Document:

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                                                                    EXHIBIT 10.3
                                                                    ------------

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

                        THE ASHTON TECHNOLOGY GROUP, INC.

                                    WARRANT
                                    -------

Warrant No. 1                                            Dated: February 9, 2001

         The Ashton Technology Group, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Jameson Drive LLC or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company the total number of shares of common stock,
$.01 par value per share (the "Common Stock"), of the Company (each such share,
a "Warrant Share" and all such shares, the "Warrant Shares") at the exercise
prices set forth in Annex A hereto (as adjusted from time to time as provided in
Section 8, the "Exercise Price") , at any time and from time to time from and
after the date hereof and through and including February 9, 2006 (the
"Expiration Date"), and subject to the following terms and conditions:+

               1.   Registration of Warrant. The Company shall register this
                    -----------------------
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
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               2.   Registration of Transfers and Exchanges.
                    ---------------------------------------

                    (a)  The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in Section
12. Upon any such registration or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.

                    (b)  This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company at its address for notice set forth
in Section 12 for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.

               3.   Duration and Exercise of Warrants.
                    ---------------------------------

                    (a)  This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., New York City time, at any time and
from time to time on or after the date hereof to and including the Expiration
Date. At 5:30 P.M., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no
value. Prior to the Expiration Date, the Company may not call or otherwise
redeem this Warrant.

                    (b)  Upon delivery of a duly completed and signed Form of
Election to Purchase attached hereto (and the Warrant Shares Exercise Log
attached hereto) duly completed and signed, to the Company at its address for
notice set forth in Section 12 and upon payment of the Exercise Price multiplied
by the number of Warrant Shares that the Holder intends to purchase hereunder,
in the manner provided hereunder, all as specified by the Holder in the Form of
Election to Purchase, the Company shall promptly (but in no event later than 3
business days after the Date of Exercise (as defined herein)) issue or cause to
be issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends except
(i) either in the event that a registration statement covering the resale of the
Warrant Shares and naming the Holder as a selling stockholder thereunder is not
then effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant. The Company
shall, upon request of the Holder, if available, use its best efforts to deliver
Warrant

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Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions. To effect
an exercise hereunder, the Holder shall not be required to physically surrender
this Warrant to the Company unless all the Warrant Shares have been exercised.
Exercises hereunder shall have the effect of lowering the number of Warrant
Shares in an amount equal to the applicable exercise, which shall be evidenced
by entries set forth in the Exercise Schedule. The Holder and the Company shall
maintain records showing the number of Warrant Shares exercised and the date of
such exercises. In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest error.
The Holder and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following exercise of
a portion of this Warrant, the number of shares issuable upon exercise of this
Warrant may be less than the amount stated on the face hereof.

                    A "Date of Exercise" means the date on which the Company
shall have received (i) the Form of Election to Purchase completed and duly
signed, and (ii) payment of the Exercise Price for the number of Warrant Shares
so indicated by the Holder to be purchased.

               (c)  This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares then
vested. The number of Warrant Shares that shall vest under this Warrant shall be
equal to the product of (1) 15 multiplied by (2) $10,000 of Purchase Price paid
at a Closing under the Securities Purchase Agreement, dated the date of issuance
of this Warrant, between the Company and the original Holder (the "Purchase
Agreement") (plus a pro rata amount of shares with respect to any portion of the
Purchase Price in excess of $10,000). Such vesting shall occur on the Closing
Date on which such Purchase Price is paid and all vested Warrant Shares shall be
cumulatively available for purchase hereunder at an Exercise Price equal to 125%
of the closing bid price of the Common Stock on the trading day immediately
prior to the vesting date for such Warrant Shares. Each of the terms "Closing,"
"Closing Date" and "Purchase Price" shall have the meanings set forth in the
Purchase Agreement. The number of Warrant Shares vested hereunder shall be
measured cumulatively for all Closings and each $100,000. Annex A shall set
forth the number of Warrant Shares then vested hereunder for each Closing and
the applicable Exercise Price.

          4.   Piggyback Registration Rights. This Warrant is subject to
               -----------------------------
the piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until all of the
Holder's Warrant Shares have been sold in accordance with an effective
registration statement or upon the Expiration Date. The Company will pay all
registration expenses in connection therewith.

          5.   Payment of Taxes. The Company will pay all documentary stamp
               ----------------
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
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          6.   Replacement of Warrant. If this Warrant is mutilated, lost,
               ----------------------
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.

          7.   Reservation of Warrant Shares. The Company covenants that it will
               -----------------------------
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.

          8.   Certain Adjustments. The Exercise Price and number of Warrant
               -------------------
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.

               (a)  If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event (and the number of Warrant Shares
to which this Warrant shall hereafter apply shall be equitably adjusted to
reflect such change. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.

