for the three months ended June 30, 1999
totaled $1,718,984 compared to $1,526,796 during the three months ended June 30,
1998. The increase in SG&A is primarily a result of the growth in staff and is
partially offset by decreases in marketing and professional fees. As of June
30, 1999, ATG(TM) and UTTC(TM) employed a total of 29 employees compared to 20
employees at June 30, 1998.
12
<PAGE>
Liquidity and Capital Resources
At June 30, 1999, the Company's principal source of liquidity consisted of cash
and cash equivalents of $10,426,042, compared to $2,667,347 at March 31, 1999.
In April 1999, Gomez completed a private placement of 6% Series B Convertible
Preferred Stock, par value $.01 per share, to accredited investors at a price of
$5 per share. Gross proceeds received by Gomez from the sale amounted to
$5,500,000. In June 1999, UTTC(TM) completed a private placement of Series TK
Convertible Preferred Stock, par value $.01 per share. Gross proceeds received
by UTTC(TM) from the sale amounted to $2,000,000 (see "Notes to Unaudited
Consolidated Financial Statements - Certain Transactions"). Additionally, on
April 3, 1998, the Company entered into the Private Equity Agreement with the
Private Equity Investors, which provided for an aggregate commitment of
$18,000,000 to the Company, subject to the satisfaction of certain conditions
(see "Notes to Unaudited Consolidated Financial Statements -Stockholders'
Equity"). As of June 30, 1999, the Company has drawn down $15,250,000 of the
total $18,000,000.
The Company believes, on a forward-looking basis, it will begin to generate
revenue, in addition to those generated by Gomez, during its fiscal year ending
March 31, 2000. The level and timing of such revenue is dependent, among other
factors, the Company's assumptions regarding (i) the date the VTS(TM) commences
live operation; (ii) the trading volume experienced by the VTS(TM); and (iii)
the pricing the Company is able to obtain for VTS(TM) trade execution. Until
adequate revenue is derived from the VTS(TM), the Company's cash, cash
equivalents and cash flow from operations will not be sufficient to meet the
presently anticipated cash requirements. Therefore, the Company anticipates
exercising additional Puts to the Private Equity Investors until the Private
Equity Line is completely utilized.
The Company's future capital requirements will depend on many factors, including
the timing for the launch of the VTS(TM), market acceptance of the Company's
products, the timing and extent of spending to support new product development
efforts and the timing of introductions of new products and enhancements to
existing products. The Company may need additional financing in the future if
(i) the Company experiences unexpected costs, (ii) there are further delays in
the introduction of the VTS(TM), or (iii) the Company fails to successfully
develop markets for its products. The Company and its subsidiaries will also
require additional financing to fund development of its products, such as
eMC(TM) and NextExchange. Such financing may be raised through spin-offs,
additional equity offerings, borrowings, or other collaborative relationships,
which may require the Company to share ownership of its subsidiaries and/or
revenue from products. There can be no assurance that additional equity or debt
financing, if required, will be available on acceptable terms or at all.
Year 2000 Computer Compliance
The Company has assessed the potential impact of what is commonly referred to as
the "Year 2000" or "Y2K" issue, concerning the inability of certain information
systems and automated equipment to properly recognize and process dates
containing the Year 2000 and beyond. If not corrected, these systems and
equipment could fail or create erroneous results. The Company is subject to the
potential impact of the Y2K issue due to the nature of financial information and
the potential impacts which may arise from software, hardware, and equipment
both within the Company's direct control and outside of the Company's control.
The Company views its Y2K risks as arising from three primary sources: (i)
internal software, hardware and equipment utilized in the operations of the
Company; (ii) applications the Company has developed or is developing for use by
its customers; and (iii) third parties with which the Company has material
relationships.
State of Readiness. The Company has determined that none of its critical
internal systems and equipment presents Y2K issues. The Company is continuously
acquiring and replacing both hardware and software and is obtaining Y2K
compliance certifications with such purchases. The Company's systems interface
electronically and operationally with software, hardware and equipment outside
of the Company's control. The Company also contracts with third parties for
such services as telecommunications. These third party vendors with whom the
Company has material agreements are primarily large, publicly traded
organizations. The Company is reviewing the publicly available Y2K disclosures
of these vendors; however there can be no assurance that the Company will not be
adversely affected by the failure of these third parties to become Y2K
compliant. The Company is not independently verifying the Y2K compliance of
these vendors.
13
<PAGE>
The Company has also determined that none of the applications it has developed
for use by its customers present Y2K issues. In addition, the Company's
customers cannot enter or export non-Y2K compliant dates into the VTS(TM) and
all VTS(TM) business partners interact with the VTS(TM) via Y2K compliant
interfaces.
Risks. Since the Company's VTS(TM) has not been activated, the potential
liabilities and costs associated with the Y2K compliance issue cannot be
estimated with certainty at this time. The potential costs, including any
potential loss of revenue, would be dependent upon several factors including,
but not limited to, the volume transacted through the Company's products, the
Y2K readiness of customers utilizing the Company's products and the
concentration of volume among the Company's customers. Because of these
uncertainties regarding others, there can be no assurance that the Y2K issue
will not have a material financial impact on our business, results of operations
and financial condition in any future period.
Costs. To date, the Company has not incurred any material costs in identifying,
evaluating or resolving Y2K compliance issues and expects any additional costs
incurred to complete its review will be immaterial. However, the costs incurred
to address this issue could become material if the Company identifies non-
compliant systems and third-party technology which must be replaced or modified,
or if the Company identifies any other problems related to the Y2K issue which
must be addressed.
Contingency Plan. Because of the factors described above, the Company has no
Y2K contingency plan and does not intend to develop such a plan at this time.
Should the Company become aware that certain products or services provided by
third parties or the customers utilizing the Company's products, are not Y2K
compliant, then the Company will develop contingency plans for those affected
services and vendors.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
Not applicable
ITEM 4. MATTERS SUBMITTED TO SHAREHOLDERS FOR VOTE
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.3 Form of Stock Purchase T Warrants
10.31 Second Addendum to Employment Agreement, dated as of June 24, 1999
between Fred S. Weingard, Ashton, and UTTC (TM)
10.32 Executive Deferred Compensation Plan Agreement dated July 1, 1999 and
Form of Split Dollar Insurance Agreement
10.33 Agreement between Ashton and Robert Eprile dated June 29, 1999
27 Financial Data Schedule
(B) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
The Ashton Technology Group, Inc.
---------------------------------
(Registrant)
Date: July 30, 1999 By: /s/ Arthur J. Bacci
-------------------------------- --------------------------------------
________________________________ Arthur J. Bacci
President
Chief Financial Officer
16
<PAGE>
EXHIBIT 4.3
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED
UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR THE
SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE
SKY LAWS. NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
STOCK PURCHASE "T" WARRANT
To Purchase _________ Shares of Common Stock of
THE ASHTON TECHNOLOGY GROUP, INC.
THIS CERTIFIES that, for value received, ______________ (the "Investor"),
is entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after June 4, 2000 and on or prior to June 4, 2002 (the
"Termination Date") but not thereafter, to subscribe for and purchase from THE
ASHTON TECHNOLOGY GROUP, INC., a Delaware corporation (the "Company")
_____________ shares of Common Stock (the "Warrant Shares"). The purchase price
of one share of Common Stock (the "Exercise Price") under this Warrant shall be
equal to ten dollars ($10.00). The Exercise Price and the number of shares for
which the Warrant is exercisable shall be subject to adjustment as provided
herein. This Warrant is being issued in connection with that certain Stock
Purchase Agreement of even date herewith (The "Agreement") by and among the
Investor, TK Holdings, Inc., the Company and Universal Trading Technologies
Corporation, a subsidiary of the Company. In the event of any conflict between
the terms of this Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and subject to
----------------
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
-----------------------
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and
<PAGE>
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. Vesting of Shares Underlying Warrant. The right to purchase the
------------------------------------
Warrant Shares shall vest in quarterly installments of twenty-five thousand
(25,000) shares beginning on the first anniversary of the Closing Date (as
defined in the Agreement) and on the last business day of each complete calendar
quarter thereafter.
4. Exercise of Warrant. Exercise of the purchase rights represented
-------------------
by this Warrant may be made at any time or times, in whole, before the close of
business on the Termination Date, or such earlier date on which this Warrant may
terminate as provided in paragraph 13 below, by the surrender of this Warrant
and the Subscription Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of Common Stock so
purchased. Certificates for shares purchased hereunder shall be delivered to
the holder hereof within five business days after the date on which this Warrant
shall have been exercised as aforesaid. Payment of the Exercise Price of the
shares may be by certified check or cashier's check or by wire transfer to an
account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
5. Mandatory Exercise. At the written demand of the Company, at the
------------------
Company's sole discretion, the Investor shall exercise any remaining portion of
the Warrant on the first business day following the twentieth (20th) consecutive
business day on which the closing stock price of the Common Stock of the Company
on the Nasdaq Small Cap Market, or each other securities market on which such
shares are listed for trading, shall exceed $10 per share. Any unvested portion
of the Warrant shall vest immediately upon such written demand by the Company.
