CONFIDENTIAL
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
Telescan, Inc.
_______________________________________________________________________
(Name of Registrant as Specified In Its Charter)
Not Applicable
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share, of Telescan, Inc.
("Telescan Common Stock")
_____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
21,729,891 shares of Telescan Common Stock (the maximum number
of shares of Telescan Common Stock that may be exchanged in the merger)
_____________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
$0.46 (based on the average of the bid and asked price of Telescan
Common Stock on June 8, 2001 as reported on the National Market System
of the National Association of Securities Dealers Automated Quotation
System)
_____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
$9,995,749.86
_____________________________________________________________________
(5) Total fee paid:
$1,999.15
_____________________________________________________________________
|_| Fee paid previously with preliminary materials:
_________________________________________________________________________
|X| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid: $2,086.07
________________________________________________________________
(2) Form, Schedule or Registration Statement No.: 0-17508
________________________________________________________________
(3) Filing Party: Telescan, Inc.
________________________________________________________________
(4) Date Filed: June 1, 2001
________________________________________________________________
[LOGO OF ZIASUN] [LOGO OF TELESCAN]
To the stockholders of ZiaSun Technologies, Inc. and Telescan, Inc.
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
The boards of directors of ZiaSun and Telescan have unanimously agreed to
merge the two companies to create INVESTools, a newly formed company that will
become a leading provider of investor education, financial publications and
analytical tools worldwide. Your vote, as a stockholder of ZiaSun or Telescan,
is now needed to approve the merger agreement.
If the merger is completed, ZiaSun and Telescan will engage in a business
combination that will result in each becoming a wholly owned subsidiary of
INVESTools. ZiaSun stockholders would each receive one share of INVESTools
common stock for each share of ZiaSun common stock they own, and holders of
Telescan common stock would receive 0.56486 shares of INVESTools common stock
for each share of Telescan common stock they own.
ZiaSun at its annual meeting of stockholders and Telescan at a special
meeting of stockholders will each ask its respective stockholders to approve
the merger agreement. The boards of directors of both ZiaSun and Telescan have
unanimously approved the merger and recommend that their respective
stockholders vote FOR the merger proposal. The proposed merger cannot be
completed unless a majority of the stockholders of ZiaSun and a majority of
the holders of Telescan common stock approve the merger agreement. If you fail
to return your proxy card or vote in person, the effect will be a vote against
the merger.
Information about the merger and the other matters to be considered at
ZiaSun's annual meeting and Telescan's special meeting is contained in the
attached joint proxy statement/prospectus. Please read the attached joint
proxy statement/prospectus carefully, including the section describing risk
factors that begins on page 12.
The date, time and place of the meetings are as follows:
for ZiaSun: for Telescan:
_____ __, 2001 at ___, _.m. ______ __, 2001 at ___, _.m.
[ADDRESS] [ADDRESS]
Whether or not you plan to attend the ZiaSun or Telescan meeting, please
complete, sign and date the enclosed ZiaSun proxy card, if you are a ZiaSun
stockholder, or the enclosed Telescan proxy card, if you are a Telescan
stockholder, and return it in the enclosed postage-prepaid envelope as soon as
possible to make sure that your shares are represented at your company's
meeting. If you attend the meeting, you may vote in person if you wish, even
though you previously returned your proxy card.
We strongly support this combination of our companies and join with our
boards of directors in recommending that you vote in favor of the merger.
/s/ /s/
D. Scott Elder Lee K. Barba
Chairman and Chief Executive Officer Chief Executive Officer
ZiaSun Technologies, Inc. Telescan, Inc.
- -----------------------------------------------------------------------------
| Neither the Securities and Exchange Commission nor any state securities |
| commission has approved or disapproved of the securities to be issued in |
| connection with the merger or determined if this joint proxy |
| statement/prospectus is accurate or complete. Any representation to the |
| contrary is a criminal offense. |
- -----------------------------------------------------------------------------
This joint proxy statement/prospectus is dated _______ __, 2001, and is
first being mailed to stockholders of ZiaSun and Telescan on or about
________ __, 2001.
Notice of Annual Meeting of
Stockholders
To the stockholders of ZiaSun Technologies, Inc.:
The annual meeting of the stockholders of ZiaSun Technologies, Inc. will
be held at ______________ on _____ __, 2001 at ___ _.m. for the following
purposes:
1. to consider and vote upon a proposal to approve and adopt a
merger agreement between ZiaSun Technologies, Inc. and Telescan, Inc.
pursuant to which ZiaSun and Telescan will engage in a business
combination that results in each becoming a wholly owned subsidiary of a
newly formed corporation, INVESTools Inc., as described in the attached
joint proxy statement/prospectus;
2. to elect five directors to serve for a term of one year or until
their successors have been elected and qualified;
3. to ratify and approve BDO Siedman, LLP to serve as ZiaSun's
independent public accountants for the year ended December 31, 2001; and
4. to conduct any other business properly brought before the annual
meeting or any adjournment or postponement of the meeting.
The accompanying joint proxy statement/prospectus describes the proposed
merger in more detail. ZiaSun encourages you to read the entire document
carefully.
ZiaSun is enclosing a copy of its Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
A list of stockholders entitled to vote at the annual meeting will be
open for examination by any stockholder for any purpose germane to the meeting
during ordinary business hours for a period of ten days prior to the annual
meeting at the office of ZiaSun, 665 San Rodolfo Drive, Suite 120, Solana
Beach, California 92075, and will also be available for examination at the
annual meeting until its adjournment.
Only stockholders of record at the close of business on ______ __, 2001
may vote at the annual meeting or any adjournment or postponement. Holders of
approximately 42% of the outstanding shares of ZiaSun stock have already
agreed to vote in favor of adopting the merger agreement. Under Nevada law,
holders of ZiaSun common stock are entitled to dissenters' rights as a result
of the merger under Sections 92A.300 to 92A.500, inclusive, of the Nevada
Revised Statutes. If the merger agreement is approved and adopted by the
ZiaSun stockholders and the merger is consummated, any ZiaSun stockholder who
(i) delivered to ZiaSun, before the vote was taken, written notice of his or
her intent to demand payment for his or her shares if the merger were to be
consummated and (ii) did not vote his or her shares in favor of the merger has
the right to demand an appraisal of the value of and payment for the
stockholder's ZiaSun common stock. The demand must be made in writing to
INVESTools by the date set forth on the written notice to be sent by ZiaSun to
the stockholder informing him or her that the merger has been approved and
adopted by the ZiaSun stockholders. Dissenters' rights are more completely
described in the accompanying joint proxy statement/prospectus under the
heading "The Merger--Dissenters' Rights" and the full text of these applicable
sections of Nevada Revised Statutes are attached as Annex VII.
Whether or not you plan to attend the meeting, please complete, sign and
date the enclosed proxy card, and return it in the enclosed postage-prepaid
envelope as soon as possible to make sure that your shares are represented at
the annual meeting. Your proxy may be revoked at any time before it is voted
by signing and returning a later dated proxy with respect to the same shares,
by filing with the Secretary of ZiaSun a written revocation bearing a later
date or by attending and voting at the annual meeting. If you fail to return
your proxy card or vote in person, the effect will be a vote against the
merger.
Allen D. Hardman
Secretary
______ __, 2001
Notice of Special Meeting of
Stockholders
To the stockholders of Telescan, Inc.:
A special meeting of the stockholders of Telescan, Inc. will be held at
______________ on _____ __, 2001 at ___ _.m. for the following purposes:
1. to consider and vote upon a proposal to approve and adopt a
merger agreement between ZiaSun Technologies, Inc. and Telescan, Inc.
pursuant to which ZiaSun and Telescan will engage in a business
combination that results in each becoming a wholly owned subsidiary of a
newly formed corporation, INVESTools Inc., as described in the attached
joint proxy statement/prospectus; and
2. to conduct any other business properly brought before the special
meeting or any adjournment or postponement of the meeting.
Please read the attached joint proxy statement/prospectus carefully for a
description of the merger agreement. Only stockholders of record at the close
of business on ______ __, 2001 may vote at the special meeting or any
adjournment or postponement. Holders of approximately 36% of the outstanding
shares of Telescan common stock have already agreed to vote in favor of
adopting the merger agreement. Under Delaware law, holders of Telescan common
stock are not entitled to appraisal rights in connection with the merger.
Whether or not you plan to attend the meeting, please complete, sign and
date the enclosed proxy card, and return it in the enclosed postage-prepaid
envelope as soon as possible to make sure that your shares are represented at
the special meeting. Your proxy may be revoked at any time before it is voted
by signing and returning a later dated proxy with respect to the same shares,
by filing with the Secretary of Telescan a written revocation bearing a later
date or by attending and voting at the special meeting. If you fail to return
your proxy card or vote in person, the effect will be a vote against the
merger.
Roger C. Wadsworth
Secretary
______ __, 2001
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE MERGER......................................1
SUMMARY.....................................................................3
The Companies......................................................3
The Merger.........................................................4
Recommendations of the Boards of Directors.........................4
The Annual and Special Stockholders' Meetings......................4
Record Dates; Votes Required; Management Ownership.................4
Voting Agreements..................................................5
Dissenters' Rights.................................................5
Interests of Directors and Officers in the Merger..................5
The Merger Agreement...............................................5
Accounting Treatment...............................................6
Merger Generally Tax-Free to ZiaSun and Telescan Stockholders......6
For ZiaSun Stockholders Only-- Election of Directors of Ziasun.....6
For ZiaSun Stockholders Only-- Ratify Ziasun's
Independent Accountants..........................................6
No Governmental Approvals or Regulatory Requirements...............6
Per Share Market Price Information.................................6
SUMMARY Historical Financial Data...........................................8
ZiaSun.............................................................8
Telescan...........................................................9
Summary Unaudited Pro Forma Combined Financial Data of ZiaSun
and Telescan....................................................10
Comparative Per Share Data........................................11
RISK FACTORS...............................................................12
Risks Relating to the Merger......................................12
Risks Relating to ZiaSun's Business...............................14
Risks Relating to Telescan's Business.............................21
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION................24
THE ZIASUN ANNUAL MEETING..................................................25
Date, Time and Place Of the Annual Meeting........................25
Purpose of the Annual Meeting.....................................25
Record Date; Stock Entitled to Vote...............................25
Votes Required; Voting Agreements.................................25
Share Ownership of Management.....................................26
Dissenters' Rights................................................26
How You Can Vote..................................................26
Board Recommendation..............................................27
Approval of Merger and Merger Agreement...........................28
Nomination and Election of Ziasun Directors.......................28
Ratification and Approval of the Ziasun's Independent
Public Accounts.................................................28
THE TELESCAN SPECIAL MEETING...............................................29
Date, Time and Place of the Special Meeting.......................29
Purpose of the Special Meeting....................................29
Record Date; Stock Entitled to Vote...............................29
Votes Required; Voting Agreements.................................29
-i-
Share Ownership of Management.....................................29
Appraisal Rights..................................................29
Board Recommendation..............................................29
How You Can Vote..................................................30
THE MERGER.................................................................31
What You Will Receive in the Merger...............................31
Background of the Merger..........................................31
ZiaSun's Reasons for the Merger; Recommendation of ZiaSun's
Board of Directors..............................................34
Telescan's Reasons for the Merger; Recommendation of
Telescan's Board of Directors...................................35
No Fairness Opinions Solicited....................................37
Interests of Directors and Executive Officers in the Merger.......37
Board of Directors and Management after the Merger................38
Material U.S. Federal Income Tax Consequences.....................39
Accounting Treatment of the Merger................................41
Exchange Procedures...............................................42
Treatment of Stock Options and Other Rights.......................42
Dissenters' Rights................................................42
No Governmental Approvals or Regulatory Requirements..............45
Expenses..........................................................45
Nasdaq Listing....................................................45
Delisting and Deregistration of ZiaSun and Telescan Stock
after the Merger................................................45
Stock Transfer Restrictions.......................................45
AGREEMENT AND PLAN OF MERGER...............................................46
General...........................................................46
Closing; Effective Time...........................................46
Representations and Warranties....................................46
Covenants.........................................................47
No Solicitation...................................................48
Conditions to Completion of the Mergers...........................50
Termination of the Merger Agreement...............................52
Termination Fee...................................................53
Amendment, Extension and Waiver...................................54
ANCILLARY AGREEMENTS.......................................................55
Voting Agreements.................................................55
Lock-Up Agreements................................................55
INVESTOOLS.................................................................56
ZIASUN BUSINESS............................................................57
General...........................................................57
Continuing Operations.............................................58
Discontinued Operations...........................................60
Distribution......................................................60
Recent Acquisitions and Investments...............................61
Raw Materials and Supplies........................................61
Intellectual Property.............................................61
Government Regulation.............................................62
Employees.........................................................62
Property..........................................................62
Legal Proceedings.................................................63
Per Share Market Price and Dividend Information...................64
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ZIASUN..................65
-ii-
ZIASUN MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS....................................................66
Overview..........................................................66
Results of Operations.............................................66
Liquidity and Capital Resources...................................68
Recent Accounting Pronouncements..................................70
Changes In, and Disagreements With, Accountants on
Accounting and Financial Disclosure.............................70
Market Risk Disclosure............................................71
ZIASUN MANAGEMENT..........................................................72
Directors and Executive Officers..................................72
Executive Compensation............................................74
General Information Concerning the Board of Directors and
its Committees..................................................77
Audit Committee...................................................77
Stock Option Plan Committee.......................................77
Compensation Committee............................................77
Compensation Committee Interlock and Insider Participation........77
ZiaSun Compensation Committee Report on Executive Compensation....78
General Compensation Philosophy...................................78
Executive Compensation............................................78
Chief Executive Officer Compensation..............................79
Internal Revenue Code Section 162(m) Limitation...................79
ZiaSun Audit Committee Report.....................................79
Stock Performance Graph...........................................80
Certain Relationships and Related Transaction with
Directors and Executive Officers................................81
Beneficial Ownership of Securities................................82
TELESCAN BUSINESS..........................................................83
General...........................................................83
Corporate Background..............................................83
Services and Products.............................................83
Business Strategy.................................................84
Marketing.........................................................86
Customers.........................................................86
Proprietary Rights................................................86
Competition.......................................................86
Employees.........................................................87
Governmental Regulation...........................................87
Description of Property...........................................87
Legal Proceedings.................................................87
Per Share Market Price and Dividend Information...................88
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TELESCAN................89
TELESCAN MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS....................................................90
Business Overview.................................................90
Results of Operations.............................................90
Liquidity and Capital Resources...................................93
Changes in, and Disagreements with, Accountants on
Accounting and Financial Disclosure.............................94
Market Risk Disclosure............................................95
TELESCAN MANAGEMENT........................................................96
Directors and Executive Officers..................................96
Executive Compensation............................................98
Security Ownership of Certain Beneficial Owners and
Management.....................................................102
Certain Relationships and Related Transaction with
Directors and Executive Officers...............................103
-iii-
DESCRIPTION OF INVESTOOLS CAPITAL STOCK...................................104
General..........................................................104
Description of Common Stock......................................104
Additional Series of Preferred Stock.............................104
Description of Series A Preferred Stock..........................104
Anti-Takeover Effects............................................105
Listing..........................................................105
COMPARISON OF STOCKHOLDER RIGHTS..........................................106
Corporate Governance.............................................106
Authorized Capital Stock.........................................106
Voting Rights....................................................106
Number of Directors..............................................107
Nomination and Election of Directors.............................107
Terms and Classification of the Board of Directors...............107
Removal of Directors.............................................107
Filling Director Vacancies.......................................108
Special Meetings of Stockholders.................................108
Stockholder Action by Written Consent............................108
Advance Notice Provisions........................................109
Amendments to Certificate of Incorporation.......................109
Amendments to By-Laws............................................109
Limitation on Personal Liability of Directors and Officers.......110
Indemnification of Directors and Officers........................110
Directors' and Officers' Insurance...............................110
WHERE YOU CAN FIND MORE INFORMATION.......................................111
LEGAL MATTERS.............................................................111
EXPERTS...................................................................111
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETINGS OF ZIASUN
AND TELESCAN............................................................112
LIST OF ANNEXES...........................................................113
FINANCIAL STATEMENTS......................................................F-1
ZiaSun.................................................................F-1
Telescan..............................................................F-45
Combined ZiaSun and Telescan on a Pro Forma Basis.....................F-77
Annex I Agreement and Plan of Merger..................................I-1
Annex II Voting Agreements............................................II-1
Annex III Lock-Up Agreements..........................................III-1
Annex IV Employment Agreements........................................IV-1
Annex V Restated Certificate of Incorporation of INVESTools...........V-1
Annex VI By-Laws of INVESTools........................................VI-1
Annex VII Sections 92A.300 to 92A.500 of the Nevada Revised Statutes..VII-1
-iv-
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why am I receiving these materials?
A: We are sending you these materials to help you decide how to vote your
shares of ZiaSun or Telescan stock with respect to their proposed merger.
Q: Why are ZiaSun and Telescan proposing the merger?
A: We are proposing the merger to create INVESTools, a newly formed company
that will become a leading provider of investor education, financial
publications and analytical tools worldwide.
Q: What will I receive in the merger?
A: ZiaSun stockholders will receive one share of INVESTools common stock for
each share of ZiaSun common stock they own.
Telescan stockholders will receive 0.56486 shares of INVESTools common
stock for each share of Telescan common stock they own.
Q: Do the companies recommend voting in favor of the proposed merger?
A: Yes. The boards of directors of both ZiaSun and Telescan have unanimously
approved the merger and recommend that their respective stockholders vote
in favor of the merger.
Q: What approvals are needed?
A: For ZiaSun, the affirmative vote of the holders of a majority of the
outstanding shares of ZiaSun common stock is required to approve the
merger agreement. Each holder of ZiaSun common stock is entitled to one
vote per share. Holders of approximately 42% of the outstanding shares of
ZiaSun common stock have already agreed to vote in favor of approving the
merger agreement.
For Telescan, the affirmative vote of the holders of a majority of the
outstanding shares of Telescan common stock is required to approve the
merger agreement. Each holder of Telescan common stock is entitled to one
vote per share. Holders of Telescan preferred stock are not entitled to
vote on the merger proposal. Holders of approximately 36% of the
outstanding shares of Telescan common stock have already agreed to vote
in favor of approving the merger agreement.
Q: How will ZiaSun and Telescan be combined?
A: ZiaSun and Telescan will become wholly owned subsidiaries of INVESTools.
The former ZiaSun stockholders will own approximately 75% of INVESTools
and the former Telescan common and preferred stockholders will own the
remaining interest of approximately 25%.
Q: What are the tax consequences of the merger to me?
A: We expect that the merger will be tax-free to ZiaSun and Telescan
stockholders for federal income tax purposes. To review the tax
consequences in greater detail see the section entitled "The
Merger--Material U.S. Federal Income Tax Consequences" that begins on
page 39.
Q: What do I need to do now?
A: Carefully read this document. It contains important information regarding
the proposed merger, as well as information about ZiaSun and Telescan.
After considering the information contained in this document, indicate on
your enclosed proxy card how you want to vote. Sign, date and mail the
proxy card in the enclosed postage-prepaid envelope as soon as possible
so that your shares may be represented at your company's meeting.
You should indicate your vote now even if you expect to attend your
company's meeting and vote in person. Indicating your vote now will not
prevent you from later canceling or revoking your proxy right up to the
time your proxy is voted at the meeting and will ensure that your shares
are voted if you later find you cannot attend.
-1-
Q: When and where is ZiaSun's annual stockholders' meeting?
A: The ZiaSun annual stockholders' meeting will take place at ______________
on _____ __, 2001 at ___ _.m.
Q: When and where is Telescan's special stockholders' meeting?
A: The Telescan special stockholders' meeting will take place at
______________ on _____ __, 2001 at ___ _.m.
Q: If my shares are held in "street name" by a broker or bank, will my
broker or bank vote my shares for me?
A: Your broker or bank will vote your shares held by them in "street name"
only if you provide instructions to them on how to vote. You should
follow the directions your broker or bank provides. Shares that are not
voted because a stockholder does not properly instruct its broker or
bank will be counted as votes against the merger.
Q: What if I don't vote?
A: If you fail to respond, it will have the same effect as a vote against
the merger. If you respond and do not indicate how you want to vote, your
proxy will be counted as a vote in favor of the merger. If you respond
and indicate that you are abstaining from voting, your proxy will have
the same effect as a vote against the merger.
Q: Can I change my vote after I have delivered my proxy?
A: Yes. You may change your vote at any time before your proxy is voted at
your company's meeting by:
o sending a written notice to the Secretary of ZiaSun, if you are a
ZiaSun stockholder, or of Telescan, if you are a Telescan
stockholder, before the meeting stating that you would like to
revoke your proxy;
o signing a later-dated proxy card and returning it by mail in time to
be received before the meeting; or
o attending the meeting and voting in person.
Q: Should I send in my stock certificates now?
A: No. You will receive written instructions from the exchange agent after
the merger is completed on how to exchange your stock certificates for
INVESTools shares. Please do not send in your stock certificates with
your proxy.
Q: When do you expect the merger to be completed?
A: We are working to obtain all necessary stockholder approvals and complete
the merger as quickly as possible. We expect to complete the merger
immediately after approval by the ZiaSun and Telescan stockholders.
Q: Who can help answer my questions?
A: If you have any questions about the merger or how to submit your proxy,
or if you need additional copies of this document or the enclosed proxy
card, you should contact:
ZiaSun Technologies, Inc. Telescan, Inc.
655 San Rodolfo, Suite 120 5959 Corporate Drive, Suite 2000
Solana Beach, CA 90275 - or - Houston, TX 77036
(858) 350-4060 (281) 588-9700
Attention: Investor Relations Attention: Investor Relations
-2-
SUMMARY
This summary and the preceding questions and answers highlight selected
information from this joint proxy statement/prospectus. They do not contain
all of the information that is important to you. To fully understand the
proposed merger and the consequences to you, and for a more complete
description of the legal terms of the merger, we urge you to read carefully
the entire joint proxy statement/prospectus and the documents we refer to in
this document. We have included page references directing you to a more
complete description of the items presented in this summary.
The Companies
INVESTools Inc. (see page 56)
5959 Corporate Drive, Suite 2000
Houston, TX 77036
(281) 588-9700
INVESTools is a newly formed company that will, as a result of the
merger, become a leading provider of investor education, financial
publications and analytical tools worldwide. INVESTools will own 100% of
ZiaSun and 100% of Telescan upon completion of the merger. On a pro forma
combined basis, INVESTools recorded $89.5 million of revenues for the year
ending December 31, 2000.
As discussed below, INVESTools will create a combination of proven
classroom investor education with advanced e-finance services and
web-delivered analytical tools. The pro forma combined company is already
doing business in 12 countries. In the year 2000, the combined operations:
o conducted more than 1,200 investment seminars and 270 two-day
investment workshops in 80 U.S. and 17 international cities;
o served more than 100,000 paying customers at price points ranging
from $15 per month to $4,000 for a complete, two-day investor
education workshop;
o reached more than one million active investors each month through
Web sites and e-mail lists; and
o represented more than 40 unique, recognizable brands, including
INVESTools, Investor Toolbox, WallStreetCity and others.
The combined company is being built on a solid and practical business
platform, in which the investor workshops complement the online financial
tools. Investors are better able to leverage the power of online financial
tools, if they are provided a variety of ways to become familiar with those
tools, including live seminars, video tapes, audio tapes and Web based
information. This multi-channel approach is also expected to produce a pro
forma combined positive cash flow, providing significant differentiation from
many purely Web based business models.
ZiaSun Technologies, Inc. (see page 57)
655 San Rodolfo, Suite 120
Solana Beach, CA 90275
(858) 350-4060
ZiaSun is an Internet technology holding company focused on international
investor education and e-finance. ZiaSun's revenues are largely derived from
Online Investors Advantage, Inc., a wholly owned subsidiary. Online Investors
Advantage provides in-depth consumer training in the optimum use of
Internet-based investment and financial management tools and services via live
workshops, home study and online subscriptions. It has developed a live
two-day workshop and a video-based home-study program, both of which it
promotes online and through a multi-step marketing program. Online Investors
Advantage has a current customer base of approximately 12,000 individuals and
expanded its international presence significantly in 2000.
-3-
The proposed merger into INVESTools fulfills a strategic objective of
ZiaSun to vertically integrate its investor education services with Telescan's
ProSearch technology, which has been an integral part of the investor
workshops and home-study courses.
Telescan, Inc. (see page 83)
5959 Corporate Drive, Suite 2000
Houston, TX 77036
(281) 588-9700
Telescan delivers premium investment advice and education to individual
investors online through two Web properties, INVESTools.com and
WallStreetCity.com. INVESTools.com publishes actionable investment advice and
education, and WallStreetCity.com is well known for its investment search
tool, ProSearch. Telescan also offers private-label subscription marketing and
e-mail list management services to marquee clients like Gilder Publishing,
TheStreet.com, TradingMarkets.com and StockJungle. In addition, through its
Business-to-Business Division, Telescan offers an array of online financial
solutions to businesses seeking to expand their offerings online and gain
greater cost efficiency through outsourcing. Telescan's business clients
include many of the nation's leading financial services and media companies,
including America Online, American Express, BusinessWeek Online, Forbes and
Quick & Reilly/Fleet National Bank.
The merger into INVESTools will provide Telescan a broader customer base
for its products and services, and will provide a more direct seminar-based
connection with the users of its online financial tools. It will also provide
a pro forma combined company which expects to have positive cash flow, no
outstanding debt and therefore a strong platform on which to build further.
The Merger (see page 31)
If the merger is completed, ZiaSun and Telescan will engage in a business
combination that results in each becoming a wholly owned subsidiary of
INVESTools. ZiaSun stockholders will receive one share of INVESTools common
stock for each share of ZiaSun common stock they own, holders of Telescan
common stock will receive 0.56486 shares of INVESTools common stock for each
share of Telescan common stock they own and holders of Telescan preferred
stock will receive one share of INVESTools preferred stock for each share of
Telescan preferred stock they own. The former ZiaSun stockholders would own
approximately 75% of INVESTools and the former Telescan common and preferred
stockholders would own the remaining interest of approximately 25%.
Recommendations of the Boards of Directors (see pages 34 & 35)
To ZiaSun Stockholders: After careful consideration, ZiaSun's board of
directors unanimously recommends that its stockholders vote FOR the merger
proposal, FOR the election of the five persons nominated as ZiaSun directors,
and FOR the appointment of BDO Siedman, LLP to serve as ZiaSun's independent
public accountants for the year ended December 31, 2001.
To Telescan Stockholders: After careful consideration, Telescan's board
of directors unanimously recommends that its stockholders vote FOR the merger
proposal.
The Annual and Special Stockholders' Meetings (see pages 25 & 29)
The ZiaSun annual stockholders' meeting to consider and vote upon the
merger will be held at ______________ on _____ __, 2001 at ___ _.m.
The Telescan special stockholders' meeting to consider and vote upon the
merger will be held at ______________ on _____ __, 2001 at ___ _.m.
Record Dates; Votes Required; Management Ownership (see pages 25 & 29)
The board of directors of ZiaSun has fixed the close of business on
_______ __, 2001 as the record date for determination of stockholders entitled
to vote at the annual meeting of stockholders. The affirmative vote of the
holders of a majority of the shares of ZiaSun common stock outstanding as of
the record date is required to approve
-4-
the merger. As of the record date, ZiaSun directors and executive officers and
their affiliates owned and were entitled to vote __% of the outstanding shares
of ZiaSun common stock.
The board of directors of Telescan has fixed the close of business on
_______ __, 2001 as the record date for determination of stockholders entitled
to vote at the special meeting of stockholders. The affirmative vote of the
holders of a majority of the shares of Telescan common stock outstanding as of
the record date is required to approve the merger. As of the record date,
Telescan directors and executive officers and their affiliates owned and were
entitled to vote __% of the outstanding shares of Telescan common stock.
Voting Agreements (see page 55)
Holders of approximately 42% of the outstanding shares of ZiaSun common
stock have already agreed to vote in favor of approving the merger.
Holders of approximately 36% of the outstanding shares of Telescan common
stock have already agreed to vote in favor of approving the merger.
Dissenters' Rights (see page 42)
Under Nevada law, holders of ZiaSun common stock are entitled to
dissenters' rights as a result of the merger under Sections 92A.300 to
92A.500, inclusive, of the Nevada Revised Statutes. If the merger agreement is
approved and adopted by the ZiaSun stockholders and the merger is consummated,
any ZiaSun stockholder, who (i) delivered to ZiaSun, before the vote was
taken, written notice of his or her intent to demand payment for his or her
shares if the merger were to be consummated and (ii) did not vote his or her
shares in favor of the merger, has the right to demand an appraisal of the
value of and payment for the stockholder's ZiaSun common stock.
Under Delaware law, the common stockholders of Telescan are not entitled
to appraisal rights in connection with the merger.
Interests of Directors and Officers in the Merger (see page 37)
When you consider the merger agreement and the recommendations of the
boards of directors of ZiaSun and Telescan to vote in favor of the proposed
merger, you should be aware that directors and officers of each of ZiaSun and
Telescan may have interests in the merger that may differ from those of their
respective stockholders.
The Merger Agreement (see page 46)
We have attached the merger agreement as Annex I to this joint proxy
statement/prospectus. We encourage you to read the merger agreement.
Conditions to Completion of the Merger. Each of ZiaSun's and Telescan's
obligations to complete the merger are subject to the satisfaction or waiver
of conditions specified in the merger agreement, including the following:
o the adoption of the merger agreement by the stockholders of ZiaSun
and Telescan;
o dissenters' rights of the ZiaSun stockholders must not have been
perfected with respect to more than 1,000,000 shares of ZiaSun
common stock;
o the approval for listing, on Nasdaq, of the shares of INVESTools
common stock to be issued, or to be reserved for issuance, in
connection with the merger; and
o the receipt by each of ZiaSun and Telescan of satisfactory opinions
from tax counsels.
Termination of the Merger; Fees Payable. ZiaSun and Telescan can jointly
terminate the merger agreement at any time without completing the merger. In
addition, either ZiaSun or Telescan can terminate the
-5-
merger agreement in circumstances specified in the agreement, including if the
merger is not completed on or before November 1, 2001.
While the merger agreement prohibits ZiaSun and Telescan from soliciting
competing acquisition proposals, each may provide non-public information to,
and engage in negotiations and discussions with respect to, an unsolicited,
written superior proposal made to it. Furthermore, subject to compliance with
the terms of the merger agreement and payment of a fee equal to 3% of the
aggregate market value of its outstanding common stock as of May 2, 2001,
either party may terminate the merger agreement and accept a superior
proposal.
Directors and Management Following the Merger. Under the merger
agreement, upon completion of the merger the board of directors of INVESTools
will be comprised of seven individuals--D. Scott Elder, Ross W. Jardine, Hans
von Meiss, William D. Savoy, Lee K. Barba, Stephen C. Wood and one other
person to be named by ZiaSun. Mr. Savoy will be the chairman.
Accounting Treatment (see page 41)
Under generally accepted accounting principles, ZiaSun will be treated as
the acquiring entity in the merger and will account for the merger as a
purchase of Telescan for financial reporting and accounting purposes. After
the merger, the results of operations of ZiaSun and Telescan will be included
in the consolidated financial statements of INVESTools.
Merger Generally Tax-Free to ZiaSun and Telescan Stockholders (see page 39)
We expect that the exchange of shares by ZiaSun and Telescan for
INVESTools stock will be tax-free to ZiaSun and Telescan stockholders for U.S.
federal income tax purposes. You should be aware that the tax consequences to
you of the merger may depend upon your own situation. In addition, you may be
subject to state, local or foreign tax laws that are not discussed in this
joint proxy statement/prospectus. You should therefore consult with your own
tax advisor for a full understanding of the tax consequences to you of the
merger.
For ZiaSun Stockholders Only -- Election of Directors of Ziasun (see page 25)
ZiaSun stockholders are being asked to vote upon the election of five
directors to serve for a term of one year or until their successors have been
elected and qualified. The board of directors has nominated for election as
directors: D. Scott Elder, Allen D. Hardman, Ross W. Jardine, Hans von Meiss
and Christopher D. Outram.
For ZiaSun Stockholders Only -- Ratify Ziasun's Independent Accountants
(see page 25)
ZiaSun stockholders are being asked to ratify and approve BDO Siedman,
LLP to serve as ZiaSun's independent public accountants for the year ended
December 31, 2001.
No Governmental Approvals or Regulatory Requirements (see page 45)
We are not aware of any material federal or state regulatory requirements
or approvals required for completion of the merger, other than filing
certificates of merger in Delaware and Nevada at or before the effective time
of the merger.
Per Share Market Price Information (see pages 64 & 88)
ZiaSun's shares are traded on the OTC Bulletin Board of the NASD under
the symbol "ZSUN." On May 3, 2001, the last full trading day before our
announcement of the signing of the merger agreement, the closing price of
ZiaSun common stock was $0.69 per share, the high price was $0.70 per share
and the low price was $0.69 per share. On _____ __, 2001, the closing price of
ZiaSun common stock was $___ per share, the high price was $___ per share and
the low price was $___ per share
Telescan's shares are traded on the National Market System of Nasdaq
under the symbol "TSCN." On May 3, 2001, the closing price of Telescan common
stock was $0.80 per share, the high price was $0.82 per share
-6-
and the low price was $0.80 per share. On ________ ___, 2001, the closing
price of Telescan common stock was $___ per share, the high price was $___ per
share and the low price was $___ per share.
-7-
SUMMARY HISTORICAL FINANCIAL DATA
ZiaSun
The following table sets forth ZiaSun's summary historical consolidated
financial information. The summary historical consolidated financial
information as of and for the fiscal years ended December 31, 1996, 1997 and
1998 has been derived from, and should be read in conjunction with, ZiaSun's
audited historical consolidated financial statements and the notes thereto,
which have been audited by Jones, Jensen & Company, independent auditors, and
which, in the case of the fiscal year ended December 31, 1998, are attached to
this joint proxy statement/prospectus. The summary historical consolidated
financial information as of and for the fiscal year ended December 31, 1999
has been derived from, and should be read in conjunction with, ZiaSun's
audited historical consolidated financial statements and the notes thereto,
which have been audited by HJ & Associates, LLC, independent auditors, and
which are attached to this joint proxy statement/prospectus. The summary
historical consolidated financial information as of and for the fiscal year
ended December 31, 2000 has been derived from, and should be read in
conjunction with, ZiaSun's audited historical consolidated financial
statements and the notes thereto, which have been audited by BDO Siedman, LLP,
independent auditors, and which are attached to this joint proxy
statement/prospectus. The summary historical consolidated financial
information as of and for the fiscal quarters ended March 31, 2000 and 2001
has been derived from, and should be read in conjunction with, ZiaSun's
unaudited historical consolidated financial statements and the notes thereto
attached to this joint proxy statement/prospectus. In ZiaSun's opinion, all
adjustments (which consist only of normal recurring entries) considered
necessary for a fair presentation have been included in ZiaSun's unaudited
financial statements. Interim results for the fiscal quarter ended March 31,
2001 are not necessarily indicative of, or projections for, the results to be
expected for the full fiscal year ending December 31, 2001. The following
summary historical consolidated financial information should be read in
conjunction with the sections entitled "Selected Historical Financial Data of
ZiaSun" and "ZiaSun Management's Discussion and Analysis of Financial
Condition and Results of Operations of ZiaSun" below and with the consolidated
financial statements of ZiaSun and the notes thereto attached to this joint
proxy statement/prospectus.
Quarters Ended
Statement of Operations March 31, Years ended December 31,
------------------ ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- --------- --------- --------- --------
(in thousands, except per share data)
Revenue.......................... $14,233 $12,914 $ 54,667 $23,620 $ -- $ -- $ --
Earnings (loss) before other
income and special charges..... (823) 3,189 4,143 4,386 (77) -- --
Goodwill impairment.............. -- -- (71,756) -- -- -- --
Other income (expense)........... (247) 94 167 17 -- -- --
Net income (loss) from
continuing operations.......... (1,093) 1,763 (70,548) 2,632 (77) (3,511) (4)
Net income (loss)................ $(1,233) $ 1,977 $(77,226) $ 5,964 $ 769 $(3,511) $ (4)
Net income (loss) per
common share from
continuing operations
Basic........................ $ (0.04) $ 0.08 $ (2.37) $ 0.12 $ -- $ -- $ --
======== ======= ========= ======= ====== ====== ======
Diluted...................... $ (0.04) $ 0.08 $ (2.37) $ 0.10 $ -- $ -- $ --
======== ======= ========= ======= ====== ====== ======
Weighted average common
Shares outstanding
Basic......................... 32,315 22,219 29,744 21,770 17,023 15,467 800
======== ======= ========= ======= ====== ====== ======
Diluted....................... 32,315 22,269 29,744 25,796 17,023 15,467 800
======== ======= ========= ======= ====== ====== ======
December 31,
------------------------------------------------------
Balance Sheet Data March 31, 2001 2000 1999 1998 1997 1996
-------------------- --------- --------- -------- ----------- ---------
(in thousands)
Working capital.................. $ (584) $ 72 $6,373 $1,661,605 $(12,355) $66,379
Total assets..................... 47,513 47,713 19,457 4,765 123 66
Total stockholders' equity....... 40,881 42,099 15,736 4,165 37 66
-8-
Telescan
The following table sets forth certain of Telescan's summary historical
consolidated financial information. The summary historical consolidated
financial information as of and for the fiscal years ended December 31, 1996,
1997, 1998 and 1999 has been derived from, and should be read in conjunction
with, Telescan's audited historical consolidated financial statements and the
notes thereto, which have been audited by Hein + Associates LLP, independent
auditors, and which, in the case of the fiscal years ended December 31, 1998
and 1999, are attached to this joint proxy statement/prospectus. The summary
historical consolidated financial information as of and for the fiscal year
ended December 31, 2000 has been derived from, and should be read in
conjunction with, Telescan's audited historical consolidated financial
statements and the notes thereto, which have been audited by Arthur Andersen
LLP, independent auditors, and which are attached to this joint proxy
statement/prospectus. The summary historical consolidated financial
information as of and for the fiscal quarters ended March 31, 2000 and 2001
has been derived from, and should be read in conjunction with, Telescan's
unaudited historical consolidated financial statements and the notes thereto
attached to this joint proxy statement/prospectus. In Telescan's opinion, all
adjustments (which consist only of normal recurring entries) considered
necessary for a fair presentation have been included in Telescan's unaudited
financial statements. Interim results for the fiscal quarter ended March 31,
2001 are not necessarily indicative of, or projections for, the results to be
expected for the full fiscal year ending December 31, 2001. The following
summary historical consolidated financial information should be read in
conjunction with the sections entitled "Selected Historical Consolidated
Financial Data of Telescan" and "Telescan Management's Discussion and Analysis
of Financial Condition and Results of Operations" below and with consolidated
financial statements of Telescan and the notes thereto attached to this joint
proxy statement/prospectus.
Quarters Ended
Statement of Operations March 31, Years Ended December 31,
------------------ -----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- --------- --------- --------- ------- ---------
(in thousands, except per share amounts)
Revenue......................... $ 5,863 $ 9,827 $ 35,938 $ 26,438 $ 15,234 $ 16,467 $ 13,721
Earnings (loss) before other
income and special
charges....................... (1,321) (521) (6,457) (2,998) (6,277) (1,496) (4,130)
Write down of assets and other
charges....................... (701) (1,500) (11,742) -- (1,530) -- --
Cost of acquisition
opportunities................. -- -- (5,009) (3,287) -- -- --
Other income (expense).......... 23 12,245 (7,436) 435 (413) 341 349
Net income (loss) from
continuing operations......... (1,999) 8,183 (30,644) (5,850) (8,220) (1,155) (3,781)
Net income (loss)............... $(1,999) $ 8,183 $(30,644) $(5,850) $ (8,201) $ (1,174) $ (3,781)
Net income (loss) per common
share from continuing
operations
Basic....................... $ (0.12) $ 0.49 $ (1.85) $ (0.39) $ (0.66) $ (0.10) $ (0.32)
======== ======= ========= ======== ========= ========= =========
Diluted..................... $ (0.12) $ 0.47 $ (1.85) $ (0.39) $ (0.66) $ (0.10) $ (0.32)
======== ======= ========= ======== ========= ========= =========
Weighted average common shares
outstanding
Basic....................... 16,296 16,633 16,665 15,486 12,654 12,203 11,655
======== ======= ========= ======== ========= ========= =========
Diluted..................... 16,296 17,469 16,665 15,486 12,654 12,203 11,655
======== ======= ========= ======== ========= ========= =========
December 31,
-----------------------------------------------------
Balance Sheet Data March 31, 2001 2000 1999 1998 1997 1996
------------------ -------- -------- --------- --------- ---------
(in thousands)
Working capital................. $ (1,774) $ 4,156 $10,049 $ (641) $ 956 $ 436
Total assets.................... 14,642 19,440 82,899 13,401 13,178 11,673
Total long-term obligations..... 18 46 11,500 2,366 507 784
Total stockholders' equity...... 6,159 9,427 57,770 4,771 9,160 7,750
-9-
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF ZIASUN AND TELESCAN
Statement of Operations Quarter Ended Year Ended
March 31, 2001 December 31, 2000
-------------- -----------------
(in thousands, except per share amounts)
Revenue................................... $ 19,889 $ 89,457
Loss before other income and special
charges................................. (2,690) (4,579)
Write down of assets and other charges.... (701) (83,498)
Cost of acquisition opportunities......... -- (5,009)
Other income (expenses)................... (223) (7,269)
Net loss from continuing
operations.............................. $ (3,614) $(102,672)
Net loss per common share from
continuing operations
Basic................................. $ (0.09) $ (2.63)
========= ==========
Diluted............................... $ (0.09) $ (2.63)
========= ==========
Weighted average common shares outstanding
Basic................................. 41,520 39,157
========= ==========
Diluted............................... 41,520 39,157
========= ==========
Balance Sheet Data March 31, 2001
--------------
(in thousands)
Working capital........................... $(2,358)
Total assets.............................. 67,534
Total long-term obligations............... 18
Total stockholders' equity................ 52,419
-10-
COMPARATIVE PER SHARE DATA
The following table sets forth selected historical and pro forma per
common share data for income and stockholders' equity as of and for the
periods ended on the dates specified (i) on a historical basis for ZiaSun,
(ii) on a historical basis for Telescan, (iii) on a pro forma basis for ZiaSun
and Telescan combined, (iv) on a pro forma combined ZiaSun equivalent basis
and (v) on a pro forma combined Telescan equivalent basis. The following
information should be read in conjunction with the historical consolidated
financial statements of ZiaSun and Telescan included in this joint proxy
statement/prospectus. Neither ZiaSun nor Telescan has paid any cash dividends
to common stockholders during the periods ended on the dates specified below.
As of and for the
As of and for the Three Months Ended Year Ended
March 31, 2001 December 31, 2000
------------------------------------ ------------------
ZiaSun Historical
Income (loss) per share from continuing
operations, fully diluted.................. $ (0.04) $ (2.37)
Stockholders' equity per share............... 1.27 1.42
Telescan Historical
Income (loss) per share, fully diluted....... $ (0.12) $ (1.85)
Stockholders' equity per share............... 0.38 0.57
Pro Forma Combined Entity
Income (loss) per share from continuing
operations, fully diluted.................. $ (0.09) $ (2.63)
Stockholders' equity per share............... 1.26 N/A
ZiaSun Equivalent Pro Forma Basis
Income (loss) per share from continuing
operations, fully diluted.................. $ (0.11) $ (3.46)
Stockholders' equity per share............... 1.62 N/A
Telescan Equivalent Pro Forma Basis
Income (loss) per share, fully diluted....... $ (0.39) $(10.92)
Stockholders' equity per share............... 5.69 N/A
-11-
RISK FACTORS
By voting in favor of the approval of the merger agreement, ZiaSun and
Telescan stockholders will be choosing to invest in INVESTools common stock.
An investment in INVESTools common stock involves a high degree of risk. In
addition to the other information contained in this joint proxy
statement/prospectus, both ZiaSun and Telescan stockholders should carefully
consider the following risk factors in deciding whether to vote for the
merger. Any of the following risks could seriously harm INVESTools', ZiaSun's
or Telescan's business and financial results and cause the value of
INVESTools', ZiaSun's or Telescan's securities to decline which, in turn,
could cause you to lose all or part of your investment.
RISKS RELATING TO THE MERGER
ZiaSun and Telescan Stockholders will Receive a Fixed Ratio of Shares of
INVESTools Common Stock
Upon completion of the merger, each share of ZiaSun common stock will be
converted into one share of INVESTools common stock, and each share of
Telescan common stock will be converted into 0.56486 shares of INVESTools
common stock. There will be no adjustment to the exchange ratio if the market
price of either ZiaSun or Telescan common stock fluctuates. The market price
of INVESTools common stock that ZiaSun and Telescan stockholders will receive
upon completion of the merger will depend, among other things, upon the market
value of ZiaSun and Telescan common stock at the time of the merger. The share
prices of both ZiaSun and Telescan common stock are subject to price
fluctuations in the market for publicly-traded equity securities and have each
experienced significant volatility. As a result, the value of the ZiaSun or
Telescan shares you exchange, and the INVESTools shares you receive, in the
merger will not be known at the time you vote on the merger. We cannot predict
the market prices for either ZiaSun or Telescan common stock at any time
before the completion of the merger or the market price for INVESTools common
stock after the completion of the merger. We encourage you to obtain current
market quotations of ZiaSun and Telescan common stock.
INVESTools May Fail to Realize the Anticipated Benefits of the Merger
INVESTools may not realize the anticipated benefits and value of the
merger if it fails to successfully integrate the businesses of ZiaSun and
Telescan. For example,
o cross-marketing synergies may not achieve expected results;
o INVESTools may also incur unanticipated integration related costs;
and
o existing relationships with customers may be impaired.
Officers and Directors of Both Companies Have Different Interests from Yours
Certain officers and directors of ZiaSun and Telescan have certain
interests in the merger and participate in certain arrangements that are
different from, or are in addition to, those of ZiaSun and Telescan
stockholders generally. These include:
o Lee K. Barba, a current member of the board of directors and the
Chief Executive Officer of Telescan, will become a member of the
board of directors and the Chief Executive Officer of INVESTools;
o D. Scott Elder, the current Chairman of the board of directors and
the Chief Executive Officer of ZiaSun, will become a member of the
board of directors and an Executive Vice President of INVESTools;
o Ross W. Jardine, a current member of the board of directors and the
Vice President and Chief Financial Officer of ZiaSun, will become a
member of the board of directors and an Executive Vice President of
INVESTools;
o William D. Savoy, the current Chairman of the Telescan board of
directors, will become the Chairman of the board of directors of
INVESTools;
-12-
o Hans von Meiss, a current member of the board of directors of
ZiaSun, will become a member of the board of directors of
INVESTools;
o Stephen C. Wood, a current member of the Telescan board of
directors, will become a member of the board of directors of
INVESTools;
o Messrs. Barba, Elder and Jardine have each entered into employment
agreements with INVESTools. The agreements are summarized as
follows:
Employment Contract between Lee K. Barba and INVESTools. Mr. Barba's
employment agreement provides for a base salary of $425,000 and an
annual bonus. As determined by the board of directors, Mr. Barba
will be eligible to receive stock option grants and/or restricted
stock awards. If within 24 months after a change of control of
INVESTools Mr. Barba is terminated, he will receive a lump sum
payment of two times the sum of his annual salary and the greater of
the target and actual bonus.
Employment Contract between D. Scott Elder and INVESTools. Mr.
Elder's employment agreement provides for a base salary of $425,000
and an annual bonus. Upon approval of the board of directors, Mr.
Elder will be granted options to purchase, at fair market value
determined as of the grant date, an aggregate of 550,000 shares of
INVESTools common stock (which vest in four equal annual
installments beginning one year after the merger). As determined by
the board of directors, Mr. Elder will be eligible to receive stock
option grants and/or restricted stock awards. Additionally, under
his employment agreement, Mr. Elder is entitled to a merger
transition award of $600,000 (payable in three equal annual
installments beginning one year after the merger) and $600,000 worth
of shares of restricted stock of INVESTools (which vest in three
equal annual installments beginning one year after the merger). All
unpaid amounts or unvested shares will vest upon a change of control
of INVESTools. If within 24 months after a change of control of
INVESTools Mr. Elder is terminated, he shall receive a lump sum
payment of two times the sum of his annual salary and the greater of
the target and actual bonus.
Employment Contract between Ross Jardine and INVESTools. Mr.
Jardine's employment agreement provides for a base salary of
$425,000 and an annual bonus. Upon approval of the board of
directors, Mr. Jardine will be granted options to purchase, at fair
market value determined as of the grant date, an aggregate of
550,000 shares of INVESTools common stock (which vest in four equal
annual installments beginning one year after the merger). As
determined by the board of directors, Mr. Jardine will be eligible
to receive stock option grants and/or restricted stock awards.
Additionally, under his employment agreement, Mr. Jardine is
entitled to a merger transition award of $600,000 (payable in three
equal annual installments beginning one year after the merger) and
$600,000 worth of shares of restricted stock of INVESTools (which
vest in three equal annual installments beginning one year after the
merger). All unpaid amounts or unvested shares will vest upon a
change of control of INVESTools. If within 24 months after a change
of control of INVESTools Mr. Jardine is terminated, he shall receive
a lump sum payment of two times the sum of his annual salary and the
greater of the target and actual bonus.
o ZiaSun and Telescan officers and directors have continuing
indemnification against certain liabilities.
These interests may have influenced these officers and directors in
supporting the adoption of the merger.
INVESTools Common Stock May Be Deemed a "Penny Stock"
INVESTools common stock may, at some future time, be deemed to be a
"penny stock" as that term is defined in Rule 3a51-1 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Penny stocks are stocks
(i) with a price of less than five dollars per share; (ii) that are not traded
on a "recognized" national exchange; (iii) whose prices are not quoted on the
National Association of Securities Dealers Automated Quotation System
("Nasdaq") automated quotation system (Nasdaq-listed stocks must still meet
requirement (i) above); or (iv) of an issuer with net tangible assets of less
than $2,000,000 (if the issuer has been in continuous operation for at least
-13-
three years) or $5,000,000 (if in continuous operation for less than three
years), or with average annual revenues of less than $6,000,000 for the last
three years.
If INVESTools common stock were deemed a penny stock, section 15(g) and
Rule 3a51-1 of the Exchange Act would require broker-dealers dealing in
INVESTools common stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in INVESTools common
stock are urged to obtain and read such disclosures carefully before
purchasing any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act requires broker-dealers in penny
stocks to approve the account of any investor for transactions in such stocks
before selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks
of penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy of such
statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment
objectives. Compliance with these requirements may make it more difficult for
investors in INVESTools common stock to resell their shares to third parties
or to otherwise dispose of them.
RISKS RELATING TO ZIASUN'S BUSINESS
Liquidity and Cash Flow
For the three months ended March 31, 2001, ZiaSun had revenues of $14.2
million compared to $13.0 million for the same period in 2000, an increase of
about $1.2 million. ZiaSun believes that in order to maintain or increase
revenues additional marketing costs will have to be incurred. No assurance can
be given that ZiaSun will be able to maintain or increase revenues by
expanding marketing costs. Further, ZiaSun has no control over the stock
market or over the effect that its fluctuations have on the demand for
investor training seminars and materials. It is ZiaSun's intention to continue
increasing its marketing efforts and to explore new opportunities to generate
additional revenue.
At March 31, 2001 ZiaSun had $3.7 million in cash and had a positive cash
flow from continued operations of $807,669. ZiaSun had an accumulated deficit
of $75,240,010, primarily due to the write off of goodwill. At March 31, 2001,
ZiaSun had negative working capital of $583,854, resulting primarily from the
categorization of potential sales tax liability as a current obligation.
Competition
There are several corporations, firms and individuals engaged in the type
of business activities in which ZiaSun is presently engaged. Many of those
entities are more experienced and possess substantially greater financial
technological, marketing, operational and other resources than ZiaSun or its
subsidiaries. Some of ZiaSun's competitors have longer operating histories. In
addition, certain of ZiaSun's competitors offer a wider range of services and
financial products than ZiaSun, and thus may be able to respond more quickly
to new or changing opportunities, technologies and customer requirements.
Certain of ZiaSun's competitors also have greater name recognition and larger
customer bases that could be leveraged, thereby gaining market share from
ZiaSun. Such competitors could conduct more extensive promotional activities
and offer better terms and lower prices to customers than ZiaSun can.
Certain competitors have established cooperative relationships among
themselves or with third parties to enhance their services and products.
Accordingly, it is possible that new competitors or alliances among existing
competitors may significantly reduce ZiaSun's market share.
The current trend toward consolidation in the commercial banking industry
could further increase competition in all aspects of ZiaSun's business. While
ZiaSun cannot predict the type and extent of competitive
-14-
services that commercial banks and other financial institutions ultimately may
offer, or whether legislative barriers will be modified, ZiaSun may be
adversely affected by such competition or legislation. To the extent ZiaSun's
competitors are able to attract and retain customers based on the convenience
of one-stop shopping, ZiaSun's business or ability to grow could be adversely
affected.
There can be no assurance that ZiaSun will be able to compete effectively
with current or future competitors or that such competition will not have a
material adverse effect on ZiaSun's business, financial condition and
operating results.
Volatile Market for Common Stock
ZiaSun common stock is quoted on the OTC Bulletin Board of the NASD under
the symbol "ZSUN." The market price of ZiaSun common stock has been and is
likely to continue to be highly volatile and subject to wide fluctuations due
to various factors, many of which may be beyond ZiaSun's control, including:
quarterly variations in actual and anticipated operating results;
announcements of technological innovations or new software, services or
products by ZiaSun or its competitors; and changes in financial estimates and
recommendations by securities analysts. In addition, ZiaSun is an
Internet-related company. There have been large price and volume fluctuations
in the stock market which have affected the market prices of securities of
many technology and services companies, often unrelated to the operating
performance of such companies. These broad market fluctuations, as well as
general economic and political conditions, may adversely affect the market
price of ZiaSun common stock. In the past, volatility in the market price of a
company's securities has often led to securities class action litigation. Such
litigation could result in substantial costs and diversion of ZiaSun's
attention and resources, which could have a material adverse effect on
ZiaSun's business, financial condition and operating results.
Dependence on Key Employees
Historically, ZiaSun and its subsidiaries have been heavily dependent on
the ability of D. Scott Elder, Ross W. Jardine, Allen D. Hardman, Scott Harris
and David McCoy, who contribute essential technical and management experience.
ZiaSun currently only has an employment and non-competition agreement with
Allen D. Hardman. In the event of future growth in administration, marketing,
manufacturing and customer support functions, ZiaSun may have to increase the
depth and experience of its management team by adding new members. ZiaSun's
success will depend to a large degree upon the active participation of its key
officers and employees. Loss of services of any of the current officers and
directors could have a significant adverse effect on the operations and
prospects of ZiaSun. There can be no assurance that it will be able to employ
qualified persons on acceptable terms to replace officers that become
unavailable.
Risks Associated with Systems Failures
Many of the services and products offered by ZiaSun and its subsidiaries
are through the Internet, online service providers and touch-tone telephone.
Thus, ZiaSun depends heavily on the integrity of the electronic systems
supporting this activity, including ZiaSun's internal software programs and
computer systems. ZiaSun's systems or any other systems of third parties
utilized by it could slow down significantly or fail for a variety of reasons
including: undetected errors in ZiaSun's internal software programs or
computer systems; ZiaSun's inability to effectively resolve any errors in
ZiaSun's internal software programs or computer systems once they are
detected; or heavy stress placed on ZiaSun's system during certain peak hours
of usage of either ZiaSun's own or its third party provider systems. In the
past, ZiaSun has experienced slower response times and interruptions in
service for a variety of reasons. ZiaSun could also be affected by computer
viruses, electronic break-ins or other similar disruptions. If any of these
systems slows down significantly or fails even for a short time, ZiaSun's
customers would suffer delays and dissatisfaction.
ZiaSun could experience a number of adverse consequences as a result of
these systems failures including the loss of existing customers and the
inability to attract or retain new customers. There can be no assurance that
ZiaSun's network structure or those of third party service providers will
operate appropriately in any of the following events: subsystem, component or
software failure; a power or telecommunications failure; human error; an
earthquake, fire or other natural disaster; or an act of God or war. There can
be no assurance that in any such
-15-
event, ZiaSun will be able to prevent an extended systems failure. Any such
systems failure that interrupts ZiaSun's operations could have a material
adverse effect on ZiaSun's business, financial condition and operating
results.
Security Breaches and Risks Associated with Encryption Technology
A significant barrier to online commerce is the secure transmission of
confidential information over public networks. The security of ZiaSun's
customers' confidential transaction data could be jeopardized as a result of
the accidental or intentional acts of Internet users, current and former
employees or others or computer viruses. ZiaSun could lose customers and be
liable for damages caused by these security breaches, which could result in
poor operating results. Security breaches experienced by other electronic
commerce companies could reduce consumers' confidence in ZiaSun. Although we
plan to continue to use encryption and authentication technology, these
measures can be circumvented. There can be no assurance that advances in
computer and cryptography capabilities or other developments will not result
in a compromise of the encryption and authentication technology ZiaSun uses to
protect customer transaction data. If any such compromise of ZiaSun's security
were to occur, it could have a material adverse effect on ZiaSun's business,
financial condition and operating results. In addition, the costs required to
continually upgrade ZiaSun's security measures could be prohibitively
expensive and could result in delays or interruption of service that could
result in a loss of customers.
Risks Associated with Significant Fluctuations in Quarterly Operating Results
ZiaSun expects to experience large fluctuations in future quarterly
operating results that may be caused by many factors, including: the timing of
introductions or enhancements to online investing services and other products
by ZiaSun or its competitors; market acceptance of online investing services
and products; the pace of development of the market for online commerce;
changes in trading volume in securities markets; trends in securities markets;
domestic and international regulation of the brokerage industry; changes in
pricing policies by ZiaSun or its competitors; changes in strategy; the
success of or costs associated with acquisitions, joint ventures or other
strategic relationships; changes in key personnel; seasonal trends; the extent
of international expansion; the mix of international and domestic revenues;
changes in the level of operating expenses to support projected growth; and
general economic conditions. ZiaSun has also experienced fluctuations in the
average number of customer transactions per day. Thus, the rate of growth in
customer transactions at any given time is not necessarily indicative of
future transaction activity.
ZiaSun's sales increased by $1,319,409 in the first quarter of 2001 as
compared to the first quarter of 2000. This is an increase of 10%. ZiaSun's
gross margin was 43% of sales in the first quarter of 2000 compared to 32% in
the first quarter of 2001. This decrease in gross margin was due to the higher
cost of seminars in the first quarter of 2001 than the first quarter of 2000.
ZiaSun's cost of seminars is higher because the average attendance at the
seminars has declined from approximately 60 attendees per seminar in the first
quarter of 2000 to approximately 45 attendees per seminar in the first quarter
of 2001. ZiaSun provides the same quality of meeting facilities and speakers
no matter what the attendance may be at its seminars. Management attributes
the average attendance decrease to the overall decline in the stock market.
The operating expenses of ZiaSun are based in part on ZiaSun's
expectations of its future revenues and are relatively fixed in the short
term. ZiaSun may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall. If ZiaSun has a shortfall in revenues in
relation to its expenses, or if its expenses precede increased revenues, then
ZiaSun's results of operations and financial condition would be materially
adversely affected.
Risks Associated with Management of a Changing Business
ZiaSun has grown rapidly and ZiaSun's business and operations have
changed substantially since ZiaSun began offering online investing services
and products, and ZiaSun expects this trend to continue. Such rapid change and
expansion places significant demands on ZiaSun's administrative, operational,
financial and other resources.
If ZiaSun's revenues do not keep up with operating expenses, ZiaSun's
information management systems do not expand to meet increasing demands,
ZiaSun fails to attract, assimilate and retain qualified personnel, or ZiaSun
fails to manage ZiaSun's expansion effectively, there could be a material
adverse effect on ZiaSun's
-16-
business, financial condition and operating results. The rapid growth in the
use of ZiaSun's services may strain ZiaSun's ability to adequately expand
technologically.
As ZiaSun acquires new equipment and applications quickly, ZiaSun has
less time and ability to test and validate hardware and software, which could
lead to performance problems. ZiaSun also relies on a number of third parties
to process ZiaSun's transactions, including online and Internet service
providers, back office processing organizations, service providers and
market-makers, all of which will need to expand the scope of the operations
they perform for ZiaSun. Any backlog caused by a third party's inability to
expand sufficiently to meet ZiaSun's needs could have a material adverse
effect on its business, financial condition and operating results. As trading
volume increases, ZiaSun may have difficulty hiring and training qualified
personnel at the necessary pace, and the shortage of licensed personnel could
cause a backlog in the processing of orders that need review, which could lead
not only to unsatisfied customers, but also to liability for orders that were
not executed on a timely basis.
Risks Associated with Early Stage of Market Development; Dependence on
Online Commerce and the Internet
The market for online investing services is rapidly evolving.
Consequently, demand and market acceptance for recently introduced services
and products are subject to a high level of uncertainty. For ZiaSun, this
uncertainty is compounded by the risks that consumers will not adopt online
commerce and that commerce on the Internet will not adequately develop or
flourish to permit ZiaSun to succeed.
Sales of many of ZiaSun's services and products will depend on consumers
adopting the Internet as a method of doing business. This may not occur
because of inadequate development of the necessary infrastructure, such as a
reliable network infrastructure, or complementary services and products such
as high-speed modems and communication lines. The Internet has grown and is
expected to grow both in number of users and amount of traffic. There can be
no assurance that the Internet infrastructure will continue to be able to
support the demands placed on it by this continued growth. In addition, the
Internet could lose its viability due to slow development or adoption of
standards and protocols to handle increased Internet activity, or due to
increased governmental regulation.
Moreover, critical issues including security, reliability, cost, ease of
use, accessibility and quality of service remain unresolved and may negatively
affect the growth of Internet use or commerce on the Internet. Because use of
the Internet for commerce is new and evolving, there can be no assurance that
the Internet will prove to be a viable commercial marketplace. If these
critical issues are not resolved, if the necessary infrastructure is not
developed, or if the Internet does not become a viable commercial marketplace,
ZiaSun's business, financial condition and operating results will be
materially adversely affected. Adoption of online commerce by individuals that
have relied upon traditional means of commerce in the past will require such
individuals to accept new and very different methods of conducting business.
Additionally, ZiaSun's services over the Internet involve a new approach
to investing research, which will require on-going marketing and sales efforts
to educate prospective customers regarding the Internet's uses and benefits.
For example, consumers who trade with more traditional brokerage firms, or
even discount brokers, may be reluctant or slow to change to obtaining
brokerage services over the Internet. Also, concerns about security and
privacy on the Internet may hinder the growth of online investing research and
trading, which could have a material adverse effect on ZiaSun's business,
financial condition and operating results.
Declines in ZiaSun's Stock Price; Securities Class Action Litigation
The market price of ZiaSun's stock has declined over the past year and
may continue to decline in the future. In addition, most publicly-held
Internet companies have experienced market price and trading volume declines.
These broad market and industry factors may materially adversely affect the
market price of ZiaSun stock, regardless of ZiaSun's actual operating
performance. In the past, following periods of decline in the market price of
a company's securities, securities class action litigation often has been
instituted against such company. This type of litigation, if instituted, could
result in substantial costs and a diversion of ZiaSun's management's attention
and resources.
-17-
Risks Associated with the Securities Industry; Concentration of Services
Most of ZiaSun's revenue in the past has been from ZiaSun's online
investor services and products, and ZiaSun expects this business to continue
to account for most of ZiaSun's revenue in the foreseeable future. ZiaSun,
like other companies in the Internet securities industry, is directly affected
by economic and political conditions, broad trends in business and finance and
changes in volume and price levels of securities and futures transactions. In
recent months, the U.S. securities markets have fluctuated considerably and a
downturn in these markets could affect customer's interest in its products and
services and adversely affect ZiaSun's operating results.
The stock market has recently suffered major declines, as a result of
which many companies and firms suffered financial losses, and the level of
individual investor trading activity decreased after these events. Reduced
trading volume and prices have historically resulted in reduced revenues to
companies such as ZiaSun. When trading volume is low and investor and customer
interest in or use of ZiaSun's products and services diminishes, ZiaSun's
operating results may be adversely affected because ZiaSun's overhead remains
relatively fixed. Severe market fluctuations in the future could have a
material adverse effect on ZiaSun's business, financial condition and
operating results.
Risks Associated with Delays in Introduction of New Services and Products
ZiaSun's future success depends in part on ZiaSun's ability to develop
and enhance ZiaSun's services and products and to adapt to rapidly changing
Internet technologies. There are significant technical risks, as well as
costs, in the development of new services and products or enhanced versions of
existing services and products. There can be no assurance that ZiaSun will be
successful in achieving any of the following: effectively using new
technologies; adapting ZiaSun's services and products to emerging industry
standards; developing, introducing and marketing service and product
enhancements; or developing, introducing and marketing new services and
products. ZiaSun may also experience difficulties that could delay or prevent
the development, introduction or marketing of these services and products.
Additionally, these new services and products may not adequately meet the
requirements of the marketplace or achieve market acceptance. If ZiaSun is
unable to develop and introduce enhanced or new services and products quickly
enough to respond to market or customer requirements, or if they do not
achieve market acceptance, ZiaSun's business, financial condition and
operating results will be materially adversely affected.
Risks Associated with Dependence on Intellectual Property Rights
ZiaSun does not presently hold any patents, but does hold some registered
copyrights. ZiaSun is also currently in the process of seeking copyright and
trademark protection of its trade names and Web site addresses. ZiaSun's
success and ability to compete are dependent to a degree on ZiaSun's name and
product recognition. Accordingly, ZiaSun will primarily rely on copyright,
trade secret and trademark law to protect its products, services and brand
names under which ZiaSun conducts its business. Effective trademark protection
may not be available for ZiaSun's trademarks. There can be no assurance that
ZiaSun will be able to secure significant protection for ZiaSun's trademarks.
ZiaSun's competitors or others may adopt product or service names similar
to ZiaSun's, thereby impeding ZiaSun's ability to build brand identity and
possibly leading to customer confusion. ZiaSun's inability to protect its
product, brand, trade names and trademarks adequately would have a material
adverse effect on ZiaSun's business, financial condition and operating
results. Despite any precautions ZiaSun takes, a third party may be able to
copy or otherwise obtain and use ZiaSun's software or other proprietary
information without authorization or to develop similar software
independently.
In addition, ZiaSun does not know whether it will be able to defend its
proprietary rights since the validity, enforceability and scope of protection
of proprietary rights in Internet-related industries is still evolving.
Policing unauthorized use of ZiaSun's technology is made especially difficult
by the global nature of the Internet and the difficulty in controlling the
ultimate destination or security of software or other data transmitted
thereon. The laws of other countries may afford ZiaSun little or no effective
protection for ZiaSun's intellectual property.
There can be no assurance that the steps ZiaSun takes will prevent
misappropriation of ZiaSun's technology or that agreements entered into for
that purpose will be enforceable. In addition, litigation may be
-18-
necessary in the future to enforce ZiaSun's intellectual property rights;
protect ZiaSun's trade secrets; determine the validity and scope of the
proprietary rights of others; or defend against claims of infringement or
invalidity. Such litigation, whether successful or unsuccessful, could result
in substantial costs and diversions of resources, either of which could have a
material adverse effect on ZiaSun's business, financial condition and
operating results.
Risks Associated with Infringement
ZiaSun may in the future receive notices of claims of infringement on
other parties' proprietary rights. There can be no assurance that claims for
infringement or invalidity (or any indemnification claims based on such
claims) will not be asserted or prosecuted against ZiaSun. Any such claims,
with or without merit, could be time consuming and costly to defend or
litigate, divert ZiaSun's attention and resources or require ZiaSun to enter
into royalty or licensing agreements. There can be no assurance that such
licenses would be available on reasonable terms, if at all, and the assertion
or prosecution of any such claims could have a material adverse effect on
ZiaSun's business, financial condition and operating results.
Risks Associated with Entering New Markets
One element of ZiaSun's strategy is to leverage ZiaSun's brand names and
services that ZiaSun and its subsidiaries provide. No assurance can be given
that ZiaSun will be able to successfully adapt ZiaSun's products and services
for use in other markets. Even if ZiaSun does adapt ZiaSun's products to other
markets, no assurance can be given that ZiaSun will be able to compete
successfully in any such new markets. There can be no assurance that ZiaSun's
marketing efforts or ZiaSun's pursuit of any new opportunities will be
successful. If ZiaSun's efforts are not successful, ZiaSun could realize less
than expected earnings, which in turn could result in a decrease in the market
value of ZiaSun common stock. Furthermore, such efforts may divert management
attention or inefficiently utilize ZiaSun's resources.
Risks Associated with International Strategy
One component of ZiaSun's strategy is a planned increase in efforts to
attract additional international customers and to expand ZiaSun's Online
Investors Advantage, Inc. ("OIA") seminars, services and products into
international markets.
There are certain risks inherent in doing business in international
markets, such as: unexpected changes in regulatory requirements, tariffs and
other trade barriers; difficulties in staffing and managing foreign
operations; political instability; fluctuations in currency exchange rates;
reduced protection for intellectual property rights in some countries;
seasonal reductions in business activity during the summer months in Europe
and certain other parts of the world; and potentially adverse tax
consequences. Any of the foregoing could adversely impact the success of
ZiaSun's international operations. In some of the countries in which ZiaSun
does business, ZiaSun relies upon third parties for a variety of business and
regulatory compliance matters. ZiaSun has limited control over the management
and direction of these third parties. ZiaSun runs the risk that their action
or inaction could harm ZiaSun's operations and/or the goodwill associated with
ZiaSun's brand names. As a result, the risk to its operations and goodwill is
higher. There can be no assurance that one or more of the factors described
above will not have a material adverse effect on ZiaSun's future international
operations, if any, and, consequently, on its business, financial condition
and operating results.
ZiaSun Common Stock May Be Deemed a "Penny Stock"
ZiaSun common stock may, at some future time, be deemed to be a "penny
stock" as that term is defined in Rule 3a51-1 of the Exchange Act. Penny
stocks are stocks (i) with a price of less than five dollars per share; (ii)
that are not traded on a "recognized" national exchange; (iii) whose prices
are not quoted on the Nasdaq automated quotation system (Nasdaq-listed stocks
must still meet requirement (i) above); or (iv) of an issuer with net tangible
assets of less than $2,000,000 (if the issuer has been in continuous operation
for at least three years) or $5,000,000 (if in continuous operation for less
than three years), or with average annual revenues of less than $6,000,000 for
the last three years.
-19-
A principal exclusion from the definition of a penny stock is an equity
security that has a price of five dollars ($5.00) or more, excluding any
broker or dealer commissions, markups or markdowns. As of the date of this
joint proxy statement/prospectus, ZiaSun common stock has a price less than
$5.00.
If ZiaSun common stock were deemed a penny stock, section 15(g) and Rule
3a51-1 of the Exchange Act would require broker-dealers dealing in ZiaSun
common stock to provide potential investors with a document disclosing the
risks of penny stocks and to obtain a manually signed and dated written
receipt of the document before effecting any transaction in a penny stock for
the investor's account. Potential investors in ZiaSun common stock are urged
to obtain and read such disclosures carefully before purchasing any shares
that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act requires broker-dealers in penny
stocks to approve the account of any investor for transactions in such stocks
before selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks
of penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy of such
statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment
objectives. Compliance with these requirements may make it more difficult for
investors in ZiaSun common stock to resell their shares to third parties or to
otherwise dispose of them.
ZiaSun Business Would be Affected if ZiaSun is Deemed to be an Investment
Advisor
On May 2, 2001, the California Department of Corporations advised ZiaSun
that it could not grant ZiaSun's application to qualify to offer and sell
certain shares of ZiaSun common stock in California, as the California
Department of Corporations believed that ZiaSun's wholly owned subsidiary OIA
was acting as an unlicensed investment adviser in California. In May 2001,
ZiaSun renewed its request that the application be approved, asserting that
based on existing case law and an opinion previously issued by the California
Department of Corporations, OIA does not engage in the activities of an
investment adviser. ZiaSun's business would be adversely affected if ZiaSun or
OIA is deemed to be an "investment adviser" by any state in which ZiaSun
currently conducts or may conduct business. ZiaSun's financial condition could
be materially adversely affected due to the cost associated with registering
as an investment adviser and maintaining that status. Further, if ZiaSun or
OIA were required to register as an investment adviser, OIA might be required
to cease holding workshops in one or more states until such registration was
completed. The loss of revenue from the canceled workshops could have a
material adverse effect on ZiaSun's financial condition.
Conflicts of Interest
D. Scott Elder, Ross Jardine, David McCoy and Scott Harris, each an
officer and/or a director of ZiaSun and/or OIA, each owns a 20% interest in
Generation Marketing, LLC, which conducts business with OIA. Generation
Marketing is a newly formed media marketing company managed by an ex-employee
of the company previously used to handle OIA's marketing requirements. In the
second half of 2000, OIA began contracting with Generation Marketing for
international marketing services and paid Generation Marketing approximately
$40,000. In 2001, OIA transferred all its marketing business to Generation
Marketing and through April 30, 2001 has made payments approximating $750,000.
ZiaSun believes the rates charged by Generation Marketing to OIA for these
services are competitive in the marketplace. Although it is ZiaSun's policy to
enter into transactions with related parties only upon terms comparable to or
better than those that would be available from unaffiliated parties, this
ownership interest of officers and directors of ZiaSun and OIA in Generation
Marketing could give rise to conflicts of interest.
-20-
RISKS RELATING TO TELESCAN'S BUSINESS
Liquidity and Cash Flow
Based on Telescan's current outlook, Telescan believes that its cash
flows from operations and current working capital will be sufficient to fund
its operations and capital requirements through June 2002. If Telescan is
unable to achieve its projected 2001 results of operations, or if the fair
value of Telescan's marketable securities decreases significantly from the
fair value at March 31, 2001, additional financing may be required to fund
Telescan's operations. No assurance can be given that Telescan will be able to
obtain additional financing or sell additional assets, or as to the terms upon
which Telescan could do so. It is Telescan's intention to continue to control
its operating expenses while continuing to invest in its existing products.
Telescan will continue to liquidate its marketable securities portfolio during
2001 and is continuing its exploration of strategic alternatives including
exploring sources of additional financing.
At March 31, 2001, Telescan had $1.6 million in cash, a net operating
loss of $2.0 million, and $60.4 million in accumulated losses in retained
earnings. Telescan had negative working capital of $1.8 million, however, this
figure includes $3.5 million of deferred revenue representing cash received in
earlier periods that has not yet been earned. Telescan has no obligation under
the contracts to refund this money to the parties in the event Telescan
defaults on the contract. Therefore, excluding this non-cash liability,
Telescan's working capital is $1.7 million at March 31, 2001.
Reliance on the Future of the Internet
The demand for Telescan's informational Internet services is highly
influenced by the general economic conditions, individual investor interest
and popularity in the stock market. In general, the subscriber base tends to
increase with rising market conditions and decline in depressed periods. There
is no assurance Internet revenue will not decline with a change in market
activity and participation.
Declines in Telescan's Stock Price; Securities Class Action Litigation
The market price of Telescan's stock has declined over the past year and
may continue to decline in the future. In addition, most publicly held
Internet companies have experienced market price and trading volume declines.
These broad market and industry factors may materially adversely affect the
market price of Telescan stock, regardless of Telescan's actual operating
performance. In the past, following periods of decline in the market price of
a company's securities, securities class action litigation often has been
instituted against such company. This type of litigation, if instituted, could
result in substantial costs and a diversion of Telescan's management's
attention and resources.
Computer and Network Operations
Telescan's operations are dependent on its ability to protect its
computer equipment, telecommunications network, and the information stored in
its data center against damage caused by unexpected events, including fire,
power loss, telecommunications failures, and unauthorized intrusion from
outside third party "hackers" or from "computer viruses" introduced into the
system. Telescan has undertaken certain precautionary measures for its data
center, including system redundancy, separate air conditioning systems, full
"zero downtime" emergency generator onsite, authorization procedures and other
security measures. Software and related databases are backed up regularly and
stored off-site, and Telescan's host computer system is based upon commonly
available computers, storage devices, and telecommunications equipment.
Further, there is no incoming access to Telescan's systems which would allow
the introduction of a "computer virus" into the operating system or that would
allow a third party "hacker" to alter any of the system's data. There can be
no assurances that these measures are sufficient to eliminate the risk of
interruption in Telescan's operations resulting from unexpected events. Any
damage or failure that causes interruptions in Telescan's operations could
have a material adverse effect on Telescan's business. Telescan has reduced
the potential loss with business interruption insurance, which provides for
some compensation during the period business is interrupted. Telescan does not
currently have an alternative off-site computer system available for use in
the event of damage to its data center. While Telescan believes that the
property and business interruption insurance is consistent with computer
industry practices, the coverage may not be adequate to compensate Telescan
for all losses that may occur.
-21-
Dependence on Protection of Proprietary Rights
Telescan attempts to protect its trade secrets and other proprietary
information with product development partners, employees and consultants
through nondisclosure agreements, contract provisions and copyright, patent,
trademark and trade secret laws. With respect to technologies that Telescan
has licensed to third parties for use in specific applications or platforms,
Telescan has entered into technology licensing agreements, which are intended
to protect the proprietary rights of Telescan related to the source code of
Telescan's products as a trade secret and as an unpublished copyright work.
Although Telescan intends to protect and defend its proprietary rights
vigorously, there can be no assurance that these measures will be successful.
Telescan believes that its products, trademarks and other proprietary
rights do not infringe on the proprietary rights of third parties, and
Telescan is not aware of any current infringement claims against Telescan.
There can be no assurance that third parties will not assert infringement
claims against Telescan in the future with respect to current or future
features, contents or services, or that any such assertion may not result in
litigation or require Telescan to enter into royalty arrangements.
Dependence Upon Outside Data Sources
Telescan's business is dependent upon its ability to enter into contracts
with private information compilers to provide access to information, both real
time and historical, electronically for inclusion in Telescan's database.
Telescan also obtains information pursuant to non-exclusive licenses from
private information compilers, some of which are current or potential
competitors of Telescan. The private sector contracts typically provide for
royalties based on usage or minimums. Telescan has such licenses from certain
data suppliers to provide business information that such suppliers also market
in competition with Telescan. While Telescan is not aware of any material data
supplier contracts that are in jeopardy of being terminated or not renewed,
there can be no assurance that Telescan will be able to renew its current
contracts with data sources, maintain comparable price levels for information,
or negotiate additional contracts with data sources as necessary to maintain
existing products or introduce new products. There is no assurance comparable
alternative sources of information could be obtained should existing contracts
be terminated or not renewed. Termination of Telescan's relationship with one
or more information suppliers could have a material adverse effect on
Telescan's operation.
Material Contracts
Telescan has a license agreement with National Broadcasting Company, Inc.
("NBC"), whereby NBC uses Telescan's proprietary Internet technology for use
on CNBC.com, a comprehensive Web site for personal finance. Under the
agreement, Telescan developed the financial content portion of the CNBC.com
Web site and currently provides hosting services for such content. Revenue
from these services accounted for 10% and 13% of total revenue in 2000 and
1999, respectively, and 9.8% and 15% of total revenue for the fiscal quarters
ended March 31, 2001 and 2000, respectively. Telescan generates revenue under
the agreement from cost reimbursement, fixed monthly license fees and a
percentage of advertising revenue generated from the site.
If the merger is consummated, NBC will be entitled to terminate this
agreement.
Dependence on Key Employees
Telescan is dependent upon the services of its Chief Executive Officer,
Lee K. Barba. Telescan and Mr. Barba entered into an employment and
non-compete agreement. Telescan does not have employment contracts providing
for continued services or non-compete from other key employees; however, it is
now Telescan's policy to have employees sign a nondisclosure and invention
agreement. In the event a key employee of Telescan's management team becomes
unable or unwilling to continue to serve, Telescan's business could be
adversely affected. Telescan does not currently maintain key life insurance on
any of its employees.
Competition
Telescan competes with companies that operate proprietary platforms
and/or Internet financial Web sites, many of which have significantly greater
financial, technical and marketing resources than Telescan. Despite recent
-22-
market volatility, new competitors continue to enter the marketplace as a
result of perceived future opportunities. Telescan believes the principal
competitive factors in the Internet financial services market include system
performance, product differentiation, quality of content, user friendliness,
price, customer support, effective marketing techniques and the ability to
earn a profit. With a redirected focus towards profitability, Telescan
believes that it competes effectively in these areas. However, continued
competitive pressures could result in price reductions, increased spending on
product development and reduced market share, which could adversely affect
Telescan's financial condition and operating results. Telescan believes that
its revenue expansion strategy to: 1) add new products and technologies; 2)
penetrate new markets; and 3) merge with or acquire complementary businesses,
will serve to lessen the impact of future competitive pressures on Telescan.
There is no assurance this strategy will be successful.
Technological Advances
There has been constant technological development in the Internet and
online industry. Telescan has developed its online software and hardware
systems in modular configurations that take advantage of standard components
available from a variety of hardware manufacturers, which allows Telescan to
quickly upgrade its system as new technology is developed. Telescan believes
that its online systems are structured to incorporate new changes or
innovations within its industry in order to maintain its competitiveness.
Delisting from Nasdaq; Telescan Common Stock May be Deemed a "Penny Stock"
The market price of Telescan common stock is, and has been since March
27, 2001, less than $1.00. As a result, under the rules governing companies
whose stock is traded on the National Market System of Nasdaq, Telescan common
stock is subject to delisting. In May, 2001, Telescan received a notice from
the NASD informing Telescan that unless its stock price exceeds $1.00 for 10
consecutive trading days before August 9, 2001 that Telescan common stock
would be delisted. To avoid such delisting, Telescan would be required to
engage in a reverse split of its stock to achieve a higher per share market
price. It has been the general experience of companies that engage in reverse
splits that the total market capitalization of such companies has declined
after the reverse split.
Telescan common stock may, at some future time, be deemed to be a "penny
stock" as that term is defined in Rule 3a51-1 of the Exchange Act. Penny
stocks are stocks (i) with a price of less than five dollars per share; (ii)
that are not traded on a "recognized" national exchange; (iii) whose prices
are not quoted on the Nasdaq automated quotation system (Nasdaq-listed stocks
must still meet requirement (i) above); or (iv) of an issuer with net tangible
assets of less than $2,000,000 (if the issuer has been in continuous operation
for at least three years) or $5,000,000 (if in continuous operation for less
than three years), or with average annual revenues of less than $6,000,000 for
the last three years.
A principal exclusion from the definition of a penny stock is an equity
security that has a price of ($5.00) or more, excluding any broker or dealer
commissions, markups or markdowns. As of the date of this joint proxy
statement/prospectus Telescan common stock has a price less than $5.00.
If Telescan common stock were deemed a penny stock, section 15(g) and
Rule 3a51-1 of the Exchange Act would require broker-dealers dealing in
Telescan common stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in Telescan common stock
are urged to obtain and read such disclosures carefully before purchasing any
shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act requires broker-dealers in penny
stocks to approve the account of any investor for transactions in such stocks
before selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks
of penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy of such
statement from the investor, confirming that it accurately reflects the
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investor's financial situation, investment experience and investment
objectives. Compliance with these requirements may make it more difficult for
investors in Telescan common stock to resell their shares to third parties or
to otherwise dispose of them.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This joint proxy statement/prospectus contains some forward-looking
statements within the meaning of federal securities laws concerning the
operations, economic performance, and financial condition of ZiaSun, Telescan
and INVESTools. These statements are based upon a number of assumptions and
estimates which are inherently subject to uncertainties and contingencies,
many of which are beyond the control of ZiaSun, Telescan and INVESTools, and
reflect future business decisions which are subject to change. Some of these
assumptions may not materialize and unanticipated events may occur which would
affect the results of ZiaSun, Telescan and INVESTools. Important factors that
could cause the actual results of ZiaSun, Telescan and INVESTools to differ
from their expectations are discussed in more detail in this joint proxy
statement/prospectus under the caption "Risk Factors." When considering these
forward-looking statements you should keep in mind the risk factors and other
cautionary statements contained in this joint proxy statement/prospectus.
These forward-looking statements are made as of the date of this joint proxy
statement/prospectus and ZiaSun, Telescan and INVESTools assume no obligation
to update them.
-24-
THE ZIASUN ANNUAL MEETING
Date, Time and Place Of the Annual Meeting
The ZiaSun annual meeting is scheduled to be held as follows:
______ __.m.
_______ __, 2001
[Address]
Purpose of the Annual Meeting
At the ZiaSun annual meeting ZiaSun's stockholders will be asked to:
o consider and vote upon a proposal to approve and adopt the merger
agreement;
o elect five directors to serve for a term of one year or until their
successors have been elected and qualified;
o ratify and approve BDO Siedman, LLP as ZiaSun's independent
accountants for the year ended December 31, 2001; and
o transact any other business that properly comes before the ZiaSun
annual meeting or any adjournment or postponement of the ZiaSun
annual meeting.
Record Date; Stock Entitled to Vote
The board of directors of ZiaSun has fixed the close of business on
_________ __, 2001 as the record date for determination of stockholders
entitled to notice of and to vote at the annual meeting of stockholders. On
the record date, there were ________ shares of ZiaSun common stock
outstanding, held by approximately _____ holders of record. Each holder of
ZiaSun common stock is entitled to one vote per share.
Votes Required; Voting Agreements
Quorum. The holders of ZiaSun common stock shall be entitled to one vote
for each share held at the record date for all matters, including the election
of directors. The required quorum for the transaction of business at the
annual meeting is a majority of the votes eligible to be cast by holders of
shares of common stock issued and outstanding on the record date. Shares that
are voted "FOR," "AGAINST," "WITHHELD," or "ABSTAIN" are treated as being
present at the annual meeting for the purposes of establishing a quorum and
are also treated as shares entitled to vote at the annual meeting with respect
to such matters. Broker non-votes will be counted for the purpose of
determining the presence or absence of a quorum.
The Merger. The affirmative vote of the holders of a majority of the
shares of ZiaSun common stock outstanding as of the record date is required to
approve and adopt the merger agreement. Failures to vote and abstentions and
broker non-votes will have the same effect as a vote against the merger
proposal.
Election of Directors. Directors are to be elected at the annual meeting
by a plurality of the votes cast by holders of common stock present in person
or represented by proxy at the annual meeting. The nominees receiving the
highest number of votes, up to the number of directors to be elected, shall be
elected. Votes cast against a candidate or which are withheld shall have no
effect. Upon the demand of any stockholder made before the voting begins, the
election of directors shall be by ballot rather than by voice vote. The proxy
holders will have the discretionary authority to vote all proxies received by
them in such a manner as to ensure the election of as many of the board of
directors' nominees as possible.
-25-
Appointment of Independent Accountants. The affirmative vote of the
holders of a majority of the shares of ZiaSun cast at a meeting at which a
quorum is present is required for the appointment of BDO Siedman, LLP as
ZiaSun's independent public accountants for the year ended December 31, 2001.
Voting Agreements. Holders of approximately 42% of the outstanding shares
of ZiaSun common stock have already agreed to vote in favor of approving the
merger. Please see "Ancillary Agreements" below.
Share Ownership of Management
As of the record date, ZiaSun directors and executive officers and their
affiliates owned and were entitled to vote __% of the outstanding shares of
ZiaSun common stock.
Dissenters' Rights
Under Nevada law, holders of ZiaSun common stock are entitled to
dissenters' rights as a result of the merger under Sections 92A.300 to
92A.500, inclusive, of the Nevada Revised Statutes. If the merger agreement is
approved and adopted by the ZiaSun stockholders and the merger is consummated,
any ZiaSun stockholder who (i) delivered to ZiaSun, before the vote was taken,
written notice of his or her intent to demand payment for his or her shares if
the merger were to be consummated and (ii) did not vote his or her shares in
favor of the merger has the right to demand an appraisal of the value of and
payment for the stockholder's ZiaSun common stock. The demand must be made in
writing to INVESTools by the date set forth on the written notice to be sent
by ZiaSun to the stockholder informing him or her that the merger has been
approved and adopted by the ZiaSun stockholders. Please see "The
Merger--Dissenters' Rights" below.
How You Can Vote
Attending Meeting or Submitting Proxies. You may vote either by:
o attending the annual stockholders' meeting and voting your shares in
person at the meeting, or
o completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage-prepaid envelope.
If you sign a written proxy card and return it without instructions, the
persons authorized in the proxy will vote your shares for each of the
proposals presented at the annual stockholders' meeting.
If your shares are held in "street name," which means the shares are held
in the name of a broker, bank or other record holder, you must either direct
the record holder of your shares as to how to vote your shares or obtain a
proxy from the record holder to vote at the annual stockholders' meeting.
Stockholders who submit proxy cards should not send in any stock
certificates with their proxy cards. INVESTools will mail a transmittal form
with instructions for the surrender of certificates representing shares of
ZiaSun stock to former ZiaSun stockholders shortly after the merger.
Revoking Proxies. If you are a stockholder of record, you may revoke your
proxy at any time prior to the time it is voted at the annual stockholders'
meeting. You may revoke your proxy:
o by sending written notice, including by telegram or telecopy, to the
Secretary of ZiaSun;
o by signing and returning a later-dated proxy by mail to the
Secretary of ZiaSun; or
o by attending the annual stockholders' meeting and voting in person.
Attendance at ZiaSun's annual stockholders' meeting will not in and of
itself constitute a revocation of a proxy.
-26-
You must send any written notice of a revocation of a proxy so as to be
delivered before the taking of the vote at the annual stockholders' meeting
to:
ZiaSun Technologies, Inc.
655 San Rodolfo, Suite 120
Solana Beach, CA 90275
Telecopy: (858) 350-4066
Attention: Secretary
To assure that your shares are represented at the meeting, please
complete, date and sign the enclosed proxy and mail it promptly in the
postage-paid envelope provided. Whether or not you plan to attend the meeting,
you may revoke your proxy at any time before it is voted.
General Proxy Information. Brokers who hold shares in street names for
customers who are the beneficial owners of those shares are prohibited from
giving a proxy to vote on the merger unless they receive specific instructions
from the customer. These so-called broker non-votes will have the same effect
as a vote against the merger.
You may specify an abstention on the merger. If you submit a proxy with
an abstention, you will be treated as present at the annual stockholders'
meeting for purposes of determining the presence or absence of a quorum for
the transaction of all business. An abstention will have the same effect as a
vote against the merger.
Solicitation of Proxies; Expenses. ZiaSun will bear the cost of
solicitation of proxies. In addition to solicitation by mail, the directors,
officers and employees of ZiaSun may also solicit proxies from stockholders by
telephone, telecopy, telegram, or in person. Arrangements will also be made
with brokerage houses and other custodians, nominees, and fiduciaries to send
the proxy materials to beneficial owners, and ZiaSun will, upon request,
reimburse those brokerage houses and custodians for their reasonable expenses.
Board Recommendation
The board of directors of ZiaSun has unanimously determined that the
terms of the merger and the proposed merger agreement, are in the best
interests of ZiaSun and the ZiaSun stockholders. Accordingly, the ZiaSun board
of directors recommends that the ZiaSun stockholders vote FOR the adoption of
the merger agreement, FOR the election of the five persons nominated as ZiaSun
directors, and FOR the appointment of BDO Siedman, LLP to serve as ZiaSun's
independent public accountants for the year ended December 31, 2001.
-27-
ZIASUN PROPOSAL 1
Approval of Merger and Merger Agreement
The merger will be consummated on the terms and subject to the conditions
set forth in the merger agreement. As a result of the merger, ZiaSun
stockholders will receive one share of INVESTools common stock for each share
of ZiaSun common stock they own. The former ZiaSun stockholders will own
approximately 75% of INVESTools.
You are encouraged to read the sections of this joint proxy
statement/prospectus entitled "Merger" on page 31 and "Agreement and Plan of
Merger" on page 46.
The board of directors of ZiaSun recommends that the stockholders vote to
approve the merger, and unanimously recommend that the ZiaSun stockholders
vote for the merger proposal.
ZIASUN PROPOSAL 2
Nomination and Election of Ziasun Directors
The board of directors of ZiaSun currently consists of five directors,
and five directors are to be elected at the annual meeting to serve for a term
of one year or until their successors have been elected and qualified. Each
director elected at the annual meeting will hold office until the election and
qualification of the director's successor or until the director's earlier
death, removal or resignation.
The board of directors has nominated for election as directors of ZiaSun
D. Scott Elder, Allen D. Hardman, Ross W. Jardine, Hans von Meiss and
Christopher D. Outram. All nominees are currently directors of ZiaSun.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by a stockholder returning a proxy card, the persons
named in the proxies will vote the shares represented by the proxies for the
election of the nominees recommended by the board of directors. The board of
directors believes all nominees will be able to serve as director; if this
should not be the case, however, the proxies may be voted for one or more
substitute nominees to be designated by the board of directors or the board
may decide to reduce the number of directors. The board of directors
unanimously recommends a vote for each of the nominees.
You are encouraged to read the sections of the joint proxy
statement/prospectus entitled "ZiaSun Business" on page 57 and "ZiaSun
Management" on page 72.
ZIASUN PROPOSAL 3
Ratification and Approval of the Ziasun's Independent Public Accounts
The board of directors has selected BDO Siedman, LLP to audit the
financial statements of ZiaSun for the year ended December 31, 2001.
The board of directors recommends that the stockholders vote for the
proposal to ratify and approve the selection of BDO Siedman, LLP to serve as
ZiaSun's independent public accountants for the year ended December 31, 2001.
-28-
THE TELESCAN SPECIAL MEETING
Date, Time and Place of the Special Meeting
The Telescan special meeting is scheduled to be held as follows:
______ __.m.
_______ __, 2001
[Address]
Purpose of the Special Meeting
At the Telescan special meeting, Telescan's stockholders will be asked
to:
o consider and vote upon a proposal to approve and adopt the merger
agreement; and
o transact any other business that properly comes before the Telescan
special meeting or any adjournment or postponement of the Telescan
special meeting.
Record Date; Stock Entitled to Vote
The board of directors of Telescan has fixed the close of business on
_______ __, 2001 as the record date for determination of stockholders entitled
to notice of and to vote at the special meeting of stockholders. On the record
date, there were __________ shares of Telescan common stock outstanding, held
by approximately ____ holders of record, and __________ shares of Telescan
preferred stock outstanding, held by ___ holders of record. Each holder of
Telescan common stock is entitled to one vote per share. Holders of Telescan
preferred stock are not entitled to vote on the merger proposal.
Votes Required; Voting Agreements
The affirmative vote of the holders of a majority of the shares of
Telescan common stock outstanding as of the record date is required to approve
and adopt the merger agreement. Failures to vote and abstentions and broker
non-votes will have the same effect as a vote against the merger proposal.
Holders of approximately 36% of the outstanding shares of Telescan common
stock have already agreed to vote in favor of approving the merger. Please see
"Ancillary Agreements--Voting Agreements" below.
Share Ownership of Management
As of the record date, Telescan directors and executive officers and
their affiliates owned and were entitled to vote ___% of the outstanding
shares of Telescan common stock.
Appraisal Rights
Under Delaware law, Telescan stockholders are not entitled to appraisal
rights in connection with the merger.
Board Recommendation
The Telescan board of directors has unanimously determined that the
merger is fair to and in the best interest of Telescan and its stockholders
and approved the merger agreement. The Telescan board of directors unanimously
recommends that Telescan stockholders vote FOR the adoption of the merger
agreement.
-29-
How You Can Vote
Attending Meeting or Submitting Proxies. You may vote either by:
o attending the special stockholders' meeting and voting your shares
in person at the meeting, or
o completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage-prepaid envelope.
If you sign a written proxy card and return it without instructions, the
persons authorized in the proxy will vote your shares for each of the
proposals presented at the special stockholders' meeting.
If your shares are held in "street name," which means the shares are held
in the name of a broker, bank or other record holder, you must either direct
the record holder of your shares as to how to vote your shares or obtain a
proxy from the record holder to vote at the special stockholders' meeting.
Stockholders who submit proxy cards should not send in any stock
certificates with their proxy cards. INVESTools will mail a transmittal form
with instructions for the surrender of certificates representing shares of
Telescan stock to former Telescan stockholders shortly after the merger.
Revoking Proxies. If you are a stockholder of record, you may revoke your
proxy at any time prior to the time it is voted at the special stockholders'
meeting. You may revoke your proxy:
o by sending written notice, including by telegram or telecopy, to the
Secretary of Telescan;
o by signing and returning a later-dated proxy by mail to the
Secretary of Telescan; or
o by attending the special stockholders' meeting and voting in person.
Attendance at Telescan's special stockholders' meeting will not in and of
itself constitute a revocation of a proxy.
You must send any written notice of a revocation of a proxy so as to be
delivered before the taking of the vote at the special stockholders' meeting
to:
Telescan, Inc.
5959 Corporate Drive, Suite 2000
Houston, TX 77036
Telecopy: (281) 588-9843
Attention: Secretary
General Proxy Information. Brokers who hold shares in street names for
customers who are the beneficial owners of those shares are prohibited from
giving a proxy to vote on the merger unless they receive specific instructions
from the customer. These so-called broker non-votes will have the same effect
as a vote against the merger.
