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EXHIBIT 14
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SECURITIES PURCHASE AGREEMENT (this
"Agreement"), dated as of July 26, 2001,
among EXCHANGE APPLICATIONS, INC., a
Delaware corporation (the "Company"),
EXSTATIC SOFTWARE, INC. (f/k/a XXXX XXXXXXX,
INC.), a Washington corporation ("eXstatic"
and together with the Company, the
"Issuers"), and the purchasers (each a
"Purchaser" and together, the "Purchasers")
identified on the signature page hereto.
WHEREAS, the Issuers desire to sell to the Purchasers and the
Purchasers desire to purchase from the Issuers (i) U.S. $7,241,307.37 in
principal amount of the Issuers' 12% Senior Secured Convertible Debenture and
(ii) U.S. $5,000,000 in principal amount of the Issuers' 12% Senior Secured
Convertible Debenture, on the terms and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used and not otherwise defined in this
Agreement have the meaning ascribed to them below or in the other locations of
this Agreement specified below:
(a) "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person. As used in this definition, the term "control" (including, with
correlative meaning, the terms "controlling," "controlled by" and "under common
control with") as used with respect to any Person, means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting Securities, by
contract or otherwise.
(b) "Agreement" has the meaning ascribed to such term in the preamble.
(c) "April 16 Letter" means the letter agreement, dated April 16, 2001,
among the Company and the Purchasers.
(d) "April 16 Warrant Shares" means the shares of Common Stock issuable
upon exercise of the April 16 Warrant.
(e) "April 16 Warrant" means the Warrant, dated April 16, 2001, issued
by the Company to the Purchasers.
(f) "Audit Committee" means the committee of the Board Directors which
shall oversee all financial accounting and auditing activities of the Company
and shall perform such
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other functions as is customary for companies similar to the Company, including
approving the engagement of the Company's auditors and approving the audit prior
to its issuance each year
(g) "Automatic Affirmative Covenant" has the meaning ascribed to it in
Section 6.1(a).
(h) "Automatic Financial Covenant Amendment" has the meaning ascribed
to it in Section 6.1.
(i) "Board" has the meaning ascribed to it in Section 6.3(a)(i).
(j) "Bridge Note Debenture" has the meaning ascribed to it in Article
II.
(k) "Business" means the providing of marketing automation and
enterprise customer relationship management solutions by the Company and its
Subsidiaries.
(l) "Business Day" means each day except for Saturday, Sunday, Federal
holidays and any other state-recognized holidays in the States of New York and
Massachusetts.
(m) "By-laws" has the meaning ascribed to such term in Section 4.1.
(n) "Cash Debenture" has the meaning ascribed to it in Article II.
(o) "Certificate of Incorporation" has the meaning ascribed to such
term in Section 4.1.
(p) "Claim" means any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or other
proceeding.
(q) "Closing" has the meaning ascribed to such term in Section 3.1(a).
(r) "Collateral" has the meaning ascribed to it in the Security
Agreement.
(s) "Commission" means the United States Securities and Exchange
Commission.
(t) "Commission Filings" means all reports, registration statements and
other filings filed by the Company with the Commission (and all notes, exhibits
and schedules thereto and documents incorporated by reference therein).
(u) "Common Stock" means the common stock, $.001 par value per share,
of the Company.
(v) "Common Stock Equivalents" means all shares of Common Stock
outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all Securities of the Company that are convertible, exchangeable or
exercisable for share of Common Stock.
(w) "Company" has the meaning ascribed to such term in the preamble.
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(x) "Company Contracts" has the meaning ascribed to such term in
Section 4.9.
(y) "Contract" means any written or oral loan contract, agreement, or
credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase
order, instrument, permit, concession, franchise or license.
(z) "Convertible Debentures" has the meaning ascribed to it in Article
II.
(aa) "Convertible Debenture Representative" means Insight Venture
Associates IV, L.L.C. or any successor thereto approved by the Company (which
approval shall not be unreasonably withheld).
(bb) "Convertible Debenture Shares" means the shares of Common Stock
issuable upon conversion of the Convertible Debentures.
(cc) "Default" has the meaning ascribed to it in the Convertible
Debentures.
(dd) "EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization, each as determined in accordance with generally
accepted accounting principles.
(ee) "Encumbrances" means any liens, charges, encumbrances, claims,
options, proxies, pledges, security interests, or other similar rights of any
nature.
(ff) "Equipment" means all of the Company's present and hereafter
acquired machinery, molds, machine tools, motors, furniture, equipment
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs,
goods and other tangible personal property (other than Inventory) of every kind
and description used in Company's operations or owned by the Company and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
(gg) "Equity Incentive Plans" means the (i) 2000 Customer Analytics
Holdings, Inc. Equity Incentive Plan, (ii) 1999 Customer Analytics, Inc. Stock
Option and Purchase Plan, (iii) 1999 GBI Stock Acquisition Plan, (iv) 1999
Knowledge Stream Partners, Inc. Stock Option Plan, (v) 1998 Stock Incentive
Plan, (vi) 1998 Director Stock Option Plan, (vii) 1998 Employee Stock Purchase
Plan and (viii) 1996 Stock Incentive Plan, each as amended, and any other stock
option, issuance, appreciation rights or other equity incentive plan for the
directors, officers and employees of, and consultants to, the Company, which
plan has been approved by the Board or appropriate committee thereof.
(hh) "Event of Default" has the meaning ascribed to such term in the
Convertible Debentures.
(ii) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
(jj) "Excluded Securities" means (i) Securities issued or granted to
eligible officers, employees or directors of, or consultants to, the Corporation
pursuant to the Equity
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Incentive Plans and any Securities issued upon exercise of such Securities; (ii)
Securities issued upon the exercise, conversion or exchange of any Common Stock
Equivalents outstanding on the Closing Date, including, without limitation,
those Securities issued upon exercise of the April 16, Warrant and the June 1,
Warrant, or pursuant to the MicroStrategy Agreement; (iii) Securities issued as
a stock dividend or upon any stock split, recapitalization or other subdivision
or combination of Common Stock; (iv) Securities issued pursuant to acquisitions,
strategic alliances and joint ventures; and (v) Securities deemed Excluded
Securities by the Purchasers.
(kk) "eXstatic" has the meaning ascribed to it in the preamble.
(ll) "Financial Covenant" has the meaning ascribed to it in Section
6.1(a).
(mm) "Financing Documents" has the meaning ascribed to such term in
Section 4.3.
(nn) "Fourth Amended and Restated Registration Rights Agreement" has
the meaning ascribed to such term in Section 3.1(b)(iv).
(oo) "Fundamental Documents" means the documents by which any Person
(other than an individual) establishes its legal existence or which govern its
internal affairs. The "Fundamental Documents" of the Company are the Certificate
of Incorporation and the By-laws.
(pp) "GAAP" means United States generally accepted accounting
principles, consistently applied.
(qq) "Governmental Entity" means any federal, state, municipal, or
other government, governmental department, commission, board, bureau, agency or
instrumentality, or any court or tribunal.
(rr) "Guaranty" means any obligation, contingent or otherwise, or any
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of payment thereof, (iii) to purchase or otherwise pay for
merchandise, materials supplies, services or other property under an arrangement
which provides that payment for such merchandise, materials, supplies, services
or other property shall be made regardless of whether delivery of such
merchandise, materials, supplies, services or other property is ever made or
tendered, or (iv) to maintain the working capital, equity capital or other
financial statement condition of any primary obligor, provided, however, that
the term Guaranty shall not include endorsement of instruments for deposit and
collection in the ordinary course of business.
(ss) "Indebtedness" of a Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by (or which customarily would be evidenced by) bonds
debentures, notes or similar instruments, (iii) all reimbursement obligations of
such Person with respect to letters of credit and similar
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instruments, (iv) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by such
Person, (v) all obligations of such Person incurred, issued or assumed as the
deferred purchase price of property or services other than accounts payable
incurred and paid on terms customary in the business of such Person (it being
understood that "deferred purchase price" in connection with any purchase of
property or assets shall include only that portion of the purchase price which
shall be deferred beyond the date on which the purchase is actually
consummated), (vi) all obligations secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vii) all obligations of such
Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (viii)
all Guaranties by such Person of obligations of others, (x) all capitalized
lease obligations of such Person and (ix) the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer, but
only to the extent to which there is recourse to such Person for payment of such
Indebtedness.
(tt) "Issuers" has the meaning ascribed to it in the Preamble.
(uu) "June 1 Note" means the 12% Bridge Promissory Note, dated June 1,
2001, issued by the Company to the Purchasers.
(vv) "June 1 Warrant" means the Warrant, dated June 1, 2001, issued by
the Company to the Purchasers.