               (b)  In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled
<PAGE>

upon such event to receive such amount of securities or property equal to the
amount of Warrant Shares such Holder would have been entitled to had such Holder
exercised this Warrant immediately prior to such reclassification or share
exchange. The terms of any such reclassification or share exchange shall include
such terms so as to continue to give to the Holder the right to receive the
securities or property set forth in this Section 8(b) upon any exercise
following any such reclassification or share exchange.

               (c)  If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").

               (d)  If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while this
Warrant is outstanding, shall issue shares of Common Stock or rights, warrants
(including those issued under the Purchase Agreement), options or other
securities or debt that is convertible into or exchangeable for shares of Common
Stock ("Common Stock Equivalents") entitling any Person to acquire shares of
Common Stock, at a price per share less than the Exercise Price (if the holder
of the Common Stock or Common Stock Equivalent so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then, at the option of the Holder for such exercises as it shall indicate, the
Exercise Price shall be adjusted to mirror the conversion, exchange or purchase
price for such Common Stock or Common Stock Equivalents (including any reset
provisions thereof) at issue. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. The Company shall notify the
Holder and the Escrow Agent in writing, no later than the Trading Day following
the issuance of any Common Stock or Common Stock Equivalent subject to this
section, indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms.

               (e)  In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for the shares of stock and other securities, cash and property
receivable
<PAGE>

upon or deemed to be held by holders of Common Stock following such merger,
consolidation or sale, and the Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property
as the Common Stock for which this Warrant could have been exercised immediately
prior to such merger, consolidation or sales would have been entitled or (B) in
the case of a merger or consolidation, (x) require the surviving entity to issue
common stock purchase warrants equal to the number Warrant Shares to which this
Warrant then permits, which newly warrant shall be identical to this Warrant,
and (y) simultaneously with the issuance of such warrant, the Holder of such
warrant shall have the right to exercise such warrant only into shares of stock
and other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger or consolidation or (C) require
the surviving entity from such merger, acquisition or business combination to
pay to the Holder, in cash, the Black Scholes value of this Warrant. In the case
of clause (B), the exercise price for such new warrant shall be based upon the
amount of securities, cash and property that each share of Common Stock would
receive in such transaction and the Exercise Price of this Warrant immediately
prior to the effectiveness or closing date for such transaction. The terms of
any such merger, sale or consolidation shall include such terms so as continue
to give the Holder the right to receive the securities, cash and property set
forth in this Section upon any conversion or redemption following such event.
This provision shall similarly apply to successive such events.

               (f)  For the purposes of this Section 8, the following clauses
shall also be applicable:

                    (i)   Record  Date.  In case the Company shall take a record
                          ------------
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                    (ii)  Treasury  Shares.  The number of shares of Common
                          ----------------
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

               (g)  All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.

               (h)  Whenever the Exercise Price is adjusted  pursuant to
Section 8(c) above,  the Holder,  after
receipt of the determination by the Appraiser, shall have the right to select an
additional appraiser (which shall be a nationally recognized accounting firm),
in which case the adjustment shall be equal to the average of the adjustments
recommended by each of the Appraiser
<PAGE>

and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.

                           (i)      If:

                                         (i)    the Company shall declare a
                                                dividend (or any other
                                                distribution) on its Common
                                                Stock; or

                                        (ii)    the Company shall declare a
                                                special nonrecurring cash
                                                dividend on or a redemption of
                                                its Common Stock; or

                                       (iii)    the Company shall authorize
                                                the granting to all holders
                                                of the Common Stock rights
                                                or warrants to subscribe
                                                for or purchase any shares
                                                of capital stock of any
                                                class or of any rights; or

                                        (iv)    the approval of any
                                                stockholders of the Company
                                                shall be required in
                                                connection with any
                                                reclassification of the
                                                Common Stock, any
                                                consolidation or merger to
                                                which the Company is a
                                                party, any sale or transfer
                                                of all or substantially all
                                                of the assets of the
                                                Company, or any compulsory
                                                share exchange whereby the
                                                Common Stock is converted
                                                into other securities, cash
                                                or property; or

                                         (v)    the Company shall authorize the
                                                voluntary dissolution,
                                                liquidation or winding up of the
                                                affairs of the Company,

then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
               --------  -------
defect therein or in the
<PAGE>

mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.

                  9.       Payment of Exercise Price.  The Holder shall pay
                           -------------------------
the Exercise Price in one of the following manners:

                           (a)      Cash Exercise.  The Holder may deliver
                                    -------------
immediately available funds; or

                           (b)      Cashless  Exercise.  The Holder may
                                    ------------------
surrender this Warrant to the Company together with a notice of cashless
exercise, in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:

                                    X = Y [(A-B)/A]
         where:
                                    X = the number of Warrant Shares to be
issued to the Holder.

                                    Y = the number of Warrant Shares with
                                    respect to which this Warrant is being
                                    exercised.