You may specify an abstention on the merger. If you submit a proxy with
an abstention, you will be treated as present at the special stockholders'
meeting for purposes of determining the presence or absence of a quorum for
the transaction of all business. An abstention will have the same effect as a
vote against the merger.
Solicitation of Proxies; Expenses. Telescan will bear the cost of
solicitation of proxies from its stockholders. In addition to solicitation by
mail, the directors, officers and employees of Telescan may also solicit
proxies from stockholders by telephone, telecopy, telegram, or in person.
Arrangements will also be made with brokerage houses and other custodians,
nominees, and fiduciaries to send the proxy materials to beneficial owners,
and Telescan will, upon request, reimburse those brokerage houses and
custodians for their reasonable expenses.
-30-
THE MERGER
What You Will Receive in the Merger
The boards of directors of ZiaSun and Telescan are using this joint proxy
statement/prospectus to solicit proxies from stockholders for the approval of
the merger at the annual stockholders' meeting of ZiaSun and a special meeting
of the stockholders of Telescan.
At the effective time of the merger, newly formed wholly owned
subsidiaries of INVESTools will merge with and into ZiaSun and Telescan, with
ZiaSun and Telescan as the surviving entities. As a result, ZiaSun and
Telescan will each become wholly owned subsidiaries of INVESTools.
In the merger, each outstanding share of ZiaSun common stock will be
converted into one share of INVESTools common stock, each outstanding share of
Telescan common stock will be converted into 0.56486 shares of INVESTools
common stock and each outstanding share of Telescan preferred stock will be
converted into one share of INVESTools preferred stock. No fractional
INVESTools shares will be issued and cash (without interest) will be paid
instead of fractional shares.
Background of the Merger
Beginning in the fourth quarter of 1998, Telescan began providing a
subscription platform to WallStreetCity.com on a discounted basis for Online
Investors Advantage, Inc., a wholly owned subsidiary of ZiaSun, to give to
each of its seminar attendees. In December of 1999, OIA and Telescan
formalized the relationship and agreed upon new financial terms for a stated
royalty; Telescan also agreed to provide OIA with an OIA-labeled, co-branded
Web site. OIA and Telescan continue to do business pursuant to the terms of
the December 1999 contract.
On April 19, 2000, a meeting was held at the Hilton Hotel in Salt Lake
City among Messrs. D. Scott Elder, Chairman of the board of directors of
ZiaSun and Chief Executive Officer of ZiaSun, Ross W. Jardine, Vice President,
Chief Financial Officer and Director of ZiaSun, Allen Hardman, President,
Chief Operating Officer, Secretary and Director of ZiaSun, Christopher D.
Outram, Director of ZiaSun, Hans von Meiss, Director of ZiaSun, Bryant Cragun,
founder of ZiaSun, George Chachas, counsel to ZiaSun, and Greg Gensemer, Vice
President of Business Development of Telescan to discuss strategic alliance
possibilities with Telescan.
On August 16, 2000, Telescan entered into a merger agreement with
GlobalNet Financial.com, Inc.
On September 26, 2000, Telescan and GlobalNet Financial.com, Inc.
announced that their proposed merger was terminated. The following day, Mr.
Elder contacted Lee K. Barba, Chief Executive Officer of Telescan, and
discussed a possible transaction in which Telescan would acquire OIA from
ZiaSun. Over the next couple of months, Messrs. Barba, Elder and Jardine, had
a number of telephone calls to discuss various aspects of the transaction.
During this period, ZiaSun proposed that any business combination should
result in the ZiaSun shareholders receiving or retaining 75% of the combined
entity, with the Telescan shareholders receiving or retaining the remaining
25%.
On October 4, 2000, ZiaSun had a board meeting where it directed
management to proceed with efforts to develop a definitive deal with Telescan.
On October 10 and 13, 2000, the ZiaSun board met and discussed a potential
spin-off of OIA as part of a merger or another transaction with Telescan. The
board directed management to continue pursuit of a possible strategic
transaction with Telescan.
On October 20, 2000, the ZiaSun board considered retaining services of a
merger and acquisition specialist and a tax consultant. On November 2, 2000,
the ZiaSun board determined that Jones Waldo Holbrook & McDonough, P.C. would
provide merger and acquisition services and legal counsel as the negotiations
and deal with Telescan proceeded.
On November 15, 2000, Messrs. Barba and Elder met in San Francisco to
discuss the transaction and to tour Telescan's office in San Francisco.
On November 16, 2000, at a telephonic meeting of the board of directors
of Telescan, Mr. Barba described the proposed transaction to the Telescan
board.
-31-
On December 4, 2000, Messrs. Barba, Elder and Jardine met in New York
with certain members of the board of directors of Telescan to discuss the
transaction and to give such board members the opportunity to meet Messrs.
Elder and Jardine. After that meeting on December 4, 2000, Messrs. Barba,
Elder and Jardine met with Simpson Thacher & Bartlett, counsel to Telescan, to
discuss the proposed transaction and structuring alternatives. It was
concluded at that meeting that Telescan's acquisition of OIA from ZiaSun would
not be possible without resulting in adverse tax consequences to ZiaSun.
Consequently, the participants at that meeting determined that the most
favorable structure would be for a new corporation to be formed that would
acquire both Telescan and ZiaSun. Also at the December 4, 2000 meeting Messrs.
Elder and Jardine reiterated their requirement that the shareholders of ZiaSun
and Telescan would own 75% and 25%, respectively, of the combined entity. The
parties agreed that they should begin the due diligence process and that
Simpson Thacher & Bartlett should begin preparing the merger agreement and
other necessary documentation for the transaction.
Later in the day after the December 4 meetings, Mr. Barba telephoned Mr.
Cragun to discuss the transaction. In particular, they discussed the proposed
75%/25% exchange ratio. Mr. Cragun stated that ZiaSun would consider making
the ratio more favorable to Telescan if Telescan was able to enter into a
co-branded partnership with a major customer, sell its remaining equity
investments in public companies or achieve profitability in its
business-to-business operations.
On December 6-7, 2000, Paul Helbling, the Chief Financial Officer of
Telescan, Roger Wadsworth, the Chief Administrative Officer of Telescan, and
Pam Thompson, Controller of Telescan, traveled to San Diego to meet with Mr.
Hardman, Gordon Jones, an independent contractor who provides services to
ZiaSun as its controller, and Mr. Chachas to discuss the background of ZiaSun
and its operations.
On December 18-19, 2000, Messrs. Hardman and Jones traveled to Houston to
initiate ZiaSun's due diligence review of Telescan.
On January 4, 2001, a meeting was held among Messrs. Barba, Elder and
Jardine in Salt Lake City regarding options to sell Telescan's
business-to-business operations. Discussions were also held regarding a
possible joint venture relationship and moving ahead on the merger.
On January 8, 2001, a ZiaSun board meeting took place where the board
discussed issues relating to the merger. It was determined that significant
shareholders of both companies should be restricted from selling INVESTools
common stock for some period of time after the merger. It was also proposed
that William D. Savoy, Chairman of the board of directors of Telescan, and
Messrs. Barba, Elder and Jardine should be appointed as board members to the
INVESTools board of directors.
On January 15-17, 2001, Messrs. Helbling and Wadsworth, Ms. Thompson and
representatives of Arthur Andersen LLP traveled to Provo to review the
financial records and other information relating to ZiaSun.
On February 1-2, 2001, Jones Waldo Holbrook & McDonough, P.C. performed a
due diligence review of Telescan in Houston.
During the months of January and February 2001, as a result of due
diligence by management and outside counsel, Telescan requested that ZiaSun
(i) begin the process to rescind the offering of ZiaSun common stock to the
shareholders of Seminar Marketing Group, Inc., (ii) renegotiate its
obligations to The McKenna Group and its related funds, MKZ Fund, LLC ("MKZ")
and MVA and (iii) more vigorously pursue the divestment of ZiaSun's Asian
assets. During that period ZiaSun's board of directors reviewed Telescan's
business-to-business operations and expressed concern about costs and
cash-flow needs relating to those operations. Representatives of ZiaSun and
Telescan addressed various solutions on both a pre-merger and post-merger
basis.
On February 26, 2001, the board of directors of Telescan met and
discussed the proposed transaction with ZiaSun. At this meeting, Telescan
management made a presentation to the Telescan board regarding the economics
and the terms of the proposed transaction with ZiaSun. The Telescan board
stated that they were favorably disposed to the transaction and instructed Mr.
Barba to continue his efforts in that regard.
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On March 19, 2001, the board of directors of Telescan held a telephonic
meeting to discuss the transaction with ZiaSun. The board was informed that
the parties had determined that neither party would be prepared to enter into
an agreement until both parties had filed their annual reports on Form 10-K
and had an opportunity to review the financial records underlying the
preparation of the annual reports on Form 10-K.
On March 20, 2001, Mr. Jones met with Mr. Helbling in Houston, Texas to
conduct due diligence.
On March 22, 2001, a ZiaSun board meeting took place where the INVESTools
employment agreements for Messrs. Elder and Jardine were discussed. The board
also considered the proxy solicitation and the make-up of the INVESTools board
of directors.
On March 30, 2001, ZiaSun filed with the Securities Exchange Commission
(the "SEC") for an extension on the time for filing its annual report on Form
10-K.
On April 2, 2001, a ZiaSun board meeting was held to discuss open audit
items for the fiscal year ending December 31, 2000.
On April 6, 2001, Mr. Jones went to the Houston offices of Arthur
Andersen LLP, to review Telescan's audit work papers.
On April 10, 2001, a ZiaSun board meeting took place and discussions were
held regarding the disposition of the 2000 audit and projected Form 10-K
filing date. ZiaSun filed its Form 10-K on April 17, 2001.
On April 11, 2001, the board of directors of Telescan held a board
meeting at which Mr. Barba updated them on the status of negotiations with
ZiaSun.
On April 17-18, 2001, Ms. Thompson and a representative of Arthur
Andersen LLP traveled to Los Angeles to review the 2000 audit papers at the
offices of BDO Siedman, LLP, ZiaSun auditors for 2000.
During the latter part of April, ZiaSun and the former shareholders of
OIA (including Messrs. Elder and Jardine) held discussions as to whether, and
in what amount, the earn-out relating to the acquisition of OIA should be
adjusted in light of an accrual for potential sales taxes applicable to OIA
recently included in ZiaSun's financial statements. See "ZiaSun Management
Discussion and Analysis of Financial Condition and Results of
Operations--Overview." In addition to the adjustment to the OIA earn-out,
during this period Messrs. Barba, Elder, Jardine, Hans von Meiss, the chairman
of the Compensation Committee of the board of directors of ZiaSun, and Stephen
Wood, the chairman of the Compensation Committee of Telescan, held a number of
discussions regarding the compensation arrangements for Messrs. Barba, Elder
and Jardine after consummation of the merger. To assist in these discussions
Arthur Andersen LLP was engaged to provide an independent review of
compensation provided by similarly-sized companies.
On April 26, 2001, the Telescan board held a telephonic meeting at which
the status of the negotiations between the parties and the terms of the merger
were discussed. At this meeting the Telescan board discussed the terms of the
merger agreement.
On April 30, 2001, a ZiaSun board meeting took place and discussions were
held on the current status of the OIA earn-out, due diligence on Telescan, the
merger exchange ratio and the lock-up agreements for certain Telescan
shareholders.
From April 30 to May 2, 2001, Mr. Barba met with Messrs. Elder and
Jardine in Provo, to finalize the terms of the transaction, the OIA earn-out
and the compensation arrangements to be entered into with Messrs. Elder and
Jardine after the merger.
On May 2, 2001, at a telephonic meeting the board of directors of
Telescan determined that the merger was in the best interests of Telescan and
its shareholders, unanimously approved the merger agreement and the merger and
unanimously recommended that the stockholders of Telescan vote for the
approval and adoption of the merger agreement. On May 3, 2001, the board of
directors of ZiaSun determined that the merger was in the best interests of
ZiaSun and its shareholders, unanimously approved the merger agreement and the
merger and unanimously recommended that the stockholders of ZiaSun vote for
the approval and adoption of the merger agreement.
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The parties signed the merger agreement on May 3, 2001, after which a
press release was issued announcing the transaction.
ZiaSun's Reasons for the Merger; Recommendation of ZiaSun's Board of Directors
The ZiaSun board of directors has determined that the merger, the merger
agreement and each of the transactions contemplated in the merger agreement
are fair to and in the best interests of ZiaSun and its stockholders.
In reaching its conclusion to approve the merger agreement, the ZiaSun
board of directors, with the assistance of outside financial and legal
advisors considered a number of factors including, among others, the following
principal factors:
o Telescan's network of e-finance and financial data content providers
could be employed to leverage horizontal and vertical expansion
opportunities for the combined companies;
o the current and historical business, operations, properties, assets,
financial condition and operating results of ZiaSun and its review
of the prospects of Telescan, including the prospects of Telescan
after giving effect to the merger;
o the projected operations, financial condition, operating results,
prospects and strategic objectives of ZiaSun, as well as the risks
involved in achieving those prospects and objectives in the
e-finance and investor education industry under current, as well as
expected future, economic and market and industry conditions;
o the various strategic alternatives available to ZiaSun, including
continuing its business operations without any extraordinary
transaction;
o the greater managerial and financial capabilities of the combined
companies;
o Telescan's network of financial industry and e-finance relationships
that could be expected to create enhanced access to capital on more
favorable terms than were previously available to ZiaSun;
o Telescan's network of financial industry and e-finance relationships
that could provide enhanced access to new technologies and consumers
that are compatible with ZiaSun's existing distribution channels and
therefore could be employed to leverage horizontal and vertical
expansion opportunities for the combined companies;
o access to Telescan's proprietary intellectual property;
o the increased size and market capitalization of the combined
companies and their expected favorable impact on stockholder
liquidity; and
o Telescan's frequent contact with e-finance and financial data
content companies could generate investment and acquisition
possibilities for the combined companies.
The ZiaSun board reviewed the principal terms and conditions of the
merger agreement, including the representations, warranties and covenants and
the conditions to each party's obligation to complete the merger. The ZiaSun
board also with its financial and legal advisors considered the events
surrounding Messrs. Elder and Jardine, particularly in light of the fact that
Messrs. Elder and Jardine may have interests in the merger that are different
from or are in addition to the interest of the other ZiaSun stockholders; the
amount of the termination fee and the events triggering the payment of such
fee; and the limitation on the ability of ZiaSun to negotiate with other
companies regarding an alternative transaction, and the potential effects that
this limitation would have on ZiaSun's receipt of alternative proposals that
could be superior to the merger with Telescan. The ZiaSun board considered
favorably that the terms of the merger agreement are reasonable and protective
of ZiaSun's interests.
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The ZiaSun board reviewed pro forma financial data for ZiaSun and
Telescan after giving effect to the merger. The ZiaSun board considered
favorably the expectation that ZiaSun might be able to leverage its investor
educational model by offering such model to Telescan's significant network of
financial industry and e-finance partners.
The ZiaSun board received reports from its management as to the results
of the due diligence investigation of Telescan and determined that these
reports did not contain matters that would preclude its approval of the
merger.
The ZiaSun board also considered the following risks and additional
factors relating to the merger:
o the risk that the benefits sought in the merger would not be fully
achieved;
o the risk that the merger would not be consummated;
o Telescan's post-merger cash flow needs may require additional cash
infusions from ZiaSun to continue Telescan's current level of
operations as Telescan has not been profitable for the past five
years;
o possible post-merger resignations of Telescan's senior management;
o e-finance and investor educational models created or developed by
ZiaSun may not be compatible with Telescan's established
distribution channels or the abilities and skills of Telescan's
sales personnel;
o the need for substantial additional financing to achieve ZiaSun's
goal of both vertical and horizontal expansion opportunities through
leverage of Telescan's network of financial and e-finance industry
relationships; and
o the other applicable risks described in this joint proxy
statement/prospectus under "Risk Factors."
The foregoing discussion of the information and factors considered by the
ZiaSun board is not intended to be exhaustive but is believed to include all
material factors considered by the ZiaSun board. In view of the wide variety
of information and factors considered, the ZiaSun board did not find it
practical to, and did not, assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights
to different factors. The ZiaSun board did not attempt to analyze the fairness
of the exchange ratio and the cash considerations in isolation from the
considerations as to the businesses of ZiaSun and Telescan, the strategic
merits of the merger or the other considerations referred to above. The ZiaSun
board of directors recommends that the ZiaSun stockholders vote FOR adoption
of the merger agreement.
Telescan's Reasons for the Merger; Recommendation of Telescan's Board of
Directors
The Telescan board of directors has determined that the merger, the
merger agreement and each of the transactions contemplated in the merger
agreement are fair to and in the best interests of Telescan and its
stockholders.
At a meeting held on May 2, 2001, the Telescan board of directors, with
the assistance of outside financial and legal advisors, considered the
financial, legal and other terms of the merger. The decision of the Telescan
board of directors to adopt the merger agreement and to approve the merger and
each of the transactions contemplated in the merger agreement, and its
conclusion that the merger, the merger agreement and each of the transactions
contemplated in the merger agreement are fair to and in the best interest of
Telescan and its stockholders, was based on several potential benefits of the
merger and involved the consideration of a number of factors, including the
following:
o the opportunity to create a leading multimedia provider of
investment education and advice upon consummation of the merger;
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o the potential for cross-selling opportunities, such as selling
ZiaSun workshops and videos to the existing Telescan subscriber base
and selling Telescan newsletters to the ZiaSun customer list;
o the opportunity to hold private-label seminars in conjunction with
Telescan's well-known major customers;
o the opportunity to allow Telescan to become part of a larger
organization with greater cash resources;
o the opportunity for Telescan's stockholders to participate in the
potential growth of the surviving corporation after the merger;
o the absence of another transaction that would have resulted in as
favorable a transaction to Telescan's stockholders as the merger;
o historical information concerning ZiaSun's and Telescan's respective
businesses, financial performance and condition, operations,
technology and management;
o the view of Telescan's management of the financial condition, the
competitive position and prospects, the results of operations and
the businesses of ZiaSun and Telescan before and after giving effect
to the merger, and the determination of Telescan's board of
directors of the merger's effect on stockholder value;
o the belief that the terms of the merger agreement were reasonable;
o the impact of the merger on Telescan's customers and employees;
o the results of due diligence investigations of ZiaSun conducted by
Telescan and its outside financial and legal advisors; and
o the structure of the merger, which permits Telescan stockholders to
exchange their Telescan stock for INVESTools common stock on a
tax-free basis.
The decision of Telescan's board of directors was the result of its
careful consideration of a range of strategic alternatives in the pursuit of a
long-term business strategy for Telescan. The board's primary consideration
was to identify and secure the alternative that would provide the best
strategic fit for Telescan and to provide long-term value to Telescan's
stockholders. The Telescan board also reviewed with its financial and legal
advisors:
o the terms and conditions of the merger agreement;
o the terms and conditions of the employment agreement of Lee K.
Barba, Telescan's Chief Executive Officer, particularly in light of
the fact that, as a result of this agreement, Mr. Barba may have
interests in the merger that are different from or are in addition
to the interests of the other Telescan stockholders;
o the amount of the termination fee and the events triggering the
payment of such fee; and
o the limitation on the ability of Telescan to negotiate with other
companies regarding an alternative transaction, and the potential
effects that this limitation would have on Telescan's receipt of
alternative proposals that could be superior to the merger with
ZiaSun.
The Telescan board also considered a number of potentially negative
factors in its deliberations concerning the merger, including:
o the relationship between the relative market values of ZiaSun and
Telescan at the time of the approval of the merger by the board of
directors and the 75%/25% exchange ratio contained in the
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merger agreement, which implied a value for Telescan common stock of
less than its then current market value;
o the risk that, because the share exchange ratio would not be
adjusted for changes in the market price of the common stock of
either ZiaSun or Telescan, the per share value of the consideration
to be received by Telescan stockholders might be significantly less
than the price per share implied by the exchange ratio immediately
prior to the announcement of the merger to the public;
o that the merger might not be consummated;
o that the benefits sought to be achieved by the merger would not be
realized; and
o the other applicable risks described in this joint proxy
statement/prospectus under "Risk Factors."
The Telescan board of directors, however, concluded that, on balance, the
merger's potential benefits to Telescan and its stockholders outweighed the
associated risks. The above discussion of the information and facts considered
by Telescan's board of directors is not intended to be exhaustive. The
Telescan board of directors did not find it practicable to, and did not
quantify or otherwise assign relative weight to, the specific facts considered
in reaching its decision.
Following careful and thorough consideration, the Telescan board of
directors determined that the merger agreement and the merger are fair to and
in the best interests of Telescan and its stockholders. The Telescan board of
directors recommends that the Telescan stockholders vote FOR adoption of the
merger agreement.
No Fairness Opinions Solicited
After careful consideration, the board of directors of ZiaSun and the
board of directors of Telescan each determined not to secure an opinion of an
independent investment banker or other financial advisor to the effect that
the merger would be fair, from a financial point of view, to their respective
shareholders.
Interests of Directors and Executive Officers in the Merger
In considering the recommendation of the boards of directors of ZiaSun
and Telescan to vote for the proposal to approve the merger agreement,
stockholders of ZiaSun and Telescan should be aware that members of each of
the ZiaSun and Telescan board of directors and members of each of ZiaSun's and
Telescan's executive management have agreements or arrangements that provide
them with interests in the merger that may differ from those of their
respective stockholders. Each board of directors was aware of these agreements
and arrangements during its deliberations of the merits of the merger and in
determining to recommend to their respective stockholders that they vote to
approve the merger agreement.
Management Positions. As described below under "--Board of Directors and
Management after the Merger," under the merger agreement, certain members of
both the ZiaSun and the Telescan boards of directors and executive management
will have positions on the INVESTools board of directors and executive
management. With respect to ZiaSun, D. Scott Elder, the current Chairman of
the board of directors and the Chief Executive Officer of ZiaSun, and Ross W.
Jardine, a current member of the board of directors and the Vice President and
Chief Financial Officer of ZiaSun, will each become a member of the board of
directors and an Executive Vice President of INVESTools. Hans von Meiss, a
current member of the board of directors of ZiaSun, also will become a member
of the board of directors of INVESTools. With respect to Telescan, Lee K.
Barba, a current member of the board of directors and the Chief Executive
Officer of Telescan, will become a member of the board of directors and the
Chief Executive Officer of INVESTools. In addition, William D. Savoy, the
current Chairman of the Telescan board of directors, will become the Chairman
of the board of directors of INVESTools, and Stephen C. Wood, a current member
of the Telescan board of directors, will become a member of the INVESTools
board of directors.
Employment Agreements. On _____ __, 2001, Messrs. Jardine, Elder and
Barba each entered into employment agreements, which become effective on the
closing of the merger.
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o Employment Contract between Ross Jardine and INVESTools. Mr.
Jardine's employment agreement provides for a base salary of
$425,000 and an annual bonus. Upon approval of the board of
directors, Mr. Jardine will be granted options to purchase, at fair
market value determined as of the grant date, an aggregate of
550,000 shares of INVESTools common stock (which vest in four equal
annual installments beginning one year after the merger). As
determined by the board of directors, Mr. Jardine will be eligible
to receive stock option grants and/or restricted stock awards.
Additionally, under his employment agreement, Mr. Jardine is
entitled to a merger transition award of $600,000 (payable in three
equal annual installments beginning one year after the merger) and
$600,000 worth of shares of restricted stock of INVESTools (which
vests in three equal annual installments beginning one year after
the merger). All unpaid amounts or unvested shares will vest upon a
change of control of INVESTools. If within 24 months after a change
of control of INVESTools Mr. Jardine is terminated, he shall receive
a lump sum payment of two times the sum of his annual salary and the
greater of the target and actual bonus.
o Employment Contract between D. Scott Elder and INVESTools. Mr.
Elder's employment agreement provides for a base salary of $425,000
and an annual bonus. Upon approval of the board of directors, Mr.
Elder will be granted options to purchase, at fair market value
determined as of the grant date, an aggregate of 550,000 shares of
INVESTools common stock (which vest in four equal annual
installments beginning one year after the merger). As determined by
the board of directors, Mr. Elder will be eligible to receive stock
option grants and/or restricted stock awards. Additionally, under
his employment agreement, Mr. Elder is entitled to a merger
transition award of $600,000 (payable in three equal annual
installments beginning one year after the merger) and $600,000 worth
of shares of restricted stock of INVESTools (which vests in three
equal annual installments beginning one year after the merger). All
unpaid amounts or unvested shares will vest upon a change of control
of INVESTools. If within 24 months after a change of control of
INVESTools Mr. Elder is terminated, he shall receive a lump sum
payment of two times the sum of his annual salary and the greater of
the target and actual bonus.
o Employment Contract between Lee K. Barba and INVESTools. Mr. Barba's
employment agreement provides for a base salary of $425,000 and an
annual bonus. As determined by the board of directors, Mr. Barba
will be eligible to receive stock option grants and/or restricted
stock awards. If, within 24 months after a change of control of
INVESTools, Mr. Barba is terminated, he will receive a lump sum
payment of two times the sum of his annual salary and the greater of
the target and actual bonus.
Indemnification and Insurance. The merger agreement provides that, upon
completion of the merger, INVESTools will indemnify and hold harmless, and
provide advancement of expenses to, all past and present officers, directors
and employees of ZiaSun and Telescan and their respective subsidiaries:
o to the same extent those persons were indemnified or entitled to
advancement of expenses under ZiaSun's or Telescan's certificate of
incorporation, by-laws and indemnification agreements; and
o to the fullest extent permitted by law.
The merger agreement also provides that INVESTools will maintain, for a
period of six years after completion of the merger, the current policies of
directors' and officers' liability insurance maintained by each of ZiaSun and
Telescan, with respect to claims arising from facts or events relating to
directors and officers of ZiaSun and Telescan, respectively, that occurred on
or before the completion of the merger. Nonetheless, INVESTools will not be
required to make annual premium payments in excess of 200% of the annual
premiums currently paid by ZiaSun or Telescan for directors' and officers'
liability insurance.
Board of Directors and Management after the Merger
Board of Directors. Under the merger agreement, upon completion of the
merger the board of directors of INVESTools will be comprised of seven
individuals: D. Scott Elder, Ross W. Jardine, Hans von Meiss, William D.
Savoy, Lee K. Barba, Stephen C. Wood and one other person to be named by
ZiaSun. Mr. Savoy will be the
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chairman. In the event dividends are not paid for two consecutive quarters on
INVESTools' outstanding preferred stock and, as a result, the holders of such
preferred stock have the right to elect a director to the board of directors
of INVESTools, the directors of INVESTools who were selected by ZiaSun
pursuant to the merger agreement will have the right to select one additional
director of INVESTools.
Biographical information with respect to Messrs. Elder, Jardine and von
Meiss is described below under "ZiaSun Management--Directors and Executive
Officers." Biographical information with respect to Messrs. Savoy, Barba and
Wood is described below under "Telescan Management--Directors and Executive
Officers."
Management. Mr. Barba will be Chief Executive Officer of INVESTools and
Mr. Elder and Mr. Jardine will each be an Executive Vice President of
INVESTools.
Material U.S. Federal Income Tax Consequences
The following summary discusses the U.S. material federal income tax
consequences of the transaction to U.S. Holders (as defined below) of ZiaSun
stock and Telescan stock.
For purposes of this discussion, a U.S. Holder means:
o a citizen or resident of the United States;
o a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its
political subdivisions;
o a trust, if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions
of the trust; or
o an estate that is subject to U.S. federal income tax on its income
regardless of its source.
This discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), Treasury regulations, administrative
rulings and judicial decisions currently in effect, all of which are subject
to change, possibly with retroactive effect. The discussion assumes that
ZiaSun stockholders hold their ZiaSun stock and will hold their INVESTools
common stock, and that Telescan stockholders hold their Telescan stock and
will hold their INVESTools common stock, as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code. Further, the discussion
addresses only the material U.S. federal income tax consequences of the
transaction and does not consider the effect of any foreign, state, local or
other tax law. Nor does the discussion address all aspects of U.S. federal
income taxation that may be relevant to a particular stockholder in light of
that stockholder's personal investment circumstances, or to stockholders
subject to special treatment under the U.S. federal income tax laws,
including:
o insurance companies;
o tax-exempt organizations;
o financial institutions;
o broker-dealers;
o persons who have elected to use the mark-to-market method of
accounting with respect to their securities holdings;
o persons that hold their ZiaSun stock or Telescan stock as part of a
straddle, a hedge against currency risk or a constructive sale or
conversion transaction;
o persons that have a functional currency other than the U.S. dollar;
o investors in pass-through entities;
-39-
o persons who acquired their ZiaSun stock or Telescan stock through
the exercise of employee stock options or otherwise as compensation
or through a tax-qualified retirement plan; or
o holders of options granted under any ZiaSun or Telescan benefit
plan.
Holders of ZiaSun and Telescan stock should consult their own tax
advisors regarding the specific tax consequences to them of the transaction,
including the applicability and effect of federal, state, local and foreign
income and other tax laws in their particular circumstances.
Consequences of the Transaction to U.S. Holders. Based on representations
contained in representation letters provided by INVESTools, ZiaSun and
Telescan, all of which must continue to be true and accurate in all material
respects as of the effective time, and customary limitations and assumptions
set forth in the confirming opinions filed as exhibits to this registration
statement of which this joint proxy statement/prospectus is a part, it is the
opinion of Jones, Waldo, Holbrook & McDonough, counsel to ZiaSun, and of
Simpson Thacher & Bartlett, counsel to Telescan, that the material United
States federal income tax consequences of the transaction to the U.S. Holders
of ZiaSun stock and Telescan stock are as follows:
o the merger between ZiaSun and a wholly owned subsidiary of INVESTools
(the "ZiaSun Merger"), and the merger between Telescan and a wholly owned
subsidiary of INVESTools (the "Telescan Merger"), taken together, will be
treated for U.S. federal income tax purposes as transactions described in
Section 351 of the Internal Revenue Code (Jones, Waldo, Holbrook &
McDonough will also render an opinion that the ZiaSun merger qualifies as
a reorganization within the meaning of Section 368 of Internal Revenue
Code)
o with respect to U.S. Holders of ZiaSun stock:
o no gain or loss will be recognized on the exchange of ZiaSun
stock for INVESTools common stock pursuant to the ZiaSun
Merger, except with respect to cash received instead of
fractional shares of INVESTools common stock;
o the aggregate adjusted basis of the INVESTools common stock
received in the ZiaSun Merger (including any fractional shares
of INVESTools common stock deemed received and exchanged for
cash) will be equal to the aggregate adjusted tax basis of the
ZiaSun stock exchanged in the ZiaSun Merger, reduced by any
amount allocable to the fractional share interests in
INVESTools common stock for which cash is received; and
o the holding period of the INVESTools common stock received in
the ZiaSun Merger will include the holding period of the ZiaSun
stock exchanged for that INVESTools common stock.
o with respect to U.S. Holders of Telescan common stock:
o no gain or loss will be recognized on the exchange of Telescan
common stock solely for INVESTools common stock pursuant to the
Telescan Merger except with respect to cash received instead of
fractional shares of INVESTools common stock;
o the aggregate adjusted basis of the INVESTools common stock
received in the Telescan Merger (including any fractional
shares of INVESTools common stock deemed received and exchanged
for cash) will be equal to the aggregate adjusted tax basis of
the Telescan common stock exchanged for that INVESTools common
stock, reduced by any amount allocable to the fractional share
interests in INVESTools common stock for which cash is
received;
o the holding period of the INVESTools common stock received in
the Telescan Merger will include the holding period of the
Telescan common stock exchange for that INVESTools common
stock;
It is a condition to the closing of the transaction that each of ZiaSun
and Telescan receive an opinion letter from its tax counsel that the ZiaSun
Merger and the Telescan Merger, taken together, will be treated for U.S.
federal
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income tax purposes as a transaction described in Section 351 of the Internal
Revenue Code (and that tax counsel to ZiaSun issue an opinion that the ZiaSun
Merger qualifies as a reorganization under Section 368 of the Internal Revenue
Code). These opinion letters are in addition to the opinions in this section.
These opinion letters will be based on updated representation letters provided
by INVESTools, ZiaSun and Telescan to be delivered at the time of closing, all
of which must continue to be true and accurate in all material respects as of
closing, and on customary limitations and assumptions, including that the
transaction will be completed according to the terms of the merger agreement.
None of INVESTools, ZiaSun or Telescan has requested a ruling from the
United States Internal Revenue Service with respect to any of the U.S. federal
income tax consequences of the transaction, and opinions of counsel are in no
way binding on the Internal Revenue Service or any court. As a result, there
can be no assurance that the Internal Revenue Service will not disagree with
or challenge any of the conclusions described above. Moreover, any change in
currently applicable law, which may or may not be retroactive, or failure of
any representations or assumptions to be true, correct and complete in all
material respects, could affect the continuing validity of the tax opinions.
Cash Instead of Fractional Shares. The receipt of cash instead of a
fractional share of INVESTools common stock by a U.S. Holder of ZiaSun stock
will result in taxable gain or loss to such U.S. Holder for U.S. federal
income tax purposes based upon the difference between the amount of cash
received by such U.S. Holder and the U.S. Holder's adjusted tax basis in the
fractional share (determined as described above). The gain or loss will
constitute capital gain or loss and will constitute long-term capital gain or
loss if the U.S. Holder's holding period is greater than one year as of the
date of the mergers. For non-corporate U.S. Holders, this long-term capital
gain generally will be taxed at a maximum U.S. federal income tax rate of 20%.
The deductibility of capital losses is subject to limits.
Backup Withholding. Payments to certain non-corporate U.S. Holders may be
subject to backup withholding at a 31% rate on cash payments received in
connection with the mergers (including cash paid instead of fractional shares
of INVESTools common stock). Backup withholding will not apply, however, to a
U.S. Holder who:
o furnishes a correct taxpayer identification number and certifies as
to not being subject to backup withholding on IRS Form W-9 or a
substitute or successor form; or
o is otherwise exempt from backup withholding.
If a U.S. Holder does not provide a correct taxpayer identification
number, such U.S. Holder may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding does not constitute an
additional tax and will be creditable against such U.S. Holder's U.S. federal
income tax liability. U.S. Holders should consult with their own tax advisors
as to their qualification for exemption from backup withholding and the
procedure for obtaining the exemption.
A U.S. Holder may avoid backup withholding by completing IRS Form W-9 or
a substitute or successor form and submitting it to the paying agent for the
transaction when submitting such U.S. Holder's stock certificates.
Reporting Requirements. U.S. Holders of ZiaSun common stock or Telescan
stock receiving INVESTools common stock as a result of the mergers will be
required to attach to their income tax returns for the taxable year in which
the closing of the transaction occurs, and maintain a permanent record of, a
complete statement of all the facts relating to the exchange of stock in
connection with the transaction. The facts to be disclosed by a U.S. Holder
include the U.S. Holder's basis in the Telescan common stock or the ZiaSun
stock, as the case may be, transferred to INVESTools and the number of shares
of INVESTools common stock received in the transaction.
Accounting Treatment of the Merger
Under generally accepted accounting principles, ZiaSun will be treated as
the acquiring entity in the merger and will account for the merger as a
purchase of Telescan for financial reporting and accounting purposes. After
the
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merger, the results of operations of ZiaSun and Telescan will be included in
the consolidated financial statements of INVESTools.
Exchange Procedures
When the merger is completed, INVESTools will cause an exchange agent to
mail to you a letter of transmittal and instructions for use in surrendering
your ZiaSun or Telescan stock certificates in exchange for statements
indicating book-entry ownership of INVESTools stock or, if requested, stock
certificates. When you deliver your stock certificates to the exchange agent
along with a properly executed letter of transmittal and any other required
documents, your stock certificates will be canceled and you will receive
statements indicating book-entry ownership of INVESTools common stock or, if
requested, stock certificates representing the number of full shares of
INVESTools stock to which you are entitled under the merger agreement. ZiaSun
and Telescan stockholders will receive a check in the amount equal to payment
in cash, without interest, instead of any fractional shares of INVESTools
common stock that would have been otherwise issuable to them as a result of
the merger. The amount of cash payable to any ZiaSun or Telescan stockholder
will be an amount equal to the product of any fractional share of INVESTools
common stock which the holder would have been entitled to receive multiplied
by the closing price as reported on Nasdaq for a share of INVESTools on the
first trading day following the closing date of the merger.
You should not submit your ZiaSun or Telescan stock certificates for
exchange until you receive the transmittal instructions and a form of letter
of transmittal from the exchange agent.
If there is any dividend or other distribution on INVESTools stock with a
record date after the date on which the merger is completed and a payment date
prior to the date you surrender your ZiaSun or Telescan stock certificates in
exchange for INVESTools stock certificates, you will receive the dividend or
distribution, without interest, with respect to the whole shares of INVESTools
stock issued to you promptly after they are issued. If there is any dividend
or other distribution on INVESTools stock with a record date after the date on
which the merger is completed and a payment date after the date you surrender
your ZiaSun or Telescan stock certificates in exchange for INVESTools stock
certificates, you will receive the dividend or distribution, without interest,
with respect to the whole shares of INVESTools stock issued to you promptly
after the payment date.
INVESTools will only issue INVESTools shares or cash instead of a
fractional share in a name other than the name in which a surrendered ZiaSun
or Telescan stock certificate is registered if you present the exchange agent
with all documents required to show and effect the unrecorded transfer of
ownership and show that you paid any applicable stock transfer taxes.
Treatment of Stock Options and Other Rights
When the merger is completed, INVESTools will assume each outstanding
ZiaSun and Telescan employee stock option and each option will be deemed to
constitute an option to acquire a number of shares of INVESTools common stock
equal to the number of shares of ZiaSun or Telescan subject to the option
multiplied by the ZiaSun and Telescan exchange ratio, respectively, rounded
down if necessary to the nearest whole share. The exercise price per share for
the assumed options will be the exercise price per share under the ZiaSun or
Telescan stock options divided by the exchange ratio, rounded to the nearest
one-hundredth of a cent. The other material terms of all assumed ZiaSun and
Telescan options referred to above will continue to apply.
Promptly after the effective time of the merger, INVESTools will file a
registration statement covering the issuance of the shares of INVESTools
common stock subject to each converted ZiaSun and Telescan option and will
maintain the effectiveness of that registration statement for as long as any
of the options remain outstanding.
Dissenters' Rights
Under Delaware law, the common stockholders of Telescan are not entitled
to appraisal rights in connection with the merger.
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Holders of ZiaSun common stock are entitled to exercise dissenters'
rights under Chapter 92A, Sections 92A.300 through 92A.500 of the Nevada
Revised Statutes ( the "NRS"). A stockholder of ZiaSun will be entitled to
relief as a dissenting stockholder if and only if he or she complies strictly
with all of the procedural and other requirements of Sections 92A.300 through
92A.500 of the NRS. A copy of Sections 92A.300 through 92A.500 is attached
hereto as Annex VII. The following summary is not a complete statement of the
method of compliance with Sections 92A.300 through 92A.500 and is qualified in
its entirety by reference to the copy of Sections 92A.300 through 92A.500
attached hereto as Annex VII.
Right to Dissent. Stockholders of a Nevada corporation have the right to
dissent from certain corporate actions in certain circumstances. According to
Section 92A.380(1)(a)(1) of the NRS, these circumstances include consummation
of a merger requiring approval of the corporation's stockholders. Stockholders
who are entitled to dissent are also entitled to demand payment in the amount
of the fair value of their shares.
Requirements. According to Section 92A.420(1) of the NRS, stockholders of
ZiaSun who wish to assert dissenters' rights:
o must deliver written notice to ZiaSun, before the vote is taken at
the meeting of the stockholders to consider the merger, of their
intent to demand payment for their ZiaSun common stock if the merger
is completed; and
o must not vote their shares in favor of approval of the merger
agreement.
Stockholders failing to satisfy these requirements will not be entitled to
dissenters' rights under Chapter 92A of the NRS.
Thereafter, the "Subject Corporation," as defined below, is required to
send a written dissenters' notice to all ZiaSun stockholders who satisfied
these two requirements (written notice of intent to demand payment and not
voting in favor of the merger). The written dissenters' notice is required to
be sent within 10 days after completion of the merger. According to Nevada
law, ZiaSun is deemed to be the "Subject Corporation" before the merger
occurs, but INVESTools will be the "Subject Corporation" after the merger
occurs. The dissenters' notice must include:
o a statement of where dissenting stockholders should send their
demand for payment and where and when certificates for ZiaSun common
stock are to be deposited;
o a form for demanding payment including the date the merger was
announced and a certification from the stockholders asserting
dissenters' rights that they had acquired beneficial ownership of
the shares before the date when the terms of the merger were
announced to the news media or the stockholders;
o a date by which the Subject Corporation must receive the demand for
payment, which may not be fewer than 30 or more than 60 days after
the date the dissenters' notice is delivered; and
o a copy of Section 92A.300 through Section 92A.500 of the NRS.
ZiaSun stockholders wishing to exercise dissenters' rights must
thereafter:
o demand payment;
o certify whether they acquired beneficial ownership of ZiaSun common
stock before May 3, 2001 (the date upon which the merger was
announced publicly); and
o deposit their certificates in accordance with the terms of the
dissenters' notice.
Nevada law further provides that ZiaSun stockholders who fail to demand
payment or deposit their certificates where required by the dates set forth in
the dissenters' notice will not be entitled to demand payment or receive the
fair market value for their shares of ZiaSun common stock as provided under
Nevada law. Instead, such
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stockholders will receive the same merger consideration as the stockholders of
ZiaSun who do not exercise dissenters' rights.
Payment for Dissenting Shares. INVESTools will be required under Nevada
law to pay each dissenter who made a valid demand the amount INVESTools
estimates to be the fair value of the dissenter's shares of ZiaSun common
stock, plus accrued interest. INVESTools must make such payment within 30 days
after INVESTools receives the dissenter's demand for payment. The payment must
be accompanied by:
o a copy of ZiaSun's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the
stockholders' equity for that year and the latest available interim
financial statements, if any;
o a statement of INVESTools' estimate of the fair value of the
dissenter's shares of ZiaSun common stock;
o an explanation of how interest was calculated;
o a statement of the dissenter's rights to demand payment under Nevada
law of the dissenter's estimate of the value of the ZiaSun common
stock (discussed below); and
o a copy of Section 92A.300 through Section 92A.500 of the NRS.
INVESTools may withhold payment from dissenters who became the beneficial
owners of shares of ZiaSun common stock on or after May 3, 2001. If payment is
withheld for this reason by INVESTools, it must estimate the fair value of the
dissenter's shares of ZiaSun common stock (plus accrued interest) and offer to
pay this amount to each dissenter in full satisfaction of his demand.
INVESTools is required to send this offer to all such dissenters with a
statement of INVESTools' estimate of the fair value of the shares of ZiaSun
common stock, an explanation of how interest was calculated and a statement of
the dissenters' rights to demand payment under Nevada law.
Nevada law also provides that a dissenter who believes that the amount
paid or offered is less than the full value of his or her shares of ZiaSun
common stock, or that the interest due is incorrectly calculated, may, within
30 days after INVESTools made or offered payment for the shares, either (i)
notify INVESTools in writing of his or her own estimate of the fair value of
the shares of ZiaSun common stock and the amount of interest due and demand
payment of difference between this estimate and any payments made or (ii)
reject the offer for payment made by INVESTools and demand payment of the fair
value of his or her shares and interest due.
If a demand for payment remains unsettled, INVESTools must commence a
court proceeding within 60 days after receiving a demand, petitioning the
court to determine the fair value of the shares of ZiaSun common stock and
accrued interest. All dissenters whose demands remain unsettled would be made
a party to such proceeding, which would be conducted in the district court of
Carson County, Nevada. If INVESTools fails to commence such a proceeding, it
would be required by Nevada law to pay the amount demanded to each dissenter
whose demand remains unsettled. Dissenters would be entitled to a judgment:
o for the amount determined by the district court to represent the
fair value of their shares, plus accrued interest, less any amount
paid pursuant to Section 92A.460 of the NRS; or
o for the amount determined by the district court to represent the
fair value of those shares on which INVESTools elected to withhold
payment pursuant to Section 92A.470 of the NRS, plus accrued
interest.
The district court will assess the costs of the proceedings against
INVESTools; however, some or all of the costs could be assessed against some
or all of the dissenters to the extent that the court finds that some or all
of the dissenters acted arbitrarily, vexatiously or not in good faith in
demanding payment. The district court may also assess against INVESTools or
the dissenters the fees and expenses of counsel and experts for the respective
parties, in the amount the court finds equitable.
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The required appraisal rights procedures must be followed exactly or any
appraisal rights may be lost.
No Governmental Approvals or Regulatory Requirements
We are not aware of any material federal or state regulatory requirements
or approvals required for completion of the merger, other than filing
certificates of merger in Nevada and Delaware at or before the effective time
of the merger. Under the merger agreement, we have agreed to use our
respective reasonable best efforts to obtain all required governmental
approvals and fulfill all applicable regulatory requirements.
Expenses
The merger agreement provides that ZiaSun and Telescan each will pay
their own expenses in connection with the merger, including the fees and
expense of their own accountants, counsel and consultants, whether or not the
merger is consummated except that ZiaSun and Telescan will share equally all
expenses incurred in connection with printing and mailing this joint proxy
statement/prospectus and the registration statement.
Nasdaq Listing
It is a condition to closing the merger that INVESTools common stock to
be issued in the merger and reserved for issuance upon exercise of ZiaSun and
Telescan stock options be approved for quotation on Nasdaq.
Delisting and Deregistration of ZiaSun and Telescan Stock after the Merger
When the merger is completed, the ZiaSun stock will be removed from the
OTC Bulletin Board of the NASD and deregistered under the Exchange Act.
When the merger is completed, the Telescan stock will be removed from
Nasdaq and deregistered under the Exchange Act.
Stock Transfer Restrictions
The shares of INVESTools common stock to be issued in connection with the
merger will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and will be freely transferable under the Securities Act,
except for shares issued to any person who is deemed to be an "affiliate" of
ZiaSun or Telescan at the time of their respective meetings. Persons who may
be ZiaSun's or Telescan's affiliates for those purposes generally include
individuals or entities that control, are controlled by, or are under common
control with, ZiaSun or Telescan, respectively. ZiaSun and Telescan each
expects that those affiliates of ZiaSun and Telescan, respectively, will agree
with INVESTools not to transfer any shares of INVESTools stock received in the
merger except in compliance with the Securities Act. This joint proxy
statement/prospectus does not cover any resale of INVESTools common stock you
will receive in the merger, and no person is authorized to make any use of
this joint proxy statement/prospectus in connection with any such resale.
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AGREEMENT AND PLAN OF MERGER
General
The following summary of the merger agreement is qualified in its
entirety by reference to the complete text of the merger agreement, which is
incorporated by reference and attached as Annex I to this joint proxy
statement/prospectus. We urge you to read the full text of the merger
agreement.
Closing; Effective Time
We expect to close the merger immediately after approval of the merger
agreement by the ZiaSun and Telescan stockholders.
On the date of closing, we will file a certificate of merger and other
appropriate documents with the Secretary of State of Delaware and the
Secretary of State of Nevada in accordance with the relevant provisions of the
Delaware General Corporate Law ("DGCL") and the NRS. The merger will become
effective at the time set forth in the certificates of mergers.
Representations and Warranties
The merger agreement contains customary representations and warranties of
ZiaSun and Telescan relating to, among other things:
o corporate organization and similar corporate matters;
o subsidiaries;
o capital structure;
o authorization and absence of conflicts;
o reports and financial statements;
o information supplied in connection with this joint proxy
statement/prospectus and the Form S-4;
o board approval and applicable state takeover laws;
o the stockholder vote required to adopt the merger agreement;
o litigation;
o compliance with applicable laws;
o absence of specified changes or events;
o intellectual property;
o brokers and finders;
o taxes;
o certain contracts;
o employee benefits;
o labor matters;
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o environmental matters;
o assets;
o insurance;
o affiliate arrangements; and
o takeover provisions.
Covenants
Under the merger agreement, each of ZiaSun and Telescan has agreed that,
during the period before completion of the merger, except as expressly
contemplated or permitted by the merger agreement, or to the extent that the
other party consents in writing, it will carry on its respective business in
the usual, regular and ordinary course in all material respects, substantially
in the same manner as previously conducted, and will use its reasonable best
efforts to preserve intact its present line of business and its relationships
with third parties. Each of ZiaSun and Telescan has also agreed that it will
not, and it will not permit any of its subsidiaries to, enter into any new
material line of business or incur or commit any capital expenditures or any
obligations or liabilities in connection with such capital expenditures, other
than as previously disclosed to the other party or in the ordinary course of
business consistent with past practice.
In addition to these agreements regarding the conduct of business
generally, each of ZiaSun and Telescan has agreed to specific restrictions
relating to the following:
o the declaration or payment of dividends;
o the alteration of share capital, including, among other things,
stock splits, combinations or reclassifications;
o the issuance or sale of capital stock, any voting debt or other
equity interests;
o the amendment of its certificate of incorporation or by-laws;
o the acquisition of assets or other entities;
o the disposition of assets;
o the extension of loans, advances, capital contributions or
investments;
o the incurrence or the guarantee of debt;
o the taking of actions that would prevent or impede the merger from
qualifying as an exchange under Section 351 of the Internal Revenue
Code and as a reorganization under Section 368 of the Internal
Revenue Code;
o compensation of directors, executive officers and key employees;
o accounting policies and procedures; and
o entrance into certain types of agreements that limit or restrict, or
after completion of the merger, could limit or restrict ZiaSun,
Telescan or any of their subsidiaries or affiliates, including
INVESTools, from engaging or competing in any line of business or in
any geographic area, which limitation would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
(as defined below in "--Conditions to Completion of the Mergers") on
INVESTools and its subsidiaries, taken together, after the merger.
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No Solicitation
The merger agreement contains detailed provisions prohibiting ZiaSun and
Telescan from seeking an alternative transaction. Under these "no
solicitation" provisions, each of ZiaSun and Telescan has agreed that neither
it nor any of its subsidiaries, officers and directors, will, and that it will
use reasonable best efforts to ensure that its and its subsidiaries'
employees, agents and representatives, do not, directly or indirectly:
o initiate, solicit, encourage or knowingly facilitate any inquires or
the making of an Acquisition Proposal, as described below;
o have any discussion with, or provide any confidential information or
data to, any person relating to an Acquisition Proposal, or engage
in any negotiations concerning an Acquisition Proposal, or knowingly
facilitate any effort or attempt to make or implement an Acquisition
Proposal;
o approve or recommend, or propose publicly to approve or recommend,
any Acquisition Proposal; or
o approve or recommend, or propose to approve or recommend, or execute
or enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar
agreement or propose publicly or agree to do any of the foregoing
related to any Acquisition Proposal.
"Acquisition Proposal" means, with respect to any entity, any proposal or
offer with respect to, or a transaction to effect:
o a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving that entity or any of its significant
subsidiaries;
o any purchase or sale of 20% or more of the consolidated assets of
the entity, including stock of its subsidiaries, taken as a whole;
or
o any purchase or sale of, or tender or exchange offer for, the equity
securities of that entity that, if completed, would result in any
person beneficially owning securities representing 20% or more of
the total voting power of that entity, or of the surviving parent
entity in the transaction, or any of its significant subsidiaries.
However, the merger agreement does not prevent each of ZiaSun and
Telescan, or its board of directors from:
o engaging in any discussions or negotiations with, or providing any
information to, any person in response to an unsolicited bona fide
written Acquisition Proposal by that person, if and only to the
extent that its board of directors concludes in good faith that
there is a reasonable likelihood that the Acquisition Proposal could
constitute a Superior Proposal, as described below; or
o effecting a Change in Board Recommendation, as defined below, (1) if
and only to the extent that it has received an unsolicited bona fide
written Acquisition Proposal from a third party and its board of
directors concludes in good faith that the Acquisition Proposal
constitutes a Superior Proposal, as described below or (2) if the
other party makes a Change in Board Recommendation first.
However, ZiaSun or Telescan may only take such action if and only to the
extent that:
o the special meeting of its stockholders to vote on the adoption of
the merger agreement has not occurred;
o its board of directors, after consultation with outside counsel,
determines in good faith that the failure to effect a Change in
Board Recommendation or to engage in discussions or negotiations
with, or provide information to, the person, as the case may be,
would be inconsistent with its fiduciary duties under applicable
law;
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o before providing any information or data to any person in connection
with an Acquisition Proposal by that person, its board of directors
receives from that person an executed confidentiality agreement with
customary provisions; except that if the confidentiality agreement
contains provisions that are less restrictive than the comparable
provision, or omits restrictive provisions contained in the
confidentiality agreement between ZiaSun and Telescan, then the
confidentiality agreement between ZiaSun and Telescan will be
automatically amended to contain the less restrictive provisions or
to omit the restrictive provisions, as the case may be; and
o before providing any information or data to any person or entering
into discussions or negotiations with any person, it promptly
notifies the other party of:
o inquiries, proposals or offers received by, any information
requested from, or any discussions or negotiations sought to be
initiated or continued with, any of its representatives; and
o the name of the person and the material terms and conditions of any
inquiries, proposals or offers.
In addition, the merger agreement does not prevent ZiaSun or Telescan
from complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
"Change in Board Recommendation" means, with respect to any party to the
merger agreement:
o withdrawing, modifying or qualifying, or proposing to withdraw,
modify or qualify, in any manner adverse to the other party to the
merger agreement, the recommendation of that party's board of
directors that its stockholders vote in favor of the adoption of the
merger agreement; or
o taking any action or making any statement in connection with the
special meeting of the stockholders of that party that is
inconsistent with the recommendation of that party's board of
directors.
However, an action or statement will not be a Change in Board
Recommendation so long as:
o the action or statement is taken or made pursuant to advice, in the
case of ZiaSun, from Jones, Waldo, Holbrook & McDonough, and, in the
case of Telescan, from Simpson Thacher & Bartlett, to the effect
that the action or statement is required by applicable law;
o if a Public Proposal, as described below, has been made and not
rescinded, the action or statement does not relate to the Public
Proposal other than any factual statement required by any regulatory
authority, and the action or statement includes a rejection of the
Public Proposal; and
o the action or statement also includes a reaffirmation of the
approval of the merger by that party's board of directors and the
recommendation to that party's stockholders to adopt the merger
agreement.
"Public Proposal" means, with respect to ZiaSun or Telescan, an
Acquisition Proposal that has been publicly announced or otherwise
communicated to the senior management, board of directors or stockholders of
ZiaSun or Telescan, as the case may be, at any time after May 3, 2001, the
date of the merger agreement.
The board of directors of ZiaSun or Telescan may only change their
respective recommendations of the merger as provided in the "no solicitation"
provision of the merger agreement.
"Superior Proposal" means a bona fide written proposal made to ZiaSun or
Telescan, as the case may be, which is for a merger, reorganization,
consolidation, share exchange, business combination, recapitalization or
similar transaction involving ZiaSun or Telescan; and
o as a result of which the person making the proposal or its
stockholders will own 40% or more of the combined voting power of
the entity surviving or resulting from the transaction, or its
ultimate parent entity; and
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o is on terms which the board of directors of ZiaSun or Telescan, as
the case may be, in good faith concludes, following receipt of the
advice of its financial advisors and outside counsel, taking into
account, among other things, all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal
would, if completed, result in a transaction that is more favorable
to the stockholders of ZiaSun or Telescan, as the case may be, from
a financial point of view, than the merger and is reasonably capable
of being completed.
Each of ZiaSun and Telescan has agreed under the provisions of the merger
agreement that:
o it will promptly keep the other party informed of the status and
terms of any proposals, offers, discussions or negotiations covered
by the "no solicitation" provisions of the merger agreement;
o it will, and its officers, directors and representatives will,
immediately cease and terminate any activities, discussions or
negotiations existing as of May 3, 2001, the date of the merger
agreement, with any parties conducted before that date with respect
to any Acquisition Proposal; and
o it will use reasonable best efforts to promptly inform its
directors, officers, key employees, agents and representatives of
the obligations of the "no solicitation" provisions of the merger
agreement.
Nothing contained in the "no solicitation" provisions of the merger
agreement will:
o permit ZiaSun or Telescan to terminate the merger agreement, except
as specifically provided in the merger agreement; or
o affect any other obligation of ZiaSun or Telescan under the merger
agreement.
Conditions to Completion of the Mergers
Each of ZiaSun's and Telescan's obligations to complete the merger are
subject to the satisfaction or waiver of specified conditions on or before
completion of the merger, including the following:
o the adoption of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of ZiaSun common
stock and the holders of a majority of the outstanding shares of
Telescan common stock;
o the absence of any law, order or injunction prohibiting completion
of the merger;
o the appraisal rights of the ZiaSun stockholders shall not have been
perfected within the meaning of Chapter 92A of the NRS with respect
to more than 1,000,000 shares of ZiaSun common stock;
o the approval for listing, on Nasdaq, of the shares of INVESTools
common stock to be issued, or to be reserved for issuance, in
connection with the merger, subject to official notice of issuance;
and
o the declaration of effectiveness of the registration statement on
Form S-4, of which this joint proxy statement/prospectus forms a
part, by the Securities and Exchange Commission (the "SEC"), and the
absence of any stop order or threatened or pending proceedings
seeking a stop order.
"Material Adverse Effect," when used in reference to any entity, means
any event, change, circumstance or effect that is or is reasonably likely to
be materially adverse to:
o the business, financial condition or results of operations of the
entity and its subsidiaries, taken as a whole; or
o the ability of the entity to complete the merger.
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However, there will be no Material Adverse Effect to the extent that any
event, change, circumstance or effect relates:
o to the economy or financial markets in general;
o generally to the industries in which the entity operates; or
o to a decline in the market price of the capital stock of such entity
in the absence of any other event with regard to such entity that
would otherwise cause a Material Adverse Effect.
ZiaSun's obligations to complete the merger relating to ZiaSun are
subject to the satisfaction or waiver of the following additional conditions
before completion of the merger:
o Telescan's representations and warranties, disregarding all
qualifications and exceptions contained in the merger agreement
relating to materiality or Material Adverse Effect, must be true and
correct as of the date of the merger agreement and as of the date of
completion of the merger, except for (1) representations and
warranties that expressly address matters only as of a particular
date, which must be true and correct as of such date and (2) any
failure of such representations and warranties to be true and
correct that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Telescan; and
ZiaSun shall have received a certificate of a senior executive
officer and a senior financial officer of Telescan to that effect;
o Telescan must have (1) performed or complied with all agreements and
covenants required to be performed by it under the merger agreement
at or prior to completion of the merger that are qualified as to
materiality or Material Adverse Effect and (2) performed or complied
in all material respects with all other material agreements and
covenants required to be performed by it under the merger agreement
that are not so qualified, and ZiaSun shall have received a
certificate of a senior executive officer and a senior financial
officer of Telescan to such effect;
o ZiaSun must have received from Jones, Waldo, Holbrook & McDonough, a
written opinion to the effect that for federal income tax purposes,
the mergers taken together will constitute an exchange to which
Section 351 of the Internal Revenue Code applies and that the ZiaSun
merger qualifies as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code;
o all consents, approvals, and actions of, filings with and notices to
any public or private third parties required of ZiaSun or Telescan
to complete the merger shall have been obtained, in form and
substance reasonably satisfactory to ZiaSun; and
o there shall not have occurred any Material Adverse Effect on
Telescan since the date of the merger agreement.
Telescan's obligations to complete the merger relating to Telescan are
subject to the satisfaction or waiver of the following additional conditions
before completion of the merger:
o ZiaSun's representations and warranties, disregarding all
qualifications and exceptions contained in the merger agreement
relating to materiality or Material Adverse Effect, must be true and
correct as of the date of the merger agreement and as of the date of
completion of the merger, except for (1) representations and
warranties that expressly address matters only as of a particular
date, which must be true and correct as of such date and (2) any
failure of such representations and warranties to be true and
correct that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on ZiaSun; and
Telescan shall have received a certificate of a senior executive
officer and a senior financial officer of ZiaSun to such effect;
o ZiaSun must have (1) performed or complied with all agreements and
covenants required to be performed by it under the merger agreement
at or prior to the date of completion of the merger that are
qualified as to materiality or Material Adverse Effect and (2)
performed or complied in all material respects with all other
material agreements and covenants required to be performed by it
under the
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merger agreement that are not so qualified, and Telescan shall have
received a certificate of a senior executive officer and a senior
financial officer of ZiaSun to such effect;
o Telescan must have received from Simpson Thacher & Bartlett, a
written opinion to the effect that for federal income tax purposes,
the mergers taken together will constitute an exchange to which
Section 351 of the Internal Revenue Code applies;
o all consents, approvals, and actions of, filings with and notices to
any public or private third parties required of ZiaSun or Telescan
to complete the merger shall have been obtained, in form and
substance reasonably satisfactory to Telescan; and
o there shall not have occurred any Material Adverse Effect on ZiaSun
since the date of the merger agreement.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the
completion of the merger, whether before or after the stockholder approvals
have been obtained:
o by mutual written consent of ZiaSun and Telescan;
o by either ZiaSun or Telescan if the merger is not completed on or
before November 1, 2001, except that this right to terminate the
merger agreement will not be available to any party whose failure to
fulfill any obligation under the merger agreement has been the cause
of, or has resulted in, the failure of the merger to be completed by
November 1, 2001;
o by either ZiaSun or Telescan if any governmental entity issues an
order, decree or ruling or takes any other action permanently
restraining, enjoining or otherwise prohibiting the transaction
contemplated in the merger agreement, and the order, decree, ruling
or other action becomes final and nonappealable, except this right
to terminate the merger agreement will not be available to any party
whose failure to comply with an obligation under the agreement has
been the cause of such action;
o by either ZiaSun or Telescan if the approval of either party's
stockholders is not obtained because of the failure to obtain the
required vote to adopt the merger agreement at a duly held meeting
of ZiaSun's or Telescan's stockholders;
o by either ZiaSun or Telescan if the board of directors of the other
party fails to recommend that the stockholders of that party vote in
favor of the adoption of the merger agreement or effects a Change in
Board Recommendation, whether or not permitted by the terms of the
merger agreement;
o by either ZiaSun or Telescan if the other party breaches or fails to
perform any of its representations, warranties, covenants or other
agreements contained in the merger agreement in such a way as to
render the conditions to the completion of the merger relating to
the accuracy of representations and warranties and the performance
of or compliance with agreements and covenants contained in the
merger agreement incapable of being satisfied on or before
November 1, 2001;
o by ZiaSun, if (i) the board of directors of ZiaSun authorizes ZiaSun
to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and ZiaSun notifies Telescan in
writing that it intends to enter into such an agreement, attaching
the most current version of such agreement to such notice (which
version shall be updated on a current basis) and (ii) Telescan does
not make, within three Business Days (or, in the case of any update
of such version with respect to a given third party, other than the
initial notification, one Business Day) of receipt of ZiaSun's
written notification of its intention to enter into a binding
agreement for a Superior Proposal, a non-revocable binding offer
that the board of directors of ZiaSun determines, in good faith, is
at least as favorable to the stockholders of ZiaSun as the Superior
Proposal; or
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o by Telescan, if (i) the board of directors of Telescan authorizes
Telescan to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and Telescan
notifies ZiaSun in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to
such notice (which version shall be updated on a current basis) and
(ii) ZiaSun does not make, within three Business Days (or, in the
case of any update of such version with respect to a given third
party, other than the initial notification, one Business Day) of
receipt of Telescan's written notification of its intention to enter
into a binding agreement for a Superior Proposal, a non-revocable
binding offer that the board of directors of Telescan determines, in
good faith, is at least as favorable to the stockholders of Telescan
as the Superior Proposal.
Termination Fee
ZiaSun Termination Fee. In the event the merger agreement is terminated,
ZiaSun shall pay Telescan $627,814 under the following circumstances:
o if either party terminates the merger agreement and each of the
following is true:
oo the stockholders of ZiaSun do not approve and adopt the merger
agreement at a meeting of ZiaSun's stockholders;
oo an Acquisition Proposal with respect to ZiaSun has been
publicly announced or otherwise communicated to the senior
management, board of directors or stockholders of ZiaSun at any
time after May 3, 2001, the date of the merger agreement, and
before the date of termination of the merger agreement; and
oo within 12 months of the termination of the merger agreement,
ZiaSun or any of its subsidiaries enters into any definitive
agreement with respect to, or consummates, an Acquisition
Proposal;
o if Telescan terminates the merger agreement as a result of the
ZiaSun board of directors failing to recommend that the ZiaSun
stockholders approve the merger agreement or effecting a Change in
Board Recommendation; or
o if ZiaSun terminates the merger agreement to enter into a
transaction that constitutes a Superior Proposal.
Telescan Termination Fee. In the event the merger agreement is
terminated, Telescan shall pay ZiaSun $415,549 under the following
circumstances:
o if either party terminates the merger agreement and each of the
following is true:
oo the stockholders of Telescan do not approve and adopt the
merger agreement at a meeting of Telescan's stockholders;
oo an Acquisition Proposal with respect to Telescan has been
publicly announced or otherwise communicated to the senior
management, board of directors or stockholders of Telescan at
any time after May 3, 2001, the date of the merger agreement,
and before the date of termination of the merger agreement; and
oo within 12 months of the termination of the merger agreement,
Telescan or any of its subsidiaries enters into any definitive
agreement with respect to, or consummates, an Acquisition
Proposal;
o if ZiaSun terminates the merger agreement as a result of the
Telescan board of directors failing to recommend that the Telescan
stockholders approve the merger agreement or effecting a Change in
Board Recommendation; or
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o if Telescan terminates the merger agreement to enter into a
transaction that constitutes a Superior Proposal.
Amendment, Extension and Waiver
The merger agreement may be amended by the parties, by action taken or
authorized by their respective boards of directors, at any time before or
after approval of the merger by the stockholders of ZiaSun and Telescan has
been obtained. After the approval has been obtained, no amendment may be made
which by law or in accordance with the rules of any relevant stock exchange
requires further approval by the stockholders of ZiaSun or Telescan, as the
case may be, without the further approval. All amendments to the merger
agreement must be in writing signed by each party.
At any time before the completion of the merger, the parties may, by
action taken or authorized by their respective boards of directors, to the
extent legally allowed:
o extend the time for the performance of any of the obligations or
other acts of the other party;
o waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
pursuant to the merger agreement; and
o waive compliance with any of the agreements or conditions contained
in the merger agreement.
All extensions and waivers must be in writing and signed by the party
against whom the waiver is to be effective.
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ANCILLARY AGREEMENTS
Voting Agreements
As an inducement to ZiaSun's willingness to enter into the merger
agreement, Vulcan Ventures, Inc., NBC-TSCN Holding, Inc., GE Capital Equity
Investments, Inc. and LJH Corporation each entered into a voting agreement
with ZiaSun under which these principal stockholders agreed to vote all their
shares of Telescan common stock, which in aggregate represent 36% of the
outstanding common stock of Telescan, in favor of the merger.
As an inducement to Telescan's willingness to enter into the merger
agreement, D. Scott Elder, Ross Jardine, Scott Harris, David W. McCoy and
Momentum Media Ltd. each entered into a voting agreement with Telescan under
which these principal stockholders agreed to vote all their shares of ZiaSun
common stock, which in aggregate represent 42% of the outstanding common stock
of ZiaSun, in favor of the merger.
The voting agreements terminate upon the earlier to occur of the
completion of the merger and the termination of the merger agreement in
accordance with its terms.
These voting agreements are attached as Annex II to this joint proxy
statement/prospectus. We urge you to read the full text of the voting
agreements.
Lock-Up Agreements
As an inducement to ZiaSun's willingness to enter into the merger
agreement, Vulcan Ventures, Inc., entered into a lock-up agreement with ZiaSun
that provides that upon closing of the merger and during the six month period
immediately following closing, this principal stockholder will not sell any
shares of INVESTools stock, and that during the six month period following
this initial period it will not sell more than 100,000 shares of INVESTools
common stock in any calendar month. As an inducement to Telescan's willingness
to enter into the merger agreement, Messrs. Elder, Jardine, Harris and McCoy
each entered into similar lock-up agreements with Telescan. These lock-up
agreements are attached as Annex III to this joint proxy statement/prospectus.
We urge you to read the full text of the lock-up agreements.
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INVESTOOLS
INVESTools Inc. is a newly formed company that will, as a result of the
merger, become a leading provider of investor education, financial
publications and analytical tools worldwide. INVESTools will own 100% of
ZiaSun and 100% of Telescan upon completion of the merger. On a pro forma
combined basis, INVESTools recorded $89.5 million of revenues for the year
ending December 31, 2000.
As discussed below, INVESTools will create a combination of proven
classroom investor education with advanced e-finance services and
web-delivered analytical tools. The pro forma combined company is already
doing business in 12 countries. In the year 2000, the combined operations:
o conducted more than 1,200 investment seminars and 270 two-day
investment workshops in 80 U.S. and 17 international cities;
o served more than 100,000 paying customers at price points ranging
from $15 per month to $4,000 for a complete, two-day investor
education workshop;
o reached more than one million active investors each month through
Web sites and e-mail lists; and
o represented more than 40 unique, recognizable brands, including
INVESTools, Investor Toolbox, WallStreetCity and others.
The combined company is being built on a solid and practical business
platform, in which the investor workshops complement the online financial
tools. Investors are better able to leverage the power of online financial
tools, if they are provided a variety of ways to become familiar with those
tools, including live seminars, video tapes, audio tapes and Web based
information. This multi-channel approach is also expected to produce a pro
forma combined positive cash flow, providing significant differentiation from
many purely Web based business models.
Effective May 21, 2001, INVESTools was incorporated in Delaware to effect
the merger of ZiaSun and Telescan. Currently, INVESTools' consolidated
financial statements consist solely of a consolidated balance sheet, as
INVESTools has had no operations or equity activity since its initial
incoporation. The consolidated balance sheet reflects the par value of
INVESTools two shares of outstanding common stock, offset by an equivalent
subscription receivable issued in connection with the stock issuance. This
consolidated financial statement is not included in this joint proxy
statement/prospectus.
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ZIASUN BUSINESS
General
ZiaSun was organized under the laws of the State of Nevada on March 19,
1996, under the name "Carlisle Enterprises, Inc." ZiaSun was originally
incorporated for the purpose of executive search and recruitment of employees
for businesses. ZiaSun is currently an Internet technology holding company
focused on international e-finance and investor education, along with
selective e-commerce opportunities. It specializes in certain online support
services within North America, Asia and other international markets. ZiaSun's
subsidiaries include: Online Investors Advantage, Inc. ("OIA"), Asia PrePress
Technology ("APT"), Asia Internet Services ("AIS"), and, through OIA, Seminar
Marketing Group, Inc. ("SMG"), and Memory Improvement Systems, Inc. ("MIS").
Additionally, ZiaSun owns a 25% equity position in Asia4Sale, a 75% equity
position in Online Investors Advantage Asia Pacific PTE Ltd. and a 60% equity
position in MKZ Fund, LLC ("MKZ") which in turn owns 43% of McKenna Venture
Accelerator, LLC ("MVA"), a venture fund.
At its board meeting on March 22, 2001, the board of directors of ZiaSun
adopted a plan to discontinue its foreign operations which are unrelated to
OIA. The foreign subsidiaries are small in comparison to the U.S. operations
and are difficult to manage at a long distance. The intent of management is to
either resell the foreign operations to the parties which originally sold the
foreign subsidiaries to ZiaSun, or to seek third-party purchasers. In May
2001, ZiaSun completed the sale of Momentum Asia, Inc. and has entered into
negotiations for the sale of APT and AIS. The net assets of the discontinued
operations are shown as a separate line item in the other assets section of
ZiaSun's balance sheets.
ZiaSun actively seeks to acquire, structure, manage and consolidate other
select holdings through its wholly owned subsidiaries operating in the U.S.
and in foreign markets. Its objective is to acquire holdings which will
provide marketing and operating synergy with one another, are well positioned
and profitable in their targeted markets, and/or have demonstrated technical
expertise in certain areas of e-commerce. While ZiaSun pursues certain
business opportunities, alliances and joint ventures which will enhance
profitable growth and development, and help maximize the stockholders' equity,
ZiaSun does not typically advertise to attract such opportunities.
The two basic challenges in effectively implementing this strategy, while
preserving and continually developing ZiaSun's core technology, are: (1)
maintaining an active pipeline of potentially desirable, acquirable companies
through various business contacts and financial institutions and (2)
maintaining the financial wherewithal to move quickly enough, when an
opportunity for a synergistic acquisition arises, to complete the acquisition,
and effectively integrate the acquired entity into ZiaSun's holdings at
minimum cost and/or disruption to the other entities. In some instances this
will include the challenge of effectively restructuring the acquired entities
with one or more existing entities to maximize their contribution to ZiaSun's
revenues and profits.
The growth in use of online financial services in the foreign markets is
one key to ZiaSun's future growth. ZiaSun is focused on capturing a large
number of these foreign users and a significant percentage of the growing
number of U.S. users of Internet tools and services. The U.S. domestic market
is also projected to sustain its growth in domestic e-commerce and online
financial services usage, and is still developing in terms of the number of
educated users of these services.
ZiaSun's business model is fairly simple and continues to present
long-term growth prospects. Revenue is generated by selling finance
educational programs and services and e-commerce services to businesses and/or
consumers worldwide. As this operating model grows, ZiaSun's base of loyal
users, subscribers and visitors to their Web sites and services should also
continue to grow. This will help build the credibility necessary to establish
further strategic relationships and alliances, and develop co-branding and
licensing agreements with Internet companies with similar objectives.
ZiaSun may, from time-to-time, divest or "spin off" its equity interest
in one or more of its entities or holdings when it proves strategically and
economically advantageous to its stockholders to do so. This could increase
the stockholders' equity, and, at the same time, allow ZiaSun to continually
refine its core operations and holdings, once it has adequately established
itself in the more profitable targeted markets.
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ZiaSun's revenues are largely derived from OIA through its instructor led
education workshops, home-study courses, and its Investor Toolbox Web site.
OIA contributed 100% of continuing revenues for the twelve-month period ended
December 31, 2000. E-finance services and training constitute the major
portion of ZiaSun's current business. Revenues are generated from attendance
fees for live workshops in major cities worldwide, sales of home-study
programs and online subscription services.
Continuing Operations
Online Investors Advantage, Inc. OIA, a wholly owned subsidiary of
ZiaSun, provides in-depth consumer training in the optimum use of
Internet-based investment and financial management tools and services via
workshops, home study, and online subscriptions. OIA recently expanded into
the international marketplace. OIA has a current customer base of some 12,000
individuals. In addition, OIA has a strategic working relationship with
Telescan, its primary data provider.
OIA has developed a video-based home-study program, which sells for
$1,995, and a live 2-day workshop, which costs $2,995 to attend if the
attendee registers at the live preview, or $3,995 if the attendee registers
after the fact. Both programs are promoted online and through a traditional
multi-step marketing program. The multi-step marketing program includes direct
mail, radio, television, newspaper, free "Introduction to Online Investing
seminars," the Internet, and word-of-mouth incentives. Prior workshop
attendees are allowed to attend a refresher workshop at no charge, or extend
their subscription to www.investortoolbox.com for six months at no charge if
they refer another person to an OIA workshop. This incentive has a $495.00
value. OIA's brochures and audio tapes are used to build further interest and
customer loyalty. The two-day workshop is OIA's principal revenue generator.
Those introduction seminar attendees who do not elect to attend the
two-day training workshops are candidates for video-based home-study
educational programs. Accordingly, OIA is well positioned to continue
providing both e-finance and investing education and services, while
developing a growing customer base for its online subscription service and
other compatible products and services.
Seminar Market Group, Inc. SMG, a wholly owned subsidiary of OIA, was
acquired to secure various marketing and support services for OIA such as
in-house telephone marketing and consulting for OIA's marketing process. These
services are now handled by OIA directly and SMG is inactive.
Memory Improvement Systems, Inc. MIS, a wholly owned subsidiary of OIA,
provides platform speaking services as well as the recruiting and training of
professional presenters for OIA's 90-minute introductory seminars.
McKenna Venture Accelerator, LLC. In August 2000, ZiaSun and The McKenna
Group formed MKZ, a joint venture fund that is owned 60% by ZiaSun and 40% by
McKenna Enterprises, an affiliate of The McKenna Group, managed by McKenna
Enterprises and funded by ZiaSun. At the same time, MKZ committed to make
investments in MVA, a venture fund created by The McKenna Group under Delaware
law for the purpose of acquiring securities of start-up and early stage
companies. MVA is a partially-owned subsidiary of MKZ, in which MKZ is the
owner of a 43% membership interest with the other investors owning the
remaining interest. The McKenna Group, under the direction of an investment
board made up of members from MKZ, the other investors and The McKenna Group,
manages the day-to-day operations of MVA.
The MVA partners total capital commitment to MVA is $18.5 million, of
which MKZ committed to invest $8 million. In 2000, MKZ invested $5.6 million
in MVA. On April 20, 2001, MVA, MKZ, McKenna Enterprises and ZiaSun entered
into a letter agreement under which MVA amended MKZ's obligation to complete
its capital commitment of $2.4 million. Under the terms of the letter
agreement, $250,000 in cash was paid from cash transferred to MKZ by ZiaSun,
$750,000 was paid in the form of cash held by MKZ and 318,339 shares of ZiaSun
common stock held by Geoffrey Mott of McKenna Enterprises. McKenna Enterprises
further provided a surety to MVA and guaranteed the difference between the
realized cash value from the sale of the 318,339 shares of ZiaSun common stock
and $386,000. MKZ, McKenna Enterprises and ZiaSun have until June 15, 2001 to
satisfy the remaining $1.4 million capital commitment balance, either in cash
or through the sale of MKZ's interest in MVA. This sale may be up to a $2.4
million interest but not less than a $1.4 million interest. On May 2, 2001,
the California Department of Corporations advised ZiaSun that it could not
grant ZiaSun's application to register 318,339 shares of ZiaSun common stock
issued to Geoffrey Mott of McKenna Enterprises, as the California Department
of Corporations believed that OIA was acting as an unlicensed investment
adviser in California. ZiaSun
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believes that OIA is not an investment advisor and is responding to the
California Department of Corporations. Accordingly, if these shares cannot be
registered and thus sold, MKZ will be required to provide substitute capital
to MVA in the amount of $386,000.
MVA makes highly selective investments primarily in early stage
business-to-business Internet technology companies with a principal focus on
three core areas: mobile communications, networking and communications and
e-business. MVA offers companies financial and infrastructure support to
accelerate operations, business and market strategy support to accelerate
time-to-market, and partnering support to accelerate scale-up, all of which
creates a highly attractive entrepreneurial environment. MVA also differs from
traditional venture funds in that its investors play an active role in
approving those investments made by the fund, which makes it possible for the
fund to leverage the particular expertise and know-how of its investors.
MVA has acquired equity positions in the following four companies:
o Last Mile Services (www.lastmileservices.com) develops software that
allows immediate deployment of disparate broadband services between
service providers and customer premises.
o IControl Incorporated is a brand new company (with no Web site
to-date) dedicated to delivering the most complete security and
authentication solutions to mobile commerce, which is expected to
grow into a $70 billion market in the next few years.
o QEDSoft (www.qedsoft.com) develops software designed to enable
delivery of high-quality 3D animation on the Web across multiple
platforms with zero latency and with low bandwidth requirements.
o Sirenic (www.sirenic.com) develops server software intended to
enable personalized content delivery and m-commerce applications
across a broad range of access devices.
MKZ has also invested directly in small equity positions in the following
group of companies, who are also clients of The McKenna Group. These companies
are typically further along than the firms MVA invests in, and their equity is
available to MKZ only because they seek out the consulting services of The
McKenna Group.
o OneSecure (www.onesecure.com) is a provider of secure managed
network solutions to large enterprises.
o Home Director (www.homedirector.com) provides complete home
networking and management solutions.
o B2B Web (www.b2bweb.com) is a supplier of state-of-the-art global
supply chain management platforms and solutions to manufacturers and
retailers.
o PortfolioScope (www.portfolioscope.com) is an applications services
provider of innovative portfolio tracking and analysis solutions to
portfolio managers and individual investors.
o Tradeworx (www.tradeworx.com) provides cutting edge analytical and
decision support tools to the online and offline financial services
industry.
o Vision is a leader in the emerging area of high-performance 3-D
search engines capable of handling all media types including video.
o iSX (www.isx.com) provides unique, rapid-retrieval database tools to
emerging e-business markets.
o Last Mile Services (www.lastmileservices.com) is also held directly
by MKZ as well as in the MVA fund.
Online Investors Advantage Asia Pacific Private Limited. Pursuant to a
joint venture agreement between OIA and Leong Chong and Eric Lip Meng Tan,
Singapore residents, Online Investors Advantage Asia Pacific PTE,
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Ltd ("OIA Singapore") was formed to expand OIA's business in the Asian
marketplace, including the performance of marketing services, the distribution
of OIA's materials and conducting workshops in Singapore, Malaysia, Brunei and
Hong Kong. OIA Singapore is owned 75% by OIA and 25% by Messrs. Chong & Tan.
Discontinued Operations
Sale of Momentum Asia, Inc. On May 10, 2001, ZiaSun consummated the sale
of all the outstanding shares of its subsidiary Momentum Asia to Momentum
Media, Ltd. ZiaSun had acquired Momentum Asia on October 5, 1998 in a
stock-for-stock exchange. Under the terms of the sale agreement, Momentum
Media acquired all of the outstanding shares of Momentum Asia in consideration
for 200,000 shares of ZiaSun common stock that were owned by Momentum Media.
In connection with the sale, ZiaSun paid Momentum Asia $50,000 to provide
Momentum Asia with working capital and Momentum Asia transferred to ZiaSun
130,000 shares of ZiaSun common stock that were owned by Momentum Asia. All
the shares of ZiaSun common stock acquired by ZiaSun were canceled.
The following entities are subject to a formal plan to be sold or
otherwise disposed of:
Asia Prepress Technologies, Inc. APT has operations in the Philippines
and provides a true 24/7 keyboarding operation for conversion of books and
other hard-copy documents into a searchable electronic format via the
Internet. APT's double-key data entry, comparison and verification analysis,
along with proofreading by a quality control source for all data entry work
completed ensures a 99.99% accuracy level for its transcription services. APT
also provides data conversion services, rendered line art services, LaTex
editing, SGML/HTML/XML keying and coding, and Quark Page Makeup. APT's other
services include Web Page design and CD replication/duplication along with
providing label and cover printing for CD's. APT has a large labor pool of
English speaking, well educated workers within low-cost incentive-rich Special
Economic Zones in the Philippines. APT's primary customer base is
typesetting/composition prepress operations in the publishing field, but it
also is doing work for groups in the medical, legal, accounting and private
industry fields. Anyone who has data that requires conversion or manipulation
into various electronic formats is a potential customer for APT. Major
competitors of APT include Innodata and Sencor.
ZiaSun acquired APT on May 22, 2000. ZiaSun received 100% of the common
stock of APT in exchange for $100,000 cash and 100,000 shares of restricted
common stock of ZiaSun. In addition, ZiaSun assumed the working capital line
of credit of APT in the amount of $250,000. As of December 31, 2000, there was
an outstanding principal balance on the line of credit of $70,000.
Asia Internet Services.com, Inc. AIS is also headquartered in Glen
Burnie, Maryland with operations in the Philippines. It is an outsourcing
contractor providing packages of specialized support services for Internet and
IT firms with high-volume response needs. Services include e-mail response,
order taking, correspondence, billing and service inquiries. Pricing is based
at a starting point of $6.00 per hour for each employee required. The primary
customer base is small to mid-size companies who wish to avoid setting up
labor intensive customer service branches. AIS provides alternative
outsourcing in order to save companies time and money allowing them to
concentrate on their core competencies. Service is provided on a 24/7 basis.
Major competitors of AIS include Brigade, Startek and Swift Response.
On May 22, 2000, ZiaSun acquired 100% of the common stock of AIS in
exchange for $200,000 and 150,000 shares of restricted common stock of ZiaSun.
Distribution
Management seeks out and investigates business opportunities by various
means and methods, including personal contacts, verified professionals,
securities broker dealers, venture capital personnel, members of the financial
community and others who may present unsolicited proposals.
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Recent Acquisitions and Investments
Seminar Marketing Group, Inc. On September 29, 2000, ZiaSun acquired all
of the outstanding stock of SMG. Pursuant to the terms of the acquisition
agreement, ZiaSun issued an aggregate of 370,000 restricted shares of common
stock to stockholders of SMG in exchange for such stock. The shares issued to
the SMG stockholders are subject to piggyback registration rights. The
acquisition of SMG had the effect of eliminating various existing royalties
and overrides of OIA which are or were currently being paid for these
marketing, seminar development, hosting and speaking services, and will reduce
certain ongoing commission obligations of OIA.
The issuance of these shares was intended to be a transaction exempt from
the registration requirements under the Securities Act pursuant to Rule 506 of
Regulation D. Upon subsequent review of the transaction by ZiaSun's attorneys,
it was determined that the issuance of the shares did not meet the technical
requirements of the Securities Act. Therefore, on February 12, 2001, ZiaSun
provided notice to the prior stockholders of SMG who received shares as a
result of the acquisition of SMG by ZiaSun, that the transaction would be
rescinded and that following the filing and effectiveness of an appropriate
registration statement, that a rescission offer would be delivered to such
stockholders in the near future.
Memory Improvement Systems, Inc. On October 16, 2000, ZiaSun acquired all
of the outstanding stock of MIS. Pursuant to the terms of the acquisition
agreement, ZiaSun issued an aggregate of 400,000 restricted shares of common
stock to stockholders of MIS in exchange for such MIS stock. The shares issued
to the MIS stockholders are subject to piggyback registration rights. MIS
provides the recruiting and training of professional platform presenters at
OIA's 90 minute "Introduction to Online Investing" seminars, and was acquired
in order to eliminate fees paid to MIS as a percentage of workshops sales.
Raw Materials and Supplies
ZiaSun does not utilize any specialized raw materials. All necessary
required materials, if any, are readily available. ZiaSun is not aware of any
existing or future problem that will materially affect the source and
availability of any such materials which would be required by ZiaSun.
Intellectual Property
U. S. Trademark Applications. ZiaSun and/or its subsidiaries have made,
and/or hold registrations for the following trademarks:
Reg/Appln
Mark Class Status Number
---- ----- ------ ------
Investor Toolbox 36 Pending 75/893296
Online Investors Advantage 9 Pending 75/893299
Online Investors Advantage 41 Pending 75/893295
Online Investor Toolbox 36 Pending 75/893280
Online Investor Toolbox Advantage 36 Pending 75/192920
Online Investor Toolbox Advantage 41 Pending 75/192922
Secrets To Online Investing 16 Pending 76/055455
Secrets To Online Investing 41 Pending 76/055249
Stock Market Investor Toolbox 16 Pending 76/198670
Stock Market Investor Toolbox 41 Pending 76/198669
Wall Street Investor Toolbox 16 Pending 76/198671
Wall Street Investor Toolbox 41 Pending 76/198672
Wall Street Mentor 16 Pending 76/198464
Wall Street Mentor 41 Pending 76/198463
Where People Learn to Invest Online 41 Registered 2,412,540
5 Step Online Investing Formula 41 Pending 75/893298
7 Cash-Flow Investing Strategies 41 Pending 75/893294
ZiaSun 35 Pending 76/084808
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ZiaSun 36 Pending 76/084807
ZiaSun 37 Pending 76/084806
ZiaSun 41 Pending 76/084899
ZiaSun 42 Pending 76/084898
OIA will discontinue the use of the trademark "Online Investors
Advantage."
U.S. Copyright Applications. ZiaSun and/or its subsidiaries have made
and/or hold registrations for the following copyrights:
1. Online Investors Advantage - Workshop Manual - Version 5.0
2. The 5 Step Online Investing Formula - Overview Handout
3. Online Investor Toolbox - Speakers Biography
4. Online Investing Workshop 2000 - Registration Form
5. Money Talks - Flyer
6. Online Investors Advantage - Ticket
7. Learn the Secrets of Online Investing - Prospect Letter
8. Here's Your Free Ticket to Retiring Early and Retiring Rich -
Ticket
9. What I Discovered About Using the Internet - Letter
10. The Internet is Empowering People - Brochure
11. Online Investors Advantage - Computer Mouse Pad
12. Online Investing - Videotape Set
13. Online Investing Advantage - Welcome Kit
Government Regulation
With the exception of the requirement that ZiaSun and its subsidiaries be
registered or qualified to do business in the States and foreign countries in
which they will be doing business, the products and services provided through
use of ZiaSun's technology are not subject to approval of any government
regulation.
For OIA to conduct workshops in the country of Australia, OIA is
registered under the proper authority with Australian Securities and
Investments Commission and has a compliance officer residing in Australia.
On May 2, 2001, the California Department of Corporations advised ZiaSun
that it could not grant ZiaSun's application to qualify to offer and sell
certain shares of ZiaSun common stock in California, as the California
Department of Corporations believed that ZiaSun's wholly owned subsidiary OIA
was acting as an unlicensed investment adviser in California. In May 2001,
ZiaSun renewed its request that the application be approved, asserting that
based on existing case law and an opinion previously issued by the California
Department of Corporations, OIA does not engage in the activities of an
investment adviser.
Employees
As of June 30, 2001, ZiaSun and its subsidiaries employ approximately ___
full time employees.
Property
ZiaSun's corporate headquarters are located at 665 San Radolfo Drive,
Suite 120, Solana Beach, California 92075. These premises have been leased
beginning May 16, 2001 for an initial period of three months and thereafter
the lease is on a month to month basis. The lease rate for these premises is
presently $1,680 per month.
OIA leases approximately 4,440 feet of office space at 5252 North
Edgewood Drive, Provo, Utah, which serves as OIA's headquarters, and houses
the OIA accounting staff, information services department, customer support,
data entry, international office and travel coordinator. These premises are
leased through July 20, 2004 with an option to renew the lease for one
additional term of 5 years. The lease rate as of the year ended December 31,
2000, was $8,006.14. On April 1, 2000 the lease rate increased to $8,175.77
per month. The lease rate increases to $8,350.48 and $8,530.43 on April 1,
2001, and April 1, 2003, respectively.
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OIA also leases 1,940 square feet of office space at 852 North 1430 West,
Unit #3, Westpoint Business Park, Orem, Utah, at a monthly rate of $1,309. OIA
has vacated these premises which are leased through October 31, 2001 and
subleases the same for $1,250 per month.
OIA leases approximately 7,750 square feet of space at 555 East 1860
South, Provo, Utah which house the OIA home study sales department, shipping
and fulfillment department. These premises are leased through April 30, 2005.
The lease rate through November 30, 2001, is $5,340. The lease rate increases
to $6,180 per month for period December 1, 2001, through July 31, 2003, and
$7,020 per month for period August 1, 2003, through April 30, 2005.
APT leases approximately 3,100 square feet of space on Argonaut highway,
Boton Area, Subic Freeport, the Philippines, at a monthly rate of $1,002 per
month. The lease is for a term from September 1, 1999, and ending on
August 31, 2002.
APT also leases office space in Glen Burnie, Maryland, under an oral
month-to-month lease from Maryland Composition, at the rate of $5,000 per
month.
Legal Proceedings
ZiaSun Technologies, Inc. v. Continental Capital & Equity Corporation.
ZiaSun is a party plaintiff in the matter of ZiaSun Technologies, Inc. v.
Continental Capital & Equity Corporation, Superior Court of California, County
of San Diego, Case No. GIC-759797. ZiaSun seeks a refund of $130,000 of the
$250,000 paid to Continental Capital, alleging breach of contract, intentional
misrepresentation and negligent misrepresentation on the part of Continental
Capital. The matter is pending.
Suntrust Banks, Inc. v. Online Investors Advantage, Inc. OIA was a party
defendant in the matter of SunTrust Banks, Inc. v. Online Investors Advantage,
Inc., United States District Court, Eastern District of Virginia, Case No.
00-1721-A. SunTrust, as the owner of the trademark "Investors Advantage,"
filed a civil action to enjoin OIA from the use of the mark and name
"Investors Advantage." On January 19, 2001, SunTrust and OIA entered into a
Settlement Agreement under which SunTrust and OIA would explore the possible
assignment of the mark and name "Investors Advantage" to OIA under mutually
agreeable terms. The parties also agreed that in the event an agreement as to
the assignment was not reached in 3 months, then OIA will within 9 months from
January 19, 2001, terminate any use of the mark and name "Investors
Advantage." Based on this agreement the pending action was dismissed without
prejudice. No agreement was reached with respect to the assignment of the
trademark "Investors Advantage."
Settlement of OIA v. Wall Street Mentors, Inc. et al. On or about April
13, 2001, ZiaSun's wholly owned subsidiary, OIA, entered into a settlement
agreement with Wall Street Mentors, Inc., five former independent contractors
of OIA and other individuals, providing for the settlement of the matter
entitled Online Investors Advantage, Inc., v. Varlin Law, Rhett Anderson,
David Nicolson, Roger Taylor, Bart Coon, Steve Admundsen, Tim Anderson, David
Shamy, Brock Madsen and Wall Street Mentors, Inc., filed by OIA on or about
February 23, 2001, in the United States District Court for the District of
Utah, Case No. 2:01 CV0129 C, as well as other possible claims of the
defendents. In this action, OIA has alleged, among other things, copyright
infringement, misappropriation of trade secrets, unfair competition, libel,
deceptive trade practices, and breach of non-competition agreements and
confidentiality agreements by the defendants. Subject to the performance of
the parties under the settlement agreement, OIA and the defendants have each
agreed to release the other from any and all claims arising out of the OIA
lawsuit described above, and Wall Street Mentors and the individual defendants
have released OIA, ZiaSun and its officers, directors and affiliates, from any
additional claims or actions they may have, in law or equity. The parties have
agreed that the terms of the settlement agreement will be kept confidential.
Scott Bowen v. ZiaSun Technologies, Inc. ZiaSun is a party defendant in
the matter of Scott Bowen v. Bryant D. Cragun, et al. Superior Court of
California, County of San Diego, Case No. 762921. The plaintiff alleges to
have purchased shares of common stock of ZiaSun and various other companies
through Amber Securities Corporation, a registered broker deal formerly known
as World Trade, and it sales associates, who were acting as agents of ZiaSun.
The plaintiff alleges that Amber and its sales associates made misstatements
regarding ZiaSun, upon which the plaintiff relied when purchasing ZiaSun
shares. The plaintiff fails to specify the exact number of shares of ZiaSun
common stock purchased and the amount paid. ZiaSun denies the allegations,
believes the lawsuit is without merit and is proceeding with defending itself.
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With the exception of the legal proceedings, claims and threatened
litigation set forth above, ZiaSun is not a party to any legal proceeding that
is material to ZiaSun. No federal, state or local governmental agency is, to
the knowledge of ZiaSun, presently contemplating any proceeding against
ZiaSun. No director, executive officer or affiliate of ZiaSun or owner of
record or beneficially of more than five percent of ZiaSun common stock is a
party adverse to ZiaSun or has a material interest adverse to ZiaSun in any
proceeding.
Per Share Market Price and Dividend Information
ZiaSun common stock is traded on the OTC Bulletin Board of the NASD under
the symbol "ZSUN." There has been relatively limited trading activity in
ZiaSun's stock since inception. The following table represents the high and
low closing prices for ZiaSun common stock for each quarter of the years ended
December 31, 2000 and 1999 and the first three quarters (or portion thereof)
for the years ended December 31, 2001.
Year Ended December 31, 1999 High Low
---------------------------- --------- ----------
First Quarter $ 25.875 $ 4.937
Second Quarter 27.125 6.375
Third Quarter 13.375 7.000
Fourth Quarter 14.625 6.968
Year Ended December 31, 2000 High Low
---------------------------- --------- ----------
First Quarter $ 15.750 $10.000
Second Quarter 11.375 4.156
Third Quarter 5.625 1.796
Fourth Quarter 2.930 1.030
Year Ended December 31, 2001 High Low
---------------------------- --------- ----------
First Quarter $ 1.630 $ 0.540
Second Quarter
Third Quarter (through ________, 2001)
The quotes reflect interdealer prices without retail mark-up or
commissions and may not necessarily reflect actual transactions.
On May 3, 2001, the last full trading day prior to our announcement of
the signing of the merger agreement, the closing price of ZiaSun common stock
was $0.69 per share, the high price was $0.70 per share and the low price was
$0.69 per share. On _____ __, 2001, the closing price of ZiaSun common stock
was $___ per share, the high price was $___ per share and the low price was
$___ per share.
ZiaSun has not declared any cash dividends with respect to its common
stock, and does not intend to declare dividends in the foreseeable future.