(ww) "June 1 Warrant Shares" means the shares of Common Stock issuable
upon the exercise of the June 1 Warrant.
(xx) "Law" means any constitution, law, statute, treaty, rule,
ordinance, permit, certificate, directive, requirement, regulation or Order (in
each case, whether foreign or domestic) of any Governmental Entity.
(yy) "Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
(zz) "Lien" means any security interest, pledge, lien, bailment (in the
nature of a pledge or for purposes of security), mortgage, deed of trust, the
grant of a power to confess judgment, conditional sale or title retention
agreement (including any lease in the nature thereof), charge, encumbrance,
easement, reservation, restriction, cloud, right of first refusal or first
offer, option, commitment or other similar arrangement or interest in real or
personal property, whether oral or written.
(aaa) "Liquidity Event" means (i) any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company or (ii) any
Sale of the Company.
(bbb) "Loss" means any loss, Liability, Claim, cost, damage,
deficiency, Tax, penalty, fine or expense, including interest, penalties,
reasonable legal and accounting fees and expenses and all amounts paid in
investigation, defense or settlement of any of the foregoing
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which any such party may suffer, sustain or become subject to, as a result of,
in connection with, relating or incidental to or by virtue of any indemnifiable
event or condition (including derivative actions brought through or in the name
of the Company).
(ccc) "Market Price" means, as to any Marketable Security, the average
of the closing prices of such Marketable Security's sales on all United States
securities exchanges on which such Security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such Security is not so listed, the average of the
representative bid and asked prices quoted on NASDAQ as of 4:00 P.M., New York
time, on such day, or, if on any day such security is not quoted on NASDAQ, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization, in each such case
averaged over a period of 5 Business Days ending immediately prior to the day as
of which "Market Price" is being determined.
(ddd) "Marketable Securities" means Securities that are traded on an
established United States securities exchange or reported through the NASDAQ, or
otherwise traded over-the-counter or traded on PORTAL (in the case of Securities
eligible for trading pursuant to Rule 144A under the Securities Act).
(eee) "Material Adverse Effect" means, with respect to the Company, a
material adverse effect on the business, operations, assets, conditions
(financial or otherwise), operating results, liabilities or prospects of the
Company and its Subsidiaries, taken as a whole.
(fff) "MicroStrategy Agreement" means the Payment and Registration
Rights Agreement, dated as of December 28, 1999, between the Company and
MicroStrategy Incorporated in effect on January 10, 2001 or as amended from time
to time.
(ggg) "Obligations" has the meaning ascribed to it in the Security
Agreement.
(hhh) "Offered Securities" has the meaning ascribed to it in Section
6.4(a).
(iii) "Orders" means judgments, writs, decrees, injunctions, orders,
compliance agreements or settlement agreements of or with any Governmental
Entity or arbitrator.
(jjj) "Person" shall be construed in the broadest sense and shall
include an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, and any other entity, including a Governmental
Entity.
(kkk) "Preemptive Offer Acceptance Notice" has the meaning ascribed to
it in Section 6.4.
(lll) "Preemptive Offer Period" has the meaning ascribed to it in
Section 6.4.
(mmm) "Proceeding" means any action, suit, proceeding, complaint,
charge, hearing, inquiry or investigation before or by a Governmental Entity or
an arbitrator or administrator.
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(nnn) "Projections" has the meaning ascribed to such term in Section
4.8.
(ooo) "Proposed New Investor" has the meaning ascribed to it in Section
6.4.
(ppp) "Purchaser Indemnified Persons" shall have the meaning ascribed
to it in Section 7.2.
(qqq) "Purchaser Representatives" shall have the meaning ascribed to it
in Section 7.2.
(rrr) "Purchasers" has the meaning ascribed to such term in the
preamble.
(sss) "Purchasers' Directors" has the meaning ascribed to it in Section
6.3.
(ttt) "Purchasers' Replacement Observers" has the meaning ascribed to
it in Section 6.3.
(uuu) "Refused Securities" has the meaning ascribed to it in Section
6.4.
(vvv) "Sale of the Company" means (i) the sale of all or substantially
all of the Company's assets, (ii) the issuance, sale or transfer of the
outstanding shares of capital stock or other voting securities of the Company,
or (iii) the merger or consolidation of the Company with another person or
entity, in each case in clauses (ii) and (iii) above under circumstances in
which the holders of the voting power of the outstanding shares of capital stock
and other voting securities of the Company, immediately prior to such
transaction, own less than 50% in voting power of the outstanding shares of
capital stock and other voting securities of the Company or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction. A sale (or multiple sales) of one or more subsidiaries of the
Company (whether by way of merger, consolidation, reorganization or sale of all
or substantially all of the assets or securities) which constitutes all or a
substantial portion of the consolidated assets or revenues of the Company shall
be deemed a Sale of the Company.
(www) "Series A Stock Certificates" means the certificates issued by
the Company to the Purchasers on January 10, 2001, representing shares of Series
A Preferred Stock.
(xxx) "Securities" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the Securities Act and includes such
Person's capital stock or other equity interests or any options, warrants or
other securities or rights that are directly or indirectly convertible into, or
exercisable or exchangeable for, such Person's capital stock or other equity
interests.
(yyy) "Securities Act" means the Securities Act of 1933, as amended.
(zzz) "Security Agreement" has the meaning ascribed to it in Section
3.1(b)(v).
(aaaa) "Series A Preferred Shares" means the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock.
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(bbbb) "Series A Preferred Stock" means the Series A Convertible
Redeemable Preferred Stock, $.001 par value per share, of the Company.
(cccc) "Subordination Agreement" has the meaning ascribed to such term
in Section 3.1(b)(vi).
(dddd) "Subsidiary" means, at any time, with respect to any Person (the
"Subject Person"), (i) any Person of which either (x) more than 50% of the
Securities entitled to vote in the election of directors or comparable Persons
performing similar functions (excluding Securities entitled to vote only upon
the failure to pay dividends thereon or other contingencies) or (y) more than a
50% interest in the profits or capital of such Person, are at the time owned or
controlled directly or indirectly by the Subject Person or through one or more
Subsidiaries of the Subject Person or (ii) any Person whose assets, or portions
thereof, are consolidated with the net earnings of the Subject Person and are
recorded on the books of the Subject Person for financial reporting purposes in
accordance with GAAP.
(eeee) "Subsidiary Board" has the meaning ascribed to it in Section
6.3.
(ffff) "Subject Person" has the meaning ascribed to such term in the
definition of "Subsidiary".
(gggg) "SVB" shall mean Silicon Valley Bank.
(hhhh) "SVB Facility" shall mean the Loan and Security Agreement, dated
April 25, 2001, among the Issuers and SVB.
(iiii) "Trading Day" means any day on which securities are traded on
National Association of Securities Dealers, Inc.'s Automated Quotation System.
(jjjj) "Wire Amount" has the meaning ascribed to such term in Article
II.
1.2 RULES OF CONSTRUCTION.
The term "this Agreement" means this agreement together with all schedules
and exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. In this Agreement,
the term "Best Knowledge" of the Company means actual knowledge of the executive
officers of the Company, including Xxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxx Xxxxxxxxxx
and Xxxx Xxxxxxx, after making reasonable inquiry of the matters in question.
The use in this Agreement of the term "including" means "including, without
limitation." The words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole, including the schedules and
exhibits, as the same may from time to time be amended, modified, supplemented
or restated, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to sections,
schedules and exhibits mean the sections of this Agreement and the schedules and
exhibits attached to this Agreement, except where otherwise stated. The title of
and the section and paragraph headings in this Agreement are for convenience of
reference only and shall not govern or affect the interpretation of any of the
terms or provisions of this Agreement. The use herein of the masculine, feminine
or neuter forms shall also denote the
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other forms, as in each case the context may require or permit. Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Unless expressly provided otherwise, the measure of a period of one month
or year for purposes of this Agreement shall be that date of the following month
or year corresponding to the starting date, provided that if no corresponding
date exists, the measure shall be that date of the following month or year
corresponding to the next day following the starting date. For example, one
month following February 18 is March 18, and one month following March 31 is May
1.