                                    A = the average of the closing sale prices
                                    of the Common Stock for the five (5) trading
                                    days immediately prior to (but not
                                    including) the Date of Exercise.

                                    B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.

                  10.      Certain Exercise Restrictions.
                           -----------------------------

                           (a)  A Holder may not exercise this Warrant to the
extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
                                                      -------- ---
rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such exercise
and held by such Holder after application of this Section. Since the Holder will
not be obligated to report to the Company the number of shares of Common Stock
it may hold at the time of an exercise hereunder, unless the exercise at issue
would result in the issuance of shares of Common Stock in excess of 4.999% of
the then outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the
Holder shall have the authority and
<PAGE>

obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.

                       (b)  A Holder may not exercise this Warrant to the
extent such exercise would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of
the then issued and outstanding shares of Common Stock, including shares
issuable upon such exercise and held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company the
number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.

                  11.  Fractional Shares. The Company shall not be required to
                       -----------------
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable on the
<PAGE>

exercise of this Warrant, the Company shall pay an amount in cash equal to the
Exercise Price multiplied by such fraction.

                  12.  Notices. Any and all notices or other communications or
                       -------
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
1900 Market Street, Suite 701Philadelphia, Pennsylvania 19103 or facsimile
number (215) 789-3399, attention President, or (ii) if to the Holder, to the
Holder at the address or facsimile number appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section.

                  13.  Warrant Agent. The Company shall serve as warrant agent
                       -------------
under this Warrant. Upon thirty days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.

                  14.  Miscellaneous.
                       -------------

                       (a)  This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.

                       (b)  Subject to Section 14(a), above, nothing in this
Warrant shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under this
Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.

                       (c)  The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without
<PAGE>

regard to the principles of conflicts of law thereof. The Company and the Holder
hereby irrevocably submit to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or that
such suit, action or proceeding is improper. Each of the Company and the Holder
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by receiving a copy thereof
sent to the Company at the address in effect for notices to it under this
instrument and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.

               (d)  The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

               (e)  In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                            SIGNATURE PAGE FOLLOWS]
<PAGE>

               IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.

                                            THE ASHTON TECHNOLOGY GROUP, INC.

                                            By:  /s/  Arthur J. Bacci
                                               ------------------------------
                                               Name:  Arthur J. Bacci
                                               Title: President
<PAGE>

                         FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To The Ashton Technology Group, Inc.:

          The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of The Ashton Technology
Group, Inc. (the "Common Stock") and, if such Holder is not utilizing the
cashless exercise provisions set forth in this Warrant, encloses herewith
$________ in cash, certified or official bank check or checks, which sum
represents the aggregate Exercise Price (as defined in the Warrant) for the
number of shares of Common Stock to which this Form of Election to Purchase
relates, together with any applicable taxes payable by the undersigned pursuant
to the Warrant.

          Date of vesting of warrant: _______________.

          Exercise Price: ________________.

          The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of

                                                PLEASE INSERT SOCIAL SECURITY OR
                                                TAX IDENTIFICATION NUMBER

                                                ________________________________

________________________________________________________________________________
                        (Please print name and address)

Dated:____________, _____             Name of Holder:

                                                (Print)________________________

                                                (By:)__________________________
                                                (Name:)
                                                (Title:)
                                                (Signature must conform in all
                                                respects to name of holder as
                                                specified on the face of the
                                                Warrant)

                                                                 Closing Warrant
<PAGE>

                              FORM OF ASSIGNMENT

          [To be completed and signed only upon transfer of Warrant]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of The Ashton Technology
Group, Inc. to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of The Ashton Technology Group,
Inc. with full power of substitution in the premises.

Dated:

_______________, ____

                                       _______________________________________
                                       (Signature must conform in all respects
                                       to name of holder as specified on the
                                       face of the Warrant)

                                       _______________________________________
                                       Address of Transferee

                                       _______________________________________

                                       _______________________________________

In the presence of:

__________________________
<PAGE>

<TABLE>
<CAPTION>
                                                                                                              ANNEX A
                                                                                                              -------
<S>                            <C>                          <C>                         <C>
---------------------------------------------------------------------------------------------------------------------
Closing/Vesting Date           Number of Warrant Shares     Applicable Exercise Price   Number of Warrant Shares
                               Vested at Such Closing                                   Not Previously  Exercised
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

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</TABLE>
                                                                 Closing WarrantAMENDED AND RESTATED
       CERTIFICATE OF DESIGNATION OF RIGHTS, PRIVILEGES, PREFERENCES, AND
              RESTRICTIONS OF SERIES B CONVERTIBLE PREFERRED STOCK
                                       OF
                      HIGHLAND HOLDINGS INTERNATIONAL, INC.