There are no material restrictions limiting, or that are likely to limit,
ZiaSun's ability to pay dividends on its securities.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ZIASUN
The following table sets forth our selected historical consolidated
financial information. The summary historical consolidated financial
information as of and for the fiscal years ended December 31, 1996, 1997 and
1998 has been derived from, and should be read in conjunction with, ZiaSun's
audited historical consolidated financial statements and the notes thereto,
which have been audited by Jones, Jensen & Company, independent auditors, and
which, in the case of the fiscal year ended December 31, 1998, are attached to
this joint proxy statement/prospectus. The summary historical consolidated
financial information as of and for the fiscal year ended December 31, 1999
has been derived from, and should be read in conjunction with, ZiaSun's
audited historical consolidated financial statements and the notes thereto,
which have been audited by HJ & Associates, LLC, independent auditors, and
which are attached to this joint proxy statement/prospectus. The selected
financial historical consolidated financial information as of and for the
fiscal year ended December 31, 2000 has been derived from, and should be read
in conjunction with, ZiaSun's audited historical financial statements and the
notes thereto, which have been audited by BDO Siedman LLP, independent
auditors, and which are attached to this joint proxy statement/prospectus. The
selected historical consolidated financial information as of and for the
fiscal quarter ended March 31, 2000 and 2001 has been derived from, and should
be read in conjunction with, ZiaSun's unaudited consolidated financial
statements and the notes thereto attached to this joint proxy
statement/prospectus. In ZiaSun's opinion, all adjustments (which consist only
of normal recurring entries) considered necessary for a fair presentation have
been included in ZiaSun's unaudited consolidated financial statements. Interim
results for the fiscal quarter ended March 31, 2001 are not necessarily
indicative of, or projections for, the results to be expected for the full
fiscal year ending December 31, 2001. The following summary historical
consolidated financial information should be read in conjunction with "ZiaSun
Management's Discussion and Analysis of Financial Condition and Results of
Operations of ZiaSun" and the consolidated financial statements and the notes
thereto attached to this joint proxy statement/prospectus.
Quarters Ended
Statement of Operations March 31, Years ended December 31,
---------------------- ------------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- ---------- ----------- ---------- ---------- ---------- ---------
(in thousands, except per share data)
Revenue $ 14,233 $ 12,914 $ 54,667 $ 23,620 $ -- $ -- $ --
Earnings (loss) before other
income and special charges........ (823) 3,189 4,143 4,386 (77) -- --
Goodwill impairment................. -- -- (71,756) -- -- -- --
Other income (expense).............. (247) 94 167 17 -- -- --
Net income (loss) from
continuing operations............. (1,093) 1,763 (70,548) 2,632 (77) (3,511) (4)
Net income (loss)................... $ (1,233) $ 1,977 $ (77,226) $ 5,964 $ 769 $(3,511) $ (4)
Net income (loss) per
common share from
continuing operations
Basic............................ $ (0.04) $ 0.08 $ (2.37) $ 0.12 $ -- $ -- $ --
======== ======== ======== ======= ======= ======= ======
Diluted ......................... $ (0.04) $ 0.08 $ (2.37) $ 0.10 $ -- $ -- $ --
======== ======== ======== ======= ======= ======= ======
Weighted average common
Shares outstanding
Basic ........................... 32,315 22,219 29,744 21,770 17,023 15,467 800
======== ======== ======== ======= ======= ======= ======
Diluted ......................... 32,315 22,269 29,744 25,796 17,023 15,467 800
======== ======== ======== ======= ======= ======= ======
December 31,
------------------------------------------------------------
Balance Sheet Data March 31, 2001 2000 1999 1998 1997 1996
------------------- --------- --------- --------- --------- ---------
(in thousands)
Working capital..................... $ (584) $ 72 $ 6,373 $1,661,605 $(12,355) $ 66,379
Total assets ....................... 47,513 47,713 19,457 4,765 123 66
Total stockholders' equity ......... 40,881 42,099 15,736 4,165 37 66
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ZIASUN MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Shares Issued Under OIA Acquisition Agreement, as Amended. In accordance
with the terms of the original OIA acquisition agreement, the former OIA
stockholders were to receive one share of ZiaSun common stock for each $0.50
of earnings before interest, income taxes, depreciation and amortization
(EBITDA) for the year from April 1, 1999 through March 31, 2000. OIA's audited
EBITDA earnings during this period were $10,910,076. Accordingly, ZiaSun would
owe 21,820,152 shares of its common stock at March 31, 2000, to the former OIA
stockholders. The value of these shares at March 31 was $248,204,230. This
value would have been added to the goodwill on ZiaSun's balance sheet.
However, pursuant to negotiations between ZiaSun and the former OIA
stockholders, and their joint recognition that it would clearly not be in the
best interests of ZiaSun to have such a large goodwill burden going forward,
ZiaSun and the former OIA stockholders agreed to amend the original terms and
conditions of the earn-out. An agreement was reached wherein the former OIA
stockholders would exchange 12,000,000 of the earn-out shares, to which they
were originally entitled, for $6,000,000 in cash. An agreement was reached on
May 9, 2000.
Therefore, under the terms and conditions of the amended earn-out
agreement, the former OIA stockholders received 9,820,152 shares (of which
5,000,000 had been previously issued and were held in escrow), rather than the
21,820,152 shares as set forth in the original agreement. This reduced the
goodwill burden to ZiaSun by $138,646,269, from $248,204,230 to $109,557,961,
and this is the value that was added to ZiaSun's balance sheet going forward
from April 1, 2000.
Due to the accrual of a liability for sales taxes payable by OIA, ZiaSun
and the former OIA stockholders have determined that a further adjustment to
the number of shares received by the former OIA stockholders pursuant to the
earn-out may be required. ZiaSun and Messrs. Elder, Jardine, McCoy and Harris
have agreed that if any sales tax liability is assessed for sales made by OIA
during the earn-out period, (i) ZiaSun will be solely responsible for the
payment of the first $554,000 of these taxes and (ii) Messrs. Elder, Jardine,
McCoy and Harris will return to ZiaSun on a pro rata basis one share of ZiaSun
common stock for each $0.50 that these taxes exceed $554,000.
Discontinued Operations. At its board meeting on March 22, 2001, the
board of directors of ZiaSun adopted a plan to discontinue its foreign
operations that are unrelated to OIA. The foreign subsidiaries are small in
comparison to the U.S. operations and are difficult to manage at a long
distance. The intent of management is to either resell the foreign operations
to the parties that originally sold the foreign subsidiaries to ZiaSun, or to
seek third-party purchasers. In May 2001, ZiaSun completed the sale of
Momentum Asia and has entered into negotiations for the sale of APT and AIS.
Accordingly, ZiaSun's financial statements and the related management's
discussion and analysis, have been restated to present the continuing
operations which are the operations of OIA. The net assets of the discontinued
operations are shown as a separate line item in the other assets section of
ZiaSun's balance sheets.
Results of Operations
Three Months Ended March 31, 2001 Compared to Three Months Ended March
31, 2000. ZiaSun's sales increased by $1,319,409 from the first quarter of
2000 to the first quarter of 2001. This is an increase of 10%. ZiaSun's gross
margin was 43% of sales in the first quarter of 2000 compared to 32% in the
first quarter of 2001. This decrease in gross margin was due to the higher
cost of seminars in the first quarter of 2001 than in the first quarter of
2000. ZiaSun's cost of seminars is higher because the average attendance at
the seminars has declined from approximately 60 attendees per seminar in the
first quarter of 2000 to approximately 45 per seminar in the first quarter of
2001. ZiaSun provides the same quality of meeting facilities and speakers no
matter what the attendance may be at its seminars. Management attributes the
average attendance decrease to the overall decline in the stock market.
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ZiaSun recorded an increase in its depreciation and amortization expense
in the first quarter of 2001 of $1,004,126. The increase was due to the
amortization of the additional goodwill recorded on the OIA earn-out. The
amortization is computed on the net goodwill carried on ZiaSun's books after
it recorded an impairment of the goodwill in the fourth quarter of 2000. The
impairment of $71,755,840 was computed using management's best estimate of the
future cash flows from OIA. The estimate is based upon the recent downturn in
the stock market which has affected ZiaSun's sales of internet investment
seminars.
General and administrative expenses increased by $1,981,025 from the
first quarter of 2000 to the first quarter of 2001. General and administrative
expenses was 30% of sales in the first quarter of 2001 compared to 17% in the
first quarter of 2000.
ZiaSun's sales are directly related to the amount of marketing it
performs. ZiaSun continues to budget significant dollars for advertising its
seminars. As ZiaSun expands overseas the advertising costs increase. Marketing
costs increased during the first quarter of 2001 in comparison to the first
quarter of 2000. ZiaSun has found that the cost for each foreign attendee is
higher than for each North American attendee. This is due in large part to
higher travel costs. However, the market abroad is large and management
believes that the gross margin is sufficient to justify the expenditures.
ZiaSun's income tax for the first quarter of 2000 was $1,555,542 compared
to $23,000 for the first quarter of 2001. ZiaSun showed a loss from continuing
operations before income taxes for 2001 of $1,070,151 compared to income of
$3,282,405 in 2000. However, because the amortization of goodwill is not
deductible for taxes, ZiaSun still incurred income tax expense.
ZiaSun recorded a loss from discontinued operations of $139,797 in the
first quarter of 2001 compared to income of $250,012 in the first quarter of
2000. These discontinued operations were in the Philippines and Hong Kong.
ZiaSun's principal operations are headquartered in the United States.
Management believes that it was in the best interest of ZiaSun to sell these
operations so that it could focus its time and resources on its profitable
enterprises. Also with the downturn in the Asian-rim economies and especially
in the Philippines, what were once profitable subsidiaries no longer provided
positive cash flow to ZiaSun by the end of 2000. However, ZiaSun's new
subsidiary, OIA-Asia has been highly successful in generating sales in
Singapore and Malaysia. OIA-Asia had sales of $523,196 in March of 2001, which
was its first month in operation.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.
ZiaSun's sales increased by $31,047,887 from 1999 to 2000. This is an increase
of 131%. ZiaSun's gross margin was 45% of sales in 1999 compared to 48% in
2000. This increase in gross margin was due to higher sales of video seminars
in 2000 than 1999. ZiaSun's cost of videos is lower than live presentations
because ZiaSun does not have to provide meeting facilities and speakers.
During 1999, ZiaSun sold 1,040 home study units compared to 4,286 in 2000.
ZiaSun also had 13,920 seminar attendees in 2000 compared to 8,257 in 1999.
If the sales of OIA for the first three months of 1999 (i.e., prior to
the purchase by ZiaSun) are included on a pro forma basis, the sales of ZiaSun
for the year ended December 31, 1999 would have been $28,320,817. Therefore,
the pro forma sales increase was $26,346,660 or 93%. The pro forma 12-month
gross margin was 29%.
ZiaSun recorded an increase in its depreciation and amortization expense
in 2000 of $2,565,580. The increase was due to the amortization of the
additional goodwill recorded on the OIA earn-out. ZiaSun also recorded an
impairment of its goodwill in the fourth quarter of 2000. The impairment of
$71,755,840 was computed using management's best estimate of the future
discounted cash flows from OIA. The estimate is based upon the recent downturn
in the stock market which may affect ZiaSun's sales of internet investment
seminars, thereby impacting the value of OIA.
General and administrative expenses increased by $13,556,325 from 1999 to
2000. General and administrative expenses was 35% of sales in 2000 compared to
23% in 1999. Included in general and administrative expenses is payroll
expense of $3,895,537, an increase of $3,095,050 over 1999. This increase was
due to the expansion of the home study and preview payrolls as well as
increased compensation to the office staff. Also included in general and
administrative expenses is ZiaSun's marketing expense. ZiaSun spent $6,933,753
for radio and television advertising in 2000 compared to $2,594,379 in 1999.
Travel expense increased from $2,645,677 to
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$4,873,370. On a pro forma basis general and administrative expenses increased
by $13,253,725 for the year ended December 31, 2000 over 1999.
ZiaSun's income tax for 2000 was $3,101,153 compared to $1,754,690 for
1999. ZiaSun showed a loss from continuing operations before income taxes for
2000 of $67,446,515 compared to income of $4,386,724 in 1999. However, because
the amortization and impairment of goodwill is not deductible for taxes,
ZiaSun still incurred income taxes.
ZiaSun recorded a loss from discontinued operations of $2,921,969 in 2000
compared to income of $648,457 in 1999 and $846,365 in 1998. These
discontinued operations were in the Philippines and Hong Kong.
ZiaSun realized a loss on the disposal of Momentum Asia, Momentum
Internet, Inc., APT and AIS of $3,756,700 in 2000 because of the write off of
the goodwill it had recorded on the purchase. ZiaSun was able to recover and
retire 725,000 shares of its common stock from the sale of Momentum Internet,
and recovered and canceled another 330,000 shares from the sale of Momentum
Asia in 2001. These share retirements along with the cancellation of the
repurchased shares discussed in the liquidity section, should have a positive
effect on earnings per share in 2001.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.
During 1998, ZiaSun was winding down its activities with the beverage centers.
By January 1999 those operations had entirely ceased. The operations of
Momentum Asia and Momentum Internet are not included because they were
discontinued in 2000.
ZiaSun's acquisition of OIA on March 31, 1999 has had a considerable
impact on the operating income of ZiaSun since that date.
Sales for the year ended December 31, 1999 were $23,619,590 compared to
$0 for 1998. Cost of goods sold for the year ended December 31, 1999 was
$13,026,015 or 55% of sales, resulting in gross profit of $10,593,575, or 45%
of sales.
Operating expenses primarily include depreciation and amortization
expense and general and administrative expenses. Depreciation and amortization
expense for the year ended December 31, 1999 includes depreciation and
amortization of goodwill of $540,825 and deferred compensation amortization of
$10,000. ZiaSun recorded goodwill for the acquisition of OIA. General and
administrative expenses were $5,493,459 or 23% of sales for the twelve months
ended December 31, 1999 and $77,045 for 1998 resulting in an increase of
$5,416,414 or 7030%. The increase is due to the operating expenses of OIA from
April 1 to December 31, 1999.
Liquidity and Capital Resources
Quarter Ended March 31, 2001. ZiaSun's current assets at December 31,
2000 were $5,072,363 compared to $5,409,425 at March 31, 2001. ZiaSun's
current liabilities were $5,000,257 and $5,993,279 for the same periods
respectively. This represents a decrease in ZiaSun's working capital from
$72,106 to $(583,854). This decrease occurred even though ZiaSun generated
$807,669 in cash from operating activities. The decrease in working capital
was largely the result of ZiaSun's investment of $497,500 in equity
investments through MVA and MKZ and payment of $453,871 of deferred
acquisition costs. Another material cause of the decrease was the accrual by
ZiaSun of sales tax and GST on its foreign and domestic sales. ZiaSun is
preparing to negotiate with the various states of the United States to
determine what, if any, sales tax it owes on its video and seminar sales. In
the interim ZiaSun has accrued management's estimate of the sales tax
liability.
ZiaSun also holds 5,400,000 shares of Asia4Sale restricted stock. ZiaSun
no longer intends to register or issue the 1,600,000 shares of this stock to
its stockholders in a dividend. ZiaSun intends to free the shares up for sale
in accordance with Rule 144. However, because the shares of Asia4Sale are
thinly traded and the shares remain restricted due to Rule 144, no value has
been recorded in the March 31, 2001 financial statements for these shares.
During the quarter ended March 31, 2001, ZiaSun paid $251,587 in income
taxes. Trade receivables increased by $253,304, accounts payable and accrued
expenses increased by $526,633 and cash decreased by $117,747 as a result of
these uses of ZiaSun resources.
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At March 31, 2001, ZiaSun has no long-term debt. ZiaSun has sufficient
cash flow from its continuing operations to meet its current obligations.
ZiaSun anticipates continued positive cash flow during the next twelve months.
Management intends to invest its cash flow in marketing and to seek mergers
with or acquisition of companies that will contribute in a positive way to its
operating strategy. ZiaSun has budgeted $1,000,000 for such acquisition
efforts in 2001. Of the amount budgeted, $453,871 has been spent through March
31, 2001 in connection with the planned merger with Telescan.
In the second half of 2000 and the first quarter of 2001, the stock
market has had a significant downturn in the United States. ZiaSun is
uncertain if this downturn will have a lasting effect on the demand for its
services and products. To date, sales have continued to grow when compared on
a quarterly basis to the prior year. Also, several new seminar companies have
entered the marketplace. Some of these companies have hired former employees
of ZiaSun. ZiaSun is uncertain as to the extent of competition it will have
with these companies.
Year Ended December 31, 2000. ZiaSun's current assets at December 31,
2000, were $5,072,363 compared to $10,093,565 at December 31, 1999. ZiaSun's
current liabilities were $5,000,257 and $3,720,657 for the same periods,
respectively. This represents a decrease in ZiaSun's working capital from
$6,372,908 to $72,106. This decrease occurred even though ZiaSun generated
$7,199,151 from its continuing operations. The decrease was largely the result
of ZiaSun's investment of $7,500,000 in MVA and MKZ. Another material cause of
the decrease was the decision of ZiaSun to amend the earn-out agreement with
the OIA stockholders by paying them $6,000,000 in lieu of issuing an
additional 12,000,000 shares of its common stock. ZiaSun also used $765,508 of
its cash to repurchase 297,500 shares of its common stock through the market.
ZiaSun spent $300,000 to acquire its now discontinued subsidiaries APT
and AIS in 2000. ZiaSun received $100,000 from the exercise of options by its
president. ZiaSun also was relieved of $690,000 of debt by its conversion to
103,500 shares of common stock.
During 2000, ZiaSun paid $4,992,587 in income taxes, of which $1,947,264
was used to pay prior-year liabilities, and $3,045,323 was paid against
current tax liabilities. ZiaSun has also accrued $3,004,914 in 2000 for
potential sales tax liabilities relating to its seminar and video sales in the
various states of the United States. Accounts payable increased by $983,480,
and cash decreased by $5,431,413 as a result of these uses of ZiaSun
resources.
Year Ended December 31, 1999. On March 25, 1999, ZiaSun acquired
Asia4Sale by issuing restricted common stock of ZiaSun for virtually all of
the stock of Asia4Sale and $15,000 cash. On December 31, 1999, ZiaSun sold
Asia4Sale for $5,000,000 cash and 300,000 shares of Internet Ventures, Ltd. On
March 31, 1999, ZiaSun also acquired OIA for restricted common stock of ZiaSun
and $400,000 cash. These acquisitions were accounted for as purchases. The
acquisition of OIA has made a substantial, positive contribution to the
financial condition of ZiaSun through year-end. The balance of current assets
at December 31, 1999 was $10,093,565 compared to a balance of $2,261,618 at
December 31,1998. The current liabilities balances were $3,720,657 and
$600,013 for the same periods, respectively.
The increase of current assets at December 31, 1999 over December 31,
1998 is due primarily to the increase of cash from $517,781 to $9,283,310, an
increase of $8,765,529 or 1,692%. This increase is due primarily to the
$5,000,000 in cash generated from the sale of Asia4Sale, the positive cash
flow generated from the operations of OIA of approximately $5,000,000 at year
end, and the cash generated from the sale of equity securities.
Current assets at December 31, 1999 also increased due to the increase of
prepaid expenses from $0 to $65,962, an increase of $65,962. The increase in
prepaid expenses is primarily due to the advance payments by OIA for costs
such as newspaper, radio and television advertising for future seminars.
Additionally, accounts receivable increased from $0 at December 31, 1998, to
$744,293 at December 31, 1999. The balance of accounts receivable at December
31, 1999 includes primarily OIA's fees for completed seminars that are in the
process of being charged and collected by ZiaSun's credit card processor.
The balance of current liabilities at December 31, 1999, is $3,720,657
and at December 31, 1998, was $586,000. The increase of $3,634,657, or 605%,
was due primarily to the income taxes payable at December 31, 1999 of
$2,083,763 relating to the U.S. earnings of OIA. There were no income taxes
payable at December 31, 1998. Current liabilities at December 31, 1999, also
increased for a related party payable of $690,000, convertible to
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common stock at the trading value of the shares on the date of conversion.
Accounts payable and accrued expenses increased $786,064 from $86,000 at
December 31, 1998, to $872,064 at December 31, 1999.
Other assets increased $9,080,776 from $0 at December 31, 1998 to
$9,080,776 at December 31, 1999. The increase is due primarily to the addition
of $2,538,567 of goodwill, (net) resulting from the acquisition of OIA.
Goodwill is the book value given to the difference between the purchase price
and the estimated fair market value of the net assets of OIA, and is amortized
over the estimated life of 10 years. Additionally other assets increased
$6,148,270 for the net assets of now discontinued operations, including
Momentum Asia, Momentum Internet and Asia4Sale.
Recent Accounting Pronouncements
In October 2000, ZiaSun adopted Financial Accounting Standards Board SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards requiring every
derivative instrument, including certain derivative instruments embedded in
other contracts to be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires changes in
the derivative's fair value to be recognized in earnings unless specific hedge
accounting criteria are met. The adoption of SFAS 133 as of January 2001, did
not have a material impact on the consolidated financial statements.
In December 1999, the SEC released Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements," which provides guidance on
the recognition, presentation and disclosure of revenue in the financial
statements filed with the SEC. Subsequently, the SEC released SAB 101B, which
delayed the implementation date of SAB 101 for registrants with fiscal years
that begin between December 16, 1999, and March 15, 2000. ZiaSun was required
to be in conformity with the provisions of SAB 101, as amended by SAB 101B, no
later than October 1, 2000. ZiaSun believes the adoption of SAB 101, as
amended by SAB 101B, has not had a material effect on the financial position,
results of operations or cash flows of ZiaSun for the year ended December 31,
2000.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, the Interpretation of APB
Opinion No. 25" ("FIN44"). The Interpretation is intended to clarify certain
problems that have arisen in practice since the issuance of APB No. 25,
"Accounting for Stock Issued to Employees." The effective date of the
Interpretation was July 1, 2000. The provisions of the Interpretation apply
prospectively, but they will also cover certain events occurring after
December 14, 1998, and after January 12, 2000. The adoption of FIN 44 did not
have a material adverse affect on the current and historical consolidated
financial statements.
Changes In, and Disagreements With, Accountants on Accounting and Financial
Disclosure
(a) Previous Independent Accountants
(i) On October 3, 2000, ZiaSun dismissed HJ & Associates, LLC, as
its independent public accountants.
(ii) Neither of the reports of HJ & Associates, LLC, on the
financial statements for the past two years contained an
adverse opinion or disclaimer of opinion or were qualified or
modified as to uncertainty, audit scope or accounting
principles.
(iii) The dismissal of HJ & Associates, LLC, was recommended and
approved by the Audit Committee of the board of directors of
ZiaSun.
(iv) During the fiscal year ended December 31, 1999 and through
September 30, 2000, there were no disagreements with HJ &
Associates on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure
which disagreements, if not resolved to the satisfaction of HJ
& Associates, would have caused
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HJ & Associates to make reference to the subject matter of the
disagreement(s) in their reports on the consolidated financial
statements for such years.
(v) During 1998 and 1999 and through the period from December 31,
1999, to September 30, 2000, there have been no reportable
events (as defined in Regulation S-K Item 304(a)(1)(v)).
(vi) ZiaSun provided HJ & Associates with a copy of the disclosure
it made in response to Item 304(a) of Regulation S-K, in its
Current Report on Form 8-K filed October 10, 2000. ZiaSun
requested HJ & Associates, LLC, to furnish, and HJ &
Associates, LLC, furnished to ZiaSun, a letter addressed to the
SEC stating that it agreed with the statements made by ZiaSun.
(b) Newly Engaged Independent Accountants
(i) On October 3, 2000, ZiaSun engaged BDO Siedman, LLP, as its new
independent accountant. Through September 30, 2000, neither ZiaSun nor
anyone on its behalf consulted BDO Siedman, LLP, regarding (i) the
application of accounting principles to any transaction, either completed
or proposed, or (ii) the type of audit opinion that might be rendered by
BDO Siedman, LLP, on ZiaSun's financial statements.
Market Risk Disclosure
ZiaSun is exposed to market risk, which is the potential loss arising
from adverse changes in market prices and rates. ZiaSun's exposure to interest
rates changes is not considered to be material to ZiaSun. ZiaSun does not
enter, or intend to enter, into derivative financial instruments for trading
or speculative purposes.
ZiaSun is exposed to the impact of changes in the market values of its
investments. ZiaSun invests in equity instruments of privately held,
information technology companies for business and strategic purposes. These
investments are included in long-term assets and are accounted for under the
cost method when ownership is less than 20%. For these non-quoted investments,
ZiaSun's policy is to regularly review the assumptions underlying the
operating performance and cash flow forecasts in assessing the carrying
values. ZiaSun identifies and records impairment losses on long-lived assets
when events and circumstances indicate that such assets might be impaired. To
date, no such impairment has been recorded. Such investments, which are in the
Internet industry, are subject to significant fluctuations in fair market
value due to the volatility of the stock market, and are recorded as long-term
investments.
A downturn in the equity markets could cause a reduction in revenue since
the number of subscribers and workshop attendees tends to increase in an
upward market. This downturn could have an adverse effect on ZiaSun's
financial position and results of operations; however, ZiaSun believes that
the effect of such adverse conditions would be minimized by its alliances with
third parties, which in some cases provide for guaranteed minimum payments.
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ZIASUN MANAGEMENT
Directors and Executive Officers
The following persons are directors of ZiaSun:
Name Age Position
-------------------- ----- ----------------------------------
D. Scott Elder 43 Chairman of the Board and Chief
Executive Officer
Allen D. Hardman 60 President, Chief Operating Officer,
Secretary and Director
Ross W. Jardine 40 Vice President, Chief Financial
Officer and Director
Hans von Meiss 54 Director
Christopher D. Outram 51 Director
There are no arrangements or understandings between any of the directors
or executive officers, or any other person or persons pursuant to which they
were selected as directors and/or officers.
D. Scott Elder. Mr. Elder was elected a director of ZiaSun in May 1999,
and as the Chairman of the Board in June 1999. On September 27, 2000, Mr.
Elder was appointed Chief Executive Officer of ZiaSun. From 1994 to 1997, Mr.
Elder owned and operated two consulting businesses, D. Scott Elder &
Associates and the Business Alliance Company, which developed marketing and
training programs. In 1998 Mr. Elder continued to operate the consulting
business of D. Scott Elder & Associates and founded OIA with Ross W. Jardine.
Mr. Elder served as the President of OIA until his appointment as the CEO and
Chairman of the Board of ZiaSun in June 1999. Before devoting himself full
time to OIA, Mr. Elder was the owner of the Business Alliance Company, which
developed joint venture marketing and training programs. Some of the companies
Mr. Elder has developed joint venture projects with include General Mills,
Procter & Gamble, Rubbermaid, and Zane Publishing, a company that markets
educational programs through Amway. Mr. Elder has a degree in Communications
from Brigham Young University and an M.B.A. from the University of Phoenix.
Allen D. Hardman. Mr. Hardman was appointed a Director and the Vice
President of ZiaSun on October 5, 1999. On September 27, 2000, Mr. Hardman was
appointed President and Chief Operating Officer of ZiaSun. Mr. Hardman earned
an Industrial Engineering Technical Diploma from the University of Utah in
1966 and a Bachelors Degree in Business Administration from California State
University in 1975. Mr. Hardman served as the Managing Director of Business
Development for Roeslein & Associates from June 1993 through June 1997. Mr.
Hardman was the Vice President of Operations of Best Way USA from July 1997
until ZiaSun's spin-off of Best Way USA in October 1998. Mr. Hardman has 35
years of varied business experience, some with small companies and some with
mid-to-large corporations. His work experience includes president for a
company furnishing pre-assembled manufacturing systems on a global basis,
director of business development for industrial manufacturing systems,
national sales manager for systems products, manufacturing engineering,
product and systems engineering, consulting engineering, operations
management, project management for multi-million dollar projects installed
worldwide, manufacturing quality control and customer service management.
During the last several years, and particularly the last two years, Mr.
Hardman has restructured several small businesses to either establish their
viability as an enterprise and/or increase their operating proficiency and
potential for profitability. He has also been intimately involved in
identifying and establishing some strategic partner alliances and/or joint
ventures. This allowed the companies involved to improve their respective
competitive position(s) in the marketplace through improved product or
intellectual property designs, which resulted from the synergy realized by
combining their individual product offerings.
Ross W. Jardine. Mr. Jardine was appointed a director of ZiaSun on April
7, 1999, and Vice President and Chief Financial Officer on September 27, 2000.
Mr. Jardine is also the President of OIA. Mr. Jardine graduated cum laude from
Brigham Young University in 1987 with a degree in communications. In 1990 Mr.
Jardine founded Jacobson & Jardine, Inc., a Sports Marketing and Promotion
company. Mr. Jardine served as President until August 1994 during which time
Mr. Jardine was responsible for operations and he developed and marketed
licensed
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products for major sporting events. These clients included National
Football League, Indy 500, Kentucky Derby, America's Cup 1992, Nabisco,
Albertsons, Coca Cola, Fisher Price, American Home Products, RJ Reynolds and
many others. In 1994 he became interested in the Internet and moved his
business online. This experience led him to start a consulting business
focused on teaching other business owners how to get their own businesses
online. Mr. Jardine founded Electronic Marketing Services (later renamed
iMALL, Inc.) in 1994 and served as President until January 1996. From January
1996, through August 1997, Mr. Jardine served as speaker/consultant for iMALL.
iMALL went public in 1996 and was recently sold to Excite@home for $425
million.
In 1997, Mr. Jardine left iMALL to focus on creating a program to train
investors in using the Internet to invest. Together with D. Scott Elder, Mr.
Jardine founded OIA.
Hans von Meiss. Mr. von Meiss was appointed a director of ZiaSun on
January 17, 2000. Mr. von Meiss received a Bachelors Degree in Economics in
1973 from the University of St. Gallen, Switzerland. After receiving an MBA in
1977 from INSEAD, Fontainebleau, France, he spent seven years in investment
banking with Bankers Trust International Ltd. and Chase Manhattan Ltd. in
London. Then, from 1984 to 1988, Mr. von Meiss served as the CEO of Dr. Ing.
Koenig AG, a leading Swiss service center for flat steel and industrial
fasteners. He spent the following 3 years from 1988 to 1991 in financial
consulting. Then, in 1991, Mr. von Meiss became the CEO of a publicly-quoted
Dutch company after its privatization from the Dutch government, and served in
that position until 1994. In 1994, he became the CEO of Swiss Textile Group
via an acquisition and completed a turnaround and eventual sale of the
business in 1997. Since 1997, Mr. von Meiss has been involved in financial
management and consulting, and pursued investments in Internet-related
businesses. He also serves on the board of an industrial concern, an M&A
consulting company, and his own company, G. von Meiss AG.
Christopher D. Outram. Mr. Outram was appointed a director of ZiaSun on
April 21, 2000. Mr. Outram received double first class honors in mechanical
engineering and industrial economics in 1972 from the University of Birmingham
in the UK. He also received the Engineering and the Economics prizes for his
course. Following University, Mr. Outram pursued a career in Marketing and
Accountancy with Mobile Oil Company, Air Products Limited and CCL Systems. He
then attended INSEAD Business School in France, where he graduated with an MBA
with distinction. Following 2 years at the world-renowned strategy
consultancy, The Boston Consulting Group, Mr. Outram became Strategic Planning
Director of one of its clients, The Van Gelder Paper Company in the
Netherlands. Two years later Mr. Outram joined Booz Allen & Hamilton in
London, where he was elected Partner in 1986. 1987 saw the creation of OC&C
Strategy Consultants (OC&C) of which Mr. Outram was the founding Director.
OC&C now operates directly and through alliances on a global basis and can
deploy in excess of 200 consultants. OC&C and its sister firms advise clients
on strategy, strategic business development and M&A activity. The consultancy
advises large corporations, as well as smaller start-ups, regarding their
Internet strategies. The combined understanding of the operating dynamics of
both large and small players in the Internet arena has allowed OC&C to develop
very creative and ambitious strategies for its clients. Mr. Outram has also
been instrumental in the creation of e-commerce venturing businesses, both in
Silicon Valley in the U.S., as well as in Europe.
Other Directorships. No director of ZiaSun or person nominated or chosen
to become a director holds any other directorship in any company with a class
of securities registered pursuant to section 12 of the Exchange Act or subject
to the requirements of section 15(d) of such Act or any other company
registered as an investment company under the Investment Company Act of 1940.
Family Relationships. There are no family relationships between any
directors or executive officers of ZiaSun, either by blood or by marriage.
Involvement in Certain Legal Proceedings. During the past five years, no
present or former director, executive officer or person nominated to become a
director or an executive officer of ZiaSun:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
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(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the SEC or the Commodity Futures Trading Commission to have violated a
Federal or state securities or commodities law, and the judgment has not
been reversed, suspended or vacated.
Section 16 (a) Beneficial Ownership Compliance. Section 16(a) of the
Exchange Act requires ZiaSun's executive officers, directors and persons who
own more than ten percent of ZiaSun common stock, to file initial reports of
beneficial ownership on Form 3, changes in beneficial ownership on Form 4 and
an annual statement of beneficial ownership on Form 5, with the SEC. Such
executive officers, directors and greater than ten percent stockholders are
required by SEC rules to furnish ZiaSun with copies of all such forms that
they have filed.
Based solely on its review of the copies of such forms received by ZiaSun
and representations from certain reporting persons, ZiaSun believes that
during the period from November 16, 1999 (the date which ZiaSun first became
subject to Section 16(a)) until December 31, 2000, all Section 16(a) filing
requirements applicable to its executive officers, directors and ten-percent
stockholders were complied with.
Executive Compensation
The following table sets forth the aggregate compensation paid by ZiaSun
for services rendered during the periods indicated:
Long Term Compensation
Awards Payouts
------------------------------------
Securities
Other Annual Restricted Underlying LTP All other
Year Salary Bonus Compensation Stock Option/SAR's Payouts Compensation
Name and Principal Position Ended ($) ($) ($) Awards (#) ($) ($)
- --------------------------- ------ ---------- ----------- ------------ ----------- ------------ -------- -------------
D. Scott Elder 2 ......... 2000 $ 117,500 $ 204,000 $2,433,065 17,500 25,000 -- --
Chief Executive Officer .. 1999 $ 102,360 $ 40,930 -- -- -- -- $ 378,000
Chairman of the Board .... 1998 $ 31,500 -- $ 174,127 -- -- -- --
Allen D. Hardman 1........ 2000 $ 184,692 -- $ 6,600 22,365 75,000 -- --
President and COO ........ 1999 $ 132,000 -- -- -- -- -- --
1998 $ 132,000 -- -- -- -- -- --
Ross D. Jardine 3......... 2000 $ 115,500 $ 204,000 $2,435,215 17,500 25,000 -- --
Vice President and ....... 1999 $ 46,860 $ 123,430 -- -- -- -- $ 378,000
Chief Financial Officer .. 1998 -- -- $ 208,520 -- -- -- --
Hans von Meiss 4 ......... 2000 -- -- -- 11,445 5,000 -- $ 187,500
Director ................. 1999 -- -- -- -- -- -- --
1998 -- -- -- -- -- -- --
Christopher D. Outram .... 2000 -- -- -- 10,350 5,000 -- --
Director ................. 1999 -- -- -- -- -- -- --
1998 -- -- -- -- -- -- --
Anthony L. Tobin 5 ....... 2000 -- -- -- -- -- -- --
Vice President ........... 1999 $ 120,000 -- -- -- -- -- --
and COO of Asia Operations 1998 $ 121,800 -- $ 31,200 -- -- -- --
Dennis E. McGrory 6 ...... 2000 $ 11,393 -- -- -- -- -- --
Secretary ................ 1999 -- -- -- -- -- -- --
1998 -- -- -- -- -- -- --
- ---------------
1 In 2000, Mr. Elder received a base salary of $117,500, a bonus of
$204,400 and additional compensation of $2,433,065 comprised of
$2,100,000 received from the purchase of 4,200,000 shares which Mr.
Elder would have received from the earn-out provided in the OIA
acquisition agreement, and $333,065 of overrides based on workshop
attendance. In 1999, Mr. Elder received a base salary of $102,360, a
bonus of $40,930 and $378,000 in payment of deferred compensation
from OIA, for total 1999 compensation of
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$521,290. In 1998, Mr. Elder received a base salary of $31,500,
consulting fees of $24,127, and $150,000 in payment of deferred
compensation, for total 1998 compensation of $205,627.
2 Mr. Hardman, the President and COO of ZiaSun, is currently subject
to an Employment Agreement with ZiaSun. See "--Employment Contracts"
below.
3 In 2000, Mr. Jardine received a base salary of $115,500, a bonus of
$204,400 and additional compensation of $2,435,215 comprised of
$2,100,000 received from the purchase of 4,200,000 shares which Mr.
Jardine would have received from the earn-out provided in the OIA
acquisition agreement, and $335,215 of overrides based on workshop
attendance. In 1999, Mr. Jardine received a base salary of $46,860,
a bonus of $123,430 and $378,000 in payment of deferred compensation
from OIA, for total 1999 compensation of $548,290. In 1998, Mr.
Jardine received consulting fees of $58,520 and $150,000 in payment
of deferred compensation from OIA, for total 1998 compensation of
$208,520.
4 In April 2000, ZiaSun authorized and issued 50,000 shares of ZiaSun
common stock to each of Hans von Meiss and Credico Inc. in
consideration for their services in introducing The McKenna Group to
ZiaSun and negotiating the creation of the joint venture funds MKZ
and MVA. The total book value attributed to the aggregate 100,000
shares was $375,000.
5 Mr. Tobin, who resigned as an officer and director of ZiaSun
effective as of April 21, 2000, is the owner of Crossbow Consultants
Limited which previously received $10,000 per month from ZiaSun's
prior subsidiary, Momentum Internet Inc., for the services provided
by Crossbow Consultants. In 1999, Crossbow received a total of
$120,000 from ZiaSun's subsidiary, Momentum Internet, for the
services provided by Crossbow Consultants. On September 13, 2000,
ZiaSun completed the sale of Momentum Internet, to Vulcan
Consultants Limited, thereby divesting any interest in Momentum
Internet, and subsidiaries and Web site of Momentum Internet, which
ZiaSun had. In 1998, in addition to the $10,000 per month Crossbow
received, Mr. Tobin through his employment agreement with Momentum
Associates Limited, a subsidiary of Momentum Internet, also received
a monthly housing allowance of approximately $2,600 and a management
fee of approximately $150 per month, for total 1998 compensation of
$153,000.
6 Dennis McGrory resigned as the Secretary of ZiaSun on July 12, 2000.
Employment Contracts. Allen D. Hardman, the President and COO and a
director of ZiaSun has an Employment Agreement with ZiaSun which commenced on
July 1, 1997, for a term of 5 years. Pursuant to the terms of the agreement,
ZiaSun's board of directors may, in its sole discretion, grant raises, bonuses
in an amount not less that the cost of living increase for the greater San
Diego area. Additionally, Mr. Hardman's Employment Agreement contains a stock
option which grants Mr. Hardman the option to purchase 100,000 shares of the
common stock of ZiaSun, at $2.00 per share, subject to adjustment for splits,
in equal installments of 25,000 shares each beginning after one year of
employment for consecutive years. To date Mr. Hardman has exercised the first
three vested portions of the stock option. On August 2, 2000, ZiaSun entered
into an Amended and Restated Employment Agreement and Stock Option with Mr.
Hardman. In conjunction with the appointment of Allen D. Hardman as the
President and CEO of ZiaSun, Mr. Hardman received an increase in his annual
salary to $200,000. Additionally, Mr. Hardman was granted an option to
purchase an additional 50,000 shares of common stock of ZiaSun pursuant to the
terms of ZiaSun's 1999 Stock Option Plan, with the exercise price of said
options being the closing price as of the date of execution of the Amended and
Restated Employment Agreement. The option shall vest and be exercisable
immediately with regard to 50% of said option shares, and exercisable with
regard to the remaining 50% of said shares as of May 1, 2002. The options
shall be exercisable for a period of seven years from the date of the grant.
Stock Options. As stated above Mr. Hardman has a stock option which gives
Mr. Hardman the option to acquire 100,000 (post split adjusted) shares of the
Common Stock of ZiaSun, at $2.00 per share (subject to adjustment for splits),
in equal installments of 25,000 (post split adjusted) shares each beginning
after one year of employment for four consecutive years. Also, pursuant to the
Amended and Restated Agreement of August 2, 2000, mentioned above, Mr. Hardman
has an option to purchase an additional 50,000 shares of common stock of
ZiaSun pursuant to the terms of ZiaSun's 1999 Stock Option Plan, with the
exercise price of said options being the closing price as of the date of
execution of the Amended and Restated Employment Agreement. The option shall
vest and be exercisable immediately with regard to 50% of said option shares,
and exercisable with regard to the remaining 50% of said shares as of May 1,
2002. The options shall be exercisable for a period of seven years from the
date of the grant.
On December 15, 1999, the board of directors adopted the ZiaSun
Technologies, Inc. 1999 Stock Option Plan. The ZiaSun 1999 Stock Option Plan
allows ZiaSun to attract and retain employees and directors of ZiaSun and its
subsidiaries and to provide such persons with incentives and awards for
superior performance. The ZiaSun 1999 Stock Option Plan is administered by a
committee appointed by the board of directors of ZiaSun, which has broad
flexibility in designing stock-based incentives. The board of directors
determines the number of shares granted and the option exercise price, but
such exercise price of Incentive Stock Options (ISOs) may not be less than one
hundred percent of the fair market value of common stock on the grant date.
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Option Grants Table. The following tables reflect certain information,
with respect to stock options granted under ZiaSun's stock option plans to
certain executive officers and directors during 2000.
Options/SAR Grants In Last Fiscal Year
% of Total
Number of Options
Securities granted to
Underlying Employees in Exercise or
Options Fiscal Year Base Price Expiration
Name Granted (#) (%) ($/Sh)(1) Date
- ---- ----------- ------------- ----------- -----------
D. Scott Elder ......... 25,000 7.30% $ 6.380 04/30/2007
Allen D. Hardman (1).... 25,000 7.30% $ 6.380 04/30/2007
Allen D. Hardman (1).... 50,000 14.60% $ 3.625 06/30/2007
Ross W. Jardine ........ 25,000 7.30% $ 6.380 04/30/2007
Hans von Meiss ......... 5,000 1.46% $ 2.125 11/19/2007
Christopher Outram ..... 5,000 1.46% $ 2.125 11/19/2007
Anthony D. Tobin (2).... -- 0.00% -- --
Dennis McGrory (3)...... -- 0.00% -- --
- ----------
(1) Does not include an option granted on May 30, 1997, to purchase
100,000 shares of common stock at exercise price of $2.00 of which
75,000 have been exercised. Said options expire on June 30, 2004.
(2) Anthony D. Tobin resigned as an officer and director of ZiaSun
effective as of April 21, 2000.
(3) Dennis McGrory resigned as the Secretary of ZiaSun on July 12, 2000.
Option Exercise and Year End-Value Table. The following tables reflect
certain information, with respect to the exercise of stock options by certain
executive officers during fiscal 2000.
Aggregated Option Exercises In The Last Fiscal Year
Number of Securities Value Of
Underlying Unexercised
Unexercised Options In-The-Money
At Fiscal Year Options At
End (#) Fiscal Year End ($)
------------------- ------------------
Shares Acquired Value Realized Exercisable/ Exercisable/
Name On Exercise (#) ($) Unexercisable Unexercisable
- ---- -------------- -------------- ------------------- ------------------
D. Scott Elder ....... -- -- 12,500/12,500 --/--
Allen D. Hardman ..... 50,000 $100,000 37,500/62,500 --/--
Ross W. Jardine ...... -- -- 12,500/12,500 --/--
Hans von Meiss ....... -- -- 1,250/3,750 --/--
Christopher Outram ... -- -- 1,250/3,750 --/--
Anthony D. Tobin (1).. -- -- --/-- --/--
Dennis McGrory (2) ... -- -- --/-- --/--
- -----
1 Anthony D. Tobin resigned as an officer and director of ZiaSun
effective as of April 21, 2000.
2 Dennis McGrory resigned as the Secretary of ZiaSun on July 12, 2000.
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General Information Concerning the Board of Directors and its Committees
The board of directors of ZiaSun met on eight occasions during 2000 and
took action by unanimous written consent of the directors on 19 occasions. The
board of directors annually elects from its members an audit committee, stock
option plan committee and compensation committee. Directors D. Scott Elder and
Allen D. Hardman attended 100% of the meetings of the board of directors held
during the period for which they were directors. Directors Hans von Meiss and
Christopher D. Outram, attended 87.5% of the meetings of the board of
directors held during the period for which they were directors, and the
meetings of the committee or committees on which they served during such
period. Director Ross W. Jardine attended 62.5% of the aggregate of the
meetings of the board of directors held during the period for which he was a
director, and the meetings of the committee or committees on which he served
during such period.
Audit Committee
The audit committee reviews the scope of ZiaSun's audit, the engagement
of its independent auditors and their audit reports. The audit committee meets
with the financial staff to review accounting procedures and reports. The
audit committee is currently composed of three directors: Ross W. Jardine,
Hans von Meiss, and Christopher D. Outram. The audit committee did not
formally meet during 2000, separate from the regular meetings of the board of
directors or telephonic board meetings at which audit committee matters were
discussed with all or a majority of the directors present.
Stock Option Plan Committee
The stock option plan committee has the authority to grant stock options
under ZiaSun's 1999 Stock Option Plan (the "ZiaSun Plan") by execution of
instruments in writing in a form approved by the stock option committee.
Pursuant to the express terms and conditions of the ZiaSun Plan, the stock
option plan committee has full power to construe the ZiaSun Plan and the terms
of any option granted under the ZiaSun Plan, to prescribe, amend and rescind
rules and regulations relating to the ZiaSun Plan or options and to make all
other determinations necessary or advisable for the ZiaSun Plan's
administration. The stock option plan committee is currently composed of two
directors: Ross W. Jardine, and Allen D. Hardman.
Compensation Committee
The compensation committee evaluates ZiaSun's compensation policies. The
current members of the compensation committee are three directors: Ross W.
Jardine, Hans von Meiss, and Christopher D. Outram. The compensation committee
did not formally meet during 2000, separate from the regular meetings of the
board of directors or telephonic board meetings meetings at which compensation
committee matters were discussed with all or a majority of the directors
present.
Compensation Committee Interlock and Insider Participation
Compensation decisions during the fiscal year ended December 31, 2000
pertaining to the compensation of ZiaSun President and Chief Operating Officer
Allen D. Hardman were made at a regular meeting of the board of directors in
April 2000. The full board was present along with all three members of
ZiaSun's compensation committee, Ross W. Jardine, currently Chief Financial
Officer, Hans von Meiss, and Christopher D. Outram. The compensation of D.
Scott Elder and Ross W. Jardine for the fiscal year 2000 was paid by and
through ZiaSun's wholly owned subsidiary OIA, which compensation was
established by the OIA board of directors, consisting of D. Scott Elder, Ross
W. Jardine, Scott Harris and David McCoy. The compensation committee of ZiaSun
did not participate in the OIA board of directors' deliberations or voting
concerning the compensation of Messrs. Elder and Jardine. The ZiaSun board of
directors at a regular meeting, however, did grant a $500,000 cash bonus to
the former OIA principals, D. Scott Elder, Ross W. Jardine, Scott Harris and
David McCoy, to be distributed as determined by Messrs. Elder and Jardine.
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ZiaSun Compensation Committee Report on Executive Compensation
This report on executive compensation is required by the SEC and shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this joint proxy statement/prospectus into any
filing under the Securities Act, or under the Exchange Act, except to the
extent that ZiaSun specifically incorporates this information by reference,
and shall not otherwise be deemed soliciting material or filed under the
Securities Act, or under the Exchange Act.
The compensation committee of the board of directors administers ZiaSun's
executive compensation program. The current members of the compensation
committee are Ross W. Jardine, Hans von Meiss, and Christopher D. Outram.
Except for Mr. Jardine, these persons are each a non-employee director within
the meaning of Section 16 of the Securities Act, and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code.
General Compensation Philosophy
The role of the compensation committee and the stock option plan
committee is to review, and set the salaries and other compensation of the
executive officers and certain other key employees of ZiaSun, and to make
grants under, and to administer, the stock option. ZiaSun's compensation
philosophy for executive officers is to relate compensation to corporate
performance and increases in stockholder value, while providing a total
compensation package that is competitive and enables ZiaSun to attract,
motivate, reward and retain key executives and employees. Accordingly, each
executive officer's compensation package may, in one or more years, be
comprised of the following three elements:
o base salary that is designed primarily to be competitive with base
salary levels in similar e-finance and investor education companies
that are of comparable size to ZiaSun and with which ZiaSun competes
for executive personnel;
o annual variable performance awards, such as bonuses, payable in cash
and tied to the achievement of performance goals, financial or
otherwise, established by the compensation committee; and
o long-term stock-based incentive awards which strengthen the
mutuality of interests between the executive officers and ZiaSun's
stockholders.
Executive Compensation
Base Salary. Salaries for executive officers were generally determined on
an individual basis by evaluating each executive's scope of responsibility,
performance, prior experience and salary history, as well as the salaries for
similar positions at comparable companies.
Annual Incentive Awards. Other than the bonus granted by the full board
of directors and the stock options granted by the stock option plan committee,
no other annual incentive awards were granted during fiscal year ended
December 31, 2000. Going forward, the compensation committee will consider
several factors including:
o the position held by the executive to whom the bonus was paid;
o total compensation paid by comparable companies to similarly
situated executives;
o the performance of the executive;
o the development of ZiaSun's operations as measured by its growth in
revenues, the decline of the ratio of expenses to revenues and the
level of its loss per share; and
o the perceived increase in the value of ZiaSun's business in light of
factors, including market capitalization, and commercial
transactions, and relative market position against competitors.
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From time to time the compensation committee considers various
discretionary incentive compensation alternatives for ZiaSun's executives.
Long-Term Incentive Awards. The stock option plan committee believes that
equity-based compensation in the form of stock options links the interests of
executive officers with the long-term interests of ZiaSun's stockholders and
encourages executive officers to remain in ZiaSun's employ. Stock options
generally have value for executive officers only if the price of ZiaSun's
shares of common stock increases above the fair market value of a share of
common stock on the grant date and the officer remains in ZiaSun's employ for
the period required for the shares granted to such person to vest.
In 2000, ZiaSun granted stock options in accordance with the 1999 Stock
Option Plan. During April 2000 and March 2001, stock options were granted to
certain executive officers as incentives to aid in the retention of executive
officers and to align their interests with those of the stockholders. Stock
options typically have been granted to executive officers when the executive
first joins ZiaSun. At the discretion of the stock option plan committee,
executive officers may also be granted stock options to provide greater
incentives to continue their employment with ZiaSun and to strive to increase
the value of ZiaSun's common stock. The number of shares subject to each stock
option granted is within the discretion of the stock option plan committee and
is based on anticipated future contribution and ability to impact ZiaSun's
results, past performance or consistency within the officer's peer group. In
April 2001, ZiaSun granted 272,400 stock options, 50% of which generally
become exercisable on May 1, 2000 and 50% of which became exercisable on May
1, 2002, each at a price that was equal to the fair market value of ZiaSun's
common stock on the date of grant. In March 2000, ZiaSun granted 1,366,500
stock options which generally become exercisable over a four year period
commencing on March 29, 2002, and were granted at a price that was equal to
the fair market value of ZiaSun's common stock on the date of grant.
Chief Executive Officer Compensation
As stated above, Mr. Elder's base salary, target bonus, bonus paid and
long-term incentive awards for the fiscal year ended December 31, 2000, were
determined by the board of directors of OIA. The compensation committee of
ZiaSun did not participate in the OIA board of directors' deliberations or
voting concerning Mr. Elder's compensation.
Internal Revenue Code Section 162(m) Limitation
The compensation committee has considered the potential impact of Section
162(m) of the Internal Revenue Code on the compensation paid to ZiaSun's
executive officers. Section 162(m) disallows a tax deduction for the
compensation paid to certain executives of publicly-held corporations in
excess of $1,000,000 in any taxable year. The $1,000,000 limitation applies
per executive per year and only to the compensation paid to the chief
executive officer and the four highest compensated executive officers, and
provided such compensation is not performance-based. In general, it is the
compensation committee's policy to qualify its executives' compensation for
deductibility under applicable tax laws, although from time to time the
compensation committee will consider and award compensation not so qualified
under appropriate circumstances.
The Compensation Committee
Ross W. Jardine
Hans von Meiss
Christopher D. Outram
ZiaSun Audit Committee Report
The following audit committee report is provided in accordance with the
rules and regulations of the SEC. Pursuant to such rules and regulations, this
report shall not be deemed "soliciting materials," filed with the SEC, subject
to Regulation 14A or 14C of the SEC or subject to the liabilities of Section
18 of the Exchange Act, nor shall the audit committee report be deemed to be
incorporated by reference by any general statement incorporating by reference
this joint proxy statement/prospectus into any filing under the Securities Act
or the Exchange Act, except to the extent that ZiaSun specifically
incorporates this information by reference.
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The audit committee oversees ZiaSun's financial reporting process on
behalf of its board of directors. Management has the primary responsibility
for the financial statements, the reporting process and the systems of
internal controls. In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements in the annual report with
management. As part of its review, the committee discussed the quality, and
not just the acceptability, of the accounting principles, the reasonableness
of significant judgments, and the clarity of disclosures in the financial
statements.
The committee as a whole and each individual member of the audit
committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments as to the
quality, not just the acceptability, of ZiaSun's accounting principles and
such other matters as are required to be discussed with the committee under
generally accepted accounting principles.
The committee discussed with the independent auditors the overall scope
and plans for their audits. The committee meets with the independent auditors
to discuss the results of their examinations, their evaluations of ZiaSun's
internal controls, and the overall quality of its financial reporting.
In reliance on the reviews and discussions referred to above, the
committee recommended to the board of directors (and the board of directors
approved) that the audited financial statements be included in the Annual
Report on Form 10-K for the year ended December 31, 2000 for filing with the
SEC.
Management has advised us that for the year ended December 30, 2000,
ZiaSun paid fees to BDO Siedman, LLP for services in the following categories:
Audit fees $ 117,298.00
Financial information systems design $ 0
and Implementation fees
All other Fees $ 49,470.00
The Audit Committee
Ross W. Jardine
Hans von Meiss
Christopher D. Outram
Stock Performance Graph
The following Performance Graph summarizes the cumulative total
shareholder return on an investment of $100.00 on May 15, 1997, the date on
which quotations for ZiaSun common stock first appeared on the OTC Bulletin
Board of the NASD, through December 31, 2000, as compared to the cumulative
total return on a similar investment of $100.00 on that date in stocks
comprising the Russell 2000 Stock Index and a management constructed peer
group consisting solely of Wade Cook Financial Corp. ZiaSun believes that the
Russell 2000 Stock Index presents the best comparision for Ziaun since it
measures the performance of small cap companies. Further, Wade Cook Financial
Corp., is the only true "peer" of ZiaSun, being the only publicly traded
company which markets business and education seminars, and materials, similar
to ZiaSun's products or markets its products through a similar marketing
channel. Such determination was made based on ZiaSun's business on a
go-forward basis, exclusive of its discontinued operations.
Neither ZiaSun, Wade Cook Financial Corp. or the Russell 2000 Stock Index
paid any cash dividends on their stock during the measurement periods. The
performance graph is not necessarily indicative of future performance.
-80-
[Performance Graph for ZiaSun, Wade Cook Financial Corp. and the Russell 2000
Stock Index]
15-May-97 31-Dec-97 31-Dec-98 31-Dec-99 31-Dec-000
--------- --------- --------- --------- ----------
ZiaSun $100.00 $ 55.56 $ 98.77 $287.65 $ 22.22
Wade Cook $100.00 $104.30 $ 10.94 $ 4.69 $ 3.13
Russell 2000 $100.00 $119.43 $115.32 $137.94 $132.14
Certain Relationships and Related Transaction with Directors and Executive
Officers
Shares Issued Under OIA Acquisition Agreement, as Amended. In accordance
with the terms of the original OIA acquisition agreement, the former OIA
stockholders, D. Scott Elder, Ross W. Jardine, David McCoy and Scott Harris,
were to receive one share of ZiaSun common stock for each $0.50 of earnings
before interest, income taxes, depreciation and amortization (EBITDA) for the
year from April 1, 1999 through March 31, 2000. OIA's audited EBITDA earnings
during this period were $10,910,076. Accordingly, ZiaSun would owe 21,820,152
shares of its common stock at March 31, 2000, to the former OIA stockholders.
The value of these shares at March 31 was $248,204,230. This value would have
been added to the goodwill on ZiaSun's balance sheet.
However, pursuant to negotiations between ZiaSun and the former OIA
stockholders, and their joint recognition that it would clearly not be in the
best interests of ZiaSun to have such a large goodwill burden going forward,
ZiaSun and the former OIA stockholders agreed to amend the original terms and
conditions of the earn-out. An agreement was reached wherein the former OIA
stockholders would exchange 12,000,000 of the earn-out shares, to which they
were originally entitled, for $6,000,000 in cash. An agreement was reached on
May 9, 2000.
Therefore, under the terms and conditions of the amended earn-out
agreement, the former OIA stockholders received 9,820,152 shares (of which
5,000,000 had been previously issued and were held in escrow), rather than the
21,820,152 shares as set forth in the original agreement. This reduced the
goodwill burden to ZiaSun by $138,646,269, from $248,204,230 to $109,557,961,
and this is the value that was added to ZiaSun's balance sheet going forward
from April 1, 2000.
Due to the accrual of a liability for sales taxes payable by OIA, ZiaSun
and the former OIA stockholders have determined that a further adjustment to
the number of shares received by the former OIA stockholders pursuant to the
earn-out may be required. ZiaSun and Messrs. Elder, Jardine, McCoy and Harris
have agreed that if any sales tax liability is assessed for sales made by OIA
during the earn-out-period, (i) ZiaSun will be solely responsible for the
payment of the first $554,000 of these taxes and (ii) Messrs. Elder, Jardine,
McCoy and Harris will return to ZiaSun on a pro rata basis one share of ZiaSun
common stock for each $0.50 that these taxes exceed $554,000.
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Generation Marketing, LLC. D. Scott Elder, Ross Jardine, David McCoy and
Scott Harris, each an officer and/or a director of ZiaSun and/or OIA, each
owns a 20% interest in Generation Marketing, LLC, which conducts business with
OIA. Generation Marketing is a newly formed media marketing company managed by
an ex-employee of the company previously used to handle OIA's marketing
requirements. In the second half of 2000, OIA began contracting with
Generation Marketing for international marketing services and paid Generation
Marketing approximately $40,000. In 2001, OIA transferred all its marketing
business to Generation Marketing and through April 30, 2001 has made payments
approximating $750,000. ZiaSun believes the rates charged by Generation
Marketing to OIA for these services are competitive in the marketplace.
Beneficial Ownership of Securities
Security Ownership of Certain Beneficial Owners. The following table sets
forth security ownership information as of the close of business on March 31,
2001, for any person or group known by ZiaSun to own more than 5% of ZiaSun's
voting securities.
Title of Name of Amount of Percent of
Class Beneficial Owner Ownership Class
- ---------------- -------------------- ----------- -----------
Common Stock D. Scott Elder 3,804,553 11.64%
Common Stock Ross W. Jardine 3,804,553 11.64%
Common Stock Momentum Media Ltd. 3,499,980 10.70%
Security Ownership of Management. The following table sets forth security
ownership information as of the close of business on March 31, 2001, for
individuals or entities in the following categories at ZiaSun's fiscal year
end: (i) each director, (ii) each named executive officer listed in the
"Summary Compensation Table" set forth herein, and (iii) all directors and
executive officers as a group.
Amount and Nature of Beneficial Ownership
----------------------------------------------------
Presently
Executive Officers, Directors Common Exercisable
And Principal Shareholders Stock Options Total Percent
- ----------------------------- ----------- --------- --------- ---------
D. Scott Elder (1) 3,804,553 12,500 3,817,053 11.67%
Allen D. Hardman (1) 97,365 37,500 134,865 *
Ross W. Jardine (1) 3,804,553 12,500 3,817,053 11.67%
Hans von Meiss (2) 274,445 2,500 276,045 *
Christopher D. Outram1 22,800 2,500 25,300 *
Anthony L. Tobin -- -- -- --
Dennis E. McGrory -- -- -- --
All Directors and Officers 8,003,716 65,000 8,070,3176 24.68%
as a Group
- ---------
* Represents less than one percent
(1) Each person has sole investment power and sole voting power over the
shares listed unless otherwise indicated.
(2) Includes shares, as to which beneficial ownership is disclaimed of
113,000 shares held for the benefit of family members.
To the best of ZiaSun's knowledge there are no present arrangements or
pledges of ZiaSun's securities which may result in a change in control of
ZiaSun.
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TELESCAN BUSINESS
General
Telescan is committed to helping investors improve their investment
results through advice and the educated use of proprietary investment search
tools. Telescan provides financial products and services marketed through two
divisions. Telescan's marketing divisions are:
o The Consumer Division delivers premium investment advice and
education to individual investors online through two Web properties,
INVESTools.com and WallStreetCity.com. INVESTools.com publishes
actionable investment advice and education, and WallStreetCity.com
is well known for its investment search tool, ProSearch. The
Consumer Division also offers private-label subscription marketing
and e-mail list management services to marquee clients like Gilder
Publishing, TheStreet.com, TradingMarkets.com and StockJungle.
o The Business-to-Business Division offers an array of online
financial solutions to businesses seeking to expand their offerings
online and gain greater cost efficiency through outsourcing. The
Business-to-Business Division's clients include many of the nation's
leading financial services and media companies, including America
Online, American Express, BusinessWeek Online, Forbes and Quick &
Reilly/Fleet National Bank.
Corporate Background
Telescan or its predecessors have operated the business of Telescan since
1983. Telescan, which is a Delaware corporation, was incorporated in 1988
under the name Max Ret, Inc. for the purpose of acquiring or participating in
a business opportunity. In 1989, Telescan issued 75% of its then outstanding
common stock to acquire all of the outstanding common stock of D.B.
Technology, Inc. ("DB"), d.b.a. Telescan, Inc. After the acquisition of DB by
Telescan, DB was merged into Telescan and Telescan changed its name from Max
Ret, Inc. to Telescan, Inc.
On May 28, 1999, Telescan completed the acquisition of INVESTools, Inc.
pursuant to which the sellers exchanged all of their shares of INVESTools,
Inc. for shares of Telescan common stock in a business combination that was
accounted for as a pooling-of-interests.
Services and Products
Consumer Division. The Consumer Division publishes premium investment
advice, education, tools and analytics for individual investors online through
two Web properties, INVESTools.com and WallStreetCity.com. In addition, the
Consumer Division operates a subscription marketing service and an e-mail list
management service. The division manages more than 40,000 paying subscribers.
INVESTools.com is a leading investment advice Web site featuring
continually updated portfolio advice from recognized money managers. The site
receives 300,000 unique visitors per month and provides more than 200,000
investors with a free weekly e-mail digest of recommendations. Customers pay a
monthly fee to access content delivered by 34 investment advisors. The content
is enhanced by interactive online tools such as e-mail hotlines, discussion
threads and portfolio alerts. INVESTools.com differentiates itself from
standard investment newsletter Web sites by developing and supporting online
interfaces that encourage interactive relationships between advisors and
subscribers, and among the subscribers themselves.
WallStreetCity.com is the culmination of Telescan's 18 years of
dedication to create the most dynamic, innovative financial analysis tools now
available on the Internet. The site provides investors with a comprehensive
historical market database, free real-time quotes, streaming real-time data
feeds, in-depth industry group analysis and powerful investment search and
portfolio tools. WallStreetCity.com is well known for its ProSearch screening
application, which is available to end-users. With ProSearch, users can build
customized searches or select pre-built searches that are complemented with
commentary and education from WallStreetCity analysts. Through a strategic
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alliance with TradingMarkets.com, users also gain access to investment courses
written by professional traders with a proven track record of success. While a
wealth of information is available on the site at no charge, Telescan's
cutting edge search technology and streaming real-time data are available only
to paid subscribers.
The Subscription Marketing Service helps online financial information
companies acquire subscribers to online subscription products and realize
maximum life time value from those subscribers. Well known investment sites
like Gilder Publishing and TheStreet.com benefit from the Consumer Division's
subscription marketing expertise and infrastructure.
The E-mail Marketing Service helps online financial information companies
manage their e-mail lists, send value-added e-mail content and track
advertising results. Through strategic alliances with StockJungle.com,
FreeRealTime.com and TradingMarkets.com, the number of registered e-mail
addresses under management or represented by the division's advertising sales
force increased to 1.1 million during 2000.
Business-to-Business Division. As an Application Service Provider (ASP),
Telescan's Business-to-Business Division offers businesses of varying sizes an
array of online financial solutions to meet the unique requirements of each
customer's Internet business strategy, along with site development and hosting
services. Financial online solutions include quotes, news, reports, charts,
portfolio tools, equity and mutual fund screening tools, Telescan commentary
and a growing list of third-party products. Solutions can be developed and
operational in a fraction of the time and cost it would take an organization
to do it independently, without major investments in hardware, networking or
technical support.
Telescan's Custom Solutions application services product offers
businesses a private-labeled or co-branded solution, customized financial
content and a unique "look and feel." During 2000, Telescan extended its
existing business relationship with OIA, a wholly owned subsidiary of ZiaSun
and entered into new relationships with BusinessWeek Online, CompuServe,
Forbes, Quick & Reilly/Fleet National Bank and StockWalk Group. Each
relationship represents a unique opportunity for Telescan and is an
endorsement of the value of Telescan's proprietary technology.
During 2000, Telescan introduced QuickTools, a new application services
product. QuickTools delivers a high value, low cost, financially oriented Web
site to small and mid-sized companies seeking a fast and affordable Internet
strategy solution. QuickTools' packaged applications include such tools as
stock quotes, graphs, portfolio and news reports, along with "Quick Search," a
feature-rich, easy-to-use stock and mutual fund screening tool. Content within
each packaged application is organized in easy-to-use templates that can be
quickly added into a customer's existing Web site. Application packages vary
depending upon the level of content received and require a minimum one-year
contract.
Business Strategy
In late 1999, Telescan began to pursue an aggressive three to five-year
growth target to penetrate global markets and to expand organically and
through acquisitions. As Telescan witnessed the weakness in the Internet
financial marketplace during 2000, particularly related to technology
companies, Telescan reevaluated its business strategy and made adjustments
designed to ensure Telescan would emerge as a key player in the industry. As
part of this reevaluation, Telescan began refocusing its attention on its core
domestic operations and made organizational and governance changes designed to
enhance growth. Telescan's resulting strategy seeks to expand Telescan's
revenue base and scale Telescan's cost structure in line with revenues.
Management will execute this strategy through: 1) new products and technology;
2) new market penetration; and 3) mergers with or acquisitions of
complementary businesses.
-84-
New Products and Technology. Telescan reviewed its product offerings and
determined that additional products and services would need to be added to
sustain market leadership. To enhance existing offerings, Telescan added new
products and services through relationships with third parties and redesigned
its WallStreetCity.com Web site.
The Consumer Division introduced several new products during 2000 through
its INVESTools.com Web property. New products included:
o "Schaeffer's Internet Stock Alert" and "10 Days to Successful
Options Trading" by Bernie Schaeffer
o "The Pure Fundamentalist" by Alvin Toral
o "The Technology Digest" by Nancy Zambell
o "The MoneyPaper" by Vita Nelson
o "The Buyback Premium Portfolio" by David Fried
o "FXC's Top 10 Stock Picks for 2001 Report" by Frank Curzio
o "The 2001 Investor Survival Guide"
New partners are chosen based on their successful long-term track record,
the ability to clearly communicate with subscribers on a regular basis and the
ability to stick to an understandable, actionable investing style that serves
to immediately benefit users. Although this approach limits the number of
advisors Telescan will work with, it reinforces INVESTools.com's position as a
trusted distributor of investment advice in the marketplace. During 2000, the
Consumer Division also relaunched WallStreetCity.com with a new interface
allowing investors to easily navigate the site's powerful suite of analytical
tools. The redesigned site features a new floating stock ticker and redesigned
portfolios.
With the addition of third-party products from FinanceCenter.com,
Money.net, Prophet Financial and TeamVest, Telescan continues to offer its
business clients a unique set of solutions to meet their changing needs.
In addition to new products, Telescan modified its technology during 2000
to build a stable, scalable platform for the future and to support Telescan's
product development culture. Changes made to Telescan's technological platform
created a more flexible and modularized architecture. In addition,
implementation of caching technology increased the speed and performance of
Telescan's hosting services.
Telescan also expanded its offerings to wireless platforms, including
Wireless Application Protocol (WAP) enabled cellular phones and the Palm(TM)
VII and modem equipped Palm V series of handheld computers.
Market Penetration. Telescan redirected its focus to the domestic market
and will continue to concentrate its efforts on penetrating the previously
untapped middle market of small and mid-sized companies. Telescan began to
market its QuickTools application services product more aggressively during
the second half of 2000, following completion of changes to Telescan's
technology platform. Combined with Telescan's Custom Solutions application
services product and the products and services from the Consumer Division,
Telescan believes it has the broadest set of products to meet the needs of the
markets Telescan serves.
As a result of changes in the Internet and the high technology industries
during 2000, Telescan began redirecting its focus from aggressive global
expansion to keeping pace with the changing market and meeting clients' needs.
With the addition of multiple foreign exchanges to Telescan's products and
services throughout 2000, Telescan believes current market data feeds are
sufficient to meet anticipated demands at this time. Telescan will continue to
explore opportunities to penetrate global markets, particularly in Europe,
Asia and Latin America.
Mergers & Acquisitions. During 2000, Telescan evaluated a number of
opportunities to add key technologies, enhance market presence and complement
existing products and services through merger and acquisition activities.
Aggressive consolidation within the technology and financial services
industries continues to
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encourage Telescan to explore merger and acquisition opportunities to add
products and/or technologies, increase market share, add to critical mass and
improve liquidity.
Marketing
Telescan's marketing objectives are focused on increasing the number of
new customers, selling additional products and services to existing customers
and lowering customer acquisition costs. Telescan utilizes public relations
campaigns, e-mail and print advertising, banner ads, joint marketing
agreements and trade show participation as marketing tools to achieve these
objectives. Customer retention is also an integral component in Telescan's
marketing strategy. Maintaining and developing the existing customer base is
accomplished by providing comprehensive and high quality data, ongoing content
and product updates, offering customer training and conducting reactivation
campaigns to encourage inactive customers to return.
Customers
Telescan has an agreement with BPI Communications, Inc. ("BPI") to
provide BPI hosting and development services for multiple BPI Web sites.
Revenue for these services represented 12% and 10% of total revenue for 2000
and 1999, respectively. This agreement was amended on December 31, 2000, to a
fixed fee arrangement for the first three months of 2001 and then the
agreement and the fees are renewed month-to-month thereafter. Revenue from
these services accounted for 6% and 11% of total revenue for the quarters
ended March 31, 2001 and 2000, respectively.
Telescan has a license agreement with NBC, whereby NBC uses Telescan's
proprietary Internet technology for use on CNBC.com, a comprehensive Web site
for personal finance. Under the agreement, Telescan developed the financial
content portion of the CNBC.com Web site and currently provides hosting
services for such content. Revenue from these services accounted for 10% and
13% of total revenue in 2000 and 1999, respectively, and 10% and 15% of total
revenue for the fiscal quarters ended March 31, 2001 and 2000, respectively.
Telescan generates revenue under the agreement from cost reimbursement, fixed
monthly license fees and a percentage of advertising revenue generated from
the site. If the merger is consummated, NBC will be entitled to terminate this
agreement.
There were no other customers that generated greater than 10% revenue in
2000, 1999, 1998 or in the first quarter of 2001.
Proprietary Rights
Telescan attempts to protect its trade secrets and other proprietary
information with product development partners, employees and consultants
through nondisclosure agreements, contract provisions and copyright, patent,
trademark and trade secret laws. With respect to technologies that Telescan
has licensed to third parties for use in specific applications or platforms,
Telescan has entered into technology licensing agreements, which are intended
to protect the proprietary rights of Telescan related to the source code of
Telescan's products as a trade secret and as an unpublished copyright work.
Telescan believes that its products, trademarks and other proprietary
rights do not infringe on the proprietary rights of third parties, and
Telescan is not aware of any current infringement claims against Telescan.
Competition
Telescan competes with companies that operate proprietary platforms
and/or Internet financial Web sites, many of which have significantly greater
financial, technical and marketing resources than Telescan. Despite recent
market volatility, new competitors continue to enter the marketplace as a
result of perceived future opportunities. Telescan believes the principal
competitive factors in the Internet financial services market include system
performance, product differentiation, quality of content, user friendliness,
price, customer support, effective marketing techniques and the ability to
earn a profit. With a redirected focus towards profitability, Telescan
believes that it competes effectively in these areas. However, continued
competitive pressures could result in price reductions, increased spending on
product development and reduced market share, which could adversely affect
Telescan's financial condition and operating results. Telescan believes that
its revenue expansion strategy to: 1) add
-86-
new products and technology; 2) penetrate new markets; and 3) merge with or
acquire complementary businesses, will serve to lessen the impact of future
competitive pressures on Telescan.
Employees
As of June 30, 2001, Telescan had ___ full-time employees. Although
Telescan experienced a series of layoffs in 2000 and early 2001 to align
staffing and expenses with forecasted revenues, Telescan believes that its
relationship with its employees is good. In an effort to motivate and retain
Telescan's remaining core talent pool in the existing tight employment market,
Telescan accelerated the annual distribution of fiscal year 2001 stock option
awards to the staff and management to October 2000. Additionally, Telescan
vested all outstanding stock options, most of which had an exercise price that
was significantly higher than Telescan's current stock price. None of
Telescan's employees is represented by a labor union and Telescan has never
experienced a work stoppage.
Governmental Regulation
Telescan is not subject to direct regulation other than regulation
generally applicable to businesses. However, changes in the regulatory
environment relating to the Internet industry could have an effect on
Telescan's business, financial condition and operating results. Telescan is
unable at this time to predict the impact, if any, future regulation may have
on its business. While not currently regulated, there is a possibility that
Telescan may become subject to laws governing investment advisors or other
securities professionals. Regulations in this area are complex and ensuring
compliance could cause a financial burden and become a time consuming process.
Description of Property
Telescan's principal executive offices, as well as its principal
marketing, computer operations and product development activities, are located
in leased facilities in Houston, Texas, consisting of a total of 77,116 square
feet. Telescan also leases office space for marketing and administrative
personnel in New York, New York and Menlo Park, California.
In an effort to further reduce costs, Telescan is exploring options to
sub-lease excess office space, primarily located at Telescan's Houston
facility, while maintaining adequate reserves for future needs.
Legal Proceedings
From time to time Telescan is involved in certain legal actions arising
in the ordinary course of business. It is the opinion of management that such
litigation will be resolved without a material effect on Telescan's financial
position or results of operations. In August 2000, a lawsuit was filed against
Telescan in the United States District Court for the Southern District of New
York by a former employee alleging that Telescan failed to grant him certain
stock options to which he was entitled. Telescan has responded to the
complaint and the case is proceeding before the court. Although no assurances
can be given, Telescan believes that the ultimate resolution of the litigation
will not have a material adverse impact on Telescan's financial position or
results of operations.
-87-
Per Share Market Price and Dividend Information
Telescan common stock is traded on the Nasdaq National Market under the
symbol "TSCN." The following table sets forth, for the periods indicated, the
high and low closing prices for the common stock as reported by the Nasdaq
National Market. The bid prices reflect inter-dealer quotations, do not
include retail markups, markdowns or commissions and do not necessarily
represent actual transactions.
Common Stock Prices
---------------------
High Low
--------- --------
1999
Quarter ended March 31* .............. $22.94 $ 7.50
Quarter ended June 30* ............... 26.38 16.50
Quarter ended September 30 ........... 24.31 13.25
Quarter ended December 31 ............ 32.88 14.06
2000
Quarter ended March 31 ............... $27.50 $ 17.72
Quarter ended June 30 ................ 23.88 7.06
Quarter ended September 30 ........... 8.25 1.81
Quarter ended December 31 ............ 2.81 0.97
2001
Quarter ended March 31 ............... $ 2.06 $ 0.50
Quarter ended June 30
Quarter ended September 30
(through ___, 2001)
- --------------
* Telescan's stock was traded on the Nasdaq Small-Cap Market prior to July
1, 1999.
On May 3, 2001, the last full trading day before our announcement of the
signing of the merger agreement, the closing price of Telescan common stock
was $0.80 per share, the high price was $0.82 per share and the low price was
$0.80 per share. On __________ __, 2001, the closing price of Telescan common
stock was $____ per share, the high price was $____ per share and the low
price was $____ per share.
The dividend rate on Telescan's preferred stock through December 31, 2000
was $1.25 per share per year. In January 2001, holders of Telescan's preferred
stock exchanged all of their stock for a new class of preferred stock paying a
dividend rate equal to $1 per share per year. Telescan has paid these
dividends to holders of preferred stock on a quarterly basis. Telescan has
never declared a cash dividend on its common stock. The Board of Directors
currently intends to retain all earnings for use in Telescan's business, and
therefore, does not anticipate paying any cash dividends on its common stock
in the foreseeable future. The declaration of dividends, if any, in the future
would be subject to the discretion of the Board of Directors, which may
consider factors such as Telescan's results of operations, financial
condition, capital needs and acquisition strategy, among other things. See
"Telescan Management Discussion and Analysis of Financial Condition and
Results of Operations" and Telescan's consolidated financial statements and
the notes thereto.
-88-
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TELESCAN
The following table sets forth certain of Telescan's summary historical
consolidated financial information. The summary historical consolidated
financial information as of and for the fiscal years ended December 31, 1996,
1997, 1998 and 1999 has been derived from, and should be read in conjunction
with, Telescan's audited historical consolidated financial statements and the
notes thereto, which have been audited by Hein + Associates LLP, independent
auditors, and which, in the case of the fiscal years ended December 31, 1998
and 1999, are attached to this joint proxy statement/prospectus. The summary
historical consolidated financial information as of and for the fiscal year
ended December 31, 2000 has been derived from, and should be read in
conjunction with, Telescan's audited historical consolidated financial
statements and the notes thereto, which have been audited by Arthur Andersen
LLP, independent auditors, and which are attached to this joint proxy
statement/prospectus. The summary historical consolidated financial
information as of and for the fiscal quarters ended March 31, 2000 and 2001
has been derived from, and should be read in conjunction with, Telescan's
unaudited historical consolidated financial statements and the notes thereto
attached to this joint proxy statement/prospectus. In Telescan's opinion, all
adjustments (which consist only of normal recurring entries) considered
necessary for a fair presentation have been included in Telescan's unaudited
financial statements. Interim results for the fiscal quarter ended March 31,
2001 are not necessarily indicative of, or projections for, the results to be
expected for the full fiscal year ending December 31, 2001. The following
summary historical consolidated financial information should be read in
conjunction with the sections entitled "Selected Historical Consolidated
Financial Data of Telescan" and "Telescan Management's Discussion and Analysis
of Financial Condition and Results of Operations" below and with consolidated
financial statements of Telescan and the notes thereto attached to this joint
proxy statement/prospectus.
Quarters Ended
Statement of Operations March 31, Years Ended December 31,
----------------------- --------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------------ --------- --------- --------- --------- --------- --------
(in thousands, except per share amounts)
Revenue ............................. $ 5,863 $ 9,827 $ 35,938 $ 26,438 $ 15,234 $ 16,467 $ 13,721
Earnings (loss) before other
income and special charges ....... (1,321) (521) (6,457) (2,998) (6,277) (1,496) (4,130)
Write down of assets and other
charges .......................... (701) (1,500) (11,742) -- (1,530) -- --
Cost of acquisition
opportunities .................... -- -- (5,009) (3,287) -- -- --
Other income (expense) 23 12,245 (7,436) 435 (413) 341 349
Net income (loss) from
continuing operations ............ (1,999) 8,183 (30,644) (5,850) (8,220) (1,155) (3,781)
Net income (loss) ................. $ (1,999) $ 8,183 $(30,644) $ (5,850) $ (8,201) $ (1,174)$ (3,781)
Net income (loss) per common
share from continuing
operations
Basic .......................... $ (0.12) $ 0.49 $ (1.85) $ (0.39) $ (0.66) $ (0.10) $ (0.32)
======== ======== ======== ======== ======== ======== ========
Diluted ........................ $ (0.12) $ 0.47 (1.85) $ (0.39) $ (0.66) $ (0.10) $ (0.32)
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding
Basic ......................... 16,296 16,633 16,665 15,486 12,654 12,203 11,655
======== ======== ======== ======== ======== ======== ========
Diluted ....................... 16,296 17,469 16,665 15,486 12,654 12,203 11,655
======== ======== ======== ======== ======== ======== ========
December 31,
---------------------------------------------------------
Balance Sheet Data March 31, 2001 2000 1999 1998 1997 1996
--------------- ------ ------ ------- ------- -------
(in thousands)
Working capital ..................... $ (1,774) $ 4,156 $ 10,049 $ (641) $ 956 $ 436
Total assets ........................ 14,642 19,440 82,899 13,401 13,178 11,673
Total long-term obligations ......... 18 46 11,500 2,366 507 784
Total stockholders' equity .......... 6,159 9,427 57,770 4,771 9,160 7,750
89
TELESCAN MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Business Overview
Telescan is committed to helping investors improve their investment
results through advice and the educated use of proprietary investment search
tools. Telescan provides financial products and services marketed through two
divisions. Telescan's marketing divisions are:
o The Consumer Division, which delivers premium investment advice and
education to individual investors online through two Web properties,
INVESTools.com and WallStreetCity.com. INVESTools.com publishes
actionable investment advice and education, and WallStreetCity.com
is well known for its investment search tool, ProSearch. The
Consumer Division also offers private-label subscription marketing
and e-mail list management services to marquee clients like Gilder
Publishing, TheStreet.com, TradingMarkets.com and StockJungle.
o The Business-to-Business Division, which offers an array of online
financial solutions to businesses seeking to expand their offerings
online and gain greater cost efficiency through outsourcing. The
Company's Business-to-Business Division's clients include many of
the nation's leading financial services and media companies,
including America Online, American Express, BusinessWeek Online,
Forbes and Quick & Reilly/Fleet National Bank.
Results of Operations
First Quarter of 2001 Compared to First Quarter of 2000. Revenues
decreased $4.0 million, or 40%, compared to the prior year, as Telescan
continued to be impacted by the effects of the softening demand for products
and services in the Internet market.
Revenues from the Consumer Division decreased $1.4 million, or 32%,
compared to the prior year, primarily due to the depressed market for Internet
advertising and online services. In addition, the first quarter of 2000
included $373,000 in revenue from a special promotion that was not repeated in
2001.
Revenues from the Business-to-Business Division decreased $1.8 million,
or 42%, from the prior year. This decline is primarily due to the termination
of contracts with GlobalNet Financial.com, Inc. and others in 2000 which
reduced the amortization of deferred revenue in 2001 as compared to 2000. The
deferred revenue associated with these contracts was recognized when the
contracts terminated. Also adversely affecting revenue is the decline in
custom contract revenue in 2001 as compared to 2000 slightly offset by the
increase in sales of QuickTools contracts upon completion of the upgrade of
the technology platform in late 2000.
Other revenue declined $769,000, or 66%, primarily due to changes in the
BPI contract initiated in December 2000 converting the contract to a flat
monthly hosting fee.
Cost of revenues decreased $2.3 million, or 49%, over the prior year. As
a percentage of revenue, cost of revenues decreased from 49% 2000 to 41% in
2001. The decrease is primarily due to (i) the change in the BPI contract to a
flat hosting fee with no direct costs for the Company, (ii) decreased
compensation costs from the reduction in the headcount initiated in the second
quarter of 2000, and (iii) decreased amortization of software development
costs due to the write off of capitalized software costs in the second quarter
of 2000.
Selling expenses decreased $118,000, or 8%, compared to the first quarter
of the prior year, primarily due to decreased compensation costs from the
reduction in headcount. As a percentage of revenue, selling and marketing
costs increased from 15% in 2000 to 23% in 2001.
General and administrative expenses decreased $698,000, or 17%, over the
prior year primarily due to the decreased compensation costs from the
headcount reductions and decreased legal fees and recruiting expenses.
90
These decreases were offset by increased equipment rental costs and increased
rent for office space that was not leased until the second quarter of 2000. As
a percentage of revenue, general and administrative costs increased from 41%
in 2000 to 58% in 2001.
During the first quarter of 2001, Telescan sold shares of marketable
securities and recognized $70,000 in gross gains and $69,000 in gross losses.
Telescan received $504,000 in proceeds from these sales.
Special and other charges in the first quarter of 2001 included the
following:
o $264,000 to write off the investment in FreeRealTime.com, Inc.,
which filed for voluntary bankruptcy.
o $240,000 to write off the investment in Tachyon, LLC because
Telescan no longer expects to recover its investment.
o $197,000 for severance as Telescan continues efforts to control
costs by further reducing staff.
In the first quarter of 2000, special and other charges included a $1.5
million accrual for the settlement of a lawsuit with CyberAction, Ltd.
Other Significant Financial Statement Activity in the First Quarter of
2001. In January 2001, Telescan received a $1.5 million cash payment on a $4.2
million note receivable due from TeamVest pursuant to a note that Telescan
entered into in November 1999. Telescan then exercised its option to convert
the remaining balance due on the note, plus accrued interest of $407,000, into
1,893,066 shares of TeamVest common stock which, on the conversion date, was
valued at $3.1 million and represented approximately a 14% interest in
TeamVest.
In January 2001, the holders of the 120,000 shares of Class A 5%
Convertible Preferred Stock agreed to exchange all of their shares for new
Class B 4% Convertible Preferred Stock. The Class B 4% Convertible Preferred
Stock pays $1.00 per share per annum in dividends and is convertible at any
time at the option of the holder into 3,000,000 shares of common stock, which
Telescan has reserved for such conversion. The preferred stock automatically
converts on May 15, 2002.
2000 Compared to 1999. During 2000, Telescan's revenue increased $9.8
million, or 38%, as compared to 1999. In the Consumer Division, revenue
increased $3.9 million, or 32%, primarily due to a $4.1 million increase in
online subscription sales and a $1.9 million increase in advertising revenue.
These gains were offset by approximately $2.1 million in declines in fees from
dial up and modem accessed subscriptions as Telescan continued to migrate its
customers to Internet services.
Revenue from the Business-to-Business Division increased $5.7 million, or
62%, as compared to 1999. Stockwalk, Forbes, Quick & Reilly/Fleet National
Bank, American Express, Citibank and others added approximately $1.6 million
in development revenue as compared to 1999. Amortization of deferred license
and hosting revenue was approximately $2.5 million in 2000, an increase of
approximately $1.3 million as compared to 1999. An additional $1.7 million of
deferred revenue was recognized in 2000 due to the early termination or
modification of contracts with GlobalNet Financial.com, Inc., GRO Corporation
and InvestorIQ, plc. Cancellation of these contracts, or elimination of
certain provisions, relieved Telescan of future performance obligations under
these contracts and thus, the related deferred license and hosting fees were
recognized in 2000 as revenue.
Cost of revenue increased $2.2 million, or 15%, as compared to 1999, but
decreased as a percentage of revenue from 56% in 1999 to 47% in 2000. The
increase in costs was primarily due to increased royalties in the Consumer
Division, which was offset by decreased software amortization costs in the
Business-to-Business Division.
Selling and marketing expenses increased $1.9 million, or 41%, as
compared to 1999 consistent with the growth in revenue. As a percentage of
revenue, selling and marketing expenses were 18% in 2000 and 1999.
General and administrative expenses increased $8.9 million, or 92%, as
compared to 1999. As a percentage of revenue, these expenses increased to 52%
from 37% in 1999. Much of this increased cost was due to fluctuations in the
size of Telescan's organization during 2000. By May 2000, Telescan had 287
employees, a 21%
91
increase over December 1999 in anticipation of market expansion. In addition,
Telescan had expanded the leased space in its Houston operations by an
additional 23,000 square feet, or 43%, as compared to 1999. This growth in
personnel and space increased expenses for salaries, recruitment, rent,
equipment, consultants, contract labor and other costs during the first half
of 2000. As Telescan reevaluated its strategy, it began to reduce headcount
and take aggressive steps to control costs. As a result of these efforts, in
the fourth quarter of 2000, headcount decreased to 167 and general and
administrative expense decreased compared to the third quarter of 2000.
During 2000, Telescan evaluated a number of opportunities to add key
technologies, enhance market presence and complement existing products and
services through merger and acquisition activities. In August 2000, Telescan
entered into a merger agreement with GlobalNet in which each share of Telescan
common stock would have been exchanged for 0.50 shares of GlobalNet common
stock. During the ensuing due diligence period, the companies determined that
their business strategies would be best served if they were pursued
separately. In September 2000, a termination agreement was signed and costs
totaling $4.5 million associated with this acquisition opportunity were
expensed. A summary of the material terms of the termination agreement is as
follows:
o Telescan exchanged 272,500 shares of GlobalNet common stock Telescan
owned for the 545,000 shares of Telescan common stock that GlobalNet
owned. These shares of Telescan common stock were subsequently
canceled.
o GlobalNet purchased 276,495 shares of GlobalNet common stock
Telescan owned for $6.00 per share.
o GlobalNet paid Telescan $250,000 in cash as compensation for
expenses incurred in connection with the proposed acquisition
opportunity.
o Telescan and GlobalNet terminated most of their commercial contracts
and agreements, and dismissed all related outstanding receivables.
Telescan accelerated recognition of deferred revenue of $1.0 million
currently into revenue on these contracts as the termination
relieved Telescan of future performance obligations under these
contracts.
o Telescan agreed it would not sell, transfer, or dispose of its
remaining 1.9 million shares of GlobalNet common stock until July
2001, except for up to 50,000 shares per month for six consecutive
months beginning October 1, 2000. During the fourth quarter of 2000,
Telescan sold 150,000 shares of GlobalNet stock on the open market
under the terms of this agreement.
Additional merger and acquisition opportunities Telescan explored during
2000 resulted in an additional $545,000 in cost of acquisition opportunities
expensed. Aggressive consolidation within the technology and financial
services industries encourages Telescan to explore merger and acquisition
opportunities to add products and/or technologies, increase market share, add
to critical mass and improve liquidity.
During 2000, Telescan modified its technology to build a stable, scalable
platform for the future and to support Telescan's product development culture.
Changes made to Telescan's technological platform created a more flexible and
modularized architecture. In May 2000, Telescan relaunched its
WallStreetCity.com Web site with a completely new interface to make navigation
easier, a new floating ticker, and redesigned portfolios. As a result of these
changes, Telescan wrote off approximately $3.4 million of unamortized
capitalized costs that were determined to be in excess of the net realizable
value of the older products.
As Telescan witnessed weaknesses in the Internet financial marketplace,
particularly related to technology companies, Telescan reevaluated its
business strategy and made adjustments designed to ensure Telescan would
emerge as a key player in the industry. As part of this reevaluation, Telescan
began refocusing its attention on its core domestic operations and made
organizational and governance changes designed to enhance growth. This
reevaluation included shedding all operations that were not related to the
core business, were generating insufficient returns, or were no longer
considered strategic for Telescan's future. As a result, Telescan wrote off
$1.1 million in assets related to product lines that were no longer considered
strategic. Telescan also recognized approximately $900,000 in severance costs
associated with these changes in strategy.
The weaknesses in the Internet financial marketplace also took a toll on
investments Telescan made during 1999 and the early part of 2000. During 2000,
Telescan continuously monitored the financial health and the market
92
value of the companies in which Telescan had investments, both public and
private. Telescan wrote down its investments in Tachyon Systems and Telebuild
when it became apparent from sale offers that Telescan would not recover its
investment in the event of a sale. Telescan also wrote off investments in
Trading Technologies when Trading Technologies ceased operations in 2000 and
in InvestorIQ, plc when InvestorIQ, plc was forced into liquidation in the
United Kingdom in November 2000. These write downs and write offs totaled $5.1
million in 2000.
Telescan's investments in marketable securities suffered as well and
Telescan determined that the market value would not return to the level
Telescan had invested at any time in the near future. Therefore, in accordance
with SFAS 115, Accounting for Debt and Equity Securities, Telescan established
a new cost basis at the market value on December 31, 2000 and recognized a
$27.7 million loss on the impairment into income. The impact of this
impairment was offset by $19.4 million in net realized gains and losses on
sales of GlobalNet securities during 2000. During the fourth quarter, Telescan
began to sell off its marketable securities portfolio in an effort to shed
non-strategic assets and redistribute the proceeds to core business
opportunities.
In May 2000, Telescan terminated an agreement with CyberAction Ltd. This
agreement granted certain international marketing rights to CyberAction, and
the parties disagreed about the contractual provisions and obligations.
Therefore, as part of its strategic reevaluation, Telescan terminated the
contract and expensed $1.1 million of settlement costs.
At the beginning of 2000, the Consumer Division, headquartered in Menlo
Park, CA, sought to expand, and entered into a lease agreement on a new
facility. During the fourth quarter, as part of its cost containment strategy,
Telescan terminated the new lease agreement and recognized $235,000 of
associated expenses, including a $100,000 write off of leasehold improvement
costs.
1999 Compared to 1998. Revenues for the year ended December 31, 1999
increased $11.2 million, or 74%, as compared to the same period in 1998,
reflecting dramatic growth in the Internet service business. In 1999, Telescan
recognized approximately $4.9 million in revenue from new private label and
licensing agreements, of which approximately $3.5 million came from an
agreement with NBC. Telescan has licensed its proprietary Internet and online
financial services technology to NBC for CNBC.com, a comprehensive Web site
for personal finance. Under the agreement, Telescan is responsible for
developing customized investment analytics, providing financial data, data
retrieval and hosting services. Telescan's revenue comes from fixed monthly
fees, cost reimbursement and a percentage of the revenue from the site.
Revenue from INVESTools increased $3.5 million over 1998 to $5.0 million as
demand for online newsletters increased. Telescan's WallStreetCity.com Web
site added $690,000 to revenue in 1999 primarily due to advertising revenue.
Other service revenues increased $1.2 million, or 84%, primarily due to
growing demand for the various Internet publications while dial up modem
revenue declined $1.1 million, reflecting Telescan shifting its growth to more
Internet services.
Cost of revenue increased $4.6 million, or 46%, as compared to 1998,
resulting in a gross margin increase of $6.8 million, or 154%. Cost of revenue
associated with the NBC agreement represented approximately $1.9 million of
the total cost of revenue increase. Cost of revenue for INVESTools was $1.3
million higher for 1999 due to higher royalty obligations associated with
increased revenue.
Marketing expenses increased 15% as compared to 1998, as Telescan shifted
its marketing focus. General and administrative expenses increased $2.7
million, or 38%, primarily due to increased staffing costs to accommodate the
development requirements associated with the growing businesses.
During 1999, Telescan recorded a one-time charge of $3.3 million for
costs related to the acquisition of INVESTools. These costs consisted of
investment banking fees, legal and accounting fees, and certain other expenses
directly related to the acquisition.
Liquidity and Capital Resources
At March 31, 2001, cash and cash equivalents totaled $1.6 million, a
$97,000 increase from December 31, 2000. The increase was primarily due to net
cash provided by investing activities offset by net cash used by operations.
Working capital, which includes $3.5 million of deferred revenue, fell $5.9
million from December 2000
93
to a deficit of $1.8 million, primarily due to the conversion of the note
receivable due from TeamVest to an equity investment.
During the first quarter of 2001, Telescan used $1.5 million in cash to
fund operations. The net loss of $2.0 million included non-cash charges of
$504,000 for write downs of investments in addition to the $546,000 routine
non-cash charge for depreciation and amortization. Working capital accounts
decreased by $539,000 primarily due to a decrease in accounts payable and
other liabilities offset by a decrease in accounts receivable.
Investing activities added $1.7 million in cash primarily from the $1.5
million payment on the $4.2 million note receivable from TeamVest received in
January and the $504,000 in proceeds on the sales of marketable securities
during the first quarter of 2001.
It is Telescan's intention to control its operating expenses while
continuing to invest in its existing products. In addition, Telescan has
implemented changes intended to reduce certain operating and general and
administrative expenses. Telescan will continue to liquidate its marketable
securities portfolio during 2001 and is continuing its exploration of
strategic alternatives including exploring sources of additional financing. If
Telescan is unable to achieve its projected 2001 results of operations, or if
the fair value of Telescan's marketable securities decreases significantly
from the fair value at March 31, 2001, additional financing may be required to
fund Telescan's operations. No assurance can be given that Telescan will be
able to obtain additional financing or sell additional assets, or as to the
terms which Telescan could do so. Based on Telescan's current outlook,
Telescan believes that its cash flows from operations and current working
capital will be sufficient to fund its operations and capital requirements
through June 2002.
Changes in, and Disagreements with, Accountants on Accounting and Financial
Disclosure
Previous Independent Accountants.
i. On April 10, 2000, Telescan dismissed Hein + Associates LLP as
its independent accountant.
ii. Neither of the reports of Hein + Associates LLP on the
financial statements for years 1998 and 1999 contained an
adverse opinion or disclaimer of opinion or were qualified or
modified as to uncertainty, audit scope or accounting
principles.
iii. The dismissal of Hein + Associates LLP was recommended and
approved by the Audit Committee of the board of directors of
Telescan.
iv. During Telescan's fiscal years 1998 and 1999 and through the
period from December 31, 1999 to April 10, 2000, there were no
disagreements with Hein + Associates LLP on any matters of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements
if not resolved to the satisfaction of Hein + Associates LLP
would have caused them to make reference thereto in their
reports on the consolidated financial statements for such
years.
v. During Telescan's fiscal years 1998 and 1999 and through the
period from December 31, 1999 to April 10, 2000, there were no
reportable events (as defined in Regulation S-K Item 304(a)
(1)(v)).
vi. Telescan provided Hein + Associates LLP with a copy of the
disclosure it made in response to Item 304 (a) of Regulation
S-K. Telescan requested Hein + Associates LLP to furnish, and
Hein + Associates LLP furnished to Telescan, a letter addressed
to the SEC stating that it agreed with the statements made by
Telescan.
