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EXHIBIT 10.18
PREFERRED STOCK EXCHANGE AGREEMENT
This Preferred Stock Exchange Agreement (this "Agreement"), effective
as of January ___, 2001, is by and between TELESCAN, INC., a Delaware
corporation (the "Company"), and R2 FUNDING, LTD., a Cayman Islands Exempted
Company (the "Investor").
WHEREAS, Investor is the owner of 60,000 shares of Class A 5%
Convertible Preferred Stock (the "Class A Preferred Stock"), of the Company; and
WHEREAS, Investor and the Company have agreed to exchange such shares
of Class A Preferred Stock for a new class of preferred stock from the Company
entitled "Class B 4% Convertible Preferred Stock" pursuant to a
"recapitalization" within the meaning of Section 368(a)(1)(E) of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Return of Class A Preferred Stock and Cancellation; Exchange for
Class B Preferred Stock. On the date hereof, Investor shall deliver the
certificate representing its shares of Class A Preferred Stock to the Company.
In exchange for Investor's delivery of the certificate representing its shares
of Class A Preferred Stock, the Company shall issue and deliver to Investor
60,000 shares of the Company's Class B 4% Convertible Preferred Stock (the
"Shares" or "Convertible Preferred") having the rights, designations and
preferences set forth in Schedule I hereto.
2. Release of Claims. Investor hereby waives any claims and rights
which it ever had, now has or hereafter can, shall or may have against the
Company arising out of, relating to or in connection with the acquisition or
ownership of the Class A Preferred Stock.
3. Representations and Warranties of the Investor. Investor hereby
makes the following representations and warranties to the Company:
(a) Authorization, Enforcement. (i) Investor has the requisite
power and authority to enter into and perform this Agreement and to acquire the
Shares hereunder, (ii) the execution and delivery of this Agreement by Investor
and the consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary partnership action, and (iii) this Agreement
constitutes a valid and binding obligation of Investor enforceable against
Investor in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(b) No Conflicts. The execution, delivery and performance of
this Agreement and the consummation by Investor of the transactions contemplated
hereby do not and will not
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(i) result in a violation of Investor's organizational documents , (ii) conflict
with any agreement, indenture or instrument to which Investor is a party, or
(iii) result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to Investor.
Investor is not required to obtain any consent or authorization of any
governmental agency in order for it to perform its obligations under this
Agreement
(c) Status of Class A Preferred Stock and Investor. Investor
is not, and never has been, an "affiliate" of the Company (as such term is
defined in the Securities Act of 1933, as amended (the "Act"), and the rules
thereunder) and has held the shares of Class A Preferred Stock for more than two
years as prescribed by, and in accordance with, Rule 144 under the Act.
4. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to Investor:
(a) Organization and Qualification. The Company is a
corporation duly incorporated and existing in good standing under the laws of
the State of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company does
not have any subsidiaries except as listed in Exhibit A hereto. The Company and
each such subsidiary, if any, is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "Material Adverse Effect" means any adverse effect on
the business, operations, properties, prospects, or financial condition of the
entity with respect to which such term is used and which is material to such
entity and other entities controlled by such entity taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the
requisite corporate power and authority to enter into and perform this Agreement
and to issue the Shares in accordance with the terms hereof, (ii) the execution
and delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors or stockholders is required except for any stockholder
approval required by the terms of the Company's listing agreement with Nasdaq or
the rules of such organization, (iii) this Agreement has been duly executed and
delivered by the Company, (iv) this Agreement constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application, and (v) prior to the date
hereof a Certificate of Designations which authorizes the Convertible Preferred
as provided in Schedule I will have been filed with the Delaware Secretary of
State and will be in full force and effect, enforceable against the Company in
accordance with its terms.
(c) Capitalization. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock; there are
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approximately 16,296,026 shares of Common Stock and 120,000 shares of Class A
Preferred Stock issued and outstanding; and, upon issuance of the Shares in
accordance with the terms hereof and pursuant to similar agreements of like
tenor, there will be approximately 16,296,026 shares of Common Stock and 120,000
shares of Class B 4% Convertible Preferred Stock issued and outstanding. All of
the outstanding shares of the Company's capital stock have been validly issued
and are fully paid and nonassessable. Except as set forth in Exhibit A hereto
and as described in the SEC Documents (as hereinafter defined), no shares of
Common Stock are entitled to preemptive rights or registration rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, or commitments to purchase or
acquire, any shares, or securities or rights convertible into shares, of capital
stock of the Company. The Company has furnished or made available to the
Investor true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof (the "Charter"), and the Company's By-Laws, as
in effect on the date hereof (the "By-Laws").