If the Investor shall fail to exercise this Warrant within thirty (30) days of
the demand made by the Company pursuant to this Section 5, this Warrant shall
terminate.
6. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant.
7. Charges, Taxes and Expenses. Issuance of certificates for shares
---------------------------
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
-------- -------
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
-------- -------
delivery of
<PAGE>
any certificates for shares of Common Stock, the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
8. Closing of Books. The Company will at no time close its
----------------
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
9. No Rights as Shareholder until Exercise. This Warrant does not
---------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
10. Assignment and Transfer of Warrant. This Warrant may be assigned
----------------------------------
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company); provided,
--------
however, that this Warrant may not be resold or otherwise transferred except (i)
- -------
in a transaction registered under the Securities Act of 1933, as amended, or
(ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to the Company is obtained by the holder of this Warrant
to the effect that the transaction is so exempt.
11. Loss, Theft, Destruction or Mutilation of Warrant. The Company
-------------------------------------------------
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day
----------------------------------
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
13. Effect of Certain Events.
------------------------
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant thirty (30)
days' notice of the
3
<PAGE>
proposed effective date of the transaction specifying that the Warrant shall
terminate if the Warrant has not been exercised by the effective date of the
transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
shareholders consists in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
(c) "Piggy-Back" Registration. The holder of this Warrant
-------------------------
shall have the right to include all of the shares of Common Stock underlying
this Warrant (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8)
and must be notified in writing of such filing. Holder shall have five (5)
business days to notify the Company in writing as to whether the Company is to
include holder or not include holder as part of the registration; provided,
--------
however, that if any registration pursuant to this Section shall be
- -------
underwritten, in whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant to this paragraph 13(c) be included
in the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. If in the good faith judgment of the
underwriter evidenced in writing of such offering only a limited number of
Registrable Securities should be included in such offering, or no such shares
should be included, the holder, and all other selling stockholders, shall be
limited to registering such proportion of their respective shares as shall equal
the proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. Those Registrable Securities which are excluded from an underwritten
offering pursuant to the foregoing provisions of this paragraph 13(c) (and all
other Registrable Securities held by the selling stockholders) shall be withheld
from the market by the holders thereof for a period, not to exceed one hundred
eighty (180) days, which the underwriter may reasonably determine is necessary
in order to effect such underwritten offering.
14. Adjustments of Exercise Price and Number of Warrant Shares. The
----------------------------------------------------------
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time in case the
Company shall (i) declare or pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of the
Common Stock, the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the holder of this
Warrant shall be entitled to receive the kind and number of
4
<PAGE>
Warrant Shares or other securities of the Company which such holder would have
owned or have been entitled to receive had such Warrant been exercised in
advance thereof. An adjustment made pursuant to this paragraph shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
15. Voluntary Adjustment by the Company. The Company may at its
-----------------------------------
option, at any time during the term of this Warrant, reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
16. Notice of Adjustment. Whenever the number of Warrant shares or
--------------------
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
17. Authorized Shares. The Company covenants that during the period
-----------------
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such shares of Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the NASDAQ Small Cap Stock Market or any domestic securities exchange upon which
the Common Stock may be listed for trading.
18. Miscellaneous.
-------------
(a) Issue Date; Jurisdiction. The provisions of this Warrant
------------------------
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws and jurisdictions of New York and for all
purposes shall be construed in accordance with and governed by the laws of said
state without regard to its conflict of law, principles or rules and be subject
to the arbitration provisions as set forth in the Agreement.
5
<PAGE>
(b) Restrictions. The holder hereof acknowledges that the Common
------------
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions
-----------------------
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
-------
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: June 4, 1999
THE ASHTON TECHNOLOGY GROUP, INC.
By: /s/ Arthur J. Bacci
--------------------------
Name: Arthur J. Bacci
Title: President
6
<PAGE>
NOTICE OF EXERCISE
------------------
To: THE ASHTON TECHNOLOGY GROUP, INC.
(1) The undersigned hereby elects to purchase ________ shares of Common Stock
of THE ASHTON TECHNOLOGY GROUP, INC. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________(Name)
_______________________________(Address)____________________
___________
Dated:
______________________________Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________,
Holder's Signature_____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: _______________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<PAGE>
EXHIBIT 10.31
SECOND ADDENDUM TO EMPLOYMENT AGREEMENT
OF FRED S. WEINGARD
This agreement ("Addendum #2") amends the Letter Employment Agreement (the
"Letter Agreement") dated June 21, 1996 as amended (by the Addendum executed 21
June 1996, "Addendum #1") between Universal Trading Technologies Corporation
(UTTC(TM)), Ashton Technology Group Inc. (Ashton), and Fred S. Weingard
(Employee). The parties agree as follows:
1. The term of employment shall be extended an additional three (3) years and
this new term of employment shall apply to all pertinent provisions (e.g.,
relating to term and termination) of the Letter Agreement, as amended by
Addendum #1. Hence, Section 4.0 shall read: "The term of your employment is
six (6) years beginning on July 8, 1996 and ending on July 7, 2002, unless
terminated earlier, as provided in paragraph 11.0 below (the "Term").
2. Section 6.3 (relating to bonuses) shall be deleted; however, a final semi-
annual minimum bonus of $40,000 is due and owing to Employee on July 5,
1999. Section 6.1 shall read: "Your base salary during the Term is
guaranteed to be no less than $265,000 per year effective 1 July 1999.
Payment of salary shall be twice per month."
3. Add as 9.3 the following: "Ashton shall make a good faith effort to file an
S-8 registration statement during August 1999 which will include shares of
common stock underlying 150,000 of the 538,750 option shares granted to
Fred Weingard on July 15, 1998. Ashton shall also seek means to permit
cashless exercise of the options by a qualified brokerage. You will also
receive, by 15 July 1999, a five year stock option (fully vested) for
100,000 shares of registered and unrestricted Ashton common stock priced at
the public price on the close of June 24, 1999. These actions are solely in
consideration for this contract extension (Addendum #2) and for superior
performance under your Letter Agreement, as amended by Addendum #1."
4. All provisions of the Letter Agreement, as amended by Addendum #1, which
are not expressly amended or modified by this Addendum or which are not
effected by Section 1.0 of this Addendum, shall remain unchanged.
Executed this 24th day of June, 1999.
By: /s/ Fred S. Weingard
------------------------------
Fred S. Weingard, Employee
Universal Trading Technologies Corporation
By: /s/ Fredric W. Rittereiser
-------------------------------
Fredric W. Rittereiser, CEO
Ashton Technology Group
By: /s/ Fredric W. Rittereiser
-------------------------------
Fredric W. Rittereiser, CEO
By: /s/ Arthur J. Bacci
------------------------------
Arthur J. Bacci, President
By: /s/ K. Ivan F. Gothner
--------------------------------------------
Ashton Compensation Committee Representative
<PAGE>
EXHIBIT 10.32
ASHTON TECHNOLOGY GROUP, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
ARTICLE I. PURPOSE......................................................................................... 1
ARTICLE II. DEFINITIONS..................................................................................... 2
2.1 "Active Participant............................................................................. 2
2.2 "Administrator"................................................................................. 2
2.3 "ATG"........................................................................................... 2
2.4 "Board"......................................................................................... 2
2.5 "Cause"......................................................................................... 2
2.6 "Code".......................................................................................... 3
2.7 "Change in Control"............................................................................. 3
2.8 "Employee"...................................................................................... 5
2.9 "Effective Date"................................................................................ 5
2.10 "ERISA"......................................................................................... 5
2.11 "Insurance Policy" or "Policy".................................................................. 5
2.12 "Insurer" or "Insurance Company"................................................................ 6
2.13 "Participant"................................................................................... 6
2.14 "Plan".......................................................................................... 6
2.15 "Plan Year"..................................................................................... 6
2.16 "Policy Commencement Date"...................................................................... 6
2.17 "Total and Permanent Disability"................................................................ 6
2.18 "Vesting Date".................................................................................. 7
ARTICLE III. PARTICIPATION................................................................................... 8
3.1 Designation of Participant...................................................................... 8
3.2 Cessation of Participation...................................................................... 8
ARTICLE IV. - INSURANCE POLICIES.............................................................................. 9
4.1 Purchase of Insurance Policies.................................................................. 9
4.2 Rights and Obligations of ATG Regarding Insurance Policies......................................10
4.3 Death Benefit...................................................................................11
ARTICLE V. - DISTRIBUTION....................................................................................12
5.1 Distribution....................................................................................12
5.2 Delayed Vesting Date............................................................................13
ARTICLE VI. - PROHIBITED ACTIVITIES...........................................................................14
6.1 Noncompetition and Nonsolicitation..............................................................14
6.2 Nondisclosure Covenant..........................................................................14
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VII. - ADMINISTRATION OF THE PLAN......................................................................15
7.1 Powers and Duties of the Administrator..........................................................15
7.2 Required Information............................................................................17
7.3 Nonuniform Determinations.......................................................................17
7.4 Claims Procedure and Review.....................................................................17
7.5 Litigation......................................................................................18
7.6 Adoption by Participating Companies.............................................................19
7.7 Withdrawal from Plan............................................................................20
ARTICLE VIII. - GENERAL PROVISIONS..............................................................................20
8.1 Funding.........................................................................................20
8.2 Nonalienation...................................................................................20
8.3 No Employment Contract..........................................................................21
8.4 Incompetent Recipient...........................................................................21
8.5 Effect on Other Benefits........................................................................21
8.6 Waiver of Liability.............................................................................21
8.7 Amendment and Termination.......................................................................22
8.8 Severability....................................................................................23
8.9 Governing Law...................................................................................23
8.10 Binding Effect..................................................................................23
8.11 Gender and Number...............................................................................23
8.12 Headings........................................................................................24
ARTICLE IX. - ADOPTION........................................................................................25
APPENDIX A Participants as of the effective Date.............................................................26
APPENDIX B Form of Split Dollar Insurance Agreement........................................................27
</TABLE>
<PAGE>
ASHTON TECHNOLOGY GROUP, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I. PURPOSE
- -------------------
The purpose of this Plan is to provide for the payment of deferred
compensation benefits, in the form of a paid-up life insurance policy or
policies, to certain designated executives of Ashton Technology Group, Inc.