Newly Engaged Independent Accountants. On April 10, 2000, Telescan
engaged Arthur Andersen LLP as its new independent accountant. Through April
10, 2000, neither Telescan nor anyone on its behalf consulted Arthur Andersen
LLP regarding (i) the application of accounting principles to any transaction,
either completed or
94
proposed, or (ii) the type of audit opinion that might be rendered by Arthur
Andersen LLP on Telescan's financial statements. In addition, through April
10, 2000, neither Telescan nor anyone on its behalf consulted Arthur Andersen
LLP regarding any matter that was the subject of a disagreement (as defined in
Regulation S-K Item 304(a)(i)(iv)) or a reportable event (as defined in
Regulation S-K Item 304(a)(1)(v)).
Market Risk Disclosure
Telescan is exposed to market risk, which is the potential loss arising
from adverse changes in market prices and rates. Telescan's exposure to
interest rate changes is not considered to be material to Telescan. Telescan
does not enter, or intend to enter, into derivative financial instruments for
trading or speculative purposes.
Telescan is exposed to the impact of changes in the market values of its
investments. Telescan invests in equity instruments of privately held,
information technology companies for business and strategic purposes. These
investments are included in long-term assets and are accounted for under the
cost method when ownership is less than 20% and Telescan does not
significantly influence or control the operations. For these non-quoted
investments, Telescan's policy is to regularly review the assumptions
underlying the operating performance and cash flow forecasts in assessing the
carrying values. During the three months ended March 31, 2001, Telescan
recorded $240,000 of impairment to these non-quoted investments. Telescan
believes its financial instruments to be properly stated at fair value at
March 31, 2001.
95
TELESCAN MANAGEMENT
Directors and Executive Officers
As of ________ __, 2001, Telescan's directors and executive officers are as
follows:
NAME AGE POSITION
---- --- --------
William D. Savoy 36 Director and Chairman
Lee K. Barba 50 Director and Chief Executive Officer
Roger C. Wadsworth 53 Senior Vice President and Secretary
Paul A. Helbling 48 Chief Financial Officer
Greg E. Gensemer 34 Vice President
Danny E. Hoover 53 Vice President
Jerrold B. Smith 48 Vice President
Alexander T. Wyche 53 Vice President, Corporate Counsel
Elisabeth Y. Sami 32 Director
Stephen C. Wood 49 Director
Each director holds office until the next annual meeting of stockholders
or until his successor has been elected and qualified. The Compensation
Committee and Audit Committee of the board of directors are each composed of
Ms. Sami and Messrs. Savoy and Wood.
William D. Savoy. Mr. Savoy was appointed Chairman of the Board in August
of 2000. He currently serves as Vice President of Vulcan Ventures
Incorporated, a venture capital fund wholly owned by Paul G. Allen, co-founder
of Microsoft Corporation. From 1987 until November 1990, Mr. Savoy was
employed by Layered, Inc., a company controlled by Mr. Allen, and became its
President in 1988. From November 1990 until the present, Mr. Savoy has served
as President for Vulcan Northwest Inc., a company which manages the personal
financial activities of Mr. Allen. Mr. Savoy serves on the Advisory Board of
Dream Works SKG of Los Angeles, California and serves on the Board of
Directors of CNET, Inc. of San Francisco, California; Harbinger Corporation of
Atlanta, Georgia; Metricom, Inc. of Los Gatos, California; Ticketmaster
Online-CitySearch, Inc., of Pasadena California; USA Networks, Inc., of St.
Petersburg, Florida; and U.S. Satellite Broadcasting of Minneapolis,
Minnesota. Mr. Savoy also represents Mr. Allen in a wide variety of other
personal financial transactions. Mr. Savoy holds a B.S. in Computer Science,
Accounting and Finance from Atlantic Union College. Mr. Savoy has been a
director since 1993.
Lee K. Barba. Mr. Barba has been a Director since April of 2000 and has
served as Chief Executive Officer since February 2000. Mr. Barba is well known
for fostering innovative global growth strategies among companies he has
managed. He implemented the European expansion of Open Link Financial, an
Enterprise Risk Management Software company, and doubled the company's
revenues in one year by forming strategic partnerships with several Fortune
500 companies. Prior to joining Open Link, Mr. Barba served as President of
Coral Energy, a wholly owned subsidiary of Shell Oil, with $4 billion in
revenue, which was Shell's marketing arm in the deregulated natural gas and
electricity markets. Mr. Barba joined Coral after 22 years on Wall Street,
where most recently he was responsible for managing global trading businesses
for Bankers Trust Company. While based in London he was responsible for
managing their European offices, as well as the Global Risk Management
Advisory practice which had offices in Asia and Latin America. Upon returning
to New York, Mr. Barba was the senior executive of the bank responsible for
managing and consolidating the firm's technology and operations functions for
the global capital markets businesses, which included over 2,100 in staff
operating throughout Asia, Europe and North America. Earlier in his career Mr.
Barba served as co-head of the Fixed Income Division at PaineWebber and as a
Vice President of Lehman Brothers Kuhn Loeb. He earned his M.B.A. from
Columbia University and his B.A. from the University of North Carolina.
Roger C. Wadsworth. Mr. Wadsworth was appointed Secretary in August 2000,
served as Director from 1989 to 2000 and has served as Senior Vice President
since 1990. From 1988 to 1990, Mr. Wadsworth served as President of Telescan.
From 1983 to 1988, Mr. Wadsworth was employed as Vice President of Information
96
Management Services, Inc., of Houston, Texas, where he provided management
services to investment vehicles such as limited partnerships and joint
ventures. From 1979 to 1983, he served as co-owner of D. Russell Smith
Associates, a restaurant and tenant finish general contractor. Mr. Wadsworth
is Secretary of IMS Securities, Inc. a full service NASD broker/dealer owned
by his wife. Mr. Wadsworth holds a B.B.A. degree from the University of
Houston.
Paul A. Helbling. Mr. Helbling joined Telescan as Chief Financial Officer
in 1999. From 1997 until joining Telescan, Mr. Helbling was Vice President of
Finance at PCC Flow Technologies, Inc., a subsidiary of Precision Castparts
Corporation and a $350 million manufacturer of pumps and valves in the U.S.
and Europe. From 1991 to 1997 Mr. Helbling served as Vice President and Chief
Financial Officer of HydroChem Industrial Services, a $150 million provider of
industrial cleaning services to the petrochemical, refining, and utility
industries. Mr. Helbling became a Certified Public Accountant in 1978, with
experience in Big-5 public accounting, and in the contract drilling and oil
and gas exploration and production industries. Mr. Helbling holds B.A. and
M.A. degrees from Rice University.
Greg E. Gensemer. Mr. Gensemer has been Vice President since rejoining
Telescan in April 1999. Prior to rejoining Telescan, Mr. Gensemer was General
Manager for Paragon Software, a provider of streaming real-time quotes to
individual investors, money managers and brokers. When previously employed by
Telescan, Mr. Gensemer held the positions of Director of Business Development,
Project Manager, Retail Sales Executive and Technical Support Representative
after originally joining Telescan in 1990. Prior to joining Telescan, Mr.
Gensemer was the Area Manager for Pilgrim Cleaners of Houston, Texas from 1986
to 1990. Mr. Gensemer serves on the Board of Directors of GRO Corporation of
Houston, Texas.
Danny E. Hoover. Mr. Hoover, Vice President since September 1996,
previously held the positions of Manager of Development, Manager of Windows
Development and Senior Windows Programmer. Before joining Telescan in 1992,
Mr. Hoover was employed as operations manager for Praxis Incorporated, a
supervisory control automation company. Mr. Hoover holds a B.S. in Electrical
Engineering from Texas A&M University.
Jerrold B. Smith. Mr. Smith, Vice President since March 1998, previously
held the positions of Business Development Manager for Telescan's Consumer Web
property, WallStreetCity.com, and Technical Support Supervisor after joining
Telescan in 1995. Prior to joining Telescan, Mr. Smith practiced financial
planning and asset management in Houston, Texas. From 1986 to 1988, Mr. Smith
was national Sales Manager for USOne Apparel of New York. From 1976 to 1986,
Mr. Smith was a salesman and ultimately regional Vice President of Donmoor,
Inc., a wholesale apparel manufacturer, also of New York. Mr. Smith holds a
B.S. in Business Administration from the University of Houston.
Alexander T. Wyche. Mr. Wyche, Vice President and Corporate Counsel, who
joined Telescan in May 1999, previously served as an attorney for Koch
Industries, Inc., a privately held international conglomerate with interests
in the natural gas industry, from 1997 to 1999. Prior to 1997, Mr. Wyche held
positions in the legal departments of Enron Corp. and Tenneco, Inc., and
served as a legal consultant to the natural gas industry. Mr. Wyche holds a
B.B.A. from Campbell University, a J.D. from North Carolina Central University
and is licensed to practice law in Texas and North Carolina.
Elisabeth Y. Sami. Ms. Sami is Vice President of Strategic Partnership
and Business Development in NBC's Digital Media group. Ms. Sami was appointed
to the board of directors on June 23, 2000 to fill the position created after
Christopher Glowacki's resignation. Ms. Sami has been with NBC since March
1997, originally as Vice President for International Business Development and
Operations in New York, and later as Vice President of Business Development
for NBC West Coast in Burbank, California. Before joining NBC, Ms. Sami served
as Vice President of International Business Development for Discovery
Communications from March 1993 to February 1997. She started her career in
international investment consulting. Ms. Sami earned her B.A. from the
University of Iowa, and received a Graduate Diploma from the University of
Stockholm.
Stephen C. Wood. Mr. Wood is currently President and Chief Executive
Officer of Wireless Services Corporation based in Bellevue, Washington. Until
May 1996, Mr. Wood was President and CEO of Notable Technologies, L.L.C.,
which filed for bankruptcy in 1996. From 1993 through 1994, Mr. Wood served as
Vice President of Information Broadcasting for McCaw Development Corporation
located in Kirkland, Washington. Until February 1993, he was President of
Starwave Corporation, a company he formed in 1991 with Microsoft
97
Corporation co-founder Paul G. Allen to develop and market data and
information products. From 1986 through 1991, Mr. Wood served in several
executive positions at Asymetrix Corporation, a software development and
marketing firm founded by Mr. Allen. From 1980 until 1985, Mr. Wood was in
charge of building a microcomputer software development organization for
Datapoint Corporation in Austin, Texas, after serving in research &
development and marketing positions. Mr. Wood began his career in 1976 when he
became the sixth employee of Microsoft Corporation, where he was general
manager from 1977 to 1980. Mr. Wood holds a B.S. in Computer Engineering from
Case Western Reserve University and an M.S. in Electrical Engineering from
Stanford University. Mr. Wood has been a director since 1992.
Executive Compensation
The following table reflects all forms of compensation for services to
Telescan for the years ended December 31, 2000, 1999, and 1998, of the
individuals serving as Telescan's Chief Executive Officer during 2000 and
Telescan's four most highly compensated executive officers who were serving
Telescan at the end of 2000 and who earned more than $100,000 that year.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
----------------------------------------- --------------
Securities
Underlying
Name Year Salary Bonus Options
- ------------------------- ---------- ---------- ---------- -------------
Lee K. Barba 2000 $248,103(1) $ 45,866 833,321
Chief Executive Officer
David L. Brown 2000 138,300 -- 58,378
Former Chief Executive Officer 1999 158,750 -- 4,393
1998 140,000 -- 28,800
David M. Berray 2000 160,240(1) 18,982 109,459
Chief Operating Officer
Roger C. Wadsworth 2000 118,750 25,299 41,478
Senior Vice President 1999 96,000 -- 2,662
1998 84,000 -- 13,200
Paul A. Helbling 2000 130,625 27,829 31,626
Chief Financial Officer 1999 42,096(2) -- 12,729
Joseph Frantz 2000 116,375 33,480 22,801
Vice President, Chief Information 1999 93,460 3,727 932
Officer 1998 83,659 -- 6,890
- --------------------
(1) Messrs. Barba and Berray joined Telescan during 2000. Therefore, the
amounts reflected for 2000 are for a partial year.
(2) Mr. Helbling joined Telescan during 1999. Therefore, the amounts
reflected for 1999 are for a partial year.
98
The following table reflects all forms of compensation for services to
Telescan for the years ended December 31, 2000, 1999, and 1998, of two
executive officers who would have been included above had they been employed
by Telescan at December 31, 2000 and who earned more than $100,000 that year.
Long-Term
Annual Compensation Compensation
----------------------------------------- --------------
Securities
Underlying
Name Year Salary Bonus Options
- ------------------------- ---------- ---------- ---------- -------------
Ronald Warren 2000 $147,692 $ 30,359 24,137
Former President 1999 118,269 -- 13,195
Resigned August 2000 1998 100,000 -- 14,000
Edward C. Oliver 2000 117,500 27,829 6,000
Former Vice President 1999 60,429(1) -- 17,929
Resigned May 2000
- ------------
(1) Mr. Oliver joined Telescan during 1999. Therefore, the amounts reflected
for 1999 are for a partial year.
99
Stock Options. The following tables set forth information relating to the
named executive officers with respect to (i) stock options granted in 2000,
and (ii) the total number of exercised options through 2000 and the value of
the unexercised in-the-money options at the end of 2000.
Option Grants In Last Fiscal Year
Potential Realizable Value at
Numbers of Total Options Assumed Annual Rate of Stock
Securities Granted to Price Appreciation for Option
Underlying Employees Exercise Term
Options in Fiscal Price Per Expiration ------------------------------
Name Granted Year Share Date 5% 10%
- --------------------- ----------- ------------- ----------- --------- ------------ -------------
Lee K. Barba 400,000(1) 20.03% $ 19.00 02/27/10 $ 4,779,599 $12,114,443
12,401(2) 0.62 5.00 08/10/10 38,995 98,820
420,920(3) 21.08 2.00 10/29/10 529,429 1,341,676
David L. Brown 20,000(4) 1.00 21.63 01/31/10 272,060 689,453
3,892(2) 0.19 19.25 02/24/10 47,117 119,405
8,349(2) 0.42 10.94 05/07/10 57,442 145,569
6,936(2) 0.35 5.00 08/10/10 21,810 55,271
7,500(2) 0.38 2.00 10/16/10 9,433 23,906
11,701(2) 0.59 2.00 10/29/10 14,717 37,297
David M. Berray 100,000(5) 5.01 22.50 03/13/10 1,415,013 3,585,921
9,459(2) 0.47 5.00 08/10/10 29,744 75,376
Roger C. Wadsworth 10,000(4) 0.50 21.63 01/31/10 136,030 344,726
2,359(2) 0.12 19.25 02/24/10 28,559 72,373
5,255(2) 0.26 5.00 08/10/10 16,524 41,876
15,000(6) 0.75 2.00 10/16/10 18,867 47,812
8,864(2) 0.44 2.00 10/29/10 11,149 28,254
Paul A. Helbling 6,000(4) 0.30 21.63 01/31/10 81,618 206,836
2,595(2) 0.13 19.25 02/24/10 31,416 79,613
5,780(2) 0.29 5.00 08/10/10 18,175 46,059
7,500(6) 0.38 2.00 10/16/10 9,433 23,906
9,751(2) 0.49 2.00 10/29/10 12,265 31,081
Joseph P. Frantz 6,000(4) 0.30 21.63 01/31/10 81,618 206,836
1,651(2) 0.08 19.25 02/24/10 19,987 50,652
5,150(2) 0.26 5.00 08/10/10 16,194 41,039
10,000(6) 0.50 2.00 10/16/10 12,578 31,875
Ronald Warren 15,000(4) 0.75 21.63 08/08/01(7) 204,045 517,090
2,831(2) 0.14 19.25 08/08/01(7) 34,273 86,854
6,306(2) 0.32 5.00 08/08/01(7) 19,829 50,251
Edward C. Oliver 6,000(4) 0.30 21.63 05/21/01(7) 81,618 206,836
- --------------------------
(1) Option vests in 3 components: (a) 100,000 shares vest six months from the
date of grant, (b) 100,000 vest annually in equal installments over five
years beginning one year after the date of grant subject to acceleration
of vesting over four years if performance targets are met, and (c)
200,000 shares vest five years from the date of grant subject to
acceleration of vesting to four years if performance targets are met.
(2) Options vest immediately upon grant.
(3) Option vests in 3 components: (a) 220,920 shares vest immediately, (b)
100,000 vest annually in equal installments over four years beginning one
year after the date of grant subject to acceleration of vesting over
three years if performance targets are met, and (c) 100,000 shares vest
four years from the date of grant subject to acceleration of vesting to
three years if performance targets are met.
(4) On October 17, 2000, the vesting of these options was accelerated to vest
100% on that date.
100
(5) Options vest in three components: (a) 25,000 shares vest six months from
date of grant, (b) 25,000 vest ratably over five years from date of grant
subject to acceleration to four years if certain performance targets are
met, and (c) 50,000 vest at the end of five years subject to acceleration
to four years if certain performance targets are met.
(6) Options vest 50% annually beginning 12 months after date of grant.
(7) Per their severance agreements, the expiration date of these options was
extended one year.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year End Option
Values
Value of
Unexercised
In-the-Money
Number of Securities Options at
Underlying Unexercised Fiscal Year
Options at Fiscal Year End End
Shares -------------------------- -------------
Acquired on Value Exercisable
Name Exercise Realized Exercisable/Unexercisable Unexercisable
- -------------------- ------------ ----------- -------------------------- -------------
Lee K. Barba -- -- 333,321/500,000 --/--
David L. Brown -- -- 139,506/-- --/--
David M. Berray -- -- 34,459/75,000 --/--
Roger C. Wadsworth -- -- 63,536/15,000 --/--
Paul A. Helbling -- -- 36,855/7,500 --/--
Joseph F. Frantz 6,373 $34,622 20,623/10,000 --/--
Ronald Warren -- -- 72,748/-- --/--
Edward C. Oliver 2,595 $49,954 23,929/-- --/--
Director Compensation. Telescan currently pays non-employee Directors
cash fees of $1,500 per Board meeting attended and reimburses expenses
incurred by Directors to attend such meetings. Directors who are not officers
of Telescan are typically granted stock options annually, at an exercise price
consistent with the market.
101
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of __________, 2001 unless
otherwise indicated, with respect to the number of shares of Telescan common
stock beneficially owned by (1) each director, nominee for director, and/or
named executive officer individually, (2) all executive officers and directors
of Telescan as a group, and (3) each stockholder known by Telescan to be the
beneficial owner of more than 5% of Telescan's common stock. The number of
shares is exclusive of shares allocated to the person's account through
Telescan's 401(k) plan. Except as noted below, each stockholder has sole
voting and investment power with respect to the shares shown.
Number of Shares
Owners Beneficially Owned 1 % of Class
- ------ ------------------- -----------
William D. Savoy 67,508 *
Lee K. Barba 333,321 2.0%
Roger C. Wadsworth 147,104 *
Paul A. Helbling 42,855 *
Elisabeth Y. Sami 7,500 *
Stephen C. Wood 60,200 *
David M. Berray 4 8,000 *
Joseph F. Frantz, II 4 22,623 *
Ronald Warren 5 124,950 *
Edward C. Oliver 5 200 *
David L. Brown 6 753,956 2 4.6%
National Broadcasting Company, Inc. and
GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, Connecticut 06927 2,331,348 14.3%
Lacy J. Harber
LJH, Corp.
377 Neva Lane
Denison, Texas 75020 2,314,000 14.2%
Paul G. Allen
Vulcan Ventures Incorporated
505 Union Station
505 5th Avenue So., Suite 900
Seattle, Washington 98104 1,390,000 3 7.9%
G. Robert Friedman
Friedman & Associates
P. O. Box 676161
Rancho Santa Fe, California 92067 1,053,919 6.5%
All Directors and executive officers as a group
(10 persons) 756,631 4.6%
- -----------------
*Less than 1%.
1. Each of the share amounts shown for the directors and officers includes
options to purchase additional shares, which are exercisable within the
next sixty days, as follows: Mr. Savoy - 34,535, Mr. Barba - 333,321, Mr.
Wadsworth - 63,536, Mr. Helbling - 36,855, Ms. Sami - 7,500, Mr. Wood -
20,250, Mr. Frantz - 20,623, Mr. Warren - 72,748.
2. Includes 636,318 shares owned by the Brown Family Partnership. David L.
Brown has shared voting and investment power in the Brown Family
Partnership along with other family members who are not officers and/or
directors of Telescan. Includes 117,638 shares owned by David L. Brown
personally.
3. Vulcan is owned 100% by Paul G. Allen.
4. The following employees resigned subsequent to December 31, 2000, but are
named executives: Mr. Berray - resigned January 2001; Mr. Frantz -
resigned June 2001.
5. The following employees resigned prior to December 31, 2000, but are
named executives: Mr. Warren - resigned August 2000; Mr. Oliver -
resigned May 2000.
6. Mr. Brown's employment with Telescan ended on March 9, 2001 upon the
expiration of his employment contract with Telescan
102
Certain Relationships and Related Transction with Directors and Executive
Officers
In the normal course of business some members of the Board of Directors
have proposed business alliances between Telescan and companies with which
they are associated. In the opinion of management, each of these transactions
or arrangements was entered into on terms as favorable to Telescan as could
have been obtained in transactions or arrangements with unaffiliated third
parties.
Vulcan Ventures, Incorporated. Pursuant to the terms of a May 20, 1992
stock purchase agreement between Vulcan Ventures and Telescan, Vulcan has the
right to designate one nominee director to Telescan's Board of Directors for
as long as Vulcan Ventures (or its affiliate) owns at least 540,000 shares of
common stock of Telescan. In addition, Telescan has agreed not to take any
corporate action to increase its number of directors to more than seven
without the unanimous written consent of all directors for as long as Vulcan
Ventures (or its affiliate) owns at least 540,000 shares of common stock of
Telescan.
Knowledge Express Data Systems, L.C. ("KEDS"). At December 31, 2000,
Telescan owned 55.58% of KEDS and a joint venture controlled by GRF Interests,
Inc. ("GRF") owned the remaining interest. G. Robert Friedman, a significant
stockholder and a former director of Telescan, controls GRF. Telescan and the
joint venture sold their interests in KEDS to an unrelated third party in
February 2001. Through that date, Telescan provided computer hardware,
programming, systems maintenance, data loading, telecommunications and certain
administrative services to KEDS. For the year ended December 31, 2000, KEDS
assets were reclassified as net liabilities held for sale, totaling $15,000.
Telebuild, L.C. ("Telebuild"). Friedman Interests, Inc., a company
controlled by G. Robert Friedman, owns 45.42% of Telebuild. Telescan and the
Brown Family Partnership own 15.83% and 25.44%, respectively, of Telebuild.
The Brown Family Partnership is owned by David L. Brown, a Director and the
former Chairman of Telescan, and other members of the Brown family. Through
December 31, 2000, Telescan performed services under contract for Telebuild,
which consisted primarily of the development, maintenance and operation of the
Telebuild database system and the provision of office space, equipment and
furniture. Telescan charged Telebuild for its personnel at a stipulated rate,
which reflected the full absorption of overhead costs to Telescan.
Non-personnel expenditures under the agreement are billed at actual cost.
During 2000, Telescan wrote off $384,000 of intercompany receivables due from
Telebuild when it became apparent that they would never be recovered. At
December 31, 2000, Telescan had no investment recorded for Telebuild and
Telebuild owed Telescan an additional $19,000, which was subsequently paid.
For the year ended December 31, 2000, $55,000, or less than 1%, of Telescan's
total revenue was derived from services provided to Telebuild.
National Broadcasting Company, Inc. In a letter agreement dated February
22, 1999 between NBC and Telescan, NBC was granted the right to have an
individual designated by NBC (the "NBC Designee") included as a nominee for
the Board of Directors of Telescan. NBC shall have this right until GE Capital
Equity Investments, Inc. ("GE Equity") owns less than 5% of the outstanding
common stock of Telescan or the license agreement with NBC terminates or
expires, whichever event occurs earlier. Pursuant to this agreement, NBC has
designated, and the Board of Directors has approved, Ms. Elisabeth Y. Sami.
In addition, GE Equity has the right to designate an individual to be
present at all Board of Directors meetings. Such individual will not be a
participating or voting member of the Board of Directors and may remain as a
designee as long as GE Equity owns at least 5% of Telescan's outstanding
common stock.
GRO Corporation. Mr. Greg E. Gensemer, an officer of Telescan, serves on
the Board of Directors for GRO Corporation. Telescan has entered into
licensing and servicing agreements with this company. In December 2000, the
licensing agreement was amended to terminate development of a new product for
GRO. As a result of this modification, $153,000 of deferred license fees for
GRO were accelerated and recognized into revenue in December. At December 31,
2000, Telescan still had approximately $358,000 of deferred license fees from
GRO to be recognized into revenue through 2003. Telescan recognized $190,000
in revenue during 2000 from this licensing agreement, excluding the
accelerated revenue. Telescan owned 603 shares of GRO Corporation representing
an ownership interest of 5.1% at December 31, 2000.
103
DESCRIPTION OF INVESTOOLS CAPITAL STOCK
General
INVESTools has _______ shares of authorized capital stock. Those shares
consist of _________ shares of preferred stock, par value $0.01 per share, and
_______ shares of common stock, par value $0.01 per share.
The rights of ZiaSun and Telescan stockholders who acquire shares of
stock offered by this joint proxy statement/prospectus will be governed by
INVESTools' certificate of incorporation and by-laws and Delaware corporate
law. We have summarized below provisions of INVESTools' certificate of
incorporation and by-laws. This summary does not contain all of the provisions
that you may want to consider as an investor in INVESTools' securities. You
may wish to review INVESTools' certificate of incorporation and by-laws, which
are attached as Annexes V and VI, respectively, to this joint proxy
statement/prospectus.
Description of Common Stock
Dividends. Dividends may be declared and paid on the INVESTools common
stock at such time and in the amounts as the board of directors in its
discretion shall determine, subject to any dividend preferences of any
outstanding preferred stock. INVESTools has no present intention of declaring
and paying cash dividends on the common stock at any time in the foreseeable
future.
Voting Rights. Each share of common stock is entitled to one vote in the
election of directors and all other matters submitted to stockholder vote,
except that holders of common stock are not entitled to vote on any amendments
to INVESTools' certificate of incorporation that relate solely to the terms of
any preferred stock if the holders of the preferred stock affected thereby are
entitled to vote thereon as a separate class or series pursuant to INVESTools'
certificate of incorporation or Delaware law.
Liquidation Rights. If INVESTools liquidates, dissolves, or winds-up its
business, whether voluntarily or not, INVESTools common stockholders will
share equally in the distribution of all assets remaining after payment to
creditors and preferred stockholders.
Additional Series of Preferred Stock
INVESTools' certificate of incorporation provides that the number of
authorized shares of any stock may be increased or decreased by an affirmative
vote of a majority of the stockholders entitled to vote thereon. The board of
directors is authorized to create and issue one or more series of preferred
stock and to determine the rights and preferences of each series within the
limits set forth in the certificate of incorporation and applicable law.
Description of Series A Preferred Stock
At the time of the merger, 120,000 shares of INVESTools Series A
Preferred Stock will be issued. The holders of Series A Preferred Stock will
have no voting rights except as described in the certificate of incorporation
or required by law. If allowed to vote, a holder of Series A Preferred Stock
will have one vote for each share held. Holders of Series A Preferred Stock,
voting separately as a class, will be entitled to vote for, and remove without
cause and replace at any time, one additional director in the event that
dividends on the Series A Preferred Stock are in arrears in an amount equal to
at least two quarterly dividends, or if for five consecutive trading days
there has not been a sufficient number of shares of common stock authorized
and reserved for issuance to cover the number of shares of common stock into
which Series A Preferred then outstanding shall be convertible. This right
terminates when the above defaults are cured. The holders of the Series A
Preferred, voting separately as a class, are entitled to remove without cause
at any time and replace any director that such stockholders elected under the
above defaults. The consent of a majority of the holders of the Series A
Preferred Stock is required to modify INVESTools' certificate of incorporation
or by-laws if any terms of the Series A Preferred Stock are affected thereby,
or to pay any dividends or distributions to stockholders.
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Holders of shares of Series A Preferred Stock will be entitled to receive
cumulative dividends at the rate of $1.00 per share per annum, payable
quarterly, when and as declared by the board of directors. The dividend will
be paid at a priority to any payment of any dividend on the common stock or
any other class or series of stock of INVESTools. Dividends shall accrue
commencing on January 1, 2001, and shall do so daily, whether or not earned or
declared.
In the event that there is a liquidation, dissolution or winding up of
INVESTools, holders of Series A Preferred Stock shall be entitled to receive
$25 per share plus any accrued but unpaid dividends prior to any distribution
of assets to holders of any other class or series of shares.
Holders of shares of Series A Preferred Stock have the option to convert
at any time each of their shares of Series A Preferred Stock into 25 (plus the
pro rata portion of any due and unpaid dividends) shares of INVESTools common
stock. On May 15, 2002, all then outstanding shares of Series A Preferred
Stock will each automatically convert into 25 (plus the pro rata portion of
any due and unpaid dividends) shares of INVESTools common stock.
Anti-Takeover Effects
INVESTools is subject to the provisions of Delaware law described below
regarding business combinations with interested stockholders.
Section 203 of the Delaware General Corporation Law applies to a broad
range of business combinations between a Delaware corporation and an
interested stockholder. The Delaware law definition of "business combination"
includes mergers, sales of assets, issuances of voting stock and certain other
transactions. An "interested stockholder" is defined as any person who owns,
directly or indirectly, 15% or more of the outstanding voting stock of a
corporation.
Section 203 prohibits a corporation from engaging in a business
combination with an interested stockholder for a period of three years
following the date on which the stockholder became an interested stockholder,
unless:
o the board of directors approved the business combination before the
stockholder became an interested stockholder, or the board of
directors approved the transaction that resulted in the stockholder
becoming an interested stockholder;
o upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, such stockholder owned at least
85% of the voting stock outstanding when the transaction began other
than shares held by directors who are also officers and other than
shares held by certain employee stock plans; or
o the board of directors approved the business combination after the
stockholder became an interested stockholder and the business
combination was approved at a meeting by at least two-thirds of the
outstanding voting stock not owned by such stockholder.
INVESTools' certificate of incorporation and by-laws provide that the
board of directors shall be divided into three classes, with each class
consisting, as nearly as possible, of one-third of the total number of
directors constituting the entire board. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as equal as possible.
Ninety days' written notice or the consent of the board of directors is
required for a holder of Series A Preferred Stock to acquire over 5% of
INVESTools common stock.
INVESTools must indemnify present and former officers and directors, and
may indemnify employees and agents.
Listing
INVESTools common stock is expected to be quoted on Nasdaq.
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COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of the material differences between the
current rights of ZiaSun and Telescan stockholders with the rights those
stockholders will have after the merger as stockholders of INVESTools.
Corporate Governance
ZiaSun is incorporated under the laws of Nevada, and Telescan is
currently incorporated under the laws of Delaware. If the merger is
consummated, the holders of ZiaSun common stock, whose rights are currently
governed by the general corporation laws of Nevada, the ZiaSun Restated
Articles of Incorporation and the Amended and Restated Bylaws, will become
holders of INVESTools common stock, whose rights are governed by the DGCL, the
INVESTools Amended and Restated Certificate of Incorporation and the
INVESTools Amended and Restated By-laws. Telescan stockholders, whose rights
are governed by the DGCL and the Telescan Restated Certificate of
Incorporation and Restated Bylaws, will also be governed by INVESTools'
applicable rules.
The general corporation and merger laws of Nevada are codified in Chapter
78 and Chapter 92A of the NRS. The NRS differs from the DGCL in many respects.
The following summary sets forth material differences that should be
considered by ZiaSun's stockholders. The following summary does not purport to
be a complete statement of the differences between the NRS and the DGCL, which
are too numerous to list in their entirety.
Authorized Capital Stock
The amount of the total authorized capital stock of ZiaSun is 50,000,000
shares with a par value of $0.001 per share. All shares shall be one class,
without series or other distinction, and shall be called common stock.
The total number of shares of all classes of stock that Telescan is
authorized to issue is 40,000,000 shares, consisting of 30,000,000 shares of
common stock with a par value of $.01 each share, and 10,000,000 shares of
preferred stock with a par value of $0.01 each share. The holders of preferred
stock shall have such rights, preferences and privileges as may be determined,
prior to the issuance of such shares, by the board of directors.
The total number of shares of all classes of stock which INVESTools shall
be authorized to issue is _____ shares, consisting of _____ shares of
preferred stock, par value $0.01 per share and ___ shares of common stock, par
value $0.01 per share. The number of authorized shares of either stock may be
increased or decreased by an appropriate vote of the holders of a majority in
voting power of the stock entitled to vote.
Voting Rights
The stockholders of ZiaSun have one vote for each share of stock
registered in his or her name on the books of the corporation.
The stockholders of Telescan common stock are entitled to one vote for
each share of common stock held by the stockholder.
Each stockholder of INVESTools common stock is entitled to one vote for
each share of common stock held by the stockholder. Holders of Series A
Preferred stock generally will not be entitled to any voting rights. However,
the consent of Series A Preferred Stock shall be required before certain
corporate actions may be taken, such as amending the certificate of
incorporation or by-laws so as to change any of the rights of the Preferred
Stock holders, or to purchase for value any common stock while there exists
any arrearage in payment of dividends. Series A Preferred Stock holders shall
also have the right to elect one director to the board in the event the
dividends on the Series A Preferred Stock are in arrears for more than two
consecutive quarters.
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Number of Directors
ZiaSun's authorized number of directors is not less than three and no
more than seven or such number as determined by the board of directors.
Telescan's authorized number of directors is no less than three and no
more than 12, and is determined by the board of directors.
INVESTools' board of directors shall consist of such number of directors,
not less than three nor more than 15, as shall be fixed exclusively from time
to time by a board resolution. The directors shall be divided into three
classes.
Nomination and Election of Directors
The election of ZiaSun directors is held at the annual meeting of the
stockholders; however, the board of directors can cause the election to be
held at a special meeting of the stockholders in the event elections are not
held at the annual meeting.
The directors at Telescan are elected at each annual meeting of
stockholders; however, in the event that no meeting is held or the directors
are not elected at the meeting, the stockholders may elect the directors at
any special meeting held for that purpose.
Directors of INVESTools shall be elected by the holders of a plurality of
the voting power present in person, or represented by proxy and entitled to
vote. Holders of INVESTools Series A Preferred Stock, voting separately as a
class, will be entitled to vote for additional directors in the event that
dividends on the Series A Preferred are in arrears in an amount equal to at
least two quarterly dividends, or if for five consecutive trading days there
has not been a sufficient number of shares of common stock authorized and
reserved for issuance to cover the number of shares of common stock into which
Series A Preferred shall then be convertible. The number of directors that may
be elected by the holders of any such series of Preferred Stock shall be in
addition to the number fixed by or pursuant to the by-laws. This right
however, terminates when the above defaults are rectified.
Terms and Classification of the Board of Directors
The ZiaSun board of directors is not classified and each director holds
office until the next annual meeting of stockholders and until his or her
successor has been duly elected and qualified.
The Telescan board of directors is not classified. All directors are
elected at annual meetings of stockholders or at special meetings held for
such purpose. All directors shall hold office until their respective
successors are elected and qualified.
The board of directors of INVESTools shall be divided into three classes,
designated Class I, Class II, and Class III. Each class, as nearly as
possible, shall have one-third of the total number of directors making up the
whole board. Class I directors shall be originally elected for a term expiring
at the next succeeding annual meeting of stockholders, and Class II directors
shall be originally elected for a term expiring at the second annual meeting
of stockholders. Class III directors shall be originally elected for a term
expiring at the third succeeding annual meeting of stockholders. At each
succeeding annual stockholders' meeting, successors to the class of directors
whose term expires at that annual meeting shall be elected for a term expiring
at the third succeeding annual meeting.
Removal of Directors
The removal of the board of directors of ZiaSun can occur at a meeting
expressly called for that purpose. At such meeting one or more directors may
be removed by a vote of a majority of the shares of outstanding stock of the
corporation entitled to vote at the election of directors.
The Telescan board can be removed with or without cause by a majority
stockholder vote.
107
INVESTools' board of directors can only be removed for cause and only by
the affirmative vote of at least 80 percent in voting power of all shares of
the company entitled to vote generally in the election of directors, voting as
a single class.
Filling Director Vacancies
All vacancies of ZiaSun board members, including those caused by an
increase in the number of directors, may be filled by a majority of the
remaining directors, though less than a quorum, unless provided otherwise in
the articles of incorporation.
A vacancy in the Telescan board of directors, except for vacancies
created by the removal of a director, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining
director. Such elected directors shall hold office until their successor is
elected at an annual or special meeting of stockholders. Vacancies created by
the removal of a director may only be filled by the vote of a majority of the
shares entitled to vote represented at a duly held meeting at which a quorum
is present, or by written consent of the holders of a majority of the
outstanding shares entitled to vote. Stockholder are able to elect a director
at any time to fill any vacancy not filed by the directors. When a director
gives notice of his or her future resignation, the board or the stockholders
have the power to elect a successor or take office when the resignation is to
become effective.
Prior to annual meeting 2002, each party to the merger agreement shall
take the necessary steps to appoint the directors of INVESTools. Each director
shall remain in office until the next election of the INVESTools directors not
to be prior to April 2, 2002.
A vacancy in the INVESTools board of directors, except for vacancies
created by the removal of a director, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining
director. Such elected directors shall hold office for a term as set forth in
the certificate of incorporation. When a director gives notice of his or her
future resignation, the board or the stockholders have the power to elect a
successor or take office when the resignation is to become effective. Any
newly created directorship on the board that results from an increase in the
number of directors and any vacancy occurring in the board may be filled only
by a majority of the directors then in office, though less than a quorum, or
by a sole remaining director. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
Special Meetings of Stockholders
A special meeting of ZiaSun stockholders may be called by the president,
or the board of directors, or by vote or signed writing of stockholders of a
majority of the issued and outstanding capital stock.
A special meeting of the stockholders of Telescan may be called at any
time by the chairman of the board or the president, or by the board of
directors, or by one or more holders of shares entitled to cast in the
aggregate not less than 10% of the votes at the meeting.
A special meeting of the INVESTools stockholders may be called at any
time only by board members until August 31, 2002. After such date, the
chairman of the board or the president, or the board of directors may at any
time call such a meeting.
Stockholder Action by Written Consent
ZiaSun stockholders are entitled to take any action which may be taken at
any annual or special meeting of the stockholders without a meeting.
Telescan stockholders may elect directors without a meeting by a consent
in writing. Any other action which, under any provision of the DGCL, may be
taken at a meeting of the stockholders, may be taken without a meeting.
For INVESTools, any action which, under any provision of the DGCL, may be
taken at a meeting of the stockholders, may be taken without a meeting if
accompanied by a written consent. The writing shall set forth the
108
action so taken and be signed by the holders of the outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at the meeting at which all shares entitled to vote
thereon were present and voted.
Advance Notice Provisions
ZiaSun special meetings require not less than 10 nor more than 60 days
written notice of such meetings. Notification of annual meetings is to be
provided to each stockholder of record entitled to vote not less than 10 nor
more than 60 days before such meetings.
Upon request in writing that a special meeting of Telescan stockholders
be called, directed to an officer by any person entitled to call a special
meeting of stockholders (other than the board of directors), the officer will
provide notice to stockholders entitled to vote that a meeting will be held at
a time requested by the person calling the meeting, not less than 35 nor more
than 60 days after receipt of the request.
Written notice of each annual or special meeting of Telescan stockholders
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote.
When any Telescan stockholders' meeting is adjourned for 30 days or more,
notice of the adjourned meeting shall be given as in the case of the original
meeting.
INVESTools' by-laws provide that written notice of each special or annual
meeting of stockholders shall be given not less than 10 nor more than 60 days
before the date of the meeting to each stockholder entitled to vote. When an
INVESTools' stockholders' meeting is adjourned for 30 days or more, notice of
the adjourned meeting shall be given as in the case of the original meeting.
INVESTools' by-laws also provide that notice of any proposed stockholder
approval without a meeting by less than unanimous written consent, shall be
given at least 10 days before the consummation of the action.
Amendments to Certificate of Incorporation
ZiaSun is permitted to amend its certificate of incorporation in any
respect provided the amendment contains only provisions that would be lawful
in an original certificate of incorporation filed at the time of amendment.
Sections 78.385 and 78.390 of the NRS provide for substantially the same
requirements as those contained in Section 242 of the DGCL.
Telescan is permitted to amend its certificate of incorporation in any
respect provided the amendment contains only provisions that would be lawful
in an original certificate of incorporation filed at the time of amendment.
Section 242 of the DGCL provides that for a corporation that has received
payment for any of its capital stock to amend its certificate of
incorporation, that corporation's board of directors must adopt a resolution
presenting the proposed amendment. In addition, a majority of the shares
entitled to vote, as well as a majority of shares by class of each class
entitled to vote, must approve the amendment to make it effective.
INVESTools may not modify the Amended and Restated Certificate of
Incorporation, by merger or otherwise, so as to amend or change the rights,
preferences, or privileges of the Series A preferred stock. The affirmative
vote of holders of at least 80 percent in voting power of all the shares of
INVESTools entitled to vote generally in the election of directors, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal sections in the Amended and Restated Certificate of
Incorporation that deal with the number and class of the board members,
special meetings of the stockholders and the bylaws.
Amendments to By-Laws
An amendment to ZiaSun's by-laws may be made at any regular or special
meeting of the board of directors by a majority vote of the board. An
amendment can also be made by a vote of, or a consent in writing signed by,
the holders of a majority of the issued and outstanding capital stock.
109
Telescan's by-laws may be amended, repealed or new by-laws adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote.
The INVESTools board shall be authorized to amend or repeal the by-laws
in any manner not inconsistent with the DGCL, subject to the power of the
stockholders to amend or repeal the by-laws.
Limitation on Personal Liability of Directors and Officers
No ZiaSun director or officer shall have any personal liability to the
corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except for acts or omissions which involve intentional
misconduct or the payment of dividends in violation of 78.300 of the NRS.
A director of Telescan shall not be personally liable for monetary
damages to the company or its stockholders for breach of any fiduciary duty as
a director, except for the breach of duty of loyalty, acts or omissions
performed not in good faith, self-dealing, or violations of Section 174 of the
DGCL.
An INVESTools director shall not be liable to the company or its
stockholders for breach of fiduciary duty as director, except to the extent
such exemption from liability or limitation is not permitted under the DGCL.
Indemnification of Directors and Officers
ZiaSun shall indemnify its directors and officers to the fullest extent
permitted under the NRS.
Telescan directors and officers shall be indemnified against expenses,
judgments, fines, settlements and other amounts reasonably incurred in
connection with any threatened, pending or completed action or proceeding to
the fullest extent permitted by the laws of the State of Delaware.
INVESTools shall indemnify any person to any proceeding by reason of the
fact that such person is or was a director or officer of the corporation.
Directors' and Officers' Insurance
ZiaSun may purchase and maintain insurance on behalf of any person who is
or was a director, employee or agent of the corporation or who is or was
serving as such at the request of the corporation, against any liability
asserted against him or her and incurred by him or her in any such capacity.
This remains the case even if the company would have the power to indemnify
such person against such liability under the laws of the state of
incorporation.
The board of directors for Telescan may determine that the company should
purchase and maintain insurance on behalf of any agent of the company against
any liability asserted against or incurred by the agent in its performance as
such, whether or not the company would have the power to indemnify such person
against such liability under the bylaws or otherwise.
INVESTools may purchase and maintain insurance on behalf of any person
who is or was an officer or director of the corporation against any liability
asserted against such person, whether or not the company would have the power
to indemnify such person against such liability under the bylaws or otherwise.
110
WHERE YOU CAN FIND MORE INFORMATION
ZiaSun and Telescan file annual, quarterly and current reports, joint
proxy statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are
also available to the public at the SEC's Web site at http://www.sec.gov.
Copies of documents filed by Telescan with the SEC are also available at the
offices of the Nasdaq Stock Market, 1735 K Street, NW, Washington, D.C. 20006.
INVESTools has filed a registration statement on Form S-4 under the
Securities Act with the SEC with respect to INVESTools common stock to be
issued in the merger. This joint proxy statement/prospectus constitutes the
prospectus of INVESTools filed as part of the registration statement. This
joint proxy statement/prospectus does not contain all of the information set
forth in the registration statement because certain parts of the registration
statement are omitted in accordance with the rules and regulations of the SEC.
The registration statement and its exhibits are available for inspection and
copying as set forth above.
Requests for documents should be directed to:
o For ZiaSun documents: o For Telescan documents:
Investor Relations Investor Relations
ZiaSun Technologies, Inc. Telescan, Inc.
Rodolfo, Suite 120 5959 Corporate Drive, Suite 2000
Solana Beach, CA 90275 Houston, TX 77036
(858) 350-4060 (281) 588-9700
This joint proxy statement/prospectus does not constitute an offer to
sell, or a solicitation of an offer to purchase, the securities offered by
this joint proxy statement/prospectus, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
such offer, solicitation of an offer or proxy solicitation in such
jurisdiction. Neither the delivery of this joint proxy statement/prospectus
nor any distribution of securities pursuant to this joint proxy
statement/prospectus shall, under any circumstances, create any implication
that there has been no change in the information set forth or incorporated
into this joint proxy statement/prospectus by reference or in our affairs
since the date of this joint proxy statement/prospectus. The information
contained in this joint proxy statement/prospectus with respect to ZiaSun was
provided by ZiaSun and the information contained in this joint proxy
statement/prospectus with respect to Telescan was provided by Telescan.
LEGAL MATTERS
That the shares of INVESTools Common Stock being offered hereby will be
legally issued, fully paid and non-assessable as well as certain Federal
income tax matters are being passed upon for INVESTools by Simpson Thacher &
Bartlett.
EXPERTS
The consolidated financial statements of ZiaSun included in this joint
proxy statement/prospectus have been audited by Jones, Jensen & Company, HJ &
Associates, LLC and BDO Siedman, LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firms as experts in accounting and
auditing.
The December 31, 2000 consolidated financial statements and schedules of
Telescan included in this joint proxy statement/prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as
111
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements and schedules of Telescan as of or
for periods ending prior to December 31, 2000 included in this joint proxy
statement/prospectus have been audited by Hein + Associates LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
STOCKHOLDER PROPOSALS FOR THE 2002
ANNUAL MEETINGS OF ZIASUN AND TELESCAN
Proposals submitted by stockholders of ZiaSun for presentation at the
2002 annual meeting of stockholders, to be held if the merger has not been
consummated prior thereto, must have been received by the Secretary of ZiaSun
no later than ________, 2001 for inclusion in the joint proxy statement and
form of proxy relating to the 2002 annual meeting of stockholders.
Proposals submitted by stockholders of Telescan for presentation at the
2002 annual meeting of stockholders, to be held if the merger has not been
consummated prior thereto, must have been received by the Secretary of
Telescan no later than ________, 2001 for inclusion in the joint proxy
statement and form of proxy relating to the 2002 annual meeting of
stockholders.
112
LIST OF ANNEXES
ANNEX I Agreement and Plan of Merger
Annex II Voting Agreements
Annex III Lock-Up Agreements
Annex IV Employment Agreements
ANNEX V Restated Certificate of Incorporation of INVESTools
ANNEX VI By-Laws of INVESTools
ANNEX VII Sections 92A.300 to 92A.500 of the Nevada Revised Statutes
113
ZIASUN TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants .................................F-2
Independent Auditors' Report .............................................F-3
Consolidated Balance Sheets as of December 31, 2000 and
December 31, 1999 ......................................................F-4
Consolidated Statements of Operations and Comprehensive Income for the
Three Years Ended December 31, 2000 ....................................F-6
Consolidated Statements of Stockholders' Equity for the Three Years
Ended December 31, 2000 ................................................F-8
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 2000 ...............................................F-10
Notes to Consolidated Financial Statements ..............................F-12
Selected Quarterly Financial Data (unaudited) ...........................F-33
Unaudited Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000 .....................................................F-34
Unaudited Consolidated Statements of Operations for the Three Months
Ended March 31, 2001 and March 31, 2000 ...............................F-36
Unaudited Consolidated Statements of Stockholders' Equity for the Year
Ended December 31, 2000 and the Three Months Ended March 31, 2001 .....F-38
Unaudited Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2001 and March 31, 2000 ...............................F-40
Notes to the Unaudited Consolidated Financial Statements ................F-42
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Boards of Directors of
ZiaSun Technologies, Inc.
We have audited the accompanying balance sheet of ZiaSun Technologies,
Inc. and subsidiaries (the "Company") as of December 31, 2000 and the related
statements of operations and comprehensive income, changes in stockholders'
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of ZiaSun Technologies, Inc.
and subsidiaries as of December 31, 2000 and the results of its operations and
its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
BDO Seidman, LLP
Los Angeles, California
March 9, 2001, except for
Notes 3 and 10, which are as of
April 13, 2001
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
ZiaSun Technologies, Inc. and Subsidiaries
Solana Beach, California
We have audited the accompanying consolidated balance sheet of ZiaSun
Technologies, Inc. and Subsidiaries as of December 31, 1999 and the related
consolidated statements of operations and comprehensive income, stockholders'
equity, and cash flows for the years ended December 31, 1999 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ZiaSun
Technologies, Inc. and Subsidiaries as of December 31, 1999 and the results of
their operations and their cash flows for the years ended December 31, 1999
and 1998 in conformity with generally accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
March 25, 2000
F-3
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
December 31,
----------------------------
2000 1999
----------- ----------
CURRENT ASSETS
Cash and cash equivalents ................................... 3,851,897 $ 9,283,310
Trade receivables ........................................... 954,848 744,293
Prepaid expenses ............................................ 265,618 65,962
----------- -----------
Total Current Assets ........................................ 5,072,363 10,093,565
----------- -----------
EQUIPMENT
Machinery and equipment ..................................... 288,905 174,947
Office equipment ............................................ 169,663 125,371
Leasehold improvements ...................................... 76,681 57,857
------------ -----------
535,249 358,175
Less: accumulated depreciation .............................. (171,585) (75,632)
----------- -----------
Equipment, Net .............................................. 363,664 282,543
----------- -----------
OTHER ASSETS
Equity investment (Note 3) .................................. 6,055,000 --
Net assets of discontinued operations (Note 10) ............. 403,915 6,148,270
Goodwill - net of accumulated amortization of $3,849,826 and
$223,535 (Note 2, 11 and 15) 35,802,447 2,756,932
Receivables - related parties (Note 6) ...................... -- 68,236
Other assets ................................................ 16,048 107,338
------------ -----------
Total Other Assets .......................................... 42,277,410 9,080,776
------------ -----------
TOTAL ASSETS ................................................ $ 47,713,437 $19,456,884
============ ===========
See accompanying notes to consolidated financial statements.
F-4
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
--------------------------
2000 1999
------------ ------------
CURRENT LIABILITIES
Accounts payable and accrued expenses ............................. 1,855,544 $ 872,064
Related party payable (Note 6) .................................... -- 690,000
Income tax payable () ....................................... 26,958 1,947,264
Sales tax payable ................................................. 3,004,914 136,499
GST payable ....................................................... 112,841 74,830
------------ ------------
Total Current Liabilities ......................................... 5,000,257 3,720,657
Total Liabilities ................................................. 5,000,257 3,720,657
COMMITMENTS AND CONTINGENCIES (Note 3 and 4)
Shares subject to rescission (Note 14) ............................ 613,830 --
STOCKHOLDERS' EQUITY (Note 1, 12 and 13)
Common stock: 250,000,000 shares authorized of $0.001 par value,
32,675,330 shares issued and 32,314,630 outstanding at
December 31, 2000, 22,205,018 shares issued and 22,141,818
outstanding, at December 31, 1999 ............................... 32,675 22,205
Additional paid-in capital ........................................ 16,909,372 12,504,547
Treasury stock, 360,700 and 63,200 shares, respectively ........... (799,538) (34,030)
Other comprehensive income ........................................ -- 54,230
Deferred compensation ............................................. (36,097) (30,000)
------------ ------------
Retained earnings / (Accumulated Deficit) ......................... (74,007,062) 3,219,275
------------ ------------
Total Stockholders' Equity ........................................ 42,099,350 5,736,227
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $ 47,713,437 $ 19,456,884
============ ============
See accompanying notes to consolidated financial statements.
F-5
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended
December 31,
------------------------------------------
2000 1999 1998
------------ ---------- ---------
SALES, NET...................................... $ 54,667,477 $ 23,619,590 $ --
COST OF GOODS SOLD.............................. 28,275,184 13,026,015 --
------------ ---------- ---------
Gross Margin.................................... 26,392,293 10,593,575 --
------------ ---------- ---------
OPERATING EXPENSES
General and administrative...................... 19,049,784 5,493,459 77,045
Depreciation and amortization expense........... 3,106,395 540,815 --
Goodwill impairment (Note 2 and 15)............. 71,755,840 -- --
Bad debt expense................................ 93,526 -- --
Consulting fees - related party (Note 6)........ -- 190,060 --
------------ ---------- ---------
Total Operating Expenses........................ 94,005,545 6,224,334 77,045
------------ ---------- ---------
Income (Loss) from Operations................... (67,613,252) 4,369,241 (77,045)
------------ ---------- ---------
OTHER INCOME (EXPENSE)
Loss on equity investments (Note 3)............. (200,000) -- --
Interest expense................................ (4,393) (21,247) --
Interest and dividend income.................... 355,707 53,868 --
Other income (expense).......................... 15,423 (15,138) --
------------ ---------- ---------
Total Other Income (Expense).................... 166,737 17,483 --
------------ ---------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES................................ (67,446,515) 4,386,724 (77,045)
INCOME TAXES (Note 5)........................... (3,101,153) (1,754,690) --
------------ ---------- ---------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS.... (70,547,668) 2,632,034 (77,045)
------------ ---------- ---------
DISCONTINUED OPERATIONS
Income (Loss) from Discontinued Operations...... (2,921,969) 648,457 846,365
Gain (Loss) on Disposal of Discontinued Operations,
net of income tax provision of $ -0-,
$2,029,420 and $ -0-, respectively.......... (3,756,700) 2,683,748 --
------------ ---------- ---------
NET INCOME (LOSS)............................... $ (77,226,337) $ 5,964,239 $ 769,320
============= =========== =========
See accompanying notes to consolidated financial statements.
F-6
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (continued)
For the Years Ended December 31,
----------------------------------
2000 1999 1998
------- ------- ------
INCOME (LOSS) PER COMMON SHARE (Note 9)
BASIC WEIGHTED AVERAGE COMMON SHARES............ 29,744,300 21,769,583 17,022,767
NET INCOME (LOSS) PER SHARE
COMMON SHARE
Continuing Operations........................... $ (2.37) $ 0.12 $ --
Discontinued Operations......................... (0.23) 0.15 0.05
------------ ---------- ---------
BASIC NET INCOME (LOSS) PER
COMMON SHARE................................ $ (2.60) $ 0.27 0.05
============ =========== =========
DILUTED WEIGHTED AVERAGE
COMMON SHARES............................... 29,744,300 25,796,000 17,022,767
DILUTED NET INCOME (LOSS) PER
COMMON SHARE
Continuing Operations........................... $ (2.37) $ 0.10 $ --
Discontinued Operations......................... (0.23) 0.13 0.05
------------- ----------- ---------
DILUTED NET INCOME (LOSS) PER
COMMON SHARE................................ $ (2.60) $ 0.23 $ 0.05
============ =========== =========
COMPREHENSIVE INCOME AND ITS COMPONENTS
CONSIST OF THE FOLLOWING:
Net income (loss)............................... $(77,226,337) $ 5,964,239 $ 769,320
Foreign currency translation adjustment......... (54,230) 15,436 (2,967)
------------- ----------- ----------
NET COMPREHENSIVE INCOME (LOSS)................. $(77,280,567) $ 5,979,675 $ 766,353
============= =========== ==========
See accompanying notes to the consolidated financial statements.
F-7
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Common Stock Other Retained
--------------------- Additional Compre- Deferred Earnings
Paid-in Treasury hensive Compen- (Accumulated
Shares Amount Capital Stock Income sation Deficit) Total
--------- --------- ----------- --------- -------- --------- -------------- -------
Balance
December 31, 1997... 15,800,000 $ 15,800 $3,576,129 $ -- $ -- $ (40,000) (3,514,284) $ 37,645
Purchase of
Momentum ASIA, Inc.
and Momentum
Internet, Inc.
(Note 1)............ 5,130,000 5,130 5,347,265 (70,000) 41,761 -- -- 5,324,156
Currency
translation
adjustment.......... -- -- -- -- (2,967) -- -- (2,967)
Net income for the
year ended December
31, 1998............ -- -- -- -- -- -- 769,320 769,320
---------- -------- ---------- ------- ------- --------- ---------- -----------
Balance
December 31,
1998................ 20,930,000 20,930 8,923,394 (70,000) 38,794 (40,000) (2,744,964) 6,128,154
---------- -------- ---------- ------- ------- --------- ---------- -----------
Purchase of
ASIA4Sale.com, Ltd.
(Note 1)............ 100,000 100 249,900 -- -- -- -- 250,000
Purchase of Online
Investors
Advantage, Inc.
(Note 1)............ 1,150,000 1,150 2,873,850 -- -- -- -- 2,875,000
Exercise of stock
option at $2.00 per
share (Note 8)...... 25,000 25 49,975 -- -- -- -- 50,000
Amortization of
deferred
compensation........ -- -- -- -- -- 10,000 -- 10,000
Proceeds from the
sale of the
Company's common
stock by a
Subsidiary (Note 12) -- -- 407,428 35,970 -- -- -- 443,398
Adjustment for
forward stock split
(Note 1)............ 18 -- -- -- -- -- -- --
Currency
translation
adjustment.......... -- -- -- -- 15,436 -- -- 15,436
Net income for the
year ended December
31, 1999............ -- -- -- -- -- -- 5,964,239 5,964,239
---------- -------- ---------- ------- ------- --------- ---------- -----------
Balance
December 31, 1999... 22,205,018 $ 22,205 $12,504,547 $ (34,030) $54,230 $ (30,000) $ 3,219,275 15,736,227
---------- -------- ---------- ------- ------- --------- ---------- -----------
See accompanying notes to the consolidated financial statements.
F-8
Common Stock Other Retained
--------------------- Additional Compre- Deferred Earnings
Paid-in Treasury hensive Compen- (Accumulated
Shares Amount Capital Stock Income sation Deficit) Total
--------- --------- ----------- --------- -------- --------- -------------- -------
Balance
December 31, 1999... 22,205,018 $ 22,205 $12,504,547 $ (34,030) $54,230 $ (30,000) $ 3,219,275 15,736,227
---------- -------- ---------- ------- ------- --------- ---------- -----------
Exercise of stock
options (Note 8).... 50,000 50 99,950 -- -- -- -- 100,000
Earn-out agreement
of Online
Investors,
Advantage, Inc.
(Note 1)............ 9,820,152 9,820 100,567,674 -- -- -- -- 100,577,494
Common stock issued
for services........ 201,660 201 843,120 -- -- -- -- 843,321
Sale of Momentum
Internet, Inc.
Subsidiary (Note 10) (725,000) (725) -- -- -- -- -- (725)
Discontinuance of
foreign
Subsidiaries
(Note 10)........... -- -- -- -- (54,230) -- -- (54,230)
Amortization of
deferred
compensation........ -- -- -- -- -- 43,752 -- 43,752
Deferred
compensation
(Note 8)............ -- -- 49,849 -- -- (49,849) -- --
Common stock issued
for related party
debt (Note 6)....... 103,500 104 689,896 -- -- -- -- 690,000
Acquisition of
subsidiaries (Note
1).................. 1,020,000 1,020 2,074,350 -- -- -- -- 2,075,370
Warrant grant
(Note 13)........... -- -- 70,935 -- -- -- -- 70,935
Options granted for
services (Note 8)... -- -- 9,051 -- -- -- -- 9,051
Repurchase of
common stock by the
Company............. -- -- -- (765,508) -- -- -- (765,508)
Loss for the
year ended
December 31, 2000... -- -- -- -- -- -- (77,226,337) (77,226,337)
---------- -------- ---------- ------- ------- --------- ---------- -----------
Balance
December 31, 2000... 32,675,330 $ 32,675 $116,909,372 $(799,538) $ -- $ (36,097) $(74,007,062) $ 42,099,350
========== ======== ============ ========= ======= ========= ============ ============
See accompanying notes to consolidated financial statements.
F-9
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
-------------------------------------------------
2000 1999 1998
------------- ------------ ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations.................. $ (70,547,668) $ 2,632,034 $ (77,045)
Adjustments to reconcile income (loss) to net cash provided by
(used in) operating activities:
Common stock for services..................................... 843,321 -- --
Cancellation of common stock.................................. (725) -- --
Depreciation and amortization................................. 3,140,147 283,458 --
Goodwill impairment........................................... 71,755,840 -- --
Loss on equity investment..................................... 200,000 -- --
Loss and disposal of assets................................... 9,335 -- --
Stock warrant granted for services............................ 70,935 -- --
Stock options granted for services............................ 9,051 -- --
Changes in operating assets and liabilities:
Increase in trade receivables................................. (210,555) (404,536) --
Increase in prepaids.......................................... (199,656) (65,962) --
(Increase) in related party, receivables...................... 68,236 (68,236) --
Decrease in other assets...................................... 91,290 38,612 --
Increase in accounts payable and accrued expenses............. 983,480 586,113 --
Increase (decrease) in income taxes payable................... (1,920,306) 1,947,264 --
Increase in goods and services tax payable.................... 38,011 74,830 --
Increase in sales tax payable................................. 2,868,415 136,499 --
-------------- ------------ ---------
Net Cash Provided by Continuing Operating Activities.......... 7,199,151 5,160,076 (77,045)
Net Cash Provided by (Used in) Discontinued Operations........ 929,186 (1,940,256) 521,797
Net Cash Provided by Operating Activities..................... 8,128,337 3,219,820 444,752
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equity investment................................. (6,255,000) -- --
Purchase of discontinued subsidiary........................... (300,000) -- --
Sale of subsidiary............................................ -- 5,000,000 --
Earn-out payment to former shareholders of
subsidiary (Note 7)........................................ (6,000,000) -- --
Purchases of property and equipment........................... (196,512) (237,689) --
Acquisition of subsidiary..................................... -- (400,000) --
Investing activities of discontinued operations............... (53,502) -- --
-------------- ------------ ---------
Net Cash Provided by
(Used in) Investing Activities............................... (12,805,014) 4,362,311 --
-------------- ------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing activities of discontinued operations............... (89,228) -- --
Purchase of treasury stock.................................... (765,508) -- --
Sale of the Company's common stock by a subsidiary............ -- 443,398 --
Proceeds from borrowings - related parties.................... -- 690,000 --
Proceeds from exercise of stock options....................... 100,000 50,000 --
-------------- ------------ ---------
Net Cash Provided by
(Used in) Financing Activities................................ $ (754,736) $ 1,183,398 $ --
-------------- ------------ ---------
See accompanying notes to consolidated financial statements.
F-10
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
-----------------------------------------
2000 1999 1998
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH............................... $ (5,431,413) $ 8,765,529 $ 444,752
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR............................................. 9,283,310 517,781 73,029
CASH AND CASH EQUIVALENTS AT END OF YEAR...................... $ 3,851,897 $ 9,283,310 $ 517,781
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest...................................................... $ 4,392 $ 22,299 $ --
Income taxes.................................................. $ 4,992,587 $ 1,514,000 $ --
Schedule of Non-Cash Financing Activities:
Purchase of subsidiaries for common stock..................... $102,652,864 $ 3,125,000 $ 5,534,156
Conversion of note receivable to treasury stock............... $ -- $ -- $ 70,000
Conversion of note payable related party to
Common stock............................................. $ 690,000 $ -- $ --
Issuance of stock subject to rescission....................... $ 614,200 $ -- $ --
See accompanying notes to consolidated financial statements.
F-11
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of ZiaSun Technologies,
Inc. (the "Company"). The Company was incorporated in the State of
Nevada on March 19, 1996. The Company is a holding company originally
in the business of acquiring companies and operations with business
models developed around the Internet. The Company is currently in the
business of providing investment seminars. The Company was considered
a development stage company as defined in SFAS No. 7 until the
acquisition of Momentum Asia, Inc. and Momentum Internet, Inc. in
1998. The Company changed its name to "BestWay U.S.A., Inc." on April
17, 1997 and, subsequently, changed its name to ZiaSun Technologies,
Inc. during 1998. On September 10, 1998 in connection with the
agreement and plan of reorganization described below, the
shareholders of the Company authorized and the Company completed a
reverse stock split of 1-for-2. On May 14, 1999, the Company's common
stock was forward split on a 2 shares for 1 share basis. All
references to shares of common stock have been retroactively
restated.
BestWay Beverages, Inc. (BBI), a wholly-owned subsidiary, was
incorporated in the State of Nevada on September 23, 1998. BBI holds
the exclusive distribution franchise rights in the U.S. and Mexico
for a patented in-store beverage center. BBI is a U.S. based
corporation. BBI was dissolved in 2001.
Momentum Asia, Inc. (MAI), a wholly-owned subsidiary, was
incorporated in Manilla, Philippines on September 6, 1994 under the
name of New Age Publications, Inc. On June 17, 1998, the name was
changed to Momentum Asia, Inc. MAI provides a wide range of
compatible graphic design, writing, printing, database management,
direct mailing and e-mail customer service operations.
Momentum Internet, Inc. (MII), a former wholly-owned subsidiary, was
incorporated under the laws of the British Virgin Islands on November
7, 1997. MII controls a range of Internet products and services,
including a copyrighted international on-line stock trading web-site,
a premium web-based e-mail service, an advertising banner network, a
finance web-site and an Asia-focused search engine. MII has its main
offices in Hong Kong.
On October 5, 1998, the Company completed an agreement and plan of
reorganization whereby Ziasun issued 5,130,000 shares of its common
stock in exchange for all the outstanding common stock of MAI and
MII. 4,000,000 shares were issued for MAI and 1,130,000 shares were
issued for MII. The reorganization was accounted for as a purchase of
MAI and MII. At the time of the acquisition, Ziasun had 15,800,000
shares outstanding. The financial statements of Ziasun reflected a
license valued at $50,000 and minimal liabilities.
Online Investors Advantage, Inc. (OIA), a wholly owned subsidiary,
was incorporated under the laws of the State of Utah in 1997 to
engage in the business of providing workshops to individuals
regarding investing in the stock market.
F-12
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)
On March 31, 1999, the Company entered into an Acquisition Agreement
and Plan of Reorganization under which the Company acquired OIA. OIA
is in the business of training individuals how to effectively use the
financial planning and investment tools available on the internet to
manage their own investment portfolios. The training is structured
around a five-step discipline, which includes searching for an
investment, evaluating the investment and assessing the risk, timing
the purchase, establishing an exit point and monitoring the
investment. This is done through live workshops, and video-based,
self-directed home learning programs, which include the use of OIA's
proprietary website, www.investortoolbox.com. In exchange for all of
the capital stock of OIA, the Company issued 1,150,000 shares of
restricted common stock and paid $400,000 in cash, all of which was
distributed pro-rata to the shareholders of OIA, thereby making OIA a
wholly-owned subsidiary of the Company. Under the terms of the
acquisition agreement, the former shareholders of OIA, were to be
issued 5,000,000 (post-split adjusted) shares, to be adjusted upwards
or downwards on a one-share basis for each $0.50 of actual earnings
of OIA greater than or less than $2,500,000, for the period from
April 1, 1999 through March 31, 2000 (the "Earn-out"). Pursuant to an
amendment to the acquisition agreement, the former OIA shareholders
agreed to accept $6,000,000 in cash and 9,820,152 shares of the
Company's common stock in satisfaction of 21,820,152 shares of common
stock that would have been issued pursuant to the original Earn-out
terms. The acquisition was completed on April 7, 1999 and was
accounted for as a purchase.
Asia4sale was incorporated on April 9, 1996, duly organized, validly
existing and in good standing under the laws of Hong Kong. Asia4sale
was organized to buy and sell merchandise over the internet, buying
and selling goods directly from manufacturers in Asia. To be
competitive in the Asian market, the Company also acquired the assets
of Pacific Barter, Ltd., a company specializing in barter in Asia.
On March 25, 1999, the Company entered into an Acquisition Agreement
and Plan of Reorganization, under which the Company acquired
Asia4sale.com, Ltd., (Asia4sale). In exchange for 99 of the 100
shares of Asia4sale, the Company issued 100,000 shares of restricted
common stock and paid $15,000 cash to the majority holder of the
capital stock of Asia4sale, thereby making Asia4sale a majority owned
subsidiary of the Company. In addition, the Company made an unsecured
loan of $50,000 to Asia4sale upon closing of the acquisition and
agreed to issue one additional share of restricted common stock for
each dollar ($1.00) of actual earnings of Asia4sale for the period
from April 1, 1999 through September 30, 2000. No additional shares
were granted. Asia4sale is in the business of Internet related
international e-commerce. In addition, the Company was granted the
option to repurchase the 100,000 shares issued in the acquisition of
Asia4sale for a period of one (1) year at a price of $1.50 per share
in the event that Asia4sale failed to reach profitability from its
operations by September 30, 2000. The option went unexercised. The
acquisition was completed on May 12, 1999. The acquisition of
Asia4sale was accounted for as a purchase.
F-13
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)
On December 31, 1999, the Company sold Asia4Sale for $5,000,000 cash
and 300,000 shares of Internet Ventures, Ltd (IVL), a Samoan
investment company. No value was attributed to the shares of IVL
because the value was determined to be de minimis. The Company
realized a gain of $4,713,163 on the sale. Based on subsequent
financing transactions of IVL, the Company's holdings in IVL became
5,400,000 shares of Asia4Sale.com restricted common stock. These
holdings are being recorded as an equity investment with a zero
carrying value as of December 31, 2000.
In May 2000, the Company entered into an Acquisition Agreement, under
which the Company acquired all of the outstanding stock of Asia
Prepress Technology, Inc. (APT) and Asia Internet Services, Inc.
(AIS) for 250,000 shares of restricted common stock and paid $300,000
cash to the former shareholders, thereby making APT and AIS
wholly-owned subsidiaries of the Company. APT and AIS are in the
business of providing data entry services to publishers and are
incorporated in the state of Maryland.
In September and October 2000, the Company acquired Seminar Marketing
Group, Inc. (SMG) and Memory Improvement Systems, Inc. (MIS) for
770,000 shares of restricted common stock, thereby making SMG and MIS
wholly-owned subsidiaries of the Company. Both companies are
incorporated in the state of Utah. SMG, through its broad base of
employees, provides marketing, seminar development, hosting and
speaking services to OIA. MIS develops preview seminar sales
presentations, provides key personnel to be the preview sales
presenters and recruits and trains additional preview seminar sales
presenters for OIA.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using accounting
principles generally accepted in the United States of America. The
Company has elected a December 31 year end.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less to be cash equivalents. The detail of cash
and cash equivalents is as follows:
December 31,
---------------------------
2000 1999
---------- -----------
Demand deposits:
U.S........................... $2,355,686 $ 3,479,299
Foreign....................... 384,678 --
---------- -----------
2,740,364 3,479,299
---------- -----------
Money market funds:
U.S........................... 1,111,533 5,804,011
---------- -----------
$3,851,897 $ 9,283,310
========== ===========
F-14
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Trade Receivables
Accounts receivable represents credit card payments made by customers
who have attended OIA's investment seminars. No allowance for
doubtful accounts is provided as accounts receivable are collected
from credit card companies shortly after the completion of OIA's
seminars.
d. Estimates
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 and disclosure of contingent assets and liabilities at
the date of the financials statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
e. Foreign Operations
The Company currently conducts printing, database management,
customer service and direct mailing activities in the Philippines, a
country with a developing economy. The Philippines has experienced
recently, or is experiencing currently, economic and political
instability. Hyperinflation, volatile exchange rates and rapid
political and legal change, often accompanied by military
insurrection, have been common in this and certain other emerging
markets in which the Company may conduct operations. The Company may
be materially adversely affected by possible political or economic
instability in any one or more of those countries. The risks include,
but are not limited to, terrorism, military repression,
expropriation, changing fiscal regimes, extreme fluctuations in
currency exchange rates, high rates of inflation and the absence of
industrial and economic infrastructure. Changes in investment
policies or shifts in the prevailing political climate in any of the
countries in which the Company conducts exploration and development
activities could adversely affect the Company's business. Operations
may be affected in varying degrees by government regulations with
respect to production restrictions, price controls, export controls,
income and other taxes, expropriation of property, maintenance of
claims, environmental legislation, labor, welfare benefit policies,
land use, land claims of local residents, water use and safety. The
effect of these factors cannot be accurately predicted. As of
December 31, 2000 the Company had adopted, and the Board of Directors
approved a plan to discontinue all of these operations. See Note 10.
f. Equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful life or
lease term of the related asset. Estimated useful lives are as
follows:
Printing equipment...........................................7 years
Machinery and equipment......................................5 years
Office equipment.............................................5 years
Vehicles....................................................10 years
Leasehold improvements.......................................5 years
F-15
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Income and Loss per Share
In 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" effective for financial statements issued
for periods ending after December 15, 1997, including interim
periods. SFAS 128 requires dual presentation of basic and diluted
earnings per share ("EPS") on the face of the income statement. It
also requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the
diluted EPS computation. (See Note 9) Basic income and loss per
common share is computed by dividing net income or loss available to
common shareholders by the weighted average number of common shares
outstanding during each period presented. Diluted EPS is based on the
weighted average number of common shares outstanding as well as
dilutive potential common shares, which in our case consist of shares
issuable under stock benefit plans, shares issuable pursuant to
warrants, shares issuable on convertible debt and contingent shares
relating to the purchase of its OIA subsidiary. Potential common
shares are not included in the diluted loss per share computation for
the year ended December 31, 2000 as they would be anti-dilutive.
h. Foreign Currency Translation
The value of the U.S. dollar rises and falls day-to-day on foreign
currency exchanges. Since the Company does business in certain
foreign countries (principally the Philippines), these fluctuations
affect the Company's financial position and results of operations. In
accordance with SFAS No. 52, "Foreign Currency Translation," all
foreign assets and liabilities have been translated in the
preparation of the consolidated financial statements at the exchange
rates prevailing at the respective balance sheet dates, and all
income statement items have been translated using the weighted
average exchange rates during the respective periods. The net gain or
loss resulting from translation upon consolidation of the financial
statements is reported as a component of comprehensive income of each
period with the accumulated foreign currency gain or loss reported as
a component of the equity category for comprehensive income. Some
translations of the Company and its foreign subsidiaries are made in
currencies different from their own. Translation gains and losses
from these transactions in foreign currencies are included in income
as they occur.
In accordance with SFAS No. 95, "Statement of Cash Flows," the cash
flows of the Company's foreign subsidiary is translated using the
weighted average exchange rates during the respective period. As a
result, amounts in the statement of cash flows related to changes in
assets and liabilities will not necessarily agree with the changes in
the corresponding balances on the balance sheet which were translated
at the exchange rate at the end of the period. The effect of exchange
rate changes on foreign cash and cash equivalents is reported as a
separate element of the statement of cash flows, if significant.
F-16
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. Fair Value of Financial Instruments
As of December 31, 2000 and 1999, the fair value of cash, trade
receivables, notes payable and accounts payable, including amounts
due to and from related parties, approximate carrying values because
of the short-term maturity of these instruments.
j. Advertising
Advertising costs are expensed as incurred. During the years ending
December 31, 2000, 1999 and 1998, the Company incurred advertising
costs of $6,933,753, $2,594,379 and $-0-, respectively.
k. Principles of Consolidation
The consolidated financial statements include the Company and its
wholly-owned subsidiaries. In addition, the Company accounts for
certain of its investments on the equity method accounting. All
significant intercompany accounts and transactions have been
eliminated.
l. Impairment of Long-Lived Assets
The Company periodically assesses the recoverability of the carrying
amounts of long-lived assets, including intangible assets. A loss is
recognized when expected undiscounted future cash flows are less than
the carrying amount of the asset. The impairment loss is the
difference by which the carrying amount of the asset exceeds its fair
value. The Company did not record any losses due to impairment of
long-lived assets during the years ended December 31, 1999, and 1998.
The Company recorded an impairment of goodwill in the year ended
December 31, 2000. See Note 15.
m. Treasury Stock
The Company accounts for its investment in treasury stock using the
cost method.
n. Reclassification
Certain reclassifications have been made to the prior year financial
statements to conform with the 2000 presentation.
o. Revenue Recognition Policy
The Company recognizes revenue as investment seminars are completed.
Revenue is accrued for partially completed seminars as of the
Company's year end. The Company recognizes revenue on product sales
as the materials are shipped.
F-17
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES (Continued)
p. Goodwill
The Company has recorded goodwill on the purchases of MAI, MII, OIA,
AIS, APP and Asia4Sale for the excess of the purchase price over the
fair value of the assets acquired and the liabilities assumed.
Goodwill is amortized using the straight-line method over 10 years.
The goodwill is evaluated annually for any impairment. If an
impairment is recognized it is charged to expense in that period. See
Note 15.
Total goodwill................................. $ 114,533,800
Goodwill impairment............................ (71,755,840)
Disposal of subsidiaries....................... (3,125,687)
Accumulated amortization....................... (3,849,826)
------------
Net goodwill at December 31, 2000.............. $ 35,802,447
=== ===== ============
q. Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), establishes a fair value
method of accounting for stock-based compensation plans and for
transactions in which a company acquires goods or services from
non-employees in exchange for equity instruments. SFAS 123 also gives
the option to account for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock issued to Employees," or SFAS 123. The Company has chosen
to account for stock-based compensation for employees utilizing the
intrinsic value method prescribed in APB 25 and not the method
established by SFAS 123. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair market price
of the Company's stock at the measurement date over the amount an
employee must pay to acquire stock.
Under SFAS 123, the Company presents in a footnote the effect of
measuring the cost of stock-based employee compensation at the grant
date based on the fair value of the award and recognizes this cost
over the service period. The value of the stock-based award is
determined using a pricing model whereby compensation cost is the
excess of the fair value of the option as determined by the model at
grant date or other measurement date.
r. Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Deferred income taxes are recognized based on the
differences between financial statement and income tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized. The provision for
income taxes represents the tax payable or benefit for the period and
the change during the year in deferred tax assets and liabilities.
F-18
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
s. New Accounting Pronouncements
In October 2000, the Company adopted Financial Accounting Standards
Board SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and
reporting standards requiring every derivative instrument, including
certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires changes in
the derivative's fair value to be recognized in earnings unless
specific hedge accounting criteria are met. The adoption of SFAS 133
as of January 2001 did not have a material impact on the consolidated
financial statements.
In December 1999, the Securities and Exchange Commission ("SEC")
released Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements," which provides guidance on the
recognition, presentation and disclosure of revenue in the financial
statements filed with the SEC. Subsequently, the SEC released SAB
101B, which delayed the implementation date of SAB 101 for
registrants with fiscal years that begin between December 16, 1999
and March 15, 2000. The Company was required to be in conformity with
the provisions of SAB 101, as amended by SAB 101B, no later than
October 1, 2000. The Company believes the adoption of SAB 101, as
amended by SAB 101B, has not had a material effect on the financial
position, results of operations or cash flows of the Company for the
year ended December 31, 2000.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, the Interpretation
of APB Opinion No. 25" (FIN44). The Interpretation is intended to
clarify certain problems that have arisen in practice since the
issuance of APB No. 25, "Accounting for Stock Issued to Employees."
The effective date of the Interpretation was July 1, 2000. The
provisions of the Interpretation apply prospectively, but they will
also cover certain events occurring after December 14, 1998 and after
January 12, 2000. The adoption of FIN 44 did not have a material
adverse affect on the current and historical consolidated financial
statements.
NOTE 3 - EQUITY INVESTMENT
In July 2000, the Company entered into a venture fund agreement with
the McKenna Group, a third party entity. The name of the fund is
McKenna-ZiaSun ("MKZ" or the "Fund"). MKZ was organized as a limited
liability company, formed in the state of Delaware. The purpose of
the Fund is to invest in emerging, early-stage technology companies,
either through the McKenna Venture Accelerator ("MVA"), a limited
liability company or through other means as determined by the
Investment Board of MKZ. Under the original MKZ agreement, the
Company agreed to fund MKZ with $15,000,000. However, in April 2001,
the Company and the McKenna Group agreed to limit ZiaSun's commitment
to MKZ to $9,150,000, $7,500,000 of which had been contributed to MKZ
during the year ended December 31, 2000. As of December 31, 2000, the
Company has an outstanding commitment to MKZ in the amount of
$1,650,000. Under the amended terms, the Company shall receive 60% of
the distributed profits of MKZ, and the McKenna Group will receive
40%. The accounts of MKZ have been consolidated with those of Ziasun
and its subsidiaries. The Company issued 100,000 shares of restricted
common
F-19
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 3 - EQUITY INVESTMENT (Continued)
stock to an advisor who assisted in consummating the venture fund
agreement. The Company recorded expense $433,000, equal to the
estimated fair value of the stock on the date of grant. Condensed
financial information of MKZ, which is included in the consolidated
financial statements of the Company, is as follows:
December 31,
2000
------------
Cash.......................................... $ 650,000
Investments in MVA............................ 5,400,000
Investments................................... 455,000
Investments due from McKenna Group, LLC....... 200,000
------------
Total assets.................................. $ 6,705,000
============
Accounts payable.............................. $ 500,491
Total liabilities............................. 500,491
------------
Contributed capital........................... 7,500,000
Accumulated deficit........................... (1,295,491)
------------
Total capital................................. 6,204,509
------------
Total liabilities and capital ................ $ 6,705,000
============
Revenue....................................... $ --
Share of loss in MVA.......................... (200,000)
General and administrative expenses........... (1,095,491)
(included in the consolidated general and
administrative expenses of the Company)....... --
------------
Net loss...................................... $(1,295,491)
===========
The main purpose of MVA is to acquire securities of start-up and
early stage companies with a principal focus of its investment
portfolio to be in the areas of broadband telecoms and
infrastructure, horizontal e-business platforms, and mobile
infrastructure and e-commerce. The total initial funding of MVA shall
be $20,000,000. Under the initial MKZ venture fund agreement, MKZ
committed to fund MVA with a minimum of $5,000,000 and up to
$10,000,000. As of December 31, 2000, MKZ has contributed $5,600,000
in cash. MKZ currently intends to contribute an additional $2,400,000
into MVA. As of December 31, 2000, MKZ had a 43.2% interest in MVA.
The Company accounts for its investment in MVA using the equity
method of accounting. MKZ does not intend to contribute any
additional amounts to MVA. Condensed financial information of MVA is
as follows:
F-20
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 3 - EQUITY INVESTMENT (Continued)
December 31,
2000
------------
Cash............................................ $10,761,241
Certificate of deposit.......................... 500,000
Employee advances............................... 15,000
-----------
Total Current Assets............................ 11,276,241
-----------
Property and Equipment, Net..................... 13,833
-----------
Portfolio investments........................... 1,500,000
Deposits........................................ 188,752
-----------
Total Other Assets.............................. 1,688,752
-----------
Total Assets.................................... $12,978,826
===========
Accounts payable................................ $136,217
Notes payable................................... 500,000
Total Current Liabilities....................... 636,217
Total Liabilities............................... 636,217
Contributed capital............................. 18,500,000
Shares subscription receivable.................. (5,709,506)
Accumulated deficit............................. (447,885)
-----------
Total Capital................................... 12,342,609
-----------
Total Liabilities and Capital................... $12,978,826
-----------
Interest income................................. $ 176,776
Other income.................................... 10,400
-----------
Total Revenues.................................. 187,176
Operating expenses.............................. 635,061
-----------
Net Loss........................................ $ (447,885)
===========
The loss attributable to MKZ for the year ended December 31, 2000, is
approximately $200,000.
F-21
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Leases
- ------
The Company's continuing operations lease space at four facilities,
one in California and three in Utah. The Company's discontinued
operations lease space at two facilities in the Philippines,
including a 20 year non-cancellable lease. Rent expense for
continuing operations for the years ended December 31, 2000,1999 and
1998 was $289,032, $213,043 and $-0-, respectively.
Future minimum lease commitments are as follows:
Continuing Discontinued
----------- ------------
2001............................ $ 290,686 $ 97,140
2002............................ 291,690 98,239
2003............................ 189,809 95,636
2004............................ 143,950 101,375
2005............................ 28,080 107,457
Thereafter...................... -- 1,705,336
----------- -----------
Total........................... $ 944,215 $ 2,205,183
=========== ===========
Employment Agreements
The Company has an employment agreement with its President providing
for annual compensation of $200,000, expiring 2002.
Contingencies
The Company is subject to certain legal proceedings and claims
arising in connection with its business. In the opinion of
management, there are currently no claims that will have a material
adverse effect on the Company's consolidated financial position,
results of operations or cash flows.
NOTE 5 - INCOME TAXES
For the years ended December 31, 2000 and 1999, the provision for
U.S. and foreign income taxes consisted of the following:
2000 1999 1998
----------- ----------- ---------
Current:
U.S................. $ 3,101,153 $ 1,754,690 --
Foreign............. -- -- --
----------- ----------- ----------
$ 3,101,153 $ 1,754,690 --
=========== =========== ==========
F-22
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 5 - INCOME TAXES (Continued)
A reconciliation of income taxes at the federal statutory rate to the
effective tax rate is as follows:
2000 1999 1998
------------ ----------- -----------
Income taxes computed at the U.S. statutory rate............ $(25,202,563) $ 4,000,915 $ 307,700
Benefit of net income not subject to taxing jurisdictions... 923,343 (74,600) (307,700)
Benefit of operating loss carryforward...................... -- (142,205) --
Taxes attributable to discontinued operations............... -- (2,029,420) --
Goodwill.................................................... 25,453,160 -- --
Other....................................................... 700,085 -- --
Disallowed loss on foreign subsidiaries..................... 1,227,128 -- --
Taxes on income............................................. $ 3,101,153 $ 1,754,690 $ --
The Company has no deferred tax liabilities or assets. The permanent
difference due to income not being subject to taxing jurisdictions
pertains to the British Virgin Islands where there is no income tax.
NOTE 6 - RELATED PARTY TRANSACTIONS
a. Receivables
At December 31, 1999, the Company had receivables of $68,236 due from
the President of the company's discontinued MAI subsidiary. The full
amount was collected in 2000.
b. Officer Compensation
In 2000 and 1999, the Company's former president was compensated for
his services under a consulting contract with a company which he
controls. The contract provides for $10,000 per month in consulting
fees. During the years ended December 31, 2000 and 1999 the Company
paid $60,000 and $120,000, respectively, to this Company. Other
officers of the Company were paid a total of $70,060 in consulting
fees in addition to their base salaries during 1999.
c. Convertible Debt
In 1999, the Company received $690,000 in advances from shareholders.
The advances were non-interest bearing and unsecured. In 2000, the
advances were converted to 103,500 shares of common stock based on
the trading value of the shares on the date of conversion.
d. Stock Issuance
In August 2000, in conjunction with the consummation of the MKZ
Venture Fund agreement, the Company issued a total of 100,000 shares
of its restricted common stock as finder's fee. 50,000 were issued to
a Company controlled by a member of the Company's advisory board and
50,000 were issued to a director of the Company. See Note 3.
The Company also issued 71,660 shares of restricted common stock to
its directors as compensation. See Note 12.
F-23
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 7 - ECONOMIC DEPENDENCE AND MAJOR CUSTOMERS
During 2000, 1999, and 1998, the Company had no customers which made
up more than 10% of net sales.
NOTE 8 - STOCK OPTIONS
During 1997, the Company issued to its vice-president the option to
purchase 100,000 shares of its common stock at $2.00 per share. At
the time of grant, the market value of the stock was $2.40 per share.
Consequently, the Company recorded deferred compensation expense of
$40,000 equal to the intrinsic value of the award granted. On
November 3, 2000, the Company's shareholders approved the 1999 Stock
Option Plan (the "1999 Plan"). The 1999 Plan allows for the issuance
of up to 2,500,000 shares of common stock upon exercise of stock
options granted under the 1999 Plan. All options are generally
granted at not less than fair value at the date of grant except for
272,400 options granted in 2000 for which deferred compensation of
$49,849 has been recorded, equal to the difference between the
exercise price and the market value of the common stock on the date
of grant. The options have a contractual life of seven years. The
purpose of this plan is to attract, retain, motivate and reward
officers, directors, employees and consultants of the Company to
maximize their contribution towards the Company's success.
The following table summarizes the activity in the plan:
Weighted
Number Average
of Exercise
Shares Price
--------- ---------
Options outstanding at January 1, 1997
Granted...................................... 100,000 $2.00
Options outstanding at December 31, 1998
and 1997..................................... 100,000 $2.00
Exercised...................................... (25,000) $2.00
Options outstanding at December 31,1999....... 75,000 $2.00
Granted........................................ 2,400 $5.73
Cancelled...................................... (43,000) $6.38
Exercised...................................... (50,000) $2.00
Options outstanding at December 31, 2000...... 324,400 $5.36
Except for the options noted above, all options issued to employees
have an exercise price not less than the fair market value of the
Company's common stock on the date of grant, and in accordance with
the accounting for such options utilizing the intrinsic value
method, there is not related compensation expense recorded in the
Company's financial statements. During the twelve months ending
December 31, 2000, the Company granted 10,000 stock options to
consultants for services rendered. Included in general and
administrative expense is $9,051 in expense relating
F-24
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 8 - STOCK OPTIONS (Continued)
to these grants. Had compensation cost for stock-based compensation
been determined based in the fair value at the grant dates in
accordance with the method delineated in Statement of Accounting
Standards No. 123, the Company's net loss per share for the years
ended December 31, 2000, 1999 and 1998, would have been increased to
the proforma amounts presented below:
2000 1999 1998
-------------- ------------ ----------
Net income (loss):
As reported..................... $ (77,226,337) $ 5,964,239 $ 769,320
Proforma........................ (77,665,254) 5,946,477 741,558
Earnings (loss) per share:
Basic EPS as reported........... (2.60) 0.27 0.05
Proforma basic EPS.............. (2.61) 0.27 0.04
Diluted EPS as reported......... (2.60) 0.23 0.05
Proforma diluted EPS............ (2.61) 0.23 0.04
Additional information relating to stock options outstanding and
exercisable at December 31, 2000 summarized by exercise price as
follows:
Outstanding Exercisable
Weighted Weighted
Exercise Price Average Life Exercisable Average
per Share Shares (Years) Exercise Price Shares Exercise Price
--------------- --------------- --------------- --------------- --------------- ---------------
$2.00 25,000 3.5 $2.00 -- $ --
$2.13 20,000 6.29 $2.13 5,000 $2.13
$3.63 50,000 6.58 $3.63 25,000 $3.63
$6.38 229,400 6.29 $6.38 114,700 $6.38
--------------- --------------- --------------- --------------- --------------- ---------------
$2.00-$6.38 324,400 6.16 $5.36 144,700 $5.76
=============== ===============
The fair value of options granted is estimated on the date of grant
utilizing the Black-Sholes option-pricing model with the following
weighted average assumptions for grants during the year ended
December 31, 2000: expected life of option 4 years, expected
volatility of 45%, risk free interest rate of 6.00% and a 0% dividend
yield. The fair value, at date of grant, using these assumptions
range from $0.91-$2.72 and the weighted average was $2.40. The
assumptions for the year ended December 31, 1999 were: expected life
of option 4 years, expected volatility of 45%, risk free interest
rate of 6.00% and a 0% dividend yield. The fair value, at date of
grant using these assumptions was $1.17.
F-25
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 9 - EARNINGS (LOSS) PER SHARE
The following data show the amounts used in computing basic earnings
per share. The number of shares used in the calculation for the years
December 31, 2000, 1999, and 1998 were as follows:
2000 1999 1998
------------- ----------- ----------
Net earnings (loss) available
to common shareholders.......... $ (77,226,337) $ 5,964,239 $ 769,320
Average number of common shares
used in basic EPS............... 29,744,300 21,769,583 17,022,767
========== ========== ==========
The Company incurred a net loss from continuing operations for the
year ended December 31, 2000 and 1998. Accordingly, the effect of
dilutive securities are not included in the calculation of EPS
because their effect would be antidilutive. The following data shows
the effect on income and the weighted average number of shares of
dilutive potential common stock.
2000 1999 1998
------------- ----------- ------------
Net earnings (loss) available
to common shareholders used in
basic EPS....................... $ (77,226,337) $ 5,964,239 $ 769,320
Average number of common shares
used in basic EPS............... 29,744,300 21,769,583 17,022,767
Stock options................... 30,813 75,000 100,000
Purchase of subsidiaries........ -- 3,847,917 --
Convertible debt................ -- 103,500 --
Average number of common shares
and dilutive potential common
stock used in diluted
EPS............................. 29,775,113 25,796,000 17,122,767
========== ========== ==========
The shares issuable upon exercise of options and warrants represent
the quarterly average of the shares issuable at exercise, net of
share assumed to have been purchased, at the average market price for
the period, with assumed exercise proceeds. Accordingly, options with
exercise prices in excess of the average market price for the period
are excluded because their effect would be antidilutive.
F-26
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 10 - DISCONTINUED OPERATIONS
In August 2000, the Company entered into a share Purchase Agreement
effective as of July 1, 2000 with Vulcan Consultants Limited, a
British Virgin Island Company (Vulcan) under which the Company would
sell all the issued and outstanding shares of Momentum Internet, Inc
(MII) in consideration of 725,000 shares of the Company's common
stock owned by Vulcan. As a condition of the sale, SwiftTrade, a
subsidiary of MII, agreed to repay a $500,000 loan made from the
Company's wholly owned subsidiary, Momentum Asia, Inc., to Swiftrade.
Subsequent to the disposition, the Company cancelled the 725,000
shares received in the transaction. The Company recorded a $1,004,186
loss on disposal of this subsidiary. The accompanying balance sheet
has been restated to separately classify the former subsidiaries net
assets as of December 31, 1999.
In March, the Company's board of directors adopted a plan to dispose
of or sell its Asia Prepress Technology and Asia Internet Services
subsidiaries. Net assets to be disposed of, at their expected
realizable values, have been separately classified in the
accompanying balance sheet at December 31, 2000. A loss on disposal
of $1,502,991 has been recorded equal to the carrying amount of
goodwill at December 2000.
In March, the Company entered into an agreement to sell its Momentum
Asia, Inc. subsidiary for 200,000 shares of restricted stock of the
Company which had previously been issued to the former shareholders
of MAI when the Company acquired it in 1998. The sale of this
subsidiary has been reflected in the December 31, 2000 financial
statements. The Company recorded a loss on disposal of $1,249,523.
The accompanying balance sheet has been restated to separately
classify the former subsidiaries net assets as of December 31, 1999.
Revenues generated by discontinued operations for the years ended
December 31, 2000, 1999 and 1998 were $2,937,715, $3,600,750 and
$2,270,036, respectively.
Net assets of discontinued operations at December 31, 2000 and 1999
consist of:
2000 1999
-------- ---------
Cash........................................ $190,659 $2,369,194
Marketable securities....................... -- 540,234
Restricted stock............................ -- 166,413
Equity investment........................... -- 254,195
Accounts receivable, net.................... 168,268 401,667
Prepaid expenses and other assets........... 6,888 92,065
Inventory................................... -- 18,239
Mortgage note receivable.................... -- 250,000
Club membership............................. -- 142,857
Equipment................................... 142,632 512,676
Excess cost over net assets acquired........ -- 1,910,691
-------- ----------
Total Assets................................ 508,447 6,658,231
Line of credit.............................. 70,000 --
Accounts payable and other liabilities...... 34,532 435,861
Deferred income............................. -- 74,100
-------- ----------
Total Liabilities........................... 104,532 509,961
-------- ----------
Net Assets of Discontinued Operations....... $403,915 $6,148,270
======== ==========
F-27
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 11 - PURCHASE OF SUBSIDIARIES
A summary of the purchases of Online Investors Advantage, Inc.,
Seminar Marketing Group, Inc., Memory Improvement Systems, Inc.,
Asia Prepress, Asia Internet Services, Momentum Asia, Inc., and
Momentum Internet, Inc. are as follows:
Continuing Operations
--------------------------------------------------------------------------
Memory
Seminar Marketing Improvement
OIA Finders Shares OIA Group Systems
------------------ ------------ ----------------- ---------------
Goodwill.............................. $375,000(1) $109,182,961 $ 614,200 $600,000
Current assets........................ -- 339,757 -- --
Property and equipment................ -- 94,777 -- --
Other assets.......................... -- 148,950 -- --
Current liabilities................... -- (285,951) -- --
-------- ------------ ---------- --------
Total Purchase Price.................. $375,000 $109,480,494 $ 614,200 $600,000
======== ============ ========== ========
Continuing Operations
-------------------------------------------------------------------------
Memory
Seminar Marketing Improvement
OIA Finders Shares OIA Group Systems
----------------- ------------ ----------------- --------------
Cash.................................. $ -- $ 6,400,000 $ -- $ --
Common stock.......................... 375,000(1) 103,080,494(2) 614,200(3) 600,000(4)
-------- ------------ ---------- --------
Total Purchase Price.................. $375,000 $109,480,494 $ 614,200 $600,000
======== ============ ========== ========
Discontinued Operations
--------------------------------------------------------------------------
Asia Internet Momemtum
Asia Prepress Services Momentum Asia Inc. Internet Inc.
