SECOND AMENDMENT TO AGREEMENT
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This Second Amendment to Agreement (the "Agreement") is effective as of
July 1, 2001, and is by and among ZiaSun Technologies, Inc., a Nevada
Corporation, (hereinafter referred to as "ZiaSun"), Online Investors Advantage
Incorporated, a Utah corporation ("OIA"), and D. Xxxxx Xxxxx, Xxxx X. Xxxxxxx,
Xxxxx XxXxx and Xxxxx Xxxxxx, (hereinafter collectively referred to as the
"Shareholders"), and amends and modifies that certain Acquisition Agreement and
Plan of Reorganization between the parties dated March 31, 1999 (the
"Acquisition Agreement") and that certain Amendment to Agreement dated May 31,
2000 (the First Amendment").
RECITALS
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A. Whereas, on March 31, 1999, ZiaSun and the Shareholders entered into
that certain Acquisition Agreement under which ZiaSun would acquire in a stock
for stock exchange all of the capital stock of OIA. All of the capital stock of
OIA was owned by the Shareholders as of that date.
B. Whereas, pursuant to the terms of the Acquisition Agreement, in exchange
for all of the capital stock of OIA owned by the Shareholders, the Shareholders
were to receive total Acquisition Consideration from ZiaSun of:
(a) Cash in the amount of $400,000 distributed pro rata to the OIA
Shareholders; and
(b) 6,000,000 (post-split adjusted) shares of the previously
authorized but unissued unregistered and restricted shares of the
Common Stock of ZiaSun based on anticipated earnings of OIA of
$2,500,000 for the period from April 1, 1999 through March 31,
2000 (the "Earn Out Period").
C. Whereas, pursuant paragraph 1.3 of the Acquisition Agreement, the OIA
shareholders received cash of $400,000 and 1,000,000 (post-split adjusted)
shares of the Common Stock of ZiaSun at closing on April 7, 1999, with the
balance of 5,000,000 (post-split adjusted) held in escrow pursuant to paragraph
1.4 of the Acquisition Agreement.
D. Whereas, paragraph 1.5 of the Acquisition Agreement provides for the
calculation of the actual OIA earnings and provides that actual OIA earnings for
the earnings period shall be calculated based on EBITDA determine in accordance
with general accepted accounting principals. Actual OIA earnings shall mean the
total gross sales of OIA less the costs of sales, less general administrative
expenses before interest, taxes, depreciation and amortization.
E. Whereas, paragraph 1.6 of the Acquisition Agreement provided that
adjustments based on the actual OIA earnings shall be made as follows:
(a) Reduction Adjustment. In the event that the actual OIA
earnings are less than $2,500,000, then the total number of Escrow
Shares shall be reduced on a one share basis for each $1.00 (i.e. 1
share basis for each $0.50 on a post-split adjusted basis) of actual
OIA earnings less than $2,500,000.
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(b) Increase Adjustment. In the event that the actual OIA
earnings are greater than $2,500,000, then ZiaSun shall issue such
additional shares on the basis of one additional share for each $1.00
(i.e. 1 share basis for each $0.50 on a post-split adjusted basis) of
actual OIA earnings greater than $2,500,000.
F. Whereas, following the end of the Earn Out Period as provided in the
Acquisition Agreement, OIA's audited EBITDA earnings for the period from April
1, 1999 through March 31, 2000 was reported as $10,910,076, which would have
resulted in ZiaSun owing 21,820,152 (post-split adjusted) shares of its common
stock at March 31, 2000 to the OIA Shareholders. The value of these shares at
March 31 was $248,204,230 which amount would have been added to the goodwill on
the Company's balance sheet. OIA's audited EBITDA earnings for the period from
April 1, 1999 through March 31, 2000 was later adjusted because of unpaid sales
tax during that period that were later accounted for, a result of which a
potential adjustment may be required as set forth herein.
G. Whereas, ZiaSun and the Shareholders jointly recognized that it would
not be in the best interests of ZiaSun to have such a large goodwill burden
going forward, and the parties agreed to and entered into the First Amendment
under which the Shareholders would exchange 12,000,000 of the (post-split
adjusted) shares they were to receive pursuant to the terms of the Acquisition
Agreement, for $6,000,000 in cash.