("ATG") and its affiliates as part of an integrated executive compensation
program intended to assist in attracting, motivating and retaining executives of
superior ability, industry and loyalty.
With respect to each Participant in the Plan, ATG shall purchase one
or more policies of life insurance. In accordance with the terms of this Plan,
ATG shall be the owner of such insurance policy(ies) and shall pay the premiums
therefore, and shall transfer ownership of such insurance policy(ies) to the
Participant in accordance with the terms hereof following the Vesting Date, as
described herein, provided the Participant has not forfeited his right to such
transfer of ownership.
It is intended that this Plan will satisfy the requirements of an
unfunded "top hat" deferred compensation plan as described in sections 201(2),
301(a)(3) and 401(a)(1) of ERISA. Consequently, participation shall be limited
to individuals who, in the determination of the Board, are management employees
or who are highly compensated employees for purposes of the foregoing provisions
of ERISA.
<PAGE>
ARTICLE II. DEFINITIONS
- ------------------------
The following terms used in this Plan shall have the following
meanings unless a different meaning is clearly required by the context:
II.1 "Active Participant" means a Participant who is also an active
------------------
employee of ATG or an affiliate of ATG.
II.2 "Administrator" means ATG or any individual or individuals
-------------
appointed by ATG to be responsible for the administration and operation of the
Plan in accordance with Article VII hereof.
II.3 "ATG" means Ashton Technology Group, Inc. and any successor.
---
II.4 "Board" means the Board of Directors of ATG, as it shall be
-----
constituted from time to time.
II.5 "Cause" means:
-----
(1) the failure by the Participant to substantially perform his
duties with ATG or an affiliate (other than any such failure due to disability)
for a period of thirty (30) days after a written demand for substantial
performance is delivered to him by ATG, which demand specifically identifies the
manner in which the participant has not substantially performed his duties;
(2) a finding by ATG, after notice to the Participant and an
opportunity for him to be heard, that the Participant engaged in misconduct
materially injurious to the interests of ATG and/or its affiliated businesses
including, without limitation, fraud, wilful misconduct or gross negligence; or
2
<PAGE>
(3) the Participant's conviction of a felony, plea of guilty to
a felony, or a plea of nolo contendere to a felony.
II.6 "Code" means the Internal Revenue Code of 1986, as amended.
----
II.7 "Change in Control" means the occurrence of any of the following
-----------------
events on or following the Effective Date:
(1) any Person, together with its affiliates and associates,
becomes the beneficial owner, directly or indirectly, of 50% or more of the
then-outstanding shares of ATG common stock; or
(2) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who, on the
Effective Date, constituted the Board and any new director whose appointment or
election by the Board or nomination for election by ATG's shareholders was
approved by a vote of at least a majority of the directors then still in office
who either were directors on the Effective Date or whose appointment, election
or nomination for election was previously so approved; or
(3) ATG consolidates with, or merges with or into, any other
Person (other than a wholly owned subsidiary of ATG), or any other Person
consolidates with, or merges with or into, ATG, and, in connection therewith,
all or part of the outstanding shares of common stock shall be changed in any
way or converted into or exchanged for stock or other securities or cash or any
other property; or
(4) a transaction or series of transactions in which, directly
or indirectly, ATG shall sell or otherwise transfer (or one or more of its
subsidiaries shall sell or otherwise transfer) assets (i) aggregating more than
50% of the assets (measured by either book value or fair market
3
<PAGE>
value) or (ii) generating more than 50% of the operating income or cash flow of
ATG and its subsidiaries (taken as a whole) to any other Person and/or the
affiliates and associates of that Person.
Notwithstanding the foregoing, no "Change in Control" shall be deemed
to have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of ATG common stock
immediately prior to such transaction or series of transactions own a majority
of the outstanding voting shares and in substantially the same proportion in an
entity which owns all or substantially all of the assets of ATG immediately
following such transaction or series of transactions.
The term "Person" in the foregoing definition shall mean a natural
person, company, trust, government, or political subdivision, agency or
instrumentality of a government. When two or more persons act as a partnership,
limited partnership, syndicate, or group for the purposes of acquiring or
holding ATG common stock or the purchase or acquisition of the assets of ATG or
a subsidiary, such partnership, syndicate or group shall be deemed a "Person."
A "Person" shall not, however, include (i) ATG or any of its affiliates, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
ATG or any of its affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of ATG in substantially the
same proportions as their ownership of ATG stock.
An "affiliate" of a Person is a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified. "Control" for this purpose
(including the terms "controlling," "controlled by," and
4
<PAGE>
"under common control") means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
An "associate" of a Person is (1) any corporation or organization of
which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (2)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, or (3) any relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person.
II.8 "Employee" means an officer or senior management employee of ATG
--------
or an adopting company as contemplated by Section 7.7.
II.9 "Effective Date" means June 1, 1999.
--------------
II.10 "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended.
II.11 "Insurance Policy" or "Policy" means each Penn Mutual Variable
-----------------------------
Universal Life Insurance Policy (the "Penn Mutual Policy"), owned by ATG,
insuring the life of a Participant and naming ATG as the beneficiary, including
any rider thereto, or any similar policy which may be obtained hereafter either
as a substitute for, or as an addition to, a Penn Mutual Policy. The terms of
any such Insurance Policy shall not be inconsistent with the contemplated
transfer of ownership of such Policy to the Participant whose life is insured
thereby, as described in this Plan. The terms of any such Insurance Policy
shall conform to the requirements set forth in Article IV.
5
<PAGE>
II.12 "Insurer or "Insurance Company" means the life insurance
-------------------------------
company that has issued an Insurance Policy on the life of a Participant
pursuant to this Plan.
II.13 "Participant" means an Employee who has been selected for
-----------
participation in this Plan pursuant to Section 3.1, and whose his participation
has not been forfeited or ended in accordance with Section 3.2.
II.14 "Plan" means the Ashton Technologies Group, Inc. Executive
----
Deferred Compensation Plan, as set forth herein and as it may be amended from
time to time.
II.15 "Plan Year" means the period beginning on the Effective Date
---------
and ending on the following December 31, and each calendar year thereafter
during which this Plan remains in effect.
II.16 "Policy Commencement Date" means the date the Insurance Policy
------------------------
with respect to a Participant first becomes effective. Such date may be prior
to the Effective Date.
II.17 "Total and Permanent Disability" (including the term "Totally
------------------------------
and Permanently Disabled") means, with respect to any Participant, a disability
due to accident, injury, or disease that renders him unable to engage in any
work for remuneration or profit for the balance of his life, but excluding such
a disability that results from:
(1) service in the Armed Forces or Merchant Marine of the
United States or any other country;
(2) warfare;
(3) willful participation in any criminal act; or
(4) intentionally self-inflicted or self-incurred injury.
6
<PAGE>
Total and Permanent Disability shall be determined by the [Administrator] [the
Board] in its sole discretion, which may consult with a medical examiner who
shall have the right to make such physical examinations and other investigations
as may be reasonably required to determine Total and Permanent Disability. A
Participant's failure or refusal to cooperate with respect to the determination
of Total and Permanent Disability shall be grounds for determining that the
Participant is not Totally and Permanently Disabled.