----------------- ------------ ----------------- -------------
Goodwill.............................. $492,992 $ 1,085,000 $1,516,427 $667,220
Current assets........................ 210,100 -- 1,382,452 325,293
Property and equipment................ 146,136 -- 421,785 19,630
Other assets.......................... -- -- 1,682,310 --
Current liabilities................... 159,228) -- (487,309) (16,337)
--------- ------------ ---------- --------
Total Purchase Price.................. $690,000 $ 1,085,000 $4,515,665 $995,806
======== ============ ========== ========
Cash.................................. $100,000 $ 200,000 $1,515,665 $148,306
Common stock.......................... 590,000(5) 885,000(5) 3,000,000(6) 847,550(6)
-------- ------------ ---------- --------
Total Purchase Price.................. $690,000 $ 1,085,000 $4,515,665 $995,806
======== ============ ========== ========
- ----------------------
(1) at $2.50 per share
(2) 1,150,000 shares at $1.50, 9,820,152 shares at $10.24
(3) at $1.66 per share
(4) at $5.90 per share
(5) at $0.75 per share
(6) at $0.75 per share
F-28
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 11 - PURCHASE OF SUBSIDIARIES (Continued)
There were minimal net assets of Asia4Sale at the date of
acquisition. The value of the 100,000 shares issued and the $250,000
paid, was written-off during the year ended December 31, 1999 as the
subsidiary was sold.
The accompanying proforma statement of operations has been prepared
as though OIA, SMG and MIS were acquired on January 1, 1999. The
summarized statement of operations of the Company includes the
operations of OIA from April 1, 1999 through December 31, 1999. The
summarized statements of operations of OIA for the three months ended
March 31, 1999 is included below as a proforma adjustment. The
summarized statements of operations of SMG and MIS for the year ended
December 31, 1999, is included below as a proforma adjustment, which
reflects the additional expense that would have been incurred if SMG
and MIS had been acquired as of January 1, 1999. The proforma amounts
do not purport to be indicative of the results what would have
actually been obtained if the acquisition occurred as of the beginning
of the periods presented or that may be obtained in the future.
The proforma effects relating to the acquisition of Asia4Sale, Asia
PrePress and Asia Internet Services have not been presented as their
operations are not significant.
Ziasun
Technologies, Proforma
Inc. and Adjustments
Subsidiaries Increase
Consolidated OIA SMG and MIS (Decrease) Proforma
------------ ---------- ------------ ------------- -----------
REVENUES........................ $23,619,590 $4,701,227 $ -- $ -- $28,320,817
NET INCOME (LOSS)............... 5,964,239 63,866 (311,807) (195,932) 5,920,366
BASIC NET INCOME (LOSS) PER
COMMON SHARE.................. 0.27 0.02 (0.01) (0.01) 0.27
DILUTED NET INCOME (LOSS) PER 3
COMMON SHARE.................. $ 0.23 $ 0.02 $ (0.01) $ (0.01) $ 0.2
F-29
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 11 - PURCHASE OF SUBSIDIARIES (Continued)
Pro forma adjustments:
To record a full year of amortization expense for OIA based on a ten-year life
($2,980,467 x 3/12 = $74,512).
To record one year of amortization expense for SMG and MIS based on a ten-year
life ($1,214,200/10 = $121,420).
The summarized statements of operations of SMG and MIS for the year ended
December 31, 2000, is included below as a proforma adjustment, which reflects
the additional expense that would have been incurred if SMG and MIS had been
acquired as of January 1, 1999. The proforma amounts do not purport to be
indicative of the results what would have actually been obtained if the
acquisition occurred as of the beginning of the periods presented or that may
be obtained in the future.
The proforma effects relating to the acquisition of Asia PrePress and Asia
Internet Services have not been presented as their operations are not
significant.
Ziasun Proforma
Technologies, Adjustments
Inc. and Increase Proforma
Subsidiaries SMG and MIS (Decrease) Consolidated
------------ ------------ ---------- -------------
REVENUES.............................. $54,667,477 $ -- $ -- $ 54,667,477
NET LOSS.............................. (77,226,337) (594,954) (121,420) (77,942,711)
BASIC NET INCOME (LOSS) PER COMMON
SHARE............................... (2.60) (0.03) (0.00) (2.62)
DILUTED NET INCOME (LOSS) PER
COMMON SHARE........................ $ (2.60) $ (0.03) $ (0.00) $(2.62)
To record one year of amortization expense for SMG and MIS based on a ten-year
life ($1,214,200/ 10 = $121,420).
F-30
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 12 - STOCKHOLDERS' EQUITY
In March 2000, the Company issued 30,000 shares of restricted common
stock to a consulting firm for services rendered. The Company
recorded expense of $273,450, the estimated fair value of the stock
issued.
In November 2000, the Company compensated its Board of Directors
members with 71,660 shares of restricted common stock for their
service. The Company recorded expense of $136,871, the estimated fair
value of the stock issued.
In March 2000, the Company's Momentum Asia, Inc. subsidiary sold
35,970 shares of treasury stock on the open market for cash. The
difference between the cash received and the cost of the treasury
shares is presented as additional paid-in capital.
NOTE 13 - COMMON STOCK WARRANT
In January, 2000, the Company issued warrants to acquire 200,000
shares of the Company's common stock to a consulting firm. The terms
of the warrant are as follows:
o 50,000 immediately exercisable, term 180 days from the issuance
date, exercise price equal to 125% of the closing bid price on
January 14, 2000.
o 50,000 immediately exercisable, term 210 days from issuance date,
exercise price equal to 150% of the closing bid price on January 14,
2000.
o 50,000 immediately exercisable, term 240 days from issuance date,
exercise price equal to 175% of the closing bid price on January 14,
2000.
o 50,000 immediately exercisable, term 270 days from issuance date,
exercise price equal to 200% of the closing bid price on January 14,
2000.
The Company recorded consulting expense and additional paid-in
capital of $70,935, equal to the fair value of the warrant on the
date of grant. The warrant expired unexercised in October 2000.
NOTE 14 - SHARES SUBJECT TO RESCISSION
In September, 2000, the Company acquired all of the issued and
outstanding shares of Seminar Marketing Group, Inc. ("SMG") for
370,000 shares of unregistered and restricted shares of the Company's
common stock. The issuance of these shares was intended to be issued
in a transaction exempt from the registration requirements under the
Securities Act of 1933 ("Securities Act") pursuant to Rule 506 of
Regulation D. Upon subsequent review of the transaction by the
Company's attorneys, it was determined that the issuance of the
shares did not meet the technical requirements of the Securities Act.
The Company is in the process of making an offer of rescission to the
former SMG shareholders under which they may be compensated with a
cash amount equal to the fair value of the shares originally granted.
F-31
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2000 and 1999
NOTE 15 - GOODWILL IMPAIRMENT
The Company periodically assesses the recoverability of carrying the
amount of goodwill. Based on its assessment, the Company recorded a
charge to goodwill for $71,755,840 during the three months ended
December 31, 2000. The magnitude of the charge is equal to the
difference between the discounted projected future cash flows from
the acquired business that gave rise to the goodwill and the carrying
amount of goodwill prior to the impairment charge.
NOTE 16 - TRADEMARK
In October 2000, a company filed a complaint against the Company
alleging trademark and servicemark infringement. It was contended
that ZiaSun's use of the trademark "Online Investors Advantage"
infringed on their trademark, "Investors Advantage." The two parties
negotiated a settlement where by the Company would cease using the
mark "Online Investors Advantage" on or before September 19, 2001. No
amounts were paid on the settlement. The Company began implementing
its trade marked name "Online Investortoolbox" in January 2001, in
order to phase out the use of Online Investors Advantage before
September 2001.
NOTE 17 - SEGMENTS
Following the sale or discontinuance of all activities other than
those of OIA the Company operates in one business segment. Enterprise
wide information regarding our geographical concentration is as
follows:
2000 1999 1998
----------- ----------- -------
Net sales:
United States................... $ 46,218,461 $20,925,850 $ --
North America-non U.S........... 5,825,702 1,014,302 --
Europe.......................... 527,221 -- --
Asia............................ 1,568,999 -- --
Australia....................... 339,258 1,679,438 --
Africa.......................... 187,836 -- --
----------- ---------- -------
Total........................... $54,667,477 $23,619,590 $ --
=========== =========== =======
The Company does not have any significant long lived assets outside
of the United States.
F-32
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------
Operating results for the years ended December 31, 2000 and 1999 by
quarters are as follows:
First Quarter Second Quarter Third Quarter Fourth Quarter Total
------------- -------------- ------------- -------------- --------
(in thousands, except earnings per share)
2000
- ----
OPERATING REVENUES - NET........ $13,789 $14,211 $13,243 $ 13,424 $ 54,667
INCOME (LOSS) FROM CONTINUING
OPERATIONS.................... 1,977 (1,792) (1,202) (69,531) (70,548)
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS....... -- (320) 1,312 (7,670) (6,678)
NET INCOME...................... 1,977 (2,112) 110 (77,201) (77,226)
BASIC EARNINGS PER SHARE OF
STOCK
Continuing operations........... 0.09 (0.06) (0.04) (2.36) (2.37)
Discontinued operations......... -- (0.01) 0.04 (0.26) (0.23)
------- -------- ------- -------- --------
Earnings Per Share.............. $ 0.09 $ (0.07) $ 0 $(2.62) $ (2.60)
======= ======= ======= ======= ========
Weighted Average Shares
Outstanding................... 22,219 32,309 31,625 32,315 29,744
======= ======= ======= ======= ========
DILUTED EARNINGS PER SHARE OF STOCK
Continuing operations........... 0.09 (0.06) (0.04) (2.36) (2.37)
Discontinued operations......... -- (0.01) 0.04 (0.26) (0.23)
------- -------- ------- -------- --------
Earnings Per Share.............. $ 0.09 $ (0.07) $ 0 $ (2.62) $ (2.60)
======= ======= ======= ======= ========
Weighted Average Shares
Outstanding................... 22,269 32,309 31,625 32,315 29,744
======= ======= ======= ======= =======
First Quarter Second Quarter Third Quarter Fourth Quarter Total
------------- -------------- ------------- -------------- --------
(in thousands, except earnings per share)
1999
OPERATING REVENUES - NET........ $ -- $ 8,570 $ 6,998 $ 8,052 $ 23,620
INCOME (LOSS) FROM CONTINUING
OPERATIONS.................... -- 1,203 35 1,394 2,632
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS....... (91) (64) 755 2,641 3,332
NET INCOME...................... (91) 1,139 790 4,126 5,964
BASIC EARNINGS PER SHARE OF STOCK
Continuing operations........... (0.00) 0.05 0.01 0.06 0.12
Discontinued operations......... (0.00) 0.00 0.03 0.13 0.15
------- -------- ------- -------- --------
Earnings Per Share.............. $ (0.00) $ 0.05 $ 0.04 $ 0.19 $ 0.27
======= ======= ======= ======== ========
Weighted Average Shares
Outstanding................... 20,930 22,201 22,055 22,205 21,770
======= ====== ====== ======== ========
DILUTED EARNINGS PER SHARE OF STOCK
Continued operations............ (0.00) 0.04 0.00 0.06 0.10
Discontinued operations......... (0.00) 0.00 0.03 0.10 0.13
------- -------- ------- -------- --------
Earnings Per Share.............. $ (0.00) $ 0.04 $ 0.03 $ 0.16 $ 0.23
======= ======= ======= ======== ========
Weighted Average Shares
Outstanding................... 21,030 26,227 27,130 26,231 25,796
======= ======= ======= ======== ========
Earnings per share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings per share may
not equal the total for the year.
F-33
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
December 31, March 31,
2000 2001
------------ ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents................. $ 3,851,897 $ 3,734,150
Trade receivables ........................ 954,848 1,208,151
Inventory................................. -- 2,797
Prepaid income taxes...................... -- 193,183
Prepaid expenses.......................... 265,618 271,144
----------- -----------
Total Current Assets.................... 5,072,363 5,409,425
----------- -----------
EQUIPMENT
Machinery and equipment................... 288,905 281,438
Office equipment.......................... 169,663 173,939
Leasehold improvements.................... 76,681 76,681
---------- ----------
535,249 532,058
Less: accumulated depreciation............ (171,585) (188,024)
---------- ----------
Total Equipment......................... 363,664 344,034
---------- ----------
OTHER ASSETS
Deferred acquisition costs................ -- 453,871
Equity investment ........................ 6,055,000 6,348,002
Net assets of discontinued operations..... 403,915 264,117
Goodwill - net of accumulated
amortization of
$3,849,826 and $4,979,622................. 35,802,447 34,672,651
Receivables - related parties ............ -- 5,000
Other assets ............................. 16,048 16,048
---------- ----------
Total Other Assets..................... 42,277,410 41,759,689
---------- ----------
TOTAL ASSETS.......................... $47,713,437 $47,513,148
=========== ===========
F-34
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31, March 31,
2000 2001
----------- --------
(Unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses....... $ 1,855,544 $ 2,381,640
Income tax payable.......................... 26,958 --
Sales tax payable........................... 3,004,914 3,461,902
GST payable................................. 112,841 137,757
Deferred income............................. -- 11,980
----------- ------------
Total Current Liabilities............... 5,000,257 93,279
----------- ------------
Total Liabilities....................... 5,000,257 93,279
----------- ------------
Shares subject to rescission................ 613,830 13,830
Minority interest........................... -- 25,000
STOCKHOLDERS' EQUITY
Common stock: 250,000 shares
authorized of $0.001 par value,
32,675,330 shares issued and
32,314,630 outstanding at
December 31, 2000, 32,391,330
shares issued and 32,328,130
outstanding, at March 31, 2001.............. 32,675 32,391
Additional paid-in capital.................. 116,909,372 116,154,273
Treasury stock, 360,700 and 63,200
shres, respectively...................... (799,538) (34,030)
Deferred compensation....................... (36,097) (31,585)
Accumulated deficit......................... (74,007,062) (75,240,010)
----------- ------------
Total Stockholders' Equity.............. 42,099,350 40,881,039
----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY................. $47,713,437 $ 47,513,148
=========== ============
F-35
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the three months ended March 31,
------------------------------------
2000 2001
---------- -----------
SALES, NET............................. $12,913,912 $14,233,321
COST OF GOODS SOLD..................... 7,296,797 9,657,959
--------- ---------
Gross Margin........................... 5,617,115 4,575,362
--------- ---------
OPERATING EXPENSES
Depreciation and amortization
expense.... ........................ 157,858 1,161,984
Bad debt expense....................... 15,000 --
General and administrative............. 2,255,655 4,236,680
--------- ---------
Total Operating Expenses........... 2,428,513 5,398,664
--------- ---------
Income (Loss) from Operations...... 3,188,602 (823,302)
--------- --------
OTHER INCOME (EXPENSE)
Other income (expense)................. 5,022 --
Loss on equity investments............. -- (204,498)
Interest expense....................... -- (75,123)
Interest and dividend income........... 70,947 23,769
Gain (loss) on disposal of assets...... 17,834 9,003
--------- ---------
Total Other Income (Expense)....... 93,803 (246,849)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES...... 3,282,405 (1,070,151)
INCOME TAXES........................... 1,555,542 23,000
--------- ---------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS..... ....... 1,762,863 (1,093,151)
--------- ----------
DISCONTINUED OPERATIONS
Income (loss) from
Discontinued Operations............. 250,012 (139,797)
Gain (Loss on) Disposal of
Discontinued Operations... ......... -- --
--------- ----------
NET INCOME (LOSS)...................... $1,976,875 $(1,232,948)
========== ===========
F-36
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (continued)
(Unaudited)
For the three months ended March 31,
-----------------------------------
2000 2001
---------- ----------
INCOME (LOSS) PER COMMON SHARE
BASIC WEIGHTED AVERAGE COMMON
SHARES.............. ................ 22,219,418 32,314,780
NET INCOME (LOSS) PER SHARE COMMON
SHARE
Continued Operations................... $ 0.08 $ (0.04)
Discontinued Operations................ 0.01 --
----------- ----------
BASIC NET INCOME (LOSS) PER COMMON
SHARE.......... ..................... $ 0.09 $ (0.04)
=========== ==========
DILUTED WEIGHTED AVERAGE COMMON
SHARES............ .................. 2,269,148 32,314,780
DILUTED NET INCOME (LOSS)
PER COMMON SHARE
Continued Operations................... $ 0.08 $ (0.04)
Discontinued Operations................ 0.01 --
----------- -----------
DILUTED NET INCOME (LOSS) PER
COMMON SHARE........ $ 0.09 $ (0.04)
=========== ==========
F-37
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Common Stock Additional Other
Paid-in Treasury Comprehensive Deferred Accumulate
Shares Amount Capital Stock Income Compsensation Deficit Total
---------- ------- ---------- -------- ------------- -------------- ----------- -----------
Balance, December 31, 1999... 22,205,018 $22,205 $12,504,547 $(34,030) $ 54,230 $(30,000) $3,219,275 $15,736,227
Exercise of stock options ... 50,000 50 99,950 -- -- -- -- 100,000
Earn out agreement of Online
Investors, Advantage, Inc. 9,820,152 9,820 100,567,674 -- -- -- -- 100,577,494
Common stock issued for
services.................. 201,660 201 843,120 -- -- -- -- 843,321
Sale of Momentum Internet,
Inc. Subsidiary........... (725,000) (725) -- -- -- -- -- (725)
Discontinuance of foreign
subsidiaries.............. -- -- -- -- (54,230) -- -- (54,230)
Amortization of deferred
compensation.............. -- -- -- -- -- 43,752 -- 43,752
Deferred compensation ....... -- -- 49,849 -- -- (49,849) -- --
Common stock issued for
related party debt ...... 103,500 104 689,896 -- -- -- -- 690,000
Acquisition of subsidiaries.. 1,020,000 1,020 2,074,350 -- -- -- -- 2,075,370
Warrant grant................ -- -- 70,935 -- -- -- -- 70,935
Options granted for services. -- -- 9,051 -- -- -- -- 9,051
Repurchase of common stock by
the Company .............. -- -- -- (765,508) -- -- -- (765,508)
Loss for the year ended
December 31, 2000......... -- -- -- -- -- -- (77,226,337) 77,226,337)
--------- ------- ---------- --------- -------- --------- ------------ -----------
Balance, December 31, 2000... 32,675,330 $32,675 $116,909,372 $(799,538) $ -- $ (36,097) $(74,007,062) $42,099,350
========== ======= ============ ========= ======== ========= ============ ===========
F-38
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)
Common Stock Additional Other
Paid-in Treasury Comprehensive Deferred Accumulate
Shares Amount Capital Stock Income Compsensation Deficit Total
---------- ------- ---------- -------- ------------- -------------- ----------- -----------
Balance, December 31, 2000.. 32,675,330 $32,675 $116,909,372 $(799,538) $-- $(36,097) $(74,007,062) $42,099,350
Amortization of deferred
compensation................ -- -- -- -- -- 4,512 -- 4,512
Common stock issued for
services................... . 13,500 14 10,111 -- -- -- -- 10,125
Treasury stock retired...... (297,500) (298) (765,210) 765,508 -- -- -- --
Loss for the three months
ended March 31, 2001........ -- -- -- -- -- -- (1,232,948) (1,232,948)
---------- ------- ------------ -------- --- -------- ------------ -----------
Balance, March 31, 2001..... 32,391,330 $32,391 $116,154,273 $(34,030) $-- $(31,585) $(75,240,010) $40,881,039
=== ===== ========== ======= ============ ======== === ======== ============ ===========
F-39
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended March 31,
------------------------------------
2000 2001
---------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations......... $1,726,863 $(1,093,151)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Common stock for services........................ -- 10,125
Depreciation and amortization.................... 157,858 1,161,984
Allowance for bad debt........................... 15,000 --
Loss on equity investment........................ -- 204,498
Gain on disposal of assets....................... -- (9,003)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable....... (45,657) (253,304)
(Increase) decrease in prepaid income taxes...... -- (193,183)
(Increase) decrease in prepaids.................. (356,195) (5,525)
(Increase) in related party, receivables......... (32,002) (5,000)
(Increase) in inventory.......................... -- (2,797)
Increase (decrease) in other assets.............. 98,637 --
Increase (decrease) in accounts payable and
accrued expenses.............................. 862,790 526,633
Increase (decrease) in income taxes payable...... 1,028,544 (26,958)
Increase (decrease) in deferred income........... 62,995 11,445
(Increase) decrease in sales and GST tax payable. 743,898 481,905
---------- ----------
Net Cash Provided by (Used In) Continuing
Operating Activities.......................... 4,262,731 807,669
Net Cash Provided by Discontinued Operations..... 557,875 --
---------- ----------
Net Cash Provided by Operating Activities........ 4,820,606 807,669
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of deferred acquisition costs............ -- (453,871)
Cash acquired in purchase of subsidiaries........ -- 25,000
Proceeds from exercise of stock options.......... 25,000 --
---------- ----------
Purchase of equity investment.................... (50,000) (497,500)
Sale of property and equipment................... -- 28,015
Purchases of property and equipment.............. (39,222) (27,060)
---------- ----------
Net Cash Provided by Investing Activities........ (89,222) (925,416)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash Provided by Financing Activities........ $ 25,000 $--
---------- ----------
F-40
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the three months ended
March 31,
-------------------------
2000 2001
------------ -----------
NET INCREASE (DECREASE) IN CASH.................. $ 4,756,384 $ (117,747)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD....... 9,283,310 3,851,897
CASH AND CASH EQUIVALENTS AT END OF PERIOD....... $ 14,039,694 $3,734,150
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest..................................... $ -- $ --
Income taxes................................. $ 251,587 $ 243,141
Schedule of Non-Cash Financing Activities:
Purchase of subsidiaries for common stock..... $100,577,494 $ --
Conversion of note payable related party
to common stock..... $ 690,000 $ --
F-41
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2001 and December 31, 2000
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments necessary to present fairly the financial position,
results of operations and cash flows at March 31, 2001 and 2000
and for all periods presented have been made.
Certain information and footnote disclosures normally included
in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December
31, 2000 audited consolidated financial statements. The results
of operations for the periods ended March 31, 2001 and 2000 are
not necessarily indicative of the operating results for the full
years.
NOTE 2 - SUBSEQUENT EVENTS
Modification to MKZ Venture Fund Agreement
------------------------------------------
On April 13, 2001, the Company and the McKenna Group, as the
sole members of MKZ entered into an agreement which modified
certain terms of the Venture Fund Agreement and the Company's
capital commitment to MKZ. As of the date the agreement, the
Company had infused $7.5 million in cash into MKZ, of which $5.6
million had been invested into MVA by MKZ. Pursuant to the
modified agreement, the Company's total capital commitment and
funding of MKZ will be capped $9,150,000, and other than the sum
of $1,650,000, to be infused by Company into MKZ, the Company
shall have no further obligation to provide any further funding
to MKZ. The Company agreed to make a further capital
contribution of $250,000 in cash to MKZ upon execution of the
agreement and would have a remaining capital contribution owing
to MKZ of $1.4 million.
Default of Operating Agreement by MKZ
-------------------------------------
On April 20, 2001, MVA, MKZ, McKenna Enterprises ("MKE") and the
Company entered into a letter agreement under which MVA waived
the breach of the operating agreement and extended the time in
which MKZ had to complete its capital commitment of $2.4
million. Under the terms of the April 20, 2001 letter agreement
$250,000 was paid immediately from cash transferred to MKZ,
$750,000 was paid by MKZ in the form of cash held in the MKZ
accounts and 318,339 shares of the Company's common stock held
by Geoffrey Mott of MKE. MKE further provided a surety to MVA
and guaranteed the difference between the realized cash value
from the sale of the 318,339 shares of ZiaSun and $386,000. MKZ,
MKE and ZiaSun have until June 15, 2001 in order to complete the
payment of the balance of $1.4 million in cash or through the
sale of up to $2.4 million of the interest of MKZ in MVA, but
not less than $1.4 million of said interest, in order to satisfy
the capital commitment. The only outstanding obligations of the
Company and MKZ with respect to MVA is the contribution of said
$1.4 million.
Merger Agreement with Telescan, Inc.
------------------------------------
On May 3, 2001, the Company and Telescan, Inc., a Delaware
Corporation ("Telescan") entered into an Agreement and Plan of
Merger (the "Merger Agreement"), whereby Telescan and the
Company agreed to engage in a business combination (the
"Merger") that results in each becoming a wholly owned
subsidiary of a new corporation, INVESTools, Inc.
("INVESTools"), to be organized under the laws of the State of
Delaware.
As a result of the Merger, each issued and outstanding share of
the Company's common stock, are to be converted into the right to
receive one share of INVESTools common stock, par value $0.01 per
share ("INVESTools common stock"). Each issued and outstanding
share of Telescan common stock, par value of $0.01 per share,
shall be converted into the right to receive 0.56486 shares of
INVESTools common stock, while each issued and outstanding share
of Telescan 4% Class B Convertible Preferred Stock, par value of
$0.01 per share, shall be converted into and become one share of
INVESTools Series A Convertible Preferred Stock, par value $0.01
per share. The merger is expected to result in
F-42
ZIASUN TECHNOLOGIES, INC. AND SUBSIDARIES
Notes to the Consolidated Financial Statements
March 31, 2001 and December 31, 2000
the Company's shareholders owing approximately 75% of
INVESTools. The Company has capitalized $453,871 of costs
associated with the merger.
The closing of the Merger is subject to certain conditions,
including the approval of the stockholders of Telescan and the
Company.
Sale of Momentum Asia, Inc.
--------------------------
On May 10, 2001 the Company consummated the sale of all shares
of its subsidiary, Momentum Asia, Inc., to Momentum Media, Ltd.
The Company acquired Momentum Asia on October 5, 1998, in a
stock-for-stock exchange. Under the terms of the agreement with
Momentum Media, Momentum Media acquired all of the issued and
outstanding shares of Momentum Asia held and owned by the
Company, in consideration of 200,000 restricted shares of
ZiaSun, owned and held by Momentum Media which shares have been
canceled. MAI further agreed to transfer all shares of the
Registrant that MIA owned, which shares have been canceled, and
the Company paid Momentum Asia $50,000 to provide Momentum Asia
working capital.
NOTE 3 - EARNINGS (LOSS) PER SHARE
The following data show the amounts used in computing basis earnings per
share. The number of shares used in the calculation for the quarters
March 31, 2001 and 2000 were as follows:
For the three months ended
March 31,
---------------------------
2000 2001
---------- -----------
Basic
- -----
Net earnings (loss) available to common shareholders........... $ 1,976,875 $(1,232,948)
=========== ===========
Average number of common shares used in basic EPS.............. 22,219,418 32,314,780
=========== ===========
The Company incurred a net loss from continuing operations for the
quarter ended March 31, 2001. Accordingly, the effect of dilutive
securities are not included in the calculation of EPS because their
effect would be antidilutive. The following data shows the effect on
income and the weighted average number of shares of dilutive potential
common stock.
For the three months ended
March 31,
---------------------------
2000 2001
---------- -----------
Diluted
- -------
Net earnings available to common shareholders
used in basic EPS.............................................. $ 1,976,875 $(1,232,948)
=========== ===========
Average number of common shares used in basic EPS.............. 22,219,418 32,314,780
Stock options.................................................. 50,000 -
---------- -----------
Average number of common shares and dilutive potential
common stock used in diluted EPS............................... 22,269,418 32,364,780
=========== ==========
The shares issuable upon exercise of options and warrants represent the
quarterly average of the shares issuable at exercise, net of share
assumed to have been purchased, at the average market price for the
period, with assumed exercise proceeds. Accordingly, options with
exercise prices in excess of the average market price for the period are
excluded because their effect would be antidilutive.
F-43
ZIASUN TECHNOLOGIES, INC. AND SUBSIDARIES
Notes to the Consolidated Financial Statements
March 31, 2001 and December 31, 2000
NOTE 4 - FORMATION OF SUBSIDIARY
In March 2001, the Company formed a 75% owned subsidiary. The subsidiary
is a Singapore corporation which markets and manages its operations in
the Asian rim, primarily Singapore and Malaysia. The minority interest
represents the capital contribution by the minority shareholders of
$25,000.
F-44
TELESCAN, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent PublicAccountants....................................F-46
Independent Auditor's Report...............................................F-47
Consolidated Balance Sheets as of December 31, 2000 and
December 31, 1999.......................................................F-48
Consolidated Statements of Operations and Comprehensive Income for the
Three Years Ended December 31, 2000.....................................F-49
Consolidated Statements of Stockholders' Equity for the Three Years
Ended December 31, 2000.................................................F-50
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 2000.......................................................F-52
Notes to Consolidated Financial Statements.................................F-53
Unaudited Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000.......................................................F-71
Unaudited Consolidated Statements of Operations for the Three Months
Ended March 31, 2001 and March 31, 2000.................................F-72
Unaudited Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2001 and March 31, 2000.................................F-73
Notes to the Unaudited Consolidated Financial Statements...................F-74
F-45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of Telescan, Inc.:
We have audited the accompanying consolidated balance sheet of Telescan, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 2000, and the
related consolidated statement of operations, comprehensive income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Telescan, Inc.
and subsidiaries as of December 31, 2000, and the results of their operations
and their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
February 21, 2001
F-46
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Telescan, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheet of Telescan, Inc.
and subsidiaries as of December 31, 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the two-year period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Telescan, Inc.
and subsidiaries as of December 31, 1999, and the results of their operations
and their cash flows for each of the years in the two-year period ended
December 31, 1999, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Houston, Texas
February 25, 2000
F-47
TELESCAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
-----------------------
2000 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 1,494 $ 12,625
Accounts receivable, net (allowance: $262; $299) 3,411 5,033
Notes receivable 4,594 5,468
Marketable securities 4,178 -
Other current assets 446 552
--------- ---------
Total current assets 14,123 23,678
Property and equipment, net 3,431 3,644
Investments 968 3,919
Software development costs, net 838 4,506
Marketable securities - 46,761
Other assets 80 391
--------- ---------
Total assets $ 19,440 $ 82,899
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue $ 4,008 $ 8,817
Accounts payable 3,799 3,550
Other current liabilities 2,160 1,262
--------- ---------
Total current liabilities 9,967 13,629
Capital lease obligations, net of current portion 46 271
Deferred taxes - 11,229
Stockholders' equity:
Class A convertible preferred stock (liquidation preference $25 per share)
(120,000 shares issued and outstanding at December 31, 2000 and 1999,
respectively.) 1 1
Common stock,
(16,296,026, 16,548,859 shares issued and outstanding at December 31,
2000 and 1999, respectively.) 162 165
Additional paid-in capital 67,650 66,875
Accumulated comprehensive income - 18,321
Accumulated deficit (58,386) (27,592)
--------- ---------
Total stockholders' equity 9,427 57,770
--------- ---------
Total liabilities and stockholders' equity $ 19,440 $ 82,899
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
F-48
TELESCAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Years Ended December 31,
--------------------------------------
2000 1999 1998
--------- --------- ---------
Revenue $ 35,938 $ 26,438 $ 15,234
Costs and expenses:
Cost of revenue 17,196 15,072 10,436
Selling and marketing expenses 6,632 4,703 4,082
General and administrative expenses 18,567 9,661 6,993
Write down of assets and other charges 11,742 - 1,530
Cost of acquisition opportunities 5,009 3,287 -
--------- --------- ---------
Total costs and expenses 59,146 32,723 23,041
--------- --------- ---------
Loss from operations (23,208) (6,285) (7,807)
Other income (expense):
Gain on marketable securities sales 19,432 - -
Realized loss on marketable securities impairment (27,668) - -
Interest, net 704 455 (597)
Other, net 96 (76) 42
--------- --------- ---------
Total other income (expense) (7,436) 379 (555)
--------- --------- ---------
Loss before minority interest in loss of subsidiary (30,644) (5,906) (8,362)
Minority interest loss - 56 142
--------- --------- ---------
Loss from continuing operations (30,644) (5,850) (8,220)
Income from discontinued operations - - 19
--------- --------- ---------
Net loss (30,644) (5,850) (8,201)
Preferred stock dividend (150) (150) (94)
Incremental yield dividend - - (44)
--------- --------- ---------
Loss attributable to common stockholders $ (30,794) $ (6,000) $ (8,339)
========= ========= =========
Net loss per common share - basic and diluted(a) $ (1.85) $ (0.39) $ (0.66)
========= ========= =========
Basic and diluted weighted average shares outstanding 16,665 15,486 12,654
========= ========= =========
(a) The earnings per share amount for discontinued operations is $0.00.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
2000 1999 1998
--------- --------- ---------
Net loss $ (30,644) $ (5,850) $ (8,201)
Change in net unrealized gains (loss) on marketable securities (29,550) 29,55 -
Deferred taxes on net unrealized gain (losses) on marketable
securities 11,229 (11,229) -
--------- --------- ---------
Comprehensive income (loss) $ (48,965) $ 12,471 $ (8,201)
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
F-49
TELESCAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Preferred Stock Common Stock Additional
----------------- ---------------- Paid-In
Shares Amount Shares Amount Capital
------ ------ ------- ------ --------
Balance January 1, 1998 - $ - 12,493 $ 125 $ 20,970
Net loss - - - - -
Issuance of stock under stock option plan - - 166 2 458
Issuance of convertible preferred stock 120 1 - - 3,000
Incremental yield on preferred stock - - - - 44
5% convertible preferred stock dividends - - - - -
Equity transactions of pooled company - - 187 2 424
Other - - - - 19
----- ------ ------- ------ --------
Balance December 31, 1998 120 1 12,846 129 24,915
Net loss - - - - -
Change in net unrealized gains - - - - -
Deferred taxes - - - - -
Issuance of stock under stock option plan - - 458 5 1,731
Issuance of common stock - - 2,876 27 39,103
5% convertible preferred stock dividends - - - - -
Equity transactions of pooled company - - 252 3 530
Change in fiscal year of pooled company - - 117 1 596
----- ------ ------- ------ --------
Balance December 31, 1999 120 1 16,549 165 66,875
Net loss - - - - -
Change in net unrealized losses - - - - -
Deferred taxes - - - - -
Issuance of stock under stock option plan - - 184 2 683
Issuance of common stock - - 108 1 1,334
Cancellation of common stock - - (545) (6) (1,731)
Stock based compensation - - - - 417
Issuance of warrants - - - - 72
5% convertible preferred stock dividends - - - - -
----- ------ ------- ------ --------
Balance December 31, 2000 120 $ 1 16,296 $ 162 $ 67,650
===== ====== ======= ====== ========
The accompanying notes are an integral part of these consolidated financial statements.
F-50
TELESCAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(Continued)
Accumulated
Accumulated Comprehensive
Deficit Income Total
----------- ---------- -----------
Balance January 1, 1998 $ (11,935) $ - $ 9,160
Net loss (8,201) - (8,201)
Issuance of stock under stock option plan - - 460
Issuance of convertible preferred stock - - 3,001
Incremental yield on preferred stock (44) - -
5% convertible preferred stock dividends (94) - (94)
Equity transactions of pooled company - - 426
Other - - 19
----------- ---------- -----------
Balance December 31, 1998 (20,274) - 4,771
Net loss (5,850) - (5,850)
Change in net unrealized gains - 29,550 29,550
Deferred taxes - (11,229) (11,229)
Issuance of stock under stock option plan - - 1,736
Issuance of common stock - - 39,130
5% convertible preferred stock dividends (150) - (150)
Equity transactions of pooled company - - 533
Change in fiscal year of pooled company (1,318) - (721)
----------- ---------- -----------
Balance December 31, 1999 (27,592) 18,321 57,770
Net loss (30,644) - (30,644)
Change in net unrealized losses - (29,550) (29,550)
Deferred taxes - 11,229 11,229
Issuance of stock under stock option plan - - 685
Issuance of common stock - - 1,335
Cancellation of common stock - - (1,737)
Stock based compensation - - 417
Issuance of warrants - - 72
5% convertible preferred stock dividends (150) - (150)
----------- ---------- -----------
Balance December 31, 2000 $ (58,386) $ - $ 9,427
=========== ========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
F-51
TELESCAN, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
-----------------------------------
2000 1999 1998
---------- --------- --------
Cash flows from operating activities:
Net loss $ (30,644) $ (5,850) $ (8,201)
Reconciling adjustments:
Gain on sale of GlobalNet stock (19,432) - -
Realized loss on marketable securities impairment 27,668 - -
Cost of acquisition opportunities 5,258 - -
Stock option compensation / warrants provided for services 371 - -
Recognition of non-cash revenue (4,449) (1,398) -
Depreciation and amortization 2,907 3,563 3,031
Write down of assets and other charges 11,026 - 1,530
Change in current assets and liabilities:
(Increase)/decrease in accounts receivable 919 (3,713) (1,613)
Increase/(decrease) in accounts payable (287) 1,408 186
(Increase)/decrease in other current assets (60) 2,974 2,365
Increase in other liabilities 658 550 587
---------- --------- --------
Net cash used in operating activities (6,065) (2,466) (2,115)
Cash flows from investing activities:
Additions to property and equipment (1,812) (3,002) (249)
Additions to software development costs (742) (1,273) (2,519)
Additions to investments (3,639) (8,935) -
Additions to notes receivable - (5,643) -
Proceeds from sale of marketable securities 468 - -
Other 525 433 -
---------- --------- --------
Net cash used in investing activities (5,200) (18,420) (2,768)
Cash flows from financing activities:
Proceeds from issuance of common stock - 32,625 -
Proceeds from issuance of convertible preferred stock - - 3,000
Proceeds from exercise of stock options 685 1,736 460
Preferred dividends paid (150) (150) (94)
Proceeds from notes payable - - 2,000
Increase in capital lease obligations 60 488 105
Payments on notes payable and capital lease obligations (461) (2,890) (568)
Equity transactions of pooled company, net of cash - 194 1
Other - (31) (9)
Net cash provided by financing activities 134 31,972 4,895
---------- --------- --------
Increase (decrease) in cash and cash equivalents (11,131) 11,086 12
Cash and cash equivalents:
Beginning of year 12,625 1,539 1,527
---------- --------- --------
End of year $ 1,494 $ 12,625 $ 1,539
========== ========= ========
Other non-cash investing and financing activities were as follows:
Net unrealized gain (loss) $ - $ 18,321 $ -
Exercise of GlobalNet option through sale of GlobalNet stock 33,227 - -
Conversion of note receivable into equity investment - 664 -
Acquisition of assets for stock 350 - -
Company common stock in exchange for investment in GlobalNet 64 6,335 -
Stock received for services and licenses - 3,298 -
The accompanying notes are an integral part of these consolidated financial statements.
F-52
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies and Related Information
The Company
Telescan, Inc. ("Telescan" or the "Company") is committed to helping
investors improve their investment results through advice and the
educated use of proprietary investment search tools. The Company
provides financial products and services marketed through two
divisions. The Company's Consumer Division manages two Web
properties, INVESTools.com and WallStreetCity.com, with the common
goal of simplifying and enriching the investing consumer's financial
life. The Company's Business-to-Business Division offers businesses
an array of online financial solutions through private-label and
co-branded versions of the Company's products and services. The
Company's business clients include many of the nation's leading
financial services and media companies, including America Online,
American Express, BusinessWeek Online, CNBC.com, Forbes and Quick &
Reilly.
The Company or its predecessors have operated the business of the
Company since 1983. The Company, which is a Delaware corporation,
was incorporated in 1988 under the name Max Ret, Inc. for the
purpose of acquiring or participating in a business opportunity. In
1989 the Company issued 75% of its outstanding common stock to
acquire all of the outstanding common stock of D.B. Technology, Inc.
("DB"), d.b.a. Telescan, Inc. After the acquisition of DB by the
Company, DB was merged into the Company and the Company changed its
name from Max Ret, Inc. to Telescan, Inc.
On May 28, 1999, the Company completed the acquisition of
INVESTools, Inc. ("INVESTools") upon which the INVESTools
stockholders exchanged all of their shares for shares of the
Company's common stock in a business combination that was accounted
for as a pooling-of-interests. The consolidated financial statements
for the two years ended December 31, 1999 and the accompanying
related notes reflect the Company's financial position and the
results of operations as if INVESTools had been a wholly-owned
subsidiary of the Company since inception. Prior to the acquisition,
INVESTools had a fiscal year-end of June 30. The adjustment for the
change in the year-end is reflected in the statement of
stockholders' equity for the year ended December 31, 1999.
The Company has an accumulated deficit of $58.4 million through
December 31, 2000 and had negative cash flows from operations of
$6.1 million, $2.5 million and $2.1 million for 2000, 1999, and
1998, respectively. It is the Company's intention to control its
operating expenses while continuing to invest in its existing
products. In addition, the Company has implemented changes intended
to reduce certain operating and general and administrative expenses.
The Company will continue to liquidate its marketable securities
portfolio during 2001 and is continuing its exploration of strategic
alternatives including exploring sources of additional financing. If
the Company is unable to achieve its projected 2001 results of
operations, or if the fair value of the Company's marketable
securities decrease significantly from the fair value at December
31, 2000, additional financing may be required to fund the Company's
operations. No assurance can be given that the Company will be able
to obtain additional financing or sell additional assets, or as to
the terms upon which the Company could do so. Based on the Company's
current outlook, it believes that its cash flows from operations and
current working capital will be sufficient to fund its operations
and capital requirements through June 2002.
Principles of Consolidation
The consolidated financial statements include the accounts of
Telescan, Inc. and its majority-owned subsidiaries for which the
Company controls the operations. All significant intercompany
transactions have been eliminated.
Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the
financial statements and disclosures of contingent assets and
liabilities. Ultimate results could differ from these estimates.
F-53
Reclassifications
Certain prior years' balances have been reclassified to conform to
the current year's presentation. These reclassifications had no
impact on operating results.
Concentration of Credit Risk
The Company markets its products and services to a diverse customer
base. Accounts receivable are generally unsecured and are derived
primarily from revenues earned from customers located in the United
States. The Company performs ongoing credit evaluations of its
customers and maintains reserves for potential credit losses;
historically, such losses have been within management's expectations.
The Company maintains deposits in banks, which may exceed the amount
of federal deposit insurance available. Management believes the
potential risk of loss on these accounts to be minimal.
Segment Reporting
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 131, Disclosure about Segments of an Enterprise and
Related Information, in 1997. The Company has one segment delivering
content and analytical tools to individual investors either directly,
through one of its Web properties, or indirectly by licensing its
tools and providing content, hosting and development services to
third party companies, which market and distribute the content and
tools to their customer base of individual investors.
Significant Customers
The Company has an agreement with BPI Communications, Inc. ("BPI") to
provide hosting and development services for multiple BPI Web sites.
Revenue for these services represented 12% and 10% of total revenue
for 2000 and 1999, respectively. This contract was amended on
December 31, 2000 to a fixed fee arrangement for the first three
months of 2001 and then the agreement and the fees are renewed
month-to-month thereafter.
The Company has a license agreement with NBC, whereby NBC uses
Telescan's proprietary Internet technology for use on CNBC.com, a
comprehensive Web site for personal finance. Under the agreement,
Telescan developed the financial content portion of the CNBC.com Web
site and currently provides hosting services for such content.
Revenue from these services accounted for 10% and 13% of total
revenue in 2000 and 1999, respectively. The Company generates revenue
under the agreement from cost reimbursement, fixed monthly license
fees and a percentage of advertising revenue generated from the site.
There were no other customers that generated greater than 10% of
revenue in 2000, 1999, or 1998.
Cash and Cash Equivalents
The Company considers all cash and cash investments with an original
maturity of three months or less to be cash equivalents. The Company
has invested excess cash in commercial paper and money market
accounts and amounts included in the consolidated financial
statements approximate fair value at the balance sheet date.
Marketable Securities
The Company's marketable securities are classified as
available-for-sale securities. Available-for-sale securities are
carried at fair value with the unrealized gains and losses, net of
tax, reported as a separate component within stockholders' equity
entitled "accumulated comprehensive income." Realized gains and
losses and permanent declines in value on available-for-sale
securities are reported in other income or expense, as incurred.
Realized investment gains (losses) are recognized using the specific
identification method.
Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation. Depreciation is calculated on a straight-line method
over the estimated useful lives of the assets, which range from three
to seven years. Equipment under capital lease is amortized over the
lesser of the remaining useful lives of the equipment or the lease
term.
F-54
Depreciation expense was approximately $1.8 million, $1.2 million
and $1.1 million for the years ended December 31, 2000, 1999 and
1998, respectively.
Investments
The Company invests in equity instruments of privately-held
information technology companies for business and strategic purposes.
These investments are included in long-term assets and are accounted
for under the cost method when ownership is less than 20% and the
Company does not significantly influence or control the entity's
operations. For these non-marketable investments, the Company
regularly reviews the assumptions underlying the operating
performance and cash flow forecasts in assessing the appropriate
carrying value of the investments.
Software Development Costs
Costs for the development of software, including the costs of coding,
software configuration, upgrades and enhancements are capitalized and
amortized over the expected useful life, generally three to five
years. Unamortized capitalized costs determined to be in excess of
the net realizable value of the product are expensed at the date of
such determination. The accumulated amortization and related software
development costs are removed from the respective accounts effective
in the year following full amortization.
Amortization expense was $1.0 million, $2.1 million, and $2.6
million, for the years ended December 31, 2000, 1999 and 1998,
respectively. Accumulated amortization totaled $204,000 and $5.0
million at December 31, 2000 and 1999, respectively.
Long-Lived Assets
The Company reviews all long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If indicators suggest that
impairment is probable, the Company will prepare an estimate of
undiscounted future cash flows expected to result from the use of the
asset. If impairment is indicated, an adjustment will be made to
reduce the carrying amount of the asset to its fair value. The
Company did not recognize any such impairment in 1999. In 2000 and
1998, the Company adjusted the carrying value of certain long-lived
assets, primarily capitalized software development costs, capital
data costs and related goodwill, to their estimated fair value,
resulting in a non-cash impairment loss of $4.2 million and $1.5
million, respectively, which is included in write down of assets and
other charges in the consolidated statement of operations.
Income Taxes
Deferred tax assets and liabilities are recognized for temporary
differences between the financial reporting basis and the tax basis
of assets and liabilities, at the enacted tax rates expected to be in
effect when the temporary differences reverse.
A valuation allowance for deferred tax assets is provided if it is
more likely than not that some portion of the deferred tax asset will
not be realized. An increase or decrease in a valuation allowance
that results from a change in circumstances that causes a change in
judgment about the reliability of the related deferred tax asset is
included in income. A change related to fluctuations in fair value of
available-for-sale securities is included in accumulated
comprehensive income in stockholders' equity.
Minority Interest
The minority interest relates to the Company's investment in
Knowledge Express Data Systems, L.C., ("KEDS") which was sold
subsequent to year end. Refer to Note 14 for additional discussion of
this subsequent event. The minority investment was reduced to zero as
of December 31, 1999.
Revenue Recognition
Revenue is recognized as services are completed. License fees are
recognized ratably over the term of the hosting arrangements, which
range from two to five years.
Deferred Revenue
Deferred revenue is primarily comprised of billings in excess of
recognized revenue relating to license and service fees.
F-55
Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, allows
companies to adopt either of two methods for accounting for stock
options. The Company accounts for its stock based compensation plans
under APB Opinion No. 25, Accounting for Stock Issued to Employees.
In accordance with SFAS No. 123, certain proforma disclosures are
provided in Note 10. The Company's long-term incentive plans provide
for the award of stock options to employees and directors.
Advertising Costs
Advertising costs are expensed when the initial advertisement is run
and are included in selling and marketing expenses. Advertising costs
for the years ended December 31, 2000, 1999 and 1998 were $296,000,
$433,000, and $808,000, respectively.
Net Loss Per Share
Net loss per share is computed by using the weighted average number
of shares of common stock outstanding. At December 31, 2000 there
were approximately 4.2 million shares of common stock potentially
issuable with respect to stock options, warrants, and convertible
preferred stock, which were excluded from the net loss per share
calculation because they are antidilutive.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 133, as amended by SFAS No. 137 effective for
years beginning after June 15, 2000, requires derivatives to be
recorded in the balance sheet as an asset or liability measured at
its fair value, with changes in the derivative's fair value
recognized currently in earnings unless specific hedge accounting
criteria are met. The Company does not invest in derivative
instruments and therefore does not believe that this statement will
have a material impact on the Company's financial statements.
2. Balance Sheet Components (in thousands):
Property and equipment: 2000 1999
---------- ---------
Property, computer and other equipment $ 6,017 $ 5,487
Furniture and fixtures 584 655
---------- ---------
Software 546 504
Total property and equipment 7,147 6,646
Less: accumulated depreciation and amortization (3,716) (3,002)
---------- ---------
Property and equipment, net $ 3,431 $ 3,644
========== =========
Other current liabilities: 2000 1999
---------- ---------
Accrued payroll $ 941 $ 485
Accrued royalties 869 100
Current portion of long term obligations 261 425
Other accrued liabilities 89 252
---------- ---------
Other current liabilities $ 2,160 $ 1,262
========== =========
F-56
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions
2000 Acquisition Opportunities
During 2000, Telescan evaluated a number of opportunities to add key
technologies, enhance market presence and complement existing
products and services through acquisitions.
In August 2000, the Company entered into a merger agreement with
GlobalNet Financial.com, Inc. ("GlobalNet") in which each share of
Telescan common stock would be exchanged for 0.50 shares of GlobalNet
common stock. During the ensuing due diligence period, the companies
determined that their business strategies would be best served if
they were pursued separately. In September 2000, a termination
agreement was signed and the costs associated with this acquisition
opportunity totaling $4.5 million were expensed. A summary of the
material terms of the termination agreement is as follows:
o The Company exchanged 272,500 shares of GlobalNet common stock
the Company owned with GlobalNet for the 545,000 shares of
Company common stock GlobalNet owned. These shares of Company
common stock were subsequently cancelled.
o GlobalNet purchased 276,495 shares of GlobalNet common stock
the Company owned for $6.00 per share.
o GlobalNet paid the Company $250,000 in cash for expenses
incurred in connection with the proposed acquisition
opportunity.
o The Company and GlobalNet terminated most of their contracts
and agreements, and dismissed all related outstanding
receivables. The Company accelerated recognition of deferred
revenue of $1.0 million currently into revenue on these
contracts as the termination relieved the Company of future
performance obligations under these contracts.
o The Company agreed it would not sell, transfer, or dispose of
its shares of GlobalNet common stock until July 2001, except
for 50,000 shares per month for six consecutive months
beginning October 1, 2000. During the fourth quarter of 2000,
the Company sold 150,000 shares of GlobalNet stock on the open
market under the terms of this agreement.
Additional merger and acquisition opportunities the Company explored
during 2000 resulted in an additional $545,000 in costs of
acquisition opportunities expensed.
1999 Acquisition Opportunities
On May 28, 1999, the Company completed the acquisition of INVESTools,
Inc., a privately held company. INVESTools operated an investment
advice Web site, featuring continually updated portfolio advice from
recognized money managers, as well as online investment advisory
newsletters. Under the terms of the acquisition agreement, which was
accounted for as a pooling-of-interests, Telescan issued 2,124,976
shares of common stock in exchange for all of INVESTools' outstanding
shares and assumed 220,955 options to purchase Telescan common stock.
All outstanding INVESTools, Inc. preferred stock and warrants were
converted to common stock immediately prior to the acquisition.
During 1999, the Company recorded a one-time charge of $3.3 million
for acquisition-related costs. These costs consisted of investment
banking fees, legal and accounting fees, and certain other expenses
directly related to the acquisition.
INVESTools had a June 30 fiscal year end and, accordingly, the
INVESTools statements of operations for the years ended June 30, 1998
and 1997 have been combined with the Company's statements of
operations for the calendar years ended December 31, 1998 and 1997,
respectively. In order to conform INVESTools' year-end to the
Company's calendar year end, the consolidated statement of
stockholders' equity was adjusted for the operating results of
INVESTools for the period from July 1, 1998 to December 31, 1998
which is not included in the consolidated results of operations. The
following is a summary of operating results for that period (in
thousands):
F-57
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue $ 1,058
Expenses 2,376
--------
Net loss $ (1,318)
========
INVESTools' historical financial statements have been adjusted to
conform to the accounting policies and practices of the Company.
These adjustments primarily related to the classification of interest
and other income and the classification of restricted cash. These
conforming adjustments did not change the net loss INVESTools
reported.
Separate revenues, net loss and related per share amounts of the
merged entities are presented in the following table (in thousands):
1998
---------
Revenue:
Telescan, Inc. (restated) $ 13,778
INVESTools 1,456
---------
Revenue as reported $ 15,234
=========
Net loss:
Telescan, Inc. $ (6,038)
INVESTools (2,163)
---------
Net loss, as reported $ (8,201)
=========
Loss per share:
Telescan, Inc. $ (0.48)
INVESTools (0.18)
---------
Loss per share as reported $ (0.66)
=========
4. Notes Receivable
In November 1999, the Company entered into a loan agreement with
TeamVest to loan $4.2 million for one year at a rate of LIBOR plus
2%, payable at maturity. The note was secured by guarantees from
certain key principals of TeamVest and was convertible into equity
interests in TeamVest, subject to certain conditions in the
agreement. In addition, the agreement contained a warrant permitting
the Company to purchase additional equity interests in TeamVest at
such time that the loan was converted into an equity interest if
certain conditions were met. At December 31, 2000, the Company had
accrued $394,000 in interest, which is classified with the note
receivable. The Company recognized license fee and development
revenue from TeamVest of $399,000 in 2000.
In January 2001, this note was settled. Refer to Note 14 for further
details of this subsequent event.
5. Marketable Securities
During 1999 and the first quarter of 2000, the Company acquired
marketable securities in companies as payment for services rendered
or as an investment to support a strategic alliance. At December 31,
2000, these investments were as follows:
Cost Basis
at
Name Original Cost December 31, 2000
- ----------------------------- ------------------- ---------------------
GlobalNetFinancial.com, Inc. $22.4 million $2.8 million
Individual Investor Group, Inc. 4.1 million .5 million
FreeRealTime.com, Inc. 3.0 million .3 million
Stockwalk Group, Inc. 2.4 million .6 million
F-58
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consistent with the overall market for Internet stocks, the Company
has seen the market value of these investments decrease during 2000.
In the fourth quarter of 2000, the Company assessed these investments
and concluded that each of the marketable securities had experienced
an "other than temporary" decline in value and, in accordance with
SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities, the cost basis of these investments, classified as
available-for-sale, was written down to market value and a realized
loss of $27.7 million was recognized. As a result, cost basis equals
fair market value as indicated by the market and there are no
unrealized gains or losses at December 31, 2000.
The Company began selling these investments in the fourth quarter of
2000 and will continue to sell these investments in 2001 because they
are considered to be a non-strategic asset and provide working
capital. Therefore, these investments were reclassified as current
assets in the accompanying balance sheet at December 31, 2000. The
majority of these marketable securities are subject to restrictions
under Rule 144 of the Securities Act of 1933 which, among other
things, limit the quantity that can be sold through a broker for a
period of time.
In March 2000, the Company exercised an option acquired in March 1999
to acquire additional shares of GlobalNet stock. A gain of $20.7
million was recorded in the first and second quarters related to
sales of GlobalNet securities, the proceeds of which were used to
exercise this option. Additional sales in the fourth quarter of 2000
reduced this gain to $19.4 million for the year. There were no other
sales of marketable securities during 2000.
6. Investments
During 1999 and 2000 the Company made strategic investments in other
companies, which had technologies that were compatible with or
enhanced the Company's technology or content. These investments are
carried at cost because the Company owns less than 20% of the total
equity and has no significant influence or control over the
operations. Due to weaknesses in the market related to Internet
companies, the Company continuously reviewed the market value of
these investments for indications that the value had declined below
cost permanently or that the Company would not be able to recover its
investment. Based on these assessments, these investments were
written down $5.1 million during 2000. This charge is included in
write down of assets and other charges in the consolidated statement
of operations.
7. Commitments and Contingencies
Commitments
Capital Leases
The Company has entered into capital lease commitments that
expire early in 2002. The future minimum lease payments
under these agreements are $267,000 and $46,000 for 2001 and
2002, respectively. The present value of these minimum
payments totals $307,000, with $6,000 attributable to
interest. The interest rates on these leases range from 3%
to 10%. Computer and telephone equipment under capital lease
totaled $1.4 million and $1.8 million at December 31, 2000
and 1999, respectively with related accumulated depreciation
of $1.2 million per year.
Interest Paid
The Company paid $26,000, $264,000 and $115,000 for interest
during the years ended December 31, 2000, 1999 and 1998,
respectively.
F-59
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating Leases
The Company has commitments to lease office space and
equipment under non-cancelable operating leases. Rent
expense under operating leases totaled $1.5 million, $1.3
million and $1.1 million for the years ended December 31,
2000, 1999 and 1998, respectively. Future minimum payments
under non-cancelable leases are as follows (in thousands):
Years Ending December 31,
-------------------------
2001* $ 1,723
2002 2,183
2003 1,474
2004 1,484
2005 1,142
Thereafter -
----------
Total $ 8,006
==========
*In 2001, the Company does not pay rent for the last six months
of the year.
Contingencies
From time to time the Company is involved in certain legal actions
arising in the ordinary course of business. It is the opinion of
management that such litigation will be resolved without a material
effect on the Company's financial position or results of operations.
In August 2000, a lawsuit was filed against the Company in the United
States District Court for the Southern District of New York by a
former employee alleging that the Company failed to grant him certain
stock options to which he was entitled. The Company has responded to
the complaint and the case is proceeding before the court. Although
no assurances can be given, the Company believes that the ultimate
resolution of the litigation will not have a material adverse impact
on the Company's financial position or results of operations.
8. Income Taxes
At December 31, 2000, the Company had net operating loss
carryforwards for income tax reporting purposes of approximately
$28.9 million, which expire in years 2009 to 2020. A portion of the
$5.0 million in net operating loss carryforwards acquired with the
INVESTools, Inc. acquisition are currently limited as to use.
Deferred tax assets and liabilities consisted of the following at
December 31, 2000 and 1999 (in thousands):
2000 1999
-------- --------
Deferred tax assets:
Acquisition costs capitalized for tax purposes $ 1,217 $ 1,217
Deferred revenue - 2,196
Net operating loss carryforwards 9,838 5,155
Net unrealized gains (losses) on securities 6,703 -
Other 181 -
-------- --------
Total deferred tax asset 17,939 8,568
Less: Valuation allowance (16,862) (7,148)
-------- --------
Deferred tax asset, net 1,077 1,420
Deferred tax liability:
Accumulated depreciation (1,077) (1,420)
Net unrealized gains (losses) on securities - (11,229)
-------- --------
Deferred tax liability, net $ - $(11,229)
======== ========
F-60
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation allowance increased approximately $9.7 million during
2000. In as much as the Company's recognition of an impairment of the
marketable securities portfolio would suggest an anticipated capital
loss from the eventual disposition of the securities, and since
capital losses are allowed for tax purposes only to the extent of
capital gains, the net deferred tax effects related to the market
value adjustments have been reduced to zero.
The following is a reconciliation of expected to actual income tax
expense based upon the statutory rates:
Years Ended December 31,
--------------------------------
2000 1999 1998
--------- -------- --------
Federal income tax benefit at statutory rates $ (10,419) $ (2,040) $ (2,788)
Acquisition costs capitalized for tax purposes - 1,217 -
Other, net 705 45 (295)
Change in valuation allowance 9,714 778 3,083
--------- -------- --------
Actual Provision $ - $ - $ -
========= ======== ========
9. Stockholders' Equity
Classes of Capital Stock
The Company has two classes of capital stock: convertible preferred
stock and common stock. During 1999, the Board of Directors approved
an amendment to the Restated Certificate of Incorporation to increase
the total number of authorized shares of all classes of capital stock
to a total of 40,000,000 shares. The Company is authorized to issue
up to 30,000,000 shares of common stock with a par value of $.01 and
10,000,000 shares of convertible preferred stock with a par value of
$.01.
Capital Stock Activity
In October 2000, as part of the termination agreement with GlobalNet
discussed in Note 3, the Company received the 545,000 shares of
Company stock issued to GlobalNet in 1999 in exchange for 272,500
shares of GlobalNet stock the Company owned. These shares were
subsequently cancelled.
In May 2000, the Company settled conflicting contractual claims with
CyberAction, Ltd. for $1.1 million, which is included in write down
of assets and other charges in the consolidated statement of
operations. As part of the settlement, the Company issued 91,628
shares of common stock and issued an option to purchase 25,000 shares
of the Company's common stock at an exercise price of $10.75 per
share. The option expires May 5, 2002.
In March 2000, as consideration for the purchase of the assets of
Reality Sports, Inc., the Company issued 15,596 shares to Reality
Sports, Inc. and 1,071 shares to CCCC Enterprises, Ltd.
In January 1999, the Company sold 1,220,237 shares of its common
stock in a private placement to NBC in conjunction with its
affiliate, GE Capital Equity Investments, Inc. The Company received
net proceeds of $8,655,000 from the transaction. The resale of the
stock is restricted under Rule 144, subject to demand registration
rights on one-half of the shares.
In July 1999, the Company sold an additional 1,111,111 shares of its
common stock in a private placement to NBC and received net proceeds
of $23,970,000. The resale of the stock is also restricted under Rule
144 subject to demand registration rights on one-half of the shares.
At December 31, 1999, NBC held 14.2% of the Company's outstanding
shares.
In March 1999, the Company entered into an agreement with GlobalNet
to exchange 520,000 shares of its common stock for 2,715,337 shares
of GlobalNet common stock, giving the Company a 9.9% ownership
interest in GlobalNet. In addition the Company issued 25,000 shares
of its common stock for a one-year option to purchase additional
shares such that, upon exercise of the option, the Company could own
an aggregate of 19.9% of GlobalNet's then outstanding common stock.
The exercise price of the option was set at $12.00 per share. This
option was exercised in March and April of 2000.
F-61
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 1998, the Company issued 120,000 shares of 5% Class A
Convertible Preferred Stock for $3.0 million dollars. In connection
with the issuance of the preferred stock, there is an incremental
yield that arises from the conversion discount from fair value that
is considered a dividend to preferred stockholders. The amount is
determined as the fixed discount from market (5%) based on the
closing price at May 15, 1998 and is calculated as follows:
Closing price at May 15, 1998 7 3/8
Fixed discount from market 5%
----------
$ 0.37
Shares issued 120,000
----------
Incremental yield $ 44,400
==========
Preferred stockholders had the option to convert the preferred shares
into common stock at any time after May 15, 1998. The conversion
price of the preferred stock conversion into common stock was to be
based on a defined formula and capped at a maximum of $8.62 per
share. In January 2001, the holders of the 120,000 shares of 5% Class
A Convertible Preferred Stock exchanged all of their shares for
120,000 shares of 4% Class B Convertible Preferred Stock. Refer to
Note 14 for details of this subsequent event.
10. Stock Option Plans
Employee Stock Option Plans
Description of Plans
2000 Stock Option Plan
Approved by stockholders in August 2000, the
Company has reserved 1.0 million shares for grant
under this Plan for issuance to officers,
directors, and employees. The Plan expires August
2010. Under the Plan, incentive options may be
granted at the fair market value of the Company's
common stock at the date of the grant, as
determined by the Board of Directors, but not less
than $1.50 per share. Non-statutory options may be
granted at prices equal to or greater than $1.50
per share, as determined by the Board of Directors.
Options generally expire ten years from the date of
grant.
Amended 1995 Stock Option Plan
This Plan was amended in June 2000 to increase the
number of shares available for grant to 1.2 million
for issuance to officers, directors, and employees.
The Plan expires March 2005. Under the Plan,
incentive options may be granted at the fair market
value of the Company's common stock at the date of
the grant, as determined by the Board of Directors,
but not at less than $1.50 per share. Non-statutory
options may be granted at prices equal to or
greater than $1.50 per share, as determined by the
Board of Directors. Options generally expire ten
years from the date of grant.
Amended 1990 Stock Option Plan
The Company reserved 1.5 million shares for grant
under this Plan for issuance to officers,
directors, and employees. This Plan expired in
August 2000 and no new options are being granted
from this Plan. Options granted under this plan
were granted at fair market value at the date of
grant and generally expire ten years from the date
of the grant.
INVESTools' Stock Option Plans
The Company reserved 220,995 shares of its common
stock for issuance under three Stock Option Plans
for employees and consultants of INVESTools. No new
options are being granted under these plans.
Options granted under these plans were granted at
fair market value at the grant date and generally
expire ten years from the date of the grant.
F-62
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Option Plan Activity
The following is a summary of option activity under these plans:
Total Shares Weighted Average
Under Option Exercise Price
------------- ----------------
Balance - January 1, 1998 872,476 $ 4.26
Granted 447,117 6.37
Cancelled (47,925) 1.94
Exercised (169,250) 2.69
----------- ----------
Balance - December 31, 1998 1,102,418 5.50
Pooling Adjustment (9,184) 0.39
Granted 306,949 11.17
Cancelled (75,826) 6.12
Exercised (516,681) 4.00
----------- ----------
Balance - December 31, 1999 807,676 8.56
Granted 1,997,139 10.93
Cancelled (260,397) 15.29
Exercised (183,516) 3.73
----------- ----------
Balance - December 31, 2000 2,360,902 $ 10.19
=========== ==========
The following table summarizes information about options outstanding
at December 31, 2000:
Options Outstanding Options Exercisable
------------------------------------- ----------------------
Weighted
Average
Remaining Weighted Weighted
Range of Years of Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Prices Exercisable Price
------------ ----------- ----------- -------- ----------- ---------
$ 0 - $4.99 1,005,520 9.25 2.19 48,468 $ 2.41
0 - 9.99 397,064 5.46 7.29 394,789 7.28
10.00 - 14.99 71,016 6.59 12.41 71,016 12.41
15.00 - 19.99 458,092 9.01 18.93 158,092 18.81
20.00 - 24.99 423,710 8.15 21.91 341,510 21.78
25.00 - 30.00 5,500 9.07 25.14 5,500 25.14
---------- ---- ------- --------- -------
Total 2,360,902 8.29 $ 10.19 1,419,375 $ 10.84
========== ==== ======= ========= =======
Stock Options Granted to Third Parties
Description of Grants
The Company issues options to certain outside vendors as
payment for services rendered. The options are valued based
on the value of services received, if available, or at fair
market value of the option at the date of grant.
F-63
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Option Activity
The following is a summary of option activity:
Total Shares Weighted Average
Under Option Exercise Price
----------- ---------------
Balance January 1, 1998 60,000 $ 5.26
Granted 50,000 6.75
----------- ----------
Balance December 31, 1998 110,000 5.94
Granted 75,000 20.00
Exercised (60,000) 6.72
Cancelled (37,500) 5.00
----------- ----------
Balance December 31, 1999 87,500 17.86
Granted 25,000 10.75
----------- ----------
Balance December 31, 2000 112,500 $ 16.28
=========== ==========
The 60,000 options exercised during 1999 were cashless exercises.
The remaining options outstanding have a weighted average remaining
life of three years.
Pro Forma Disclosures
Had compensation expense arising from stock-based
compensation been determined consistent with the provisions
of SFAS 123, net loss and net loss per share would have been
as follows (in thousands, except per share amounts):
2000 1999
---- ----
Net loss:
As reported $ (30,644) $ (5,850)
Pro forma (42,041) (6,974)
Net loss per common share:
As reported $ (1.85) $ (0.39)
Pro forma (2.53) (0.46)
The weighted average fair values of the options granted during 2000,
1999 and 1998 were $9.19, $10.79 and $3.79 respectively. The fair
value of each option grant was estimated at the date of grant using
the Black-Scholes option pricing model with the following
assumptions; risk free rates ranging from 5.74% to 6.88% for 2000
and 5.00% to 6.15% for 1999; volatility factors ranging from 75.9%
to 78.4% for 2000 and 78.67% and 86.14% for 1999; expected lives of
10 years for 2000 and 3 years for 1999; and no assumed dividend
yield in either period.
11. Employee Benefits
The Company sponsors a defined contribution 401(k) Profit Sharing
Plan for its employees. The plan provides participants a mechanism
for making contributions for retirement savings. Each participant may
contribute certain amounts of eligible compensation. The plan allows
for Company matching contributions, and effective January 1, 2000,
the Company invoked this privilege, matching 25% of participant
contributions up to 1% of salary.
12. Fair Value of Financial Instruments
At December 31, 2000, the book value of the Company's financial
instruments equaled market.
At December 31, 1999, the book value of cash and cash equivalents,
notes receivable excluding the TeamVest note, marketable securities
and capital lease obligations equaled market value. The fair market
value of the TeamVest note receivable reported at cost was not
determinable because it was convertible into equity of a private
company. The fair value of investments reported at cost was not
readily determinable since they represent equity investments in
private companies.
F-64
13. Related Parties
KEDS
At December 31, 2000 the Company owned 55.58% of KEDS and a joint
venture controlled by GRF Interests, Inc., owned the remainder. G.
Robert Friedman, a significant stockholder and former director of the
Company, controls GRF Interests, Inc. In February 2001, all owners
sold their interests to an unrelated third party. Refer to Note 14
for more details of this subsequent event.
Telebuild, L.C. ("Telebuild")
At December 31, 2000, the Company owned 15.83% of Telebuild. Friedman
Interests, Inc, and the Brown Family Partnership own 45.42% and
25.44%, respectively. G. Robert Friedman, a significant stockholder
and former director of the Company, controls Friedman Interests, Inc.
David L. Brown, Director and former Chairman of the Company and other
members of the Brown family own the Brown Family Partnership. The
Company recognized contract revenue from Telebuild of $55,000,
$1,369,000, and $1,152,000 in 2000, 1999, and 1998, respectively. The
Company recognized contract expense of $1,241,000, and 1,016,000
during the years ended 1999, and 1998, respectively. As of December
31, 2000 and 1999, $19,000 and $1,043,000 were due from Telebuild for
contract services provided. At December 31, 2000, the Company's
investment in Telebuild was zero.
GRO Corporation ("GRO")
Mr. Greg E. Gensemer, an officer of Telescan, serves on the Board of
Directors for GRO. The Company has entered into licensing and
servicing agreements with this company. In December 2000, the
licensing agreement was amended to terminate development of a new
product for GRO. As a result of this modification, $153,000 of
deferred license fees for GRO were accelerated and recognized as
revenue in 2000. At December 31, 2000, the Company still had
approximately $358,000 of deferred license fees from GRO to be
recognized as revenue through 2003. The Company recognized $190,000
in revenue during 2000 from this licensing agreement. The Company
owned 603 shares of GRO Corporation representing an ownership
interest of 5.1% at December 31, 2000.
National Broadcasting Company, Inc. ("NBC")
In a letter agreement dated February 22, 1999 between the NBC and the
Company, NBC was granted the right to have an individual designated
by NBC (the "NBC Designee") included as a nominee for the Board of
Directors of the Company. NBC shall have this right until GE Capital
Equity Investments, Inc. ("GE Equity") owns less than 5% of the
outstanding common stock of the Company or the license agreement with
NBC terminates or expires, whichever event occurs earlier. Pursuant
to this agreement, NBC has designated and the Board of Directors has
approved Ms. Elisabeth Y. Sami.
In addition, GE Equity has the right to designate an individual to be
present at all Board of Director meetings. Such individual will not
be a participating or voting member of the Board of Directors and may
remain as a designee so long as GE Equity owns at least 5% of the
Company's outstanding common stock. Note 1 to the financial
statements discusses activity with NBC during 1999 under the caption
"Concentration of Credit Risk."
14. Subsequent Events
TeamVest
In January 2001, the Company received a $1.5 million payment on the
$4.2 million note receivable due from TeamVest that the Company
entered into in November 1999 (refer to Note 4 for details). The
Company then exercised its option to convert the remaining balance
due on the note, plus accrued interest of $407,000, into 1.9 million
shares of TeamVest common stock.
Convertible Preferred Stock
In January 2001, the holders of the 120,000 shares of Class A 5%
Convertible Preferred Stock agreed to exchange all of their shares
for new Class B 4% Convertible Preferred Stock. This stock pays $1.00
per share per annum in dividends and is convertible into 3,000,000
shares of Common Stock, which the Company has reserved for such
conversion. The stock automatically converts on May 15, 2002.
F-65
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KEDS
In February 2001, all interests in KEDS, including the Company's 56%
interest, were sold to a third party. The net liabilities of KEDS, a
consolidated subsidiary of the Company, were reclassified as net
liabilities held for sale and are included in other liabilities on
the balance sheet at December 2000. In February 2001, the Company
recognized a $9,000 loss on the sale.
BPI
The Company had an agreement with BPI to provide hosting and
development services for multiple BPI Web sites. Revenue for these
services represented 12% and 10% of total revenue for 2000 and 1999,
respectively. This contract was amended on December 31, 2000 to a
fixed fee arrangement for the first three months of 2001 and then the
agreement and the fees are renewed month-to-month thereafter.
F-66
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Unaudited Selected Quarterly Results of Operations
(in thousands, except per share data)
Quarters Ended
--------------------------------------------------
12/31/00 9/30/00 6/30/00 3/31/00
---------- --------- --------- --------
Revenue $ 8,003 $ 9,183 $ 8,925 $ 9,827
Cost and expenses from operations 11,650 17,462 18,186 11,848
-------- -------- -------- --------
Loss from operations (3,647) (8,279) (9,261) (2,021)
Other income (expense) (28,726) 180 8,865 12,245
Income tax (expense) benefit -- -- 2,041 (2,041)
-------- -------- -------- --------
Net income (loss) $(32,373) $ (8,099) $ 1,645 $ 8,183
======== ======== ======== ========
Net income (loss) attributable to common $(32,410) $ (8,137) $ 1,607 $ 8,146
stockholders ======== ======== ======== ========
Earnings per share - basic
Net income (loss) $ (1.97) $ (0.48) $ 0.10 $ 0.49
======== ======== ======== ========
Weighted average shares 16,450 16,829 16,747 16,633
======== ======== ======== ========
Earnings per share - diluted
Net income (loss) $ (1.97) $ (0.48) $ 0.09 $ 0.47
======== ======== ======== ========
Weighted average shares 16,450 16,829 17,371 17,469
======== ======== ======== ========
Quarters Ended
--------------------------------------------------
12/31/99 9/30/99 6/30/99 3/31/99
---------- --------- --------- --------
Revenue $ 8,928 $ 6,735 $ 6,039 $ 4,736
Cost and expenses from operations 8,991 7,773 10,055 5,904
-------- -------- -------- --------
Loss from operations (63) (1,038) (4,016) (1,168)
Other income (expense) 268 166 34 (89)
Minority interest loss -- -- 24 32
-------- -------- -------- --------
Net income (loss) $ 205 (872) $ (3,958) $ (1,225)
-------- -------- -------- --------
Net income (loss) attributable to common
stockholders $ 168 $ (910) $ (3,995) $ (1,263)
======== ======== ======== ========
Earnings per share - basic
Net income (loss) $ 0.01 $ (0.06) $ (0.26) $ (0.09)
======== ======== ======== ========
Weighted average shares 16,511 16,174 15,131 14,068
======== ======== ======== ========
Earnings per share - diluted
Net income (loss) $ 0.01 $ (0.06) $ (0.26) $ (0.09)
======== ======== ======== ========
Weighted average shares 17,348 16,174 15,131 14,068
======== ======== ======== ========
F-67
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Telescan, Inc.:
We have audited, in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of Telescan, Inc. and
subsidiaries as of December 31, 2000 and for the year then ended included in
this Form 10-K and have issued our report thereon dated February 21, 2001. Our
audit was made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The Schedule listed in Item 14-2 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. Information on this schedule
for the year ended December 31, 2000 has been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 21, 2001
F-68
INDEPENDENT AUDITOR'S REPORT ON SCHEDULE
Board of Directors and Stockholders
Telescan, Inc.
Houston, Texas
We have audited the financial statements of Telescan, Inc. and subsidiaries as
of December 31, 1999 and 1998, and for each of the years in the two-year
period ended December 31, 1999. Our audits for such years also included the
financial statement schedule of Telescan, Inc. and subsidiaries, listed in
Item 14-2, for each of the years in the two-year period ended December 31,
1999. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to report on this schedule based on our
audits. In our opinion, such a financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth herein.
HEIN + ASSOCIATES LLP
Houston, Texas
February 25, 2000
F-69
TELESCAN, INC. AND SUBSIDIARIES
SCHEDULE I - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Deductions:
Accounts
Balance at Additions: Written Off
Beginning of the Charged to Cost Against Balance at
Description Year and Expenses Allowance End of Year
- ------------------------------- ------------------ ----------------- --------------- ---------------
December 31, 1998
Allowance for Doubtful Accounts $ 114 $ 399 $(139) $ 374
December 31, 1999
Allowance for Doubtful Accounts $ 374 $ 184 $(259) $ 299
December 31, 2000
Allowance for Doubtful Accounts $ 299 $ 530 $(567) $ 262
F-70
PART I Financial Information
ITEM 1. financial Statements
TELESCAN, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
March 31, December 31,
2001 2000
----------- ------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 1,591 $ 1,494
Accounts receivable, net (allowance: $300; $262) 2,556 3,411
Notes receivable -- 4,594
Marketable securities 2,173 4,178
Other current assets 371 446
----------- ------------
Total current assets 6,691 14,123
Investments 3,835 968
Property and equipment, net 3,049 3,431
Software development costs, net 997 838
Other assets 70 80
----------- ------------
Total assets $ 14,642 $ 19,440
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue $ 3,467 $ 4,008
Accounts payable 3,096 3,799
Accrued payroll 690 941
Accrued royalties 892 869
Other current liabilities 320 350
----------- ------------
Total current liabilities 8,465 9,967
Capital lease obligations 18 46
Stockholders' equity:
Class A convertible preferred stock (liquidation preference $25 per share)
(shares issued and outstanding: 0; 120,000) - 1
Class B convertible preferred stock (liquidation preference $25 per share)
(shares issued and outstanding: 120,000; 0) 1 -
Common stock
(shares issued and outstanding: 16,296,026; 16,296,026) 162 162
Additional paid in capital 67,650 67,650
Accumulated comprehensive loss (1,238) -
Accumulated deficit (60,416) (58,386)
----------- ------------
Total stockholders' equity 6,159 9,427
----------- ------------
Total liabilities and stockholders' equity $ 14,642 $ 19,440
=========== ============
The accompanying notes are an integral part of these consolidated financial statements.
F-71
TELESCAN, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months
Ended March 31,
--------------------------
2001 2000
--------- --------
Revenue $ 5,863 $ 9,827
Costs and expenses:
Cost of revenue 2,432 4,780
Selling and marketing expenses 1,377 1,495
General and administrative expenses 3,375 4,073
Special and other charges 701 1,500
--------- --------
Total costs and expenses 7,885 11,848
Loss from operations (2,022) (2,021)
Other income (expense):
Net gain on sales of marketable securities 1 12,001
Interest, net 31 244
Other, net (9) -
--------- --------
Total other income 23 12,245
--------- --------
Income (loss) before income taxes (1,999) 10,224
Income tax expense - (2,041)
--------- --------
Net income (loss) (1,999) 8,183
Less: Preferred stock dividends (31) (37)
--------- --------
Income (loss) attributable to common stockholders $ (2,030) $ 8,146
========= ========
Net income (loss) per common share:
Basic $ (0.12) $ 0.49
Diluted $ (0.12) $ 0.47
Weighted average common shares outstanding:
Basic 16,296 16,633
Diluted 16,296 17,469
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income (loss) $ (1,999) $ 8,183
Change in net unrealized gains (losses)
on marketable securities (1,238) (22,309)
Deferred taxes on net unrealized gains (losses)
on marketable securities -- 8,478
--------- --------
Comprehensive loss $ (3,237) $ (5,648)
========= ========
The accompanying notes are an integral part of these financial statements.
F-72
TELESCAN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
-----------------------------
2001 2000
----------- ---------
Cash flows from operating activities:
Net income (loss) $ (1,999) $ 8,183
Reconciling adjustments:
Gain on sales of marketable securities (1) (12,001)
Special and other non-cash charges 504 -
Depreciation and amortization 546 927
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 855 (831)
Decrease in other current assets 85 61
Decrease in accounts payable (699) (918)
Increase (decrease) in other current liabilities (750) 3,366
Other, net (30) -
----------- ---------
Net cash used in operating activities (1,489) (1,213)
Cash flows from investing activities:
Additions to property and equipment (68) (894)
Additions to software development costs (261) (226)
Proceeds from repayment of note receivable 1,500 -
Proceeds from sale of marketable securities 504 -
Purchases of investments - (3,504)
Other 8 43
----------- ---------
Net cash (used in)/provided by investing activities 1,683 (4,581)
Cash flows from financing activities:
Proceeds from exercise of stock options - 481
Preferred dividends paid (31) (37)
Increase in notes payable 23 -
Payments on notes payable and capital lease obligations (89) (128)
----------- ---------
Net cash (used in)/provided by financing activities (97) 316
----------- ---------
Increase (decrease) in cash and cash equivalents 97 (5,478)
Cash and cash equivalents:
Beginning of period 1,494 12,625
----------- ---------
End of period $ 1,591 $ 7,147
=========== =========
Other non-cash investing and financing activities were as follows:
Net unrealized gain, net of tax $ 1,238 $ 2,597
Exercise of GlobalNetFinancial.com option through sale of
GlobalNetFinancial.com stock - 19,971
Stock received in lieu of payment for services rendered - 743
Acquisition of assets for stock - 350
Conversion of note receivable into equity investment 3,107 64
The accompanying notes are an integral part of these financial statements.
F-73
TELESCAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The consolidated financial statements reflect the accounts of
Telescan, Inc. (the "Company") and its wholly and majority owned
subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The accompanying condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 2000 included in the
Company's Annual Report on Form 10-K.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with Rule 10-01 of
Regulation S-X for interim financial statements required to be filed
with the Securities and Exchange Commission and do not include all
information and footnotes required by accounting principles generally
accepted in the United States. However, in the opinion of management,
the information furnished reflects all adjustments, consisting of
normal recurring adjustments, which are necessary to make a fair
presentation of financial position and operating results for the
interim periods. The results of operations for the three month period
ended March 31, 2001 are not necessarily indicative of the results to
be expected for the full year.
Amounts in the March 31, 2000 consolidated financial statements have
been reclassified to conform to the current period's presentation.
2. Liquidity and Capital Resources
It is the Company's intention to control its operating expenses while
continuing to invest in its existing products. In addition, the
Company has implemented changes intended to reduce certain operating
and general and administrative expenses. The Company will continue to
liquidate its marketable securities portfolio during 2001 and is
continuing its exploration of strategic alternatives including
exploring sources of additional financing. If the Company is unable
to achieve its projected 2001 results of operations, or if the fair
value of the Company's marketable securities decreases significantly
from the fair value at March 31, 2001, additional financing may be
required to fund the Company's operations. No assurance can be given
that the Company will be able to obtain additional financing or sell
additional assets, or as to the terms upon which the Company could do
so. Based on the Company's current outlook, the Company believes that
its cash flows from operations and current working capital will be
sufficient to fund its operations and capital requirements through
June 2002.
3. Note Receivable
In January 2001, the Company received a $1.5 million cash payment on
a $4.2 million note receivable due from TeamVest pursuant to a note
that the Company entered into in November 1999. The Company then
exercised its option to convert the remaining balance due on the
note, plus accrued interest of $407,000, into approximately 1.9
million shares of TeamVest common stock which, on the conversion
date, was valued at $3.1 million and represented approximately a 14%
interest in TeamVest. The investment in TeamVest is carried at cost.
4. Exchange of Convertible Preferred Stock
In January 2001, the holders of the 120,000 shares of Class A 5%
Convertible Preferred Stock agreed to exchange all of their shares
for new Class B 4% Convertible Preferred Stock. The Class B 4%
Convertible Preferred Stock pays $1.00 per share per annum in
dividends and is convertible into 3,000,000 shares of Common Stock,
which the Company has reserved for such conversion. The stock
automatically converts on May 15, 2002.
5. Marketable Securities Transactions
During the first quarter of 2001, the Company sold shares of
marketable securities and recognized $70,000 in gross gains and
$69,000 in gross losses. Proceeds of $504,000 were received from
these sales.
F-74
6. Special and Other Charges
Special and other charges in the first quarter of 2001 included the
following:
o $264,000 to write off the investment in FreeRealTime.com, Inc.,
which filed for voluntary bankruptcy.
o $240,000 to write off the investment in Tachyon, LLC because
the Company no longer expects to recover its investment.
o $197,000 for severance costs as the Company continues efforts
to control costs by further reducing staff.
7. Contingencies
From time to time the Company is involved in certain legal actions
arising in the ordinary course of business. It is the opinion of
management that such litigation will be resolved without a material
adverse effect on the Company's financial position or results of
operations.
In August 2000, a lawsuit was filed against the Company in the United
States District Court for the Southern District of New York by a
former employee alleging that the Company failed to grant him certain
stock options to which he was entitled. The Company has responded to
the complaint and the case is proceeding before the court. Although
no assurances can be given, the Company believes that the ultimate
resolution of the litigation will not have a material adverse effect
on the Company's financial position or results of operations.
8. Calculation of Earnings Per Share
The calculation of earnings per share was as follows:
(in thousands, except per share amounts) Three Months Ended March 31,
----------------------------
2001 2000
------------ ----------
Net income (loss) attributable to common shareholders (a) $ (2,030) $ 8,146
Dividends on preferred stock - (c) 37
------------ --------
Net income (loss) attributable to common shareholders,
assuming dilution (b) $ (2,030) $ 8,183
============ ========
Weighted average common shares outstanding (a) 16,296 16,633
Effect of dilutive securities
Convertible preferred stock - (c) 488
Stock options - (c) 348
------------ --------
Weighted average common shares outstanding,
assuming dilution (b) 16,296 17,469
============ ========
Net income (loss) per common share
Basic $ (0.12) $ 0.49
Diluted $ (0.12) $ 0.47
-------------------
(a) Used to compute basic earnings per share.
(b) Used to compute diluted earnings per share.
(c) Because the company is in a loss position, the convertible
preferred and the stock options are antidilutive.
F-75
9. Subsequent Events
In May 2001, the Company executed a merger agreement with ZiaSun
Technologies, Inc. ("ZiaSun") to form a new company, INVESTools, Inc.
("INVESTools"). The new company will be a leading provider of
investor education, financial publications and analytical tools
worldwide. The merger will be a stock for stock exchange with
shareholders of ZiaSun receiving 75% of the stock in the new company
and Telescan shareholders receiving 25% of the stock in the new
company. Each share of ZiaSun common stock will be exchanged for 1
share of INVESTools common stock and each share of Telescan common
stock will be exchanged for .56486 share of INVESTools common stock.
The merger is expected to be completed in September 2001.
F-76
INDEX TO
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
OF ZIASUN AND TELESCAN
Pages
-----
Unaudited Pro Forma Combined Condensed Financial Statement Overview.........F-78
Unaudited Pro Forma Balance Sheet as of March 31, 2001......................F-79
Unaudited Pro Forma Combined Statements of Operations For the
Three Months Ended March 31, 2000.........................................F-80
Unaudited Pro Forma Combined Statements of Operations For the Year
Ended December 31, 2001 ..................................................F-81
Notes to Unaudited Pro Forma Combined Financial Information.................F-82
F-77
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENT OVERVIEW
On May 3, 2001, ZiaSun and Telescan announced the signing of a definitive
agreement to merge into a newly formed company, INVESTools. Under the terms of
the merger, each outstanding share of ZiaSun will be exchanged for one share
of INVESTools common stock; holders of Telescan common stock will receive
0.56486 shares of INVESTools common stock for each share of Telescan common
stock they own; and holders of Telescan preferred stock will receive one share
of INVESTools convertible preferred stock for each share of Telescan preferred
stock they own. The merger will be accounted for as a purchase in which ZiaSun
is treated as the acquirer of Telescan for financial accounting purposes.
The following Unaudited Pro Forma Condensed Consolidated Financial
Information gives pro forma effect to the merger by application of the pro
forma adjustments described in the accompanying notes. The Unaudited Pro Forma
Condensed Consolidated Balance Sheet as of March 31, 2001, gives effect to the
merger as if it occurred on that date.
The Unadudited Pro Forma Condensed Consolidated Statements of Operations
for the three months ended March 31, 2001 and for the year ended December 31,
2000 give effect to the merger as if it occurred on January 1, 2000 and
include adjustments directly attributable to the merger and expected to have a
continuing impact on the merged company.
The Unaudited Pro Forma Condensed Consolidated Financial Information is
based, in part, on the following historical financial statements, which have
been previously filed with the Securities and Exchange Commission by ZiaSun or
Telescan and are included herein:
o The audited Consolidated Financial Statements of ZiaSun as of and for the
year ended December 31, 2000
o The unaudited Consolidated Financial Statements of ZiaSun as of and for
the three months ended March 31, 2001
o The audited Consolidated Financial Statements of Telescan as of and for
the year ended December 31, 2000
o The unaudited Consolidated Financial Statements of Telescan as of and for
the three months ended March 31, 2001
The pro forma adjustments are based on information available, preliminary
estimates and certain assumptions that ZiaSun and Telescan believe are
reasonable. The preliminary allocation of the purchase price to assets and
liabilities of Telescan reflects the assumption that assets and liabilities
are carried at historical amounts which approximate fair market value. The
actual allocation of the purchase price may differ from that reflected in the
unaudited pro forma financial statements after all relevant information is
obtained regarding the fair market value of the assets and liabilities.
The Unaudited Pro Forma Condensed Consolidated Financial Information and
related notes are provided for informational purposes only and are not
necessarily indicative of the consolidated financial position or results of
operations of the merged company. The Unaudited Pro Forma Condensed
Consolidated Financial Information should be read in conjunction with the
historical financial statements of ZiaSun and Telescan, and the related notes
thereto, which are included elsewhere in this Joint Proxy
Statement/Prospectus.
F-78
Unaudited Pro Forma Combined Condensed Balance Sheet
As of March 31, 2001
(in thousands)
Pro Forma Combined
ZiaSun Telescan Adjustments Pro Forma
--------- -------- ----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 3,734 $ 1,591 $ -- $ 5,325
Accounts receivable, net 1,208 2,556 -- 3,764
Marketable securities -- 2,173 -- 2,173
Other current assets 467 371 -- 838
--------- -------- ----------- -----------
Total current assets 5,409 6,691 -- 12,100
--------- -------- ----------- -----------
Property and equipment, net 344 3,049 -- 3,393
Investments 6,348 3,835 -- 10,183
Software development costs, net -- 997 -- 997
Goodwill, net 34,673 -- -- 34,673
Net assets of discontinued operations 264 -- -- 264
Deferred tax asset -- -- (c)5,379 5,379
Other assets 475 70 -- 545
--------- -------- ----------- -----------
Total assets $ 47,513 $14,642 $ 5,379 $ 67,534
========= ======= =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Deferred revenue $ 12 $ 3,467 $ -- $ 3,479
Accounts payable and accrued liabilities 5,981 4,998 -- 10,979
--------- -------- ----------- -----------
Total current liabilities 5,993 8,465 -- 14,458
--------- -------- ----------- -----------
Capital lease obligations, net of current
portion -- 18 -- 18
Shares subject to rescission 614 -- -- 614
Minority interest 25 -- -- 25
Shareholders' Equity:
Preferred stock -- 1 -- 1
Common stock 32 162 (f)221 437
(j)22
Additional paid-in capital 116,154 67,650 (56,530) (g)128,952
(j)1,678
Treasury stock (34) -- (h)34 --
Accumulated comprehensive income -- (1,238) 1,238 --
Deferred compensation (31) -- (j)(1,700) (1,731)
Accumulated deficit (75,240) (60,416) 60,416 (75,240)
--------- -------- ----------- -----------
Total shareholders' equity 40,881 6,159 5,379 52,419
--------- -------- ----------- -----------
Total liabilities and
stockholders' equity $ 47,513 $14,642 $ 5,379 $ 67,534
========= ======= =========== ==========
F-79
Unaudited Pro Forma Combined Condensed Statements of Operations
For The Three Months Ended March 31, 2001
(in thousands except per share data)
Pro Forma Combined
ZiaSun Telescan Adjustments Pro Forma
--------- -------- ----------- -----------
Revenue $ 14,233 $ 5,863 $ (207)(d) $ 19,889
Cost and expenses:
Cost of revenue 9,658 3,688 (153)(d) 13,193
General and administrative 4,237 2,950 283 (j) 7,678
208 (i)
Depreciation and amortization 1,162 546 - 1,708
Write down of assets and other
charges - 701 - 701
--------- -------- ----------- -----------
Income (loss) from operations (824) (2,022) (545) (3,391)
--------- -------- ----------- -----------
Other income (expense):
Loss on equity investments (204) - - (204)
Gain on marketable securities - 1 - 1
Interest, net (51) 31 - (20)
Other, net 9 (9) - -
--------- -------- ----------- -----------
Total other income (expense) (246) 23 - (223)
--------- -------- ----------- -----------
Income (loss) from continuing
operations before taxes (1,070) (1,999) (545) (3,614)
Income taxes (23) - 23 (b) -
--------- -------- ----------- -----------
Income (loss) from continuing
operations (1,093) (1,999) (522) (3,614)
Preferred stock dividend - (31) - (31)
--------- -------- ----------- -----------
Income (loss) from continuing
operations attributable to common
stockholders $ (1,093) $ (2,030) $ (522) $ (3,645)
========= ======== =========== ===========
Earnings per share from continuing operations:
Basic $ (0.04) $ (0.12) $ (0.09)
========= ======== =========== ===========
Diluted $ (0.04) $ (0.12) $ (0.09)
========= ======== =========== ===========
Weighted average common shares:
Basic 32,315 16,296 (7,091) 41,520 (e)
========= ======== =========== ===========
Diluted 32,315 16,296 (7,091) 41,520 (e)
========= ======== =========== ===========
F-80
Unaudited Pro Forma Combined Condensed Statements of Operations
For The Year Ended December 31, 2000
(in thousands except per share data)
Pro Forma Combined
ZiaSun Telescan Adjustments Pro Forma
--------- -------- ----------- -----------
Revenue $ 54,667 $ 35,938 $(1,148)(d) $ 89,457
Cost and expenses:
Cost of revenue 28,369 22,695 (848)(d) 50,216
General and administrative 19,050 16,793 1,133 (j) 37,807
831 (i)
Depreciation and amortization 3,106 2,907 - 6,013
Write down of assets and other
charges 71,756 11,742 - 83,498
Cost of acquisition opportunities - 5,009 - 5,009
--------- -------- ----------- -----------
Income (loss) from operations (67,614) (23,208) (2,264) (93,086)
--------- -------- ----------- -----------
Other income (expense):
Loss on equity investments (200) - - (200)
Gain on marketable securities - 19,432 - 19,432
Realized loss on marketable
securities impairment - (27,668) - (27,668)
Interest, net 351 704 - 1,055
Other, net 16 96 - 112
--------- -------- ----------- -----------
Total other income (expense) 167 (7,436) - (7,269)
--------- -------- ----------- -----------
Income (loss) from continuing
operations before taxes (67,447) (30,644) (2,264) (100,355)
Income taxes (3,101) - 784 (2,317)
--------- -------- ----------- -----------
Income (loss) from continuing
operations (70,548) (30,644) (1,480) (102,672)
Preferred stock dividend - (150) - (150)
--------- -------- ----------- -----------
Income (loss) from continuing
operations attributable to common
stockholders $ (70,548) $(30,794) $(1,480) $ (102,822)
========= ======== ========== ===========
Earnings per share from continuing operations:
Basic $ (2.37) $ (1.85) $ (2.63)
========= ======== ===========
Diluted $ (2.37) $ (1.85) $ (2.63)
========= ======== ===========
Weighted average common shares:
Basic 29,744 16,665 (7,252) 39,157 (e)
========= ======== ========== ===========
Diluted 29,744 16,665 (7,252) 39,157 (e)
========= ======== ========== ===========
F-81
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(a) To record the effect of the merger of Telescan by ZiaSun.
Preferred
Purchase consideration is as follows: Common Stock Stock Options
------------- ------------ -----------
Telescan shares/options outstanding at May 3, 2001 16,296,026 120,000 2,016,150
Exchange ratio to convert shares/options into common stock
equivalents 1 25 1
------------- ------------ -----------
Telescan's equivalent shares/options acquired in merger 16,296,026 3,000,000 2,016,150
Exchange ratio .56486 .56486 .56486
------------- ------------ -----------
ZiaSun equivalent shares/options 9,204,973 1,694,580 1,138,842
Eight day average closing share price of ZiaSun with the date
of the merger announcement as the midpoint/Black Scholes option
valuation $ 0.92 $ 0.92 $ 0.40
------------- ------------ -----------
Fair value of shares/options acquired $ 8,468,575 $ 1,559,014 $ 459,952
============= ============ ===========
Total value of shares and options issued $ 10,487,541
Estimated merger costs 1,050,000
-------------
Total purchase consideration $ 11,537,541
=============
Preliminary allocation of purchase consideration is as follows:
Book value of Telescan $ 6,159,000
Deferred tax asset 5,378,541(c)
-------------
Total purchase consideration allocation $ 11,537,541
=============
The preliminary allocation of the purchase price to Telescan's acquired assets
and liabilities reflects the assumption that assets and liabilities are
carried at historical amounts which approximate fair market value. The actual
allocation of the purchase price may differ from that reflected in the
unaudited pro forma financial statements after all relevant information is
obtained regarding the fair market value of the assets and liabilities.
