1
THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED OR PLEDGED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR IF THE
PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OR REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. THIS
WARRANT IS SUBJECT TO THE TERMS AND PROVISIONS OF THE SECURITIES PURCHASE
AGREEMENT (THE "PURCHASE AGREEMENT") AMONG EXCHANGE APPLICATIONS, INC. AND THE
PURCHASERS THEREIN, DATED AS OF AUGUST 29, 2001, AS AMENDED FROM TIME TO TIME,
AND THE HOLDERS OF THIS WARRANT ARE ENTITLED TO THE BENEFITS THEREOF.
EXCHANGE APPLICATIONS, INC.
WARRANT
NO.: W-5 AUGUST 29, 2001
VOID AFTER AUGUST 29, 2011
(OR EARLIER UPON THE OCCURRENCE OF
CERTAIN EVENTS DESCRIBED BELOW)
Section 1. THIS CERTIFIES that, for value received, each holder listed
on Schedule 1 hereto or such holder's respective assigns (each, a "Holder", and
together, the "Holders"), and in accordance with the percentages opposite such
Holder's name on Schedule 1 hereto, shall be entitled to subscribe for and
purchase from EXCHANGE APPLICATIONS, INC., a Delaware corporation (including any
successor thereto (by way of merger, consolidation, sale or otherwise), the
"Company"), up to 1,570,845 shares of Common Stock, $.001 par value per share
(the "Common Stock"), of the Company (the "Warrant Shares"). Capitalized terms
used herein but not otherwise defined herein have the meanings ascribed thereto
in the Purchase Agreement.
Section 2. EXERCISE PERIOD. This Warrant may be exercised, in whole or
in part, by the Holders at any time or from time to time on or prior to August
29, 2011 (such period being herein referred to as the "Exercise Period").
Anything to the contrary notwithstanding, in no event shall the Holders be
entitled to exercise this Warrant until such time as the Company shall have
increased the authorized number of shares of Common Stock to at least
225,000,000 (or the
2
Company otherwise has sufficient authorized and unissued shares to enable the
Company to issue Common Stock upon the conversion or exercise, as the case may
be, of all of the Transaction Securities outstanding at such time).
Section 3. EXERCISE PRICE. The exercise price (the "Exercise Price") at any time
for each Warrant Share shall be $.3183.
Section 4. EXERCISE OF WARRANT; WARRANT SHARES.
(a) The rights represented by this Warrant may be exercised, in whole
or in any part (but not as to a fractional Warrant Share), by (i) the surrender
of this Warrant (properly endorsed) at the office of the Company (or at such
other agency or office of the Company as it may designate by notice in writing
to the each Holder at the address of such Holder appearing on the books of the
Company), (ii) delivery to the Company of a notice of election to exercise in
the form of EXHIBIT A attached hereto, and (iii) payment to the Company of the
aggregate Exercise Price by (A) cash, wire transfer funds or check and/or (B)
Warrant Shares or Warrants to purchase Warrant Shares (net of the Exercise Price
for such Warrant Shares), valued for such purposes at the Market Price per share
on the date of exercise. As used herein, "Market Price" at any date shall be (i)
the last reported sales price regular way or, in case no such reported sales
took place on such day, the average of the last reported bid and ask price
regular way on the principal national securities exchange on which the class or
series of the Company's securities to which the Warrant Shares belong is listed
or admitted to trading (or if such class or series is not at the time listed or
admitted for trading on any such exchange, then such price as shall be equal to
the last reported sale price, or if there is no such sale price, the average of
the last reported bid and ask price, as reported by the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on such day, or if, on
any day in question, the security shall not be quoted on the NASDAQ, then such
price shall be equal to the average of the last reported bid and ask price on
such day as reported by the National Quotation Bureau, Inc. or any similar
reputable quotation and reporting service, if such quotation is not reported by
the National Quotation Bureau, Inc.) or (ii) if the class or series of the
Company's securities to which the Warrant Shares belong is not listed or
admitted to trading on a principal national securities exchange, the value given
such share as determined in good faith by the Company's Board of Directors.
