Related parties transactions
See all the self dealing to the board members? This was from last quarterly report. There is also mention in there about their deal with the stock promoter continental capital getting over 800K for his 1999 promotion of the stock from $1 or $2 to $18.
4. RELATED PARTY TRANSACTIONS
The Dover Group, Inc.
Ashton has utilized The Dover Group, Inc. ("Dover") for consulting services related to Ashton's financings and product development efforts. Fredric W. Rittereiser, Ashton's Chairman and Chief Executive Officer, is the sole stockholder, director and officer of Dover. Ashton paid consulting fees to Dover amounting to $80,000 and $135,000 in the nine-month periods ended December 31, 2000 and 1999, respectively. Effective September 1, 2000, Ashton and UTTC entered into an employment agreements with Mr. Rittereiser, and the consulting arrangement with Dover was terminated.
On January 14, 1998, Ashton and UTTC entered into an agreement with Dover and Mr. Rittereiser, whereby Dover and Mr. Rittereiser agreed to reimburse Ashton and UTTC for $413,980 in legal costs associated with a lawsuit brought by David N. Rosensaft against Ashton and UTTC (the "Rosensaft Lawsuit"), to the extent such costs were not covered by Ashton 's directors' and officers' liability insurance carrier. Dover and Mr. Rittereiser pledged 250,001 shares of UTTC stock as collateral in support of their agreement to pay the legal costs ("Agreement to Pay Legal Costs"). On March 4, 1998, the U.S. District Court for the Southern District of New York entered an order awarding damages against Dover and Mr. Rittereiser in the Rosensaft Lawsuit in the amount of $1.2 million.
Ashton and its subsidiary, UTTC, had previously been dismissed as parties to the Rosensaft Lawsuit. On April 7, 1998, Ashton's Board of Directors, after due deliberation, concluded that Ashton and UTTC derived mutual benefit from the Rosensaft settlement entered into by Dover and Mr. Rittereiser. The Board resolved to fund one-third of the $1.2 million settlement amount. Separately, UTTC agreed to fund one-third of the Rosensaft settlement. On April 8, 1998, pursuant to a Repayment Agreement, Ashton loaned $380,000 to Dover and Mr. Rittereiser at an annual interest rate of 9% for thirty months to satisfy their portion of the Rosensaft settlement. In exchange for the loan to satisfy the Rosensaft settlement, Dover initially pledged 300,000 shares of Ashton common stock under its control to Ashton. On March 20, 2000, Ashton , Dover and Mr. Rittereiser amended the agreement and reduced the number of shares of Ashton common stock subject to the pledge from 300,000 shares to 63,500 shares.
Ashton has determined that it will not receive any payments from its insurance carrier in connection with the claim it filed related to the Rosensaft Lawsuit. As a result, on April 3, 2000, Ashton's Board of Directors resolved to accept from Dover and Mr. Rittereiser shares of Gomez common stock owned by Dover equivalent in value to the amounts due Ashton and UTTC under the Repayment Agreement and the Agreement to Pay Legal Costs, or approximately $884,564, as full and complete satisfaction of the debts. The Board agreed the number of shares of Gomez stock to be transferred to Ashton and UTTC would be valued at the initial public offering price of the shares or such other price as determined by Ashton's Board of Directors. On October 8, 2000, Ashton extended the maturity date on the $380,000 note to Dover for a period of ninety days, during which time Ashton's Board of Directors would determine the valuation of the Gomez common stock and the resulting number of shares to be transferred to Ashton. The Board agreed to accept, as of November 23, 2000, 216,805 shares of Gomez common stock in satisfaction of the amounts due Ashton. The price of the common stock was determined by the Board based upon the price of the Gomez Series D Preferred Stock issued in October 2000, discounted by 20% to reflect the liquidation preference and dividends applicable to the Gomez Series D Preferred.
As a result of the acceptance of the Gomez common stock in November, Ashton recorded other income of $413,980 for the reimbursement of legal costs. However, due to Ashton's equity method of accounting for Gomez, Ashton recorded a loss in affiliates of $884,564 offset by the $413,980 of other income and the $470,584 received as satisfaction of the note receivable and accrued interest.
In April 2000, Mr. Rittereiser entered into an agreement with Morgan Stanley Dean Witter, whereby he pledged certain shares of his Ashton common stock in exchange for a loan in the amount of $500,000 (the "Rittereiser Loan"). Morgan Stanley requested Ashton provide additional credit enhancements to secure the Rittereiser Loan, in the form of a guarantee of the loan by Ashton. Ashton agreed to guarantee the Rittereiser Loan up to $500,000, on the condition that Mr. Rittereiser secure Ashton's guarantee with sufficient personal collateral pledged to Ashton and on the condition that the guarantee shall only extend until such time that Mr. Rittereiser repays the Rittereiser Loan or locates other collateral to substitute for Ashton's guarantee. Mr. Rittereiser agreed to secure Ashton's guarantee of the Rittereiser Loan with a first lien on certain real estate that he owns, which is valued in excess of $500,000, and has agreed to repay the Rittereiser Loan and/or locate substitute collateral for Ashton's guarantee within a reasonable period of time.
Adirondack Capital, LLC
In 1997, Ashton retained Adirondack Capital, LLC to provide investment banking and financial advisory services. K. Ivan F. Gothner, a member of Ashton's Board of Directors, is the Managing Director of Adirondack. Ashton paid consulting fees to Adirondack amounting to $90,000 in each of the nine-month periods ended December 31, 2000 and 1999. In addition, Ashton paid Adirondack a fee of $75,000 in September 2000 to terminate a fee agreement for advisory services provided by Adirondack to eMC. Additionally, during the nine months ended December 31, 1999, Ashton paid Adirondack $287,500 pursuant to the Private Equity Line of Credit Agreement, and Gomez paid Adirondack $50,000 for its assistance in structuring the private placement of the Gomez Series B Preferred Stock.
Wyndham Capital Corporation
In 1997, Ashton retained Wyndham Capital Corporation to provide investment banking and financial advisory services. Thomas G. Brown, a member of Ashton's Board of Directors, is the President and Managing Director of Wyndham. Ashton paid $25,000 in consulting fees to Wyndham during the nine months ended December 31, 1999. Effective September 1, 1999, Wyndham's consulting fees were terminated and Mr. Brown began receiving a monthly board retainer upon his election to the Board.
Kronish, Lieb, Weiner & Hellman LLP
Kronish, Lieb, Weiner & Hellman LLP, the law firm of which Herbert Kronish, a director of Ashton, is a Senior Partner, acted as counsel to Ashton and its subsidiaries in various matters since 1998. Ashton paid aggregate fees of $55,385 and $79,732 during the nine-month periods ended December 31, 2000 and 1999, respectively, to Kronish, Lieb, Weiner & Hellman LLP for legal services.
___________________________
Just say NO to stock fraud!
AI