Total common shares issued by INVESTools: ZiaSun Telescan INVESTools
------------- ------------ -----------
Shares outstanding at March 31, 2001 32,328,130 16,296,026
Exchange ratio 1.00 0.56486
------------- ------------ -----------
32,328,130 9,204,973 41,533,103
============= ============ ===========
(b) To adjust the pro forma tax provision (benefit) to reflect the estimated
utilization of the deferred tax asset of the merged company.
(c) Fair value of the deferred tax asset expected to be utilized in the
future by the merged company.
(d) To eliminate transactions between ZiaSun and Telescan. Differences in
intercompany amounts reflect timing differences in recording the
transactions.
F-82
(e) The calculation of the combined weighted average shares outstanding and
basic and diluted earnings per share is as follows:
Fiscal Year Ended 2000
--------------------------------------------
ZiaSun Telescan Combined
------------- ------------ -----------
Basic and diluted:
Weighted average shares outstanding 29,744,000 16,665,000
Exchange ratio to convert ZiaSun/Telescan shares into
INVESTools shares 1.00 0.56486
------------- ------------
INVESTools equivelent weighted average shares
outstanding - basic 29,744,000 9,413,392 39,157,392
============= ============ ===========
Three Months Ended March 31, 2001
--------------------------------------------
ZiaSun Telescan Combined
------------- ------------ -----------
Basic and diluted:
Weighted average shares outstanding 32,315,000 16,296,000
Exchange ratio to convert ZiaSun/Telescan shares into
INVESTools shares 1.00 0.56486
------------- ------------ -----------
INVESTools equivalent weighted average shares
outstanding - diluted 32,315,000 9,204,959 41,519,959
============= ============ ===========
(f) Adjustments to common stock:
INVESTools issuance of 41,533,103 shares of $0.01 par value common stock
in exchange for ZiaSun common stock
outstanding and Telescan's common stock outstanding $ 415,000
Elimination of ZiaSun common stock (32,000)
Elimination of Telescan common stock (162,000)
------------
$ 221,000
============
(g) Adjustments to additional paid in capital:
Purchase price, net of merger costs $ 11,538,000
Par value of INVESTools common stock issued at merger (415,000)
Par value of INVESTools preferred stock issued at merger (1,000)
Additional paid in capital for ZiaSun at March 31, 2001 116,154,000
Elimination of ZiaSun common stock 32,000
Elimination of ZiaSun treasury stock (34,000)
Deferred compensation related to the merger transition award 1,678,000
------------
$128,952,000
============
(h) Retirement of ZiaSun treasury stock.
(i) Additional executive compensation effective upon consummation of the
merger.
(j) Merger transition award of cash and stock. This award vests equally over
a three year period on the anniversary of the merger.
F-83
ANNEX I
------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of May 3, 2001
Between
ZIASUN TECHNOLOGIES, INC.
And
TELESCAN, INC.
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TABLE OF CONTENTS
Page
ARTICLE I FORMATION OF HOLDING COMPANY AND SUBSIDIARIES........................1
1.1. Organization of Holdco..............................................1
1.2. Directors and Officers of Holdco....................................2
1.3. Organization of Merger Subsidiaries.................................2
1.4. Actions of Directors and Officers...................................2
1.5. Actions of ZiaSun and Telescan......................................3
ARTICLE II THE MERGERS; CERTAIN RELATED MATTERS................................3
2.1. The Merger..........................................................3
2.2. Closing.............................................................3
2.3. Effective Time......................................................4
2.4. Effects of the Mergers..............................................4
2.5. Charters and Bylaws.................................................4
2.6. Officers and Directors..............................................4
2.7. Effect on ZiaSun Common Stock.......................................5
2.8. ZiaSun Stock Options................................................5
2.9. Certain Adjustments.................................................7
2.10. ZiaSun Appraisal Rights.............................................7
2.11. Effect on Telescan Capital Stock....................................8
2.12. Telescan Stock Options..............................................9
ARTICLE III EXCHANGE OF CERTIFICATES..........................................10
3.1. Exchange Fund......................................................10
3.2. Exchange Procedures................................................10
3.3. Distributions with Respect to Unexchanged Shares...................11
3.4. No Further Ownership Rights in Telescan Capital Stock or
ZiaSun Common Stock .............................................12
3.5. No Fractional Shares of Holdco Common Stock........................12
3.6. Termination of Exchange Fund.......................................12
3.7. No Liability.......................................................13
3.8. Investment of the Exchange Fund....................................13
3.9. Lost Certificates..................................................13
3.10. Withholding Rights.................................................13
3.11. Further Assurances.................................................14
3.12. Stock Transfer Books...............................................14
3.13. Exchange Procedure for Telescan Preferred Stock....................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES.....................................14
4.1. Representations and Warranties of Telescan.........................14
4.2. Representations and Warranties of ZiaSun...........................33
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...........................50
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5.1. Covenants of Telescan..............................................50
5.2. Covenants of ZiaSun................................................54
5.3. Rescission Offer...................................................58
5.4. Governmental Filings...............................................59
ARTICLE VI ADDITIONAL AGREEMENTS..............................................59
6.1. Preparation of Proxy Statement; Stockholders Meetings..............59
6.2. Holdco Board of Directors; Executive Officers......................62
6.3. Access to Information..............................................62
6.4. Reasonable Best Efforts............................................63
6.5. Acquisition Proposals..............................................63
6.6. Fees and Expenses..................................................65
6.7. Directors' and Officers' Indemnification and Insurance.............65
6.8. Public Announcements...............................................67
6.9. Listing of Shares of Holdco Common Stock...........................67
6.10. Affiliates.........................................................67
6.11. Section 16 Matters.................................................68
ARTICLE VII CONDITIONS PRECEDENT..............................................68
7.1. Conditions to Each Party's Obligation to Effect its
Respective Merger ...............................................68
7.2. Additional Conditions to Obligations of Telescan...................69
7.3. Additional Conditions to Obligations of ZiaSun.....................70
ARTICLE VIII TERMINATION AND AMENDMENT........................................71
8.1. Termination........................................................71
8.2. Effect of Termination..............................................73
8.3. Amendment..........................................................74
8.4. Extension; Waiver..................................................74
ARTICLE IX GENERAL PROVISIONS.................................................75
9.1. Non-Survival of Representations, Warranties and Agreements.........75
9.2. Notices............................................................75
9.3. Interpretation.....................................................77
9.4. Counterparts.......................................................77
9.5. Entire Agreement; No Third Party Beneficiaries.....................77
9.6. Governing Law......................................................77
9.7. Severability.......................................................77
9.8. Assignment.........................................................78
9.9. Submission to Jurisdiction; Waivers................................78
9.10. Enforcement........................................................78
9.11. Definitions........................................................79
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LIST OF EXHIBITS
Exhibit Title
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Exhibit A-1 Form of Voting Agreements relating to ZiaSun Shares
Exhibit A-2 Form of Voting Agreements relating to Telescan Shares
Exhibit B-1 Form of Certificate of Incorporation of Holdco
Exhibit B-2 Form of Bylaws of Holdco
Exhibit 6.2 List of Holdco Officers and Directors
Exhibit 6.10 Form of Affiliate Agreement
Exhibit 7.2(c)(1) Form of Holdco and Telescan Merger Sub Representations Letter
Exhibit 7.2(c)(2) Form of Holdco and ZiaSun Merger Sub Representations Letter
Exhibit 7.2(c)(3) Form of Telescan Representations Letter
Exhibit 7.2(c)(4) Form of ZiaSun Representations Letter
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AGREEMENT AND PLAN OF MERGER, dated as of May 3, 2001 (this
"Agreement"), between ZIASUN TECHNOLOGIES, INC., a Nevada corporation
("ZiaSun"), and TELESCAN, INC., a Delaware corporation ("Telescan").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of ZiaSun and Telescan deem it
advisable and in the best interests of each corporation and its respective
stockholders that ZiaSun and Telescan engage in a business combination on the
terms set forth herein in order to advance the long-term strategic business
interests of ZiaSun and Telescan;
WHEREAS, the combination of ZiaSun and Telescan shall be effected by
the terms of this Agreement through the Mergers (as defined in Section
2.1(b));
WHEREAS, in furtherance thereof, the Board of Directors of each of
ZiaSun and Telescan has approved this Agreement and the applicable Merger,
upon the terms and subject to the conditions set forth in this Agreement,
pursuant to which each share of capital stock of ZiaSun and each share of
capital stock of Telescan issued and outstanding immediately prior to the
Effective Time (as defined in Section 2.3) will be converted into the right to
receive shares of capital stock of Holdco (as defined in Section 1.1) as set
forth herein;
WHEREAS, as a condition and inducement to each of ZiaSun's and
Telescan's willingness to enter into this Agreement, ZiaSun, Telescan, certain
stockholders of ZiaSun (the "ZiaSun Designated Stockholders") and certain
stockholders of Telescan (the "Telescan Designated Stockholders") are entering
into agreements dated as of the date hereof in the form of Exhibit A (the
"Voting Agreements") pursuant to which each of the ZiaSun Designated
Stockholders and the Telescan Designated Stockholders have agreed, among other
things, to vote their shares of capital stock of ZiaSun and Telescan,
respectively, in favor of the adoption of this Agreement; and
WHEREAS, for Federal income tax purposes, it is intended that the
Mergers shall qualify as exchanges within the meaning of Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder, and that the ZiaSun Merger (as defined in Section
2.1(a)) shall qualify as a reorganization within the meaning of Section 368(a)
of the Code and the regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1. Organization of Holdco. As promptly as practicable following
the execution of this Agreement and receipt of any required approvals, ZiaSun
and Telescan shall cause a new corporation ("Holdco") to be organized under
the laws of the State of Delaware. The certificate
of incorporation and bylaws of Holdco shall initially be as agreed upon by
ZiaSun and Telescan. The authorized capital stock of Holdco shall initially
consist of 100 shares of common stock, par value $0.01 per share (the "Holdco
Common Stock"), of which one share shall be issued to ZiaSun and one share
shall be issued to Telescan. ZiaSun and Telescan shall take, and shall cause
Holdco to take, all requisite action to cause the certificate of incorporation
of Holdco to be in the form of Exhibit B-1 (the "Holdco Charter") and the
bylaws of Holdco to be in the form of Exhibit B-2 (the "Holdco Bylaws"), in
each case, at the Effective Time.
1.2. Directors and Officers of Holdco. Prior to the Effective Time,
the directors and officers of Holdco shall consist of equal numbers of
representatives of ZiaSun and Telescan and shall initially be as designated
and elected by ZiaSun and Telescan. ZiaSun and Telescan shall take all
requisite action to cause the directors and officers of Holdco as of the
Effective Time to be as provided in Section 6.2. Each such director and
officer shall remain in office until his or her successors are elected in
accordance with Section 6.2 and the Holdco Bylaws.
1.3. Organization of Merger Subsidiaries. As promptly as practicable
following the execution of this Agreement, Holdco shall cause to be organized
for the sole purpose of effectuating the Mergers contemplated herein:
(a) a corporation organized under the laws of the State of Nevada
("ZiaSun Merger Sub"); the certificate of incorporation and bylaws of
ZiaSun Merger Sub shall be in such forms as shall be determined by Holdco
as soon as practicable following the execution of this Agreement and the
authorized capital stock of ZiaSun Merger Sub shall initially consist of
100 shares of common stock, par value $0.01 per share, all of which
shares shall be issued to Holdco at a price of $1.00 per share; and
(b) a corporation organized under the laws of the State of Delaware
("Telescan Merger Sub" and, together with ZiaSun Merger Sub, the "Merger
Subsidiaries"); the certificate of incorporation and bylaws of Telescan
Merger Sub shall be in such forms as shall be determined by Holdco as
soon as practicable following the execution of this Agreement; and the
authorized capital stock of Telescan Merger Sub shall initially consist
of 100 shares of common stock, par value $0.01 per share, all of which
shares shall be issued to Holdco at a price of $1.00 per share.
1.4. Actions of Directors and Officers. As promptly as practicable
following the execution of this Agreement, ZiaSun and Telescan shall take all
requisite action to designate the directors and officers of Holdco and each of
the Merger Subsidiaries and to take such steps as may be necessary or
appropriate to complete the organization of Holdco and the Merger
Subsidiaries. ZiaSun and Telescan shall cause the directors of Holdco to
ratify and approve this Agreement, and the directors of the Merger
Subsidiaries to ratify and approve this Agreement.
1.5. Actions of ZiaSun and Telescan. As promptly as practicable
following the execution of this Agreement, ZiaSun and Telescan, as the holders
of all the outstanding shares of Holdco Common Stock, shall adopt this
Agreement and shall cause Holdco, as the sole stockholder of each of the
Merger Subsidiaries, to adopt this Agreement. Each of ZiaSun and
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Telescan shall cause Holdco, and Holdco shall cause the Merger Subsidiaries,
to perform their respective obligations under this Agreement. As promptly as
practicable after the date hereof the parties shall cause this Agreement to be
amended to add Holdco and the Merger Subsidiaries as parties hereto and each
Merger Subsidiary shall become a constituent corporation in its respective
Merger.
ARTICLE II THE MERGERS; CERTAIN RELATED MATTERS
2.1. The Merger. (a) Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Nevada Revised
Statutes (the "NRS"), ZiaSun Merger Sub shall be merged with and into
ZiaSun (the "ZiaSun Merger"). ZiaSun shall be the surviving corporation
in the ZiaSun Merger and shall continue its corporate existence under the
laws of the State of Nevada. As a result of the ZiaSun Merger, ZiaSun
shall become a wholly owned subsidiary of Holdco.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL"), Telescan Merger Sub shall be merged with and into Telescan
(the "Telescan Merger"). Telescan shall be the surviving corporation in
the Telescan Merger and shall continue its corporate existence under the
laws of the State of Delaware. As a result of the Telescan Merger,
Telescan shall become a wholly owned subsidiary of Holdco. The ZiaSun
Merger and the Telescan Merger are together referred to herein as the
"Mergers".
2.2. Closing. Upon the terms and subject to the conditions set forth
in Article VII and the termination rights set forth in Article VIII, the
closing of the Mergers (the "Closing") will take place on the first Business
Day (as defined in Section 9.11(d)) after the satisfaction or waiver (subject
to applicable law) of the conditions (excluding conditions that, by their
nature, cannot be satisfied until the Closing Date (as defined below)) set
forth in Article VII, unless this Agreement has been theretofore terminated
pursuant to its terms or unless another time or date is agreed to in writing
by the parties hereto (the actual time and date of the Closing being referred
to herein as the "Closing Date"). The Closing shall be held at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York, 10017,
unless another place is agreed to in writing by the parties hereto.
2.3. Effective Time. As soon as practicable, but not later than five
business days, following the satisfaction or waiver (subject to applicable
law) of the conditions set forth in Article VII, at the Closing the parties
shall file (i) the ZiaSun Certificate of Merger (as defined below) with the
Secretary of State of the State of Nevada in such form as is required by and
executed and acknowledged in accordance with the relevant provisions of the
NRS and make all other filings or recordings required under the NRS in
connection with the ZiaSun Merger and (ii) the Telescan Certificate of Merger
(as defined below) with the Secretary of State of the State of Delaware in
such form as is required by and executed and acknowledged in accordance with
the relevant provisions of the DGCL and make all other filings or recordings
required under the DGCL in connection with the Telescan Merger. The Mergers
shall become effective at (i) the
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later of the date and time the certificate of merger relating to the ZiaSun
Merger (the "ZiaSun Certificate of Merger") is duly filed with the Secretary
of State of the State of Nevada and the date and time the certificate of
merger relating to the Telescan Merger (the "Telescan Certificate of Merger";
together with the ZiaSun Certificate of Merger, the "Certificates of Merger")
is duly filed with the Secretary of State of the State of Delaware or (ii)
such subsequent time as ZiaSun and Telescan shall agree and as shall be
specified in the Certificates of Merger; provided that both Mergers shall
become effective at the same time (such time as the Mergers become effective
being the "Effective Time").
2.4. Effects of the Mergers. At and after the Effective Time, (i)
the ZiaSun Merger will have the effects set forth in the NRS and (ii) the
Telescan Merger will have the effects set forth in the DGCL.
2.5. Charters and Bylaws. (a) Certificates of
Incorporation. The Restated Articles of Incorporation of ZiaSun, as
in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the surviving corporation in the
ZiaSun Merger. The Restated Certificate of Incorporation of
Telescan, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation of the surviving
corporation in the Telescan Merger.
(b) Bylaws. The bylaws of ZiaSun, as in effect immediately
prior to the Effective Time, shall be the bylaws of the surviving
corporation in the ZiaSun Merger. The bylaws of Telescan, as in
effect immediately prior to the Effective Time, shall be the bylaws
of the surviving corporation in the Telescan Merger.
2.6. Officers and Directors. The officers and directors of ZiaSun
Merger Sub immediately prior to the Effective Time shall be the officers and
directors of the surviving corporation in the ZiaSun Merger. The officers and
directors of Telescan Merger Sub immediately prior to the Effective Time shall
be the officers and directors of the surviving corporation in the Telescan
Merger.
2.7. Effect on ZiaSun Common Stock. (a) As of the Effective Time, by
virtue of the ZiaSun Merger and without any action on the part of the holder
of any shares of the common stock, par value $0.001 per share, of ZiaSun (the
"ZiaSun Common Stock") or any shares of common stock of ZiaSun Merger Sub:
(b) Common Stock of ZiaSun Merger Sub. Each issued and
outstanding share of common stock, par value $0.01 per share, of
ZiaSun Merger Sub shall be converted into one fully paid and
nonassessable share of common stock, par value $0.01 per share, of
the surviving corporation in the ZiaSun Merger.
(c) Cancellation of Treasury Stock. Each share of ZiaSun
Common Stock issued and owned or held by ZiaSun at the Effective
Time shall, by virtue of the ZiaSun Merger, cease to be outstanding
and shall be canceled and retired, and no consideration shall be
delivered in exchange therefor.
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(d) Conversion of ZiaSun Common Stock. Subject to Section 3.5, each
issued and outstanding share of ZiaSun Common Stock (other than shares to
be canceled in accordance with Section 2.7(b) and other than shares
subject to Section 2.10) shall be converted into the right to receive one
(the "ZiaSun Exchange Ratio") fully paid and nonassessable shares of
Holdco Common Stock. The shares of Holdco Common Stock into which shares
of ZiaSun Common Stock are converted pursuant to the foregoing are
referred to herein collectively as the "ZiaSun Merger Consideration."
As a result of the ZiaSun Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of ZiaSun Common Stock
shall cease to be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of a certificate which immediately prior to
the Effective Time represented any such shares of ZiaSun Common Stock (such
certificate or other evidence of ownership, a "ZiaSun Certificate") shall
thereafter cease to have any rights with respect to such shares of ZiaSun
Common Stock, except the right (subject to Section 2.7(b) and Section 2.10) to
receive the applicable ZiaSun Merger Consideration with respect thereto and
any cash in lieu of fractional shares of applicable Holdco Common Stock with
respect thereto to be issued in consideration therefor and any dividends or
other distributions to which holders of ZiaSun Common Stock become entitled
all in accordance with Article III upon the surrender of such ZiaSun
Certificate.
2.8. ZiaSun Stock Options. (a) Each ZiaSun Stock Option (as defined
in Section 4.2(b)) granted prior to the Effective Time and which remains
outstanding immediately prior to the Effective Time shall cease to
represent a right to acquire shares of ZiaSun Common Stock and shall be
converted (each, as so converted, a "ZiaSun Converted Option"), at the
Effective Time, into an option to acquire, on the same terms and
conditions as were applicable under the ZiaSun Stock Option (but taking
into account any changes thereto, including the acceleration thereof,
provided for in the ZiaSun Stock Option Plans (as defined in Section
4.2(b)), in any award agreement or in such option by reason of this
Agreement or the transactions contemplated hereby), that number of shares
of Holdco Common Stock determined by multiplying the number of shares of
ZiaSun Common Stock subject to such ZiaSun Stock Option by the ZiaSun
Exchange Ratio, rounded down, if necessary, to the nearest whole share of
Holdco Common Stock, at a price per share (rounded to the nearest
one-hundredth of a cent) equal to the per share exercise price specified
in such ZiaSun Stock Option divided by the ZiaSun Exchange Ratio;
provided, however, that in the case of any ZiaSun Stock Option to which
Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code, the option price, the number of shares subject
to such option and the terms and conditions of exercise of such option
shall be determined in a manner consistent with the requirements of
Section 424(a) of the Code. Without limiting the foregoing, the duration
and other terms of each ZiaSun Converted Option immediately after the
Effective Time (unless otherwise agreed in writing by the holder of a
ZiaSun Converted Option with respect to such ZiaSun Converted Option)
shall be the same as the corresponding ZiaSun Stock Option that were in
effect immediately before the Effective Time, except that references to
ZiaSun and ZiaSun Common Stock in the ZiaSun Option Plans (and the
corresponding
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references in each option agreement documenting each such ZiaSun Stock
Option) shall, as appropriate, be deemed to be references to Holdco and
Holdco Common Stock.
(b) As soon as practicable after the Effective Time, Holdco shall
deliver to the holders of ZiaSun Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective ZiaSun
Stock Option Plans and agreements evidencing the grants of such ZiaSun
Stock Options and stating that such ZiaSun Stock Options and agreements
shall be assumed by Holdco and shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 2.8
after giving effect to the ZiaSun Merger and the terms of the ZiaSun
Stock Option Plans). To the extent permitted by law, Holdco shall comply
with the terms of the ZiaSun Stock Option Plans and shall take such
reasonable steps as are necessary or required by, and subject to the
provisions of, such ZiaSun Stock Option Plans, to have the ZiaSun Stock
Options which qualified as incentive stock options under Section 422 of
the Code prior to the Effective Time continue to qualify as incentive
stock options of Holdco after the Effective Time.
(c) Prior to the Effective Time, Holdco shall take all necessary
action to assume as of the Effective Time all obligations undertaken by,
or on behalf of, Holdco under this Section 2.8 and to adopt at the
Effective Time the ZiaSun Stock Option Plans and each ZiaSun Converted
Option, and to take all other actions called for by this Section 2.8,
including the reservation, issuance and listing of a number of shares of
Holdco Common Stock at least equal to the number of shares of Holdco
Common Stock that will be subject to ZiaSun Converted Options. No later
than the Effective Time, Holdco shall file a registration statement on
Form S-8 (or any successor or, including if Form S-8 is not available,
other appropriate forms) with respect to the shares of Holdco Common
Stock subject to such options or restricted shares and shall maintain the
effectiveness of such registration statement or registration statements
(and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options or restricted shares
remain outstanding.
2.9. Certain Adjustments. If, between the date of this Agreement and
the Effective Time (and as permitted by Sections 5.1 and 5.2), the outstanding
shares of Telescan Capital Stock (as defined in Section 2.11(d)) or the
outstanding shares of ZiaSun Common Stock shall have been increased,
decreased, changed into or exchanged for a different number of shares or
different class, in each case, by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange of shares or
a stock dividend or dividend payable in any other securities shall be declared
with a record date within such period, or any similar event shall have
occurred, the applicable Merger Consideration (as defined in Section 2.11(d))
shall be appropriately adjusted to provide to the holders of ZiaSun Common
Stock and Telescan Capital Stock the same economic effect as contemplated by
this Agreement prior to such event.
2.10. ZiaSun Appraisal Rights. (a) Notwithstanding anything in this
Agreement to the contrary and unless provided for by applicable law, shares of
ZiaSun Common Stock that are issued and outstanding immediately prior to the
Effective Time and that are
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owned by stockholders who have properly perfected their rights of appraisal
within the meaning of Chapter 92A of the NRS (the "ZiaSun Dissenting Shares")
shall not be converted into the right to receive the applicable ZiaSun Merger
Consideration with respect thereto, unless and until such stockholders shall
have failed to perfect their right of appraisal under applicable law, but,
instead, the holders thereof shall be entitled to payment of the appraised
value of such ZiaSun Dissenting Shares in accordance with Chapter 92A of the
NRS. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right of appraisal, each share of ZiaSun Common Stock
held by such stockholder shall thereupon be deemed to have been converted into
the right to receive and become exchangeable for, at the Effective Time, the
applicable ZiaSun Merger Consideration with respect thereto, in the manner
provided for in Section 2.7.
(b) ZiaSun shall give Telescan (i) prompt notice of any demands for
appraisal filed pursuant to Chapter 92A of the NRS received by ZiaSun,
withdrawals of such demands and any other instruments served or delivered in
connection with such demands pursuant to the NRS and received by ZiaSun and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands under the NRS consistent with the obligations of ZiaSun
thereunder. ZiaSun shall not, except with the prior written consent of
Telescan, (x) make any payment with respect to any such demand, (y) offer to
settle or settle any such demand or (z) waive any failure to timely deliver a
written demand for appraisal or timely take any other action to perfect
appraisal rights in accordance with the NRS.
2.11. Effect on Telescan Capital Stock. As of the Effective Time, by
virtue of the Telescan Merger and without any action on the part of the holder
of any shares of the Telescan Capital Stock or any shares of capital stock of
Telescan Merger Sub:
(a) Capital Stock of Telescan Merger Sub. Each issued and
outstanding share of common stock, par value $0.01 per share, of Telescan
Merger Sub shall be converted into one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the surviving corporation
in the Telescan Merger.
(b) Cancellation of Treasury Stock. Each share of Telescan Capital
Stock issued and owned or held by Telescan at the Effective Time shall,
by virtue of the Telescan Merger, cease to be outstanding and shall be
canceled and retired, and no consideration shall be delivered in exchange
therefor.
(c) Conversion of Telescan Common Stock. Subject to Section 3.5, (i)
each issued and outstanding share of common stock, par value $0.01 per
share, of Telescan (the "Telescan Common Stock") (other than shares to be
canceled in accordance with Section 2.11(b)) shall be converted into the
right to receive 0.56486 (the "Telescan Exchange Ratio") fully paid and
nonassessable shares of Holdco Common Stock.
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(d) Conversion of Telescan Preferred Stock. Subject to Section 3.5,
each issued and outstanding share of the 5% Series B Convertible
Preferred Stock, par value $0.01 per share, of Telescan, (the "Telescan
Preferred Stock"), shall be converted into and become one fully paid and
nonassessable share of 5% Convertible Preferred Stock, par value $0.01
per share, of Holdco (the "Holdco Preferred Stock"), with the identical
terms as the Telescan Preferred Stock with the terms of conversion into
shares of Holdco Common Stock consistent with the Telescan Exchange
Ratio. The Telescan Preferred Stock, together with the Telescan Common
Stock are referred to herein collectively as the "Telescan Capital
Stock"). The shares of Holdco Common Stock or Holdco Preferred Stock into
which shares of Telescan Common Stock or Telescan Preferred Stock are
respectively converted pursuant to Sections 2.11(c) and (d) are referred
herein collectively as the "Telescan Merger Consideration", and together
with the ZiaSun Merger Consideration, are referred to herein as the
"Merger Consideration."
As a result of the Telescan Merger and without any action on the
part of the holders thereof, at the Effective Time, all shares of Telescan
Capital Stock shall cease to be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of a certificate which immediately
prior to the Effective Time represented any such shares of Telescan Capital
Stock (such certificate or other evidence of ownership, a "Telescan
Certificate" and, together with the ZiaSun Certificates, the "Certificates")
shall thereafter cease to have any rights with respect to such shares of
Telescan Capital Stock, except the right (subject to Section 2.11(b)) to
receive the Telescan Merger Consideration to be issued in consideration
therefor and any dividends or other distributions to which holders of Telescan
Capital Stock become entitled all in accordance with Article III upon the
surrender of such Telescan Certificate.
2.12. Telescan Stock Options. (a) Each Telescan Stock Option (as
defined in Section 4.1(b)) granted prior to the Effective Time and which
remains outstanding immediately prior to the Effective Time shall cease
to represent a right to acquire shares of Telescan Common Stock and shall
be converted (each, as so converted, a "Telescan Converted Option"), at
the Effective Time, into an option to acquire, on the same terms and
conditions as were applicable under the Telescan Stock Option (but taking
into account any changes thereto, including the acceleration thereof,
provided for in the Telescan Stock Option Plans (as defined in Section
4.1(b)), in any award agreement or in such option by reason of this
Agreement or the transactions contemplated hereby), that number of shares
of Holdco Common Stock determined by multiplying the number of shares of
Telescan Common Stock subject to such Telescan Stock Option by the
Telescan Exchange Ratio, rounded down, if necessary, to the nearest whole
share of Holdco Common Stock, at a price per share (rounded to the
nearest one-hundredth of a cent) equal to the per share exercise price
specified in such Telescan Stock Option divided by the Telescan Exchange
Ratio; provided, however, that in the case of any Telescan Stock Option
to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code, the option price, the number of shares
subject to such option and the terms and conditions of exercise of such
option shall be determined in a manner
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consistent with the requirements of Section 424(a) of the Code. Without
limiting the foregoing, the duration and other terms of each Telescan
Converted Option immediately after the Effective Time (unless otherwise
agreed in writing by the holder of an Telescan Converted Option with
respect to such Telescan Converted Option) shall be the same as the
corresponding Telescan Stock Option that were in effect immediately
before the Effective Time, except that references to Telescan and
Telescan Common Stock in the Telescan Option Plans (and the corresponding
references in each option agreement documenting each such Telescan Stock
Option) shall, as appropriate, be deemed to be references to Holdco and
Holdco Common Stock.
(b) As soon as practicable after the Effective Time, Holdco shall
deliver to the holders of Telescan Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Telescan
Stock Option Plans and agreements evidencing the grants of such Telescan
Stock Options and stating that such Telescan Stock Options and agreements
shall be assumed by Holdco and shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 2.12
after giving effect to the Telescan Merger and the terms of the Telescan
Stock Option Plans). To the extent permitted by law, Holdco shall comply
with the terms of the Telescan Stock Option Plans and shall take such
reasonable steps as are necessary or required by, and subject to the
provisions of, such Telescan Stock Option Plans, to have the Telescan
Stock Options which qualified as incentive stock options under Section
422 of the Code prior to the Effective Time continue to qualify as
incentive stock options of Holdco after the Effective Time.
(c) Prior to the Effective Time, Holdco shall take all necessary
action to assume as of the Effective Time all obligations undertaken by,
or on behalf of, Holdco under this Section 2.12 and to adopt at the
Effective Time the Telescan Stock Option Plans and each Telescan
Converted Option, and to take all other actions called for by this
Section 2.12, including the reservation, issuance and listing of a number
of shares of Holdco Common Stock at least equal to the number of shares
of Holdco Common Stock that will be subject to Telescan Converted
Options. No later than the Effective Time, Holdco shall file a
registration statement on Form S-8 (or any successor or, including if
Form S-8 is not available, other appropriate forms) with respect to the
shares of Holdco Common Stock subject to such options or restricted
shares and shall maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such
options or restricted shares remain outstanding.
ARTICLE III EXCHANGE OF CERTIFICATES
3.1. Exchange Fund. Prior to the Effective Time, the parties shall
appoint a commercial bank or trust company to act as exchange agent hereunder
for the purpose of exchanging Certificates for the applicable Merger
Consideration (the "Exchange Agent"). At or prior to the Effective Time,
Holdco shall deposit with the Exchange Agent, in trust for the
9
benefit of holders of shares of Telescan Common Stock and ZiaSun Common Stock,
certificates representing the shares of the Holdco Common Stock issuable
pursuant to Sections 2.7 and 2.11 in exchange for outstanding shares of
Telescan Common Stock and ZiaSun Common Stock. Holdco agrees to make available
to the Exchange Agent from time to time as needed, cash sufficient to pay cash
in lieu of fractional shares pursuant to Section 3.5 and any dividends and
other distributions pursuant to Section 3.3. Any cash and certificates
representing Holdco Common Stock deposited with the Exchange Agent shall
hereinafter be referred to as the "Exchange Fund".
3.2. Exchange Procedures. Promptly after the Effective Time, Holdco
shall cause the Exchange Agent to mail to each holder of a Certificate (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent, and which letter shall be
in customary form and have such other provisions as ZiaSun or Telescan may
reasonably specify (such letter to be reasonably acceptable to ZiaSun and
Telescan prior to the Effective Time) and (ii) instructions for effecting the
surrender of such Certificates in exchange for the applicable Merger
Consideration, together with any dividends and other distributions with
respect thereto and any cash in lieu of fractional shares. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
(A) one or more shares of Holdco Common Stock (which shall be in
uncertificated book-entry form unless a physical certificate is requested or
is otherwise required by applicable law or regulation) representing, in the
aggregate, the whole number of shares that such holder has the right to
receive pursuant to Section 2.7 or 2.11 (after taking into account all shares
of Telescan Common Stock and ZiaSun Common Stock then held by such holder) and
(B) a check in the amount equal to the cash that such holder has the right to
receive pursuant to the provisions of this Article III, including cash in lieu
of any fractional shares of Holdco Common Stock pursuant to Section 3.5 and
dividends and other distributions pursuant to Section 3.3. No interest will be
paid or will accrue on any cash payable pursuant to Section 3.3 or 3.5. In the
event of a transfer of ownership of Telescan Common Stock which is not
registered in the transfer records of Telescan or a transfer of ownership of
ZiaSun Common Stock which is not registered in the transfer records of ZiaSun,
one or more shares of Holdco Common Stock evidencing, in the aggregate, the
proper number of shares of Holdco Common Stock, a check in the proper amount
of cash in lieu of any fractional shares of Holdco Common Stock pursuant to
Section 3.5 and any dividends or other distributions to which such holder is
entitled pursuant to Section 3.3, may be issued with respect to such Telescan
Common Stock or ZiaSun Common Stock to such a transferee if the Certificate
representing such shares of Telescan Common Stock or ZiaSun Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
3.3. Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Holdco Common Stock that such holder
10
would be entitled to receive upon surrender of such Certificate and no cash
payment in lieu of fractional shares of Holdco Common Stock shall be paid to
any such holder pursuant to Section 3.5 until such holder shall surrender such
Certificate in accordance with Section 3.2. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder thereof without interest, (a) promptly after the
time of such surrender, the amount of any cash payable in lieu of fractional
shares of Holdco Common Stock to which such holder is entitled pursuant to
Section 3.5 and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
shares of Holdco Common Stock and (b) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time and a payment date subsequent to such surrender payable with
respect to such shares of Holdco Common Stock.
3.4. No Further Ownership Rights in Telescan Capital Stock or ZiaSun
Common Stock. All shares of Holdco Common Stock issued and cash paid upon
conversion of shares of Telescan Capital Stock or ZiaSun Common Stock in
accordance with the terms of Article II and this Article III (including any
cash paid pursuant to Section 3.3 or 3.5) shall be deemed to have been issued
or paid in full satisfaction of all rights pertaining to the shares of
Telescan Capital Stock or ZiaSun Common Stock.
3.5. No Fractional Shares of Holdco Common Stock.
(a) No certificates or scrip or shares of Holdco Common
Stock representing fractional shares of Holdco Common Stock or
book-entry credit of the same shall be issued upon the surrender for
exchange of Certificates and such fractional share interests will
not entitle the owner thereof to vote or to have any rights of a
stockholder of Holdco or a holder of shares of Holdco Common Stock.
(b) Notwithstanding any other provision of this Agreement,
each holder of shares of Telescan Common Stock or ZiaSun Common
Stock exchanged pursuant to the Telescan Merger and the ZiaSun
Merger, respectively, who would otherwise have been entitled to
receive a fraction of a share of Holdco Common Stock (determined
after taking into account all Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of
Holdco Common Stock multiplied by (ii) the closing price for a share
of Holdco Common Stock as reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") on the
first trading day following the date on which the Effective
Time occurs. As promptly as practicable after the determination of
the amount of cash, if any, to be paid to holders of fractional
interests, the Exchange Agent shall so notify Holdco, and Holdco
shall deposit such amount with the Exchange Agent and shall cause
the Exchange Agent to forward payments to such holders of fractional
interests subject to and in accordance with the terms hereof.
3.6. Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months
after the Effective Time shall,
11
at Holdco's request, be delivered to Holdco or otherwise on the instruction of
Holdco, and any holders of the Certificates who have not theretofore complied
with this Article III shall after such delivery look only to Holdco for the
Merger Consideration with respect to the shares of Telescan Common Stock or
ZiaSun Common Stock formerly represented thereby to which such holders are
entitled pursuant to Sections 2.7, 2.11 and 3.2, any cash in lieu of
fractional shares of Holdco Common Stock to which such holders are entitled
pursuant to Section 3.5 and any dividends or distributions with respect to
shares of Holdco Common Stock to which such holders are entitled pursuant to
Section 3.3. Any such portion of the Exchange Fund remaining unclaimed by
holders of shares of Telescan Common Stock or ZiaSun Common Stock immediately
prior to such time as such amounts would otherwise escheat to or become
property of any Governmental Entity (as defined in Section 4.1(c)(iii)) shall,
to the extent permitted by law, become the property of Holdco free and clear
of any claims or interest of any Person (as defined in Section 9.11(h))
previously entitled thereto.
3.7. No Liability. None of Holdco, ZiaSun, ZiaSun Merger Sub,
Telescan, Telescan Merger Sub or the Exchange Agent shall be liable to any
Person in respect of any Merger Consideration from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
3.8. Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Holdco on a daily
basis; provided that no such investment or loss thereon shall affect the
amounts payable to ZiaSun or Telescan stockholders pursuant to Article II and
the other provisions of this Article III. Any interest and other income
resulting from such investments shall promptly be paid to Holdco.
3.9. Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Holdco, the posting by such Person of a bond in such reasonable
amount as Holdco may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration with respect to the shares of Telescan Common Stock or
ZiaSun Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Holdco Common Stock, and unpaid dividends and
distributions on shares of Holdco Common Stock deliverable in respect thereof,
pursuant to this Agreement.
3.10. Withholding Rights. Holdco shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Telescan Common Stock or ZiaSun Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Holdco, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Telescan Common Stock or ZiaSun Common Stock in respect of which
such deduction and withholding was made
12
by Holdco.
3.11. Further Assurances. At and after the Effective Time, the
officers and directors of Holdco will be authorized to execute and deliver, in
the name and on behalf of ZiaSun, ZiaSun Merger Sub, Telescan or Telescan
Merger Sub, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of ZiaSun, ZiaSun Sub, Telescan or Telescan
Merger Sub, any other actions and things to vest, perfect or confirm of record
or otherwise in Holdco any and all right, title and interest in, to and under
any of the rights, properties or assets acquired or to be acquired by Holdco
as a result of, or in connection with, the Mergers.
3.12. Stock Transfer Books. The stock transfer books of Telescan and
ZiaSun shall be closed immediately upon the Effective Time and there shall be
no further registration of transfers of shares of Telescan Common Stock or
ZiaSun Common Stock thereafter on the records of Telescan or ZiaSun. On or
after the Effective Time, any Certificates presented to the Exchange Agent or
Holdco for any reason shall be converted into the right to receive the
applicable Merger Consideration with respect to the shares of Telescan Common
Stock or ZiaSun Common Stock formerly represented thereby (including any cash
in lieu of fractional shares of Holdco Common Stock to which the holders
thereof are entitled pursuant to Section 3.5 and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
3.3).
3.13. Exchange Procedure for Telescan Preferred Stock. At or prior
to the Effective Time, Holdco shall hold in trust for the benefit of holders
of shares of Telescan Preferred Stock, certificates representing the shares of
Holdco Preferred Stock issuable pursuant to Section 2.11(d) in exchange for
outstanding shares of Telescan Preferred Stock. Upon surrender of a
Certificate representing any shares of Telescan Preferred Stock, and such
other documents as may reasonably be required by Holdco, the holder of such
Certificate shall be entitled to receive in exchange therefor shares of Holdco
Preferred Stock representing, in the aggregate, the whole number of shares
that such holder has the right to receive pursuant to Section 2.11(d). The
exchange of the Telescan Preferred Stock for Holdco Preferred Stock shall also
be subject to the provisions of Section 3.4, Section 3.7, Section 3.9, Section
3.11 and Section 3.12.
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of Telescan. Except as disclosed
in the Telescan SEC Reports (as defined in Section 4.1 (d)(i)) filed prior to
the date hereof or as set forth in the Telescan Disclosure Schedule delivered
by Telescan to ZiaSun prior to the execution of this Agreement (the "Telescan
Disclosure Schedule"), Telescan represents and warrants to ZiaSun as follows:
13
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of Telescan and each of its Subsidiaries (as
defined in Section 9.11(j)) is a corporation or other organization
duly incorporated or organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease,
use and operate its assets and properties and to carry on its
business as now being conducted, except where the failure to be in
good standing, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on
Telescan. Telescan and each of the Subsidiaries is duly qualified
and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good
standing, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Telescan. The copies
of the certificate of incorporation and bylaws of Telescan and each
of its Subsidiaries in, or incorporated by reference in, the
Telescan SEC Reports are true, complete and correct copies of such
documents as in effect on the date of this Agreement. A list of the
respective jurisdictions of organization of Telescan and each of its
Subsidiaries, and the respective jurisdictions where Telescan and
each of its Subsidiaries is qualified or licensed as a foreign
corporation to do business, are disclosed in Section 4.1(a) of the
Telescan Disclosure Schedule.
(ii) Exhibit 21 to Telescan's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 includes all the
Subsidiaries of Telescan which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X
of the Securities and Exchange Commission (the "SEC")). All the
outstanding shares of capital stock of, or other equity interests
in, each such Significant Subsidiary are duly authorized, validly
issued, fully paid and nonassessable and are, except as set forth in
such Exhibit 21, owned directly or indirectly by Telescan, free and
clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively
"Liens") and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such
capital stock or other ownership interests), except for restrictions
imposed by applicable securities laws. Except as disclosed in
Section 4.1(a) of the Telescan Disclosure Schedule, as of the date
of this Agreement, neither Telescan nor any of its Subsidiaries
directly or indirectly owns 5% or more of any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or
other business association or entity (other than Subsidiaries) that
is or would reasonably be expected to be material to Telescan and
its Subsidiaries taken as a whole.
14
(b) Capital Structure. As of the date hereof, the
authorized capital stock of Telescan consists of (A) 30,000,000
shares of Telescan Common Stock, of which 16,296,026 shares were
outstanding and (B) 10,000,000 shares of Telescan Preferred Stock,
of which 120,000 shares were outstanding. All issued and outstanding
shares of the capital stock of Telescan are duly authorized, validly
issued, fully paid and nonassessable and free of any preemptive
rights. There are no subscriptions, options, warrants or other
rights (including "phantom" stock rights), agreements, arrangements
or commitments obligating Telescan to issue or sell shares of
Capital Stock or other equity interests in Telescan other than
options and other rights to acquire Telescan Common Stock from
Telescan representing in the aggregate the right to purchase
approximately 2,433,865 shares of Telescan Common Stock (such
options, together with the other employee stock options issued by
Telescan after the date hereof in accordance with the Telescan Stock
Option Plans and Section 5.1, collectively, the "Telescan Stock
Options") under Telescan's Amended and Restated Amended Stock Option
Plan, 1995 Stock Option Plan, 2000 Stock Option Plan and other
option plans assumed by Telescan (collectively, the "Telescan Stock
Option Plans"). Section 4.1(b) of the Telescan Disclosure Schedule
sets forth a complete and correct list, as of the date hereof, of
the number of shares of Telescan Common Stock subject to Telescan
Stock Options or other rights to purchase or receive Telescan Common
Stock granted under the Telescan Benefit Plans or otherwise and the
exercise price of the outstanding Telescan Stock Options referenced
therein. Except as disclosed in Sections 4.01(b) or 4.01(m) of the
Telescan Disclosure Schedule, there are no outstanding obligations
of Telescan or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Telescan Capital Stock or any
capital stock or other equity or ownership interests of any
Subsidiary of Telescan or to provide funds to, or make any
investments (in form of a loan, capital contribution or otherwise)
in, any Subsidiary of Telescan or any other Person.
(c) Authority; No Conflicts.
(i) Telescan has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby,
subject in the case of the consummation of the Telescan Merger to
the adoption of this Agreement by the Required Telescan Vote (as
defined in Section 4.1(g)). The execution and delivery of this
Agreement, the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part
of Telescan and no other corporate proceedings on the part of
Telescan are necessary to authorize the execution and delivery of
this Agreement or to consummate the Telescan Merger and the other
transactions contemplated hereby, subject in the case of the
consummation of the Telescan Merger to the adoption of this
Agreement by the Required Telescan Vote. This Agreement has been
duly and validly executed and delivered by Telescan and constitutes
a valid, legal and binding agreement of Telescan, enforceable
against Telescan in accordance with its terms, except as such
15
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
(ii) The execution and delivery of this Agreement by
Telescan do not, and the performance of its obligations hereunder
and the consummation by Telescan of the Telescan Merger and the
other transactions contemplated hereby will not, conflict with, or
result in any violation or breach of, or constitute a default (with
or without notice or lapse of time, or both) under, or give rise to
a right of, or result by its terms in the, termination, amendment,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a Lien, charge, "put" or
"call" right or other encumbrance on, or the loss of, any assets,
including Intellectual Property (as defined in Section 4.1(j)), or
cause or create any right of payment or reimbursement (any such
conflict, violation, breach, default, right of termination,
amendment, cancellation or acceleration, loss, creation, payment or
reimbursement, a "Violation") pursuant to: (A) any provision of the
certificate of incorporation or bylaws or similar organizational
document of Telescan or any Significant Subsidiary of Telescan, or
(B) except as (1) individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on
Telescan; (2) would not prevent or materially delay the consummation
of the Mergers, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below or (3) as set forth in
Section 4.1(c) of the Telescan Disclosure Schedule, any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Telescan or any
Subsidiary of Telescan or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational,
national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or
commission or other authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other
governmental or quasi-governmental authority (a "Governmental
Entity") or any other Person is required by or with respect to
Telescan or any Subsidiary of Telescan in connection with the
execution and delivery of this Agreement by Telescan or the
performance of its obligations hereunder or the consummation of the
Telescan Merger and the other transactions contemplated hereby,
except for those required under or in relation to (A) state
securities or "blue sky" laws (the "Blue Sky Laws"), (B) the
Securities Act of 1933, as amended (the "Securities Act"), (C) the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(D) the DGCL and NRS with respect to the filing of the Certificates
of Merger, (E) the rules and
16
regulations of the NASDAQ and (F) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure
of which to make or obtain, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on
Telescan. Consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in
relation to any of the foregoing clauses (A) through (E) are
hereinafter referred to as "Necessary Consents".
(d) Reports and Financial Statements.
(i) Telescan has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January 1,
1999 (collectively, including all exhibits thereto, the "Telescan
SEC Reports"). None of the Telescan SEC Reports, as of their
respective dates (and, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing),
contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the Telescan SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of Telescan and its consolidated
Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with United States
generally accepted accounting principles ("GAAP") consistently
applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to the absence of notes and normal year-end adjustments
that have not been and are not expected to be material in amount.
All of such Telescan SEC Reports, as of their respective dates (and
as of the date of any amendment to the respective Telescan SEC
Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act
and the rules and regulations promulgated thereunder. Each
Subsidiary of Telescan is treated as a consolidated Subsidiary of
Telescan in the financial reports of Telescan included in the
Telescan SEC Reports.
(ii) Except as disclosed in the Telescan financial
statements for the period ending December 31, 2000, included in the
Telescan SEC Reports, or as disclosed in Section 4.1(d) of the
Telescan Disclosure Schedule, neither Telescan nor any of its
Subsidiaries has any obligations, liabilities or debts (whether
accrued or fixed, or absolute or contingent, or unmatured, or
determined or determinable), including without limitation those
arising under law or any contract, arrangement or commitment or
undertaking that are of a nature that would be required to be
disclosed on the consolidated balance sheet of Telescan and its
consolidated Subsidiaries or the footnotes thereto prepared in
conformity with GAAP, other
17
than (A) liabilities incurred in the ordinary course of business
consistent with past practices, (B) liabilities incurred in
accordance with Section 5.1, (C) liabilities for Taxes (as defined
in Section 4.1(l)) or (D) liabilities that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on Telescan.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by
Telescan for inclusion or incorporation by reference in (A) the Form
S-4 (as defined in Section 6.1) will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 6.1) will, on the date
it is first mailed to ZiaSun stockholders or Telescan stockholders
or at the time of the ZiaSun Stockholders Meeting or the Telescan
Stockholders Meeting (each as defined in Section 6.1), contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this
Section 4.1(e), no representation or warranty is made by Telescan
with respect to statements made or incorporated by reference in the
Form S-4 or the Joint Proxy Statement/Prospectus based on
information supplied by ZiaSun for inclusion or incorporation by
reference therein.
(f) Board Approval. The Board of Directors of Telescan, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "Telescan Board
Approval"), has duly (i) determined that this Agreement is fair to and in
the best interests of Telescan and its stockholders and declared the
Telescan Merger to be advisable, (ii) approved this Agreement, the Voting
Agreements and the Telescan Merger and (iii) recommended that the
stockholders of Telescan adopt this Agreement and directed that such
matter be submitted for consideration by Telescan's stockholders at the
Telescan Stockholders Meeting. The Telescan Board Approval constitutes
approval of this Agreement, the Voting Agreements and the Telescan Merger
for purposes of Section 203 of the DGCL. To the knowledge of Telescan,
except for Section 203 of the DGCL (which has been rendered
inapplicable), no state takeover statute is applicable to this Agreement,
the Voting Agreements or the Telescan Merger or the other transactions
contemplated hereby or thereby.
18
(g) Vote Required. The affirmative vote of the holders of
a majority of the outstanding shares of Telescan Common Stock to
adopt this Agreement (the "Required Telescan Vote") is the only vote
of the holders of any class or series of Telescan Capital Stock
necessary to approve or adopt this Agreement and the Telescan Merger
and to consummate the Telescan Merger and the other transactions
contemplated hereby.
(h) Litigation; Compliance with Laws.
(i) There are no claims, investigations, suits, actions,
judgments or proceedings (collectively, "Actions") pending or, to
the knowledge of Telescan, threatened, against or affecting Telescan
or any Subsidiary of Telescan or any property or asset of Telescan
or any Subsidiary of Telescan, before any court, arbitrator or
Governmental Entity (domestic or foreign), which, individually or in
the aggregate, would reasonably be expected to have a Material
Adverse Effect on Telescan, nor are there any judgments, decrees,
determinations, awards, injunctions, rules or orders of any
Governmental Entity or arbitrator outstanding against Telescan or
any Subsidiary of Telescan which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on
Telescan.
(ii) Except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on
Telescan, Telescan and its Subsidiaries hold all permits, licenses,
franchises, variances, exemptions, orders and approvals of all
Governmental Entities which are necessary for the operation of the
businesses as now being conducted of Telescan and its Subsidiaries,
(the "Telescan Permits"), and no suspension or cancellation of any
of the Telescan Permits is pending or, to the knowledge of Telescan,
threatened. Telescan and its Subsidiaries are in compliance with the
terms of the Telescan Permits, except where the failure to so
comply, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Telescan. Neither
Telescan nor any of its Subsidiaries is in violation of, and
Telescan and its Subsidiaries have not received any notices of
violations with respect to, any laws, statutes, ordinances, rules or
regulations of any Governmental Entity, except for violations which,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Telescan.
(i) Absence of Certain Changes or Events. Except as
disclosed in Section 4.1(i) of the Telescan Disclosure Schedule and
for liabilities permitted to be incurred in accordance with this
Agreement or the transactions contemplated hereby, since December
31, 2000, Telescan and each Subsidiary of Telescan has conducted its
business only in the ordinary course and in a manner consistent with
past practices and since such date and prior to the date hereof,
neither Telescan nor any Subsidiary of Telescan has:
19
(i) made or adopted amendments or changes to its
Certificate or Articles of Incorporation or Bylaws;
(ii) declared, set aside or paid a dividend or other
distribution with respect to its capital stock or any direct or
indirect redemption, purchase or other acquisition by it of any of
its capital stock;
(iii) acquired or entered into any agreement, arrangement
or understanding for the acquisition (including, without limitation,
by merger, consolidation, or acquisition of stock or assets) of any
material interest in any corporation, partnership, other business
organization or any division thereof or any material assets, other
than the acquisition of assets in the ordinary course of business
consistent with past practices;
(iv) incurred any indebtedness for borrowed money or
issued any debt securities or assumed, guaranteed or endorsed, or
otherwise as an accommodation become responsible for the obligations
of any Person, or made any loans or advances except for indebtedness
incurred in the ordinary course of business consistent with past
practices;
(v) entered into any contract or agreement material to its
business, results of operations or financial condition other than in
the ordinary course of business consistent with past practices;
(vi) made or authorized any capital expenditure of $50,000
in any individual case or $125,000 in the aggregate;
(vii) revalued any of its assets;
(viii) sold, leased, licensed or otherwise disposed of any
of its material assets or properties, except in the ordinary course
of business as conducted on that date and consistent with past
practices;
(ix) amended or terminated any material contract,
agreement or license to which it is a party or by which it is bound;
(x) permitted or allowed any of its material assets or
properties (whether tangible or intangible) to be subjected to any
Lien, other than in the ordinary course of business, consistent with
past practices;
(xi) taken any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past
practices, with respect to accounting policies, methods or
procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts
receivable);
20
(xii) paid, discharged or satisfied any material claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with
past practices, of liabilities reflected or reserved against in the
financial statements of Telescan included in the Telescan SEC
Reports or subsequently incurred in the ordinary course of business
and consistent with past practices;
(xiii) suffered any casualty, loss or damage with respect
to any of its assets which in the aggregate have a replacement cost
of more than $50,000, whether or not such casualty, loss or damage
shall have been covered by insurance;
(xiv) increased the salary or other compensation payable
or to become payable by it to any of its directors, executive-level
officers or advisors, or declared, paid, committed or otherwise
become obligated for the payment of a bonus or other additional
salary or compensation to any such person except as otherwise
contemplated by this Agreement;
(xv) waived or released any of its material rights or
claims, including any write-off or other compromise of any amount of
its account receivables;
(xvi) changed the prices or royalties set or charged by it
to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to it;
(xvii) terminated, discontinued, closed or disposed of any
facility or other business operation, or laid off any employees
(other than layoffs of less than 5 employees) or implemented any
early retirement, separation or program providing early retirement
window benefits or announced or planned any such action or program
for the future;
(xviii) commenced or received notice or threat of
commencement of any lawsuit or proceeding against or investigation
of it or its affairs;
(xix) received notice of any claim of ownership by a third
party of its Intellectual Property (as defined in Section 4.1(j)
below) or of infringment by it of any third party's Intellectual
Property rights;
(xx) issued or sold any of its shares of capital stock, or
securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(xxi) suffered any Material Adverse Effect;
(xxii) made any material changes in the customary methods
of its operations; or
21
(xxiii) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 4.1(i).
(j) Intellectual Property.
(i) For the purposes of this Agreement, the following
terms have the following definitions:
"Intellectual Property" shall mean any of the following
and all rights in, arising out of, or associated
therewith: (i) all United States and foreign patents and
utility models and applications therefor and all reissues,
divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, and
equivalent or similar rights anywhere in the world in
inventions and discoveries ("Patents"); (ii) all
inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and
customer lists, and all documentation embodying or
evidencing any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor and all
other rights corresponding thereto throughout the world;
("Copyrights"); (iv) all mask works, mask work
registrations and applications therefor, and any
equivalent or similar rights in semiconductor masks,
layouts, architectures or topology ("Mask Works"); (v) all
industrial designs and any registrations and applications
therefor throughout the world; (vi) all trade names, brand
names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications
therefor and all goodwill associated therewith throughout
the world ("Trademarks"); (vii) all databases and data
collections and all rights therein throughout the world;
and (viii) all computer software including all source
code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing
is recorded; (ix) all World Wide Web addresses, sites and
domain names; and (x) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the
world.
"Telescan Business" means the business of Telescan
or any Subsidiary of Telescan, including the
manufacture, use, licensing, distribution and sale
of any products or technology or the provision of
any services by Telescan or
22
any Subsidiary of Telescan, as currently conducted, as
conducted since the inception of Telescan or any
Subsidiary of Telescan, or as reasonably is contemplated
to be conducted by Telescan or any Subsidiary of Telescan
in the future.
"Telescan Intellectual Property" shall mean any
Intellectual Property that is owned by or licensed
to Telescan or any Subsidiary of Telescan.
"Registered Intellectual Property" shall mean all
United States, international and foreign: (i)
Patents, including applications therefor; (ii)
registered Trademarks, applications to register
Trademarks, including intent-to-use applications,
or other registrations or applications related to
Trademarks; (iii) Copyrights registrations and
applications to register Copyrights; (iv) Mask Work
registrations and applications to register Mask
Works; and (v) any other Intellectual Property of
Telescan or any Subsidiary of Telescan that is the
subject of an application, certificate, filing,
registration or other document issued by, filed
with, or recorded by any state, government or other
public legal authority at any time.
(ii) Section 4.1(j) of the Telescan Disclosure Schedule
lists all Registered Intellectual Property in whole or in part owned
by, assigned to, or filed in the name of Telescan or any Subsidiary
of Telescan (the "Telescan Registered Intellectual Property").
(iii) Except as set forth in Section 4.1(j) of the
Telescan Disclosure Schedule, each item of Telescan Intellectual
Property, including all Telescan Registered Intellectual Property
listed on Section 4.1(j) of the Telescan Disclosure Schedule, is
free and clear of any Lien.
(iv) Telescan or a Subsidiary of Telescan: (i) is the
exclusive owner of all Trademarks as such Trademarks are currently
used by the Telescan Business, including trade names, trade dress
and similar designations of origin used in connection with the
operation or conduct of the Telescan Business and (ii) owns
exclusively, and has good title to, all copyrighted works, software
products or other works of authorship that it otherwise purports to
own.
(v) Except as set forth in Section 4.1(j) of the
Disclosure Schedule, neither Telescan nor any Subsidiary of Telescan
has transferred ownership of, or granted any license of or right to
use or authorized the retention of any rights to use, any
23
Intellectual Property that is, or was, Telescan Intellectual
Property, to any other Person, except in the ordinary course of
business consistent with past practices.
(vi) The Telescan Intellectual Property constitutes all
the Intellectual Property used in and/or necessary to the conduct of
the Telescan Business including (i) the making, using, selling,
marketing, or importing of any product or device, (ii) the practice
of any process, (iii) the offering or performance of any service, or
(iv) the copying, display, performance, distribution, creation of
derivative works of, or the exploitation of any device or work.
(vii) The contracts, licenses and agreements listed in
Section 4.1(j) of the Telescan Disclosure Schedule include all
material contracts, licenses and agreements pursuant to which any
Person, including any affiliate or any Subsidiary of Telescan, has
licensed any Intellectual Property to Telescan or any Subsidiary of
Telescan. Neither Telescan nor any Subsidiary of Telescan is in
breach of, nor has it failed to perform under any of the foregoing
contracts, licenses and agreements and, to its knowledge, no other
party to such contracts, licenses and agreements is in breach of or
has failed to perform thereunder.
(viii) The contracts, licenses and agreements listed in Section
4.1(j) of the Telescan Disclosure Schedule include all material
contracts and agreements pursuant to which any Person, including any
third party developer or consultant, has developed any device or
technology, authored any work, or otherwise created any thing in
which any Intellectual Property rights might arise, either
separately or jointly with Telescan, any Subsidiary of Telescan, or
any other Person, which Telescan or any Subsidiary of Telescan uses
or possess or which it believes it owns.
(ix) The contracts, licenses and agreements listed in Section 4.1(j)
of the Telescan Disclosure Schedule include all material contracts,
licenses and agreements pursuant to which Telescan or any Subsidiary
of Telescan has licensed or transferred to any third person or any
affiliate or Subsidiary of Telescan any Telescan Intellectual
Property. Neither Telescan nor any Subsidiary of Telescan is in
breach of, nor has it failed to perform under any of the foregoing
contracts, licenses and agreements and, to its knowledge, no other
party to such contracts, licenses and agreements is in breach of or
has failed to perform thereunder.
(x) Neither the consummation of the transaction contemplated by this
Agreement nor the transfer to ZiaSun of any contracts, licenses,
agreements or Telescan Intellectual Property will cause or obligate
ZiaSun (i) to grant to any third party any rights or licenses with
respect to any Intellectual Property of ZiaSun; or (ii) pay any
royalties or other amounts in excess of those being paid by Telescan
or any Subsidiary of Telescan prior to the Effective Date.
24
(xi) Section 4.1(j) of the Telescan Disclosure Schedule lists all
material agreements, licenses and contracts pursuant to which
Telescan or any Subsidiary of Telescan has agreed to indemnify, hold
harmless, or otherwise agree to be liable for any losses, cost or
damages of a third party with respect to any Intellectual Property
or product or service of Telescan or any Subsidiary of Telescan.
(xii) Except as set forth in Section 4.1(j) of the Telescan
Disclosure Schedule, all Telescan Intellectual Property (other than
Telescan Intellectual Property licensed from third parties) will be
fully, transferable, alienable or licensable by, or between,
Telescan (or any Subsidiary of Telescan) or ZiaSun without
restriction and without payment of any kind to any third party.
(xiii) Except as set forth in Section 4.1(j) of the Telescan
Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not result in the loss of, or
otherwise adversely affect, any ownership rights of Telescan or any
Subsidiary of Telescan in any Telescan Intellectual Property or
result in the breach or termination of any license, contract or
agreement to which Telescan or any Subsidiary of Telescan is a party
respecting any Telescan Intellectual Property.
(xiv) To Telescan's knowledge, the operation of the Telescan
Business, including (i) the making, using, selling, marketing, or
importing of any product or device, (ii) the practice of any
process, (iii) the offering or performance of any service, or (iv)
the copying, distribution, performance, display, creation of
derivative works of, or the exploitation of any device or work, does
not, and will not when conducted in substantially the same manner,
following the Closing by Holdco, infringe or misappropriate the
Intellectual Property of any person, violate the rights of any
person, or constitute unfair competition or trade practices under
the laws of any jurisdiction, and neither Telescan nor any
Subsidiary of Telescan has received notice from any person claiming
that such operation or any act, product, technology or service of
the Telescan Business infringes or misappropriates the Intellectual
Property of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is Telescan or any
Subsidiary of Telescan aware of any basis therefor). Without
limiting the foregoing, to Telescan's knowledge, neither Telescan
nor any Subsidiary of Telescan has misappropriated the trade secrets
of, or infringed the Copyright or Mask Works of any third party.
(xv) There are no material contracts, licenses or agreements between
Telescan or any Subsidiary of Telescan and any other person with
respect to Telescan Intellectual Property under which there is any
dispute known to Telescan or any Subsidiary of Telescan regarding
the scope of, or performance under, such
25
contract, license or agreement, including with respect to any
payments to be made or received by Telescan or any Subsidiary of
Telescan thereunder.
(xvi) To the knowledge of Telescan or any of its Subsidiaries, no
person is infringing or misappropriating any Telescan Intellectual
Property.
(xvii) No Telescan Intellectual Property or product, technology or
service of the Telescan Business is subject to any proceeding or
outstanding decree, order, judgment or stipulation that restricts in
any manner the use, transfer or licensing thereof by Telescan or any
Subsidiary of Telescan or may affect the validity, use or
enforceability of such Telescan Intellectual Property.
(xviii) Section 4.1(j) of the Telescan Disclosure Schedule lists all
action, including the payment of any fees, that must, or should be
performed by, or on behalf of, Telescan or any Subsidiary of
Telescan in the ninety-day period following the Effective Date, with
respect to any application for, perfection of, preservation of, or
continuation of any rights of Telescan or any Subsidiary of Telescan
with respect to any Telescan Intellectual Property, including the
filing of any patent applications, response to Patent Office actions
or payment of fees, including renewal fees.
(xix) Neither Telescan nor any Subsidiary of Telescan has claimed
small business status, or other particular status in the application
for any Registered Telescan Intellectual Property which claim of
status was not at the time made, or which has since become,
inaccurate or false, or that will no longer be true and accurate as
a result of the Closing.
(xx) All software products of Telescan or any Subsidiary of Telescan
were written and created solely by either (i) employees of Telescan
or any Subsidiary of Telescan acting within the scope of their
employment or (ii) by third parties who have validly assigned or
licensed the necessary rights, including Intellectual Property
rights, in such products to Telescan or any Subsidiary of Telescan.
(xxi) Neither Telescan nor any Subsidiary of Telescan has knowledge
of any facts or circumstances that would render any Telescan
Intellectual Property invalid or unenforceable. Without limiting the
foregoing, neither Telescan nor any Subsidiary of Telescan knows of
any information, materials, facts or circumstances, including any
information or fact that would constitute prior art, that would
render any of the Telescan Registered Intellectual Property invalid
or unenforceable, or would adversely affect any pending application
for any Telescan Registered Intellectual Property, and neither
Telescan nor any Subsidiary of Telescan has misrepresented, or
failed to disclose, nor is aware of any misrepresentation or failure
to disclose, any fact or circumstances in any application for any
Telescan Register Intellectual Property that would constitute fraud
or a material misrepresentation with respect to such application or
that
26
would otherwise effect the validity or enforceability of any
Telescan Registered Intellectual Property.
(xxii) Telescan and each Subsidiary of Telescan have taken all steps
reasonable under the circumstances to protect the confidentiality
and trade secret status of their material confidential information
and know of no basis on which it could be claimed that either
Telescan or any Subsidiary of Telescan has failed to protect the
confidentiality of any of their material confidential information.
(k) Brokers or Finders. No agent, broker, investment
banker, financial advisor or other firm or Person is or will be
entitled to any broker's or finder's fee or any other similar
commission or fee in connection with any of the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of Telescan.
(l) Taxes. Each of Telescan and its Subsidiaries has filed all Tax
Returns (as defined below) required to have been filed (or extensions for
filing thereof have been duly obtained and have not expired), has paid
all Taxes (as defined below) required to have been paid by it, has
provided adequate reserves in the financial statements for any Taxes that
have not been paid (whether or not shown as being due on any returns) or
are payable by Telescan or any of its Subsidiaries, except where failure
to file such Tax Returns or pay or provide reserves for such Taxes would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Telescan. All Tax Returns filed by Telescan or
any Subsidiary of Telescan are true, correct and complete in all material
respects. Neither Telescan nor any of its Subsidiaries has received from
any governmental authority any written notice of any proposed adjustment,
deficiency or underpayment of Taxes, which notice has not been withdrawn
or satisfied by payment, and there are no material claims that have been
asserted or, to the knowledge of Telescan or any Subsidiary of Telescan,
threatened against Telescan or any of its Subsidiaries relating to such
Taxes. For purposes of this Agreement: (i) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any
governmental authority or any obligation to pay Taxes imposed on any
entity for which a party to this Agreement is liable as a result of any
indemnification provision or other contractual obligation and (ii) "Tax
Return" means any return, report or similar statement required to be
filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax. Neither Telescan nor any
of its Subsidiaries has taken any action or knows of any fact that is
reasonably likely to prevent the Mergers from qualifying as exchanges
within the meaning of Section 351 of the Code and the ZiaSun Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
27
(m) Certain Contracts. As of the date hereof, except as disclosed in
Section 4.1(m) of the Telescan Disclosure Schedule, neither Telescan nor
any Subsidiary of Telescan has, is a party to, or is bound by
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements;
(iv) any employment or consulting agreement with an
employee or individual consultant or salesperson;
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement
or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of real or personal property having a
value or obligation individually in excess of $100,000, or that does
not terminate within six months;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement containing any covenant limiting its
freedom to engage in any line of business or to compete with any
Person or in any geographic area or during any period of time;
(x) any agreement relating to capital expenditures and
involving future payments in excess of $50,000;
(xi) any agreement relating to the disposition or
acquisition of assets or any interest in any business enterprise
outside the ordinary course of Telescan's or any Subsidiary of
Telescan's business;
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit, including
guaranties referred to in clause (viii) hereof;
(xiii) any letter of credit in excess of $50,000;
28
(xiv) any distribution, joint marketing or development agreement;
(xv) any agreement pursuant to which it has granted or may
grant in the future, to any Person a source-code license or option
or other right to use or acquire a source-code;
(xvi) any agreement relating to trademarks, copyrights,
licenses, software development or any other Intellectual Property;
or
(xvii) any other agreement that involves $100,000 or more
and is not cancelable without penalty within 30 days.
Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with
the lapse of time, giving of notice or both, as are all noted in
Section 4.1(m) of the Telescan Disclosure Schedule, neither Telescan
nor any of its Subsidiaries has breached, violated or defaulted
under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Section 4.1(m) of
the Telescan Disclosure Schedule (any such agreement, contract or
commitment, an "Telescan Contract"). Each Telescan Contract is in
full force and effect and, except as otherwise disclosed in Section
4.1(m) of the Telescan Disclosure Schedule, is not subject to any
default thereunder, of which Telescan has knowledge, by any party
obligated to Telescan or any of the Subsidiaries pursuant thereto.
Section 4.1(m) of the Telescan Disclosure Schedule identifies each
Telescan Contract that requires a consent, waiver or approval to
preserve all rights of, and benefits to, Telescan or any of the
Subsidiaries under such Telescan Contract as a result of entering
into this Agreement or effecting the Merger or the other
transactions contemplated by this Agreement.
(n) Employee Benefits.
(i) The Benefit Plans, whether oral or written, under
which any current or former employee or director of Telescan or its
Subsidiaries has any present or future right to benefits contributed
to, sponsored by or maintained by Telescan or its Subsidiaries, or
under which Telescan or its Subsidiaries has any present or future
liability shall be collectively referred to as the "Telescan Benefit
Plans."
(ii) Except as set forth in Section 4.1(n) of the Telescan
Disclosure Schedule, with respect to each Telescan Benefit Plan, no
liability has been incurred and there exists no condition or
circumstances in connection with which Telescan or any of its
Subsidiaries could be subject to any liability that is reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect on Telescan, in each case under ERISA (as defined in Section
9.11(b)), the Code, or any other applicable law, rule or regulation.
29
(iii) Telescan and its Subsidiaries are in compliance with
all federal, state, local and foreign requirements regarding
employment, except for any failures to comply that are not
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on Telescan. As of the date of this
Agreement, there is no labor dispute, strike or work stoppage
against Telescan or any of its Subsidiaries pending or, to the
knowledge of Telescan, threatened which may interfere with the
business activities of Telescan or any of its Subsidiaries, except
where such dispute, strike or work stoppage is not reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect on Telescan.
(o) Labor Matters. Except as disclosed in the Telescan SEC Reports
filed prior to the date of this Agreement or in Section 4.1(o) of
the Telescan Disclosure Schedule, there are no controversies pending
or, to the knowledge of Telescan, threatened between Telescan or any
of its Subsidiaries and any representatives of its employees, except
as would not, individually or in the aggregate, have a Material
Adverse Effect on Telescan and, to the knowledge of Telescan and its
Subsidiaries, there are no material organizational efforts presently
being made involving any of the now unorganized employees of
Telescan or any of its Subsidiaries. Since January 1, 1999, there
has been no work stoppage, strike or other concerted action by
employees of Telescan or any of its Subsidiaries, except as is not
having or could not be reasonably expected to have a Material
Adverse Effect on Telescan.
(p) Environmental Matters.
(i) Each of Telescan and its Subsidiaries has obtained all
licenses, permits, authorizations, approvals and consents from
Governmental Entity which are required under any applicable
Environmental Law in respect of its business or operations
("Environmental Permits"), except for such failures to have
Environmental Permits which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on
Telescan. Each of such Environmental Permits is in full force and
effect and each of Telescan and its Subsidiaries is in compliance
with the terms and conditions of all such Environmental Permits and
with any applicable Environmental Law, except for such failures to
be in full force and effect or to be in compliance which,
individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect on Telescan.
(ii) To the knowledge of Telescan, no site or facility now
or previously owned, operated or leased by Telescan or any of its
Subsidiaries is listed or proposed for listing on the National
Priorities List promulgated pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, and the rules and regulations thereunder ("CERCLA"), or on
any similar state or local list of sites requiring investigation or
clean-up.
30
(iii) No Liens have arisen under or pursuant to any
Environmental Law on any site or facility owned, operated or leased
by Telescan or any of its Subsidiaries, other than any such Liens on
real property not individually or in the aggregate material to
Telescan and its Subsidiaries taken as a whole, and no action of any
Governmental Entity has been taken or, to the knowledge of Telescan,
is in process which could subject any of such properties to such
Liens, and neither Telescan nor any of its Subsidiaries would be
required to place any notice or restriction relating to the presence
of Hazardous Materials at any such site or facility owned by it in
any deed to the real property on which such site or facility is
located.
(iv) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or
which are in the possession of, Telescan or any of its Subsidiaries
in relation to any site or facility now or previously owned,
operated or leased by Telescan or any of its Subsidiaries which have
not been delivered to ZiaSun prior to the execution of this
Agreement.
(q) Assets. The assets, properties, rights and Telescan Contracts,
including (as applicable) title or leaseholds thereto, of Telescan and
its Subsidiaries, taken as a whole, are sufficient to permit Telescan and
its Subsidiaries to conduct their business as currently being conducted
with only such exceptions as are not reasonably likely to have a Material
Adverse Effect on Telescan. All material real property owned by Telescan
and its Subsidiaries is owned free and clear of all Liens, except (i)
those reflected or reserved against in the latest balance sheet or notes
thereto included in the Telescan financial statements included in the
Telescan SEC Reports, (ii) taxes and general and special assessments not
in default and payable without penalty or interest, (iii) Liens disclosed
in Section 4.1(q) of the Telescan Disclosure Schedule and (iv) Liens that
do not materially adversely interfere with any present use of such
property.
(r) Insurance. Section 4.1(r) of the Telescan Disclosure Schedule
sets forth a complete and accurate list of all material policies of
insurance of Telescan and its Significant Subsidiaries currently in
force, including surety bonds or other credit support therefor (the
"Telescan Insurance Policies"), the current annual premiums for each
Telescan Insurance Policy and the types of risk covered and limits
of coverage. All Telescan Insurance Policies are in full force and
effect and all premiums due thereon have been paid. Telescan has
complied in all material respects with the terms and provisions of
the Telescan Insurance Policies. Telescan has never applied for and
been refused or denied any policy of insurance with respect to
product liability matters, matters arising by reason of clinical
trials, environmental matters or worker's compensation. Telescan's
insurance coverage is adequate in kind and amount based on current
industry practice.
(s) Affiliate Arrangements. Except as disclosed in Section
4.1(s) of the Telescan Disclosure Schedule, neither Telescan nor any
of its Subsidiaries is a party to any
31
contract, arrangement, understanding or other commitment or pending or
proposed transaction with any director or officer of Telescan or of any
of its Subsidiaries or any affiliates of any such persons (other than
compensation arrangements entered into in the ordinary course of business
and other than as disclosed in the Telescan SEC Reports filed prior to
the date of this Agreement and employee health, welfare and benefit plans
available generally to the officers or employees of Telescan and its
Subsidiaries).
(t) Takeover Provisions of the DGCL Not Applicable.
Telescan has taken all necessary actions so that the provisions of
Section 203 of the DGCL do not and will not, before the termination
of this Agreement, apply to this Agreement, the Merger or the other
transactions contemplated hereby.
(u) Contingent Voting Rights of the Telescan Preferred Stock.
Telescan has not acted or failed to act in any manner that would entitle
the holders of the Telescan Preferred Stock to the voting rights set
forth in Section 8(b) of the certificate of designation of Telescan
Preferred Stock.
4.2. Representations and Warranties of ZiaSun. Except as disclosed
in the ZiaSun SEC Reports (as defined in Section 4.2(d)(i)) filed prior
to the date hereof or as set forth in the ZiaSun Disclosure Schedule
delivered by ZiaSun to Telescan prior to the execution of this Agreement
(the "ZiaSun Disclosure Schedule"), ZiaSun represents and warrants to
Telescan as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of ZiaSun and its Subsidiaries (as defined in Section
9.11(j)) is a corporation or other organization duly incorporated or
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization, has all requisite
power and authority to own, lease, use and operate its assets and
properties and to carry on its business as now being conducted,
except where the failure to be in good standing, individually or in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect on ZiaSun. ZiaSun and each of the Subsidiaries is
duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure so to qualify or to be
in good standing, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on ZiaSun.
The copies of the certificate of incorporation and bylaws of ZiaSun
and each of its Subsidiaries in, or incorporated by reference in,
the ZiaSun SEC Reports are true, complete and correct copies of such
documents as in effect on the date of this Agreement. A list of the
respective jurisdictions of organization of ZiaSun and each of its
Subsidiaries, and the respective jurisdictions where ZiaSun and each
of its Subsidiaries is qualified or licensed as
32
a foreign corporation to do business, are disclosed in Section
4.2(a) of the ZiaSun Disclosure Schedule.
(ii) Exhibit 21 to ZiaSun's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 includes all the Subsidiaries of
ZiaSun which as of the date of this Agreement are Significant
Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC).
All the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary are duly authorized,
validly issued, fully paid and nonassessable and are, except as set
forth in such Exhibit 21, owned directly or indirectly by ZiaSun,
free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), except
for restrictions imposed by applicable securities laws. Except as
disclosed in Section 4.2(a) of the ZiaSun Disclosure Schedule, as of
the date of this Agreement, neither ZiaSun nor any of its
Subsidiaries directly or indirectly owns 5% or more of any equity or
similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity (other than
Subsidiaries) that is or would reasonably be expected to be material
to ZiaSun and its Subsidiaries taken as a whole.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of ZiaSun consists of 50,000,000 shares of ZiaSun Common Stock, of
which 32,698,669 shares were outstanding. All issued and outstanding
shares of the capital stock of ZiaSun are duly authorized, validly
issued, fully paid and nonassessable and free of any preemptive rights.
There are no subscriptions, options, warrants or other rights (including
"phantom" stock rights), agreements, arrangements or commitments
obligating ZiaSun to issue or sell shares of capital stock or other
equity interests in ZiaSun other than options and other rights to acquire
ZiaSun Common Stock from ZiaSun representing in the aggregate the right
to purchase approximately 1,679,900 shares of ZiaSun Common Stock (such
options, together with the other employee stock options issued by ZiaSun
after the date hereof in accordance with the ZiaSun Stock Option Plans
and Section 5.2, collectively, the "ZiaSun Stock Options") under ZiaSun's
1999 Stock Option Plan and other option plans assumed by ZiaSun
(collectively, the "ZiaSun Stock Option Plans"). Section 4.2(b) of the
ZiaSun Disclosure Schedule sets forth a complete and correct list, as of
the date hereof, of the number of shares of ZiaSun Common Stock subject
to ZiaSun Stock Options or other rights to purchase or receive ZiaSun
Common Stock granted under the ZiaSun Benefit Plans or otherwise and the
exercise price of the outstanding ZiaSun Stock Options referenced
therein. Except as disclosed in Sections 4.2(b) or 4.2(m) of the ZiaSun
Disclosure Schedule, there are no outstanding obligations of ZiaSun or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of ZiaSun Common Stock or any capital stock or other equity or
ownership interests of any Subsidiary of ZiaSun or to provide funds to,
or make any investments (in
33
form of a loan, capital contribution or otherwise) in, any Subsidiary of
ZiaSun or any other Person.
(c) Authority; No Conflicts.
(i) ZiaSun has all requisite corporate power and authority to
enter into this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby, subject in the
case of the consummation of the ZiaSun Merger to the adoption of
this Agreement by the Required ZiaSun Vote (as defined in Section
4.2(g)). The execution and delivery of this Agreement, the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of ZiaSun
and no other corporate proceedings on the part of ZiaSun are
necessary to authorize the execution and delivery of this Agreement
or to consummate the ZiaSun Merger and the other transactions
contemplated hereby, subject in the case of the consummation of the
ZiaSun Merger to the adoption of this Agreement by the Required
ZiaSun Vote. This Agreement has been duly and validly executed and
delivered by ZiaSun and constitutes a valid, legal, and binding
agreement of ZiaSun, enforceable against ZiaSun in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by ZiaSun do
not, and the performance of its obligations hereunder and the
consummation by ZiaSun of the ZiaSun Merger and the other
transactions contemplated hereby will not, conflict with, or result
in a Violation pursuant to: (A) any provision of the certificate of
incorporation or bylaws or similar organizational document of ZiaSun
or any Significant Subsidiary of ZiaSun or (B) except as (1)
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on ZiaSun, (2) would not prevent
or materially delay the consummation of the Mergers, subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph
(iii) below or (3) as set forth in Section 4.2(c)(ii) of the ZiaSun
Disclosure Schedule, any loan or credit agreement, note, mortgage,
bond, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
ZiaSun or any Subsidiary of ZiaSun or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or
any other Person is required by or with respect to ZiaSun or any
Subsidiary of ZiaSun in connection with the execution and delivery
of this Agreement by ZiaSun or the performance of its obligations
34
hereunder or the consummation of the ZiaSun Merger and the other
transactions contemplated hereby, except the Necessary Consents.
(d) Reports and Financial Statements.
(i) ZiaSun has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January 1,
1999 (collectively, including all exhibits thereto, the "ZiaSun SEC
Reports"). None of the ZiaSun SEC Reports, as of their respective
dates (and, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing), contained or
will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the ZiaSun SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of ZiaSun and its consolidated
Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to the absence of notes and normal year-end adjustments
that have not been and are not expected to be material in amount.
All of such ZiaSun SEC Reports, as of their respective dates (and as
of the date of any amendment to the respective ZiaSun SEC Reports),
complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder. Each Subsidiary of
ZiaSun is treated as a consolidated Subsidiary of ZiaSun in the
financial reports of ZiaSun included in the ZiaSun SEC Reports.
(ii) Except as disclosed in the ZiaSun financial statements for
the period ending December 31, 2000, included in the ZiaSun SEC
Reports or as disclosed in Section 4.2(d) of the ZiaSun Disclosure
Schedule, neither ZiaSun nor any of its Subsidiaries has any
obligations, liabilities or debts (whether accrued or fixed, or
absolute or contingent, or unmatured, or determined or
determinable), including without limitation those arising under Law
or any contract, arrangement or commitment or undertaking, that are
of a nature that would be required to be disclosed on the
consolidated balance sheet of ZiaSun and its consolidated
Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course of
business, consistent with past practices, (B) liabilities incurred
in accordance with Section 5.2, (C) liabilities for Taxes or (D)
liabilities that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on ZiaSun.
35
(e) Information Supplied.
(i) None of the information supplied or to be supplied by
ZiaSun for inclusion or incorporation by reference in (A) the Form
S-4 (as defined in Section 6.1) will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 6.1) will, on the date
it is first mailed to ZiaSun stockholders or Telescan stockholders
or at the time of the ZiaSun Stockholders Meeting or the Telescan
Stockholders Meeting (each as defined in Section 6.1), contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
4.2(e), no representation or warranty is made by ZiaSun with respect
to statements made or incorporated by reference in the Form S-4 or
the Joint Proxy Statement/ Prospectus based on information supplied
by Telescan for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of ZiaSun, by resolutions
duly adopted at a meeting duly called and held and not subsequently
rescinded or modified in any way (the "ZiaSun Board Approval"), has duly
(i) determined that this Agreement is fair to and in the best interests
of ZiaSun and its stockholders and declared the ZiaSun Merger to be
advisable, (ii) approved this Agreement, the Voting Agreements and the
ZiaSun Merger and (iii) recommended that the stockholders of ZiaSun adopt
this Agreement and directed that such matter be submitted for
consideration by ZiaSun's stockholders at the ZiaSun Stockholders
Meeting. The ZiaSun Board Approval constitutes approval of this
Agreement, the Voting Agreements and the ZiaSun Merger for purposes of
Section 78.438 of the NRS. To the knowledge of ZiaSun, except for
Sections 78.411 to 78.444 of the NRS (which has been rendered
inapplicable), no state takeover statute is applicable to this Agreement,
the Voting Agreements or the ZiaSun Merger or the other transactions
contemplated hereby or thereby.
(g) Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of ZiaSun Common Stock to adopt this Agreement
(the "Required ZiaSun Vote") is the only vote of the holders of any class
or series of ZiaSun common stock necessary to approve or adopt this
Agreement and the ZiaSun Merger and to consummate the ZiaSun Merger and
the other transactions contemplated hereby.
36
(h) Litigation; Compliance with Laws.
(i) There are no Actions pending or, to the knowledge of
ZiaSun, threatened, before any court, arbitrator or Government
Entity (domestic or foreign) against or affecting ZiaSun or any
Subsidiary of ZiaSun or any property or asset of ZiaSun or any
Subsidiary of ZiaSun, before any court, arbitrator or Governmental
Entity (domestic or foreign) which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect on ZiaSun, nor are there any judgments, decrees,
determinations, awards, injunctions, rules or orders of any
Governmental Entity or arbitrator outstanding against ZiaSun or any
Subsidiary of ZiaSun which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on ZiaSun.
(ii) Except as, individually or in the aggregate, would not to
have a Material Adverse Effect on ZiaSun, ZiaSun and its
Subsidiaries hold all permits, licenses, franchises, variances,
exemptions, orders and approvals of all Governmental Entities which
are necessary for the operation of the businesses as now being
conducted of ZiaSun and its Subsidiaries (the "ZiaSun Permits"), and
no suspension or cancellation of any of the ZiaSun
Permits is pending or, to the knowledge of ZiaSun, threatened.
ZiaSun and its Subsidiaries are in compliance with the terms of the
ZiaSun Permits, except where the failure to so comply, individually
or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on ZiaSun. Neither ZiaSun nor any of its
Subsidiaries is in violation of, and ZiaSun and its Subsidiaries
have not received any notices of violations with respect to, any
laws, statutes, ordinances, rules or regulations of any Governmental
Entity, except for violations which, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on ZiaSun.
(i) Absence of Certain Changes or Events. Except as disclosed in
Section 4.2(i) of the ZiaSun Disclosure Schedule and for liabilities
permitted to be incurred in accordance with this Agreement or the
transactions contemplated hereby, since December 31, 2000, ZiaSun and
each Subsidiary of ZiaSun has conducted its business only in the ordinary
course and in a manner consistent with past practices and, since such
date and prior to the date hereof, neither ZiaSun nor any Subsidiary of
ZiaSun has:
(i) made or adopted amendments or changes to its Certificate or
Articles of Incorporation or Bylaws;
(ii) declared, set aside or paid a dividend or other
distribution with respect to its capital stock, or any direct or
indirect redemption, purchase or other acquisition by it of any of
its capital stock;
(iii) acquired or entered into any agreement, arrangement or
understanding for the acquisition (including, without limitation, by
merger, consolidation, or
37
acquisition of stock or assets) of any material interest in any
corporation, partnership, other business organization or any
division thereof or any material assets, other than the acquisition
of assets in the ordinary course of business consistent with past
practices;
(iv) incurred any indebtedness for borrowed money or issued any
debt securities or assumed, guaranteed or endorsed, or otherwise as
an accommodation become responsible for, the obligations of any
Person, or made any loans or advances except for indebtedness
incurred in the ordinary course of business consistent with past
practices;
(v) entered into any contract or agreement material to its
business, results of operations or financial condition other than in
the ordinary course of business consistent with past practices;
(vi) made or authorized any capital expenditure of $50,000 in any
individual case or $125,000 in the aggregate;
(vii) revalued any of its assets;
(viii)sold, leased, licensed or otherwise disposed of any of its
material assets or properties, except in the ordinary course of
business as conducted on that date and consistent with past
practices;
(ix) amended or terminated any material contract, agreement or
license to which it is a party or by which it is bound;
(x) permitted or allowed any of its material assets or properties
(whether tangible or intangible) to be subjected to any Lien, other
than in the ordinary course of business, consistent with past
practices;
(xi) taken any action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practices,
with respect to accounting policies, methods or procedures
(including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable);
(xii) paid, discharged or satisfied any material claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past practices,
of liabilities reflected or reserved against in the financial
statements of ZiaSun included in the ZiaSun SEC Reports or
subsequently incurred in the ordinary course of business and
consistent with past practices;
38
(xiii)suffered any casualty, loss or damage with respect to any of
its assets which in the aggregate have a replacement cost of more
than $50,000, whether or not such casualty, loss or damage shall
have been covered by insurance;
(xiv) increased the salary or other compensation payable or to
become payable by it to any of its directors, executive-level
officers or advisors, or declared, paid, committed or otherwise
become obligated for the payment of a bonus or other additional
salary or compensation to any such person except as otherwise
contemplated by this Agreement;
(xv) waived or released any of its material rights or claims,
including any write-off or other compromise of any amount of its
account receivables;
(xvi) changed the prices or royalties set or charged by it to its
customers or licensees or in pricing or royalties set or charged by
persons who have licensed Intellectual Property to it;
(xvii)terminated, discontinued, closed or disposed of any facility
or other business operation, or laid off any employees (other than
layoffs of less than 5 employees) or implemented any early
retirement, separation or program providing early retirement window
benefits or announced or planned any such action or program for the
future;
(xviii) commenced or received notice or threat of commencement of
any lawsuit or proceeding against or investigation of it or its
affairs;
(xix) received notice of any claim of ownership by a third party of
its Intellectual Property or of infringment by it of any third
party's Intellectual Property rights;
(xx) issued or sold any of its shares of capital stock, or
securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(xxi) suffered any Material Adverse Effect;
(xxii) made any material changes in the customary methods of its
operations; or
(xxiii) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 4.2(i).
(j) Intellectual Property.
(i) For the purposes of this Agreement, the following terms have the
following definitions:
39
"ZiaSun Business" means the business of ZiaSun or any
Subsidiary of ZiaSun, including the manufacture, use,
licensing, distribution and sale of any products or
technology or the provision of any services by ZiaSun or
any Subsidiary of ZiaSun, as currently conducted, as
conducted since the inception of ZiaSun or any Subsidiary
of ZiaSun, or as reasonably is contemplated to be
conducted by ZiaSun or any Subsidiary of ZiaSun in the
future.
"ZiaSun Intellectual Property" shall mean any Intellectual
Property that is owned by or licensed to ZiaSun or any
Subsidiary of ZiaSun.
(ii) Section 4.2(j) of the ZiaSun Disclosure Schedule lists all
Registered Intellectual Property in whole or in part owned by,
assigned to, or filed in the name of ZiaSun or any Subsidiary of
ZiaSun (the "ZiaSun Registered Intellectual Property").
(iii) Except as set forth on Section 4.2(j) of the ZiaSun Disclosure
Schedule, each item of ZiaSun Intellectual Property, including all
ZiaSun Registered Intellectual Property listed on Section 4.2(j) of
the ZiaSun Disclosure Schedule, is free and clear of any Lien.
(iv) ZiaSun or a Subsidiary of ZiaSun: (i) is the exclusive owner of
all Trademarks as such Trademarks are currently used by the ZiaSun
Business, including trade names, trade dress and similar
designations of origin used in connection with the operation or
conduct of the ZiaSun Business and (ii) owns exclusively, and has
good title to, all copyrighted works, software products or other
works of authorship that it otherwise purports to own.
(v) Except as set forth in Section 4.2(j) of the Disclosure
Schedule, neither ZiaSun nor any Subsidiary of ZiaSun has
transferred ownership of, or granted any license of or right to use
or authorized the retention of any rights to use, any Intellectual
Property that is, or was, ZiaSun Intellectual Property, to any
Person, except in the ordinary course of business consistent with
past practices.
(vi) The ZiaSun Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the
ZiaSun Business including (i) the making, using, selling, marketing,
or importing of any product or device, (ii) the practice of any
process, (iii) the offering or performance of any service, or (iv)
the copying, display, performance, distribution, creation of
derivative works of, or the exploitation of any device or work.
(vii) The contracts, licenses and agreements listed on Section
4.2(j) of the ZiaSun Disclosure Schedule include all material
contracts, licenses and agreements pursuant to which any Person,
including any affiliate or any Subsidiary of ZiaSun, has licensed
any Intellectual Property to ZiaSun or any
40
Subsidiary of ZiaSun. Neither ZiaSun nor any Subsidiary of ZiaSun is
in breach of, nor has it failed to perform under any of the
foregoing contracts, licenses and agreements and, to its knowledge,
no other party to such contracts, licenses and agreements is in
breach of or has failed to perform thereunder.
(viii) The contracts, licenses and agreements listed in Section
4.2(j) of the ZiaSun Disclosure Schedule include all material
contracts and agreements pursuant to which any Person, including any
third party developer or consultant, has developed any device or
technology, authored any work, or otherwise created any thing in
which any Intellectual Property rights might arise, either
separately or jointly with ZiaSun, any Subsidiary of ZiaSun, or any
other Person, which ZiaSun or any Subsidiary of ZiaSun uses or
possess or which it believes it owns.
(ix) The contracts, licenses and agreements listed on Section 4.2(j)
of the ZiaSun Disclosure Schedule include all material contracts,
licenses and agreements pursuant to which ZiaSun or any Subsidiary
of ZiaSun has licensed or transferred to any third person or any
affiliate or Subsidiary of ZiaSun any ZiaSun Intellectual Property.
Neither ZiaSun nor any Subsidiary of ZiaSun is in breach of, nor has
it failed to perform under any of the foregoing contracts, licenses
and agreements and, to its knowledge, no other party to such
contracts, licenses and agreements is in breach of or has failed to
perform thereunder.
(x) Neither the consummation of the transaction contemplated by this
Agreement nor the transfer to Telescan of any contracts, licenses,
agreements or ZiaSun Intellectual Property will cause or obligate
Telescan (i) to grant to any third party any rights or licenses with
respect to any Intellectual Property of Telescan; or (ii) pay any
royalties or other amounts in excess of those being paid by ZiaSun
or any Subsidiary of ZiaSun prior to the Effective Date.
(xi) Section 4.2(j) of the ZiaSun Disclosure Schedule lists all
material agreements, licenses and contracts pursuant to which ZiaSun
or any Subsidiary of ZiaSun has agreed to indemnify, hold harmless,
or otherwise agree to be liable for any losses, cost or damages of,
a third party with respect to any Intellectual Property or product
or service of ZiaSun or any Subsidiary of ZiaSun.
(xii) Except as set forth on Section 4.2(j) of the ZiaSun Disclosure
Schedule, all ZiaSun Intellectual Property (other than ZiaSun
Intellectual Property licensed from third parties) will be fully,
transferable, alienable or licensable by, or between, ZiaSun (or any
Subsidiary of ZiaSun) or Telescan without restriction and without
payment of any kind to any third party.
(xiii) Except as set forth on Section 4.2(j) of the ZiaSun
Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not result in the loss of, or
otherwise adversely affect, any ownership rights of ZiaSun or any
Subsidiary of ZiaSun in any ZiaSun Intellectual Property or result
in the
41
breach or termination of any license, contract or agreement to which
ZiaSun or any Subsidiary of ZiaSun is a party respecting any ZiaSun
Intellectual Property.
(xiv) To ZiaSun's knowledge, the operation of the ZiaSun Business,
including (i) the making, using, selling, marketing, or importing of
any product or device, (ii) the practice of any process, (iii) the
offering or performance of any service, or (iv) the copying,
distribution, performance, display, creation of derivative works of,
or the exploitation of any device or work, does not, and will not
when conducted in substantially the same manner following the
Closing by Holdco, infringe or misappropriate the Intellectual
Property of any person, violate the rights of any person, or
constitute unfair competition or trade practices under the laws of
any jurisdiction, and neither ZiaSun nor any Subsidiary of ZiaSun
has received notice from any person claiming that such operation or
any act, product, technology or service of the ZiaSun Business
infringes or misappropriates the Intellectual Property of any Person
or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor is ZiaSun or any Subsidiary of ZiaSun aware
of any basis therefor). Without limiting the foregoing, to ZiaSun's
knowledge, neither ZiaSun nor any Subsidiary of ZiaSun has
misappropriated the trade secrets of, or infringed the Copyright or
Mask Works of any third party.
(xv) There are no material contracts, licenses or agreements between
ZiaSun or any Subsidiary of ZiaSun and any other person with respect
to ZiaSun Intellectual Property under which there is any dispute
known to ZiaSun or any Subsidiary of ZiaSun regarding the scope of,
or performance under, such contract, license or agreement including
with respect to any payments to be made or received by the Power or
any Subsidiary of ZiaSun thereunder.
(xvi) To the knowledge of ZiaSun or any of its Subsidiaries, no
person is infringing or misappropriating any ZiaSun Intellectual
Property.
(xvii) No ZiaSun Intellectual Property or product, technology or
service of the ZiaSun Business is subject to any proceeding or
outstanding decree, order, judgment or stipulation that restricts in
any manner the use, transfer or licensing thereof by ZiaSun or any
Subsidiary of ZiaSun or may affect the validity, use or
enforceability of such ZiaSun Intellectual Property.
(xviii) Section 4.2(j) of the ZiaSun Disclosure Schedule lists all
action, including the payment of any fees, that must, or should be
performed by, or on behalf of, ZiaSun or any Subsidiary of ZiaSun in
the ninety-day period following the Effective Date, with respect to
any application for, perfection of, preservation of, or continuation
of any rights of ZiaSun or any Subsidiary of ZiaSun with respect to
any ZiaSun Intellectual Property, including the filing of any patent
applications, response to Patent Office actions or payment of fees,
including renewal fees.