ARTICLE II
PURCHASE AND SALE OF THE CONVERTIBLE DEBENTURES
2.1 CONVERTIBLE DEBENTURES.
(a) Issuance of the Convertible Debentures. At the Closing, and subject
to the terms and conditions contained in this Agreement, (i) the Issuers shall
issue, sell and deliver to the Purchasers: (A) a 12% Convertible Debenture in
the aggregate principal amount of U.S. $7,241,307.37, substantially in the form
of Exhibit A (the "Bridge Note Debenture") and (B) a 12% Convertible Debenture
in the aggregate principal amount of U.S. $5,000,000, substantially in the form
of Exhibit B (the "Cash Debenture" together with the Bridge Note Debenture, the
"Convertible Debentures") and (ii) the Purchasers (A) acting as a group, shall
surrender to the Issuers the June 1 Note (which surrender shall terminate all
obligations under the June 1 Note and the Purchasers shall xxxx the June 1 Note
"Cancelled" or "Paid in Full") and (B) shall pay to the Issuers the wire amount
set forth opposite each Purchaser's name on Schedule I hereto (collectively, the
"Wire Amount"). The cancellation of the obligations of the Company under the
June 1 Note and the payment of Wire Amount shall together constitute full
payment of the purchase price for the Bridge Note Debenture and the Cash
Debenture, respectively. Each Issuer shall be jointly and severally liable for
all of the monetary and other obligations of the Issuers under this Agreement
and each other Financing Document.
(b) Use of Proceeds. The Issuers shall use the Cash Amount from the
sale of the Convertible Debentures for the Company's working capital and general
corporate purposes.
ARTICLE III
THE CLOSING; DELIVERY OF DOCUMENTS AT THE CLOSING
3.1 THE CLOSING.
(a) The closing (the "Closing") shall take place simultaneously with
the execution and delivery of this Agreement at the offices of X'Xxxxxxxx LLP,
00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
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(b) The obligation of each Purchaser to purchase and pay for the
Convertible Debentures to be purchased hereunder at the Closing is subject to
the delivery by the Issuer of the following items (unless waived by such
Purchaser):
(i) the Convertible Debentures, which Convertible Debentures
shall have been duly authorized, executed and delivered by the Issuer
and shall be in full force and effect and enforceable against the
Issuer in accordance with their terms;
(ii) evidence satisfactory to the Purchasers that the Company
has reserved the Convertible Debenture Shares for issuance upon
conversion of the Convertible Debentures;
(iii) the favorable opinion of Xxxxxxx Xxxx LLP, counsel to
the Company, addressed to the Purchasers, dated as of the Closing, in
substantially the form attached hereto as Exhibit C;
(iv) the Fourth Amended and Restated Registration Rights
Agreement in substantially the form attached hereto as Exhibit D (the
"Fourth Amended and Restated Registration Rights Agreement"), which
Fourth Amended and Restated Registration Rights Agreement shall have
been duly authorized, executed and delivered by the Company and shall
be in full force and effect and enforceable against the Company in
accordance with its terms;
(v) the Security Agreement in substantially the form attached
hereto as Exhibit E (the "Security Agreement"), which Security
Agreement shall have been duly authorized, executed and delivered by
the Company and shall be in full force and effect and enforceable
against the Company in accordance with its terms;
(vi) the Subordination Agreement in substantially the form
attached hereto as Exhibit F (the "Subordination Agreement"), which
Security Agreement shall have been duly authorized, executed and
delivered by SVB and shall be in full force and effect and enforceable
against SVB in accordance with its terms;
(vii) all consents, approvals, authorizations, filings and
notices required to consummate the transactions contemplated hereby
shall have been obtained, made or given and shall be in full force and
effect, including, without limitation, the (A) consent of SVB and the
confirmation of SVB that the Company shall be able to borrow additional
funds pursuant to the terms of the SVB Facility (which consent and
confirmation shall be contained in the Subordination Agreement) and (B)
consent and authorization of the NASD;
(viii) evidence reasonably satisfactory to the Purchasers that
the Company has made arrangements to provide notice to the Company's
shareholders pursuant to NASD Rule 4350(i)(2);
(ix) receipt of revised cash flow budget through December 31,
2001, acceptable to the Purchasers;
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(x) evidence satisfactory to the Purchasers of the filings of
all UCC-1 Financing Statements and any other required security interest
filings, which Financing Statements and other filings provide the
Purchasers with a perfected security interest in the Collateral (as
defined in the Security Agreement);
(xi) a certificate of the Secretary or an Assistant Secretary
of the Company, dated as of the Closing and certifying on behalf of the
Company: (A) that attached thereto is a true, correct and complete copy
of each of the Fundamental Documents of the Company as in effect on the
date of such certification; (B) that attached thereto is a true,
correct and complete copy of all resolutions adopted by the Board of
Directors (and any committees thereof) of the Company authorizing (1)
the execution, delivery and performance of the Financing Documents, (2)
the issuance, sale and delivery of the Convertible Debentures, and (3)
the reservation of the Convertible Debenture Shares for issuance upon
conversion of the Convertible Debentures, and that all such resolutions
in (1), (2) and (3), are in full force and effect; and (C) the
incumbency and specimen signature of all officers of the Company
executing the Financing Documents, and any certificate or instrument
furnished pursuant hereto;
(xii) a certification by another officer of the Company as to
the incumbency and signature of the officer signing the certificate
referred to in clause (xi);
(xiii) a duly authorized, executed and delivered copy of each
of the other Financing Documents, if any, which shall be in full force
and effect and shall be enforceable against the Issuer or the Company,
as the case may be, and such parties in accordance with their
respective terms;
(xiv) a telegram, telex or other acceptable method of
confirmation from the Secretaries of State of the States of Delaware
and Massachusetts dated on the Closing as to the continued good
standing of the Company and from the Secretaries of State of the State
of Washington as to the due incorporation and good standing of
eXstatic, as applicable; and
(xv) such additional supporting documents and other
information with respect to the operations and affairs of the Company
and its Subsidiaries as the Purchasers may reasonably request.
(c) The obligation of the Issuers to issue, deliver and sell the
Convertible Debentures at the Closing is subject to the delivery by the
Purchasers of the following items (unless waived by the Company):
(i) a duly authorized, executed and delivered copy of each of
the other Financing Documents which shall be in full force and effect
and shall be enforceable against the Purchasers and such parties in
accordance with their respective terms;
(ii) the Purchasers shall surrender to the Company the June 1
Note;
(iii) each Purchaser shall deliver or cause to be delivered to
the Company by wire transfer of immediately available funds the Wire
Amount set forth opposite such
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Purchaser's name on Schedule I hereto to such bank account as the
Issuers shall designate to each Purchaser in writing on or prior to the
day immediately preceding the Closing;
(iv) all consents, approvals, authorizations, filings and
notices required to consummate the transactions contemplated hereby
shall have been obtained, made or given and shall be in full force and
effect, including, without limitation, the (A) consent of SVB and (B)
consent and authorization of the NASD; and
(v) evidence reasonably satisfactory to the Issuers that the
Company has made arrangements to provide notice to the Company's
shareholders pursuant to NASD Rule 4350(i)(2);
(d) The Convertible Debentures do not constitute a revolving loan and
any amounts repaid or prepaid under the Convertible Debentures may not be
reborrowed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each Issuer hereby represents and warrants to each of the Purchasers as
follows:
4.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
Each of the Company and its Subsidiaries is duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation and has all requisite corporate or other power and
authority to own, lease and operate its properties and other assets and to carry
on its business as presently conducted and as proposed to be conducted. Each of
the Company and its Subsidiaries is duly qualified and in good standing to
transact business as a foreign Person in those jurisdictions listed on Schedule
4.1, which constitute all the jurisdictions in which the character of the
property owned, leased or operated by the Company or such Subsidiary or the
nature of the activities conducted by the Company or such Subsidiary makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. eXstatic is a wholly owned subsidiary of the
Company. The Company has delivered to the Purchasers a correct and complete copy
of the Amended and Restated Certificate of Incorporation of the Company in
effect on the date hereof (the "Certificate of Incorporation"). A copy of the
Amended and Restated By-laws of the Company in effect on the date hereof (the
"By-laws") is filed as an exhibit to the Commission Filings.
4.2 CAPITALIZATION.
(a) Immediately upon consummation of the Closing, the authorized,
issued and outstanding capital stock of the Company shall consist of:
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(i) 10,000,000 shares of Preferred Stock, of which 5,330,000
are designated as Series A Preferred Stock and 5,325,645 are validly
issued and outstanding, fully paid and nonassessable; and
(ii) 150,000,000 shares of Common Stock, of which:
(A) 34,052,921 shares are validly issued and
outstanding, fully paid and nonassessable;
(B) 6,488,781 shares shall be reserved for issuance
upon conversion of the Series A Preferred Stock;
(C) 29,003,860 shares are reserved as Convertible
Debenture Shares for issuance upon conversion of the
Convertible Debentures;
(D) 1,363,672 shares are reserved as Replacement
Warrant Shares for issuance upon exercise of the Replacement
Warrant
(E) 1,519,091 shares are reserved as April 16 Warrant
Shares for issuance upon exercise of the April 16 Warrant;
(F) 366,565 shares are reserved as treasury shares;
and
(G) 11,890,285 shares are reserved for issuance in
accordance with the Equity Incentive Plans.