II.18 "Vesting Date" means, with respect to a Participant's interest
------------
in an Insurance Policy on his life under this Plan, the first to occur of the
following dates, provided the Participant has not forfeited his interest
pursuant to Section 3.2(a):
(1) the first day of the month on or next following the fifth
anniversary of the Policy Commencement Date with respect to an Insurance Policy
on the life of a Participant (or subsequent Delayed Vesting Date pursuant to the
Participant's election under Section 5.2), provided the Participant remains an
Active Participant on such fifth anniversary date or, if applicable, Delayed
Vesting Date;
(2) the first day of the month on or next following the
Participant's retirement from employment with ATG and all affiliates on or after
age 65.
(3) the first day of the month on or next following the date the
[Board][Administrator] determines the Participant to be Totally and Permanently
Disabled;
(4) the date that ATG undergoes a Change in Control.
7
<PAGE>
ARTICLE III. PARTICIPATION
- --------------------------
III.1 Designation of Participant. An Employee shall become a
--------------------------
Participant in this Plan if designated for participation by the Board, in its
sole and absolute discretion. Each such designation shall identify (a) the name
of the Participant, (b) the Insurance Policy or Policies which has, have or will
be purchased by ATG on the life of the Participant and the death benefit thereof
and (c) the Policy Commencement Date, if known, with respect to the Participant.
If the Policy Commencement Date is not known on the date the Participant is
designated as such, the Policy Commencement Date shall be communicated to the
Participant as soon as practicable after the Insurer issues the Policy. The
initial Participants in the Plan are the individuals designated in Appendix A.
III.2 Cessation of Participation.
--------------------------
(1) A Participant shall cease to be a Participant and shall
forfeit the right to any benefit payable under this Plan if, prior to the
Vesting Date, he voluntarily or involuntarily terminates employment with ATG and
all affiliates, including by reason of death except as to his interest in the
Policy's death benefit as may have been provided by means of a Split Dollar
Agreement as contemplated by Section 4.3. Notwithstanding the foregoing, in the
event the Participant elects to defer his Vesting Date with respect to a Policy
beyond the fifth anniversary of the Policy Commencement Date in accordance with
an election made pursuant to Section 5.2, he shall forfeit the right to any
benefit payable under this Plan, on and after the fifth anniversary of the
Policy Commencement Date and prior to the Delayed Vesting Date with respect to
the Policy, only in the event of:
8
<PAGE>
(1) his voluntary termination of employment with ATG and all
affiliates;
(2) his involuntary termination of employment with ATG and all
affiliates for Cause; or
(3) his death, except as to his interest in the Policy's death
benefit as may have been provided by means of a Split Dollar Agreement as
contemplated by Section 4.3.
(2) A Participant shall cease to be a Participant if the
Administrator determines that an Insurance Policy cannot be obtained for him as
contemplated by the last sentence of Section 4.1.
(3) A Participant's participation shall cease, and all obligations of
ATG with respect to such Participant under this Plan shall be discharged,
following the transfer of ownership of all Insurance Policies on the life of
such Participant as contemplated by Article V.
ARTICLE IV.- INSURANCE POLICIES
- -------------------------------
IV.1 Purchase of Insurance Policies. The benefits to be provided
------------------------------
under this Plan shall be provided by means of an Insurance Policy or Policies on
each Participant's life. These Insurance Policies will be owned by ATG. It is
anticipated that the Insurance Policy or Policies will be purchased by ATG on or
prior to the Board's designation of the Employee as a Participant hereunder, or
as soon as practicable thereafter. Each Participant shall provide the
Administrator with such information as it may require in order to enable ATG to
apply for such insurance and to cooperate fully with the Administrator in regard
of such application, including, without limitation, the taking of a physical
examination, if requested to do so. Notwithstanding the foregoing, in the event
the Insurer to which an application for insurance coverage is made
9
<PAGE>
declines to issue an Insurance Policy at standard premium rates, the
Administrator can determine not to purchase a Policy on such terms and may, in
its sole discretion, determine to make other arrangements to provide deferred
compensation benefits to the Employee or to terminate the Employee's status as a
Participant so that no deferred compensation benefits under this Plan will be
payable.
IV.2 Rights and Obligations of ATG Regarding Insurance Policies.
----------------------------------------------------------
(1) ATG, as owner under each Insurance Policy, shall pay the
premium thereon. The terms of each Insurance Policy shall permit the payment of
the full premium (so that the Insurance Policy is fully paid up) by the end of
the end of the five-year period beginning on the Policy Commencement Date. ATG
shall pay the premium in accordance with the terms of the Insurance Policy,
including any minimum payment provision. However, ATG shall in all events pay
the entire premium due for the Insurance Policy by the Participant's Vesting
Date (or as soon as practicable following the Participant's Vesting Date), so
that a fully paid-up Policy may be transferred to the Participant.
(2) ATG shall not sell, surrender, or transfer ownership of the
Policy with respect to an Active Participant prior to the first to occur of the
date the Participant's participation ceases pursuant to Section 3.2(a) or the
date ownership of the Policy is transferred to the Participant following his
Vesting Date as contemplated by Article V, without first giving the Participant
the option to purchase the Policy during a period of sixty (60) days from notice
to Participant of such intention. The purchase price of the Policy shall be the
cash value of the Policy as of the date of transfer to the Participant, less any
policy and premium loans and any
10
<PAGE>
other indebtedness secured by the Policy. This restriction shall not impair the
right of ATG to amend or terminate this Plan pursuant to the terms hereof.
(3) Except as otherwise provided herein, ATG, as owner of the
Insurance Policy, may exercise all rights of ownership with regard to the
Policy, including by not limited to the right to direct the application of all
policy dividends, to designate a death beneficiary with respect to the Policy
subject to the Participant's right to do so under Section 4.3, and to borrow
with respect to the cash value of the Policy, provided that all such Policy
loans be repaid in full prior to the date ownership of the Policy is, following
the Vesting Date, transferred to the Participant.
IV.3 Death Benefit.
-------------
(1) ATG shall, prior to the transfer of ownership contemplated in
Article V, be the sole owner of each Insurance Policy and shall be the direct
beneficiary of an amount of the death proceeds equal to ATG's cumulative
premiums paid to the Insurer. Any indebtedness on the Policy will first be
deducted from the proceeds payable to ATG.
(2) The Participant shall have the right, prior to the Vesting Date
and provided he has not ceased to be a Participant pursuant to Section 3.2, to
designate and change the direct and contingent beneficiaries of any remaining
death proceeds and to elect and change a payment option for such beneficiary.
The Participant's right to designate a beneficiary with respect to the above-
described portion of the death proceeds shall be evidenced by means of a Split
Dollar Agreement between ATG and the Participant, which shall be filed with the
Insurance Company. ATG shall execute such other documentation, such as an
endorsement to the Policy, as may be required by the Insurance Company to
effectuate the assignment of a portion of the death
11
<PAGE>
proceeds as contemplated by the Split Dollar Agreement. In the event the
Participant shall cease to be a Participant pursuant to Section 3.2(a), ATG
shall have all rights of ownership with respect to the Policy, including without
limitation to sell, transfer or surrender the policy, and/or designate a
beneficiary or beneficiaries (including ATG) with respect to the death proceeds
payable under the Policy.
(3) The economic benefit of the death benefit protection for the
Participant, as described above, for which AGT pays the premium shall be taxable
income to the Participant. Such economic benefit shall be determined consistent
with Section 79 of the Code based on (1) the annual cost of current life
insurance protection under the Policy on the life of the Participant, measured
using the lower of (i) the "Table 1" rates, as specified in Treas. Reg.
(S) 1.79-3 (or the corresponding applicable provisions of any future law,
regulation or Revenue Ruling) or (ii) the current published premium rates of the
Insurer for annual renewable term insurance, for standard risks, plus (2) the
annual cost of any additional insurance protection as measured under
subparagraph (1) provided through the use of Policy dividends. ATG shall be
responsible for determining and reporting the taxable income generated by its
payment of the Policy premiums with respect to such current death benefit
protection.
ARTICLE V. - DISTRIBUTION
- -------------------------
5.1 Distribution
------------
(1) Within 90 days following a Participant's Vesting Date (or
following the Participant's involuntary termination of employment, other than
for Cause, on or after the fifth anniversary of his Policy Commencement Date, if
the Participant has made the election
12
<PAGE>
contemplated by Section 5.2 to delay his Vesting Date), ATG shall pay any
remaining premium with respect to the Insurance Policy (and repay any
outstanding Policy loans) and shall transfer ownership of the Insurance Policy
on a fully paid-up basis to the Participant or to the trustee of an estate
planning trust as may be identified by the Participant to ATG.
(2) In the event the Participant should die on or after his Vesting
Date but before the actual transfer of ownership of the Insurance Policy, ATG
shall distribute the death benefit under the Policy to the executer or
administrator of the Participant's estate.
