EXHIBIT 99.1
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SECURITIES PURCHASE AGREEMENT (this
"Agreement"), dated as of August
29, 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 up to U.S. $15,500,000 in
principal amount of the Issuers' 12% Senior Secured Convertible Debentures (the
"New Debentures"), 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) "Aggregate Convertible Debenture Holders" means the holders of the
Aggregate Convertible Debentures, or any successor to, or assignee or transferee
of, any such holder.
(c) "Aggregate Convertible Debenture Replacement Observers" has the
meaning ascribed to it in Section 6.3.
(d) "Aggregate Convertible Debenture Shares" means the shares of Common
Stock issuable upon conversion of the Aggregate Convertible Debentures.
(e) "Aggregate Convertible Debenture Super Majority" has the meaning
ascribed to it in Section 6.3(a)(i).
(f) "Aggregate Convertible Debentures" means collectively, the Existing
Debentures and the New Debentures.
(g) "Aggregate Debenture Holders' Directors" has the meaning ascribed
to it in Section 6.3.
(h) "Aggregate Warrants" means the April 16 Warrant, the June 1
Warrant, the Insight Warrant and the Warrants.
(i) "Agreement" has the meaning ascribed to such term in the preamble.
(j) "Annual Budget" has the meaning ascribed to it in Section
6.2(a)(v).
(k) "April 16 Warrants" means the Warrants dated as of April 16, 2001,
issued by the Company to Insight.
(l) "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 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
(m) "Automatic Affirmative Covenant" has the meaning ascribed to it in
Section 6.1(a).
(n) "Automatic Financial Covenant Amendment" has the meaning ascribed
to it in Section 6.1.
(o) "Board" has the meaning ascribed to it in Section 6.3(a)(i).
(p) "Business" means the providing of marketing automation and
enterprise customer relationship management solutions by the Company and its
Subsidiaries.
(q) "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.
(r) "By-laws" has the meaning ascribed to such term in Section 4.1.
(s) "Certificate Amendment" has the meaning ascribed to it in Section
6.5(d).
(t) "Certificate of Incorporation" has the meaning ascribed to such
term in Section 4.1.
(u) "Claim" means any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or other
proceeding.
(v) "Closing" has the meaning ascribed to such term in Section 3.1(a).
(w) "Collateral" has the meaning ascribed to it in the Security
Agreement.
(x) "Collateral Agency and Intercreditor Agreement" has the meaning
ascribed to it in Section 3.1(b)(vii).
(y) "Commission" means the United States Securities and Exchange
Commission.
(z) "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).
(aa) "Common Stock" means the common stock, $.001 par value per share,
of the Company.
(bb) "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.
(cc) "Company" has the meaning ascribed to such term in the preamble.
(dd) "Company Contracts" has the meaning ascribed to such term in
Section 4.8.
(ee) "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.
(ff) "Default" has the meaning ascribed to it in the New Debentures.
(gg) "EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization, each as determined in accordance with generally
accepted accounting principles.
(hh) "Encumbrances" means any liens, charges, encumbrances, claims,
options, proxies, pledges, security interests, or other similar rights of any
nature.
(ii) "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.
(jj) "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.
(kk) "Event of Default" has the meaning ascribed to such term in the
New Debentures.
(ll) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
(mm) "Excluded Securities" means (i) Securities issued or granted to
eligible officers, employees or directors of, or consultants to, the Corporation
pursuant to the Equity 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.
(nn) "Existing Debenture Shares" means the shares of Common Stock
issuable upon conversion of the Existing Debentures.
(oo) "Existing Debentures" means (i) the Amended and Restated 12%
Convertible Debenture in the aggregate principal amount of U.S. $7,318,307.37,
and (ii) the Amended and Restated 12% Convertible Debenture in the aggregate
principal amount of U.S. $5,055,890.41, both (i) and (ii) issued by the Issuers
to Insight on August 29, 2001(amending, respectively (a) the 12% Convertible
Debenture in the aggregate principal amount of U.S. $7,241,307.37, and (b) the
12% Convertible Debenture in the aggregate principal amount of U.S. $5,000,000,
both (a) and (b) issued by the Grantors to the Existing Investors on July 26,
2001).