(d) Issuance of Shares. The issuance of the Shares has been
duly authorized and, when paid for and issued in accordance with the terms
hereof, the Shares shall be validly issued, fully paid and non-assessable and
entitled to the rights and preferences set forth in Schedule I hereto. The
Company shall have authorized and reserved for issuance upon conversion of the
Class B 4% Convertible Preferred Stock 3,000,000 shares of Common Stock (the
"Reserved Amount"), which number shall not be reduced, but which shall be
appropriately adjusted by the Board of Directors, acting in good faith, in the
event of stock splits, dividends or other distributions, or other events so as
to carry out the intentions of this Agreement. If the Reserved Amount for any
three consecutive trading days shall be less than 125% of the number of shares
of Common Stock issuable upon conversion of the Convertible Preferred, the
Company shall immediately notify all holders of the Convertible Preferred of
such occurrence and shall take action as soon as possible, but in any event
within 60 days (including, if necessary, seeking shareholder approval to
authorize the issuance of additional shares of Common Stock) to increase the
Reserved Amount to 200% of the number of shares of Common Stock then issuable
upon conversion of the Convertible Preferred. The Common Stock issuable upon
conversion of the Convertible Preferred will be duly authorized, validly issued,
fully paid and nonassessable and the holders shall be entitled to all rights and
preferences accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) result in a violation
of the Company's Charter or By-Laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any federal, state, local or foreign law, rule, regulation, order, judgment or
decree (including Federal and state securities laws and
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regulations) applicable to the Company or any of its subsidiaries or by which
any property or assets of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect); provided that, for purposes of such
representation as to Federal, state, local or foreign law, rule or regulation,
no representation is made herein with respect to any of the same applicable
solely to the Investor and not to the Company. The business of the Company is
not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for violations which either singly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under Federal, state or local law, rule or regulation in the United
States to obtain any consent, authorization or order of, or make any filing
(other than the filing of the Certificate of Amendment with the Delaware
Secretary of State) or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Shares in accordance with the terms hereof
(other than any SEC, NASD, stock exchange or state securities filings which may
be required to be made by the Company subsequent to the Closing, and any
registration statement which may be filed pursuant hereto); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Investor herein.
(f) SEC Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company
has filed on a timely basis all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January 1, 1997 pursuant
to the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d), in addition to one or more registration
statements and amendments thereto heretofore filed by the Company with the SEC
under the Act since July 1, 1996 (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "SEC
Documents"). The Company has delivered or made available to the Investor true
and complete copies of the SEC Documents. The Company has not provided to the
Investor any information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Act or the Exchange Act as the
case may be and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a 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 financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be otherwise indicated in such financial
statements or the notes thereto) and fairly present in all material
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respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) No Material Adverse Change. Since the date through which
the most recent report of the Company on Form 10-K or Form 10-Q has been
prepared and filed with the SEC, a copy of which is included in the SEC
Documents, no Material Adverse Effect has occurred or exists with respect to the
Company or its subsidiaries.
(h) No Undisclosed Liabilities. The Company and its
subsidiaries have no material liabilities or obligations not disclosed in the
SEC Documents, other than those incurred in the ordinary course of the Company's
or its subsidiaries' respective businesses since the date of the most recently
filed SEC Documents which, individually or in the aggregate, do not or would not
have a Material Adverse Effect on the Company or its subsidiaries.
(i) No Undisclosed Events or Circumstances. To the best
knowledge of the Company, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
(j) Freely Tradeable Shares. The Shares issued hereunder are
freely tradeable without restrictions as to timing or amount or otherwise and
are unlegended (except as respects Delaware law concerning preferred stock).
5. Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Shares
pursuant hereto.
6. Entire Agreement, Amendment. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor Investor makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
7. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to
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such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
to the Company: Xxxxx X. Xxxxxxxxx
Senior Vice President
Telescan, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
with copies to: Xxxxx X. Xxxxxx
Xxxxx Xxxxxxx & Xxxx LLP
000 Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
to the Investor: At the address set forth at the foot of this
Agreement
Any party hereto may from time to time change its address for notices
by giving at least 10 days' written notice of such changed address to the other
party hereto.
8. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
9. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. The assignment by a party
to this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.
10. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
11. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of Texas without regard to
such state's principles of conflict of laws.
12. Survival. The representations and warranties of the Company and
Investor contained in Sections 3 and 4 and shall survive the Closing.
13. Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed signature page(s) to be physically delivered to the other party within
five days of the execution hereof.
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14. Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first written above.
TELESCAN, INC.
By:
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Name:
----------------------------------
Title:
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R(2) FUNDING, LTD.
By: Amalgamated Gadget, L.P., as
Investment Manager
By: Scepter Holdings, Inc., general
partner
By:
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Xxxxxxxx Xxxxxx, President
Address:
c/o Amalgamated Gadget, L.P.,
as Investment Manager
Attn: Xxxxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
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