(3) In the event the Participant should die prior to his Vesting Date,
or forfeit his participation in the Plan prior to the Vesting Date as provided
in Section 3.2, ATG shall have no obligation to transfer ownership of the
Policy, or to distribute any portion of the death benefit to the Participant's
estate or beneficiary, except as may be provided pursuant an endorsement to the
Policy as contemplated in Section 4.3.
5.2 Delayed Vesting Date. An Active Participant in this Plan may, at
--------------------
any time at least 365 days prior to the fifth anniversary of his Policy
Commencement Date, elect to postpone his Vesting Date with respect to the Policy
by substituting for the date set forth in Section 2.18(a) the first day of the
month on or next following the sixth or later integral anniversary of the Policy
Commencement (or such other later date as may be approved by the Administrator)
(his "Delayed Effective Date"). Any election to delay the Participant's Vesting
Date must be made in writing on a form approved by the Administrator for this
purpose, and the Participant's Delayed Effective Date must be consented to by
the Administrator.
13
<PAGE>
ARTICLE VI. - PROHIBITED ACTIVITIES
- -----------------------------------
VI.1 Noncompetition and Nonsolicitation. As a condition to the right to
----------------------------------
receive benefits hereunder, each Participant shall, during his employment and
during the period ending with the first anniversary of the date ownership of the
Insurance Policy(ies) are transferred to him pursuant to Article V hereof,
refrain from engaging in all of the following activities:
(1) Entering into or engaging, directly or indirectly, in any business
(either financially or as a shareholder, employee, officer, partner, independent
contractor, or owner) which is competitive with the businesses of ATG or its
affiliates, provided that nothing herein shall prevent a Participant from
investing in the securities of any company which are publicly traded so long as
his investment does not give him any voice in the management or conduct of the
affairs of such company;
(2) Soliciting business, accepting any business from or otherwise
doing, or contracting to do, business with any person or entity who at any time
during the Participant's period of employment with ATG was an active customer or
was actively solicited by ATG according to ATG's books and records; or
(3) Soliciting, enticing, persuading, inducing, requesting or
otherwise causing any employee, officer or agent of ATG to refrain from
rendering services to ATG or to terminate his relationship, contractual or
otherwise, with ATG.
VI.2 Nondisclosure Covenant. Each Participant covenants and agrees that as
----------------------
a result of his right to receive benefits hereunder, he will not, except in the
performance of his duties on behalf of ATG, communicate or disclose to any
person (other than ATG and its employees), or
14
<PAGE>
use for his own account, without the prior written consent of an authorized
representative of ATG, any Confidential Information (as hereinafter defined)
which was obtained or acquired by the Participant during his employment with
ATG. The Participant (i) shall retain such Confidential Information in trust for
the sole benefit of ATG and its successors and assigns, and (ii) shall promptly
deliver to ATG all tangible evidence of such Confidential Information prior to,
or at the termination of, his employment with ATG. For purposes of this
Agreement, "Confidential Information" shall mean any and all knowledge and
information relating to the business affairs of ATG and its affiliates, their
products, processes and/or services and their customers, creditors,
shareholders, suppliers, contractors, agents, consultants and employees,
including (but not limited to) the provisions of this Plan, provided, however,
that Confidential Information shall not include any information which may be in
the public domain or have come into the public domain not as a result of a
breach by the Participant of his covenant hereunder.
VI.3 Enforcement. In the event the Participant engages in one of the
-----------
foregoing prohibited activities following the date ownership of the Insurance
Policy is transferred to him, ATG shall have the right to demand the return of
the Policy or to otherwise take legal action to recover the value of the Policy
transferred to the Participant, together with its reasonable costs of enforcing
this Article VI, including attorneys' fees.
ARTICLE VII. - ADMINISTRATION OF THE PLAN
- -----------------------------------------
VII.1 Powers and Duties of the Administrator. The Administrator shall be
--------------------------------------
responsible for the operation and administration of the Plan, and shall have
such powers as may be necessary
15
<PAGE>
or appropriate to carry out the provisions of the Plan and to perform its duties
hereunder, including the power:
(1) To engage such persons as it deems necessary or advisable to
assist in the administration of the Plan or to render advice with respect to the
responsibilities of the Administrator under the Plan, including accountants,
actuaries, insurance brokers and attorneys.
(2) To make use of the services of employees of ATG in administrative
matters.
(3) To obtain and act on the basis of all tables, valuations,
certificates, opinions, and reports furnished by the persons described in
Subsections (a) or (b) hereof.
(4) To determine all benefits and resolve all questions pertaining to
the administration and interpretation of the Plan, either by rules of general
applicability or by particular decisions. To the maximum extent permitted by
law, all interpretations of the Plan and other decisions of the Administrator
shall be conclusive and binding on all parties.
(5) To adopt such forms, rules and regulations as it shall deem
necessary or appropriate for the administration of the Plan and the conduct of
its affairs, provided that any such forms, rules and regulations shall not be
inconsistent with the provisions of the Plan.
(6) To remedy any inequity from any incorrect information received by,
or communicated to, the Administrator or from administrative error.
(7) To commence or defend in any legal or administrative proceeding
any litigation arising from the operation of the Plan, or to enforce its or
ATG's rights under the Plan.
16
<PAGE>
(8) To make all elections required by the Insurance Policies,
including, to take whatever actions the Administrator deems necessary or
appropriate in order to avoid having an Insurance Policy become a "modified
endowment contract," as defined in Code section 7702A.
VII.2 Required Information. A Participant and any beneficiary eligible to
--------------------
receive benefits under the Plan shall furnish to the Administrator any
information or proof requested by the Administrator and reasonably required for
the proper administration of the Plan, including, but not limited to, the
information required to obtain an Insurance Policy, as provided for in Section
4.1 hereof. Failure on the part of a Participant or beneficiary to comply with
any such request within a reasonable period of time shall be sufficient grounds
for delay in the payment of benefits under the Plan until such information or
proof is received by the Administrator.
VII.3 Nonuniform Determinations. Neither the Administrator's nor ATG's
-------------------------
determinations or interpretations under the Plan need be uniform and may be made
by the Administrator or ATG selectively among Participants (whether or not such
Participants are similarly situated). Without limiting the generality of the
foregoing, the Administrator shall be entitled, among other things, (a) to make
nonuniform and selective determinations with respect to the acceleration of
vesting, (b) the commencement of benefit payments, and (c) any other matters
regarding the administration or operation of the Plan. Moreover, either the
Administrator or ATG may elect, in its sole discretion, to waive any requirement
or restriction set forth in the Plan without being required to implement the
same or a similar waiver for the same Participant at a future time or for other
similarly situated Participants.
VII.4 Claims Procedure and Review.
---------------------------
(1) Claims for benefits under the Plan shall be filed in writing by a
claimant
17
<PAGE>
with the Administrator. Within 60 days after receipt of such claim, the
Administrator shall act on the claim and shall notify the claimant in writing as
to whether the claim has been granted in whole or in part; provided, however, if
the claimant has not received written notice of such decision within such 60-day
period, the claimant shall, for the purpose of Subsection (c) hereof, regard his
claim as having been denied.
(2) Any notice of denial of a claim, in whole or in part, shall set
forth (i) the specific reason or reasons for the denial, (ii) reference to the
Plan provisions on which the denial is based, and (iii) a copy of the Plan's
claims and review provisions.
(3) Any claimant who has had a claim denied, in whole or in part,
under the Plan shall be entitled, upon the filing of a written request for
review with the Administrator within 60 days after receipt by the claimant of
written notice of such denial (or, if the claimant had not received written
notice of the decision within the 60-day period described in Subsection (a)
hereof, within 120 days of receipt of the claim form by the Administrator), to
appeal the denial of his claim to the Administrator.
(4) The claimant shall be entitled in connection with such appeal to
examine pertinent documents and submit issues and comments in writing to the
Administrator. Any decision on review by the Administrator shall be in writing,
and shall include specific reasons for the decision (including reference to the
Plan provisions on which the decision is based). Such decision shall be made by
the Administrator not later than 60 days after receipt by it of the claimant's
request for review.
VII.5 Litigation. In any action or judicial proceeding affecting the Plan
----------
[and the Rabbi Trust], it shall be necessary to join as a party only ATG.
Except as may be otherwise required by
18
<PAGE>
law, no Participant or beneficiary shall be entitled to any notice or service of
process, and any final judgment entered in such action shall be binding on all
persons interested in, or claiming under, the Plan.
VII.6 Adoption by Participating Companies.
-----------------------------------
(1) This Plan may be adopted by any parent, subsidiary, related or
affiliated company which the Board shall designate and declare as eligible to
adopt and participate in the Plan (an "adopting company"), subject to the
following conditions:
(1) Each employer who becomes an adopting company after the
Effective Date shall execute and deliver such instruments as the Board shall
deem necessary or desirable, including an instrument evidencing the joinder of
the adopting company in the Plan [and Trust Agreement]; and
(2) Each adopting company shall designate ATG as its agent to
act for it in all transactions regarding the Plan, including, without
limitation, its amendment and termination, as provided by Article VIII hereof,
as well as its administration, as provided by this Article VII.