(b) Except as contemplated by the Financing Documents or as otherwise
set forth on Schedule 4.2, there are, and immediately after consummation of the
Closing there will be, no (i) outstanding warrants, options, agreements,
convertible Securities or other commitments or instruments pursuant to which the
Company is obligated to issue, sell or otherwise transfer any Securities or (ii)
preemptive or similar rights to purchase or otherwise acquire Securities of the
Company pursuant to any provision of Law, the Company's Fundamental Documents or
any Contract to which the Company is a party.
(c) All Securities issued by the Issuers have been issued in
transactions in accordance in all material respects with applicable state and
federal Laws governing the sale and purchase of Securities.
(d) The authorization, reservation, issuance, sale and delivery, as
applicable, of the Convertible Debenture Shares, the June 1 Warrant Shares, the
April 16 Warrant Shares and the Series A Preferred Shares have been duly and
validly authorized by all requisite corporate action on the part of the Company
and eXstatic, as the case may be. The Convertible Debenture Shares, June 1
Warrant Shares, the April 16 Warrant Shares and the Series A Preferred Shares
(assuming the issuance thereof in accordance with the applicable terms of the
Convertible Debenture, the June 1 Warrant, the April 16 Warrant Shares and the
Series A Preferred Shares, respectively), will be duly and validly issued and
outstanding, fully paid and nonassessable, with no personal liability attaching
to the ownership thereof, free and clear of any Encumbrances whatsoever and with
no restrictions on the voting rights thereof and not subject to any
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preemptive rights, rights of first refusal or other similar rights of the
stockholders of the Company and eXstatic, as the case may be.
4.3 AUTHORIZATION OF AGREEMENT, ETC.
Each Issuer, as the case may be, has or had, as the case may be, all
requisite corporate power and authority to execute and deliver this Agreement,
the Convertible Debentures, the Fourth Amended and Restated Registration Rights
Agreement and the Security Agreement and any and all instruments necessary or
appropriate in order to effectuate fully the terms and conditions of each such
agreement and all related transactions (collectively, the "Financing Documents")
and to perform its obligations under and to consummate the transactions
contemplated by each such Financing Document. The execution, delivery and
performance by each Issuer, as the case may be, of each Financing Document to
which it is a party and the issuance, sale and delivery of the Convertible
Debentures has been duly authorized by all requisite corporate action by each
Issuer, as the case may be, and this Agreement and each other Financing Document
has been duly executed and delivered by each Issuer, as the case may be. No
other corporate or stockholder action on the part of any Issuer, as the case may
be, is necessary for such authorization, execution and delivery. Each of the
Financing Documents constitutes a legal, valid and binding obligation of each
Issuer, as the case may be, enforceable against each Issuer, as the case may be,
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar Laws
affecting creditors' rights and remedies generally, and subject, in the case of
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a Proceeding at law or in equity).
4.4 NO CONFLICTS.
Except as otherwise disclosed on Schedule 4.4, the execution, delivery and
performance by each Issuer, as the case may be, of this Agreement and each of
the other Financing Documents, the issuance, sale and delivery of the
Convertible Debentures and compliance with the provisions hereof and thereof by
such Issuer, does not or will not, as the case may be, (a) violate any provision
of Law or any Order applicable to any Issuer or any of its properties or assets
or (b) conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
or result in the creation of, any Encumbrance upon any of the properties or
assets of the Issuer or, except as previously disclosed in writing to the
Purchasers, any material Contract to which it is a party or (c) conflict with or
violate any provision of the Fundamental Documents of any Issuer currently in
effect.
4.5 APPROVALS.
No permit, authorization, consent or approval of or by, or any
notification of or filing with, any Person is required in connection with the
execution, delivery or performance by each Issuer, as the case may be, of each
Financing Document to which it is a party.
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4.6 COMMISSION FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all Commission Filings that it has been
required to file with the Commission under the Securities Act and the Exchange
Act. As of the respective dates of their filing with the Commission, or the date
of any amendment thereto filed on or prior to the date hereof, the Commission
Filings complied as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.
(b) Each of the historical consolidated financial statements of the
Company (including any related notes or schedules) included in the Commission
Filings was prepared in accordance with GAAP (except as may be disclosed
therein), and complied in all material respects with the rules and regulations
of the Commission. Such financial statements fairly present in all material
respects the consolidated financial position of the Company and its Subsidiaries
as of the dates thereof and the consolidated results of operations, cash flows
and changes in stockholders' equity for the periods then ended (subject, in the
case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments). Except as set forth or reflected in the Commission
Filings filed prior to the date hereof or as set forth on Schedule 4.6, neither
the Company nor any of its Subsidiaries have any liabilities or obligations of
any nature (whether accrued, absolute, contingent, unasserted or otherwise) that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
4.7 PRIVATE OFFERING.
Assuming the accuracy of the representations of the Purchasers in Section
5.2, the offering, sale, issuance and delivery by the Issuers of the Convertible
Debentures are exempt from the registration and prospectus delivery requirements
of the Securities Act and applicable state securities laws and the rules and
regulations promulgated thereunder. Neither the Company or its Subsidiaries, nor
any Person acting on their behalf, has offered or sold or will offer or sell any
Securities, or has taken or will take any other action (including, without
limitation, any offering of any Securities of the Company under circumstances
that would require, under the Securities Act or any applicable blue-sky laws,
the integration of such offering with the transactions contemplated by this
Agreement), which would subject the transactions contemplated by this Agreement
to the registration provisions of the Securities Act.
4.8 PROVIDED INFORMATION.
All written summaries provided by the Company to legal counsel for the
Purchasers on or about December 26, 2000, with regard to the events leading up
to the Company's press releases of September 29, 2000, and October 2, 2000, are
accurate in all material respects and do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements are made. The financial projections concerning the Company
and its Subsidiaries contained in the most recent version of the "revised street
plan" projections delivered to the Board of Directors (the "Projections") were
at the time they were made available
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to the Board of Directors prepared on a basis reflecting the reasonable good
faith estimates and judgments of the Company's management as to the future
financial performance of the Company and its Subsidiaries for the periods
covered thereby. The Projections are specifically and expressly limited and
qualified by underlying written assumptions disclosed therein.
4.9 CERTAIN CONTRACTS.
All material Contracts to which the Company or any of its Subsidiaries is
a party or may be bound that are required by Item 610(b)(10) of Regulation S-K
to be filed as exhibits to, or incorporated by reference in, the Company's Form
10-K or the Company's Form 10-Q are referred to herein as "Company Contracts".
All Company Contracts are legal, valid and binding and in full force and effect
on the date hereof except to the extent previously disclosed in writing to the
Purchasers, to the extent they have previously expired in accordance with their
terms or to the extent such failure to be so legal, valid and binding would not
reasonably be expected to have a Material Adverse Effect and, except as set
forth on Schedule 4.9, neither the Company nor any of its Subsidiaries has
violated any provision of, or committed or failed to perform any act that, with
or without notice, lapse of time, or both, would constitute a default under the
provisions of any Company Contract, except as previously disclosed in writing to
the Purchasers or for defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
4.10 INTELLECTUAL PROPERTY RIGHTS.
(a) To the Company's Best Knowledge, each of the Company and its
Subsidiaries owns or is licensed to use all trademarks, copyrights, service
marks, and applications and registrations therefor, and all trade names, domain
names, web sites, customer lists, trade secrets, proprietary processes and
formulae, inventions, know-how, other confidential and proprietary information,
and other industrial and intellectual property rights necessary to permit each
of the Company and its Subsidiaries to carry on its business as presently
conducted. To the Company's Best Knowledge, each of the Company and its
Subsidiaries has the right to bring infringement actions with respect to all
trademarks, copyrights, service marks, trade names, domain names, trade secrets,
proprietary processes and formulae, inventions, know how and other confidential
and proprietary information that it owns. Except as otherwise disclosed in
Schedule 4.10, all registered patents, copyrights, trademarks, and service marks
owned by the Company and its Subsidiaries are in full force and effect and are
not subject to any taxes or maintenance fees. Except as otherwise disclosed in
Schedule 4.10, there is no pending or, to the Best Knowledge of the Company,
threatened Claim or litigation against the Company or any Subsidiary contesting
the right to use its intellectual property rights, asserting the material misuse
of any thereof, or asserting the material infringement or other material
violation of any intellectual property right of a third party. All inventions
and know-how conceived by employees of the Company or its Subsidiaries and used
by the Company and its Subsidiaries in the business of the Company and its
Subsidiaries as currently conducted are owned by the Company or its
Subsidiaries. Except as disclosed on Schedule 4.10, each of the Company and its
Subsidiaries has taken reasonable security measures to protect the secrecy,
confidentiality, and value of its trade secrets, proprietary processes,
formulae, inventions, know-how and other confidential and proprietary
information.