     Highland Holdings International, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and pursuant to the General Corporation Law of the
State of Delaware, the Board of Directors of the Company duly adopted
resolutions (i) authorizing a series of the Company's previously authorized
preferred stock, $0.001 par value per share, and (ii) providing for the
designation of rights, privileges, preferences and restrictions of One Million
(1,000,000) shares of Series B Preferred Stock of the Company, as follows:

     RESOLVED, that the Company is authorized to issue 1,000,000 shares of
Series B Preferred Stock (the "Preferred Shares"), $0.001 par value per share,
which shall have rights, privileges, preferences, and restrictions, as follows:

     (1) Dividends.

          (a) Dividends. Subject to a declaration thereof by the Company's Board
     of Directors, each holder (a "Holder" and, collectively, the "Holders") of
     the Preferred Shares shall be entitled to a dividend (individually, a
     "Dividend"; collectively, the "Dividends") at a rate determined by the
     Company's Board of Directors on a pari passu basis with the holders of
     Common Shares and other classes of preferred shares of the Company, exept
     for those holders of any class of preferred shares which have a preference
     with respect to the right to receive dividends.

          (b) General Payment Provisions. All Dividends, if, when, and as
     declared, by the Company with respect to any Preferred Share shall be made
     in lawful money of the United States of America by depositing with the
     United States Postal Service, within 15 days of the date of declaration by
     the Company's Board of directors of such Dividend a company check, made
     payable to the Holder, to such address as such Holder may from time to time
     designated by written notice to the Company in accordance with the
     provisions of this Amended and Restated Certificate of Designation of
     Rights, Privileges, Preferences and Restrictions (the "Certificate of
     Designation").

<PAGE>

     (2) Conversion of Preferred Shares. Preferred Shares shall be convertible
into shares of the Company's common stock, par value $ 0.001 per share (the
"Common Stock"), on the terms and conditions set forth in this Section 2.

          (a) Certain Defined Terms. For purposes of this Certificate of
     Designation, the following terms shall have the following meanings:

               (i) "Business Day" means any day in which the Principal Market is
          open for business.

               (ii) "Closing Asked Price" means, for any security as of any
          date, the last closing asked price for such security on the Principal
          Market as reported by Bloomberg Financial Markets ("Bloomberg"), or,
          if the Principal Market is not the principal securities exchange or
          trading market for such security, the last closing asked price of such
          security on the principal securities exchange or trading market where
          such security is listed or traded as reported by Bloomberg, or if the
          foregoing do not apply, the last closing asked price of such security
          on the OTC Bulletin Board for such security as reported by Bloomberg,
          or, if no closing asked price is reported for such security by
          Bloomberg, the last closing trade price of such security as reported
          by Bloomberg, or, if no last closing trade price is reported for such
          security by Bloomberg, the average of the asked prices of any market
          makers for such security as reported by Pink Sheets, LLC. If the
          Closing Asked Price cannot be calculated for such security on such
          date on any of the foregoing bases, the Closing Asked Price of such
          security on such date shall be the fair market value as mutually
          determined by the Company and the Holders of Preferred Shares. If the
          Company and the Holders of Preferred Shares are unable to agree upon
          the fair market value of the Common Stock, then such dispute shall be
          resolved pursuant to Section 2(e)(iii) below with the term "Closing
          Asked Price" being substituted for the term "Conversion Rate." (All
          such determinations to be appropriately adjusted for any stock
          dividend, stock split or other similar transaction during such
          period).

               (iii) "Closing Bid Price" means, for any security as of any date,
          the last closing bid price for such security on the Principal Market
          as reported by Bloomberg Financial Markets ("Bloomberg"), or, if the
          Principal Market is not the principal securities exchange or trading
          market for such security, the last closing bid price of such security
          on the principal securities exchange or trading market where such
          security is listed or traded as reported by Bloomberg, or if the
          foregoing do not apply, the last closing bid price of such security on
          the OTC Bulletin Board for such security as reported by Bloomberg, or,
          if no closing bid price is reported for such security by Bloomberg,
          the last closing trade price of such security as reported by
          Bloomberg, or, if no last closing trade price is reported for such
          security by Bloomberg, the average of the bid prices of any market
          makers for such security as reported by Pink Sheets, LLC. If the
          Closing Bid Price cannot be calculated for such security on such date
          on any of the foregoing bases, the Closing Bid Price of such security
          on such date shall be the fair market value as mutually determined by
          the Company and the Holders of Preferred Shares. If the Company and
          the Holders of Preferred Shares are unable to agree upon the fair
          market value of the Common Stock, then such dispute shall be resolved
          pursuant to Section 2(e)(iii) below with the term "Closing Bid Price"
          being substituted for the term "Conversion Rate." (All such
          determinations to be appropriately adjusted for any stock dividend,
          stock split or other similar transaction during such period).

                                       2
<PAGE>

               (iv) "Closing Date" has the same meaning as the term is defined
          in the Securities Purchase Agreement (the "Securities Purchase
          Agreement"), entered into by and between the Company and the initial
          Holders of the Preferred Shares, dated March 12, 2001.