(pp) "eXstatic" has the meaning ascribed to it in the preamble.
(qq) "Fifth Amended and Restated Registration Rights Agreement" has the
meaning ascribed to such term in Section 3.1(b)(vi).
(rr) "Financial Covenant" has the meaning ascribed to it in Section
6.1(a).
(ss) "Financing Documents" has the meaning ascribed to such term in
Section 4.3.
(tt) "Four Million Dollar Holder" has the meaning assigned to it in
Section 6.3(b)(i).
(uu) "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.
(vv) "GAAP" means United States generally accepted accounting
principles, consistently applied.
(ww) "Governmental Entity" means any federal, state, municipal, or
other government, governmental department, commission, board, bureau, agency or
instrumentality, or any court or tribunal.
(xx) "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.
(yy) "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 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, (ix) all capitalized lease obligations of such Person and
(x) 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.
(zz) "Insight" means, collectively, InSight Venture Partners, IV, L.P.,
InSight Venture Partners (Cayman) IV, L.P., InSight Venture Partners IV (Fund
B), L.P. and InSight Venture Partners IV (Co-Investors), L.P., and their
respective Affiliates.
(aaa) "Insight Warrants" means the Warrants dated as of the date
hereof, issued by the Company to Insight.
(bbb) "Issuers" has the meaning ascribed to it in the Preamble.
(ccc) "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.
(ddd) "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.
(eee) "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.
(fff) "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.
(ggg) "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 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).
(hhh) "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.
(iii) "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).
(jjj) "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.
(kkk) "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.
(lll) "NASDAQ Letter" has the meaning ascribed to it in Section 6.5(e).
(mmm) "New Debenture Representatives" has the meaning ascribed to it in
Section 6.3(b)(i).
(nnn) "New Debenture Shares" means the shares of Common Stock issuable
upon conversion of the New Debentures.
(ooo) "New Debentures" has the meaning ascribed to it in the Preamble
of this Agreement.
(ppp) "Obligations" has the meaning ascribed to it in the Security
Agreement.
(qqq) "Observers" has the meaning ascribed to it in Section 6.3(b)(i)
(rrr) "Offered Securities" has the meaning ascribed to it in Section
6.4(a).
(sss) "Orders" means judgments, writs, decrees, injunctions, orders,
compliance agreements or settlement agreements of or with any Governmental
Entity or arbitrator.
(ttt) "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.
(uuu) "Preemptive Offer Acceptance Notice" has the meaning ascribed to
it in Section 6.4.
(vvv) "Preemptive Offer Period" has the meaning ascribed to it in
Section 6.4.
(www) "Proceeding" means any action, suit, proceeding, complaint,
charge, hearing, inquiry or investigation before or by a Governmental Entity or
an arbitrator or administrator.
(xxx) "Proposed New Investor" has the meaning ascribed to it in Section
6.4.
(yyy) "Purchaser Indemnified Persons" shall have the meaning ascribed
to it in Section 7.2.
(zzz) "Purchaser Representative" shall mean the person listed on
Schedule A hereto.
(aaaa) "Purchasers" has the meaning ascribed to such term in the
preamble.
(bbbb) "Refused Securities" has the meaning ascribed to it in Section
6.4.
(cccc) "Representative" of a Person shall be construed broadly and
shall include such Person's partners, officers, directors, employees, agents,
counsel, accountants and other representatives.
(dddd) "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.
(eeee) "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.
(ffff) "Securities Act" means the Securities Act of 1933, as amended.
(gggg) "Security Agreement" has the meaning ascribed to it in Section
3.1(b)(vii).
(hhhh) "Series A Preferred Shares" means the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock.
(iiii) "Series A Preferred Stock" means the Series A Convertible
Redeemable Preferred Stock, $.001 par value per share, of the Company.
(jjjj) "Significant Purchasers" shall mean Purchasers who hold more
than $2,000,000 in New Debentures.
(kkkk) "Subject Person" has the meaning ascribed to such term in the
definition of "Subsidiary".
(llll) "Subordination Agreement" has the meaning ascribed to such term
in Section 3.1(b)(viii).
(mmmm) "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.