(b) Each date on which this Warrant is surrendered and on which payment
of the Exercise Price is made in accordance with Section 3 above is referred to
herein as an "Exercise Date." As soon as practicable after each exercise, the
Company shall issue and deliver a certificate or certificates for the Warrant
Shares being purchased pursuant to such exercise, registered in the name of such
Holder or such Holder's designee, to the Holder or designee, as the case may be.
If such exercise shall not have been for the full number of the Warrant Shares,
then the Company shall issue and deliver to such Holder a new Warrant,
registered in the name of such Holder, of like tenor to this Warrant, for the
balance of the Warrant Shares that remain after exercise of the Warrant.
(c) The person in whose name any certificate for Warrant Shares is
issued upon any exercise shall for all purposes be deemed to have become the
holder of record of such shares as of the Exercise Date, except that if the
Exercise Date is a date on which the share transfer
2
3
books of the Company are closed, such person or entity shall be deemed to have
become the holder of record of such shares at the close of business on the next
succeeding date on which the share transfer books are open.
(d) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up (or if no
record date is set, the date such stock dividend, subdivision of stock split is
consummated), the Exercise Price shall be appropriately decreased, and the
number of shares of Common Stock issuable on exercise of the Warrant shall be
increased, in proportion to such increase in outstanding shares of Common Stock.
(e) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Exercise Price shall be appropriately increased, and the number of shares of
Common Stock issuable on exercise of the Warrant shall be decreased, in
proportion to such decrease in outstanding shares of Common Stock.
(f) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from no par value to par value or from par value to no par value or as a
result of a stock dividend or subdivision, split-up or combination of shares
covered by clause (d) or (e) above), or any consolidation or merger of the
Company, the Warrant shall after such reorganization, reclassification,
consolidation or merger be exercisable for the kind and number of shares of
stock or other Securities or property of the Company or of the company resulting
from such consolidation or surviving such merger to which the holder of the
number of shares of Common Stock deliverable (immediately prior to the time of
such reorganization, reclassification, consolidation or merger) upon exercise of
the Warrant would have been entitled upon such reorganization, reclassification,
consolidation or merger. The provisions of this clause shall similarly apply to
successive reorganizations, reclassifications, consolidations or mergers.
(g) All calculations under this paragraph shall be made to the nearest
one hundredth (1/100) of a cent.
(h) In any case in which the provisions of this Section shall require
that an adjustment shall become effective immediately after a record date of an
event, the Company may defer until the occurrence of such event (1) issuing to
the holder of any Warrant exercised after such record date and before the
occurrence of such event the shares of capital stock issuable upon such exercise
by reason of the adjustment required by such event in addition to the shares of
capital stock issuable upon such exercise before giving effect to such
adjustments, and (2) paying to such holder any amount in cash in lieu of a
fractional share of capital stock; provided, however, that the Company shall
deliver to such holder an appropriate instrument evidencing such holder's right
to receive such additional shares and such cash upon the occurrence of such
event. If after the determination of such record date the event to which such
record date relates does not occur, then the Exercise Price and the number of
shares issuable under this Warrant
3
4
shall be appropriately adjusted to eliminate any adjustment previously made on
account of such record date.
(i) Whenever the Exercise Price and the number of shares issuable under
this Warrant shall be adjusted as provided in this Section, the Company shall
make available for inspection during regular business hours, at its principal
executive offices or at such other place as may be designated by the Company, a
statement, signed by its chief executive officer, showing in detail the facts
requiring such adjustment and the Exercise Price and the number of shares
issuable under this Warrant that shall be in effect after such adjustment. The
Company shall also cause a copy of such statement to be sent by first class
certified mail, return receipt requested and postage prepaid, to each holder of
the Warrant at such holder's address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part of
any notice required to be mailed under the provisions of paragraph (j) below.