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(b) Except as otherwise disclosed in Schedule 4.11, no Proceedings or
Claims in which the Company or any Subsidiary alleges that any Person is
materially infringing upon, or otherwise materially violating, any patents,
trademarks, copyrights, service marks, and applications and registrations
therefor are pending, and none have been served by, instituted or asserted by
the Company or any Subsidiary, nor are any Proceedings or Claims threatened
alleging any such material violation or material infringement, nor does the
Company or any Subsidiary know of any valid basis for any such Proceedings or
Claims.
4.11 LITIGATION OTHER PROCEEDINGS OR CLAIMS.
Except as set forth on Schedule 4.11, there are no (i) Proceedings or
Claims pending against or initiated by the Company or any Subsidiary or, to the
best knowledge of the Company, threatened against the Company or any Subsidiary,
whether at law or in equity, whether civil or criminal in nature, except for
Proceedings or Claims that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, or (ii) material
Orders with respect to the Company or any Subsidiary.
4.12 TERMINATION OF EMPLOYMENT.
To the Company's Best Knowledge, except as set forth on Schedule 4.12 no
executive officer or key employee, or any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any officer, key employee or group of key employees.
4.13 BROKERS.
Neither the Company nor any of its Subsidiaries have employed or otherwise
retained any broker or finder in connection with the transactions contemplated
by this Agreement.
4.14 REGISTRATION RIGHTS.
Except as contemplated by the Fourth Amended and Restated Registration
Rights Agreement and except as set forth on Schedule 4.14, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any shares of Common Stock or any other Securities of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as follows:
5.1 AUTHORIZATION OF THE FINANCING DOCUMENTS.
Each Purchaser has the requisite power and authority (corporate or
otherwise) to execute, deliver and perform the Financing Documents to which it
is a party and the transactions contemplated thereby, and the execution,
delivery and performance by such Purchaser of the Financing Documents to which
it is a party have been duly authorized by all requisite action by
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such Purchaser and each such Financing Document, when executed and delivered by
such Purchaser, constitutes a legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar Laws affecting creditors' rights and
remedies generally, and subject, in the case of enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
Proceeding at law or in equity).
5.2 INVESTMENT REPRESENTATIONS.
(a) The Convertible Debentures to be purchased by each Purchaser
hereunder are acquired for its own account, for investment and not with a view
to the distribution thereof in violation of the Securities Act or applicable
foreign or state securities Laws.
(b) Each Purchaser understands that (i) the Convertible Debentures have
not been, and the Securities issuable upon conversion or exercise thereof will
not be, registered under the Securities Act or applicable foreign or state
securities Laws, by reason of their issuance by the Company in a transaction
exempt from the registration requirements of the Securities Act and applicable
foreign and state securities Laws and (ii) the Convertible Debentures, and the
Securities issuable upon conversion or exercise thereof, must be held by the
Purchasers or each Purchaser, as the case may be, indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable foreign and state securities Laws or is exempt from registration
thereof. Each Purchaser is an "accredited investor" (as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act).
(c) Except for the acquisition of the Securities of the Company
pursuant to the Note Purchase Agreement, dated December 15, 2000, the Securities
Purchase Agreement, dated January 10, 2001, the Securities Purchase Agreement,
dated February 20, 2001, the Securities Purchase Agreement, dated March 28,
2001, the April 16 Letter and the Securities Purchase Agreement, dated June 1,
2001, each such agreement by and among the Company and the Purchasers, and for
the transactions contemplated hereby, no Purchaser or any affiliate has (i)
bought or sold Securities, or options to buy or sell Securities, of the Company,
(ii) requested, instructed or knowingly participated in a plan or arrangement
with another Person to buy or sell Securities, or options to buy or sell
Securities, of the Company, at any time during the period commencing on October
15, 2000, and ending on (and including) the Closing.
(d) None of the Purchasers have employed or otherwise retained any
broker or finder in connection with the transactions contemplated by this
Agreement.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 AMENDMENTS TO DEBT DOCUMENTS.
(a) Neither the Company nor any of its Subsidiaries shall or shall
permit any change, amendment, supplement or other modification of any terms of
the SVB Facility or related documents, without the prior consent of the
Purchasers, if the effect of such change,
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amendment, supplement or other modification (or renewal, refinancing, refunding
or extension) is to:
(i) increase any applicable margin with respect to the interest rate
in effect on the extensions of credit under the SVB Facility by more than
a rate equal to 2% per annum from those provided for in the SVB Facility
as in effect on the date hereof, or otherwise change the basis for the
calculation of the interest rate thereunder if such change has the effect
of increasing the interest rate charged thereunder by more than 2% per
annum from those provided for in the SVB Facility as in effect on the date
hereof (provided, that nothing herein shall preclude the imposition of a
post-default rate of interest in the amount and under the circumstances
provided in the SVB Facility as in effect on the date hereof);
(ii) shorten or extend the scheduled maturity of any payment of any
principal amount of the revolving loans under the SVB Facility from the
scheduled maturity thereof as in effect on the date hereof, except
extending the payment schedule of such revolving loans so long as the
final maturity on such loans shall fall on or before 180 days prior to the
maturity date (provided, that nothing herein shall preclude the Issuers
from reducing the amount of commitments under the SVB Facility);
(iii) add any additional defaults or events of default under the SVB
Facility or permit any modifications to the terms of any defaults or
events of default under the SVB Facility except for any modifications to
make such terms less restrictive on the Issuers and their Subsidiaries);
(iv) make any numerically based restriction in any one or more of
the financial covenants under the SVB Facility (or related documents) as
in effect on the date hereof more restrictive on the Issuers and their
Subsidiaries by more than 10%; provided, that, an amendment to a
numerically based restriction in a financial covenant in the SVB Facility
shall result in an automatic equal percentage amendment (an "AUTOMATIC
FINANCIAL COVENANT AMENDMENT") in the corresponding financial covenant (if
any) in the Financing Documents (and the Issuers agree to execute and
deliver promptly thereafter an amendment thereto that incorporates each
such Automatic Financial Covenant Amendment);
(v) add any financial covenant to the SVB Facility; or
(vi) except in connection with waiving any violation of the SVB
Facility or modifying any covenant to eliminate any violation of the SVB
Facility, add any negative covenant.
For purposes of this Section 6.1, the term "FINANCIAL COVENANT" means any
covenant, for which the compliance or noncompliance therewith is based on the
financial performance or financial condition of a Person. Notwithstanding
anything to the contrary contained in this Section 6.1, if an amendment to the
SVB Facility results in the modification or addition of an affirmative covenant,
then such amendment shall result in an automatic amendment to this Agreement,
subject to the consent of the Purchasers (an "AUTOMATIC AFFIRMATIVE COVENANT
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AMENDMENT") modifying or adding, as the case may be, such affirmative covenant
to this Agreement (and the Issuer agrees to execute and deliver promptly
thereafter an amendment hereto that incorporates each such Automatic Affirmative
Covenant Amendment).
6.2 INFORMATION RIGHTS.
(a) Reports. For so long as the Convertible Debentures remain
outstanding, the Company shall furnish to the following Purchasers:
(i) Weekly Statements. As soon as available, but no later than
Wednesday after the end of each week, an unaudited internal financial
report of the Company, which report shall be prepared in a manner
consistent with GAAP consistently applied, and otherwise in the form
provided to the Company's senior management, and which shall consist of
cash flow analysis for such weekly accounting period together with a
cumulative cash flow statement from the first day of the current year to
the last day of such weekly accounting period;
(ii) Monthly Statements. As soon as available, but no later than 20
days after the end of each monthly accounting period, an unaudited
internal financial report of the Company, which report shall be prepared
in a manner consistent with GAAP consistently applied, and otherwise in
the form provided to the Company's senior management, and which shall
include the following:
(A) profit and loss statement for such monthly accounting
period, together with a cumulative profit and loss statement for the
prior twelve-month period and for the comparable twelve-month period
for the prior year;
(B) balance sheet as at the last day of such monthly
accounting period;
(C) cash flow analysis for such monthly accounting period
together with a cumulative cash flow statement from the first day of
the current year to the last day of such monthly accounting period;
(D) comparison between all of the actual figures provided
pursuant to clauses (1), (2) and (3) above (including, in the cases
of clauses (1) and (2), the cumulative statements), for such monthly
accounting period and the comparable figures for the prior year for
such monthly accounting period, with an explanation of any material
differences between them and compared to the budget for such period;
and
(E) a report by management of the Company of the operating and
financial highlights of the Company for such monthly accounting
period and the cumulative period for the fiscal year to date which
shall include a comparison between operating and financial results
and the corresponding plan or budget and a discussion of the
variances between current and prior periods.