(nnnn)"Subsidiary Board" has the meaning ascribed to it in Section 6.3.
(oooo) "SVB" shall mean Silicon Valley Bank.
(pppp) "SVB Facility" shall mean the Loan and Security Agreement, dated
April 25, 2001, among the Issuers and SVB, as amended.
(qqqq) "Trading Day" means any day on which securities are traded on
National Association of Securities Dealers, Inc.'s Automated Quotation System.
(rrrr) "Transaction Securities" means the Aggregate Convertible
Debenture, the Warrants and InSight Warrants.
(ssss) "Warrant Shares" means the shares of Common Stock issuable upon
the exercise of the Warrants.
(tttt) "Warrants" has the meaning ascribed to such term in Article II.
(uuuu) "Wire Amount" has the meaning ascribed to such term in Article
II.
1.2 RULES OF CONSTRUCTION.
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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, J. Xxxxx
Xxxxxx, Xxx Xxxxx, 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 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 NEW DEBENTURES
AND THE WARRANTS
2.1 NEW DEBENTURES AND WARRANTS.
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(a) Issuance of the New Debentures. At the Closing, and subject to the
terms and conditions contained in this Agreement, (i) the Issuers shall issue,
sell and deliver to each Purchaser (A) a New Debenture substantially in the form
of Exhibit A and (B) a Warrant, substantially in the form of Exhibit B
(collectively, the "Warrants") to purchase shares of Common Stock and (ii) each
Purchaser shall pay to one or more accounts designated by the Issuers prior to
the Closing the amount set forth opposite each Purchaser's name on Schedule I
hereto by wire transfer of immediately available funds (the "Wire Amount"). The
Issuers' agreement with each Purchaser is a separate agreement, and the sale of
New Debentures to each Purchaser is a separate sale. No Purchaser shall have any
obligation to purchase more than the amount set forth opposite such Purchaser's
name on Schedule I hereto or any New Debentures not purchased by another
Purchaser. 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. The Company and the Purchasers agree that 99.5% of the
aggregate purchase price to be paid at the Closing by the Purchasers shall be
allocated to the sale and purchase of the New Debentures, with the remainder
thereof allocated to the sale and purchase of the Warrants. No party hereto
shall take a position inconsistent with this allocation unless otherwise
required by Law.
(b) Use of Proceeds. The Issuers shall use the proceeds from the sale
of the New Debentures to pay the fees and expenses of X'Xxxxxxxx LLP, special
counsel to the Purchasers, and Proskauer Rose LLP as required pursuant to
Section 8.16 hereof and for the Company's working capital and general corporate
purposes.
(c) Satisfaction of Commitment. The Company hereby acknowledges that
the Purchasers' purchase of the New Debentures and the Warrants fully satisfies
all obligations of Insight to the Company pursuant to the commitment letter
dated April 16, 2001 to provide "Financing" (as defined therein) and that the
Company's obligations to Insight pursuant to such commitment letter remain in
full force and effect.
ARTICLE III
THE CLOSING; DELIVERY OF DOCUMENTS AT THE CLOSING
3.1 THE CLOSING.
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(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.
(b) The obligation of each Purchaser to purchase and pay for the New
Debentures to be purchased hereunder at the Closing is subject to the delivery
by the Issuers of the following items (unless waived by such Purchaser):
(i) the New Debentures, which New Debentures shall have been duly
authorized, executed and delivered by the Issuers and shall be in full
force and effect and enforceable against the Company in accordance with
their terms;
(ii) the Warrants, which Warrants shall have been duly authorized,
executed and delivered by the Company and shall be in full force and
effect and enforceable against the Issuer in accordance with their
terms;
(iii) the 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 G; and
(iv) evidence satisfactory to the Purchasers that the Company has
reserved the New Debenture Shares for issuance upon conversion of the
New Debentures;
(v) evidence satisfactory to the Purchasers that the Company has
reserved the Warrant Shares for issuance upon exercise of the Warrants;
(vi) the Fifth Amended and Restated Registration Rights Agreement
in substantially the form attached hereto as Exhibit C (the "Fifth
Amended and Restated Registration Rights Agreement"), which Fifth
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;
(vii) the Security Agreement in substantially the form attached
hereto as Exhibit D (the "Security Agreement") and the Collateral
Agency and Intercreditor Agreement in substantially the form attached
hereto as Exhibit E (the "Collateral Agency and Intercreditor
Agreement"), each of which 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;
(viii) the Subordination Agreement in substantially the form
attached hereto as Exhibit F (the "Subordination Agreement"), which
Subordination 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;
(ix) 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 consent and authorization of the
NASD;
(x) receipt of revised cash flow budget through December 31, 2001,
acceptable to the Purchasers;
(xi) 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).