(2) In the event of such adoption, the Administrator designated by
the Board shall thereafter also act as the Administrator for the adopting
company.
(3) The Plan shall be effective with respect to each adopting
company and its employees on such date as shall be specified in the resolutions
of such company's board of directors, authorizing the adoption of the Plan.
(4) The adopting companies on the Effective Date shall be deemed to
have satisfied the conditions set forth in this Section 7.6 by virtue of their
participation in the Plan.
19
<PAGE>
VII.7 Withdrawal from Plan. Any adopting company may withdraw from this
--------------------
Plan at any time by giving ninety (90) days prior written notice to the
Administrator. Such withdrawal shall be treated as a partial termination with
respect to the Participants to whom such withdrawal applies. The withdrawing
company shall thereafter cease to participate in this Plan and its employees
shall cease to be eligible to participate in the Plan.
ARTICLE VIII. - GENERAL PROVISIONS
- ----------------------------------
VIII.1 Funding. This Plan shall be unfunded and neither any Participant
-------
nor any beneficiary shall have any rights, title or interest in the Insurance
Policies except as provided in this Plan. Benefits shall only be provided at
such times and in the manner expressly provided in the Plan, and ATG shall only
have a contractual obligation to provide such benefits when due. No notes or
security for the payment of any Participant's benefit shall be issued or
provided by ATG. The Insurance Policies obtained with respect to this Plan
shall, prior to distribution as contemplated in Article V, be owned by ATG and
shall be subject to the claims of its general creditors.
VIII.2 Nonalienation. Except as provided in the following sentence, no
-------------
Participant or beneficiary shall pledge, hypothecate, anticipate, assign or in
any way create a lien upon any amounts provided under this Plan, and no
Insurance Policy or other benefit payable hereunder shall be assignable in
anticipation of payment or transfer either by voluntary or involuntary acts, or
by operation of law. Notwithstanding the foregoing, the Participant may direct
the Administration to transfer ownership of an Insurance Policy, as provided
under Article V, to the trustee of a trust established by the Participant for
estate planning purposes. In the event that any
20
<PAGE>
Participant's or beneficiary's benefits or interest hereunder are garnished or
attached by order of any court, the Administrator may bring an action for a
declaratory judgment in a court of competent jurisdiction to determine the
proper recipient of the benefits to be paid under the Plan. During the pendency
of such action, any benefits or interests that become payable or distributable
shall be held by or at the direction of the Administrator or, if the
Administrator prefers, paid into the court as they become payable, to be
distributed by the court to the recipient as it deems proper at the close of
such judicial preceding.
VIII.3 No Employment Contract. The establishment of this Plan shall not
----------------------
be construed to confer upon any Employee the legal right to be retained in the
employ of ATG or any affiliate, or give an Employee or any beneficiary, any
right to any payment whatsoever, except to the extent of the benefits provided
for hereunder.
VIII.4 Incompetent Recipient. If the Administrator determines that any
---------------------
person to whom a benefit is payable under the Plan is incompetent by reason of
age or physical or mental disability, the Administrator shall have the power to
cause the payments becoming due to such person to be made to another for his
benefit without any responsibility to see to the application of such payments.
Any payment made pursuant to such power shall, as to the amount of such payment,
operate as a complete discharge of ATG.
VIII.5 Effect on Other Benefits. The benefits of each Participant shall
------------------------
be in addition to any benefits paid or payable to or on account of the
Participant under any other pension, disability, equity, annuity or retirement
plan or policy.
VIII.6 Waiver of Liability. No liability shall attach to or be incurred
-------------------
by any officer or director of ATG under or by reason of the terms, conditions
and provisions contained in this
21
<PAGE>
Plan, or for the acts or decisions taken or made thereunder or in connection
therewith; and as a condition precedent to the establishment of the Plan or the
receipt of benefits hereunder, or both, such liability, if any, is expressly
waived and released by each Participant and by any and all persons claiming
under or through such Participant. Such waiver and release shall be conclusively
evidenced by any act of participation in, or the acceptance of benefits under,
the Plan.
VIII.7 Amendment and Termination. The Board shall have the sole authority
-------------------------
to modify, amend or terminate the Plan, provided that no amendment or
termination shall have an adverse effect upon rights which have vested or upon
amounts which are being paid as of the date of such amendment or termination.
Should this Plan be terminated, each Participant shall receive written notice of
when such termination shall be effective.
(1) Notwithstanding the provisions of this Section 8.7, the Plan
may be amended at any time, retroactively if deemed necessary in the opinion of
the Administrator, in order to ensure that the Plan is characterized as a non-
qualified plan of deferred compensation maintained for a select group of
management or highly compensated employees, as described under Code section 451
and under sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and to conform the
Plan to the provisions and requirements of any applicable law (including ERISA
and the Code). No such required amendment shall be considered prejudicial to any
interest of a Participant or beneficiary hereunder.
(2) This Subsection (b) shall become operative on a complete
termination of the Plan. The provisions of this Subsection (b) shall also become
operative on a partial termination of the Plan, as determined by the Board, but
only with respect to that portion of the
22
<PAGE>
Plan attributable to the Participants to whom the partial termination is
applicable. Upon the effective date of any such event, notwithstanding any other
provisions of the Plan, no persons who were not theretofore Participants shall
be eligible to become Participants, and all nonvested interests of Participants
not yet fully vested shall be forfeited unless the Board otherwise provides for
full vesting. As soon as practicable following after such termination, there
shall be transferred to each vested Participant the Insurance Policy or Policies
on his life.
VIII.8 Severability. Should any provision of the Plan or any regulation
------------
adopted thereunder be deemed, or be held, to be unlawful or invalid for any
reason, such fact shall not adversely affect the other Plan provisions or
regulations, unless such invalidity shall render impossible or impractical the
functioning of the Plan, and, in such case, the Board shall immediately adopt a
new provision or regulation to take the place of the one held illegal or
invalid.
VIII.9 Governing Law. The Plan shall be governed by the internal laws of
-------------
the Commonwealth of Pennsylvania, without regard to conflict of law principles.
VIII.10 Binding Effect. This Plan shall be binding upon each Employee and
--------------
Participant his personal or legal representatives, executors, administrators,
heirs, successors and assigns. In the event of a merger, consolidation, or
reorganization involving the ADP, this Plan shall continue in force and become
an obligation of ADP's successor or successors.
VIII.11 Gender and Number. Whenever used in the Plan, the masculine shall
-----------------
include the feminine and the singular shall include the plural.
23
<PAGE>
VIII.12 Headings. The article and section headings contained herein are
--------
for convenience of reference only and are not to be considered in the
interpretation of the terms and conditions of the Plan.
24
<PAGE>
ARTICLE IX. - ADOPTION
- ----------------------
To record the adoption of this Plan, Ashton Technology Group, Inc., has
caused its duly authorized officers to execute this instrument as of the 1st day
of July, 1999.
Attest: ASHTON TECHNOLOGY GROUP, INC.
/S/ Arthur J. Bacci By: Fredric W. Rittereiser
- --------------------------------- ---------------------------
Secretary Title:
25
<PAGE>
ASHTON TECHNOLOGY GROUP, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Appendix A - Participants as of the Effective Date
- --------------------------------------------------
<TABLE>
<CAPTION>
Policy Commencement
Insured Executive Policy Death Benefit Date
- ---------------------- ---------------- ------------- -------------------
<S> <C> <C> <C>
Frederic Rittereiser Penn Mutual 5 yr $ 1,000,000
VUL no. 8521382
Frederic Rittereiser Penn Mutual 5 yr $ 1,000,000
VUL no. 8523412
Fred Weingard Penn Mutual 5 yr $ 900,000
VUL no. 8526603
William Uchimoto Penn Mutual 5 yr
VUL no. 8527289 $ 900,000
John Blohm Penn Mutual 5 yr $ 900,000
VUL no. 8526602
Arthur Bacci Penn Mutual 5 yr $ 900,000
VUL no. 8532952
</TABLE>
26
<PAGE>
ASHTON TECHNOLOGY GROUP, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
APPENDIX B - SPLIT-DOLLAR INSURANCE AGREEMENT
---------------------------------------------
THIS AGREEMENT is entered into this _______ day of __________, 1999,
by and between Ashton Technology Group, Inc. of Philadelphia, Pennsylvania,
hereinafter called "ATG" and ____________, hereinafter called "Employee".
WHEREAS, Employee is a valued employee of ATG or an affiliate and ATG
wishes to retain him/her in such employ, and
WHEREAS, Employee has been selected for participation in the Ashton
Technology Group, Inc. Executive Deferred Compensation Plan (the "Plan") and,
pursuant to which, ATG has purchased an Insurance Policy on the life of the
Employee.