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The reports furnished by the Company pursuant to clauses (1) and (5)
of the preceding sentence shall be certified by the chief financial
officer of the Company.
(iii) Quarterly Report. As soon as available, but no later than 45
days after the end of each calendar quarter, in addition to the financial
statements for the three prior monthly accounting periods, the Company
shall complete a quarterly report, which quarterly report shall be
certified by the chief financial officer of the Company.
(iv) Annual Audit. As soon as available, but not later than 90 days
after the end of each fiscal year of the Company, audited financial
statements of the Company, which shall include a statement of cash flows
and statement of operations for such fiscal year and a balance sheet as at
the last day thereof, each prepared in accordance with GAAP (except as set
forth in the notes thereto), and accompanied by the report of a firm of
independent certified public accountants of nationally recognized standing
selected by the Audit Committee (the "Accountants").
(v) Budget. Within 30 days after the end of each fiscal year of the
Company, an annual updated consolidated budget and work plan, including
projected income statements, balance sheets and cash flow statements
(setting forth in detail the assumptions therefor) on a quarterly basis
for the Company and its Subsidiaries for the immediately following fiscal
year of the Company, which such budget and work plan shall be approved by
the Board and the Purchasers at the first regularly scheduled meeting of
the Board of the Company thereafter.
(vi) Subsidiaries. If for any period the Company shall have any
Subsidiary or Subsidiaries whose accounts are consolidated with those of
the Company, then in respect of such period the financial statements
delivered pursuant to the foregoing clauses shall be consolidated (and
consolidating if normally prepared by the Company) financial statements of
the Company and all such consolidated Subsidiaries.
(vii) Accountants Reports. Promptly upon becoming available, copies
of all reports prepared for or delivered to the management of the Company
by the Accountants.
(viii) Security Holders Reports. Promptly upon becoming available,
copies of all reports prepared for or delivered to the Company's lenders
or other security holders.
(ix) Material Events. Promptly upon becoming aware of a Liquidity
Event or any other condition or event that could reasonably be expected to
have a Material Adverse Effect on the Company (including any material
defaults, litigation, governmental inquiry, or discovery of a significant
liability but excluding general market conditions), (1) a report
summarizing such condition or event and the Company's proposed response
thereto (2) have the right to retain counsel to represent the Purchasers
(and such counsels' reasonable fees and expenses shall be paid directly by
(or reimbursed by) the Company and (3) be afforded time to review and
comment on any agreements relating thereto.
(x) Miscellaneous. Promptly upon request, any other documentation or
information reasonably requested by any Purchaser.
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(xi) Access to Records and Properties. For so long as the
Convertible Debentures remains outstanding, the Company shall afford to
each Purchaser and its Representatives, during normal business hours upon
3 Business Days advance notice, the right to (i) visit and inspect the
assets and properties of the Company, (ii) examine upon reasonable advance
notice, the books of accounts and records of the Company and (iii) make
copies of such records and permit such Persons to discuss all aspects of
the Company with any officers, employees or Accountants of the Company;
provided, however, that such investigation shall not unreasonably
interfere with the operations of the Company. The Company will instruct
the Accountants to discuss such aspects of the financial condition of the
Company with each Purchaser and its Representatives as may reasonably
request, and to permit each Purchaser and its Representatives to inspect,
copy and make extracts from such financial statements, analyses, work
papers and other documents and information (including electronically
stored documents and information) prepared by the Accountants with respect
to the Company as may reasonably request. All costs and expenses incurred
by each Purchaser and its Representatives in connection with exercising
such rights of access shall be borne by each Purchaser, and all
out-of-pocket costs and expenses incurred by the Company in complying with
any extraordinary requests by each Purchaser and its Representatives in
connection with exercising such access rights shall be borne by each
Purchaser.
(xii) Confidential Information. Each Purchaser and its
Representatives shall hold in confidence all nonpublic information of the
Company provided or made available to such Purchaser and its
Representatives pursuant to this Section 6.1 until such time as such
information has become publicly available other than as a consequence of
any breach by such Purchaser and its Representatives of its
confidentiality obligations hereunder (provided that such information may
be disclosed to any other Purchaser and Representatives who are bound by
this provision) and shall not (A) trade or otherwise directly or
indirectly transfer any Securities of the Company in violation of the
Securities Act or Exchange Act or (B) use such information for any purpose
other than exercise of its rights as a holder of Securities and its rights
under this Agreement and the Related Documents.
6.3 BOARD OF DIRECTORS; OBSERVATION RIGHTS.
(a) Board of Directors.
(i) The number of directors constituting the Board of Directors of
the Company (the "Board") and the Board of Directors of each Subsidiary
(each, a "Subsidiary Board"), as fixed from time to time by the Board of
Directors of the Company or any Subsidiary in accordance with the
Company's or each Subsidiary's By-laws, shall be five. At the option of
the Purchasers at anytime, the Company shall use its best efforts to cause
two individuals appointed by the Purchasers to be nominated and elected to
the Board and each Subsidiary Board, and any committee thereof (the
"Purchasers' Directors"). The Purchasers' Directors shall be removed
without cause only by the Purchasers.
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(ii) The provisions of clause (i) notwithstanding, at any time and
from time to time, the Purchasers shall have the right to remove any or
both of Purchasers' Directors from the Board and each Subsidiary Board
and, in such case, the Purchasers shall be entitled to appoint an observer
or observers (in addition to the Purchaser's Current Observers (as
hereinafter defined)) to serve as an observer or observers at all meetings
of the Board and each Subsidiary Board, and any committees thereof (the
"Purchasers' Replacement Observers"). The Purchasers' Replacement
Observers shall have all of the rights of the Purchasers' Current
Observers (as hereinafter defined). At the election of the Purchasers at
any time and from time to time, the Company shall use its best efforts to
cause the Purchasers' Replacement Observers, or, at the Purchasers'
option, individuals appointed by the Purchasers in place of the
Purchasers' Replacement Observers, to again be nominated and elected to
the Board and each Subsidiary Board, and any committee thereof. The
Purchasers shall not be entitled to appoint more than two individuals to
the Board or each Subsidiary Board, or any committee thereof, as a result
of this clause (ii). Such procedure shall be repeated at any time and from
time to time at the option of the Purchasers.
(iii) The Company shall pay, or reimburse, the Purchasers' Directors
or the Purchasers' Replacement Observers, as the case may be, for all
travel and related expenses incurred by the Purchasers' Directors, or the
Purchasers' Replacement Observers, as the case may be, in connection with
attending such meetings and monitoring the Purchasers' investment in the
Convertible Debentures. The Company shall also pay for, or reimburse, the
Purchasers for the travel and related expenses incurred by any advisors of
the Purchasers' Directors or the Purchasers' Replacement Observers, as the
case may be, in connection with such matters.
(iv) The Company and each Subsidiary shall maintain directors' and
officers' insurance policies from an insurance company rated "A" or above
by A.M. Best and otherwise in form and substance reasonably satisfactory
to the Purchasers, which policies shall name as an insured, or otherwise
provide coverage to, the Purchasers' Director. The Company and each
Subsidiary shall maintain such insurance policies for so long as any
Purchasers' Director remains on the Board or any Subsidiary Board. The
Company and each Subsidiary shall otherwise indemnify all of the members
of the Board and each Subsidiary Board to the fullest extent permissible
under applicable law.
(b) Observation Rights.
(i) Two representatives appointed by the Purchasers (the "Current
Observers" and collectively with the Purchasers' Replacement Observers,
the "Observers")) shall be entitled to serve as observers at all meetings
of the Board and each Subsidiary Board, and any committees thereof. Such
right shall from time to time be exercisable by delivery to the Company of
written notice from the Purchasers specifying the names of the Current
Observers.
(ii) Each Observer shall have all of the rights of a member of the
Board and each Subsidiary Board, provided, that no Observer shall have the
right to vote on matters on which the members of the Board or any
Subsidiary Board are entitled to vote. Each of
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the Company and its Subsidiaries will give each Observer reasonable prior
notice (it being agreed that the same prior notice given to the Board and
each Subsidiary Board shall be deemed reasonable prior notice) in any
manner permitted in the Company's or each Subsidiary's By-laws for notices
to directors of the time and place of any proposed meeting of each such
Board of Directors, such notice in all cases to include true and complete
copies of all documents furnished to any director in connection with such
meeting. Each Observer will be entitled to be present in person as an
observer at any such meeting or, if a meeting is held by telephone
conference, to participate therein.