42
(xix) Neither ZiaSun nor any Subsidiary of ZiaSun has claimed small
business status, or other particular status in the application for
any Registered ZiaSun Intellectual Property which claim of status
was not at the time made, or which has since become, inaccurate or
false, or that will no longer be true and accurate as a result of
the Closing.
(xx) All software products of ZiaSun or any Subsidiary of ZiaSun
were written and created solely by either (i) employees of ZiaSun or
any Subsidiary of ZiaSun acting within the scope of their employment
or (ii) by third parties who have validly assigned or licensed the
necessary rights, including Intellectual Property rights, in such
products to ZiaSun or any Subsidiary of ZiaSun.
(xxi) Neither ZiaSun nor any Subsidiary of ZiaSun has knowledge of
any facts or circumstances that would render any ZiaSun Intellectual
Property invalid or unenforceable. Without limiting the foregoing,
neither ZiaSun nor any Subsidiary of ZiaSun knows of any
information, materials, facts, or circumstances, including any
information or fact that would constitute prior art, that would
render any of the ZiaSun Registered Intellectual Property invalid or
unenforceable, or would adversely affect any pending application for
any ZiaSun Registered Intellectual Property, and neither ZiaSun nor
any Subsidiary of ZiaSun has misrepresented, or failed to disclose,
and nor is aware of any misrepresentation or failure to disclose,
any fact or circumstances in any application for any ZiaSun Register
Intellectual Property that would constitute fraud or a material
misrepresentation with respect to such application or that would
otherwise effect the validity or enforceability of any ZiaSun
Registered Intellectual Property.
(xxii) ZiaSun and each Subsidiary of ZiaSun have taken all steps
reasonable under the circumstances to protect the confidentiality
and trade secret status of their material confidential information
and know of no basis on which it could be claimed that either ZiaSun
or any Subsidiary of ZiaSun has failed to protect the
confidentiality of any of their material confidential information.
(k) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of ZiaSun.
(l) Taxes. Each of ZiaSun and its Subsidiaries has filed all Tax
Returns required to have been filed (or extensions for the filing thereof
have been duly obtained and have not expired), has paid all Taxes
required to have been paid by it, has provided adequate reserves in the
financial statements for any Taxes that have not been paid (whether or
not shown as being due on any returns) or are payable by ZiaSun or any of
its Subsidiaries, except where failure to file such Tax Returns or pay or
provide reserves for such Taxes would not, individually or in the
aggregate, reasonably be expected to have a
43
Material Adverse Effect on ZiaSun. All Tax Returns filed by ZiaSun or any
Subsidiary of ZiaSun are true, correct and complete in all material
respects. Neither ZiaSun nor any of its Subsidiaries has received from
any governmental authority any written notice of any proposed adjustment,
deficiency or underpayment of Taxes, which notice has not been withdrawn
or satisfied by payment, and there are no material claims that have been
asserted or, to the knowledge of ZiaSun or any Subsidiary of ZiaSun,
threatened against ZiaSun or any of its Subsidiaries relating to such
Taxes. Neither ZiaSun nor any of its Subsidiaries has taken any action or
knows of any fact that is reasonably likely to prevent the Mergers from
qualifying as exchanges within the meaning of Section 351 of the Code and
the ZiaSun Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
(m) Certain Contracts. As of the date hereof, except as disclosed in
Section 4.2(m) of the ZiaSun Disclosure Schedule, neither ZiaSun nor any
Subsidiary of ZiaSun has, is a party to, or is bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any severance pay
or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or
arrangements;
(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson;
(v) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any
of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of real or personal property having a value or
obligation individually in excess of $100,000, or that does not
terminate within six months;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement containing any covenant limiting its freedom to
engage in any line of business or to compete with any Person or in
any geographic area or during any period of time;
44
(x) any agreement relating to capital expenditures and involving
future payments in excess of $50,000;
(xi) any agreement relating to the disposition or acquisition of
assets or any interest in any business enterprise outside the
ordinary course of ZiaSun's or any Subsidiary of ZiaSun's business;
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties
referred to in clause (viii) hereof;
(xiii) any letter of credit in excess of $50,000;
(xiv) any distribution, joint marketing or development agreement;
(xv) any agreement pursuant to which it has granted or may grant in
the future, to any Person a source-code license or option or other
right to use or acquire a source-code;
(xvi) any agreement relating to trademarks, copyrights, licenses,
software development or any other Intellectual Property; or
(xvii) any other agreement that involves $100,000 or more and is not
cancelable without penalty within 30 days.
Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the
lapse of time, giving of notice, or both, as are all noted in Section
4.2(m) of the ZiaSun Disclosure Schedule, neither ZiaSun nor any of its
Subsidiaries has breached, violated or defaulted under, or received
notice that it has breached, violated or defaulted under, any of the
terms or conditions of any agreement, contract or commitment required to
be set forth on Section 4.2(m) of the ZiaSun Disclosure Schedule (any
such agreement, contract or commitment, a "ZiaSun Contract"). Each ZiaSun
Contract is in full force and effect and, except as otherwise disclosed
in Section 4.2(m) of the ZiaSun Disclosure Schedule, is not subject to
any default thereunder, of which ZiaSun has knowledge, by any party
obligated to ZiaSun or any of the Subsidiaries pursuant thereto. Section
4.2(m) of the ZiaSun Disclosure Schedule identifies each ZiaSun Contract
that requires a consent, waiver or approval to preserve all rights of,
and benefits to, ZiaSun or any of the Subsidiaries under such ZiaSun
Contract as a result of entering into this Agreement or effecting the
Merger or the other transactions contemplated by this Agreement.
45
(n) Employee Benefits.
(i) The Benefit Plans, whether oral or written, under which any
current or former employee or director of ZiaSun or its Subsidiaries
has any present or future right to benefits contributed to,
sponsored by or maintained by ZiaSun or its Subsidiaries, or under
which ZiaSun or its Subsidiaries has any present or future liability
shall be collectively referred to as the "ZiaSun Benefit Plans."
(ii) Except as set forth in Section 4.2(n) of the ZiaSun Disclosure
Schedule, with respect to each ZiaSun Benefit Plan, no liability has
been incurred and there exists no condition or circumstances in
connection with which ZiaSun or any of its Subsidiaries could be
subject to any liability that is reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on ZiaSun, in
each case under ERISA, the Code, or any other applicable law, rule
or regulation.
(iii) ZiaSun and its Subsidiaries are in compliance with all
federal, state, local and foreign requirements regarding employment,
except for any failures to comply that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on ZiaSun. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against ZiaSun or any of its
Subsidiaries pending or, to the knowledge of ZiaSun, threatened
which may interfere with the business activities of ZiaSun or any of
its Subsidiaries, except where such dispute, strike or work stoppage
is not reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect on ZiaSun.
(o) Labor Matters. Except as disclosed in the ZiaSun SEC Reports
filed prior to the date of this Agreement or in Section 4.2(o) of the
ZiaSun Disclosure Schedule, there are no controversies pending or, to the
knowledge of ZiaSun, threatened between ZiaSun or any of its Subsidiaries
and any representatives of its employees, except as would not,
individually or in the aggregate, have a Material Adverse Effect on
ZiaSun, and, to the knowledge of ZiaSun and its Subsidiaries, there are
no material organizational efforts presently being made involving any of
the now unorganized employees of ZiaSun or any of its Subsidiaries. Since
January 1, 1999, there has been no work stoppage, strike or other
concerted action by employees of ZiaSun or any of its Subsidiaries except
as is not having or could not be reasonably expected to have a Material
Adverse Effect on ZiaSun.
(p) Environmental Matters.
(i) Each of ZiaSun and its Subsidiaries has obtained all
Environmental Permits, except for such failures to have
Environmental Permits which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on
ZiaSun. Each of such Environmental Permits is in full force and
effect and each of ZiaSun and its Subsidiaries is in compliance with
the terms and conditions of all such Environmental Permits and with
any
46
applicable Environmental Law, except for such failures to be in
compliance which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on ZiaSun.
(ii) To the knowledge of ZiaSun, no site or facility now or
previously owned, operated or leased by ZiaSun or any of its
Subsidiaries is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, or on any similar
state or local list of sites requiring investigation or clean-up.
(iii) No Liens have arisen under or pursuant to any Environmental
Law on any site or facility owned, operated or leased by ZiaSun or
any of its Subsidiaries, other than any such Liens on real property
not individually or in the aggregate material to ZiaSun and its
Subsidiaries taken as a whole, and no action of any Governmental
Entity has been taken or, to the knowledge of ZiaSun, is in process
which could subject any of such properties to such Liens, and
neither ZiaSun nor any of its Subsidiaries would be required to
place any notice or restriction relating to the presence of
Hazardous Materials at any such site or facility owned by it in any
deed to the real property on which such site or facility is located.
(iv) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are
in the possession of, ZiaSun or any of its Subsidiaries in relation
to any site or facility now or previously owned, operated or leased
by ZiaSun or any of its Subsidiaries which have not been delivered
to Telescan prior to the execution of this Agreement.
(q) Assets. The assets, properties, rights and ZiaSun Contracts,
including (as applicable) title or leaseholds thereto, of ZiaSun and its
Subsidiaries, taken as a whole, are sufficient to permit ZiaSun and its
Subsidiaries to conduct their business as currently being conducted with
only such exceptions as are not reasonably likely to have a Material
Adverse Effect on ZiaSun. All material real property owned by ZiaSun and
its Subsidiaries is owned free and clear of all Liens, except (i) those
reflected or reserved against in the latest balance sheet or notes
thereto included in the ZiaSun financial statements included in the
ZiaSun SEC Reports, (ii) taxes and general and special assessments not in
default and payable without penalty or interest, (iii) Liens disclosed in
Section 4.2(q) of the ZiaSun Disclosure Schedule and (iv) Liens that do
not materially adversely interfere with any present use of such property.
(r) Insurance. Section 4.2(r) of ZiaSun Disclosure Schedule sets
forth a complete and accurate list of all material policies of insurance
of ZiaSun and its Significant Subsidiaries currently in force, including
surety bonds or other credit support therefor (the "ZiaSun Insurance
Policies"), the current annual premiums for each ZiaSun Insurance Policy
and the types of risk covered and limits of coverage. All ZiaSun
Insurance Policies are in full force and effect and all premiums due
thereon have been paid. ZiaSun has complied in all material respects with
the terms and provisions of the
47
ZiaSun Insurance Policies. ZiaSun has never applied for and been refused
or denied any policy of insurance with respect to product liability
matters, matters arising by reason of clinical trials, environmental
matters or workmen's compensation. ZiaSun's insurance coverage is
adequate in kind and amount based on current industry practice.
(s) Affiliate Arrangements. Except as disclosed in Section 4.2(s) of
the ZiaSun Disclosure Schedule, neither ZiaSun nor any of its
Subsidiaries is a party to any contract, arrangement, understanding or
other commitment or pending or proposed transaction with any director or
officer of ZiaSun or of any of its Subsidiaries or any affiliates of any
such persons (other than compensation arrangements entered into in the
ordinary course of business and other than as disclosed in the ZiaSun SEC
Reports filed prior to the date of this Agreement and employee health,
welfare and benefit plans available generally to the officers or
employees of ZiaSun and its Subsidiaries).
(t) Takeover Provisions of the NRS Not Applicable. ZiaSun has taken
all necessary actions so that the provisions of Sections 78.411 to 78.444
of the NRS do not and will not, before the termination of this Agreement,
apply to this Agreement, the Merger or the other transactions
contemplated hereby. ZiaSun is not an "Issuing Corporation" as defined in
Section 78.3788 of the NRS.
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Covenants of Telescan. During the period from the date of this
Agreement and continuing until the Effective Time, Telescan agrees as to
itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or Section 5.1 of the Telescan Disclosure
Schedule or to the extent that ZiaSun shall otherwise consent in
writing):
(a) Ordinary Course.
(i) Telescan and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted,
and shall use their reasonable best efforts to preserve intact their
present lines of business, maintain their rights and franchises and
preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that no action by Telescan or its
Subsidiaries with respect to matters specifically addressed
by any other provision of this Section 5.1 shall be deemed a breach
of this Section 5.1(a)(i) unless such action would constitute a
breach of one or more of such other provisions of this Section 5.1.
Telescan shall promptly notify ZiaSun of any event or occurrence or
emergency not in the ordinary course of business of Telescan and any
event which would reasonably be expected to have a Material Adverse
Effect on Telescan.
48
(ii) Other than in connection with acquisitions permitted by Section
5.1(i) or investments permitted by Section 5.1(k), Telescan shall
not, and shall not permit any of its Subsidiaries to, (A) enter into
any new material line of business or (B) incur or commit to any
capital expenditures or any obligations or liabilities in connection
therewith other than capital expenditures and obligations or
liabilities in connection therewith incurred or committed to in the
ordinary course of business consistent with past practices.
(b) Stock Options. Telescan shall not, and shall not permit any of
its Subsidiaries to, accelerate, amend or change the period of
exercisability of any outstanding Telescan Stock Options or stock subject
to vesting, or authorize cash payments in exchange for any such
outstanding options.
(c) Intellectual Property. Telescan shall not, and shall not permit
any of its Subsidiaries to, transfer to any Person any rights to any
Telescan Intellectual Property (other than end-user licenses granted to
customers of Telescan in the ordinary course of business).
(d) Marketing Rights. Telescan shall not, and shall not permit any
of its Subsidiaries to, enter into or amend any material agreements
pursuant to which any other party is granted marketing, distribution, or
similar rights of any type or scope with respect to any products of
Telescan except in the ordinary course of business consistent with past
practices.
(e) Amendments to Agreements. Telescan shall not, and shall not
permit any of its Subsidiaries to, amend or otherwise modify (or agree to
do so), except in the ordinary course of business, or materially violate
the terms of, any of the agreements set forth or described in the
Telescan Disclosure Schedule.
(f) Dividends; Changes in Share Capital. Except for the payment of
dividends on Telescan Preferred Stock, Telescan shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to, (i) declare
or pay any dividends on or make other distributions in respect of any of
its capital stock, except for any such dividend or distribution by a
wholly owned Subsidiary of Telescan, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for,
shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock (or options,
warrants, or other rights exercisable therefor).
(g) Issuance of Securities. Telescan shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital
stock of any class or any securities convertible into or exercisable for,
or any rights, warrants, calls or options to acquire, any such shares, or
enter into any commitment, arrangement, undertaking or agreement with
respect to any of
49
the foregoing, other than (i) the issuance of Telescan Common Stock upon
the exercise of Telescan Stock Options in accordance with their present
terms or pursuant to Telescan Stock Options or other stock based awards
granted pursuant to clause (ii) below, (ii) the granting of Telescan
Stock Options or other stock based awards of or to acquire shares of
Telescan Common Stock granted under Benefit Plans outstanding on the date
hereof in the ordinary course of business consistent with past practices,
(iii) issuances by a wholly owned Subsidiary of Telescan of capital stock
to such Subsidiary's parent or another wholly owned Subsidiary of
Telescan.
(h) Governing Documents. Except to the extent required to comply
with their respective obligations hereunder or with applicable law,
Telescan shall not amend or propose to so amend its certificate of
incorporation or bylaws.
(i) No Acquisitions. Telescan shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets (excluding the acquisition of assets used in the operations of
the business of Telescan and its Subsidiaries in the ordinary course,
which assets do not constitute a business unit, division or all or
substantially all of the assets of the transferor) in excess of $500,000
individually or in the aggregate; provided, however, that the foregoing
shall not prohibit (x) internal reorganizations or consolidations
involving existing Subsidiaries of Telescan or (y) the creation of new
Subsidiaries of Telescan organized to conduct or continue activities
otherwise permitted by this Agreement.
(j) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Telescan, (ii)
dispositions referred to in the Telescan SEC Reports filed prior to the
date of this Agreement or (iii) as may be required by or in conformance
with law or regulation in order to permit or facilitate the consummation
of the transactions contemplated hereby or (iv) as disclosed in Section
5.1 of the Telescan Disclosure Schedule, Telescan shall not, and shall
not permit any of its Subsidiaries to, sell, lease or otherwise dispose
of, or agree to sell, lease or otherwise dispose of, any of its assets
(including capital stock of Subsidiaries of Telescan but excluding
inventory in the ordinary course of business), if the fair market value
of the total consideration (including the value of the indebtedness
acquired or assumed) therefor exceeds $50,000.
(k) Investments; Indebtedness. Telescan shall not, and shall not
permit any of its Subsidiaries to, (i) make any loans, advances or
capital contributions to, or investments in, any other Person in excess
of $10,000, other than (x) loans or investments by Telescan or a
Subsidiary of Telescan to or in Telescan or any Subsidiary of Telescan,
(y) employee loans or advances made in the ordinary course of business or
(z) in the ordinary course of business consistent with past practices
which are not, individually or in the aggregate, material to Telescan and
its Subsidiaries taken as a whole or (ii) without regard to
50
anything contained in the Telescan Disclosure Schedule, incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of Telescan or any of its
Subsidiaries, guarantee any debt securities of another Person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another Person (other than any wholly owned Subsidiary) or
enter into any arrangement having the economic effect of any of the
foregoing in excess of $2,500,000.
(l) Tax-Free Qualification. Telescan shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit
any of its Subsidiaries to, take any action (including any action
otherwise permitted by this Section 5.1) that would prevent or impede the
Mergers from qualifying as exchanges under Section 351 of the Code and
the ZiaSun Merger from qualifying as a reorganization under Section 368
of the Code.
(m) Compensation. Except (x) as required by law or by the terms of
any agreement currently in effect between Telescan or any Subsidiary of
Telescan and any executive officer or employee thereof or (y) in the
ordinary course of business consistent with past practices, Telescan
shall not increase the amount of compensation of any director, executive
officer or key employee of Telescan or any Subsidiary of Telescan or
grant any severance or termination pay to any director or officer or to
any other employee of Telescan or any Subsidiary of Telescan, or make any
increase in or commitment to increase any employee benefits, issue any
additional Telescan Stock Options, adopt or amend or make any commitment
to adopt or amend any Benefit Plan or make any contribution, other than
regularly scheduled contributions, to any Telescan Benefit Plan.
(n) Accounting Methods; Income Tax Elections. Except as disclosed in
Telescan SEC Reports filed prior to the date of this Agreement, or as
required by a Governmental Entity, Telescan shall not change its methods
of accounting, except as required by changes in GAAP as concurred in by
Telescan's independent public accountants. Telescan shall not (i) change
its fiscal year or (ii) make any tax election that, individually or in
the aggregate, would have a Material Adverse Effect on Telescan.
(o) Certain Agreements and Arrangements. Telescan shall not, and
shall not permit any of its Subsidiaries to, enter into any agreements or
arrangements that limit or otherwise restrict Telescan or any of its
Subsidiaries or any of their respective affiliates or any successor
thereto or that could, after the Effective Time, limit or restrict
Telescan or any of its affiliates (including Holdco) or any successor
thereto, from engaging or competing in any line of business or in any
geographic area which agreements or arrangements, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect
on Holdco and its Subsidiaries, taken together, after giving effect to
the Mergers.
(p) Satisfaction of Closing Conditions. Except as required by law,
Telescan shall not, and shall not permit any of its Subsidiaries to, take
any action that would, or would
51
reasonably be expected to, result in (i) any of the conditions to the
Mergers set forth in Article VII not being satisfied or (ii) a material
delay in the satisfaction of such conditions.
(q) Write-Offs. Telescan shall not, and shall not permit any of its
Subsidiaries to, and shall not propose to, revalue any of Telescan's
assets, including without limitation writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary
course of business.
(r) Strategic Alliances. Telescan shall not, and shall not permit
any of its Subsidiaries to, and shall not propose to, enter into any
strategic alliance, joint venture, partnership, joint development or
joint marketing agreement with any Person.
(s) Other Actions. Telescan shall not, and shall not permit any of
its Subsidiaries to, and shall not propose to agree orally or in writing
or otherwise to take, any action that would reasonably be expected to
cause a Material Adverse Effect on ZiaSun or Holdco.
(t) No Related Actions. Telescan will not, and will not permit any
of its Subsidiaries to agree or commit to do any of the foregoing (except
for clause (a)(i) of this Section 5.1).
(u) Contingent Voting Rights of the Telescan Preferred Stock.
Telescan shall not take any action, or fail to take any action, that
would entitle the holders of the Telescan Preferred Stock to the voting
rights set forth in Section 8(b) of the certificate of designation of the
Telescan Preferred Stock.
5.2. Covenants of ZiaSun. During the period from the date of this
Agreement and continuing until the Effective Time, ZiaSun agrees as to
itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or Section 5.2 of the ZiaSun Disclosure
Schedule or to the extent that ZiaSun shall otherwise consent in
writing):
(a) Ordinary Course.
(i) ZiaSun and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted,
and shall use their reasonable best efforts to preserve intact their
present lines of business, maintain their rights and franchises and
preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that no action by ZiaSun or its
Subsidiaries with respect to matters specifically addressed by any
other provision of this Section 5.2 shall be deemed a breach of this
Section 5.2(a)(i) unless such action would constitute a breach of
one or more
52
of such other provisions of this Section 5.2. ZiaSun shall promptly
notify Telescan of any event or occurrence or emergency not in the
ordinary course of business of ZiaSun and any event which would
reasonably be expected to have a Material Adverse Effect on ZiaSun.
(ii) Other than in connection with acquisitions permitted by Section
5.1(i) or investments permitted by Section 5.1(k), ZiaSun shall not,
and shall not permit any of its Subsidiaries to, (A) enter into any
new material line of business or (B) incur or commit to any capital
expenditures or any obligations or liabilities in connection
therewith other than capital expenditures and obligations or
liabilities in connection therewith incurred or committed to in the
ordinary course of business consistent with past practices.
(b) Stock Options. ZiaSun shall not, and shall not permit any of its
Subsidiaries to, accelerate, amend or change the period of exercisability
of any outstanding ZiaSun Stock Options or stock subject to vesting, or
authorize cash payments in exchange for any such outstanding options.
(c) Intellectual Property. ZiaSun shall not, and shall not permit
any of its Subsidiaries to, transfer to any Person any rights to any
ZiaSun Intellectual Property (other than end-user licenses granted to
customers of ZiaSun in the ordinary course of business).
(d) Marketing Rights. ZiaSun shall not, and shall not permit any of
its Subsidiaries to, enter into or amend any material agreements pursuant
to which any other party is granted marketing, distribution, or similar
rights of any type or scope with respect to any products of ZiaSun except
in the ordinary course of business consistent with past practices.
(e) Amendments to Agreements. ZiaSun shall not, and shall not permit
any of its Subsidiaries to, amend or otherwise modify (or agree to do
so), except in the ordinary course of business, or materially violate the
terms of, any of the agreements set forth or described in the ZiaSun
Disclosure Schedule.
(f) Dividends; Changes in Share Capital. ZiaSun shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except for any such dividend or distribution by
a wholly owned Subsidiary of ZiaSun, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for,
shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock (or options,
warrants, or other rights exercisable therefor).
53
(g) Issuance of Securities. ZiaSun shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital
stock of any class or any securities convertible into or exercisable for,
or any rights, warrants, calls or options to acquire, any such shares, or
enter into any commitment, arrangement, undertaking or agreement with
respect to any of the foregoing, other than (i) the issuance of ZiaSun
Common Stock upon the exercise of ZiaSun Stock Options in accordance with
their present terms or pursuant to ZiaSun Stock Options or other stock
based awards granted pursuant to clause (ii) below, (ii) the granting of
ZiaSun Stock Options or other stock based awards of or to acquire shares
of ZiaSun Common Stock granted under Benefit Plans outstanding on the
date hereof in the ordinary course of business consistent with past
practices, (iii) issuances by a wholly owned Subsidiary of ZiaSun of
capital stock to such Subsidiary's parent or another wholly owned
Subsidiary of ZiaSun.
(h) Governing Documents. Except to the extent required to comply
with their respective obligations hereunder or with applicable law,
ZiaSun shall not amend or propose to so amend its certificate of
incorporation or bylaws.
(i) No Acquisitions. ZiaSun shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets (excluding the acquisition of assets used in the operations of
the business of ZiaSun and its Subsidiaries in the ordinary course, which
assets do not constitute a business unit, division or all or
substantially all of the assets of the transferor) in excess of $500,000
individually or in the aggregate; provided, however, that the foregoing
shall not prohibit (x) internal reorganizations or consolidations
involving existing Subsidiaries of ZiaSun or (y) the creation of new
Subsidiaries of ZiaSun organized to conduct or continue activities
otherwise permitted by this Agreement.
(j) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of ZiaSun, (ii)
dispositions referred to in the ZiaSun SEC Reports filed prior to the
date of this Agreement, (iii) as may be required by or in conformance
with law or regulation in order to permit or facilitate the consummation
of the transactions contemplated hereby or (iv) as disclosed in Section
5.2(j) of the ZiaSun Disclosure Schedule, ZiaSun shall not, and shall not
permit any of its Subsidiaries to, sell, lease or otherwise dispose of,
or agree to sell, lease or otherwise dispose of, any of its assets
(including capital stock of Subsidiaries of ZiaSun but excluding
inventory in the ordinary course of business), if the fair market value
of the total consideration (including the value of the indebtedness
acquired or assumed) therefor exceeds $50,000.
(k) Investments; Indebtedness. ZiaSun shall not, and shall not
permit any of its Subsidiaries to, (i) make any loans, advances or
capital contributions to, or investments
54
in, any other Person in excess of $10,000, other than (x) loans or
investments by ZiaSun or a Subsidiary of ZiaSun to or in ZiaSun or any
Subsidiary of ZiaSun, (y) employee loans or advances made in the ordinary
course of business or (z) in the ordinary course of business consistent
with past practices which are not, individually or in the aggregate,
material to ZiaSun and its Subsidiaries taken as a whole or (ii) without
regard to anything contained in the ZiaSun Disclosure Schedule, incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of ZiaSun or any of its
Subsidiaries, guarantee any debt securities of another Person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another Person (other than any wholly owned Subsidiary) or
enter into any arrangement having the economic effect of any of the
foregoing in excess of $2,500,000.
(l) Tax-Free Qualification. ZiaSun shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit
any of its Subsidiaries to, take any action (including any action
otherwise permitted by this Section 5.2) that would prevent or impede the
Mergers from qualifying as exchanges under Section 351 of the Code and
the ZiaSun Merger from qualifying as a reorganization under Section 368
of the Code.
(m) Compensation. Except (x) as required by law or by the terms of
any agreement currently in effect between ZiaSun or any Subsidiary of
ZiaSun and any executive officer or employee thereof or (y) in the
ordinary course of business consistent with past practices, ZiaSun shall
not increase the amount of compensation of any director, executive
officer or key employee of ZiaSun or any Subsidiary of ZiaSun or grant
any severance or termination pay to any director or officer or to any
other employee of ZiaSun or any Subsidiary of ZiaSun, or make any
increase in or commitment to increase any employee benefits, issue any
additional ZiaSun Stock Options, adopt or amend or make any commitment to
adopt or amend any Benefit Plan or make any contribution, other than
regularly scheduled contributions, to any ZiaSun Benefit Plan.
(n) Accounting Methods; Income Tax Elections. Except as disclosed in
ZiaSun SEC Reports filed prior to the date of this Agreement, or as
required by a Governmental Entity, ZiaSun shall not change its methods of
accounting, except as required by changes in GAAP as concurred in by
ZiaSun's independent public accountants. ZiaSun shall not (i) change its
fiscal year or (ii) make any tax election that, individually or in the
aggregate, would have a Material Adverse Effect on ZiaSun.
(o) Certain Agreements and Arrangements. ZiaSun shall not, and shall
not permit any of its Subsidiaries to, enter into any agreements or
arrangements that limit or otherwise restrict ZiaSun or any of its
Subsidiaries or any of their respective affiliates or any successor
thereto, or that could, after the Effective Time, limit or restrict
Telescan or any of its affiliates (including Holdco) or any successor
thereto, from engaging or competing in any line of business or in any
geographic area which agreements or arrangements, individually or in the
aggregate, would reasonably be expected to have a
55
Material Adverse Effect on Holdco and its Subsidiaries, taken together,
after giving effect to the Mergers.
(p) Satisfaction of Closing Conditions. Except as required by law,
ZiaSun shall not, and shall not permit any of its Subsidiaries to, take
any action that would, or would reasonably be expected to, result in (i)
any of the conditions to the Mergers set forth in Article VII not being
satisfied or (ii) a material delay in the satisfaction of such
conditions.
(q) Write-Offs. ZiaSun shall not, and shall not permit any of its
Subsidiaries to, and shall not propose to, revalue any of ZiaSun's
assets, including without limitation writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary
course of business.
(r) Strategic Alliances. ZiaSun shall not, and shall not permit any
of its Subsidiaries to, and shall not propose to, enter into any
strategic alliance, joint venture, partnership, joint development or
joint marketing agreement with any Person.
(s) Other Actions. ZiaSun shall not, and shall not permit any of its
Subsidiaries to, and shall not propose to agree orally or in writing or
otherwise to take, any action that would reasonably be expected to cause
a Material Adverse Effect on ZiaSun or Holdco.
(t) No Related Actions. ZiaSun will not, and will not permit any of
its Subsidiaries to, agree or commit to do any of the foregoing (except
for clause (a)(i) of this Section 5.2).
5.3. Rescission Offer. ZiaSun shall offer to rescind the transaction
pursuant to the Acquisition Agreement and Plan of Reorganization, dated
as of September 8, 2000, among ZiaSun and the selling shareholders party
thereto. Such offer to rescind shall be made to each such selling
shareholder and shall be registered with the SEC.
5.4. Governmental Filings. Each party shall (a) confer on a
reasonable basis with the other and (b) report to the other (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) on operational matters. ZiaSun and Telescan shall file all
reports required to be filed by each of them with the SEC (and all other
Governmental Entities) between the date of this Agreement and the
Effective Time and shall, if requested by the other party and to the
extent permitted by law or regulation or any applicable confidentiality
agreement, deliver to the other party copies of all such reports,
announcements and publications promptly after such request.
ARTICLE VI ADDITIONAL AGREEMENTS
6.1. Preparation of Proxy Statement; Stockholders Meetings. (a) As
promptly as reasonably practicable following the date hereof, Telescan
and ZiaSun shall cooperate
56
in preparing and each shall cause to be filed with the SEC mutually
acceptable proxy materials which shall constitute the joint proxy
statement/prospectus relating to the matters to be submitted to the
Telescan stockholders at the Telescan Stockholders Meeting and the
matters to be submitted to the ZiaSun stockholders at the ZiaSun
Stockholders Meeting (such proxy statement/prospectus, and any amendments
or supplements thereto, the "Joint Proxy Statement/Prospectus") and
Holdco shall prepare and file with the SEC a registration statement on
Form S-4 with respect to the issuance of Holdco Common Stock in the
Mergers (such Form S-4, and any amendments or supplements thereto, the
"Form S-4"). The Joint Proxy Statement/Prospectus will be included as a
prospectus in and will constitute a part of the Form S-4 as Holdco's
prospectus. Each of Telescan and ZiaSun shall use reasonable best efforts
to have the Joint Proxy Statement/Prospectus cleared by the SEC and the
Form S-4 declared effective by the SEC and to keep the Form S-4 effective
as long as is necessary to consummate the Mergers and the transactions
contemplated hereby. Telescan and ZiaSun shall, as promptly as
practicable after receipt thereof, provide the other party copies of any
written comments and advise the other party of any oral comments with
respect to the Joint Proxy Statement/Prospectus or Form S-4 received from
the SEC. The parties shall cooperate and provide the other with a
reasonable opportunity to review and comment on any amendment or
supplement to the Joint Proxy Statement/Prospectus and the Form S-4 prior
to filing such with the SEC, and will provide each other with a copy of
all such filings made with the SEC. Notwithstanding any other provision
herein to the contrary, no amendment or supplement (including by
incorporation by reference) to the Joint Proxy Statement/Prospectus or
the Form S-4 shall be made without the approval of both parties, which
approval shall not be unreasonably withheld or delayed; provided that
with respect to documents filed by a party which are incorporated by
reference in the Form S-4 or Joint Proxy Statement/Prospectus, this right
of approval shall apply only with respect to information relating to the
other party or its business, financial condition or results of
operations. Telescan will use reasonable best efforts to cause the Joint
Proxy Statements/Prospectus to be mailed to Telescan's stockholders, and
ZiaSun will use reasonable best efforts to cause the Joint Proxy
Statement/Prospectus to be mailed to ZiaSun's stockholders, in each case
as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. Holdco shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to
be taken under any applicable state securities laws in connection with
the Mergers and each of ZiaSun and Telescan shall furnish all information
concerning it and the holders of its capital stock as may be reasonably
requested in connection with any such action. Each party will advise the
other party, promptly after it receives notice thereof, of the time when
the Form S-4 has become effective, the issuance of any stop order, the
suspension of the qualification of the Holdco Common Stock issuable in
connection with the Mergers for offering or sale in any jurisdiction, or
any request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or the Form S-4. If at any time prior to the
Effective Time any information relating to Telescan or ZiaSun, or any of
their respective affiliates, officers or directors, should be discovered
by Telescan or ZiaSun which should be set forth in an
57
amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers
such information shall promptly notify the other party and, to the extent
required by law, rules or regulations, an appropriate amendment or
supplement describing such information shall be promptly filed with the
SEC and disseminated to the stockholders of Telescan and ZiaSun.
(b) ZiaSun shall duly take all lawful action to call, give notice of,
convene and hold a meeting of its stockholders on a date determined in
accordance with the mutual agreement of ZiaSun and Telescan (the "ZiaSun
Stockholders Meeting") for the purpose of obtaining the Required ZiaSun
Vote with respect to the transactions contemplated by this Agreement and
shall take all lawful action to solicit the adoption of this Agreement by
the Required ZiaSun Vote; and the Board of Directors of ZiaSun shall
recommend adoption of this Agreement by the stockholders of ZiaSun to the
effect as set forth in Section 4.2(f) (the "ZiaSun Recommendation"), and
shall not, unless Telescan makes a Change in the Telescan Recommendation,
(x) withdraw, modify or qualify (or propose to withdraw, modify or
qualify) in any manner adverse to Telescan such recommendation or (y)
take any action or make any statement (other than any action described in
the foregoing clause (x)) in connection with the ZiaSun Stockholders
Meeting inconsistent with such recommendation (collectively, a "Change in
the ZiaSun Recommendation"); provided, however, any action or statement
under clause (y) will not be deemed a Change in the ZiaSun Recommendation
provided (I) such action or statement is taken or made pursuant to advice
from Jones, Waldo, Holbrook & McDonough, counsel to ZiaSun, to the effect
that such action or statement is required by applicable law, (II) if a
ZiaSun Public Proposal (as defined in Section 8.2(b)) has been made and
not rescinded, such action or statement shall not relate to such ZiaSun
Public Proposal other than any factual statement required by any
regulatory authority (including the SEC) and shall in any event include a
rejection of such ZiaSun Public Proposal and (III) such action or
statement also includes a reaffirmation of the ZiaSun Board of Directors'
approval of the Mergers and the other transactions contemplated hereby
and recommendation to the ZiaSun stockholders to adopt this Agreement;
provided further, however, that the Board of Directors of ZiaSun may make
a Change in the ZiaSun Recommendation pursuant to Section 6.5.
Notwithstanding any Change in the ZiaSun Recommendation, this Agreement
shall be submitted to the stockholders of ZiaSun at the ZiaSun
Stockholders Meeting for the purpose of adopting this Agreement and
nothing contained herein shall be deemed to relieve ZiaSun of such
obligation.
(c) Telescan shall duly take all lawful action to call, give notice
of, convene and hold a meeting of its stockholders on a date determined
in accordance with the mutual agreement of Telescan and ZiaSun (the
"Telescan Stockholders Meeting") for the purpose of obtaining the
Required Telescan Vote with respect to the transactions contemplated by
this Agreement and shall take all lawful action to solicit the adoption
of this Agreement by the Required Telescan Vote, and the Board of
Directors of Telescan shall recommend adoption of
58
this Agreement by the stockholders of Telescan to the effect as set forth
in Section 4.1(f) (the "Telescan Recommendation"), and shall not, unless
ZiaSun makes a Change in the ZiaSun Recommendation, (x) withdraw, modify
or qualify (or propose to withdraw, modify or qualify) in any manner
adverse to ZiaSun such recommendation or (y) take any action or make any
statement (other than any action described in the foregoing clause (x))
in connection with the Telescan Stockholders Meeting inconsistent with
such recommendation (collectively, a "Change in the Telescan
Recommendation"); provided, however, any action or statement under clause
(y) will not be deemed a Change in the Telescan Recommendation provided
(I) such action or statement is taken or made pursuant to advice from
Simpson Thacher & Bartlett, counsel to Telescan, to the effect that such
action or statement is required by applicable law, (II) if an Telescan
Public Proposal (as defined in Section 8.2(c)) has been made and not
rescinded, such action or statement shall not relate to such Telescan
Public Proposal other than any factual statement required by any
regulatory authority (including the SEC) and shall in any event include a
rejection of such Telescan Public Proposal and (III) such action or
statement also includes a reaffirmation of the Telescan Board of
Directors' approval of the Mergers and the other transactions
contemplated hereby and recommendation to the Telescan stockholders to
adopt this Agreement; provided further, however, that the Board of
Directors of Telescan may make a Change in the Telescan Recommendation
pursuant to Section 6.5. Notwithstanding any Change in the Telescan
Recommendation, this Agreement shall be submitted to the stockholders of
Telescan at the Telescan Stockholders Meeting for the purpose of adopting
this Agreement and nothing contained herein shall be deemed to relieve
Telescan of such obligation.
6.2. Holdco Board of Directors; Executive Officers. At or prior to
the Effective Time, each party hereto will take all action necessary to
(i) cause the Board of Directors of Holdco and each committee thereof as
of the Effective Time to be comprised in accordance with Exhibit 6.2
hereto and (ii) cause the individuals listed in Exhibit 6.2 hereto to be
appointed as officers of Holdco as of the Effective Time in accordance
with Exhibit 6.2 hereto. Each such director and officer shall remain in
office until the next election of the directors of Holdco which shall not
be prior to April 2, 2002, provided, however, any such director may be
removed for cause as set forth in the Holdco Bylaws. In the event that
any of the four directors of Holdco identified on Exhibit 6.2 as having
been nominated by ZiaSun or any of the three directors of Holdco
identified on Exhibit 6.2 as having been nominated by Telescan are
unwilling or unable to continue to serve in such capacity during the
period following the Effective Time and prior to the first election if
the Board of Directors of Holdco, either due to death, disability,
resignation or removal for cause, such vacating director shall be replace
by: (A) in the case of a vacating director who was nominated by ZiaSun,
by the remaining directors of Holdco who were nominated by ZiaSun as set
forth on Exhibit 6.2 hereto or appointed pursuant to this clause (A) of
this Section 6.2 and (B) in the case of a vacating director who was
nominated by Telescan, by the remaining directors of Holdco who were
nominated by Telescan as set forth on Exhibit 6.2 hereto or appointed
pursuant to this clause (B) of this Section 6.2. In the event the holders
of the Series A Preferred Stock of Holdco elect an additional director to
the Board of Directors of
59
Holdco pursuant to Section B9(b) of Article IV of the Holdco Charter, Holdco
shall increase the size of the Board of Directors by an additional director
(above that required to accommodate the rights of the holders of the Series A
Preferred Stock of Holdco), which vacancy shall be filled by a person selected
by the directors of Holdco who were nominated by ZiaSun as set forth on
Schedule 6.2 hereto or appointed pursuant to clause (A) of the immediately
preceding sentence of this Section 6.2.
6.3. Access to Information. Upon reasonable notice, each party shall
(and shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of the
other party reasonable access during normal business hours, during the
period prior to the Effective Time, to all its properties, books,
contracts, commitments, records, officers and employees and, during such
period, such party shall (and shall cause its Subsidiaries to) furnish
promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of
federal, state or local laws (other than documents which such party is
not permitted to disclose under applicable law), and (b) all other
information concerning it and its business, properties and personnel as
such other party may reasonably request. The parties will hold any such
information obtained pursuant to this Section 6.3 in confidence in
accordance with, and shall otherwise be subject to, the provisions of the
confidentiality letter dated January 12, 2001, between ZiaSun and
Telescan (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect. Any investigation by
either of Telescan or ZiaSun shall not affect the representations and
warranties of the other.
6.4. Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under this Agreement and applicable
laws and regulations to consummate the Mergers and the other transactions
contemplated by this Agreement as soon as practicable after the date
hereof, including (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions,
filings, tax ruling requests and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders,
registrations, approvals, permits, rulings, authorizations and clearances
necessary or advisable to be obtained under any of the parties'
agreements, contracts, licenses or leases in order to preserve the
benefits thereunder or otherwise in connection with the Merger and from
any third party and/or any Governmental Entity in order to consummate the
Mergers or any of the other transactions contemplated by this Agreement
(collectively, the "Required Approvals"), (ii) taking all reasonable
steps as may be necessary to obtain all Required Approvals and (iii) the
satisfaction of the conditions hereunder.
6.5. Acquisition Proposals. Without limitation on any of such
party's other obligations under this Agreement (including under Article V
hereof), each of Telescan and ZiaSun agrees that neither it nor any of
its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker,
attorney or accountant retained by it or any of
60
its Subsidiaries) not to, directly or indirectly, (i) initiate, solicit,
encourage or knowingly facilitate any inquiries or the making of any proposal
or offer with respect to, or a transaction to effect, a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving it
or any of its Significant Subsidiaries (as defined in Rule 1-02 of Regulation
S-X of the SEC), or any purchase or sale of 20% or more of the consolidated
assets (including without limitation stock of its Subsidiaries) of such party
and its Subsidiaries, taken as a whole, or any purchase or sale of, or tender
or exchange offer for, the equity securities of such party that, if
consummated, would result in any Person (or the stockholders of such Person)
beneficially owning securities representing 20% or more of the total voting
power of such party (or of the surviving parent entity in such transaction) or
any of its Significant Subsidiaries (any such proposal, offer or transaction
(other than a proposal or offer made by the other party or an affiliate
thereof) being hereinafter referred to as an "Acquisition Proposal"), (ii)
have any discussion with or provide any confidential information or data to
any Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal, (iii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal or (iv) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar agreement
or propose publicly or agree to do any of the foregoing related to any
Acquisition Proposal.
Notwithstanding anything in this Agreement to the contrary, each of
Telescan and ZiaSun or its Board of Directors shall be permitted to (A) to the
extent applicable, comply with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal, (B) effect a Change in
the Telescan or ZiaSun Recommendation, as the case may be, or (C) engage in
any discussions or negotiations with, or provide any information to, any
Person in response to an unsolicited bona fide written Acquisition Proposal by
any such Person, if and only to the extent that, in any such case referred to
in clause (B) or (C), (i) its Stockholders Meeting shall not have occurred,
(ii) (x) in the case of clause (B) above, it has received an unsolicited bona
fide written Acquisition Proposal from a third party and its Board of
Directors concludes in good faith that such Acquisition Proposal constitutes a
Superior Proposal (as defined below) and (y) in the case of clause (C) above,
its Board of Directors concludes in good faith that there is a reasonable
likelihood that such Acquisition Proposal could constitute a Superior
Proposal, (iii) in the case of clause (B) or (C) above, its Board of
Directors, after consultation with outside counsel, determines in good faith
that the failure to take such action would violate its fiduciary duties under
applicable law, (iv) prior to providing any information or data to any Person
in connection with an Acquisition Proposal by any such Person, its Board of
Directors receives from such Person an executed confidentiality agreement
having provisions that are customary in such agreements, as advised by
counsel, provided that if such confidentiality agreement contains provisions
that are less restrictive than the comparable provision, or omits restrictive
provisions, contained in the Confidentiality Agreement, then the
Confidentiality Agreement will be deemed to be amended to contain only such
less restrictive provisions or to omit such restrictive provisions, as the
case may be, and (v) prior to providing any information or data to any Person
or entering into discussions or negotiations with any Person, such party
notifies the other party
61
promptly of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to
be initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms
and conditions of any inquiries, proposals or offers. Each of Telescan and
ZiaSun agrees that it will promptly keep the other party informed of the
status and terms of any such proposals or offers and the status and terms of
any such discussions or negotiations. Each of Telescan and ZiaSun agrees that
it will, and will cause its officers, directors and representatives to,
immediately cease and cause to be terminated any activities, discussions or
negotiations existing as of the date of this Agreement with any parties
conducted heretofore with respect to any Acquisition Proposal. Each of
Telescan and ZiaSun agrees that it will use reasonable best efforts to
promptly inform its directors, officers, key employees, agents and
representatives of the obligations undertaken in this Section 6.5. Nothing in
this Section 6.5 shall (x) permit Telescan or ZiaSun to terminate this
Agreement (except as specifically provided in Article VIII hereof) or (y)
affect any other obligation of Telescan or ZiaSun under this Agreement.
Neither Telescan nor ZiaSun shall submit to the vote of its stockholders any
Acquisition Proposal other than the Telescan Merger or ZiaSun Merger,
respectively. "Superior Proposal" means with respect to Telescan or ZiaSun, as
the case may be, a bona fide written proposal made by a Person other than
either such party which is (I) for a merger, reorganization, consolidation,
share exchange, business combination, recapitalization or similar transaction
involving such party as a result of which the other party thereto or its
stockholders will own 40% or more of the combined voting power of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof) and (II) is on terms which the Board of Directors of such party in
good faith concludes (following receipt of the advice of its financial
advisors and outside counsel), taking into account, among other things, all
legal, financial, regulatory and other aspects of the proposal and the Person
making the proposal, (x) would, if consummated, result in a transaction that
is more favorable to its stockholders (in their capacities as stockholders),
from a financial point of view, than the transactions contemplated by this
Agreement and (y) is reasonably capable of being completed.
6.6. Fees and Expenses. Subject to Section 8.2, whether or not the
Mergers are consummated, all Expenses (as defined below) incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such Expenses, except Expenses
incurred in connection with the filing, printing and mailing of the Joint
Proxy Statement/Prospectus and Form S-4 shall be paid 50% by ZiaSun and
50% by Telescan. "Expenses" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the Voting
Agreements and the transactions contemplated hereby and thereby,
including the preparation, printing, filing and mailing of the Joint
Proxy Statement/Prospectus and Form S-4 and the solicitation of
stockholder approvals and all other matters related to the transactions
contemplated hereby and thereby. The parties hereto shall cooperate with
each other in preparing, executing and filing any Tax Returns with
respect to property or transfer taxes.
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6.7. Directors' and Officers' Indemnification and Insurance.
(a) Holdco shall (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of ZiaSun and its Subsidiaries (in all of their capacities) (a)
to the same extent such persons are indemnified or have the right to
advancement of expenses as of the date of this Agreement by ZiaSun
pursuant to ZiaSun's certificate of incorporation, bylaws and
indemnification agreements, if any, in existence on the date hereof with
any directors, officers and employees of ZiaSun and its Subsidiaries and
(b) without limitation to clause (a), to the fullest extent permitted by
law, in each case for acts or omissions occurring at or prior to the
Effective Time (including for acts or omissions occurring in connection
with the approval of this Agreement and the consummation of the
transactions contemplated hereby), (ii) include and cause to be
maintained in effect in Holdco's (or any successor's) certificate of
incorporation and bylaws after the Effective Time, provisions regarding
elimination of liability of directors, indemnification of officers,
directors and employees and advancement of expenses which are, in the
aggregate, no less advantageous to the intended beneficiaries than the
corresponding provisions contained in the current certificate of
incorporation and bylaws of ZiaSun and (iii) cause to be maintained for a
period of six years after the Effective Time the current policies of
directors' and officers' liability insurance and fiduciary liability
insurance maintained by ZiaSun (provided that Holdco (or any successor)
may substitute therefor one or more policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims
arising from facts or events that occurred on or before the Effective
Time; provided, however, that in no event shall Holdco be required to
expend in any one year an amount in excess of 200% of the annual premiums
currently paid by ZiaSun for such insurance; and, provided further that
if the annual premiums of such insurance coverage exceed such amount,
Holdco shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount. The obligations of Holdco
under this Section 6.7(a) shall not be terminated or modified in such a
manner as to adversely affect any indemnitee to whom this Section 6.7(a)
applies without the consent of such affected indemnitee (it being
expressly agreed that the indemnitees to whom this Section 6.7(a) applies
shall be third party beneficiaries of this Section 6.7(a)).
(b) Holdco shall (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of Telescan and its Subsidiaries (in all of their capacities)
(a) to the same extent such persons are indemnified or have the right to
advancement of expenses as of the date of this Agreement by Telescan
pursuant to Telescan's certificate of incorporation, bylaws and
indemnification agreements, if any, in existence on the date hereof with
any directors, officers and employees of Telescan and its Subsidiaries
and (b) without limitation to clause (a), to the fullest extent permitted
by law, in each case for acts or omissions occurring at or prior to the
Effective Time (including for acts or omissions occurring in connection
with the approval of this Agreement and the consummation of the
transactions contemplated
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hereby), (ii) include and cause to be maintained in effect in Holdco's
(or any successor's) certificate of incorporation and bylaws after the
Effective Time, provisions regarding elimination of liability of
directors, indemnification of officers, directors and employees and
advancement of expenses which are, in the aggregate, no less advantageous
to the intended beneficiaries than the corresponding provisions contained
in the current certificate of incorporation and bylaws of Telescan and
(iii) cause to be maintained for a period of six years after the
Effective Time the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by Telescan
(provided that Holdco (or any successor) may substitute therefor one or
more policies of at least the same coverage and amounts containing terms
and conditions which are, in the aggregate, no less advantageous to the
insured) with respect to claims arising from facts or events that
occurred on or before the Effective Time; provided, however, that in no
event shall Holdco be required to expend in any one year an amount in
excess of 200% of the annual premiums currently paid by Telescan for such
insurance; and, provided further that if the annual premiums of such
insurance coverage exceed such amount, Holdco shall be obligated to
obtain a policy with the greatest coverage available for a cost not
exceeding such amount. The obligations of Holdco under this Section
6.7(b) shall not be terminated or modified in such a manner as to
adversely affect any indemnitee to whom this Section 6.7(b) applies
without the consent of such affected indemnitee (it being expressly
agreed that the indemnitees to whom this Section 6.7(b) applies shall be
third party beneficiaries of this Section 6.7(b)).
6.8. Public Announcements. Telescan and ZiaSun shall use reasonable
best efforts to develop a joint communications plan and each party shall
use reasonable best efforts (i) to ensure that all press releases and
other public statements with respect to the transactions contemplated
hereby shall be consistent with such joint communications plan and (ii)
unless otherwise required by applicable law or by obligations pursuant to
any listing agreement with or rules of any securities exchange, to
consult with each other before issuing any press release or, to the
extent practical, otherwise making any public statement with respect to
this Agreement or the transactions contemplated hereby. In addition to
the foregoing, except to the extent disclosed in or consistent with the
Joint Proxy Statement/Prospectus in accordance with the provisions of
Section 6.1, neither Telescan nor ZiaSun shall issue any press release or
otherwise make any public statement or disclosure concerning the other
party or the other party's business, financial condition or results of
operations without the consent of the other party, which consent shall
not be unreasonably withheld or delayed.
6.9. Listing of Shares of Holdco Common Stock. Holdco shall use its
reasonable best efforts to cause the shares of Holdco Common Stock to be
issued in the Merger and the shares of Holdco Common Stock to be reserved
for issuance upon exercise of the ZiaSun Stock Options and Telescan Stock
Options to be quoted on the NASDAQ, subject to official notice of
issuance, prior to the Closing Date.
6.10. Affiliates. (a) Not less than 45 days prior to the date of the
ZiaSun Stockholders Meeting, ZiaSun shall deliver to Telescan a letter
identifying all Persons
64
who, in the judgment of ZiaSun, may be deemed at the time this Agreement
is submitted for adoption by the stockholders of ZiaSun, "affiliates" of
ZiaSun for purposes of Rule 145 under the Securities Act and applicable
SEC rules and regulations, and such list shall be updated as necessary to
reflect changes from the date thereof. ZiaSun shall use reasonable best
efforts to cause each Person identified on such list to deliver to Holdco
not less than 30 days prior to the Effective Time, a written agreement
substantially in the form attached as Exhibit 6.10 hereto (an "Affiliate
Agreement").
(b) Not less than 45 days prior to the date of the Telescan
Stockholders Meeting, Telescan shall deliver to ZiaSun a letter
identifying all Persons who, in the judgment of Telescan, may be deemed
at the time this Agreement is submitted for adoption by the stockholders
of Telescan, "affiliates" of Telescan for purposes of Rule 145 under the
Securities Act and applicable SEC rules and regulations, and such list
shall be updated as necessary to reflect changes from the date thereof.
Telescan shall use reasonable best efforts to cause each Person
identified on such list to deliver to Holdco not less than 30 days prior
to the Effective Time, an Affiliate Agreement.
6.11. Section 16 Matters. Prior to the Effective Time, Telescan and
ZiaSun shall take all such steps as may be required to cause any
dispositions of ZiaSun Common Stock or Telescan Common Stock (including
derivative securities with respect to ZiaSun Common Stock or Telescan
Common Stock) or acquisitions of Holdco Common Stock (including
derivative securities with respect to Holdco Common Stock) resulting from
the transactions contemplated by Article I or Article II of this
Agreement by each individual who is subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to Telescan and ZiaSun
to be exempt under Rule 16b-3 promulgated under the Exchange Act.
ARTICLE VII CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation to Effect its Respective
Merger. The respective obligations of ZiaSun and Telescan to effect the
ZiaSun Merger and Telescan Merger are subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. (i) ZiaSun shall have obtained the
Required ZiaSun Vote in connection with the adoption of this Agreement by
the stockholders of ZiaSun and (ii) Telescan shall have obtained the
Required Telescan Vote in connection with the adoption of this Agreement
by the stockholders of Telescan.
(b) No Injunctions or Restraints, Illegality. No laws shall have
been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction shall be in effect,
having the effect of making the Mergers illegal or otherwise prohibiting
consummation of the Mergers.
65
(c) NASDAQ Listing. The shares of Holdco Common Stock to be issued
in the Mergers and such other shares of Holdco Common Stock to be
reserved for issuance in connection with the Mergers shall have been
approved for listing on the NASDAQ, subject to official notice of
issuance.
(d) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Form S-4 shall have been issued by
the SEC and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) Appraisal Rights. Stockholders of ZiaSun shall not have
perfected their rights of appraisal within the meaning of Chapter 92A of
NRS with respect to more than 1,000,000 shares of ZiaSun Common Stock.
7.2. Additional Conditions to Obligations of Telescan. The
obligations of Telescan to effect the Telescan Merger are subject to the
satisfaction, or waiver by Telescan, on or prior to the Closing Date of
the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of ZiaSun set forth in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality
or Material Adverse Effect, shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent that such representations and
warranties speak as of another date, in which case such representations
and warranties shall be true and correct as of such other date), except
where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on ZiaSun; and Telescan shall
have received a certificate of a senior executive officer and a senior
financial officer of ZiaSun to such effect.
(b) Performance of Obligations of ZiaSun. ZiaSun shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality or Material Adverse Effect and shall have
performed or complied in all material respects with all other material
agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified, and
Telescan shall have received a certificate of a senior executive officer
and a senior financial officer of ZiaSun to such effect.
(c) Tax Opinion. Telescan shall have received from Simpson Thacher &
Bartlett, counsel to Telescan, on the Closing Date, a written opinion to
the effect that the Mergers, taken together, will be treated for federal
income tax purposes as exchanges to which Section 351 of the Code
applies. In rendering such opinion, counsel to Telescan shall be entitled
to rely upon information, representations and assumptions provided by
Holdco, Telescan and ZiaSun substantially in the form of Exhibits
7.2(c)(1), 7.2(c)(2) and
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7.2(c)(3) (allowing for such amendments to the representations as counsel
to Telescan deems reasonably necessary).
(d) Governmental and Regulatory and Other Consents and Approvals.
Other than the filing provided for by Section 7.1(c), all consents,
approvals, and actions of, filings with and notices to any Governmental
Entity or any other public or private third parties required of ZiaSun,
Telescan or any of their Subsidiaries to consummate the Merger and the
other matters contemplated hereby, the failure of which to be obtained or
taken could be reasonably expected to have a Material Adverse Effect on
Holdco or to materially diminish the value of the transactions
contemplated by this Agreement to Telescan, or on the ability of ZiaSun
and Telescan to consummate the transactions contemplated hereby, shall
have been obtained, all in form and substance reasonably satisfactory to
Telescan.
(e) Material Adverse Change. There shall not have occurred any
Material Adverse Effect on ZiaSun since the date of this Agreement.
7.3. Additional Conditions to Obligations of ZiaSun. The obligations
of ZiaSun to effect the ZiaSun Merger are subject to the satisfaction, or
waiver by ZiaSun, on or prior to the Closing Date of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Telescan set forth in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality
or Material Adverse Effect, shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent that such representations and
warranties speak as of another date, in which case such representations
and warranties shall be true and correct as of such other date), except
where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Telescan; and ZiaSun shall
have received a certificate of a senior executive officer and a senior
financial officer of Telescan to such effect.
(b) Performance of Obligations of Telescan. Telescan shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality or Material Adverse Effect and shall have
performed or complied in all material respects with all other material
agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified, and
ZiaSun shall have received a certificate of a senior executive officer
and a senior financial officer of Telescan to such effect.
(c) Tax Opinion. ZiaSun shall have received from Jones, Waldo,
Holbrook & McDonough, counsel to ZiaSun, on the Closing Date,
a written opinion to the effect that the Mergers, taken together, will be
treated for federal income tax purposes as exchanges to which Section 351
of the Code applies and that the ZiaSun Merger will constitute a
67
reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, counsel to ZiaSun shall be entitled to rely upon
information, representations and assumptions provided by Holdco, Telescan
and ZiaSun substantially in the form of Exhibits 7.2(c)(1), 7.2(c)(2) and
7.2(c)(3) (allowing for such amendments to the representations as counsel
to ZiaSun deems reasonably necessary).
(d) Governmental and Regulatory and Other Consents and Approvals.
Other than the filing provided for by Section 7.1(c), all consents,
approvals and actions of, filings with and notices to any Governmental
Entity or any other public or private third parties required of ZiaSun,
Telescan or any of their Subsidiaries to consummate the Merger and the
other matters contemplated hereby, the failure of which to be obtained or
taken could be reasonably expected to have a Material Adverse Effect on
Holdco or to materially diminish the value of the transactions
contemplated by this Agreement to Telescan, or on the ability of ZiaSun
and Telescan to consummate the transactions contemplated hereby, shall
have been obtained, all in form and substance reasonably satisfactory to
Telescan.
(e) Material Adverse Change. There shall not have occurred any
Material Adverse Effect on Telescan since the date of this Agreement.
ARTICLE VIII TERMINATION AND AMENDMENT
8.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided
below, whether before or after approval of the matters presented in
connection with the Mergers by the stockholders of ZiaSun or Telescan:
(a) By mutual written consent of Telescan and ZiaSun;
(b) By either ZiaSun or Telescan, if the Effective Time shall not
have occurred on or before November 1, 2001 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement (including without limitation
such party's obligations set forth in Section 6.4) has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before
the Termination Date;
(c) By either ZiaSun or Telescan, if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which
the parties shall have used their reasonable best efforts to resist,
resolve or lift, as applicable, in accordance with Section 6.4)
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable and
which is necessary to fulfill the conditions set forth in Section 7.1(b)
or (c), as applicable; provided, however, that the right to terminate
this Agreement under this Section 8.1(c) shall not be
available to any party whose failure to comply with Section 6.4 has been
the cause of such action;
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(d) By either ZiaSun or Telescan, if the approvals of the
stockholders of either Telescan or ZiaSun contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or of any
adjournment thereof at which the vote was taken;
(e) By Telescan, if ZiaSun shall have (i) failed to make the ZiaSun
Recommendation or effected a Change in the ZiaSun Recommendation (or
resolved to take any such action), whether or not permitted by the terms
hereof or (ii) materially breached its obligations under this Agreement
by reason of a failure to call the ZiaSun Stockholders Meeting in
accordance with Section 6.1(b) or a failure to prepare and mail to its
stockholders the Joint Proxy Statement/Prospectus in accordance with
Section 6.1(a);
(f) By ZiaSun, if Telescan shall have (i) failed to make the
Telescan Recommendation or effected a Change in the Telescan
Recommendation (or resolved to take any such action), whether or not
permitted by the terms hereof, or (ii) materially breached its
obligations under this Agreement by reason of a failure to call the
Telescan Stockholders Meeting in accordance with Section 6.1(c) or a
failure to prepare and mail to its stockholders the Joint Proxy
Statement/Prospectus in accordance with Section 6.1(a);
(g) By ZiaSun, if Telescan shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements
contained in this Agreement, such that the conditions set forth in
Section 7.3(a) or (b) are not capable of being satisfied on or before the
Termination Date; or
(h) By Telescan, if ZiaSun shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements
contained in this Agreement, such that the conditions set forth in
Section 7.2(a) or (b) are not capable of being satisfied on or before the
Termination Date.
(i) By ZiaSun, if (i) the board of directors of ZiaSun authorizes
ZiaSun to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and ZiaSun notifies Telescan in
writing that it intends to enter into such an agreement, attaching the
most current version of such agreement to such notice (which version
shall be updated on a current basis) and (ii) Telescan does not make,
within three Business Days (or, in the case of any update of such version
with respect to a given third party, other than the initial notification,
one Business Day) of receipt of ZiaSun's written notification of its
intention to enter into a binding agreement for a Superior Proposal, a
non-revocable binding offer that the board of directors of ZiaSun
determines, in good faith, is at least as favorable to the stockholders
of ZiaSun as the Superior Proposal; or
(j) By Telescan, if (i) the board of directors of Telescan
authorizes Telescan to enter into a binding written agreement concerning
a transaction that constitutes a Superior Proposal and Telescan notifies
ZiaSun in writing that it intends to enter into such an
69
agreement, attaching the most current version of such agreement to such
notice (which version shall be updated on a current basis) and (ii)
ZiaSun does not make, within three Business Days (or, in the case of any
update of such version with respect to a given third party, other than
the initial notification, one Business Day) of receipt of Telescan's
written notification of its intention to enter into a binding agreement
for a Superior Proposal, a non-revocable binding offer that the board of
directors of Telescan determines, in good faith, is at least as favorable
to the stockholders of Telescan as the Superior Proposal.
8.2. Effect of Termination.
(a) In the event of termination of this Agreement by either ZiaSun
or Telescan as provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
any of the parties or their respective officers or directors except with
respect to Section 4.1(k), Section 4.2(k), the second sentence of Section
6.3, Section 6.6, this Section 8.2 and Article IX, which provisions shall
survive such termination, and except that, notwithstanding anything to
the contrary contained in this Agreement, neither Telescan nor ZiaSun
shall be relieved or released from any liabilities or damages arising out
of its willful and material breach of this Agreement.
(b) If (A) (I) Telescan or ZiaSun shall terminate this Agreement
pursuant to Section 8.1(d) (provided that the basis for such termination
is the failure of ZiaSun's stockholders to adopt this Agreement) or
pursuant to Section 8.1(b) without the ZiaSun Stockholder Meeting having
occurred, (II) at any time after the date of this Agreement and before
such termination an Acquisition Proposal with respect to ZiaSun shall
have been publicly announced or otherwise communicated to the senior
management, Board of Directors or stockholders of ZiaSun (a "ZiaSun
Public Proposal") and (III) within twelve months of such termination
ZiaSun or any of its Subsidiaries enters into any definitive agreement
with respect to, or consummates, any Acquisition Proposal, (B) Telescan
shall terminate this Agreement pursuant to Section 8.1(e) or (C) ZiaSun
shall terminate this Agreement pursuant to Section 8.1(i); then ZiaSun
shall promptly, but in no event later than the date of such termination
(or, if later, in the case of clause (A), the date ZiaSun or its
Subsidiary enters into such agreement with respect to or consummates such
Acquisition Proposal), pay Telescan an amount equal to the ZiaSun
Termination Fee, by wire transfer of immediately available funds. The
"ZiaSun Termination Fee" shall be an amount equal to 3% of the product
of (x) the number of shares of ZiaSun Common Stock
outstanding as of the date hereof multiplied by (y) the last sale price
of ZiaSun Common Stock on the NASDAQ on the trading day immediately prior
to the date hereof (such product, the "ZiaSun Amount").
(c) If (A) (I) Telescan or ZiaSun shall terminate this Agreement
pursuant to Section 8.1(d) (provided that the basis for such termination
is the failure of Telescan's stockholders to adopt this Agreement) or
pursuant to Section 8.1(b) without the Telescan Stockholders Meeting
having occurred, (II) at any time after the date of this Agreement
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and before such termination an Acquisition Proposal with respect to
Telescan shall have been publicly announced or otherwise communicated to
the senior management, Board of Directors or stockholders of Telescan (an
"Telescan Public Proposal") and (III) within twelve months of such
termination Telescan or any of its Subsidiaries enters into any
definitive agreement with respect to, or consummates, any Acquisition
Proposal, (B) ZiaSun shall terminate this Agreement pursuant to Section
8.1(f) or (C) Telescan shall terminate this Agreement pursuant to Section
8.1(j); then Telescan shall promptly, but in no event later than the date
of such termination (or, if later, in the case of clause (A), the date
Telescan or its Subsidiary enters into such agreement with respect to or
consummates such Acquisition Proposal), pay ZiaSun an amount equal to the
Telescan Termination Fee, by wire transfer of immediately available
funds. The "Telescan Termination Fee" shall be an amount equal to 3% of
the product of (x) the number of shares of Telescan Common Stock
outstanding as of the date hereof multiplied by (y) the last sale price
of Telescan Common Stock on the NASDAQ on the trading day immediately
prior to the date hereof (such product, the "Telescan Amount").
(d) The parties acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, none of the parties would
enter into this Agreement; accordingly, if either Telescan or ZiaSun
fails promptly to pay any amount due pursuant to this Section 8.2, and,
in order to obtain such payment, the other party commences a suit which
results in a judgment against such party for the fee set forth in this
Section 8.2, such party shall pay to the other party its costs and
expenses (including attorneys' fees and expenses) in connection with such
suit, together with interest on the amount of the fee at the prime rate
of Citibank, N.A. in effect on the date such payment was required to be
made notwithstanding the provisions of Section 6.6. The parties agree
that any remedy or amount payable pursuant to this Section 8.2 shall not
preclude any other remedy or amount payable hereunder and shall not be an
exclusive remedy for any breach of any representation, warranty, covenant
or agreement contained in this Agreement.
8.3. Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at
any time before or after approval of the matters presented in connection
with the Mergers by the stockholders of ZiaSun and Telescan, but, after
any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.4. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards
of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto
and (iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party
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hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE IX GENERAL PROVISIONS
9.1. Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and other agreements
in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants, agreements and other provisions,
shall survive the Effective Time, except for those covenants, agreements
and other provisions contained herein (including Section 6.7, Section 6.2
and Exhibit 6.2) that by their terms apply or are to be performed in
whole or in part after the Effective Time and this Article.
9.2. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon
confirmation of receipt, (b) on the first Business Day following the date
of dispatch if delivered by a recognized next-day courier service or (c)
on the tenth Business Day following the date of mailing if delivered by
registered or certified mail, return receipt requested, postage prepaid.
All notices hereunder shall be delivered as set forth below, or pursuant
to such other instructions as may be designated in writing by the party
to receive such notice:
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(a) if to Telescan to:
Telescan, Inc.
5959 Corporate Drive
Suite 2000 Houston, TX 77036
Fax: (281) 588-9843
Attention: Lee K. Barba
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(b) if to ZiaSun to:
ZiaSun Technologies Inc.
655 San Rodolfo
Suite 120
Solana Beach, CA 90275
Fax: Attention: D. Scott Elder
with a copy to:
Jones, Waldo, Holbrook & McDonough
1500 Wells Fargo Plaza
170 South Main Street
Salt Lake City, Utah 84101
Telephone: (801) 521-3200
Facsimile: (801) 328-0537
Attention: Ronald S. Poelman, Esq.
Wenthur & Chachas
4180 La Jolla Village Drive, Suite 500
La Jolla, CA 92037
Telephone: (858) 457-3800
Facsimile: (858) 457-3691
Attention: George Chachas, Esq.
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if to Holdco, Telescan Merger Sub or ZiaSun Merger Sub to each of
the parties entitled to receive notice pursuant to this Section 9.2 for
Telescan and ZiaSun.
9.3. Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an
Article or Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." In
addition, each Section of this Agreement is qualified by the matters set
forth in the Telescan Disclosure Schedule, the ZiaSun Disclosure Schedule
and the Schedules to this Agreement, as applicable, to the extent
specified therein and such other Sections of this Agreement to the extent
a matter in such Section is disclosed in such a way as to make its
relevance called for by such other Section readily apparent.
9.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
9.5. Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement, the Confidentiality Agreement and the exhibits
and schedules hereto and the other agreements and instruments of the
parties delivered in connection herewith constitute the entire agreement
and supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 6.7 (which is intended to be for the
benefit of the Persons covered thereby).
9.6. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware (without giving
effect to choice of law principles thereof).
9.7. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public
policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable
74
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
9.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the
parties hereto, in whole or in part (whether by operation of law or
otherwise), without the prior written consent of the other parties, and
any attempt to make any such assignment without such consent shall be
null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
9.9. Submission to Jurisdiction; Waivers. Each of the parties to
this Agreement irrevocably agrees that any legal action or proceeding
with respect to this Agreement or for recognition and enforcement of any
judgment in respect hereof brought by any other party hereto or its
successors or assigns may be brought and determined in the Chancery or
other Courts of the State of Delaware, and each party hereby irrevocably
submits with regard to any such action or proceeding for itself and in
respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each party hereby
irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with
respect to this Agreement, (a) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process (b) that it or its
property is exempt or immune from jurisdiction of any such court or from
any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), (c) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in
any such court is brought in an inconvenient forum, (ii) the venue of
such suit, action or proceeding is improper and (iii) this Agreement, or
the subject matter hereof, may not be enforced in or by such courts and
(d) any right to a trial by jury.
9.10. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly
agreed that the parties shall be entitled to specific performance of the
terms hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.11. Definitions. As used in this Agreement:
(a) "beneficial ownership" or "beneficially own" shall have the
meaning under Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
(b) "Benefit Plans" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination,
stay agreement or bonus, change in control and severance plan,
program, arrangement and contract) in
75
effect on the date of this Agreement or disclosed on the ZiaSun
Disclosure Schedule or the Telescan Disclosure Schedule, as the case
may be, to which such Person or its Subsidiary is a party, which is
maintained or contributed to by such Person, or with respect to
which such Person could incur material liability under Sections
4069, 4201 or 4212(c) of ERISA.
(c) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(d) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(e) "Hazardous Materials": any solid wastes, toxic or hazardous
substances, materials or wastes, defined, listed, classified or regulated
as such in or under any Environmental Laws, including, without
limitation, asbestos, petroleum or petroleum products (including
gasoline, crude oil or any fraction thereof), polychlorinated biphenyls,
and urea-formaldehyde insulation, and any other substance the presence of
which may give rise to liability under any Environmental Law.
(f) "known" or "knowledge" means, with respect to any party, the
knowledge of such party's or its Subsidiaries' executive officers after
reasonable inquiry.
(g) "Material Adverse Effect" means, with respect to any entity any
event, change, circumstance or effect that is or
is reasonably likely to be materially adverse to the business, financial
condition or results of operations of such entity and its Subsidiaries
taken as a whole, other than (x) any event, change, circumstance or
effect relating to the economy or financial markets in general, (y) any
event, change, circumstance or effect relating in general to the
industries in which such entity operates and not specifically relating to
(or having the effect of specifically relating to or having a materially
disproportionate effect (relative to most other industry participants)
on) such entity or (z) a decline in the market price of the capital stock
of such entity in the absence of any other event, change, circumstance or
effect with regard to such entity that otherwise would cause a Material
Adverse Effect.
(h) "the other party" means, with respect to ZiaSun, Telescan and
means, with respect to Telescan, ZiaSun.
(i) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(j) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or
unincorporated, at least a majority of the securities or other interests
of which having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with
respect
76
to such corporation or other organization is directly or indirectly owned
or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(k) "Environmental Laws" means all applicable U.S. federal, state,
local and foreign laws, regulations, rules and orders relating to
pollution or protection of the environment (including ambient air,
surface water, ground water, land surface or subsurface strata).
77
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its respective officers thereunto duly
authorized, all as of the date first written above.
TELESCAN, INC.
By: /s/ Lee Barba
-------------------------------
Name: Lee Barba
Title: CEO
ZIASUN TECHNOLOGIES, INC.
By: /s/ D. Scott Elder
-------------------------------
Name: D. Scott Elder
Title: CEO, Chairman
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 3, 2001 (the "Agreement"), is
made by and between ZiaSun Technologies, Inc., a Nevada corporation
("ZiaSun"), and Vulcan Ventures, Inc. (the "Stockholder"). Capitalized terms
not otherwise defined herein shall have the respective meanings set forth in
the Merger Agreement (as defined below).
WHEREAS, simultaneously herewith, ZiaSun and Telescan, Inc., a
Delaware corporation ("Telescan"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which ZiaSun has agreed to engage in a business combination with Telescan on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of Telescan and has voting
power with respect to the number of shares (the "Shares") of common stock of
Telescan (the "Telescan Common Stock") set forth below the Stockholder's
signature hereto; and
WHEREAS, in order to induce ZiaSun to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of Telescan
Common Stock, Shares of Telescan Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of Telescan Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Telescan stockholders called to vote upon
the Telescan Merger or the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a
vote, consent or other approval with respect to the Telescan
Merger or the Merger Agreement is sought (the "Telescan
Stockholders' Meeting"), the Stockholder shall vote (or cause
to be voted) all of the Stockholder's Shares in favor of the
Telescan Merger, the execution and delivery by Telescan of the
Merger Agreement and the approval of the terms thereof, and
each of the other transactions contemplated by the Merger
Agreement.
(ii) At any meeting of Telescan stockholders or at any
adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) all of the
Stockholder's Shares against (A) the approval of any
Acquisition Proposal or
2
(B) any amendment of Telescan's Certificate of Incorporation or
Bylaws or other proposal or transaction involving Telescan or
any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or
nullify the Telescan Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
ZiaSun and D. Scott Elder, Chief Executive Officer of ZiaSun, and Ross
Jardine, Chief Financial Officer of ZiaSun, in their respective
capacities as officers of ZiaSun, and any individual who shall hereafter
succeed to any such office of ZiaSun, and each of them individually, its
proxy and attorney-in-fact, with full power of substitution, for and in
the name, place and stead of the Stockholder, to vote upon and act with
respect to all of the Stockholder's Shares as set forth in subsections
(a)(i) and (a)(ii) of this Section 1. The Stockholder represents that any
proxies heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked. The
Stockholder hereby affirms that the irrevocable proxy set forth in this
Section 1(b) is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may not be revoked, except as provided in this
Agreement. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212 of the Delaware General
Corporation Law. This proxy shall survive the bankruptcy, merger,
dissolution or liquidation of the Stockholder. In the event that the
stockholders of Telescan take action to approve the Telescan Merger and
the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a
copy to ZiaSun.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of Telescan affecting the Telescan capital stock, or the
acquisition of additional shares of Telescan capital stock or other voting
securities of Telescan by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Telescan capital stock or other voting securities of
Telescan issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to ZiaSun that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
3
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that ZiaSun is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
ZiaSun.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, ZiaSun that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated
4
by this Agreement, including, without limitation, executing and
delivering, or causing to be executed and delivered (including by any
record holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as ZiaSun may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Representations and Warranties of ZiaSun. ZiaSun represents and
warrants that this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, ZiaSun, enforceable
against ZiaSun in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application respecting creditors' rights and by
general equitable principles, and that ZiaSun is simultaneously entering into
similar voting agreements NBC-TSCN Holding, Inc./GE Capital Equity
Investments, Inc., and LJH Corporation.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by ZiaSun
in whole or in part to any direct or indirect wholly-owned subsidiary of
ZiaSun, provided that ZiaSun shall remain liable for any obligations so
assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
5
(e) Enforcement of Agreement. The parties agree that ZiaSun would be
irreparably damaged if for any reason the Stockholder failed, in breach
of its obligations hereunder, to perform any of its obligations under
this Agreement, and that ZiaSun would not have an adequate remedy at law
for money damages in such event. Accordingly, ZiaSun shall be entitled to
specific performance and injunctive and other equitable relief to enforce
the performance of this Agreement by the Stockholder; and, if ZiaSun
should institute an action or proceeding seeking specific enforcement of
the provisions hereof, the Stockholder hereby waives the claim or defense
that ZiaSun has an adequate remedy at law and hereby agrees not to assert
in any such action or proceeding the claim or defense that such a remedy
at law exists. The Stockholder further agrees to waive any requirements
for the securing or posting of any bond in connection with obtaining any
such equitable relief. This provision is without prejudice to any other
rights that ZiaSun may have against the Stockholder for any failure to
perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to ZiaSun:
ZiaSun Technologies, Inc.
462 Stevens Avenue, Suite 106
Attention: Allen D. Hardman
Facsimile: (858) 350-4066
with a copy (which shall not constitute notice) to:
Jones, Waldo, Holbrook & McDonough
1500 Wells Fargo Plaza
170 South Main Street
Salt Lake City, Utah 84101
Telephone: (801) 521-3200
Facsimile: (801) 328-0537
Attention: Ronald S. Poelman, Esq.
and
6
Wenthur & Chachas
4180 La Jolla Village Drive, Suite 500
La Jolla, CA 92037
Telephone: (858) 457-3800
Facsimile: (858) 457-3691
Attention: George Chachas, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party hereto.
Each such notice, request or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 6(h) and the appropriate
facsimile confirmation is received or (ii) if given by any other means,
when delivered at the address specified in this Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is a director
or officer of Telescan makes any agreement in this Agreement in his or her
capacity as such director or officer. The Stockholder signs solely in its
capacity as a record holder and beneficial owner of Shares. The provisions of
this Agreement shall not apply to actions taken or omitted to be taken by any
such person in his or her capacity as a director or officer of Telescan.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
By: /s/ D. Scott Elder
------------------------------------
Name: D. Scott Elder
Title: CEO, Chairman
STOCKHOLDER:
By: /s/ William D. Savoy
------------------------------------
Name: William D. Savoy
Title: President, Vulcan Ventures Inc.
Address: 505 Fifth Avenue South, Suite 900
Seattle, WA 98104
Number of Shares Beneficially Owned:
1,290,000
---------------------------------------
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 3, 2001 (the "Agreement"), is
made by and between ZiaSun Technologies, Inc., a Nevada corporation
("ZiaSun"), and NBC-TSCN Holding, Inc., and GE Capital Equity Investments,
Inc. (the "Stockholder"). Capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Merger Agreement (as defined
below).
WHEREAS, simultaneously herewith, ZiaSun and Telescan, Inc., a
Delaware corporation ("Telescan"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which ZiaSun has agreed to engage in a business combination with Telescan on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of Telescan and has voting
power with respect to the number of shares (the "Shares") of common stock of
Telescan (the "Telescan Common Stock") set forth below the Stockholder's
signature hereto; and
WHEREAS, in order to induce ZiaSun to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of Telescan
Common Stock, Shares of Telescan Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of Telescan Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Telescan stockholders called to vote upon
the Telescan Merger or the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a
vote, consent or other approval with respect to the Telescan
Merger or the Merger Agreement is sought (the "Telescan
Stockholders' Meeting"), the Stockholder shall vote (or cause
to be voted) all of the Stockholder's Shares in favor of the
Telescan Merger, the execution and delivery by Telescan of the
Merger Agreement and the approval of the terms thereof, and
each of the other transactions contemplated by the Merger
Agreement.
2
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of Telescan affecting the Telescan capital stock, or the
acquisition of additional shares of Telescan capital stock or other voting
securities of Telescan by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Telescan capital stock or other voting securities of
Telescan issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to ZiaSun that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
3
(e) The Stockholder understands and acknowledges that ZiaSun is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, ZiaSun that it
shall not deposit such shares into a voting trust or enter into a voting
agreement or arrangement with respect to such shares, except for any
arrangements which do not materially impair the ability of the
Stockholder to perform its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as ZiaSun may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
5. Representations and Warranties of ZiaSun. ZiaSun represents and
warrants that this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, ZiaSun, enforceable
against ZiaSun in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application respecting creditors' rights and by
general equitable principles, and that ZiaSun is simultaneously entering into
similar voting agreements with Vulcan Ventures, Inc. and LJH Corporation.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by ZiaSun
in whole or in part to any direct or indirect wholly-owned subsidiary of
ZiaSun, provided that ZiaSun shall remain liable for any obligations so
assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
4
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that ZiaSun would be
irreparably damaged if for any reason the Stockholder failed, in breach
of its obligations hereunder, to perform any of its obligations under
this Agreement, and that ZiaSun would not have an adequate remedy at law
for money damages in such event. Accordingly, ZiaSun shall be entitled to
seek specific performance and injunctive and other equitable relief to
enforce the performance of this Agreement by the Stockholder. This
provision is without prejudice to any other rights that ZiaSun may have
against the Stockholder for any failure to perform its respective
obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to ZiaSun:
ZiaSun Technologies, Inc.
462 Stevens Avenue, Suite 106
Attention: Allen D. Hardman
Facsimile: (858) 350-4066
with a copy (which shall not constitute notice) to:
Jones, Waldo, Holbrook & McDonough
1500 Wells Fargo Plaza
170 South Main Street
Salt Lake City, Utah 84101
Telephone: (801) 521-3200
5
Facsimile: (801) 328-0537
Attention: Ronald S. Poelman, Esq.
and
Wenthur & Chachas
4180 La Jolla Village Drive, Suite 500
La Jolla, CA 92037
Telephone: (858) 457-3800
Facsimile: (858) 457-3691
Attention: George Chachas, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party hereto.
Each such notice, request or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 6(h) and the appropriate
facsimile confirmation is received or (ii) if given by any other means,
when delivered at the address specified in this Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers or (c) September 30, 2001
(l) Action in Stockholder Capacity Only. No Stockholder who is a director
or officer of Telescan makes any agreement in this Agreement in his
or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of
Shares. The provisions of this Agreement shall not apply to actions
taken or omitted to be taken by any such person in his or her
capacity as a director or officer of Telescan.
6
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
By: /s/ D. Scott Elder
----------------------------------
Name: D. Scott Elder
Title: CEO, Chairman
STOCKHOLDER:
By: /s/ Daniel Widowsky
----------------------------------
Name: Daniel Widowsky
Title: Assistant Treasurer, NBC-TSCN
Address: 30 Rockefeller Plaza
New York, NY 10112
Number of Shares Beneficially Owned:
1,165,674
-------------------------------------
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 3, 2001 (the "Agreement"), is
made by and between ZiaSun Technologies, Inc., a Nevada corporation
("ZiaSun"), and NBC-TSCN Holding, Inc., and GE Capital Equity Investments,
Inc. (the "Stockholder"). Capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Merger Agreement (as defined
below).
WHEREAS, simultaneously herewith, ZiaSun and Telescan, Inc., a
Delaware corporation ("Telescan"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which ZiaSun has agreed to engage in a business combination with Telescan on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of Telescan and has voting
power with respect to the number of shares (the "Shares") of common stock of
Telescan (the "Telescan Common Stock") set forth below the Stockholder's
signature hereto; and
WHEREAS, in order to induce ZiaSun to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of Telescan
Common Stock, Shares of Telescan Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of Telescan Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Telescan stockholders called to vote upon
the Telescan Merger or the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a
vote, consent or other approval with respect to the Telescan
Merger or the Merger Agreement is sought (the "Telescan
Stockholders' Meeting"), the Stockholder shall vote (or cause
to be voted) all of the Stockholder's Shares in favor of the
Telescan Merger, the execution and delivery by Telescan of the
Merger Agreement and the approval of the terms thereof, and
each of the other transactions contemplated by the Merger
Agreement.
2
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of Telescan affecting the Telescan capital stock, or the
acquisition of additional shares of Telescan capital stock or other voting
securities of Telescan by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Telescan capital stock or other voting securities of
Telescan issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to ZiaSun that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
3
(e) The Stockholder understands and acknowledges that ZiaSun is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, ZiaSun that it
shall not deposit such shares into a voting trust or enter into a voting
agreement or arrangement with respect to such shares, except for any
arrangements which do not materially impair the ability of the
Stockholder to perform its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as ZiaSun may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
5. Representations and Warranties of ZiaSun. ZiaSun represents and
warrants that this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, ZiaSun, enforceable
against ZiaSun in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application respecting creditors' rights and by
general equitable principles, and that ZiaSun is simultaneously entering into
similar voting agreements with Vulcan Ventures, Inc. and LJH Corporation.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by ZiaSun
in whole or in part to any direct or indirect wholly-owned subsidiary of
ZiaSun, provided that ZiaSun shall remain liable for any obligations so
assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
4
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that ZiaSun would be
irreparably damaged if for any reason the Stockholder failed, in breach
of its obligations hereunder, to perform any of its obligations under
this Agreement, and that ZiaSun would not have an adequate remedy at law
for money damages in such event. Accordingly, ZiaSun shall be entitled to
seek specific performance and injunctive and other equitable relief to
enforce the performance of this Agreement by the Stockholder. This
provision is without prejudice to any other rights that ZiaSun may have
against the Stockholder for any failure to perform its respective
obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to ZiaSun:
ZiaSun Technologies, Inc.
462 Stevens Avenue, Suite 106
Attention: Allen D. Hardman
Facsimile: (858) 350-4066
with a copy (which shall not constitute notice) to:
Jones, Waldo, Holbrook & McDonough
1500 Wells Fargo Plaza
170 South Main Street
Salt Lake City, Utah 84101
Telephone: (801) 521-3200
5
Facsimile: (801) 328-0537
Attention: Ronald S. Poelman, Esq.
and
Wenthur & Chachas
4180 La Jolla Village Drive, Suite 500
La Jolla, CA 92037
Telephone: (858) 457-3800
Facsimile: (858) 457-3691
Attention: George Chachas, Esq.
(ii) if to Stockholder, to its address shown below its signature on
the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party hereto.
Each such notice, request or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 6(h) and the appropriate
facsimile confirmation is received or (ii) if given by any other means,
when delivered at the address specified in this Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers or (c) September 30, 2001
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of Telescan makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of Telescan.
6
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
By: /s/ D. Scott Elder
----------------------------------------------
Name: D. Scott Elder
Title: CEO, Chairman
STOCKHOLDER:
By: /s/ Regina Reale
----------------------------------------------
Name: Regina Reale
Title: Vice President, GE Capital Equity
Investments, Inc.
Address: 120 Long Ridge Rd.
Stamford, CT 06927
Number of Shares Beneficially Owned:
1,165,674
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 3, 2001 (the "Agreement"), is
made by and between ZiaSun Technologies, Inc., a Nevada corporation
("ZiaSun"), and LJH Corporation (the "Stockholder"). Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Merger Agreement (as defined below).
WHEREAS, simultaneously herewith, ZiaSun and Telescan, Inc., a
Delaware corporation ("Telescan"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which ZiaSun has agreed to engage in a business combination with Telescan on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of Telescan and has voting
power with respect to the number of shares (the "Shares") of common stock of
Telescan (the "Telescan Common Stock") set forth below the Stockholder's
signature hereto; and
WHEREAS, in order to induce ZiaSun to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of Telescan
Common Stock, Shares of Telescan Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of Telescan Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Telescan stockholders called to vote upon
the Telescan Merger or the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a
vote, consent or other approval with respect to the Telescan
Merger or the Merger Agreement is sought (the "Telescan
Stockholders' Meeting"), the Stockholder shall vote (or cause
to be voted) all of the Stockholder's Shares in favor of the
Telescan Merger, the execution and delivery by Telescan of the
Merger Agreement and the approval of the terms thereof, and
each of the other transactions contemplated by the Merger
Agreement.
(ii) At any meeting of Telescan stockholders or at any
adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) all of the
Stockholder's Shares against (A) the approval of any
Acquisition Proposal or
2
(B) any amendment of Telescan's Certificate of Incorporation or
Bylaws or other proposal or transaction involving Telescan or
any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or
nullify the Telescan Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
ZiaSun and D. Scott Elder, Chief Executive Officer of ZiaSun, and Ross
Jardine, Chief Financial Officer of ZiaSun, in their respective
capacities as officers of ZiaSun, and any individual who shall hereafter
succeed to any such office of ZiaSun, and each of them individually, its
proxy and attorney-in-fact, with full power of substitution, for and in
the name, place and stead of the Stockholder, to vote upon and act with
respect to all of the Stockholder's Shares as set forth in subsections
(a)(i) and (a)(ii) of this Section 1. The Stockholder represents that any
proxies heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked. The
Stockholder hereby affirms that the irrevocable proxy set forth in this
Section 1(b) is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may not be revoked, except as provided in this
Agreement. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212 of the Delaware General
Corporation Law. This proxy shall survive the bankruptcy, merger,
dissolution or liquidation of the Stockholder. In the event that the
stockholders of Telescan take action to approve the Telescan Merger and
the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a
copy to ZiaSun.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of Telescan affecting the Telescan capital stock, or the
acquisition of additional shares of Telescan capital stock or other voting
securities of Telescan by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Telescan capital stock or other voting securities of
Telescan issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to ZiaSun that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the
Stockholder,enforceable against the
3
Stockholder in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws of general application respecting creditors' rights
and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that ZiaSun is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
ZiaSun.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, ZiaSun that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
4
Shares), such additional or further consents, documents and other
instruments, as ZiaSun may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
5. Representations and Warranties of ZiaSun. ZiaSun represents and
warrants that this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, ZiaSun, enforceable
against ZiaSun in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application respecting creditors' rights and by
general equitable principles, and that ZiaSun is simultaneously entering into
similar voting agreements with Vulcan Ventures, Inc. and NBC-TSCN Holding,
Inc./ GE Capital Equity Investments, Inc.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by ZiaSun
in whole or in part to any direct or indirect wholly-owned subsidiary of
ZiaSun, provided that ZiaSun shall remain liable for any obligations so
assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that ZiaSun would be
irreparably damaged if for any reason the Stockholder failed, in breach
of its obligations hereunder, to perform any of its obligations under
this Agreement, and that ZiaSun would
5
not have an adequate remedy at law for money damages in such event.
Accordingly, ZiaSun shall be entitled to specific performance and
injunctive and other equitable relief to enforce the performance of this
Agreement by the Stockholder; and, if ZiaSun should institute an action
or proceeding seeking specific enforcement of the provisions hereof, the
Stockholder hereby waives the claim or defense that ZiaSun has an
adequate remedy at law and hereby agrees not to assert in any such action
or proceeding the claim or defense that such a remedy at law exists. The
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable
relief. This provision is without prejudice to any other rights that
ZiaSun may have against the Stockholder for any failure to perform its
respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to ZiaSun:
ZiaSun Technologies, Inc.
462 Stevens Avenue, Suite 106
Attention: Allen D. Hardman
Facsimile: (858) 350-4066
with a copy (which shall not constitute notice) to:
Jones, Waldo, Holbrook & McDonough
1500 Wells Fargo Plaza
170 South Main Street
Salt Lake City, Utah 84101
Telephone: (801) 521-3200
Facsimile: (801) 328-0537
Attention: Ronald S. Poelman, Esq.
and
6
Wenthur & Chachas
4180 La Jolla Village Drive, Suite 500
La Jolla, CA 92037
Telephone: (858) 457-3800
Facsimile: (858) 457-3691
Attention: George Chachas, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party hereto.
Each such notice, request or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 6(h) and the appropriate
facsimile confirmation is received or (ii) if given by any other means,
when delivered at the address specified in this Section 6(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of Telescan makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of Telescan.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
By: /s/ D. Scott Elder
----------------------------------------
Name: D. Scott Elder
Title: CEO, Chairman
STOCKHOLDER:
LJH, Ltd.
By: DLH Management, LLC, General Partner
By: /s/ Lacy J. Harber
----------------------------------------
Name: Lacy J. Harber
Title: President
Address: 377 Neva Lane
Denison, Texas 75020
Number of Shares Beneficially Owned:
2,314,000
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
Ross Jardine (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of ZiaSun and has voting
power with respect to the number of shares (the "Shares") of common stock of
ZiaSun (the "ZiaSun Common Stock") set forth below the Stockholder's signature
hereto; and
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of ZiaSun
Common Stock, Shares of ZiaSun Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of ZiaSun Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of ZiaSun stockholders called to vote upon
the ZiaSun Merger or the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote,
consent or other approval with respect to the ZiaSun Merger or
the Merger Agreement is sought (the "ZiaSun Stockholders'
Meeting"), the Stockholder shall vote (or cause to be voted)
all of the Stockholder's Shares in favor of the ZiaSun Merger,
the execution and delivery by ZiaSun of the Merger Agreement
and the approval of the terms thereof, and each of the other
transactions contemplated by the Merger Agreement.
(ii) At any meeting of ZiaSun stockholders or at any
adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) all of the
Stockholder's Shares against (A) the approval of any
Acquisition Proposal or
2
(B) any amendment of ZiaSun's Certificate of Incorporation or
Bylaws or other proposal or transaction involving ZiaSun or any
of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or
nullify the ZiaSun Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
Telescan and Lee Barba, Chief Executive Officer of Telescan, and
Paul Helbling, Chief Financial Officer of Telescan, in their
respective capacities as officers of Telescan, and any individual
who shall hereafter succeed to any such office of Telescan and each
of them individually, its proxy and attorney-in-fact, with full
power of substitution, for and in the name, place and stead of the
Stockholder, to vote upon and act with respect to all of the
Stockholder's Shares as set forth in subsections (a)(i) and (a)(ii)
of this Section 1. The Stockholder represents that any proxies
heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked. The
Stockholder hereby affirms that the irrevocable proxy set forth in
this Section 1(b) is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure
the performance of the duties of the Stockholder under this
Agreement. The Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may not be
revoked, except as provided in this Agreement. The Stockholder
hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 78.353 of the Nevada General Corporation
Law. This proxy shall survive the bankruptcy, merger, dissolution or
liquidation of the Stockholder. In the event that the stockholders
of ZiaSun take action to approve the ZiaSun Merger and the Merger
Agreement by written consent in lieu of a meeting of stockholders,
the Stockholder will execute such consent and provide a copy to
Telescan.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of ZiaSun affecting the ZiaSun capital stock, or the
acquisition of additional shares of ZiaSun capital stock or other voting
securities of ZiaSun by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of ZiaSun capital stock or other voting securities of ZiaSun
issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
3
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
Telescan.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated
4
by this Agreement, including, without limitation, executing and
delivering, or causing to be executed and delivered (including by any
record holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as Telescan may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles, and that
Telescan is simultaneously entering into similar voting agreements with D.
Scott Elder, Scott Harris, David W. McCoy, Momentum Media Ltd.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations
5
hereunder, to perform any of its obligations under this Agreement, and
that Telescan would not have an adequate remedy at law for money damages
in such event. Accordingly, Telescan shall be entitled to specific
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Stockholder; and, if Telescan should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense
that Telescan has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a
remedy at law exists. The Stockholder further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief. This provision is without prejudice
to any other rights that Telescan may have against the Stockholder for
any failure to perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
6
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 7(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 7(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
7
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
----------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ Ross Jardine
----------------------------------------
Name: Ross Jardine
Address: 116 South Pfeifferhorn Drive.
Alpine, UT 84004
Number of Shares Beneficially Owned:
3,804,553
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
D. Scott Elder (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of ZiaSun and has voting
power with respect to the number of shares (the "Shares") of common stock of
ZiaSun (the "ZiaSun Common Stock") set forth below the Stockholder's signature
hereto; and
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of ZiaSun
Common Stock, Shares of ZiaSun Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of ZiaSun Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of ZiaSun stockholders called to vote upon the
ZiaSun Merger or the Merger Agreement or at any adjournment thereof
or in any other circumstances upon which a vote, consent or other
approval with respect to the ZiaSun Merger or the Merger Agreement
is sought (the "ZiaSun Stockholders' Meeting"), the Stockholder
shall vote (or cause to be voted) all of the Stockholder's Shares in
favor of the ZiaSun Merger, the execution and delivery by ZiaSun of
the Merger Agreement and the approval of the terms thereof, and each
of the other transactions contemplated by the Merger Agreement.