               (v) "Conversion Percentage" shall be sixty-seven percent (67%).

               (vi) "Conversion Price" means, as of any Conversion Date (as
          defined below) or other date of determination, the amount determined
          by multiplying (i) the Market Price of the Company Common Stock by
          (ii) the Conversion Percentage in effect as of such date, subject to
          adjustment as provided herein.

               (vii) "Market Price" means, with respect to any security for any
          period, that price which shall be computed as the volume-weighted
          arithmetic average of the Closing Bid Prices and Closing Asked Prices
          for such security during the ninety (90) consecutive trading day
          period immediately preceding such date of determination. (All such
          determinations to be appropriately adjusted for any stock dividend,
          stock split or other similar transaction during such period).

               (viii) "Issuance Date" means, with respect to each Preferred
          Share, the date of issuance of the applicable Preferred Share.

               (ix) "Mandatory Conversion Date" means, with respect to any
          Preferred Share, the date which is two (2) years after the Issuance
          Date.

               (x) "Person" means an individual, a limited liability company, a
          partnership, a joint venture, a corporation, a trust, an
          unincorporated organization and a government or any department or
          agency thereof.

               (xi) "Principal Market" means the means the principal market on
          which the Common Stock is quoted or listed for trading as of the
          Conversion Date.

               (xii) "Transaction Value" means the sum of (A) $1.00 and (B)
          accrued and unpaid Dividends, if so included at the Company's sole
          discretion.

          (b) Holder's Conversion Right; Mandatory Conversion. Subject to the
     provisions of Section 2(d), below, at any time or times on or after the
     Issuance Date, any Holder of Preferred Shares shall be entitled to convert
     any whole number of Preferred Shares into fully paid and nonassessable
     shares of Common Stock in accordance with Section 2(e), at the Conversion
     Rate (as defined below). If any Preferred Shares remain outstanding on the
     Mandatory Conversion Date, then, subject to Section 2(d), below, such
     Preferred Shares shall be converted at the Conversion Rate as of such date

                                       3
<PAGE>

     in accordance with Section 2(e), below. The Company shall not issue any
     fraction of a share of Common Stock upon any conversion. All shares of
     Common Stock (including fractions thereof) issuable upon conversion of more
     than one Preferred Share by a Holder thereof shall be aggregated for
     purposes of determining whether the conversion would result in the issuance
     of a fraction of a share of Common Stock. If, after the aforementioned
     aggregation, the issuance would result in the issuance of a fraction of a
     share of Common Stock, the Company shall round such fraction of a share of
     Common Stock up to the nearest whole share.

          (c) Conversion Rate. The number of shares of Common Stock issuable
     upon conversion of each Preferred Share pursuant to Section 2(b) shall be
     determined according to the following formula (the "Conversion Rate"):

                                Transaction Value
                                -----------------
                                Conversion Price

          (d) Limitation on Beneficial Ownership. The Company shall not effect
     any conversion of any Preferred Share and no holder of any Preferred Share
     shall have the right to convert any Preferred Share pursuant to Section
     2(b) to the extent that after giving effect to such conversion such Person
     (together with such Person's affiliates) (A) would beneficially own in
     excess of 4.9% of the outstanding shares of the Common Stock following such
     conversion and (B) would have acquired, through conversion of any Preferred
     Share or otherwise (including without limitation, exercise of any warrant
     issued pursuant to the Securities Purchase Agreement), in excess of 4.9% of
     the outstanding shares of the Common Stock following such conversion during
     the 60-day period ending on and including such Conversion Date (defined
     below). For purposes of the foregoing sentence, the number of shares of
     Common Stock beneficially owned by a Person and its affiliates or acquired
     by a Person and its affiliates, as the case may be, shall include the
     number of shares of Common Stock issuable upon conversion of the Preferred
     Shares with respect to which the determination of such sentence is being
     made, but shall exclude the number of shares of Common Stock which would be
     issuable upon (i) conversion of the remaining, nonconverted Preferred
     Shares beneficially owned by such Person and its affiliates and (ii)
     exercise or conversion of the unexercised or unconverted portion of any
     other securities of the Company (including, without limitation, any
     warrants) subject to a limitation on conversion or exercise analogous to
     the limitation contained herein beneficially owned by such Person and its
     affiliates. Except as set forth in the preceding sentence, for purposes of
     this Section 2(d), beneficial ownership shall be calculated in accordance
     with Section 13(d) of the Securities Exchange Act of 1934, as amended.
     Notwithstanding anything to the contrary contained herein, each Conversion
     Notice (defined below) shall constitute a representation by the holder
     submitting such Conversion Notice that, after giving effect to such
     Conversion Notice, (A) the holder will not beneficially own (as determined
     in accordance with this Section 2(d)) and (B) during the 60-day period
     ending on and including such Conversion Date, the holder will not have

                                       4
<PAGE>

     acquired, through conversion of any Preferred Share or otherwise (including
     without limitation, exercise or any Warrant), a number of shares of Common
     Stock in excess of 4.9% of the outstanding shares of Common Stock as
     reflected in the Company's most recent Form 10-Q (or Form 10-QSB) or Form
     10-K (or Form 10-KSB), as the case may be, or more recent public press
     release or other public notice by the Company setting forth the number of
     shares of Common Stock outstanding, but after giving effect to conversions
     of any Preferred Share by such holder since the date as of which such
     number of outstanding shares of Common Stock was reported.