(j) If the Company shall propose to take any action of the types
described in clauses (d), (e) or (f) of this Section 4, the Company shall give
notice to each holder of the Warrant, in the manner set forth in Section 9
below, which notice shall specify the record date, if any, with respect to any
such action and the date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Exercise Price and the number, kind
or class of shares or other Securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
the Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 10
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.
(k) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the holders of the Warrant against impairment.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company
represents and warrants to each Holder that all Warrant Shares that may be
issued upon the exercise of this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable, with no personal liability attaching to the
ownership thereof, and free from all liens and charges with respect to the issue
thereof (other than liens and charges created by the Holders). The Company will
from time to time use its reasonable best efforts to take all such action as may
be required to assure that the stated or par value per Warrant Share is at all
times no greater than the then effective Exercise Price. Upon the effectiveness
of the Certificate Amendment, the Company shall at all times have authorized and
reserved, free from preemptive rights, a sufficient number of Warrant Shares to
provide for the exercise of this Warrant. Upon the effectiveness of the
Certificate Amendment, the Company shall not take any action which would cause
the number of authorized but unissued
4
5
Warrant Shares to be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrant. If any Warrant Shares
reserved for the purpose of issuance upon the exercise of this Warrant require
registration with or approval of any governmental authority under any Federal or
state law before such shares may be validly issued or delivered upon exercise,
then the Company shall in good faith and as expeditiously as possible endeavor
to secure such registration or approval, as the case may be. In the event, and
to the extent, that the issuance of any Warrant Shares would result in a
violation of any law or NASD rule or regulation applicable to the Company, the
Company shall issue three (3) month promissory notes to the Holders in lieu of
the Warrant Shares in a principal amount equal to the product of (x) the number
of Warrant Shares for which this Warrant is exercised that cannot be issued due
to such violation (the "Exercised Shares") and (y) the excess of (A) the Market
Price for the Exercised Shares as of the Exercise Date over (B) the Exercise
Price for the Exercised Shares, at a market rate of interest payable in cash and
with such other terms and conditions to be mutually determined by the Company
and the Holders. If requested by the Company's bank lenders, the Holders shall
negotiate in good faith with the Company and its bank lenders to execute and
deliver reasonable and customary documentation required to subordinate the right
of the Holders to receive payments of cash from the Company with respect to such
notes. The Holders agree not to exercise this Warrant unless the Company has
sufficient authorized shares to issue the Holders the number of shares of Common
Stock to which the Holders are entitled under this Warrant.
Section 6. NO SHAREHOLDER RIGHTS. Prior to exercise, this Warrant shall
not entitle the Holders to any voting rights or other rights as a shareholder of
the Company.
Section 7. RESTRICTIONS ON TRANSFER. The Holders may assign or transfer
this Warrant, the Warrant Shares and all rights hereunder, in whole or in part
(provided, that if the assignment of this Warrant is in part, the Holders must
assign warrants to purchase a minimum of 1,000,000 shares of Common Stock) at
the agency or office of the Company referred to in Section 3 hereof to (i) its
limited partners, members, or any Affiliate of the Holders, (ii) InSight or
(iii) any purchaser or transferee from the Holder of Warrant Shares or the
Warrant upon (x) surrender of this Warrant properly endorsed, and (y) delivery
of a notice of transfer in the form of EXHIBIT B hereto. Each permitted
transferee of this Warrant, by accepting or holding the same, consents to be
treated as a Holder under this Warrant and shall be entitled to exercise the
rights represented by this Warrant; provided, however, that until each such
transfer is recorded on such books, the Company may treat the registered holder
hereof as the owner hereof for all purposes.
Section 8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
terms as to indemnity or otherwise as it may in its reasonable discretion impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
Section 9. NOTICES. The terms and provisions of Section 8.5 of the
Purchase Agreement are expressly incorporated in this Warrant.