(xii) 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);
(xiii) 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 New Debentures, and (3) the
reservation of the New Debenture Shares for issuance upon conversion of
the New 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;
(xiv) a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate
referred to in clause (xiii);
(xv) 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 Issuers or the Company, as
the case may be, and such parties in accordance with their respective
terms;
(xvi) 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
(xvii) 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 New
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; and
(ii) 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 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; and
(iii) 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.
(d) The New Debentures do not constitute a revolving loan and any
amounts repaid or prepaid under the New 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:
(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) 34,053,087 shares are validly issued and outstanding,
fully paid and nonassessable;
(B) 22,000,000 shares shall be reserved for issuance upon
conversion of the Series A Preferred Stock;
(C) 36,404,336 shares are reserved as New Debenture Shares
for issuance upon conversion of the New Debentures;
(D) 31,809,614 shares are reserved as Existing Debenture
Shares for issuance upon conversion of the Existing Debentures
subject to the effective Certificate of Amendment;
(E) 23,041,475 shares shall be reserved for issuance upon
exercise of the Warrants subject to the effectiveness of the
Certificate of Amendment;
(F) 18,433,180 shares shall be reserved for issuance upon
exercise of the Insight Warrants subject to the effective
Certificate of Amendment;
(G) 1,179,337 shares are reserved for issuance upon exercise
of the April 16 Warrant;
(H) 366,565 shares are reserved as treasury shares; and
(I) 11,834,947 shares are reserved for issuance in
accordance with the Equity Incentive Plans.
(b) The Company agrees that the Capitalization Table attached hereto as
Exhibit H accurately reflects the capitalization of the Company (after giving
effect to the transactions contemplated by this Agreement, including the
issuance of the Warrants and the InSight Warrants to purchase up to 20,348,099
shares of Common Stock and the issuance to Insight of the Existing Debentures.
The parties acknowledge and agree that, with respect to the Transaction
Securities, the Capitalization Table attached hereto as Exhibit H assumes that
the Certificate of Amendment is effective.
(c) 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.
(d) 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.
(e) Except with respect to the corporate and other requisite action
necessary to effectuate the Certificate Amendment, the authorization,
reservation, issuance, sale and delivery, as applicable, of the New Debenture
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 New Debenture
Shares and the Warrant Shares (assuming the issuance thereof in accordance with
the applicable terms of the New Debentures or Warrants, as the case may be),
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 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.
--------------------------------
Except with respect to the corporate and other requisite action
necessary to effectuate the Certificate Amendment, 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 New Debentures, the Warrants, the
Fifth Amended and Restated Registration Rights Agreement, the Collateral Agency
and Intercreditor 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 New Debentures and the Warrants 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 New
Debentures and the Warrants 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 any Issuer or, except as previously disclosed in
writing to each of 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.
----------
Except with respect to the corporate and other requisite action
necessary to effectuate the Certificate Amendment, 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.
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 New
Debentures, the Warrants and the Warrant Shares 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 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 as set forth on Schedule 4.8A, 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
4.8B, 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 for defaults that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
4.9 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 4.9, 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 4.9, 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 4.9, 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.
(b) Except as otherwise disclosed in Schedule 4.10, 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.
4.10 LITIGATION OTHER PROCEEDINGS OR CLAIMS.
---------------------------------------
Except as set forth on Schedule 4.10, 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.
4.11 TERMINATION OF EMPLOYMENT.
--------------------------
To the Company's Best Knowledge, except as set forth on Schedule 4.11
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.
4.12 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.