H. Whereas, in accordance with the First Amendment, the Shareholders
receive $6,000,000 in cash and 9,820,152 (post-split adjusted) shares of
ZiaSun's common stock of which 5,000,000 shares had been previously issued to
the Shareholders and were held in escrow pursuant to the terms of the
Acquisition Agreement, and an total of 4,820,152 new restricted shares were
issued collectively to the Shareholders.
I. Whereas, following the completion of the audit of the financial
statements of ZiaSun for the year ended December 31, 2000, by BDO Xxxxxxx, LLP,
the independent auditors of ZiaSun, it was determined that OIA had inadvertently
failed to filed certain sales tax returns and make the payment of sales tax on
certain sales of the educational workshops of OIA for sales that had occurred in
1998, 1999 and 2000. As a result of the oversight in payment of sales taxes for
these years ZiaSun accrued a sales tax liability of $3,004,914 on its financial
statements for the year ended December 31, 2000, representing the potential
sales, tax, penalties and interest that ZiaSun may be liable for the years 1998,
1999 and 2000.
J. Whereas, had OIA paid sales tax on sales made during the Earn Out
Period, the audited EBITDA earnings of OIA during the Earn Out Period would have
been less than initially audited and consequently the number of shares which the
Shareholders would have been entitled to under the terms of the Acquisition
Agreement and First Amendment, would have been less.
K. Whereas, after an analysis of the potential sales tax liability of
ZiaSun on sales made during the Earn Out Period and the benefits received by
ZiaSun and the Shareholders as a result of the modified earn out as reflected in
the First Amendment, ZiaSun and the Shareholders have agreed to a further
amendment and modification of the provisions pertaining to an adjustment of
shares issuable to the Shareholders pursuant to paragraph 1.6 of the Acquisition
Agreement and First Amendment, as set forth herein.
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AGREEMENT
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NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, ZiaSun and the
Shareholders hereby agree as follows:
1. ZiaSun Obligation of Sales Tax Paid. ZiaSun and the Shareholders hereby
agree, that in light of the benefits received by ZiaSun as a result of the
adjustment set forth in the First Amendment, and the uncertainly as to the exact
amount of sales tax liability which may be paid, if during the three (3) year
period commencing from the date of this Agreement (July 1, 2001 through June 30,
2004), any sales tax liability is paid for sales made during the Earn Out
Period, then ZiaSun shall absorb and be solely responsible for the payment of
any actual sales tax liability up to the amount of $554,000 (the "ZiaSun Sales
Tax Obligation"), on sales made by OIA during the Earn Out Period.
2. Shareholders Obligation of Sales Tax Paid and Adjustment to Shares
Issued Pursuant to Acquisition Agreement, as amended, ZiaSun and the
Shareholders hereby agree that in the event that the actual sales tax paid by
ZiaSun on sales made by OIA during the Earn Out Period exceeds the amount of
ZiaSun Sales Tax Obligation, then the Shareholders shall reduce, return and
deliver to ZiaSun, 1 share for each $0.50 of actual sales taxes paid by ZiaSun,
in excess of $554,000 (the "Shareholders Sales Tax Obligation").
3. Delivery of INVESTools Restricted Shares. The Shareholders, jointly and
severally agree, that the shares, if any, to be returned to ZiaSun by the
Shareholders to cover the Shareholders Sales Tax Obligation, shall be restricted
shares of INVESTtools, Inc., a Delaware corporation ("INVESTools"), which the
Shareholders will receive as part of their transition bonuses, in conjunction
with the consummation of the anticipated merger by and between ZiaSun and
Telescan, Inc., with INVESTools. In this regard, the return of any Shares shall
first be made through the reduction of the number of restricted shares to be
issued in installments pursuant to the transition bonus, from the later
installments and thereafter from the earlier installments.
4. Contingent Delivery of INVESTools Registered Shares or Shares of ZiaSun.
The Shareholders, jointly and severally agree, that in the event that there are
insufficient INVESTtools restricted shares held by, or to be delivered to the
Shareholders, pursuant to the transition bonuses, to satisfy any adjustments
required to cover the Shareholders Sales Tax Obligation, then Shareholders shall
return and deliver to ZiaSun such additional registered shares of INVESTools
received by the Shareholders as a result of the consummation of the anticipated
merger by and between ZiaSun and Telescan, Inc., with INVESTools, on the basis
of 1 share for each $0.50 of Shareholders Sales Tax Obligation, to satisfy the
Shareholders Sales Tax Obligation. Or, if the merger by and between ZiaSun and
Telescan, Inc., with INVESTools is not consummated, then the Shareholders shall
return and deliver to ZiaSun such additional shares of ZiaSun, as required, on
the basis of 1 share for each $0.50 of Shareholders Sales Tax Obligation, to
satisfy the Shareholders Sales Tax Obligation.