          (e) Mechanics of Conversion. The conversion of Preferred Shares shall
     be conducted in the following manner:

               (i) Holder's Delivery Requirements. To convert Preferred Shares
          into shares of Common Stock on any date (the "Conversion Date"), the
          Holder shall (A) transmit by facsimile (or otherwise deliver), for
          receipt on or prior to 11:59 p.m., Pacific Time on such date, a copy
          of a fully executed notice of conversion in the form attached hereto
          as Exhibit I (the "Conversion Notice") to the Company's designated
          transfer agent (the "Transfer Agent") with a copy thereof to the
          Company and (B) surrender to a nationally recognized overnight
          delivery service carrier for delivery to the Transfer Agent as soon as
          practicable following such date the original certificates representing
          the Preferred Shares being converted (or an indemnification
          undertaking with respect to such shares in the case of their loss,
          theft or destruction) (the "Preferred Stock Certificates").

               (ii) Company's Response. Upon receipt by the Company of a copy of
          a Conversion Notice, the Company shall immediately send, via
          facsimile, a confirmation of receipt of such Conversion Notice to such
          Holder and the Transfer Agent, which confirmation shall constitute an
          instruction to the Transfer Agent to process such Conversion Notice in
          accordance with the terms herein. Upon receipt by the Transfer Agent
          of the Preferred Stock Certificates to be converted pursuant to a
          Conversion Notice, the Transfer Agent shall, on the next Business Day
          following the date of receipt (or the second Business Day following
          the date of receipt if received after 11:00 a.m. local time of the
          Transfer Agent), (A) issue and surrender to a nationally recognized
          overnight delivery service for overnight delivery to the address as
          specified in the Conversion Notice, a certificate, registered in the
          name of the Holder or its designee, for the number of shares of Common
          Stock to which the Holder shall be entitled, or (B) provided the
          Transfer Agent is participating in The Depository Trust Company
          ("DTC") Fast Automated Securities Transfer Program, upon the request
          of the Holder, credit such aggregate number of shares of Common Stock
          to which the Holder shall be entitled to the Holder's or its
          designee's balance account with DTC through its Deposit Withdrawal
          Agent Commission system. If the number of Preferred Shares represented
          by the Preferred Stock Certificate(s) submitted for conversion is
          greater than the number of Preferred Shares being converted, then the
          Transfer Agent shall, as soon as practicable and in no event later
          than three (3) Business Days after receipt of the Preferred Stock
          Certificate(s) and at the Company's expense, issue and deliver to the
          Holder a new Preferred Stock Certificate representing the number of
          Preferred Shares not converted.

                                       5
<PAGE>

               (iii) Dispute Resolution. In the case of a dispute as to the
          determination of the arithmetic calculation of the Conversion Rate,
          the Company shall instruct the Transfer Agent to issue to the Holder
          the number of shares of Common Stock that is not disputed and shall
          submit the disputed determinations or arithmetic calculations to the
          Holder via facsimile within one (1) Business Day of receipt of such
          Holder's Conversion Notice. If such Holder and the Company are unable
          to agree upon the determination of the arithmetic calculation of the
          Conversion Rate within one (1) Business Day of such disputed
          determination or arithmetic calculation being submitted to the Holder,
          then the Company shall within one (1) Business Day submit via
          facsimile the disputed arithmetic calculation of the Conversion Rate
          to an independent, reputable investment bank or accountant selected by
          the affected Holders and approved by the Company. The Company shall
          cause the investment bank or the accountant, as the case may be, to
          perform the determinations or calculations and notify the Company and
          the Holder of the results no later than forty-eight (48) hours from
          the time it receives the disputed determinations or calculations. Such
          investment bank's or accountant's determination or calculation, as the
          case may be, shall be binding upon all parties absent manifest error
          and the Company shall be liable and responsible for paying such
          investment bank or accountant fees and expenses.

               (iv) Record Holder. The person or persons entitled to receive the
          shares of Common Stock issuable upon a conversion of Preferred Shares
          shall be treated for all purposes as the record holder or holders of
          such shares of Common Stock on the Conversion Date.