4.13 REGISTRATION RIGHTS.
--------------------
Except as contemplated by the Fifth Amended and Restated Registration
Rights Agreement and except as set forth on Schedule 4.13, 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 to
itself only, as follows:
5.1 AUTHORIZATION OF THE FINANCING DOCUMENTS.
-----------------------------------------
Such 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 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 New Debentures and the Warrants to be purchased by such
Purchaser hereunder are being 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) Such Purchaser understands that (i) the New Debentures and the
Warrants 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 New Debentures and the
Warrants, 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. Such Purchaser is an "accredited investor" (as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act).
(c) Such Purchaser has had a reasonable time prior to the date hereof
to ask questions and receive answers concerning the terms and conditions of the
offering of the New Debentures and the Warrants, and to obtain any additional
information which the Company possesses or could acquire without unreasonable
effort or expense, and has generally such knowledge and experience in business
and financial matters and with respect to investments in securities of privately
held companies as to enable such Purchaser to understand and evaluate the risks
of such investment and form an investment decision with respect thereto.
(d) Such Purchaser is not relying on any representation, warranty,
statement, document, act (including the fact that Insight is an investor in the
Company) or investment expertise of Insight in making such Purchaser's decision
to purchase the New Debentures and the Warrants. In addition to making the above
representation and warranty to the Company, each Purchaser hereby makes such
representation and warranty to Insight.
(e) Such Purchaser has not 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) Provided that at least 15% of the original principal amount of the
Aggregate Convertible Debentures are outstanding, 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 Aggregate Convertible Debenture Super Majority
(based on outstanding principal amount) of the Aggregate Convertible Debentures,
if the effect of such change, 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
January 10, 2005 (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
Amendment") modifying or adding, as the case may be, such affirmative covenant
to this Agreement (and the Issuers agree 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 New Debentures remain outstanding, the
Company shall furnish the following to each of the Significant Purchasers
(unless such Significant Purchaser requests that such information not be
furnished at such time):
(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.
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
("Annual Budget"), 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. Within 10 days after any amendment to any budget, a
copy of such amendment.
(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.
(xi) Access to Records and Properties. For so long as any New
Debentures remain 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 in connection with any Purchaser's
compliance with Laws (in which case Purchaser will provide the Company
with prompt written notice so that it may seek a protective order or
other appropriate remedy)) 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 six. At the option of
the holders of at least two-thirds (based on outstanding principal
amount) of the Aggregate Convertible Debentures (the "Aggregate
Convertible Debenture Super Majority") at anytime, the Company shall
use its best efforts to cause two individuals appointed by such
Aggregate Convertible Debenture Super Majority to be nominated and
elected to the Board and each Subsidiary Board, and any committee
thereof (the "Aggregate Convertible Debenture Holders' Directors");
provided, however, that if (i) at any time the Aggregate Convertible
Debenture Holders hold less than 25% of the original principal amount
of the Aggregate Convertible Debentures, then the number of Aggregate
Convertible Debenture Holders' Directors shall be automatically reduced
to one, and (ii) if at any time the Aggregate Convertible Debenture
Holders hold less than 15% of the original principal amount of the
Aggregate Convertible Debentures, then the number of Aggregate
Convertible Debenture Holders' Directors shall be automatically reduced
to zero. The Aggregate Convertible Debenture Holders' Directors shall
be removed without cause only with the approval of the Aggregate
Convertible Debenture Super Majority. The rights granted under this
Section 6.3(a)(i) are inclusive of and not in addition to any similar
rights granted to Insight on July 26, 2001.
(ii) The provisions of clause (i) notwithstanding, at any time and
from time to time, a Aggregate Convertible Debenture Super Majority
shall have the right to remove any or both of Aggregate Debenture
Holders' Directors from the Board and each Subsidiary Board and, in
such case, the Aggregate Convertible Debenture Super Majority shall be
entitled to appoint an observer or observers (in addition to any
Observer rights Insight may have) to serve as an observer or observers
at all meetings of the Board and each Subsidiary Board, and any
committees thereof (the "Aggregate Convertible Debenture Holders'
Replacement Observers"). The Aggregate Convertible Debentures'
Replacement Observers shall have all of the rights of the Observers (as
hereinafter defined). At the election of the Aggregate Convertible
Debenture Super Majority at any time and from time to time, the Company
shall use its best efforts to cause individuals appointed by the
Aggregate Convertible Debenture Super Majority in place of the
Aggregate Convertible Debenture Holders' Replacement Observers, to be
nominated and elected to the Board and each Subsidiary Board, and any
committee thereof. In no event shall the Aggregate Convertible
Debenture Holders' as a result of this clause (ii) be entitled to
appoint more than two individuals to the Board or each Subsidiary
Board, or any committee thereof, as contemplated by Section 6.3(a)(i).