5
6
Section 10. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York (without giving
effect to principles of conflicts of laws).
Section 11. SEVERABILITY. If any provision of this Warrant is held in
any 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 Warrant or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, such provision shall automatically be amended to the extent (but only
to the extent) necessary to make it not invalid, prohibited or unenforceable in
such jurisdiction, without invalidating the remaining provisions of this Warrant
or amending or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 12. HEADINGS. The headings of the various sections contained in
this Warrant have been inserted for convenience of reference only and should not
be deemed to be a part of this Warrant.
Section 13. AMENDMENTS AND WAIVERS. No provision of this Warrant may be
amended or waived except if such amendment or waiver is in writing and is
signed, in the case of an amendment, by the Company and the Holders, or in the
case of a waiver, by the party against whom the waiver is to be effective.
Section 14. REGISTRATION RIGHTS. All of the Warrant Shares shall be
deemed to be "Registrable Shares" as defined under the Fifth Amended and
Restated Registration Rights Agreement, as the same may be amended, modified or
supplemented in accordance with its terms from time to time.
* * * *
6
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officers as of the date first written above.
EXCHANGE APPLICATIONS, INC.
By: /s/ F. Xxxxxx Xxxxx
-------------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
8
EXHIBIT A
FORM OF NOTICE OF ELECTION TO EXERCISE
[To be executed only upon exercise
of the Warrant to which this form is attached]
To Exchange Applications, Inc. or its successor
The undersigned, the holder of the Warrant to which this form is
attached, hereby irrevocably elects to exercise the right represented by such
Warrant to purchase _________ Warrant Shares of EXCHANGE APPLICATIONS, INC. or
its successor, and herewith tenders the aggregate payment of $_________ in the
form of (1) cash, wire transfer funds or check and/or (2) Warrant Shares or
Warrants to purchase Warrant Shares (net of the Exercise Price for such shares)
valued for such purposes at the Market Price (as defined in Section 3) per share
on the date of exercise, in full payment of the purchase price for such shares.
The undersigned requests that a certificate for such shares be issued in the
name of ______________, whose address is ___________________________, and that
such certificate be delivered to ________________________, whose address is
__________________________.
If such number of shares is less than all of the shares purchasable
under the current Warrant, the undersigned requests that a new Warrant, of like
tenor as the Warrant to which this form is attached, representing the remaining
balance of the shares purchasable under such current Warrant be registered in
the name of _________________________________, whose address is, and that such
new Warrant be delivered to ________________________________, whose address is
___________________________________.
Signature:
____________________________________________
(Signature must conform in all respects to
the name of the holder of the Warrant as
specified on the face of the Warrant)
Date:
____________________________________________
A-1
9
EXHIBIT B
FORM OF NOTICE OF TRANSFER
[To be executed only upon transfer
of the Warrant to which this form is attached]
For value received, the undersigned hereby sells, assigns and transfers
unto _________________________ all of the rights represented by the Warrant to
which this form is attached to purchase _________________________ Warrant Shares
of, EXCHANGE APPLICATIONS, INC. (including any successor thereto, the
"Company"), to which such Warrant relates, and appoints _______________________
as its attorney to transfer such right on the books of the Company, with full
power of substitution in the premises.
Signature:
___________________________________________
(Signature must conform in all respects to
the name of the holder of the Warrant as
specified on the face of the Warrant)
Address: ___________________________________________
___________________________________________
Date:
___________________________________________
Signed in the presence of:
__________________________
X-0
00
XXXXXXXX 0
XXXXX XXXXXXXXXXX
----- -----------
InSight Venture Partners IV, L.P. 76.666130%
InSight Venture Partners (Cayman) IV, L.P. 10.537455%
InSight Venture Partners IV (Fund B), L.P. 0.660033%
InSight Venture Partners IV 12.136382%
(Co-Investors), L.P.
TOTAL 100%