WHEREAS, pursuant to the Plan, ownership of the Insurance Policy will
be transferred to the Employee following his attainment of his Vesting Date
under the terms of the Plan provided the Employee does not forfeit his right to
such transfer of the ownership of the Insurance Policy prior to the Vesting
Date, as set forth in Section 3.2 of the Plan; and
WHEREAS, in the event of Employee's death while employed by ATG prior
to the Vesting Date, the Employee and ATG desire that Employer be permitted to
designate a beneficiary or beneficiaries to receive a portion of the death
benefit under the Insurance Policy.
NOW, THEREFORE, each of ATG and the Employee agrees as follows:
1. The life insurance policy with which this Agreement deals is
Policy Number _____________ (hereinafter called "Insurance Policy" or "Policy")
issued by Penn Mutual Life Insurance Company (the "Insurance Company") on the
life of the Employee. ATG shall be the sole owner of the Policy, except that
while in the employ of ATG or an affiliate and prior to the transfer of
ownership of the Policy to Employee following the Vesting Date under the Plan,
the Employee shall have the right to designate a beneficiary for the Designated
Amount of life insurance proceeds and the right to elect a policy settlement
option with respect to such proceeds. ATG will be the direct beneficiary of the
balance of the proceeds of the Policy as of the date of death of the Employee,
less any policy indebtedness to the Insurance Company.
2. The Designated Amount of life insurance proceeds shall be equal
to the difference between (1) the total death proceeds payable under the
Insurance Policy as of the date of death of the Employee and (2) that portion of
the death proceeds payable to ATG, equal to the cumulative insurance premiums
paid by ATG as of the Employee's date of death to the Insurance Company. In the
event there is any indebtedness on the Policy as of the date of death, such
indebtedness shall be deducted, to the extent possible, from the proceeds
payable to ATG.
27
<PAGE>
3. Each premium on the policy shall be paid by ATG as it becomes
due. Employee understands and agrees that ATG's payment of the premium will
cause taxable income to the Employee in an amount equal to the value of the
economic benefit (as computed for Federal income tax purposes) attributable to
the life insurance protection provided to Employee under the Plan and this Split
Dollar Agreement as determined under applicable tax laws, regulations, and
rulings.
4. This Agreement shall terminate upon the termination of Employee's
employment with ATG or an ATG affiliate under the circumstances set forth in
Section 3.2(a) of the Plan, except in the event of the Employee's death while
still employed or otherwise eligible for participation in the Plan pursuant to
Section 3.2 of the Plan. Upon such termination as aforesaid, ATG shall have the
right as owner of the Policy, without limitation, to change any endorsements on
the Policy, to terminate Employee's right to designate a beneficiary and to
designate a beneficiary of ATG's own choosing, without prior notice to Employee.
This Agreement shall also terminate upon Employee's attainment of his Vesting
Date, as set forth in the Plan, and the transfer of ownership of the Policy to
the Employee. All the applicable terms of the Plan are incorporated herein by
reference and made a part hereof.
5. The Insurance Company is hereby authorized to recognize, without
any liability on its part, the claims of the Employee or his designated
beneficiaries with respect to the Designated Amount of the death proceeds in
accordance with this Agreement, unless and until such time as ATG advises the
Insurance Company in writing that this Agreement is no longer in force. Until
such notification is provided, the Insurance Company may assume that the
Agreement remains effective.
6. Except as specifically provided herein and under the Plan, ATG
shall retain and possess all other incidents of ownership in the Policy.
7. The Agreement shall bind ATG and its successors and assigns,
Employee and his/her heirs, executors, administrators and assigns, and any
Policy beneficiary.
8. This Split Dollar Agreement shall be signed in duplicate, each
copy of which shall serve as an original for all purposes, but both copies shall
be considered to be one and the same Split Dollar Agreement. One signed
duplicate shall be filed with the Insurance Company, and ATG agrees to execute
such endorsements to the Insurance Policy or other documentation as may be
required by the Insurance Company to effectuate the assignment of death proceeds
represented by this Split Dollar Agreement. This Split Dollar Agreement may be
signed in counterpart.
28
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement.
_______________________ __________________________________
Date Employee
ASHTON TECHNOLOGIES GROUP, INC.
_______________________ By:_______________________________
Date
Duplicate received and filed at the home office of the Insurance Company in
_____________, this ______ day of ________________, 1999.
PENN MUTUAL INSURANCE COMPANY
By:______________________________________
Authorized Officer
29
<PAGE>
EXHIBIT 10.33
AGREEMENT
AGREEMENT (the "Agreement") dated as of June 29, 1999, between The Ashton
Technology Group, Inc., ("Ashton"), Universal Trading Technologies, Inc.
("UTTC"), and their subsidiaries and affiliates, (collectively, the "Company"),
on one hand, and Robert Eprile (the "Executive").
WHEREAS, the Executive has been employed as an officer and has served as a
director of the Company.
WHEREAS, the Company and the Executive mutually desire to have the
employment and service as a director of the Executive by the Company terminate;
and
WHEREAS, the parties wish to settle their mutual rights and obligations
arising from, or related to, the termination of the Executive's employment and
service as a director with the Company.
NOW THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
agree as follows:
Section 1. Termination and Resignation from Offices. The Executive and
----------------------------------------
the Company hereby confirm that Executive's employment with the Company
terminated effective March 24, 1999 and that effective the date hereof he shall
be deemed to have resigned from all positions with the Company.
Section 2. Other Benefits.
--------------
Health Insurance. The Company will pay for the cost to
----------------
continue health insurance for the Executive and his family until June 30, 1999.
Section 3. UTTC Stock. On the date hereof, UTTC will deliver to the
----------
Executive a certificate representing 416,632 shares of common stock of UTTC.
Such shares shall be subject to the rights and obligations contained in Sections
2.3, 3.1, 3.2, 3.3, 3.4, 3.5, and 3.6 (with the exception that the reference to
Rosensaft shall be construed as a reference to the Executive) of the agreement
between the Company and David Rosensaft dated March 19, 1999, a copy of which is
attached hereto as Exhibit A.
Section 4. (a) Ashton Options. On the date hereof, Ashton and Executive
--------------
agree to amend the stock option agreement entered into on July 15, 1998, a copy
of which is attached hereto as Exhibit B (the "Stock Option Agreement"), to
provide that the grant to Executive shall be for 500,000 shares of Ashton's
common stock which option shall fully vest on the date this Agreement is
executed, shall be exercisable until July 15, 2003 and is otherwise subject to
the terms and subject to the conditions contained in such stock option
<PAGE>
other than Sections 3.2(a) and (c) of the Stock Option Agreement.
Notwithstanding the preceding sentence, in the event of an exercise by Executive
of some or all of his options, the portion of the options exercised shall be
deemed exercised upon full payment for such shares, and the shares shall be
issued by Ashton as of such date of such full payment. Notwithstanding anything
to the contrary herein or in the Stock Option Agreement, the authority conferred
upon the Compensation Committee of the Board of Directors of Ashton in Section
5.1 of the Stock Option Agreement to interpret such agreement shall not be
construed to permit the Compensation Committee to reduce the number of options
granted to Executive, or otherwise take any action which would disadvantage
Executive as compared to the other holders of Option Shares with respect to the
stock option or the Option Shares, except as may be provided in Sections 2.4 and
2.5 of the Stock Option Agreement, the Certificate of Incorporation or Bylaws of
Ashton or applicable law.
(b) Registration of Shares Underlying Options.
-----------------------------------------
(i) In the event that Ashton registers some or all of the
shares of common stock underlying options granted to other executives
of the Company pursuant to stock option grants made on July 15, 1998
("Option Shares"), Ashton shall include on such registration statement
or registration statements, as the case may be, the amount of Options
Shares owned by Executive which is equal to the product of 500,000 and
a fraction, the numerator of which is the number of shares common
stock underlying options being registered by holders of Option Shares
other than Executive and the denominator of which is 4,460,000. If the
holders of a majority of the Option Shares being registered agree to
sell or to refrain from selling their shares in a particular manner,
then Executive shall agree to the same manner of sale of the Option
Shares owned by him. If such registration statement provides for an
underwritten offering, the Option Shares owned by Executive shall be
subject to any cutbacks or hold backs and indemnification and
contribution provisions and such other matters as requested by the
managing underwriter or underwriters. Neither of the foregoing
provisions contained in the immediately preceding two sentences are
intended to disadvantage Executive as compared to the other holders of
Option Shares with respect to the stock option or the Option Shares.
(ii) If the Option Shares owned by Executive are not
eligible for registration on the registration form on which such
Option Shares are registered, Ashton shall prepare and file with the
Securities and Exchange Commission (the "SEC") a registration
statement on a form which allows for the registration of Executive's
Option Shares. In such event, Executive shall pay all reasonable
costs, in an amount not to exceed $10,000, in connection with the
registration of such Option Shares, including, but not limited to,
filing fees, legal and accounting fees and expenses, expenses of the
transfer agent and the like.