Such procedure shall be repeated at any time and from time to time at
the option of the Aggregate Convertible Debenture Super Majority.
(iii) The Company shall pay, or reimburse, the Aggregate
Convertible Debenture Holders' Directors or the Aggregate Convertible
Debenture Holders' Replacement Observers, as the case may be, for all
travel and related expenses incurred by the Aggregate Convertible
Debenture Holders' Directors, or the Aggregate Debenture Holders'
Replacement Observers, as the case may be, in connection with attending
such meetings and monitoring the Aggregate Convertible Debenture
Holders' investment in the New Debentures and the Existing Debentures.
The Company shall also pay for, or reimburse, the Aggregate Convertible
Debenture Holders for the travel and related expenses incurred by any
advisors of the Aggregate Convertible Debenture Holders' Directors or
the Aggregate Convertible Debenture Holders' 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 Aggregate Convertible Debenture Holders, which
policies shall name as an insured, or otherwise provide coverage to,
the Aggregate Convertible Debenture Holders' 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) Any Purchaser that holds at least $4,000,000 in principal
amount of New Debentures (each a "Four Million Dollar Holder") shall be
entitled to appoint 1 representative (the "New Debenture
Representative" and collectively with the Aggregate Convertible
Debenture Holders' Replacement Observers, the "Observers") who shall be
entitled to serve as an observer 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 each Four Million Dollar Holder specifying the name of the
applicable New Debenture Representative.
(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 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 New 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 Aggregate Convertible Debenture Holder of its
confidentiality obligations hereunder (provided that such information
may be disclosed to any other Persons who are bound by this provision
and in connection with a Purchaser's compliance with Laws in which case
Purchaser will provide the Company with prompt written notice so that
it may seek a protective order or other appropriate remedy) 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.
6.4 RIGHTS TO SUBSCRIBE FOR SECURITIES.
-----------------------------------
(a) For so long as any of the New 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 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
up to a number of Offered Securities that will allow such Purchaser to maintain
its fully-diluted ownership percentage of the
Company's common stock (assuming conversion of all securities of the Company
that are directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock).
(c) 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 notice delivered pursuant to Section
6.4(a) above. 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, on 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 6.4 may not be sold or
otherwise disposed of until they are again offered to the Purchasers under the
procedures specified in this Section 6.4.
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 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.
(d) The Company shall take all action necessary to obtain all approvals
and consents necessary for it to satisfy all of its obligations under this
Agreement, the Aggregate Convertible Debentures and the Aggregate Warrants.
Without limiting the generality of the foregoing, the Company shall take, in
accordance with applicable law and its Certificate of Incorporation, all action
necessary to convene a meeting of holders of Common Stock as promptly as
practicable, and in no event later than December 15, 2001, to consider and vote
upon an amendment of the Certificate of Incorporation (the "Certificate
Amendment") to increase the number of authorized shares of Common Stock to
permit the Company to satisfy the transactions contemplated hereunder (which
shall be 225,000,000 as the same shall be adjusted for any stock splits, reverse
stock splits, recapitalization etc.). The Company's board of directors shall
recommend approval of the Certificate Amendment and shall take all lawful action
to solicit such approval.
(e) The Company shall take all action necessary to comply with the
requirements specified in the letter addressed to Xxxx Xxxxxxxx from NASDAQ
dated August 23, 2001 (the "NASDAQ Letter").