(iii) Each of the Company and its Subsidiaries will deliver to each
Observer copies of all papers which may be distributed from time to time
to the members of the Board and each Subsidiary Board at such time as such
papers are so distributed to them, including copies of any written
consent. In addition, from time to time upon the request of each Observer,
the Company or each Subsidiary will furnish to such Observer such
information regarding the business, affairs, prospects and financial
condition of the Company or each Subsidiary as such Observer may
reasonably request.
(iv) Each of the Company and its Subsidiaries shall pay, or
reimburse, the Observers for all travel and related expenses incurred by
the Observers in connection with attending such meetings and monitoring
the Purchasers' investment in the Convertible Debentures.
(v) Each Observer shall hold in confidence all nonpublic information
of the Company provided or made available to such Observer pursuant to
this Section 6.2(b) until such time as such information has become
publicly available other than as a consequence of any breach by such
Observer or any Purchaser of its confidentiality obligations hereunder
(provided that such information may be disclosed to any other Persons who
are bound by this provision) and shall not (1) trade or otherwise directly
or indirectly transfer any Securities of the Company in violation of the
Securities Act or Exchange Act or (2) use such information for any purpose
other than exercise of its rights as a holder of Securities and its rights
under this Agreement and the other Financing Documents.
(c) The rights of the Purchasers in subsections (a) and (b) above are
all of the Purchasers' rights with respect to the appointment of members of the
Board and any Subsidiary Board and Observer rights, and are not in addition to
the rights provided to the Purchasers pursuant to Section 5.3(c) of the
Securities Purchase Agreement dated as of January 10, 2001, among the Purchasers
and the Company.
6.4 RIGHTS TO SUBSCRIBE FOR SECURITIES.
(a) For so long as any of the Convertible Debentures remain
outstanding, in the event that any equity and/or equity-linked Securities (the
"Offered Securities"), other than Excluded Securities, are proposed to be issued
by the Company or any Subsidiary to any Person (a "Proposed New Investor"), the
Company or any Subsidiary shall deliver to each Purchaser a written notice
(which notice shall state the number or amount of the Offered Securities
proposed to be issued, the purchase price therefor and any other terms or
conditions of the proposed
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issuance) of such issuance at least 30 days prior to the date of the proposed
issuance (the "Preemptive Offer Period").
(b) Each Purchaser shall have the option, exercisable at any time
during the first 20 days of the Preemptive Offer Period by delivering written
notice to the Company (a "Preemptive Offer Acceptance Notice"), to subscribe for
(i) the number or amount of such Offered Securities up to its Percentage
Allocation set forth on Schedule 1 hereto of the total number or amount of
Offered Securities proposed to be issued and (ii) up to its Percentage
Allocation set forth on Schedule 1 hereto of the Offered Securities not
subscribed for by other Purchasers as specified in its Preemptive Offer
Acceptance Notice. Any Offered Securities not subscribed for by the Purchasers
shall be deemed to be re-offered to and accepted by the Purchasers exercising
their options specified in clause (ii) of the immediately preceding sentence
with respect to the lesser of (A) the amount specified in their respective
Preemptive Offer Acceptance Notices and (B) an amount equal to their respective
Proportionate Percentages (computed without including Purchasers who have not
exercised their option specified in clause (ii) of the immediately preceding
sentence) with respect to such deemed reoffer. Such deemed reoffer and
acceptance procedures described in the immediately preceding sentence shall be
deemed to be repeated until either (x) all of the Offered Securities are
accepted by the Purchasers or (y) no Purchaser desires to subscribe for more
Offered Securities. The Company shall notify each Purchaser within five days
following the expiration of the Preemptive Offer Period of the number or amount
of Offered Securities which such Investor has subscribed to purchase.
(c) If Preemptive Offer Acceptance Notices are not given by the
Purchasers for all the Offered Securities, the Company may issue all or any part
of such Offered Securities as to which Preemptive Offer Acceptances Notices have
not been given by the Purchasers (the "Refused Securities") to the Proposed New
Investor, in accordance with the terms set forth in the Preemptive Offer. Upon
the closing, which shall include full payment to the Company, of the sale to the
Proposed New Investor of all the Refused Securities, the Purchasers shall
purchase from the Company, and the Company shall sell to the Purchasers, the
Offered Securities with respect to which Preemptive Offer Acceptance Notices
were delivered by the Purchasers, at the terms specified in the Preemptive Offer
Acceptance Notice. In each case, any Offered Securities not purchased within 90
days of the end of the Preemptive Offer Period by the Proposed New Investor in
accordance with this Section 6.3(a) may not be sold or otherwise disposed of
until they are again offered to the Purchasers under the procedures specified in
this Section 6.3(a).
6.5 FINANCIAL AND OTHER COVENANTS.
(a) The Issuers shall at all times comply with the financial and other
covenants set forth on Schedule 6.5. To the extent the Issuers enter into an
agreement with SVB providing for the loosening or relaxation of one or more of
the financial covenants in the Credit Agreement, the Issuers and the Purchasers
agree (only with respect to the first agreement after the dates hereof between
SVB and the Issuers) to cause the financial covenants set forth on Schedule 6.5
to be loosened and or relaxed in the same manner.
(b) Insurance. The Issuers shall, at all times insure its tangible
personal property Collateral in the amount of not less than Ten Million Dollars
($10,000,000.00) and carry such other business insurance, with insurers
reasonably acceptable to the Purchasers, in such form and
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amounts as the Purchasers may reasonably require, and the Issuers shall provide
evidence of such insurance to the Purchasers, so that the Purchasers is
satisfied that such insurance is, at all times, in full force and effect. All
such insurance policies shall name the Purchasers as additional loss payees and
shall contain a lenders loss payee endorsement in form reasonably acceptable to
the Purchasers. Upon receipt of the proceeds of any such insurance, the
Purchasers shall apply such proceeds to the Obligations as the Purchasers shall
determine in their discretion, except that, provided no Default or Event of
Default has occurred and is continuing, the Purchasers shall release to the
Company insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by the Issuers for the replacement of the
Equipment with respect to which the insurance proceeds were paid. The Purchasers
may require reasonable assurance that the insurance proceeds so released will be
so used. If the Issuers fails to provide or pay for any insurance, the
Purchasers may, but is not obligated to, obtain the same at the Issuers'
expense. The Issuers shall promptly deliver to the Purchasers copies of all
reports made to insurance companies.
(c) Litigation Cooperation. Should any third-party suit or proceeding
be instituted by or against the Purchasers with respect to any Collateral or in
any manner relating to the Issuers, the Issuers shall, without expense to the
Purchasers, make available the Issuers and their respective officers, employees
and agents and the Issuers' books and records, to the extent that the Purchasers
may deem them reasonably necessary in order to prosecute or defend any such suit
or Proceeding.
ARTICLE VII
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS, ETC.
All statements contained in any other Financing Document or any closing
certificate delivered by the Company, the Issuers, or the Purchasers pursuant to
this Agreement shall constitute representations and warranties by the Issuers,
or the Purchasers, as applicable, under this Agreement. Notwithstanding any
investigation made at any time by or on behalf of any party hereto, all
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Issuers or any Purchaser, as applicable, in connection with
the transactions contemplated by this Agreement shall survive the Closing until
the fifteenth (15th) month anniversary of the Closing Date. All agreements and
covenants contained in this Agreement or made in writing by or on behalf of the
Issuers, or any Purchaser, as applicable, in connection with the transactions
contemplated by this Agreement shall survive the Closing indefinitely or until
they are earlier terminated by their terms.
7.2 INDEMNIFICATION.
(a) In addition to all other rights and remedies available to the
Purchasers, the Company and each Subsidiary shall indemnify, defend and hold
harmless each Purchaser and its Affiliates and their respective partners,
officers, directors, employees, agents and representatives (collectively, the
"Purchaser Representatives"; and together with such Purchaser, the "Purchaser
Indemnified Persons") against all Losses in connection with or arising from any
Claim asserted
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against any Person (whenever made) resulting from or caused by any transaction,
status, event, condition, occurrence or situation relating to, arising out of or
in connection with (A) the status, or conduct of the Business and affairs of,
the Issuers, (B) the execution, delivery and performance by the Issuers of this
Agreement and the other Financing Documents and the transactions contemplated
hereby and thereby or (C) any actions taken by or omitted to be taken by any of
the Purchaser Indemnified Persons in connection with this Agreement and the
other Financing Documents or the transactions contemplated hereby and thereby,
except, in each case, to the extent such Losses result from the gross negligence
or willful misconduct of the Purchaser Indemnified Persons.