               (v) Pro Rata Conversion. In the event the Company receives a
          Conversion Notice from more than one Holder of Preferred Shares for
          the same Conversion Date and the Company can convert some, but not
          all, of such Preferred Shares, the Company shall convert from each
          Holder of Preferred Shares electing to have Preferred Shares converted
          at such time a pro rata amount of such Holder's Preferred Shares
          submitted for conversion based on the number of Preferred Shares
          submitted for conversion on such date by such Holder relative to the
          number of Preferred Shares submitted for conversion on such date.

               (vi) Mechanics of Mandatory Conversion. Subject to Section 2(d),
          above, on the Mandatory Conversion Date, all Holders of Preferred
          Shares shall surrender all Preferred Shares to the Transfer Agent and
          all Preferred Shares shall be converted as of such date as if the
          Holders of such Preferred Shares had given the Conversion Notice for
          all such Preferred Shares on the Mandatory Conversion Date.

          (f) Taxes. The Company shall pay any and all taxes that may be payable
     with respect to the issuance and delivery of Common Stock upon the
     conversion of Preferred Shares.

                                       6
<PAGE>

          (g) Adjustments to Conversion Price. The Conversion Price will be
     subject to adjustment from time to time as provided in this Section 2(g).

               (i) Adjustment of Conversion Price upon Subdivision or
          Combination of Common Stock. If the Company at any time subdivides (by
          any stock split, stock dividend, recapitalization or otherwise) one or
          more classes of its outstanding shares of Common Stock into a greater
          number of shares, the Conversion Price in effect immediately prior to
          such subdivision will be proportionately reduced. If the Company at
          any time combines (by combination, reverse stock split or otherwise)
          one or more classes of its outstanding shares of Common Stock into a
          smaller number of shares, the Conversion Price in effect immediately
          prior to such combination will be proportionately increased.

               (ii) Other Events. If any event occurs of the type contemplated
          by the provisions of this Section 2(g) but not expressly provided for
          by such provisions (including, without limitation, the granting of
          stock appreciation rights, phantom stock rights or other rights with
          equity features), then the Company's Board of Directors will make an
          appropriate adjustment in the Conversion Price so as to protect the
          rights of the Holders of the Preferred Shares; provided that no such
          adjustment will increase the Conversion Price as otherwise determined
          pursuant to this Section 2(g).

               (iii) Notice. Immediately upon any adjustment of the Conversion
          Price, the Company will give written notice thereof to each Holder of
          Preferred Shares, setting forth in reasonable detail, and certifying,
          the calculation of such adjustment.

     (3) Reservation of Shares. The Company shall, at all times so long as any
of the Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares (the "Reserved
Amount") of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding. The initial number
of shares of Common Stock reserved for conversions of the Preferred Shares and
each increase in the number of shares so reserved shall be allocated pro rata
among the Holders of the Preferred Shares based on the number of Preferred
Shares held by each Holder at the time of issuance of the Preferred Shares or
increase in the number of reserved shares, as the case may be. In the event a
Holder shall sell or otherwise transfer any of such Holder's Preferred Shares,
each transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and allocated to any Person who ceases to hold any Preferred Shares
shall be allocated to the remaining Holders of Preferred Shares, pro rata based
on the number of Preferred Shares then held by such Holders.

     (4) Voting Rights. Holders of Preferred Shares shall have no voting rights,
except as required by law, including but not limited to the General Corporation
Law of the State of Delaware, and as expressly provided in this Certificate of
Designation.

                                       7
<PAGE>

     (5) Liquidation, Dissolution, Winding-Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the Holders
of the Preferred Shares shall be entitled to receive in cash out of the assets
of the Company, whether from capital or from earnings available for distribution
to its stockholders (the "Liquidation Funds"), before any amount shall be paid
to the holders of any of the capital stock of the Company of any class junior in
rank to the Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to $1.00 and any accrued but unpaid
Dividends (such sum being referred to as the "Liquidation Preference"); provided
that, if the Liquidation Funds are insufficient to pay the full amount due to
the Holders of Preferred Shares, then each Holder of Preferred Shares shall
receive a percentage of the Liquidation Funds equal to the full amount of
Liquidation Funds payable to such Holder as a liquidation preference. The
purchase or redemption by the Company of stock of any class, in any manner
permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the consolidation
or merger of the Company with or into any other Person, nor the sale or transfer
by the Company of less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up of the
Company. No Holder of Preferred Shares shall be entitled to receive any amounts
with respect thereto upon any liquidation, dissolution or winding up of the
Company other than the amounts provided for herein; provided that a Holder of
Preferred Shares shall be entitled to all amounts previously accrued with
respect to amounts owed hereunder.