(ii) At any meeting of ZiaSun stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent
or other approval is sought, the Stockholder shall vote (or cause to
be voted) all of the Stockholder's Shares against (A) the approval
of any Acquisition Proposal or
(B) any amendment of ZiaSun's Certificate of Incorporation or Bylaws
or other proposal or transaction involving ZiaSun or any of its
subsidiaries which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the ZiaSun
Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
Telescan and Lee Barba, Chief Executive Officer of Telescan, and Paul
Helbling, Chief Financial Officer of Telescan, in their respective
capacities as officers of Telescan, and any individual who shall
hereafter succeed to any such office of Telescan and each of them
individually, its proxy and attorney-in-fact, with full power of
substitution, for and in the name, place and stead of the Stockholder, to
vote upon and act with respect to all of the Stockholder's Shares as set
forth in subsections (a)(i) and (a)(ii) of this Section 1. The
Stockholder represents that any proxies heretofore given in respect of
the Stockholder's Shares are not irrevocable, and that any such proxies
are hereby revoked. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 1(b) is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is
given to secure the performance of the duties of the Stockholder under
this Agreement. The Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may not be revoked,
except as provided in this Agreement. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 78.353 of the
Nevada General Corporation Law. This proxy shall survive the bankruptcy,
merger, dissolution or liquidation of the Stockholder. In the event that
the stockholders of ZiaSun take action to approve the ZiaSun Merger and
the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a
copy to Telescan.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of ZiaSun affecting the ZiaSun capital stock, or the
acquisition of additional shares of ZiaSun capital stock or other voting
securities of ZiaSun by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of ZiaSun capital stock or other voting securities of ZiaSun
issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
2
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
Telescan.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated
3
by this Agreement, including, without limitation, executing and
delivering, or causing to be executed and delivered (including by any
record holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as Telescan may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles, and that
Telescan is simultaneously entering into similar voting agreements with Ross
Jardine, Scott Harris, David W. McCoy, Momentum Media Ltd.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations
4
hereunder, to perform any of its obligations under this Agreement, and
that Telescan would not have an adequate remedy at law for money damages
in such event. Accordingly, Telescan shall be entitled to specific
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Stockholder; and, if Telescan should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense
that Telescan has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a
remedy at law exists. The Stockholder further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief. This provision is without prejudice
to any other rights that Telescan may have against the Stockholder for
any failure to perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
5
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party hereto.
Each such notice, request or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 7(h) and the appropriate
facsimile confirmation is received or (ii) if given by any other means,
when delivered at the address specified in this Section 7(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
6
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
-------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ D. Scott Elder
--------------------------------------
Name: D. Scott Elder
Address: 1156 E. 100 N.
Orem, UT
Number of Shares Beneficially Owned:
3,804,553
7
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
Scott Harris (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of ZiaSun and has voting
power with respect to the number of shares (the "Shares") of common stock of
ZiaSun (the "ZiaSun Common Stock") set forth below the Stockholder's signature
hereto; and
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of ZiaSun
Common Stock, Shares of ZiaSun Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of ZiaSun Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of ZiaSun stockholders called to vote upon the
ZiaSun Merger or the Merger Agreement or at any adjournment thereof
or in any other circumstances upon which a vote, consent or other
approval with respect to the ZiaSun Merger or the Merger Agreement
is sought (the "ZiaSun Stockholders' Meeting"), the Stockholder
shall vote (or cause to be voted) all of the Stockholder's Shares in
favor of the ZiaSun Merger, the execution and delivery by ZiaSun of
the Merger Agreement and the approval of the terms thereof, and each
of the other transactions contemplated by the Merger Agreement.
(ii) At any meeting of ZiaSun stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent
or other approval is sought, the Stockholder shall vote (or cause to
be voted) all of the Stockholder's Shares against (A) the approval
of any Acquisition Proposal or
(B) any amendment of ZiaSun's Certificate of Incorporation or Bylaws
or other proposal or transaction involving ZiaSun or any of its
subsidiaries which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the ZiaSun
Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
Telescan and Lee Barba, Chief Executive Officer of Telescan, and Paul
Helbling, Chief Financial Officer of Telescan, in their respective
capacities as officers of Telescan, and any individual who shall
hereafter succeed to any such office of Telescan and each of them
individually, its proxy and attorney-in-fact, with full power of
substitution, for and in the name, place and stead of the Stockholder, to
vote upon and act with respect to all of the Stockholder's Shares as set
forth in subsections (a)(i) and (a)(ii) of this Section 1. The
Stockholder represents that any proxies heretofore given in respect of
the Stockholder's Shares are not irrevocable, and that any such proxies
are hereby revoked. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 1(b) is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is
given to secure the performance of the duties of the Stockholder under
this Agreement. The Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may not be revoked,
except as provided in this Agreement. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 78.353 of the
Nevada General Corporation Law. This proxy shall survive the bankruptcy,
merger, dissolution or liquidation of the Stockholder. In the event that
the stockholders of ZiaSun take action to approve the ZiaSun Merger and
the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a
copy to Telescan.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of ZiaSun affecting the ZiaSun capital stock, or the
acquisition of additional shares of ZiaSun capital stock or other voting
securities of ZiaSun by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of ZiaSun capital stock or other voting securities of ZiaSun
issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
2
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
Telescan.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated
3
by this Agreement, including, without limitation, executing and
delivering, or causing to be executed and delivered (including by any
record holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as Telescan may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles, and that
Telescan is simultaneously entering into similar voting agreements with Ross
Jardine, D. Scott Elder, David W. McCoy and Momentum Media Ltd.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations
4
hereunder, to perform any of its obligations under this Agreement, and
that Telescan would not have an adequate remedy at law for money damages
in such event. Accordingly, Telescan shall be entitled to specific
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Stockholder; and, if Telescan should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense
that Telescan has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a
remedy at law exists. The Stockholder further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief. This provision is without prejudice
to any other rights that Telescan may have against the Stockholder for
any failure to perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
5
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 7(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 7(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with
its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
6
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
---------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ Scott Harris
---------------------------------------
Name: Scott Harris
Address: 876 N. 500 E
Springville, UT 84663
Number of Shares Beneficially Owned:
1,607,023
7
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
David W. McCoy (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and Powder Technologies,
Inc., a Nevada corporation ("Powder"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with Powder on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of Powder and has voting
power with respect to the number of shares (the "Shares") of common stock of
Powder (the "Powder Common Stock") set forth below the Stockholder's signature
hereto; and
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of Powder
Common Stock, Shares of Powder Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of Powder Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Powder stockholders called to vote upon the
Powder Merger or the Merger Agreement or at any adjournment thereof
or in any other circumstances upon which a vote, consent or other
approval with respect to the Powder Merger or the Merger Agreement
is sought (the "Powder Stockholders' Meeting"), the Stockholder
shall vote (or cause to be voted) all of the Stockholder's Shares in
favor of the Powder Merger, the execution and delivery by Powder of
the Merger Agreement and the approval of the terms thereof, and each
of the other transactions contemplated by the Merger Agreement.
(ii) At any meeting of Powder stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent
or other approval is sought, the Stockholder shall vote (or cause to
be voted) all of the Stockholder's Shares against (A) the approval
of any Acquisition Proposal or
(B) any amendment of Powder's Certificate of Incorporation or Bylaws
or other proposal or transaction involving Powder or any of its
subsidiaries which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the Powder
Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
Telescan and Lee Barba, Chief Executive Officer of Telescan, and Paul
Helbling, Chief Financial Officer of Telescan, in their respective
capacities as officers of Telescan, and any individual who shall
hereafter succeed to any such office of Telescan and each of them
individually, its proxy and attorney-in-fact, with full power of
substitution, for and in the name, place and stead of the Stockholder, to
vote upon and act with respect to all of the Stockholder's Shares as set
forth in subsections (a)(i) and (a)(ii) of this Section 1. The
Stockholder represents that any proxies heretofore given in respect of
the Stockholder's Shares are not irrevocable, and that any such proxies
are hereby revoked. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 1(b) is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is
given to secure the performance of the duties of the Stockholder under
this Agreement. The Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may not be revoked,
except as provided in this Agreement. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 78.353 of the
Nevada General Corporation Law. This proxy shall survive the bankruptcy,
merger, dissolution or liquidation of the Stockholder. In the event that
the stockholders of Powder take action to approve the Powder Merger and
the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a
copy to Telescan.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of Powder affecting the Powder capital stock, or the
acquisition of additional shares of Powder capital stock or other voting
securities of Powder by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Powder capital stock or other voting securities of Powder
issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
2
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
Telescan.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated
3
by this Agreement, including, without limitation, executing and
delivering, or causing to be executed and delivered (including by any
record holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as Telescan may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles, and that
Telescan is simultaneously entering into similar voting agreements with Ross
Jardine, D. Scott Elder, Scott Harris, Momentum Media Ltd.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations
4
hereunder, to perform any of its obligations under this Agreement, and
that Telescan would not have an adequate remedy at law for money damages
in such event. Accordingly, Telescan shall be entitled to specific
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Stockholder; and, if Telescan should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense
that Telescan has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a
remedy at law exists. The Stockholder further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief. This provision is without prejudice
to any other rights that Telescan may have against the Stockholder for
any failure to perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
5
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 7(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 7(h).
(i) Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise
specifically provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Termination. This Agreement shall terminate upon the
earliest to occur of (a) the termination of the Merger Agreement in
accordance with its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is
a director or officer of Powder makes any agreement in this
Agreement in his or her capacity as such director or officer. The
Stockholder signs solely in its capacity as a record holder and
beneficial owner of Shares. The provisions of this Agreement shall
not apply to actions taken or omitted to be taken by any such person
in his or her capacity as a director or officer of Powder.
6
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
-----------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ David W. McCoy
-----------------------------------
Name: David W. McCoy
Address: 621 West Ranch Circle
Alpine, UT 84004
Number of Shares Beneficially Owned:
1,349,023
7
ANNEX II
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
Momentum Media Ltd. (the "Stockholder"). Capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Merger
Agreement (as defined below).
WHEREAS, simultaneously herewith, Telescan and Powder Technologies,
Inc., a Nevada corporation ("Powder"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with Powder on
the terms set forth therein (the "Mergers");
WHEREAS, the Stockholder is a stockholder of Powder and has voting
power with respect to the number of shares (the "Shares") of common stock of
Powder (the "Powder Common Stock") set forth below the Stockholder's signature
hereto; and
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder agrees to vote all of its Shares of Powder
Common Stock, Shares of Powder Common Stock of any person the voting of
which is controlled by the Stockholder and any Shares of Powder Common
Stock hereafter acquired by the Stockholder or by any person controlled
by the Stockholder (collectively, the "Stockholder's Shares") as follows:
(i) At any meeting of Powder stockholders called to vote upon the
Powder Merger or the Merger Agreement or at any adjournment thereof
or in any other circumstances upon which a vote, consent or other
approval with respect to the Powder Merger or the Merger Agreement
is sought (the "Powder Stockholders' Meeting"), the Stockholder
shall vote (or cause to be voted) all of the Stockholder's Shares in
favor of the Powder Merger, the execution and delivery by Powder of
the Merger Agreement and the approval of the terms thereof, and each
of the other transactions contemplated by the Merger Agreement.
(ii) At any meeting of Powder stockholders or at any adjournment
thereof or in any other circumstances upon which their vote, consent
or other approval is sought, the Stockholder shall vote (or cause to
be voted) all of the Stockholder's Shares against (A) the approval
of any Acquisition Proposal or
(B) any amendment of Powder's Certificate of Incorporation or Bylaws
or other proposal or transaction involving Powder or any of its
subsidiaries which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the Powder
Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(b) The Stockholder hereby irrevocably grants to, and appoints,
Telescan and Lee Barba, Chief Executive Officer of Telescan, and Paul
Helbling, Chief Financial Officer of Telescan, in their respective
capacities as officers of Telescan, and any individual who shall
hereafter succeed to any such office of Telescan and each of them
individually, its proxy and attorney-in-fact, with full power of
substitution, for and in the name, place and stead of the Stockholder, to
vote upon and act with respect to all of the Stockholder's Shares as set
forth in subsections (a)(i) and (a)(ii) of this Section 1. The
Stockholder represents that any proxies heretofore given in respect of
the Stockholder's Shares are not irrevocable, and that any such proxies
are hereby revoked. The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 1(b) is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is
given to secure the performance of the duties of the Stockholder under
this Agreement. The Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may not be revoked,
except as provided in this Agreement. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 78.353 of the
Nevada General Corporation Law. This proxy shall survive the bankruptcy,
merger, dissolution or liquidation of the Stockholder. In the event that
the stockholders of Powder take action to approve the Powder Merger and
the Merger Agreement by written consent in lieu of a meeting of
stockholders, the Stockholder will execute such consent and provide a
copy to Telescan.
2. Certain Events. The Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Stockholder's Shares and be
binding upon any transferee of such shares. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of Powder affecting the Powder capital stock, or the
acquisition of additional shares of Powder capital stock or other voting
securities of Powder by the Stockholder, the number of the Stockholder's
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Powder capital stock or other voting securities of Powder
issued to or acquired by the Stockholder.
3. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
2
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder acknowledges
that the irrevocable proxy set forth in Section 1(b) is granted in
consideration for the execution and delivery of the Merger Agreement by
Telescan.
4. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated
3
by this Agreement, including, Without limitation, executing and
delivering, or causing to be executed and delivered (including by any
record holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as Telescan may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles, and that
Telescan is simultaneously entering into similar voting agreements with Ross
Jardine, D. Scott Elder, Scott Harris and David W. McCoy.
6. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting foregoing,
each party agrees that service of process on such party as provided in
Section 6(h) shall be deemed effective service of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations
4
hereunder, to perform any of its obligations under this Agreement, and
that Telescan would not have an adequate remedy at law for money damages
in such event. Accordingly, Telescan shall be entitled to specific
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Stockholder; and, if Telescan should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or defense
that Telescan has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a
remedy at law exists. The Stockholder further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief. This provision is without prejudice
to any other rights that Telescan may have against the Stockholder for
any failure to perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
5
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 7(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 7(h).
(i) Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise
specifically provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Termination. This Agreement shall terminate upon the
earliest to occur of (a) the termination of the Merger Agreement in
accordance with its terms or (b) consummation of the Mergers.
(l) Action in Stockholder Capacity Only. No Stockholder who is
a director or officer of Powder makes any agreement in this
Agreement in his or her capacity as such director or officer. The
Stockholder signs solely in its capacity as a record holder and
beneficial owner of Shares. The provisions of this Agreement shall
not apply to actions taken or omitted to be taken by any such person
in his or her capacity as a director or officer of Powder.
6
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
--------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ Paula Mayers
--------------------------------------
Name: Paula Mayers (Momentum Media Ltd.)
Address: P.O. Box 339
9121 Atlanta Avenue
Huntington Beach, CA 92646
Number of Shares Beneficially Owned:
3,299,980
7
ANNEX III
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT, dated as of May 2, 2001 (the "Agreement"),
is made by and between ZiaSun Technologies, Inc., a Nevada corporation
("ZiaSun"), and Vulcan Ventures, Inc. (the "Stockholder"). Capitalized terms
not otherwise defined herein shall have the respective meanings set forth in
the Merger Agreement (as defined below).
WHEREAS, simultaneously herewith, ZiaSun and Telescan, Inc., a
Delaware corporation ("Telescan"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which ZiaSun has agreed to engage in a business combination with Telescan on
the terms set forth therein (the "Mergers");
WHEREAS, in order to induce ZiaSun to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Lock-Up. (a) Upon the Closing of the Mergers and during the six
month period commencing at the Effective Time the Stockholder will not,
without the prior written consent of Investools, Inc.:
(i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any share of Investools, Inc.
Common Stock or any securities convertible into or exercisable or
exchangeable for Investools, Inc. Common Stock or file any
registration statement under the Securities Act of 1933, as amended
with respect to any of the foregoing; or
(ii) enter into swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Investools, Inc. Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of Investools, Inc. Common Stock or such other
securities, in cash or otherwise (clause (i) and (ii) are hereinafter referred
to as a "Transfer").
(b) During the six month period following the Initial Period, the
Stockholder (together with its permitted transferees) will not, without the
prior written consent of Investools, Inc., engage in a Transfer with respect
to more than 100,000 shares of Investools, Inc. Common Stock in any calendar
month.
(c) Notwithstanding anything to the contrary contained herein, the
Stockholder shall be permitted to (i) engage in Transfers to family members or
trusts the beneficiaries of which are family members so long as each such
transferee agrees to be bound by the terms of this Agreement, and (ii) engage
in Transfers to charitable organizations or to trusts the beneficiaries of
which are solely charitable organizations.
2. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to ZiaSun that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that ZiaSun is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
2
3. Covenants.
(a) The Stockholder agrees with, and covenants to, ZiaSun that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as ZiaSun may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
4. Representations and Warranties of ZiaSun. ZiaSun represents and
warrants that this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, ZiaSun, enforceable
against ZiaSun in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application respecting creditors' rights and by
general equitable principles, and that ZiaSun is simultaneously entering into
similar lock-up agreement with LJH Corporation.
5. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by ZiaSun
in whole or in part to any direct or indirect wholly-owned subsidiary of
ZiaSun, provided that ZiaSun shall remain liable for any obligations so
assigned. Notwithstanding the foregoing, upon the Closing of the Mergers,
as of the Effective Time, all rights of ZiaSun set forth in Section 1
shall be deemed to be automatically assigned to Investools, Inc.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying
3
of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.
Without limiting foregoing, each party agrees that service of process on
such party as provided in Section 6(h) shall be deemed effective service
of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that ZiaSun would be
irreparably damaged if for any reason the Stockholder failed, in breach
of its obligations hereunder, to perform any of its obligations under
this Agreement, and that ZiaSun would not have an adequate remedy at law
for money damages in such event. Accordingly, ZiaSun shall be entitled to
specific performance and injunctive and other equitable relief to enforce
the performance of this Agreement by the Stockholder; and, if ZiaSun
should institute an action or proceeding seeking specific enforcement of
the provisions hereof, the Stockholder hereby waives the claim or defense
that ZiaSun has an adequate remedy at law and hereby agrees not to assert
in any such action or proceeding the claim or defense that such a remedy
at law exists. The Stockholder further agrees to waive any requirements
for the securing or posting of any bond in connection with obtaining any
such equitable relief. This provision is without prejudice to any other
rights that ZiaSun may have against the Stockholder for any failure to
perform its respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to ZiaSun:
ZiaSun Technologies, Inc.
462 Stevens Avenue, Suite 106
Attention: Allen D. Hardman
Facsimile: (858) 350-4066
4
with a copy (which shall not constitute notice) to:
Jones, Waldo, Holbrook & McDonough
1500 Wells Fargo Plaza
170 South Main Street
Salt Lake City, Utah 84101
Telephone: (801) 521-3200
Facsimile: (801) 328-0537
Attention: Ronald S. Poelman, Esq.
and
Wenthur & Chachas
4180 La Jolla Village Drive, Suite 500
La Jolla, CA 92037
Telephone: (858) 457-3800
Facsimile: (858) 457-3691
Attention: George Chachas, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 5(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 5(h).
(i) Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise
specifically provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Action in Stockholder Capacity Only. No Stockholder who is
a director or officer of Telescan makes any agreement in this
Agreement in his or her capacity as such director or officer. The
Stockholder signs solely in its capacity as a record holder and
beneficial owner of Shares. The provisions of this Agreement shall
not apply to actions taken or omitted to be taken by any such person
in his or her capacity as a director or officer of Telescan.
5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
ZIASUN TECHNOLOGIES, INC.
By: /s/ D. Scott Elder
----------------------------------------
Name: D. Scott Elder
Title: CEO, Chairman
STOCKHOLDER:
By: /s/ William D. Savoy
----------------------------------------
Name: William D. Savoy
Title: President, Vulcan Ventures Inc.
Address: 505 Fifth Avenue South, Suite 900
Seattle, WA 98104
Number of Shares Beneficially Owned:
1,290,000 Common
-----------------------------------
6
ANNEX III
LOCKUP AGREEMENT
THIS LOCKUP AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
Ross Jardine (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Lock-Up. (a) Upon the Closing of the Mergers and during the six
month period commencing at the Effective Time the Stockholder will not,
without the prior written consent of Holdco:
(i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any share of Holdco Common Stock
or any securities convertible into or exercisable or exchangeable
for Holdco Common Stock or file any registration statement under the
Securities Act of 1933, as amended with respect to any of the
foregoing; or
(ii) enter into swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Holdco Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of Holdco Common Stock or such other securities, in
cash or otherwise (clause (i) and (ii) are hereinafter referred to as a
"Transfer").
(b) During the six month period following the Initial Period, the
Stockholder (together with its permitted transferees) will not, without the
prior written consent of Holdco, engage in a Transfer with respect to more
than 100,000 shares of Holdco Common Stock in any calendar month.
(c) Notwithstanding anything to the contrary contained herein, the
Stockholder shall be permitted to (i) engage in Transfers to family members or
trusts the beneficiaries of which are family members so long as each such
transferee agrees to be bound by the terms of this Agreement, and (ii) engage
in Transfers to charitable organizations or to trusts the beneficiaries of
which are solely charitable organizations.
2. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of
the number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, the
Stockholder, enforceable against the Stockholder in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application respecting creditors' rights and by
general equitable principles.
(c) Neither the execution and delivery of this Agreement nor
the consummation by the Stockholder of the transactions contemplated
hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement,
understanding, arrangement or restriction of any kind to which the
Stockholder is a party or bound or to which the Stockholder's Shares
are subject, other than a violation, default or conflict which does
not materially impair the ability of the Stockholder to perform its
obligations under this Agreement. If the Stockholder is married and
the Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its
terms. Consummation by the Stockholder of the transactions
contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order,
decree, statute, law, rule or regulation applicable to the
Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing
the Stockholder's Shares are now, and at all times all such shares
then held will be, held by the Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all
liens, security interest, proxies, voting trusts or voting
agreements or any other encumbrances whatsoever, except for (i) any
such encumbrances or proxies arising hereunder and (ii) any
arrangements that do not materially impair the ability of the
Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan
is entering into the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Agreement.
2
3. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan
that it shall not (i) grant any proxy, power of attorney or other
authorization in or with respect to such shares, except for this
Agreement or (ii) deposit such shares into a voting trust or enter
into a voting agreement or arrangement with respect to such shares,
except for any arrangements which do not materially impair the
ability of the Stockholder to perform its obligations under this
Agreement.
(b) The Stockholder shall use commercially reasonable efforts
to take, or cause to be taken, all necessary actions, and to do, or
cause to be done all things necessary, proper or advisable under
this Agreement to consummate the transactions contemplated by this
Agreement, including, without limitation, executing and delivering,
or causing to be executed and delivered (including by any record
holder of any of the Stockholder's Shares), such additional or
further consents, documents and other instruments, as Telescan may
reasonably request, for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
4. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles and that
Telescan is simultaneously entering into similar lock-up agreements with D.
Scott Elder, Scott Harris, David W. McCoy and Momentum Media Ltd.
5. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding
upon each party hereto and such party's successors and assigns. This
Agreement shall not be assignable by the Stockholder, but may be
assigned by Telescan in whole or in part to any direct or indirect
wholly-owned subsidiary of Telescan, provided that Telescan shall
remain liable for any obligations so assigned. Notwithstanding the
foregoing, upon the Closing of the Mergers, as of the Effective
Time, all rights of Telescan set forth in Section 1 shall be deemed
to be automatically assigned to Holdco.
(b) Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. Any
suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby or thereby may be
brought in any federal or state court located in the State of
Delaware, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action
or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court.
3
Without limiting foregoing, each party agrees that service of
process on such party as provided in Section 6(h) shall be deemed
effective service of process on such party.
(d) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan
would be irreparably damaged if for any reason the Stockholder
failed, in breach of its obligations hereunder, to perform any of
its obligations under this Agreement, and that Telescan would not
have an adequate remedy at law for money damages in such event.
Accordingly, Telescan shall be entitled to specific performance and
injunctive and other equitable relief to enforce the performance of
this Agreement by the Stockholder; and, if Telescan should institute
an action or proceeding seeking specific enforcement of the
provisions hereof, the Stockholder hereby waives the claim or
defense that Telescan has an adequate remedy at law and hereby
agrees not to assert in any such action or proceeding the claim or
defense that such a remedy at law exists. The Stockholder further
agrees to waive any requirements for the securing or posting of any
bond in connection with obtaining any such equitable relief. This
provision is without prejudice to any other rights that Telescan may
have against the Stockholder for any failure to perform its
respective obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the
execution and delivery of a written agreement executed by the
parties hereto. This Agreement contains the entire agreement between
the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
4
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 5(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 5(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
----------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ Ross Jardine
----------------------------------------
Name: Ross Jardine
Address: 116 S. Pfeifferhorn Dr.
Alpine, Utah 84004
Number of Shares Beneficially Owned:
3,804,553
6
ANNEX III
LOCKUP AGREEMENT
THIS LOCKUP AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
D. Scott Elder (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to
be legally bound hereby, the parties hereto agree as follows:
1. Lock-Up. (a) Upon the Closing of the Mergers and during the six
month period commencing at the Effective Time the Stockholder will not,
without the prior written consent of Holdco:
(i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any share of
Holdco Common Stock or any securities convertible into or
exercisable or exchangeable for Holdco Common Stock or file any
registration statement under the Securities Act of 1933, as
amended with respect to any of the foregoing; or
(ii) enter into swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Holdco Common
Stock,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of Holdco Common Stock or such other securities, in
cash or otherwise (clause (i) and (ii) are hereinafter referred to as a
"Transfer").
(b) During the six month period following the Initial Period, the
Stockholder (together with its permitted transferees) will not, without the
prior written consent of Holdco, engage in a Transfer with respect to more
than 100,000 shares of Holdco Common Stock in any calendar month.
(c) Notwithstanding anything to the contrary contained herein, the
Stockholder shall be permitted to (i) engage in Transfers to family members or
trusts the beneficiaries of which are family members so long as each such
transferee agrees to be bound by the terms of this Agreement, and (ii) engage
in Transfers to charitable organizations or to trusts the beneficiaries of
which are solely charitable organizations.
2. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
2
3. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as Telescan may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
4. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles and that
Telescan is simultaneously entering into similar lock-up agreements with Ross
Jardine, Scott Harris, David W. McCoy and Momentum Media Ltd.
5. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned. Notwithstanding the foregoing, upon the
Closing of the Mergers, as of the Effective Time, all rights of Telescan
set forth in Section 1 shall be deemed to be automatically assigned to
Holdco.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying
3
of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.
Without limiting foregoing, each party agrees that service of process on
such party as provided in Section 6(h) shall be deemed effective service
of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations hereunder, to perform any of its obligations
under this Agreement, and that Telescan would not have an adequate remedy
at law for money damages in such event. Accordingly, Telescan shall be
entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by the Stockholder;
and, if Telescan should institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Stockholder hereby
waives the claim or defense that Telescan has an adequate remedy at law
and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Stockholder
further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This
provision is without prejudice to any other rights that Telescan may have
against the Stockholder for any failure to perform its respective
obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
4
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party
may hereafter specify for the purpose by notice to the other
party hereto. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in
this Section 5(h) and the appropriate facsimile confirmation is
received or (ii) if given by any other means, when delivered at
the address specified in this Section 5(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
-------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ D. Scott Elder
-------------------------------------
Name: D. Scott Elder
Address: 1150 E. 100 N.
Orem, Utah
Number of Shares Beneficially Owned:
3,804,553
6
ANNEX III
LOCKUP AGREEMENT
THIS LOCKUP AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
Scott Harris (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Lock-Up. (a) Upon the Closing of the Mergers and during the six
month period commencing at the Effective Time the Stockholder will not,
without the prior written consent of Holdco:
(i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any share of Holdco Common Stock
or any securities convertible into or exercisable or exchangeable
for Holdco Common Stock or file any registration statement under the
Securities Act of 1933, as amended with respect to any of the
foregoing; or
(ii) enter into swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Holdco Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of Holdco Common Stock or such other securities, in
cash or otherwise (clause (i) and (ii) are hereinafter referred to as a
"Transfer").
(b) During the six month period following the Initial Period, the
Stockholder (together with its permitted transferees) will not, without the
prior written consent of Holdco, engage in a Transfer with respect to more
than 100,000 shares of Holdco Common Stock in any calendar month.
(c) Notwithstanding anything to the contrary contained herein, the
Stockholder shall be permitted to (i) engage in Transfers to family members or
trusts the beneficiaries of which are family members so long as each such
transferee agrees to be bound by the terms of this Agreement, and (ii) engage
in Transfers to charitable organizations or to trusts the beneficiaries of
which are solely charitable organizations.
2. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
2
3. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as Telescan may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
4. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles and that
Telescan is simultaneously entering into similar lock-up agreements with Ross
Jardine, D. Scott Elder, David W. McCoy and Momentum Media Ltd.
5. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned. Notwithstanding the foregoing, upon the
Closing of the Mergers, as of the Effective Time, all rights of Telescan
set forth in Section 1 shall be deemed to be automatically assigned to
Holdco.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying
3
of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.
Without limiting foregoing, each party agrees that service of process on
such party as provided in Section 6(h) shall be deemed effective service
of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations hereunder, to perform any of its obligations
under this Agreement, and that Telescan would not have an adequate remedy
at law for money damages in such event. Accordingly, Telescan shall be
entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by the Stockholder;
and, if Telescan should institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Stockholder hereby
waives the claim or defense that Telescan has an adequate remedy at law
and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Stockholder
further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This
provision is without prejudice to any other rights that Telescan may have
against the Stockholder for any failure to perform its respective
obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
4
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 5(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 5(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
----------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ Scott Harris
-----------------------------------------
Name: Scott Harris
Address: 876 N. 500 E
Springville, UT 84663
Number of Shares Beneficially Owned:
1,607,023
6
ANNEX III
LOCKUP AGREEMENT
THIS LOCKUP AGREEMENT, dated as of May 2, 2001 (the "Agreement"), is
made by and between Telescan, Inc., a Delaware corporation ("Telescan"), and
David W. McCoy (the "Stockholder"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement
(as defined below).
WHEREAS, simultaneously herewith, Telescan and ZiaSun Technologies,
Inc., a Nevada corporation ("ZiaSun"), have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which Telescan has agreed to engage in a business combination with ZiaSun on
the terms set forth therein (the "Mergers");
WHEREAS, in order to induce Telescan to enter into the Merger
Agreement and to provide reasonable assurances that the transactions
contemplated by the Merger Agreement will be consummated, the Stockholder is
making certain agreements regarding the Shares upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Lock-Up. (a) Upon the Closing of the Mergers and during the six
month period commencing at the Effective Time the Stockholder will not,
without the prior written consent of Holdco:
(i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any share of Holdco Common Stock
or any securities convertible into or exercisable or exchangeable
for Holdco Common Stock or file any registration statement under the
Securities Act of 1933, as amended with respect to any of the
foregoing; or
(ii) enter into swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Holdco Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of Holdco Common Stock or such other securities, in
cash or otherwise (clause (i) and (ii) are hereinafter referred to as a
"Transfer").
(b) During the six month period following the Initial Period, the
Stockholder (together with its permitted transferees) will not, without the
prior written consent of Holdco, engage in a Transfer with respect to more
than 100,000 shares of Holdco Common Stock in any calendar month.
(c) Notwithstanding anything to the contrary contained herein, the
Stockholder shall be permitted to (i) engage in Transfers to
family members or trusts the beneficiaries of which are family members so long
as each such transferee agrees to be bound by the terms of this Agreement, and
(ii) engage in Transfers to charitable organizations or to trusts the
beneficiaries of which are solely charitable organizations.
2. Representation and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Telescan that:
(a) The Stockholder is the record and/or beneficial owner of the
number of Shares listed below its signature hereto.
(b) This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder,
enforceable against the Stockholder in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles.
(c) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject, other than a violation,
default or conflict which does not materially impair the ability of the
Stockholder to perform its obligations under this Agreement. If the
Stockholder is married and the Stockholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's Shares.
(d) The Stockholder's Shares and the certificates representing the
Stockholder's Shares are now, and at all times all such shares then held
will be, held by the Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, security
interest, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for (i) any such encumbrances or proxies
arising hereunder and (ii) any arrangements that do not materially impair
the ability of the Stockholder to perform its obligations hereunder.
(e) The Stockholder understands and acknowledges that Telescan is
entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
2
3. Covenants.
(a) The Stockholder agrees with, and covenants to, Telescan that it
shall not (i) grant any proxy, power of attorney or other authorization
in or with respect to such shares, except for this Agreement or (ii)
deposit such shares into a voting trust or enter into a voting agreement
or arrangement with respect to such shares, except for any arrangements
which do not materially impair the ability of the Stockholder to perform
its obligations under this Agreement.
(b) The Stockholder shall use commercially reasonable efforts to
take, or cause to be taken, all necessary actions, and to do, or cause to
be done all things necessary, proper or advisable under this Agreement to
consummate the transactions contemplated by this Agreement, including,
without limitation, executing and delivering, or causing to be executed
and delivered (including by any record holder of any of the Stockholder's
Shares), such additional or further consents, documents and other
instruments, as Telescan may reasonably request, for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
4. Representations and Warranties of Telescan. Telescan represents
and warrants that this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, Telescan,
enforceable against Telescan in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
respecting creditors' rights and by general equitable principles and that
Telescan is simultaneously entering into similar lock-up agreements with Ross
Jardine, D. Scott Elder, Scott Harris and Momentum Media Ltd.
5. Miscellaneous.
(a) Benefit and Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns. This Agreement
shall not be assignable by the Stockholder, but may be assigned by
Telescan in whole or in part to any direct or indirect wholly-owned
subsidiary of Telescan, provided that Telescan shall remain liable for
any obligations so assigned. Notwithstanding the foregoing, upon the
Closing of the Mergers, as of the Effective Time, all rights of Telescan
set forth in Section 1 shall be deemed to be automatically assigned to
Holdco.
(b) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state
court located in the State of Delaware, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying
3
of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.
Without limiting foregoing, each party agrees that service of process on
such party as provided in Section 6(h) shall be deemed effective service
of process on such party.
(d) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(e) Enforcement of Agreement. The parties agree that Telescan would
be irreparably damaged if for any reason the Stockholder failed, in
breach of its obligations hereunder, to perform any of its obligations
under this Agreement, and that Telescan would not have an adequate remedy
at law for money damages in such event. Accordingly, Telescan shall be
entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by the Stockholder;
and, if Telescan should institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Stockholder hereby
waives the claim or defense that Telescan has an adequate remedy at law
and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Stockholder
further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This
provision is without prejudice to any other rights that Telescan may have
against the Stockholder for any failure to perform its respective
obligations under this Agreement.
(f) Amendments; Entire Agreement. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This
Agreement contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with
respect to such transactions.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
(h) Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile or
similar writing) and shall be given,
(i) if to Telescan:
Telescan, Inc.
5959 Corporate Drive
Suite 2000
4
Attention: Paul Helbling
Facsimile: (281) 588-9843
with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Gary I. Sellers, Esq.
(ii) if to Stockholder, to its address shown below its
signature on the last page hereof;
or to such other address or facsimile number as either party may
hereafter specify for the purpose by notice to the other party
hereto. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 5(h)
and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in
this Section 5(h).
(i) Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically
provided herein.
(j) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(k) Action in Stockholder Capacity Only. No Stockholder who is a
director or officer of ZiaSun makes any agreement in this Agreement in
his or her capacity as such director or officer. The Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares.
The provisions of this Agreement shall not apply to actions taken or
omitted to be taken by any such person in his or her capacity as a
director or officer of ZiaSun.
5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
TELESCAN, INC.
By: /s/ Lee Barba
-----------------------------------------
Name: Lee Barba
Title: CEO
STOCKHOLDER:
By: /s/ David W. McCoy
-----------------------------------------
Name: David W. McCoy
Address: 621 West Ranch Circle
Alpine, Utah 84004
Number of Shares Beneficially Owned:
1,349,023
6
ANNEX IV
EMPLOYMENT AGREEMENTS
To be filed upon completion of the Employment Agreements.
ANNEX V
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INVESTOOLS, INC.
The name of the corporation is Investools, Inc., and the original
Certificate of Incorporation of the corporation was filed with the Secretary
of State of the State of Delaware on ______, 2001. The original Certificate of
Incorporation of the corporation is hereby amended and restated in its
entirety as follows:
ARTICLE I
NAME
The name of the corporation (hereinafter called the "Corporation")
is Investools, Inc.
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle County. The name of the
Corporation's registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is _____ shares, consisting of (1)
____ shares of Preferred Stock, par value $__ per share ("Preferred Stock")
and (2) ____ shares of Common Stock, par value $0.01 per share ("Common
Stock"). The number of authorized shares of any of the Preferred Stock or the
Common Stock may be increased or decreased (but not below the number of shares
thereof then outstanding (and in accordance with Section B(5)(i) of this
Article IV)) by the affirmative vote of the holders of a majority in voting
power of the stock of the Corporation entitled to vote thereon irrespective of
the provisions of Section 242(b)(2) of the General Corporation Law of the
State of
Delaware (or any successor provision thereto), and no vote of the holders of
any of the Preferred Stock or the Common Stock voting separately as a class
shall be required therefor.
A. Preferred Stock.
---------------
1. Issuance. The Board of Directors is hereby expressly authorized,
by resolution or resolutions, to provide, out of the unissued shares of
Preferred Stock, for one or more series of Preferred Stock and, with
respect to each such series, to fix the number of shares constituting
such series and the designation of such series, the voting powers (if
any) of the shares of such series, and the preferences and relative,
participating, optional or other special rights, if any, and any
qualifications, limitations or restrictions thereof, of the shares of
such series. The powers, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock, and
the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding.
B. Series A Preferred Stock.
------------------------
1. Designation. There is hereby established a series of the
authorized Preferred Stock, such shares of such series shall be
designated as "Series A Preferred Stock" and the number of shares
constituting such series shall be ____________.
2. Dividends. The holders of shares of Series A Preferred Stock
shall be entitled to receive out of any assets legally available therefor
cumulative dividends at the rate of $1.00 per share per annum, payable
quarterly on March 31, June 30, September 30 and December 31 of each
year, when and as declared by the Board of Directors, in preference and
priority to any payment of any dividend on the Common Stock or any other
class or series of stock of the Corporation. Such dividends shall accrue
on any given share commencing on and including January 1, 2001, and shall
accrue from day to day whether or not earned or declared. If at any time
dividends on the outstanding Series A Preferred Stock at the rate set
forth above shall not have been paid or declared and set apart for
payment with respect to all preceding periods, the amount of the
deficiency shall be fully paid or declared and set apart for payment, but
without interest, before any distribution, whether by way of dividend or
otherwise, shall be declared or paid upon or set apart for the shares of
any other class or series of stock of the Corporation.
3. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or
involuntary, the holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of any other class or series of
shares, the amount of $25 per share plus any accrued but unpaid dividends
(the "Liquidation Preference").
4. Forced Conversion.
2
(a) The Corporation at its option may cause all outstanding
shares of the Series A Preferred Stock to be converted into Common
Stock at any time after the date of issuance, on at least 20 days'
notice, at a conversion price determined as set forth in Section
B(5) of this Article IV (the "Conversion Price") as of the date
specified in such notice (the "Conversion Date") and otherwise on
the terms set forth in said section; provided, however, that the
Corporation may not exercise such right of conversion unless the
Closing Price (last trade price) of the Common Stock as reported by
Nasdaq for the 20 consecutive trading days prior to the date the
Conversion Notice (as defined in paragraph (ii) below) is mailed has
not on any day been less than 120% of the Conversion Cap (as defined
in Section B(5)(d)(i) of this Article IV) (subject to adjustment for
stock dividends, stock splits and reverse stock splits).
(b) At least 30 days, but not more than 60 days, prior to the
Conversion Date, written notice (the "Conversion Notice") shall be
mailed, first class postage prepaid, by the Corporation to each
holder of record of the Series A Preferred Stock, at the address
last shown on the records of the Corporation for such holder,
notifying such holder of the conversion which is to be effected,
specifying the Conversion Date and calling upon each such holder to
surrender to the Corporation, in the manner and at the place
designated, a certificate or certificates representing the number of
shares of Series A Preferred Stock held by such holder. On or after
the Conversion Date, each holder of Series A Preferred Stock shall
surrender to the Corporation the certificate or certificates
representing the shares of Series A Preferred Stock owned by such
holder as of the Conversion Date, in the manner and at the place
designated in the Conversion Notice, and thereupon the shares
issuable upon such conversion shall be delivered as provided in
Section B(5)(b) of this Article IV.
(c) On May 15, 2002 (the "Termination Date"), all then
outstanding shares of Series A Preferred Stock shall be
automatically converted into Common Stock at the Conversion Price
and otherwise pursuant to the applicable provisions set forth in
Section B(5) of this Article IV.
5. Optional Conversion. The holders of the Series A Preferred Stock
shall have optional conversion rights as follows:
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at any time at the option of the holder
thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (A) the Liquidation
Preference of the Series A Preferred Stock determined pursuant to
Section B(3) of this Article IV on the date the notice of conversion
is given, by (B) the Conversion Price determined as hereinafter
provided in effect on said date.
(b) Mechanics of Conversion. To convert shares of Series A
Preferred Stock into shares of Common Stock, the holder shall give
written notice to the Corporation (which notice may be given by
facsimile transmission, confirmed in due course by first class mail)
that such holder elects to convert the same and shall state therein
the
3
number of shares to be converted and the name or names in which such
holder wishes the certificate or certificates for shares of Common
Stock to be issued. Promptly thereafter the holder shall surrender
the certificate or certificates representing the shares to be
converted, duly endorsed, at the office of the Corporation or of any
transfer agent for such shares, or at such other place designated by
the Corporation. The Corporation shall, immediately upon receipt of
such notice, issue and deliver to or upon the order of such holder,
against delivery of the certificates representing the shares which
have been converted, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled. The
Corporation shall effect such issuance within three business days of
its receipt of the notice of conversion and shall transmit the
certificates by messenger or overnight delivery service to reach the
corporate address designated by such holder within three business
days after the receipt of such notice. Notice of conversion may be
given by a holder at any time during the day up to 11:59 p.m. New
York time and such conversion shall be deemed to have been made
immediately prior to the close of business on the date such notice
of conversion is given. The person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock at the close of business on such date.
(c) Payments in the Event of Non-Conversion. If, at any time,
the Corporation fails for any reason to deliver, within the three
business day period described above, certificates representing such
number of shares of Common Stock to which the holder is entitled
upon such conversion, then the Corporation shall pay to such holder
[$0] per share of such non-converted Series A Preferred Stock for
each calendar day of such non-delivery period on the first day of
each week following the date of any such failed delivery. In
addition, if (i) the Corporation fails for any reason to deliver,
within such three business day period specified above, shares of
Common Stock to the holder upon a conversion of the Series A
Preferred Stock and (ii) after such three business day period
specified above with respect to such conversion, the holder
purchases (in an open market transaction or otherwise) shares of
Common Stock to make delivery upon a sale by the holder of the
shares of Common Stock (the "Sold Shares") which such holder
anticipated receiving upon such conversion, the Corporation shall
pay such holder within two business days following receipt of
written notice of a claim pursuant to this Section B(5)(d) of this
Article IV (in addition to any other remedies available to the
holder) the amount by which (x) such holder's total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the net proceeds received by such
holder from the sale of the Sold Shares.
(d) Determination of Conversion Price.
(i) The Conversion Price shall be $1.00 per share. The
Conversion Cap shall be $8.62 per share.
4
(ii) If, during any period of consecutive trading days provided
for above, the Corporation shall declare or pay any
dividend on the Common Stock payable in Common Stock or in
rights to acquire Common Stock, or shall effect a stock
split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock,
then the Conversion Price and the Conversion Cap shall be
proportionately decreased or increased, as appropriate, to
give effect to such event.
(e) Distributions. If the Corporation shall at any time or from
time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the
Corporation or any of its subsidiaries other than additional shares
of Common Stock, then in each such event provision shall be made so
that the holders of Series A Preferred Stock shall receive, at the
same time as the holders of Common Stock, the securities of the
Corporation which they would have received had they been the owners
on such record date of the number of shares of Common Stock issuable
to them upon conversion on such record date.
(f) Certificates as to Adjustments. Upon the occurrence of any
adjustment or readjustment of the Conversion Price or the Conversion
Cap pursuant to this Section B(5) of this Article IV, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and, in the event
the Corporation and the holders of the Series A Preferred Stock
shall not agree on such adjustment or readjustment, cause the
independent public accountant regularly employed to audit the
financial statements of the Corporation to make or verify such
computation and prepare and furnish to each holder of Series A
Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like
certificate prepared by the Corporation setting forth (A) such
adjustments and readjustments, and (B) the number of other
securities and the amount, if any, of other property which at the
time would be received upon the conversion of Series A Preferred
Stock with respect to each share of Common Stock received upon such
conversion.
(g) Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other
distribution, any security or right convertible into or entitling
the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, the Corporation shall mail to each holder
of Series A Preferred Stock at least 10 days prior to the date
specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend,
distribution, security or right and the amount and character of such
dividend, distribution, security or right.
5
(h) Issue Taxes. The Corporation shall pay any and all issue
and other taxes, excluding any income, franchise or similar taxes,
that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not
be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series A
Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock, subject to the
limitation set forth in Section B(5)(m) of this Article IV below,
and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series A Preferred Stock, the
Corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purpose, including, without limitation, engaging
in its best efforts to obtain the requisite shareholder approval.
(j) Fractional Shares. No fractional shares shall be issued
upon the conversion of any share or shares of Series A Preferred
Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series A
Preferred Stock by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share
of Common Stock, the Corporation shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction
a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of
Directors of the Corporation).
(k) Notices. Any notice required by the provisions of this
Section B(5)(k) of this Article IV to be given to the holders of
shares of Series A Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed
to each holder of record at its address appearing on the books of
the Corporation.
(l) Reorganization or Merger.
(i) Subject to clause (B) below, in case of any reorganization
or any reclassification of the capital stock of the
Corporation or any consolidation or merger of the
Corporation with or into any other corporation or
corporations or a sale of all or substantially all of the
assets of the Corporation to any other person, the holders
of Series A Preferred Stock shall thereafter have the
right to receive upon conversion of their Series A
Preferred Stock shares, upon the basis and upon the terms
and conditions
6
specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such
stock, securities or other assets which the holder would
have been entitled to receive in such transaction had the
Series A Preferred Stock been converted immediately prior
to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and
interests of the holders of the Series A Preferred Stock
to the end that the provisions hereof shall thereafter be
applicable, as nearly as may be practicable, in relation
to any securities thereafter deliverable upon the exercise
hereof.
(ii) In case of any reorganization or any reclassification of
the capital stock of the Corporation or any consolidation
or merger of the Corporation with or into any other
corporation or corporations or a sale of all or
substantially all of the assets of the Corporation to any
other person, and where all, or a part, of the
consideration paid in connection with any such event to
the holders of Common Stock consists of common stock of
the surviving corporation (or its direct or indirect
parent corporation), such surviving corporation (or its
parent entity) shall establish, as of the effective time
of any such event, a new series or class of preferred
securities having terms essentially identical to those of
the Series A Preferred Stock so as to carry out fully the
terms of this Section B(5)(l) of this Article IV;
provided, however, that (A) the Conversion Cap shall be
set at an amount equal to the Conversion Cap in effect
immediately prior to the effective time of such event
multiplied by the appropriate exchange ratio or conversion
factor established in connection with such event (subject
to clause (B) below, the "Exchange Ratio"), (B) if only
part of such consideration paid in connection with such
event consists of such common stock, the Exchange Ratio
shall be appropriately adjusted by the Board of Directors
of the Corporation, acting in good faith. The Corporation
shall not effect any transaction described in this Section
B(5)(l) of this Article IV unless the resulting successor
or acquiring entity (if not the Corporation) assumes by
written instrument the obligations of the Corporation
under this Certificate of Designation including this
Section B(5)(l) of this Article IV.
(iii) Notwithstanding clauses (A) and (B) above, in case of any
consolidation or merger of the Corporation with or into
any other corporation or corporations or a sale of all or
substantially all of the assets of the Corporation to any
other person, the Corporation may, at its option, redeem
the shares of Series A Preferred Stock, in whole and not
in part, on the date of the consolidation or merger of the
Corporation with or into any other corporation or
corporations or a sale of all or substantially all of the
assets of the Corporation to any other person (the
"Redemption Date"). In any such case, the redemption price
(the "Redemption Price") shall be an amount in cash such
that the holders of the Series A Preferred Stock shall
have received, through the Redemption Date, a compounded
internal rate of return on their investment in the Series
A Preferred Stock of 20% per
7
annum (using quarterly compounding and including any
dividends paid). Such Redemption Price shall be payable on
the Redemption Date. Notice of such Redemption Date shall
be given at least 30 days, but not more than 60 days,
prior to the Redemption Date and shall be given, mutatis
mutandis, in the manner specified in Section B(2) of this
Article IV for the giving of a Conversion Notice.
(m) Restricted Number of Conversion Shares. The Corporation
shall not be obligated to issue, in the aggregate, shares of Common
Stock upon conversion of the Series A Preferred Stock if issuance of
such shares would (A) constitute a breach of the Corporation's
obligations under its agreements with the NASD or Nasdaq or the
rules of such organizations or (B) cause the Corporation to exceed
the number of shares authorized in this Amended and Restated
Certificate of Incorporation. If further issuances of shares of
Common Stock upon redemption of the Series A Preferred Stock would
cause the Corporation to exceed either of the limitations specified
in clauses (A) and (B) above, then so long thereafter as such
limitation shall continue to be applicable and any shares of Series
A Preferred Stock are submitted for conversion, such shares shall
receive in cash an amount equal to the current value of the Common
Stock which such shares would otherwise be entitled to receive upon
conversion (such value per share to be the closing price of such
shares as reported by Nasdaq on the Conversion Date), in lieu of the
Common Stock such shares would otherwise be entitled to receive upon
conversion, and such shares will be deemed cancelled. In the event
that any such cash payment shall be required, the Corporation shall
so notify the holder by telephone, confirmed in writing by telecopy
(specifying the number of shares affected and the amount of cash to
be paid), on the same day that notice of conversion is given by such
holder to the Corporation. Payment of said cash amount shall be made
no later than one business day after the time specified in Section
B(5)(b) of this Article IV for the delivery of Common Stock upon
conversion, and shall bear daily interest thereafter until paid at a
rate equal to the lesser of .1% or the highest rate permitted by
law. Such maximum number of shares of Common Stock shall be
proportionately and equitably adjusted in the event of stock splits,
stock dividends, reverse stock splits, reclassifications or other
such events, in such manner as the Board of Directors of the
Corporation shall reasonably determine. The Corporation shall, at
any time upon the oral or written request of any holder, forthwith
inform such holder, orally or in writing, of the highest Common
Stock trade price at which any cash payment under this Section
B(5)(m) of this Article IV would then be required.
(n) Reissuance of Certificates. In the event of an optional
conversion of Series A Preferred Stock pursuant to Section B(5)(a)
of this Article IV hereof in which less than all of the shares of
Series A Preferred Stock of a particular certificate are converted,
the Corporation shall promptly cause to be issued and delivered to
the holder of such certificate a certificate representing the
remaining shares of Series A Preferred Stock which have not been so
converted.
8
(o) Corporation to Prevent Dilution. If any event or condition
occurs as to which other provisions of this Section B(5) of this
Article IV are not strictly applicable or if strictly applicable
would not fairly protect the conversion rights of the holders of the
Series A Preferred Stock in accordance with the essential intent and
principles of such provisions, or which might materially and
adversely affect the conversion rights of any holder hereof, then
the Corporation, acting in good faith, shall make an adjustment in
the application of such provisions, or an addition thereto, in
accordance with such essential intent and principles, so as to
protect such conversion rights as aforesaid, including, without
limitation, any adjustment necessary with respect to the Conversion
Price and the Conversion Cap so as to preserve the rights of the
holders of the Series A Preferred Stock.
6. Other Provisions. For all purposes of this Section B of this
Article IV, the term "date of issuance" and the terms "Closing" or
"Closing Date" shall mean the day on which shares of the Series A
Preferred Stock are first issued by the Corporation. Any provision herein
which conflicts with or violates any applicable usury law shall be deemed
modified to the extent necessary to avoid such conflict or violation. The
term "Nasdaq" herein refers to the principal market on which the Common
Stock of the Corporation is traded. If the Common Stock is listed on a
securities exchange, or if another market becomes the principal market on
which the Common Stock is traded or through which price quotations for
the Common Stock are reported, the term "Nasdaq" shall be deemed to refer
to such exchange or other principal market.
7. Restrictions and Limitations.
(a) The Corporation shall not undertake the following actions
without the consent, which consent shall not be unreasonably
withheld in the case of clause (B) below, of the holders of a
majority of the Series A Preferred Stock, voting separately as a
class: (A) modify this Amended and Restated Certificate of
Incorporation or its By-Laws, by merger or otherwise, so as to amend
or change any of the rights, preferences, or privileges of the
Series A Preferred Stock, (B) so long as at least 20,000 shares of
the Series A Preferred Stock remain outstanding, authorize or issue
any derivative or equity-linked security; provided, however, that
the Corporation may authorize or issue such securities pursuant to
qualified employee stock option plans, (C) purchase or otherwise
acquire for value any Common Stock or other equity security of the
Corporation either junior or senior to or on a parity with the
Series A Preferred Stock while there exists any arrearage in the
payment of cumulative dividends hereunder; provided, however, that
the Corporation may effect purchases for the purpose of funding
qualified employee stock option plans, or (D) pay or effect any
dividend or distribution to shareholders of cash, securities or any
other items whatsoever; provided, however, that the Corporation may
effect one or more distributions of securities (and cash in lieu of
any fractional shares) in connection with the spin-off of its
non-financial business assets to shareholders.
(b) The holders of Series A Preferred Stock agree that after a
conversion of the Series A Preferred Stock (or any portion thereof)
owned by a holder, no holder
9
will be permitted to sell any of its shares of the Common Stock
received in such conversion for a period of 6 months following the
execution of the Preferred Stock Exchange Agreement dated January
25, 2001 hereof, pursuant to which the Series A Preferred Stock was
issued (the "Lock-up Period"). After the expiration of the Lock-up
Period and until May 15, 2002, each holder will limit its sales of
shares of Common Stock received upon conversion of the Series A
Preferred Stock to 75,000 shares per month. Between May 16, 2002 and
May 15, 2003, each holder will be free to sell its shares either
publicly or privately, but in marketing any large blocks of shares
of Common Stock received upon conversion of the Series A Preferred
Stock, the Corporation and the holder(s) will cooperate in good
faith to minimize the effects of any such sales on the share price
of the Common Stock, including, without limitation, cooperating in
the arrangement of block trades, where feasible.
8. No Five Percent Holders.
(a) The purpose of this Section B(8) of this Article IV is to
prevent any holder of Series A Preferred Stock from holding over 5%
of the Corporation's Common Stock without the consent of the Board
of Directors or 90 days' prior written notice, the holders of Series
A Preferred Stock having assured the Corporation of their
intentions, as of the Closing Date, to remain passive investors and
not to acquire any significant (that is, over 5%) block of the
Corporation's Common Stock without such consent or prior written
notice.
(b) Notwithstanding anything to the contrary contained herein,
the Series A Preferred Stock shall not be convertible by a holder or
the Corporation to the extent (but only to the extent) that, if so
converted the holder would beneficially own in excess of 4.9% of the
then outstanding shares of Common Stock of the Corporation;
provided, however, that the provisions of this Section B(8) of this
Article IV shall not apply to a conversion effected pursuant to
Section B(4) (c) of this Article IV. To the extent this limitation
applies, the determination of whether any particular shares of
Series A Preferred Stock shall be convertible shall be in the sole
discretion of the holder thereof and submission of the Series A
Preferred Stock for conversion shall be deemed to be the holder's
determination of whether such Series A Preferred Stock is
convertible, subject to such aggregate percentage limitation. No
prior inability to convert Series A Preferred Stock pursuant to this
Section B(8) of this Article IV shall have any effect on the
applicability of its provisions with respect to any subsequent
determination of convertibility. For the purposes of this Section
B(8) of this Article IV, beneficial ownership and all calculations
including, without limitation, with respect to calculations of
percentage ownership, shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and the
regulations thereunder. Notwithstanding the foregoing, each holder
shall have the right to waive such restriction upon 90 days' prior
notice to the Corporation. No transferee of Series A Preferred Stock
shall be bound by such restriction unless the transferee expressly
so agrees. The provisions of this Section B(8) of this Article IV
may be waived or implemented in a manner otherwise than in strict
conformity with the terms hereof with the approval of the Board of
Directors.
10
9. Voting Rights.
(a) General. The holders of Series A Preferred Stock will not
have any voting rights except as set forth herein or as otherwise
from time to time required by law. In connection with any right to
vote, each holder of Series A Preferred Stock will have one vote for
each share held. Any shares of Series A Preferred Stock held by the
Corporation or any entity controlled by the Corporation shall not
have voting rights hereunder and shall not be counted in determining
the presence of a quorum.
(b) Contingent Voting Rights. As long as at least 20,000 shares
of the Series A Preferred Stock shall remain outstanding, whenever
(A) dividends on the Series A Preferred Stock shall be in arrears in
an amount equal to at least two quarterly dividends (whether or not
consecutive), or (B) the Corporation, for five consecutive trading
days, shall not have sufficient shares of Common Stock authorized
and reserved for issuance to cover the number of shares of Common
Stock into which the Series A Preferred Stock shall then be
convertible hereunder, then, in the case of any of the events
specified in the foregoing clauses (A) and (B), (x) the number of
members of the Board of Directors of the Corporation shall be
increased to create such number of vacancies as may be required to
permit the holders of Series A Preferred Stock to elect forthwith
one member of the Board of Directors, or such other appropriate
action shall be taken to permit such election, effective as of the
time of election of such director as hereinafter provided and (y)
the holders of the Series A Preferred Stock (voting separately as a
class) will have the exclusive right to vote for and elect such
additional director of the Corporation at any meeting of
stockholders of the Corporation at which directors are to be elected
held during the period the defaults specified in clauses (A) and (B)
above continue and remain uncured. The right of the holders of the
Series A Preferred Stock to vote for such additional director shall
terminate when the applicable defaults specified in clauses (A) and
(B) above shall be cured. The term of office of the director so
elected shall terminate immediately upon the termination of the
right of the holders of the Series A Preferred Stock to vote for
such additional director.
The foregoing right of holders of the Series A Preferred Stock
with respect to the election of one member of the Board of Directors
may be exercised at any annual meeting of stockholders or at any
special meeting of stockholders held for such purpose. If the right
to elect a director shall have accrued to the holders of the Series
A Preferred Stock more than 90 days preceding the date established
for the next annual meeting of stockholders, the Chairman of the
Board of Directors of the Corporation shall, within 20 days after
the delivery to the Corporation at its principal office of a written
request for a special meeting signed by the holders of at least 25%
of the Series A Preferred Stock then outstanding, call a special
meeting of the holders of the Series A Preferred Stock to be held
within 30 days after the delivery of such request for the purpose of
electing such additional director.
11
The holders of the Series A Preferred Stock, voting separately
as a class, shall have the right to remove without cause at any time
and replace any director such holders shall have elected pursuant to
this Section B(9) of this Article IV.
(c) Class Voting Rights. So long as the Series A Preferred
Stock is outstanding, the holders thereof shall also have the class
voting rights specified in Section B(7) of this Article IV.
10. No Adverse Actions. The Corporation shall not in any manner,
whether by amendment of this Amended and Restated Certificate of
Incorporation (including, without limitation, any certificate of
designations), merger, reorganization, recapitalization, consolidation,
sales of assets, sale of stock, tender offer, dissolution or otherwise,
take any action, or permit any action to be taken, solely or primarily
for the purpose of increasing the value of any class of stock of the
Corporation if the effect of such action is to reduce the value or
security of the Series A Preferred Stock.
C. Common Stock.
------------
1. Voting Rights. Each holder of Common Stock, as such, shall be
entitled to one vote for each share of Common Stock held of record by
such holder on all matters on which stockholders generally are entitled
to vote; provided, however, that, except as otherwise required by law,
holders of Common Stock, as such, shall not be entitled to vote on any
amendment to this Amended and Restated Certificate of Incorporation
(including any certificate of designations relating to any series of
Preferred Stock) that relates solely to the terms of one or more
outstanding series of Preferred Stock if the holders of such affected
series are entitled, either separately or together with the holders of
one or more other such series, to vote thereon pursuant to this Amended
and Restated Certificate of Incorporation (including any certificate of
designations relating to any series of Preferred Stock) or pursuant to
the General Corporation Law of the State of Delaware.
2. Dividends. Subject to applicable law and the rights, if any, of
the holders of any outstanding series of Preferred Stock or any class or
series of stock having a preference over or the right to participate with
the Common Stock with respect to the payment of dividends, dividends may
be declared and paid on the Common Stock at such times and in such
amounts as the Board of Directors in its discretion shall determine.
3. Dissolution, Liquidation or Winding Up. Upon the dissolution,
liquidation or winding up of the Corporation, subject to the rights, if
any, of the holders of any outstanding series of Preferred Stock or any
class or series of stock having a preference over or the right to
participate with the Common Stock with respect to the distribution of
assets of the Corporation upon such dissolution, liquidation or winding
up of the Corporation, the holders of the Common Stock, as such, shall be
entitled to receive the assets of the Corporation available for
distribution to its stockholders ratably in proportion to the number of
shares held by them.
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ARTICLE V
BOARD OF DIRECTORS
1. Number and Classes. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors
consisting of not less than three directors, the exact number of
directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the Board of Directors [and shall
initially be seven]. The directors shall be divided into three classes
designated Class I, Class II and Class III. Each class shall consist, as
nearly as possible, of one-third of the total number of directors
constituting the entire Board of Directors. Class I directors shall be
originally elected for a term expiring at the next succeeding annual
meeting of stockholders, Class II directors shall be originally elected
for a term expiring at the second succeeding annual meeting of
stockholders, and Class III directors shall be originally elected for a
term expiring at the third succeeding annual meeting of stockholders. At
each succeeding annual meeting of stockholders following ______, 2001,
successors to the class of directors whose term expires at that annual
meeting shall be elected for a term expiring at the third succeeding
annual meeting. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a newly created
directorship resulting from an increase in such class shall hold office
for a term that shall coincide with the remaining term of that class, but
in no case shall a decrease in the number of directors remove or shorten
the term of any incumbent director. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Any newly created directorship on the Board of Directors that results
from an increase in the number of directors and any vacancy occurring in
the Board of Directors may be filled only by a majority of the directors
then in office, although less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same remaining term as
that of his predecessor. Directors may be removed only for cause, and
only by the affirmative vote of at least 80 percent in voting power of
all shares of the Corporation entitled to vote generally in the election
of directors, voting as a single class.
2. Rights of Holders of Preferred Stock. Notwithstanding the
foregoing, whenever the holders of any series of Preferred Stock or any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall have the right, voting separately as
a series or separately as a class with one or more such other series, to
elect directors at an annual or special meeting of stockholders, the
election, term of office, removal, filling of vacancies and other
features of such directorships shall be governed by the terms of this
Amended and Restated Certificate of Incorporation (including any
certificate of designations relating to any series of Preferred Stock or
any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation) applicable thereto, and such directors
so elected shall not be divided into classes pursuant to this Article V
unless expressly provided by such terms.
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ARTICLE VI
SPECIAL MEETINGS OF STOCKHOLDERS
Except as otherwise required by law and subject to the rights of the
holders of any series of Preferred Stock or any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
special meetings of stockholders of the Corporation may be called only by the
Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors or as otherwise provided in the By-Laws of the
Corporation.
ARTICLE VII
BY-LAWS
The Board of Directors shall be authorized to make, amend, alter,
change, add to or repeal the By-Laws of the Corporation in any manner not
inconsistent with the laws of the State of Delaware, subject to the power of
the stockholders to amend, alter, change, add to or repeal the By-Laws made by
the Board of Directors. Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least 80 percent in voting power of all the shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal any provision of the By-Laws which is to the same
effect as Section 1 of Article V, Article VI, and Article VII of this Amended
and Restated Certificate of Incorporation or to adopt any provision
inconsistent therewith.
ARTICLE VIII
INDEMNIFICATION AND LIMITATION OF LIABILITY
1. Indemnification. To the fullest extent permitted by the laws of
the State of Delaware:
(a) The Corporation shall indemnify any person (and such person's
heirs, executors or administrators) who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (brought in the right of the Corporation or otherwise), whether
civil, criminal, administrative or investigative, and whether formal or
informal, including appeals, by reason of the fact that such person is or was
a director or officer of the Corporation or, if a director or officer of the
Corporation, by reason of the fact that such person is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, for and against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person or such heirs, executors or administrators in
connection with such action, suit or proceeding, including appeals.
Notwithstanding the preceding sentence, the Corporation shall be required to
indemnify a person described in such sentence in connection with any action,
suit or proceeding (or part thereof) commenced by such person only if the
commencement of such action, suit or proceeding (or part thereof) by such
person was authorized by the Board of Directors of the Corporation. The
Corporation may indemnify any person (and such person's heirs, executors or
administrators) who was or is a party or is threatened to be made a party to
any threatened, pending or completed
14
action, suit or proceeding (brought in the right of the Corporation or
otherwise), whether civil, criminal, administrative or investigative, and
whether formal or informal, including appeals, by reason of the fact that such
person is or was an employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, for and against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person or such heirs, executors or
administrators in connection with such action, suit or proceeding, including
appeals.
(b) The Corporation shall promptly pay expenses incurred by (i) any
person whom the Corporation is obligated to indemnify pursuant to the first
sentence of Section 1(a) of this Article VIII or (ii) any person whom the
Corporation has determined to indemnify pursuant to the third sentence of
Section 1(a) of this Article VIII, in defending any action, suit or proceeding
in advance of the final disposition of such action, suit or proceeding,
including appeals, upon presentation of appropriate documentation.
(c) The Corporation may purchase and maintain insurance on behalf of
any person described in Section 1(a) of this Article VIII against any
liability asserted against such person, whether or not the Corporation would
have the power to indemnify such person against such liability under the
provisions of this Section 1 of this Article VIII or otherwise.
(d) The provisions of this Section 1 of this Article VIII shall be
applicable to all actions, claims, suits or proceedings made or commenced
after the adoption hereof, whether arising from acts or omissions to act
occurring before or after its adoption. The provisions of this Section 1 of
this Article VIII shall be deemed to be a contract between the Corporation and
each director or officer who serves in such capacity at any time while this
Section 1 of this Article VIII and the relevant provisions of the laws of the
State of Delaware and other applicable law, if any, are in effect, and any
repeal or modification hereof shall not affect any rights or obligations then
existing with respect to any state of facts or any action, suit or proceeding
then or theretofore existing, or any action, suit or proceeding thereafter
brought or threatened based in whole or in part on any such state of facts. If
any provision of this Section 1 of this Article VIII shall be found to be
invalid or limited in application by reason of any law or regulation, it shall
not affect the validity of the remaining provisions hereof. The rights of
indemnification provided in this Section 1 of this Article VIII shall neither
be exclusive of, nor be deemed in limitation of, any rights to which an
officer, director, employee or agent may otherwise be entitled or permitted by
contract, this Amended and Restated Certificate of Incorporation, vote of
stockholders or directors or otherwise, or as a matter of law, both as to
actions in such person's official capacity and actions in any other capacity
while holding such office, it being the policy of the Corporation that
indemnification of any person whom the Corporation is obligated to indemnify
pursuant to the first sentence of Section 1(a) of this Article VIII shall be
made to the fullest extent permitted by law.
(e) For purposes of this Article VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
15
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries.
2. Limitation of Liability. A director of the Corporation shall not
be liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereof is not permitted under the
General Corporation Law of the State of Delaware as the same exists or
may hereafter be amended. Any amendment, modification or repeal of the
foregoing sentence shall not adversely affect any right or protection of
a director of the Corporation hereunder in respect of any act or omission
occurring prior to the time of such amendment, modification or repeal.
ARTICLE IX
AMENDMENT
In addition to any requirements of law and any other provisions of
this Amended and Restated Certificate of Incorporation or any resolution or
resolutions of the Board of Directors adopted pursuant to Article IV of this
Amended and Restated Certificate of Incorporation (and notwithstanding the
fact that a lesser percentage may be specified by law, this Amended and
Restated Certificate of Incorporation or any such resolution or resolutions),
the affirmative vote of the holders of at least 80 percent in voting power of
all the shares of the Corporation entitled to vote generally in the election
of directors, voting together as a single class, shall be required in order
for the stockholders to alter, amend or repeal Section 1 of Article V, Article
VI, Article VII or this Article IX or to adopt any provision inconsistent
therewith.
Investools, Inc. does hereby further certify that this Amended and
Restated Certificate of Incorporation was duly adopted by unanimous written
consent of the stockholders in accordance with the provisions of Sections 228,
242 and 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Investools, Inc. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by_______________,
its __________________, this ___ day of ______________, 2001.
INVESTOOLS, INC.
By:
----------------------------------------
Name:
Title:
16
ANNEX VI
AMENDED AND RESTATED BY-LAWS OF
INVESTOOLS INC.
=============================================================================
ARTICLE I
OFFICES
Section 1. Principal Executive Office. The principal executive
office of the corporation shall be located as directed by the board of
directors.
Section 2. Other Offices. Other business offices may at any time
be established by the board of directors at any place or places deemed
advisable by them or where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at the principal executive office of the corporation, or at any other
place within or without the State of Delaware.
Section 2. Annual Meetings. The annual meetings of stockholders
shall be as fixed by the board of directors. At such meetings directors shall
be elected, reports of the affairs of the corporation shall be considered, and
any other business may be transacted which is within the powers of the
stockholders.
Section 3. Special Meetings. Special meetings of the stockholders,
for the purpose of taking any action permitted by the stockholders under the
Delaware General Corporation Law and the certificate of incorporation of the
corporation, may be called at any time only by the board of directors until
August 31, 2002. After such date, the chairman of the board, the president or
the board of directors may call at any time a special meeting of the
stockholders.
Section 4. Notice of Annual or Special Meeting. Written notice of
each annual or special meeting of stockholders shall be given not less than 10
nor more than 60 days before the date of the meeting to each stockholder
entitled to vote thereat. Such written notice shall be given either personally
or by mail or other means of written communication, charges prepaid, addressed
to such stockholder at his address appearing on the books of the corporation
or given by him to the corporation for the purpose of notice.
2
An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation, shall be prima facie evidence of the giving
of the notice.
Section 5. Quorum. The presence in person or by proxy of the holders
of no less than one-third of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business at any meeting of
stockholders. The stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be
adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but in the absence of a quorum at the commencement of the meeting, no other
business may be transacted at such meeting.
When any stockholders' meeting, either annual or special, is
adjourned for 30 days or more, or if after adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be
given as in the case of an original meeting. Except as provided above, it
shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat, other than by
announcement of the time and place thereof at the meeting at which such
adjournment is taken.
Section 7. Voting. The stockholders entitled to vote at any meeting
of stockholders shall be determined in accordance with the Delaware General
Corporation Law (relating to voting of shares held by a fiduciary, in the name
of a corporation, or in joint ownership). The stockholders may vote by voice
vote or by ballot; provided, however, that all elections for director shall be
by ballot. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter shall be
the act of the stockholders, unless the vote of a greater number of voting by
classes is required by the Delaware General Corporation Law or the certificate
of incorporation.
Section 8. Action Without Meeting. Any action which, under any
provision of the Delaware General Corporation Law, may be taken at a meeting
of the stockholders, may be taken without a meeting, and without notice except
as hereinafter set forth, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Notice of any proposed stockholder approval without a meeting by
less than unanimous written consent, shall be given at least 10 days before
the consummation of the action authorized by such approval.
Unless, as provided in Section 11 of this Article II, the board of
directors has fixed a record date for the determination of stockholders
entitled to notice of and to give such written consent, the record date for
3
such determination shall be the day on which the first written consent is
given. All such written consents shall be filed with the secretary of the
corporation.
Any stockholder giving a written consent, or the stockholder's proxy
holders, or a transferee of the shares or a personal representative of the
stockholder or their respective proxy holders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the corporation.
Section 9. Proxies. Every person entitled to vote or execute
consents shall have the right to do so either in person or by one or more
agents authorized by a written proxy executed by such person or his duly
authorized agent and filed with the secretary of the corporation. Subject to
the Delaware General Corporation Law in the case of any proxy which states
that it is irrevocable, any proxy duly executed shall continue in full force
and effect until (i) an instrument revoking it or a duly executed proxy
bearing a later date is filed with the secretary of the corporation prior to
the vote pursuant thereto, (ii) the person executing the proxy attends the
meeting and votes in person, or (iii) written notice of the death or
incapacity of the maker of such proxy is received by the corporation before
the vote pursuant thereto is counted; provided that no such proxy shall be
valid after the expiration of 11 months from the date of its execution, unless
otherwise provided for in the proxy. The dates contained on the forms of proxy
shall presumptively determine the order of execution of the proxies,
regardless of the postmark dates on the envelopes in which they are mailed.
Section 10. Inspectors of Election. In advance of any meeting of
stockholders, the board of directors may appoint any person or persons other
than nominees for office as inspectors of election to act at such meeting or
any adjournment thereof. If inspectors of election be not so appointed, the
chairman of any such meeting may, and on the request of any stockholder or his
proxy shall, make such appointment at the meeting. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may, and on the request of any stockholder or a stockholder's proxy shall, be
filled by appointment by the board of directors in advance of the meeting, or
at the meeting by the chairman of the meeting.
The duties of such inspectors shall be as prescribed by the Delaware
General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies; receiving votes, ballots or consents; hearing and determining all
challenges and questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining when the
polls shall close; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all stockholders.
The inspectors of election shall perform their duties impartially,
in good faith, to the best of their ability and as expeditiously as is
practical. Any report or certificate made by the inspectors of election is
prima facie evidence of the facts stated therein.
Section 11. Record Date for Stockholder Notice, Voting and Giving
Consents. For purposes of determining the stockholders entitled to notice of
4
any meeting or to vote or entitled to give consent to corporate action without
a meeting, the board of directors may fix, in advance, a record date, which
shall not be more than 60 days nor less than 10 days before the date of any
such meeting nor more than 60 days before any such action without a meeting,
and in this event only stockholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares an the books of the corporation
after the record date, except as otherwise provided in the Delaware General
Corporation Law.
If the board of directors does not so fix a record date:
a. The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders, shall be at the close of
business on the business day next preceding the day on which notice
is given, or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
b. The record date for determining stockholders entitled to give
consent to corporate action in writing without a meeting, (i) when
no prior action by the board has been taken, shall be the day on
which the first written consent is given or (ii) when prior action
of the board has been taken, shall be at the close of business on
the day on which the board adopts the resolution relating to that
action, or the 60th day before the date of such other action,
whichever is later.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to the provisions of the Delaware General
Corporation Law, and to any limitations in the certificate of incorporation
and these By-Laws, relating to action required to be approved by the
stockholders or approved by the outstanding shares, all corporate powers shall
be exercised by or under the authority of, and the business and affairs of the
corporation shall be managed by, the board of directors. Without prejudice to
such general powers, but subject to the same limitations, it is hereby
expressly declared that the board of directors shall have the following
powers, to wit:
a. To select and remove all the officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the certificate of incorporation or with
these By-Laws, fix their compensation and require from them security
for faithful service.
b. To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not
inconsistent with law, or with the certificate of incorporation or
with these By-Laws, as they may deem best.
c. To change the principal executive office and principal office for
the transaction of the corporation from one location to another; to
fix and locate from time to time one or more subsidiary offices of
the corporation within or without the State of Delaware; to
designate any place within or without the State of Delaware for the
holding of any stockholders' meeting or meetings; and to adopt, make
5
and use a corporate seal, and to prescribe the forms of certificates
of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem
best, provided such seal and such certificates shall at all times
comply with the provisions of law.
d. To authorize the issuance of shares of stock of the corporation from
time to time, upon such terms as may be lawful.
e. To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of
trust, mortgages, pledges, hypothecations or other evidences of debt
and securities therefor.
Section 2. Number and Qualification of Directors. The board of
directors of the corporation shall consist of such number of directors, not
less than three nor more than 15, as shall from time to time be fixed
exclusively by resolution of the board of directors. The directors shall be
divided into three classes in the manner set forth in the certificate of
incorporation of the corporation, each class to be elected for the term set
forth therein. Directors shall (except as hereinafter provided for the filling
of vacancies and newly created directorships) be elected by the holders of a
plurality of the voting power present in person or represented by proxy and
entitled to vote. A majority of the total number of directors then in office
(but not less than one-third of the number of directors constituting the
entire board of directors) shall constitute a quorum for the transaction of
business and, except as otherwise provided by law or by the corporation's
certificate of incorporation, the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors. Directors need not be stockholders.
Section 3. Directors Elected by Preferred Stockholders.
Notwithstanding the foregoing, whenever the holders of any one or more series
of preferred stock issued by the corporation shall have the right, voting
separately by series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, removal, filling of vacancies and
other features of such directorships shall be governed by the terms of the
certificate of incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to Article V of the certificate of
incorporation unless expressly provided by such terms. The number of directors
that may be elected by the holders of any such series of preferred stock shall
be in addition to the number fixed by or pursuant to the By-Laws. Except as
otherwise expressly provided in the terms of such series, the number of
directors that may be so elected by the holders of any such series of stock
shall be elected for terms expiring at the next annual meeting of stockholders
and without regard to the classification of the members of the board of
directors as set forth in Section 2 of this Article III, and vacancies among
directors so elected by the separate vote of the holders of any such series of
preferred stock shall be filed by the affirmative vote of a majority of the
remaining directors elected by such series, or, if there are no such remaining
directors, by the holders of such series in the same manner in which such
series initially elected a director.
Section 4. Vacancies. A vacancy in the board of directors shall be
deemed to exist in case of the death, resignation or removal of any director,
or if the board of directors by resolution declares vacant the office of a
6
director who has been declared of unsound mind by order of court or convicted
of a felony, or if the authorized number of directors be increased, or if the
stockholders fail, at any annual or special meeting of stockholders at which
any director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting.
Vacancies in the board of directors, except for a vacancy created by
the removal of a director, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, and
each director so elected shall hold office for a term as set forth in the
certificate of incorporation of the corporation.
Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors
of the corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board
of directors or the stockholders shall have power to elect a successor or take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 5. Place of Meeting. Regular meetings of the board directors
shall be held at any place within or without the State of Delaware which has
been designated from time to time by resolution by the board or by written
consent of all members of the board of directors. In the absence of such
designation, regular meetings shall be held at the principal executive office
of the corporation. Special meetings of the board may be held either at a
place so designated or at the principal executive office.
Section 6. Annual Meeting. Immediately following each annual meeting
of stockholders, the board of directors shall hold a regular meeting at the
place of said annual meeting or at such other place as shall be fixed by the
board of directors, for the purpose of organization, election of officers, and
the transaction of other business. Call and notice of such meetings are hereby
dispensed with.
Section 7. Other Regular Meetings. Other regular meetings of the
board of directors shall be held on the date and at the time which the board
of directors may from time to time designate; provided, however, that should
the day so designated fall upon a Saturday, Sunday or legal holiday observed
by the corporation at its principal executive office, then said meeting shall
be held at the same time on the next day thereafter ensuing which is a full
business day. Notice of all such regular meetings of the board of directors is
hereby dispensed with.
Section 8. Special Meetings. Special meetings of the board of
directors for any purpose or purposes shall be called at any time by the
chairman of the board, the president, any vice president, the secretary or by
the director.
Special meetings of the board of directors shall be held upon 4
days' written notice or 48 hours' notice given personally or by telephone,
telegraph, telex or other similar means of communication. Any such notice
shall be addressed or delivered to each director at such director's address as
7
it is shown upon the records of the corporation or as may have been given to
the corporation by the director for purposes of notice or, if such address is
not shown on such records or is not readily ascertainable, at the place in
which the meetings of the directors are regularly held.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mail, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated to the recipient or to a person at the
office of the recipient who the person giving the notice has reason to believe
will promptly communicate it to the recipient.
Any notice shall state the date, place and hour of the meeting.
Notice given to a director in accordance with this section shall constitute
due, legal and personal notice to such director.
Section 9. Action at a Meeting: Quorum and Required Vote. The
presence of a majority of the authorized number of directors at a meeting of
the board of directors constitutes a quorum for the transaction of business,
except as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board of directors, unless a
greater number, or the same number, after disqualifying one or more directors
from voting, is required by law, by the certificate of incorporation or by
these By-Laws. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, provided
that any action taken is approved by at least a majority of the required
quorum for such meeting. If at any meeting for the election of directors, the
corporation has outstanding more than one class of stock, and one or more such
classes or series thereof are entitled to vote separately as a class, and
there shall be a quorum of only one such class or series of stock, that class
or series of stock shall be entitled to elect its quota of directors
notwithstanding absence of a quorum of the other class or series of stock.
Section 10. Validation of Defectively Called or Noticed Meeting. The
transactions of any meeting of the board of directors, however called and
noticed or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum is present and if, either
before or after the meeting, each of the directors not present or who, though
present, has prior to the meeting or at its commencement, protested the lack
of proper notice to him, signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes or the meeting.
Section 11. Adjournment. A majority of the directors present,
whether or not constituting a quorum, may adjourn any board of directors'
meeting to another time or place.
Section 12. Notice of Adjournment. If a meeting is adjourned for
more than 24 hours, notice of any adjournment to another time or place shall
be given prior to the time of the adjourned meeting to the directors who were
8
not present at the time of adjournment; otherwise, notice of the time and
place of holding an adjourned meeting need not be given to absent directors if
the time and place be fixed at the meeting adjourned.
Section 13. Participation in Meetings by Conference Telephone.
Members of the board of directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all
members participating in such meeting can hear one another. Participating in a
meeting as permitted in this Section constitutes presence in person at such
meeting.
Section 14. Action Without Meeting. Any action by the board of
directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board of directors and shall have the same force and effect as a unanimous
vote of such directors.
Section 15. Fees and Compensation. Directors and members of
Committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
board of directors.
Section 16. Committees. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate an
executive and other committees, each consisting of 2 or more directors, to
serve at the pleasure of the board of directors, and may prescribe the manner
in which proceedings of any such committee meetings of such committee may be
regularly scheduled in advance and may be called at any time by any 2 members
thereof; otherwise, the provisions of these By-Laws with respect to notice and
conduct of meetings of the board of directors shall govern. Any such
committee, to the extent provided in a resolution of the board of directors,
shall have all of the authority of the board of directors, except with respect
to:
a. The approval of any action for which the Delaware General
Corporation Law or the certificate of incorporation require approval
of the stockholders or approval of the outstanding shares;
b. The filling of vacancies on the board of directors or on any
committee thereof;
c. The fixing of compensation of the directors for serving on the board
of directors or on any committee thereof;
d. The amendment or repeal of these By-Laws or the adoption of new
By-Laws;
e. The amendment or repeal of any resolution of the board of directors
which by its express term is not so amendable or repealable;
f. Any distribution to the stockholders, except at a rate or in a
periodic amount or within a price range determined by the board of
directors; and
g. The appointment of other committees of the board of directors or the
members thereof.
9
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board,
one or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV. Any number of
offices may be held by the same person.
Section 2. Election. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 6 of this Article IV, shall be chosen annually by, and shall serve at
the pleasure of, the board of directors, and each shall hold his office until
he or she shall resign or shall be removed or otherwise disqualified to serve,
or his or her successor shall be elected and qualified.
Section 3. Subordinate Officer. The board of directors or the
president may appoint, such other officers as the business of the corporation
may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
board of directors may from time to time determine.
Section 4. Removal and Resignation. Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the board of directors, at any regular or
special meeting thereof, or, except in case of an officer chosen by the board
of directors, by any officer upon whom such power or removal may be conferred
by the board of directors.
Any officer may resign at any time by giving written notice to the
board of directors, or to the president or to the secretary of the
corporation. Any resignation is without prejudice to the rights, if any, of
the corporation under any contract to which such officer is a party. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these By-Laws for regular election or appointment to
such office.
Section 6. Chairman of the Board. The chairman of the board, if
there be such an office, shall, be the Chief Executive Officer, and, if
present, preside at all meetings of the board of directors and exercise and
perform such other powers and duties as may be from time to time assigned to
him by the board of directors or prescribed by these By-Laws.
Section 7. President. Subject to such supervisory powers, if any, as
may be given by the board of directors to the chairman of the board, if there
be such an office, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and officers of the
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corporation. He shall preside at all meetings of the stockholders and in the
absence of the chairman of the board, or if there be none, at all meetings of
the board of directors. He shall be ex officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general power and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors or these By-Laws.
Section 8. Vice Presidents. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, if there be such an officer or officers, shall perform all the
duties of the president, and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents,
if there be such an officer or officers, shall have such other powers and
perform such other duties as from time to time may be prescribed for then
respectively by the board of directors or these By-Laws.
Section 9. Secretary. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive
office or such other place as the board of directors may order, a book of
minutes of all meetings and actions, of the stockholders, the board of
directors and all committees thereof, with the time and place of holding of
meetings, whether regular or special, and, if special, how authorized, the
notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders' meetings, and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, or
registrar, if one be appointed, a share register, or a duplicate share
register, showing the names of the stockholders and their addresses, the
number and classes of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
Section 10. Chief Financial Officer. The chief financial officer
shall keep and maintain, or cause to be kept and maintained, adequate and
colored accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by any
director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of this corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors,
shall render to the president and directors, whenever they request it, an
account of all of his transactions as chief financial officer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the board of directors or
these By-Laws.
Section 11. Assistant Secretaries and Assistant Treasurers. In the
absence or disability of the secretary or the chief financial officer, their
duties shall be performed and their powers exercised, respectively, by any
assistant secretary or any assistant treasurer which the board of directors,
the president, or the secretary or chief financial officer over them, may have
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elected or appointed. The assistant secretaries and the assistant treasurers
shall have such other duties and powers as may have been delegated to them,
respectively, by the secretary or the chief financial officer or by the board
of directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
Section 1. To the fullest extent permitted by the laws of the State
of Delaware:
(a) The corporation shall indemnify any person (and such person's
heirs, executors or administrators) who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (brought in the right of the corporation or otherwise), whether
civil, criminal, administrative or investigative, and whether formal or
informal, including appeals, by reason of the fact that such person is or was
a director or officer of the corporation or, if a director or officer of the
corporation, by reason of the fact that such person is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, for and against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person or such heirs, executors or administrators in
connection with such action, suit or proceeding, including appeals.
Notwithstanding the preceding sentence, the corporation shall be required to
indemnify a person described in such sentence in connection with any action,
suit or proceeding (or part thereof) commenced by such person only if the
commencement of such action, suit or proceeding (or part thereof) by such
person was authorized by the board of directors of the corporation. The
corporation may indemnify any person (and such person's heirs, executors or
administrators) who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding (brought in
the right of the corporation or otherwise), whether civil, criminal,
administrative or investigative, and whether formal or informal, including
appeals, by reason of the fact that such person is or was an employee or agent
of the Corporation or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
for and against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person or
such heirs, executors or administrators in connection with such action, suit
or proceeding, including appeals.
(b) The corporation shall promptly pay expenses incurred by (i) any
person whom the corporation is obligated to indemnify pursuant to the first
sentence of Section 1(a) of this Article V or (ii) any person whom the
corporation has determined to indemnify pursuant to the third sentence of
Section 1(a) of this Article V, in defending any action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding, including
appeals, upon presentation of appropriate documentation.
(c) The corporation may purchase and maintain insurance on behalf of
any person described in Section 1(a) of this Article V against any liability
asserted against such person, whether or not the corporation would have the
power to indemnify such person against such liability under the provisions of
this Section 1 of this Article V or otherwise.
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(d) The provisions of this Section 1 of this Article V shall be
applicable to all actions, claims, suits or proceedings made or commenced
after the adoption hereof, whether arising from acts or omissions to act
occurring before or after its adoption. The provisions of this Section 1 of
this Article V shall be deemed to be a contract between the corporation and
each director or officer who serves in such capacity at any time while this
Section 1 of this Article V and the relevant provisions of the laws of the
State of Delaware and other applicable law, if any, are in effect, and any
repeal or modification hereof shall not affect any rights or obligations then
existing with respect to any state of facts or any action, suit or proceeding
then or theretofore existing, or any action, suit or proceeding thereafter
brought or threatened based in whole or in part on any such state of facts. If
any provision of this Section 1 of this Article V shall be found to be invalid
or limited in application by reason of any law or regulation, it shall not
affect the validity of the remaining provisions hereof. The rights of
indemnification provided in this Section 1 of this Article V shall neither be
exclusive of, nor be deemed in limitation of, any rights to which an officer,
director, employee or agent may otherwise be entitled or permitted by
contract, the certificate of incorporation, these By-Laws, vote of
stockholders or directors or otherwise, or as a matter of law, both as to
actions in such person's official capacity and actions in any other capacity
while holding such office, it being the policy of the corporation that
indemnification of any person whom the corporation is obligated to indemnify
pursuant to the first sentence of Section 1(a) of this Article V shall be made
to the fullest extent permitted by law.
(e) For purposes of this Article V, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries.
Section 2. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence shall not
adversely affect any right or protection of a director of the corporation
hereunder in respect of any act or omission occurring prior to the time of
such amendment, modification or repeal.
ARTICLE VI
GENERAL CORPORATE MATTERS
Unless the context otherwise requires, the general provisions, rules
of construction and definitions contained in the Delaware General Corporation
Law shall govern the construction of these By-Laws. Without limiting the
generality of the foregoing, the masculine gender includes the feminine and
neuter, the singular number includes the plural and the plural number includes
the singular, and the term "person" includes a corporation as well as a
natural person.
ANNEX VII
QUALIFICATIONS OF AND PROCEDURES
FOR DISSENTING STOCKHOLDERS
NEVADA REVISED STATUTES ("NRS") SEC. 92A
92A.300 DEFINITIONS. As used in NRS 92A.300 to 92A.500, inclusive, unless the
context otherwise requires, the words and terms defined in NRS 92A.305 to
92A.335, inclusive, have the meanings ascribed to them in those sections.
NRS 92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means a
person who is a beneficial owner of shares held in a voting trust or by a
nominee as the stockholder of record.
NRS 92A.310 "CORPORATE ACTION" DEFINED. "Corporate action" means the action of
a domestic corporation.
NRS 92A.315 "DISSENTER" DEFINED. "Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.400 to
92A.480, inclusive.
NRS 92A.320 "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of
the corporate action to which he objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable.
NRS 92A.325 "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record
or a beneficial stockholder of a domestic corporation.
NRS 92A.330 "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means the
person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
NRS 92A.335 "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective
or the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
NRS 92A.340 COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300
to 92A.500, inclusive, must be computed from the effective date of the action
until the date of payment, at the average rate currently paid by the entity on
its principal bank loans or, if it has no bank loans, at a rate that is fair
and equitable under all of the circumstances.
NRS 92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
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provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with
any merger or exchange in which the domestic limited partnership is a
constituent entity.
NRS 92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED-LIABILITY COMPANY.
The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
Organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
NRS 92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION.
1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior notice,
but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his
resignation and is thereby entitled to those rights, if any, which would have
existed if there had been no merger and the membership had been terminated or
the member had been expelled.
2. Unless otherwise provided in its articles of incorporation or bylaws,
no member of a domestic nonprofit corporation, including, but not limited to,
a cooperative corporation, which supplies services described in chapter 704 of
NRS to its members only, and no person who is a member of a domestic nonprofit
corporation as a condition of or by reason of the ownership of an interest in
real property, may resign and dissent pursuant to subsection 1.
NRS 92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS AND
TO OBTAIN PAYMENT FOR SHARES.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder
is entitled to dissent from, and obtain payment of the fair value of his
shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for the merger by
NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation
and he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged
with its parent under NRS 92A.180.
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(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's interests
will be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles of incorporation, bylaws or a
resolution of the board of directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS
92A.300 to 92A.500, inclusive, may not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with respect to
him or the domestic corporation.
NRS 92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES
OR SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the record
date fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting at which the plan of merger or exchange is to be acted on,
were either listed on a national securities exchange, included in the national
market system by the National Association of Securities Dealers, Inc., or held
by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the
shares provide otherwise; or
(b) The holders of the class or series are required under the plan
of merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu
of fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective date of the plan
of merger or exchange, were either listed on a national securities
exchange, included in the national market system by the National
Association of Securities Dealers, Inc., or held of record by at
least 2,000 holders of owner's interests of record; or
(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1) of
paragraph (b).
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2. There is no right of dissent for any holders of stock of the surviving
domestic corporation if the plan of merger does not require action of the
stockholders of the surviving domestic corporation under NRS 92A.130.
NRS 92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY TO
SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER.
1. A stockholder of record may assert dissenter's rights as to fewer than
all of the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one person and notifies the subject
corporation in writing of the name and address of each person on whose behalf
he asserts dissenter's rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he dissents and his
other shares were registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the
beneficial stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the vote.
NRS 92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT.
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, the notice of the meeting must
state that stockholders are or may be entitled to assert dissenters' rights
under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those
sections.
2. If the corporate action creating dissenters' rights is taken by
written consent of the stockholders or without a vote of the stockholders, the
domestic corporation shall notify in writing all stockholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenter's notice described in NRS 92A.430.
NRS 92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, a stockholder who wishes to
assert dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is
taken, written notice of his intent to demand payment for his shares if
the proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
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2. A stockholder who does not satisfy the requirements of subsection 1
and NRS 92A.400 is not entitled to payment for his shares under this chapter.
NRS 92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS; CONTENTS.
1. If a proposed corporate action creating dissenters' rights is
authorized at a stockholders' meeting, the subject corporation shall deliver a
written dissenter's notice to all stockholders who satisfied the requirements
to assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and
when certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the
demand for payment is received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to the news media or to the stockholders of the
terms of the proposed action and requires that the person asserting
dissenter's rights certify whether or not he acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the subject corporation must receive the
demand for payment, which may not be less than 30 nor more than 60 days
after the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
NRS 92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF
RIGHTS OF STOCKHOLDER.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for
this certification; and
(c) Deposit his certificates, if any, in accordance with the terms
of the notice.
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2. The stockholder who demands payment and deposits his certificates, if
any, before the proposed corporate action is taken retains all other rights of
a stockholder until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
NRS 92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND
FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
NRS 92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced by
the district court:
(a) Of the county where the corporation's registered office is
located; or
(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the dissenter
resides or has its registered office. The court shall dispose of the
complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the
stockholders' equity for that year and the latest available interim
financial statements, if any;
(b) A statement of the subject corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
7
(d) A statement of the dissenter's rights to demand payment under
NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
NRS 92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF
DISSENTER'S NOTICE.
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth in
the dissenter's notice as the date of the first announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment,
after taking the proposed action, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment
pursuant to NRS 92A.480.
NRS 92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT
CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE.
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due, and
demand payment of his estimate, less any payment pursuant to NRS 92A.460, or
reject the offer pursuant to NRS 92A.470 and demand payment of the fair value
of his shares and interest due, if he believes that the amount paid pursuant
to NRS 92A.460 or offered pursuant to NRS 92A.470 is less than the fair value
of his shares or that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this
section unless he notifies the subject corporation of his demand in writing
within 30 days after the subject corporation made or offered payment for his
shares.
NRS 92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT
CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER.
1. If a demand for payment remains unsettled, the subject corporation
shall commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the subject corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it
shall commence the proceeding in the county where the registered
8
office of the domestic corporation merged with or whose shares were acquired
by the foreign entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must be served with a copy
of the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or any amendment thereto. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value
of his shares, plus interest, exceeds the amount paid by the subject
corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the subject corporation elected to withhold payment
pursuant to NRS 92A.470.
NRS 92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND
FEES.
1. The court in a proceeding to determine fair value shall determine all
of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable,
to the extent the court finds the dissenters acted arbitrarily, vexatiously or
not in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters
if the court finds the subject corporation did not substantially comply
with the requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor
of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in
good faith with respect to the rights provided by NRS 92A.300 to 92A.500,
inclusive.
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3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the subject
corporation, the court may award to those counsel reasonable fees to be paid
out of the amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the
proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115
TELESCAN, INC.
SPECIAL MEETING OF STOCKHOLDERS
Solicited by the Board of Directors
The undersigned hereby appoints Lee K. Barba and William D. Savoy,
each with full power of substitution, as proxies and authorizes them to vote
as designated all of the shares of Common Stock of Telescan, Inc. (the
"Company"), held of record by the undersigned on ___________ __, 2001, at the
Special Meeting of Stockholders to be held on ___________ __, 2001, and at any
adjournments or postponements thereof.
This Proxy, when properly executed, will be voted in the manner
directed herein by the Stockholder. If no direction is made, this proxy will
be voted for the approval and adoption of the merger agreement and, in the
discretion of the proxies, for such other business as may properly come before
the Special Meeting of Stockholders, or any adjournments or postponements
thereof. Failures to vote and abstentions will have the same effect as a vote
against the merger. If more than one of the proxies designated hereby shall be
present in person at the Special Meeting of Stockholders, or at any
adjournments or postponements thereof, either of said proxies present and
voting, either in person or by substitution shall exercise all the powers
herein given.
ITEM 1. To approve and adopt the Merger Agreement, dated May 3, 2001, between
ZiaSun Technologies, Inc. and the Company and the transactions contemplated by
the Merger Agreement.
FOR / / AGAINST / / ABSTAIN / /
Date: ______________ __, 2001
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Signature
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(Type or Printed Name)
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Signature (If Held Jointly)
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When signing
as trustee, attorney, administrator or guardian, give full
title as such. If a corporation, please sign in full
corporate name by president or other authorized officer.
If a partnership, please sign in partnership name by
authorized personnel.
This proxy may be revoked at any time
before it is voted at the meeting.
Please mark, sign, date and return this
proxy promptly in the postage-prepaid
envelope provided.