<PAGE>
Section 5. Ashton Stock. Following the nineteenth day of the date hereof,
------------
and upon receipt by Ashton of confirmation by Executive that he has owned
(assuming full payment of purchase price) the shares of Ashton stock referred to
below for in excess of one year, Ashton shall instruct its transfer agent to
remove the restrictive legend contained on the certificate or certificates
representing an aggregate of 750,000 shares of common stock and 5,062.5 shares
of Series A Convertible PIK Preferred Stock of Ashton (or, in the event such
shares of Series A Convertible PIK Preferred Stock have been converted, up to
50,000 shares of common stock underlying such Series A Convertible PIK Preferred
Stock), less any shares which may have been sold subsequent to March 24, 1999.
Section 6. No further Obligations of the Parties. Except as provided
-------------------------------------
herein, neither party shall have any further obligations to the other.
Section 7. Conditions of Benefits. The Company shall provide to the
----------------------
Executive the rights, payments and benefits set forth herein as consideration
for (i) the Executive's execution, non-revocation and honoring of a release of
claims and covenant not to sue in favor of the Company in the form attached
hereto as Exhibit C and (ii) the Executive's continued compliance with the
provisions of Sections 8, 9 and 10 hereof.
Section 8. Non-Disclosure; Noncompetition; Nonsolicitation. (a) The
-----------------------------------------------
Executive agrees that for a period of one year from the date hereof, the
Executive will not (i) directly or indirectly, own, manage, operate, control or
participate in the ownership, management or control of, or be connected as an
officer, employee, partner, director, or otherwise with, or have any financial
interest in, or aid or assist anyone else in the conduct of, any entity or
business which is engaged in the development and commercialization of on-line
transaction systems for the securities, or (ii) either personally or by his
agent or by letters, circulars or advertisements, and whether for himself or on
behalf of any other person, company, firm or other entity canvass or solicit, or
enter into or effect (or cause or authorize to be solicited, entered into or
effected), directly or indirectly, for or on behalf of himself or any other
person, any business relating to the development and commercialization of on-
line transaction systems for the securities markets or orders for such business
from any person, company, firm or other entity who is, or has at any time within
two years prior to the date of such action been, a customer or supplier of the
Company or any of its subsidiaries, affiliates or divisions. Notwithstanding
the foregoing, the Executive's ownership of securities of a public company
engaged in competition with the Company not in excess of 5% of any class of such
securities shall not be considered a breach of the covenants set forth in this
Section.
(b) The Executive hereby agrees that he shall not, at any time
following the date hereof, disclose or use for any purpose confidential
information or proprietary data of the Company (or any of its subsidiaries),
except as required by applicable law or legal process; provided, however, that
--------
confidential information shall not include any information known generally to
the public or ascertainable from public or published sources (other than as a
result of unauthorized disclosure by the Executive) or any information of a
<PAGE>
type not otherwise considered confidential by persons engaged in the same
business or a business similar to that conducted by the Company.
(c) The Executive acknowledges and agrees that the Company will suffer
irreparable injury in the event of any material breach of this Section 8, that
damages resulting from such injury will be incapable of being precisely
measured, and that the Company will not have an adequate remedy at law to
redress the harm which such violation shall cause. Therefore, the Executive
agrees that the Company shall have the rights and remedies of specific
performance and injunctive relief, in addition to any other rights or remedies
that may be available at law or in equity or under this Agreement, in respect of
any failure, or threatened failure, on the part of the Executive to comply with
the provisions of this Section 8, including, but not limited to, temporary
restraining orders and temporary injunctions to restrain any violation or
threatened violation of this Section 8 by the Executive.
Section 9. Return of Company Property. The Executive acknowledges that
--------------------------
all records, files, documents (including marketing and presentation materials)
and equipment, all information relating to employees, Company suppliers, and any
other materials that in any way relate to the business of the Company which the
Executive has accumulated during his employment by the Company, other than
information and documents publicly known or disseminated, are the property of
the Company, including all duplicates and copies of any of the foregoing, and
that all such property shall be returned to the sole possession of the Company
at the date of execution hereof. In addition, the Executive shall deliver to
Company on the date hereof a list of all marketing and other contacts made by
the Executive on behalf of the Company.
Section 10. Business Goodwill. At all times following date hereof, unless
-----------------
required by process of law or subpoena, the Executive shall make no comments or
take any other actions, direct or indirect, that will reflect adversely on the
Company or its officers, directors, employees or agents in such capacity or
adversely affect their business reputation or goodwill. At all times following
the date hereof, the Board of Directors, each director and each officer of the
Company shall make no comments or take any other actions, direct or indirect,
that will reflect adversely on the Executive or adversely affect his business
reputation or goodwill. The Executive hereby agrees that for a period of two
years following the date hereof, he shall reasonably cooperate with the Company
in providing information that the Company reasonably requests and in taking such
other action as the Company may reasonably request, testifying in connection
with any legal proceeding or matter relating to the Company, other than
proceedings relating to the enforcement of this Agreement or other proceedings
in which the Executive is a named party whose interests are adverse to those of
the Company. In the event that Executive is requested by the Company to perform
any of the obligations set forth in the previous sentence, the Company shall pay
to Executive his reasonable out-of-pocket expenses.
<PAGE>
Section 11. Release by the Company. The Company agrees to execute and
----------------------
deliver to the Executive within ten days of the date hereof, a release of claims
and covenant not to sue in the form of Exhibit D.
Section 12. Miscellaneous.
-------------
A. Complete Agreement. This Agreement constitutes the entire agreement
------------------
between the parties and cancels and supersedes all other agreements and
understandings, whether written or oral, between the parties which may have
related to the subject matter contained in this Agreement.
B. Modification; Agreement: Waiver. No modification, amendment or waiver
-------------------------------
of any provisions of this Agreement shall be effective unless approved in
writing by both parties. The failure at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of either party thereafter to enforce
each and every provision hereof in accordance with its terms.
C. Governing Law; Jurisdiction. This Agreement and performance under it,
---------------------------
and all proceedings that may ensue from its breach, shall be construed in
accordance with and under the laws of the Commonwealth of Pennsylvania, and the
parties submit to the jurisdiction of the courts of the Commonwealth of
Pennsylvania located in Philadelphia for purposes of any actions or proceedings
that may be required to enforce this Agreement.
D. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
E. Assignment. The rights and obligations of the parties under this
----------
Agreement shall be binding upon and inure to the benefit of their respective
successors, assigns, executors, administrators and heirs.
F. Notices. All notices and other communications under this Agreement
-------
shall be in writing and shall be given in person or by telegraph, telefax or
first class mail, certified or registered with return receipt requested, and
shall be deemed to have been duly given when delivered personally or three days
after mailing or one day after transmission of a telegram or telefax, as the
case may be, to the respective persons named below:
If to the Company: Ashton Technology Group, Inc.
1900 Market Street
Philadelphia, PA 19103
Attn: Secretary
<PAGE>
If to the Executive: Robert Eprile
1 Columbus Place
New York, NY 10019
with a copy to:
Daniel J. Kornstein, Esq.
Kornstein, Veisz & Wexler, LLP
757 Third Avenue
New York, NY 10017
The parties may give notice of change of address in which event the notices
required by this section shall be furnished in accordance with the notice of
change.
G. Advice of Counsel. The Executive acknowledges that he has consulted
-----------------
with his own legal counsel with respect to the subject matter and the terms of
this Agreement and that this Agreement is the product of negotiations between
the Company and its counsel on the one hand and the Executive and his counsel
on the other.
H. Indemnification. Executive shall be entitled to the indemnification
---------------
for claims for any act or omission in his capacity as an officer and director of
Ashton in accordance with the Certificate of Incorporation and By-laws of
Ashton.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ASHTON TECHNOLOGY GROUP, INC.
By /s/ Arthur J. Bacci
-------------------
Its President
-------------------
EXECUTIVE:
/s/ Robert Eprile
-----------------
Robert Eprile
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,426,042
<SECURITIES> 0
<RECEIVABLES> 1,026,383
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,566,476
<PP&E> 2,756,748
<DEPRECIATION> 1,091,458
<TOTAL-ASSETS> 14,481,630
<CURRENT-LIABILITIES> 1,338,162
<BONDS> 0
0
2,327,628
<COMMON> 236,191
<OTHER-SE> 3,079,649
<TOTAL-LIABILITY-AND-EQUITY> 14,481,630
<SALES> 794,101
<TOTAL-REVENUES> 794,101
<CGS> 31,250
<TOTAL-COSTS> 3,655,069
<OTHER-EXPENSES> (87,930)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,773,038)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,773,038)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,773,038)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