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5. Adjustment of Shares Deliverable by Shareholders. In the event that
ZiaSun or INVESTools shall effect, make or authorize, the payment of a stock
dividend, any adjustment, recapitalization, reorganization, or other change in
ZiaSun's or INVESTool's capital structure or their business, or any merger or
consolidation of ZiaSun or INVESTools, or a change in the exchange ratio of the
contemplated merger of ZiaSun and Telescan, or other increase or reduction of
the number of shares of the stock outstanding, or any other corporate act or
proceedings of ZiaSun or INVESTools, whether of a similar character or
otherwise, then the number of shares of stock subject to the satisfaction of the
Shareholders Sales Tax Obligation, shall: (1) in the event of an increase in the
number of outstanding shares, be proportionately increased, and the dollar
amount per share counterpart shall be proportionately reduced; and, (2) in the
event of a reduction in the number of outstanding shares, be proportionately
reduced, and the dollar amount per share counterpart shall be proportionately
increased.
By way of example and for the purpose of clarification, in event that
ZiaSun or INVESTools effects 1-for-2 reverse stock split, then the Shareholders
shall reduce, return and deliver to ZiaSun, 1 share for each $1.00 of actual
sales taxes paid by ZiaSun, in excess of $554,000, rather than 1 share for each
$0.50 of actual sales taxes paid by ZiaSun, in excess of $554,000. In the event
of 1-for-4 reverse stock split, then the Shareholders shall reduce, return and
deliver to ZiaSun, 1 share for each $200 of actual sales taxes paid by ZiaSun,
in excess of $554,000, rather than 1 share for each $0.50 of actual sales taxes
paid by ZiaSun, in excess of $554,000.
6. Amendment to Agreement. The Shareholders and ZiaSun hereby agree that
the terms of the Acquisition Agreement and First Amendment, are amended and
modified to reflect the agreement and undertakings of ZiaSun and the
Shareholders, as set forth herein.
7. All other terms and conditions of the Acquisition Agreement and First
Amendment shall remain in full force and effect.
8. Entire Agreement. This Agreement contains the entire agreement between
the parties relating to the subject matter contained in this Agreement. All
prior or contemporaneous agreements, representations or warranties, written or
oral, between the parties are superseded by this Agreement. This Agreement may
not be modified except by written document signed by an authorized
representative of each party. In the event that any part of this Agreement is
found to be unenforceable, the remainder shall continue in effect, to the extent
consistent with the intent of the parties as of the effective date of this
Agreement.
9. No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
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10. Non-Waiver. The failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants or
conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
11. Choice of Law. This Agreement and its application shall be governed by
the laws of the State of California.
12. Counterparts and/or Facsimile Signature. This Agreement may be executed
in any number of counterparts, including counterparts transmitted by telecopier
or FAX, any one of which shall constitute an original of this Agreement. When
counterparts of facsimile copies have been executed by all parties, they shall
have the same effect as if the signatures to each counterpart or copy were upon
the same document and copies of such documents shall be deemed valid as
originals. The parties agree that all such signatures may be transferred to a
single document upon the request of any party.
13. Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
ZIASUN TECHNOLOGIES, INC.
A Nevada Corporation
Dated: July 26, 2001 /S/ Xxxxx X. Xxxxxxx
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By: Xxxxx X. Xxxxxxx
Its: President and COO
ONLINE INVESTORS ADVANTAGE, INC.
A Utah Corporation
Dated: July 9, 2001 /S/ D. Xxxxx Xxxxx
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By: D. Xxxxx Xxxxx
Its: Chief Executive Officer
Dated: July 9, 2001 /S/ Xxxxx XxXxx
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By: Xxxxx XxXxx
Its: President
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SHAREHOLDERS
Dated: July 9, 2001 /S/ D. Xxxxx Xxxxx
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D. Xxxxx Xxxxx
Dated: July 10, 2001 /S/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
Dated: July 9, 2001 /S/ Xxxxx XxXxx
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Xxxxx XxXxx
Dated: July 9, 2001 /S/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
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