(b) All indemnification rights hereunder shall survive indefinitely the
execution and delivery of the Financing Documents and the consummation of the
transactions contemplated herein and therein, notwithstanding any inquiry or
examination made for or on behalf of, or any knowledge of any of the Purchasers
and/or any of the other Purchaser Indemnified Persons or the acceptance by any
such Purchaser of any certificate or opinion.
ARTICLE VIII
MISCELLANEOUS
8.1 PARTIES IN INTEREST; ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the Issuers, the
Purchasers and their respective successors and assigns. No party hereto may
assign this Agreement, any other Financing Document or any of its rights,
interests or obligations hereunder or thereunder without the prior written
consent of the other parties; provided, however, that each Purchaser may assign
any of its rights under this Agreement, any other Financing Document or any
other document or investment contemplated hereby to any Affiliate or limited
partner of such Purchaser.
8.2 ENTIRE AGREEMENT.
This Agreement, each other Financing Document and the other writings and
agreements referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto.
8.3 SENIOR FINANCING.
At the Issuers' request, the Purchasers shall negotiate in good faith with
any successor to SVB and the SVB Facility to execute and deliver reasonable and
customary documentation required to subordinate (on reasonable and customary
terms) the right of the Purchasers to receive payments of cash from the Company
with respect to their Convertible Debentures.
8.4 PUBLIC ANNOUNCEMENTS.
Except as otherwise required by Law or by the rules of NASDAQ, so long as
this Agreement is in effect, neither the Company (or any of its Subsidiaries)
nor the Purchasers, will
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issue or cause the publication of any press release or make any other public
announcement with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be unreasonably
withheld. The Issuers and the Purchasers will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.
8.5 NOTICES.
All notices, demands and requests of any kind to be delivered to any party
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered or if sent by
internationally-recognized overnight courier or by registered or certified mail,
return receipt requested and postage prepaid, addressed as follows:
(a) if to the Issuers, to:
Exchange Applications, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to the Purchasers, to:
InSight Venture Partners
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
X'Xxxxxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, X.X. 10112
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Attention: Xxxx X. Nissan, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance with the
provisions of this Section 8.5. Any such notice or communication shall be deemed
to have been received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of internationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted.
8.6 AMENDMENTS.
This Agreement may not be modified or amended, or any of the provisions
hereof waived, except by written agreement of the Issuers and the Purchasers.
8.7 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
8.8 HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.9 GOVERNING LAW.
(a) All questions concerning the construction, interpretation and validity
of this Agreement shall be governed by and construed and enforced in accordance
with the domestic Laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether in the State of New York or
any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of New York. In furtherance of the foregoing,
the internal Law of the State of New York will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive Law of some other jurisdiction
would ordinarily or necessarily apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
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PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
8.10 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Issuers contained in this Agreement (a)
are being given by the Issuers as an inducement to the Purchasers to enter into
this Agreement and the other Financing Documents (and the Issuers acknowledge
that the Purchasers have expressly relied thereon) and (b) are solely for the
benefit of the Purchasers. Accordingly, no third party (including, without
limitation, any holder of Securities of the Issuers) or anyone acting on behalf
of such third party (other than the Purchasers) shall be a beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Purchasers or the Issuers with respect to such
representations or warranties or any matter subject to or resulting in
indemnification under this Agreement or otherwise.
8.11 SUBMISSION TO JURISDICTION.
Any Proceeding with respect to this Agreement or the other Financing
Documents may be brought in the courts of the State of New York and the United
States of America for the Southern District of New York and, by execution and
delivery of this Agreement, each Issuer hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Issuer hereby irrevocably waives, in connection with any
such action or Proceeding, any objection, including, without limitation, any
objection to the venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or Proceeding in
such respective jurisdictions. Each Issuer hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
Proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its address as set forth herein. Nothing herein shall
affect the right of the Investors to serve process in any other manner permitted
by Law or to commence Proceedings or otherwise proceed against the Issuers in
any other jurisdiction.
8.12 EXTENSION; WAIVER.
The parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement and (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party, and any such
waiver shall not operate or be construed as a waiver of any subsequent breach by
the other party.
8.13 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement and the other Financing Documents be enforced to the fullest extent
permissible under the Law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, in the event that any provision of
this Agreement and the other Financing Documents would be held in any
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jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement and the other Financing Documents or
affecting the validity or enforceability of such provision in any jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not be invalid, prohibited or unenforceable in such jurisdiction, it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement and the other Financing Documents or
affecting the validity or enforceability of such provision in any other
jurisdiction.
8.14 INDEPENDENCE OF AGREEMENTS.
All agreements and covenants hereunder shall be given independent effect
so that if a certain action or condition constitutes a default under a certain
agreement or covenant, the fact that such action or condition is permitted by
another agreement or covenant shall not affect the occurrence of such default,
unless expressly permitted under an exception to such covenant. In addition, all
representations and warranties hereunder shall be given independent effect so
that if a particular representation or warranty proves to be incorrect or is
breached, the fact that another representation or warranty concerning the same
or similar subject matter is correct or is not breached will not affect the
incorrectness of or a breach of the representation and warranty first referred
to in this sentence.
8.15 ACTIONS OF REPRESENTATIVES.
(a) A decision, act, consent or instruction of the Purchaser Representative in
respect of any action hereunder shall constitute a decision of all Purchasers
and shall be final, binding and conclusive upon each such Purchaser and the
Issuers may rely upon any decision, act, consent or instruction of the Purchaser
Representative hereunder as being the decision, act, consent or instruction of
each and every such Purchaser. Notice delivered to the Purchasers'
Representative shall for all purposes constitute notice to all Purchasers. The
foregoing shall be binding upon all Purchasers and all transferees and assignees
thereof.
(b) A decision, act, consent or instruction of the Company in respect of any
action hereunder shall constitute a decision of any Issuer and shall be final,
binding and conclusive upon each such Issuer and the Purchasers may rely upon
any decision, act, consent or instruction of the Company hereunder as being the
decision, act, consent or instruction of each and every such Issuer. Notice
delivered to the Company shall for all purposes constitute notice to all
Issuers. The foregoing shall be binding upon all Issuers and all transferees and
assignees thereof.
8.16 EXPENSES.
The Issuers agree to pay, and hold the Purchasers and/or their
representatives harmless against, as incurred, all liability for the payment of
(i) the actual, out-of-pocket costs and expenses incurred by the Purchasers (A)
at or prior to Closing in connection with the transactions contemplated hereby,
including, without limitation, all fees and expenses of counsel, accountants and
other advisors, in connection with the preparation of the Financing Documents,
the purchase of the Convertible Debentures and the consummation of all of the
transactions contemplated by the Financing Documents (including, but not limited
to, the conversion of the Convertible
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Debentures into Convertible Debenture Shares), (ii) the reasonable costs and
expenses (including fees and expenses of counsel, accountants and other
advisors) incurred by the Purchasers in connection with any amendment or waiver
of, or enforcement of, any Financing Documents, (iii) any costs reasonably
incurred by the Purchasers in rendering assistance to the Company or any of its
Subsidiaries, to the extent the Company or such Subsidiary requested such
assistance (it being understood that the Purchasers are not obligated to render,
and may charge additional fees for, such assistance), (iv) the reasonable fees
and expenses incurred by the Purchasers in any filing with any governmental
authority with respect to its investment in the Issuers or in any other filing
with any governmental authority with respect to the Company or any of its
Subsidiaries that mentions the Purchasers or their affiliates, and (v) any stamp
or similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of any of the Financing Documents or any
modification, amendment or alteration of any of the Financing Documents, and all
issue taxes in respect of the issuance of any Convertible Debenture or
Convertible Debentures Shares.
ARTICLE IX
CONSENT OF THE PURCHASERS
Pursuant to Section 3(b) of the Company's Certificate of Incorporation,
the Purchasers hereby consent to the transactions contemplated by this Agreement
and the other Financing Documents.
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IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
ISSUER:
EXCHANGE APPLICATIONS, INC.
By: /s/ F. Xxxxxx Xxxxx
--------------------------------------------
Name: F. Xxxxxx Xxxxx
Title: CSO
EXSTATIC SOFTWARE, INC.
By: /s/ F. Xxxxxx Xxxxx
--------------------------------------------
Name: F. Xxxxxx Xxxxx
Title: CSO
PURCHASERS:
INSIGHT VENTURE PARTNERS IV, L.P.
INSIGHT VENTURE PARTNERS (CAYMAN) IV, L.P.
INSIGHT VENTURE PARTNERS IV (FUND B), L.P.
INSIGHT VENTURE PARTNERS IV (CO-INVESTORS), L.P.
By: Insight Venture Associates IV, L.L.C.,
the general partner to each of the
above-referenced entities:
By: /s/ Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director