     (6) Preferred Rank. All shares of Common Stock shall be of junior rank to
all Preferred Shares in respect to the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Company. The
rights of the shares of Common Stock shall be subject to the preferences and
relative rights of the Preferred Shares. Without the prior express written
consent of the Holders of not less than three-fifths (3/5) of the then
outstanding Preferred Shares, the Company shall not hereafter authorize or issue
additional or other capital stock that is of senior or equal rank to the
Preferred Shares in respect of the preferences as to distributions and payments
upon the liquidation, dissolution and winding up of the Company. Without the
prior express written consent of the Holders of not less than three-fifths (3/5)
of the then outstanding Preferred Shares, the Company shall not hereafter
authorize or make any amendment to the Company's Certificate of Incorporation or
bylaws, or file any resolution of the board of directors of the Company with the
Delaware Secretary of State or enter into any agreement containing any
provisions that would adversely affect or otherwise impair the rights or
relative priority of the Holders of the Preferred Shares relative to the holders
of the Common Stock or the holders of any other class of capital stock. In the
event of the merger or consolidation of the Company with or into another
corporation, the Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein and no merger shall result
inconsistent therewith.

                                       8
<PAGE>

     (7) Restriction on Cash Dividends. Until all of the Preferred Shares have
been converted as provided herein, the Company shall not, directly or
indirectly, redeem, or declare or pay any cash dividend or distribution on, its
Common Stock without the prior express written consent of the Holders of not
less than three-fifths (3/5) of the then outstanding Preferred Shares.

     (8) Limitation on Number of Conversion Shares. The Company shall not be
obligated to issue any shares of Common Stock upon conversion of the Preferred
Shares if the issuance of such shares of Common Stock would exceed that number
of shares of Common Stock that the Company may issue upon Conversion of the
Preferred Shares (the "Exchange Cap") without breaching the Company's
obligations under the rules or regulations of the Principal Market, or the
market or exchange where the Common Stock is then traded or quoted, except that
such limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market, or the market or exchange where the Common Stock is then
traded or quoted, (or any successor rule or regulation) for issuances of Common
Stock in excess of such amount or (b) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the Holders of a majority of the Preferred Shares
then outstanding. Until such approval or written opinion is obtained, no
purchaser of Preferred Shares pursuant to the Securities Purchase Agreement (the
"Purchasers") shall be issued, upon conversion of Preferred Shares, shares of
Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
Preferred Shares issued to such Purchaser pursuant to the Securities Purchase
Agreement and the denominator of which is the aggregate amount of all the
Preferred Shares issued to the Purchasers pursuant to the Securities Purchase
Agreement (the "Cap Allocation Amount"). In the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser's Preferred Shares, the
transferee shall be allocated a pro rata portion of such Purchaser's Cap
Allocation Amount. In the event that any Holder of Preferred Shares shall
convert all of such Holder's Preferred Shares into a number of shares of Common
Stock which, in the aggregate, is less than such Holder's Cap Allocation Amount,
then the difference between such Holder's Cap Allocation Amount and the number
of shares of Common Stock actually issued to such Holder shall be allocated to
the respective Cap Allocation Amounts of the remaining Holders of Preferred
Shares on a pro rata basis in proportion to the number of Preferred Shares then
held by each such Holder.

     (9) Vote to Change the Terms of Preferred Shares. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting,
of the Holders of not less than three-fifths (3/5) of the then-outstanding
Preferred Shares, shall be required for any change to this Certificate of
Designation or the Company's Certificate of Incorporation which would amend,
alter, change or repeal any of the powers, designations, preferences and rights
of the Preferred Shares.

                                       9
<PAGE>

     (10) Lost or Stolen Certificates. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.

     (11) Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Preferred Shares that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof).

     (12) Specific Shall Not Limit General; Construction. No specific provision
contained in this Certificate of Designation shall limit or modify any more
general provision contained herein. This Certificate of Designation shall be
deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.

     (13) Failure or Indulgence Not Waiver. No failure or delay on the part of a
Holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

                            [Signature Page Follows]

                                       10
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Designation to be signed be signed by John Demoleas, its
President, as of the 15th day of March, 2001.

HIGHLAND HOLDINGS INTERNATIONAL, INC.

By: /s/ John Demoleas
---------------------------------------
John Demoleas, President

                                       11
<PAGE>

                                    EXHIBIT I

                                CONVERSION NOTICE

     Reference is made to the Amended and Restated Certificate of Designation,
Preferences and Rights (the "Certificate of Designation") of Highland Holdings
International, Inc. (the "Company"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series B Preferred Stock, $0.001 par value per share (the
"Preferred Shares"), of the Company indicated below into shares of Common Stock,
par value $ 0.001 per share (the "Common Stock"), of the Company, by tendering
the stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.

     Date of Conversion:

     Number of Preferred Shares to be converted:

     Stock certificate no(s). of Preferred Shares to be converted:

Please confirm the following information:

     Conversion Price:

     Number of shares of Common Stock to be issued:

     Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:

     Issue to:

     Facsimile Number:

     Authorization:
                By:
                Title:

     Dated:

     Account Number:
       (if electronic book entry transfer):

     Transaction Code Number
       (if electronic book entry transfer):

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