(f) Anything to the contrary notwithstanding, if the Transaction
Securities are not fully convertible or exercisable, as the case may be, because
the Company has not increased the authorized shares of Common Stock to at least
225,000,000, the Company will not enter into any binding agreement to consummate
a Sale Event (as defined in the Debentures) unless the Company has made
arrangements to provide each holder of the Transaction Securities, pursuant to
the definitive documents for such Company, with the right to elect to receive
upon consummation of and out of the consideration to be paid in connection with
such Sale Event, the same consideration had all of such holder's Transaction
Securities been convertible or exercisable, as the case may be, immediately
prior to such Sale Event.
(g) The Company will not pay any amount (including, without limitation,
the original stated value of and premium, if any, and/or dividend) on the Series
A Convertible Redeemable Preferred Stock, or any other class or series of
capital stock of the Company, or to the holders of any such shares in respect of
any such shares unless and until the Aggregate Convertible Debentures, together
with all accrued interest and any premium thereon, have been indefeasibly repaid
in full or fully converted into equity securities of the Company.
(h) Each of the parties hereto agrees that all repayments of the
Aggregate Convertible Debentures (including any premium and/or accrued interest
thereon) by the Company (other than by conversion of the Aggregate Convertible
Debentures) will be paid pro rata to the Aggregate Convertible Debenture Holders
based upon the principal amount then outstanding to each of such parties.
(i) Insight agrees that it will not exercise its right to redeem the
Series A Preferred Stock until such time as all the Aggregate Convertible
Debentures have either been indefeasibly repaid in full or converted into Common
Stock.
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 thirty-sixth (36th) 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 (together with such
Purchaser, the "Purchaser Indemnified Persons") against all Losses in connection
with or arising from any Claim asserted 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.
(c) Notwithstanding anything to the contrary, each Issuer acknowledges
and agrees that its rights, benefits and remedies and the exercise thereof are
subject to the terms and provisions of the Collateral Agency and Intercreditor
Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 PARTIES IN INTEREST; THIRD PARTY BENEFICIARIES ASSIGNMENT.
----------------------------------------------------------
This Agreement shall bind and inure to the benefit of the Issuers, the
Purchasers and their respective successors and assigns. Insight is an intended
third party beneficiary of Section 2.1(c) and the Purchasers' representations
and warranties to the Company set forth in Section 5.2(d) hereof, and the
holders of the Existing Debentures are intended third party beneficiaries of the
rights of the holders of the Aggregate Convertible Debentures as specifically
provided hereunder. 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, member 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 New 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 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 Purchaser, to the address for such Purchaser set forth on
Schedule I hereto.
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 holders of 70%
(based on outstanding principal amount) of the New Debentures; provided,
however, that any such modification or amendment that affects the rights of the
holders of the Aggregate Convertible Debentures shall also require the approval
of the holders of a majority (based on outstanding principal amount) of the
Aggregate Convertible Debentures.
8.7 COUNTERPARTS.
-------------
This Agreement may be executed in any number of original or facsimile
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 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 Purchasers 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
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 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 New Debentures and the Warrants and the consummation of all
of the transactions contemplated by the Financing Documents (including, but not
limited to, the conversion of the New Debentures into New Debenture Shares),
which shall be payable at the Closing and may be netted from the wire transfer
as contemplated by Section 3.1(c)(ii), (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 New Debenture or New Debentures
Shares.
* * * * *
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
ISSUERS:
-------
EXCHANGE APPLICATIONS, INC.
By:
-------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By:
-------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
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 of each of the foregoing limited partnerships
By:
---------------------------------------------
Name:
Title:
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
SKP INVESTMENTS LLC
By:
-------------------------------
Name:
Title:
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
THK PRIVATE EQUITIES
By:
-------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxxxx
Title: Principal
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
XXXXXX FAMILY FOUNDATION
By:
-------------------------------
Name: Xxxx Xxxxxx
Title: Trustee
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
BOSTON PIPES, LLC
By:
-------------------------------
Name:
Title:
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Securities Purchase Agreement as of the date first written above.
-----------------------------------
XXXXX XXXXXXXX
SCHEDULE 4.1
ORGANIZATION
1. EXCHANGE APPLICATIONS, INC.
Massachusetts
2. CUSTOMER ANALYTICS, INC.
Massachusetts
Texas
3. KNOWLEDGE STREAM PARTNERS, INC.
Illinois
4. XXXX XXXXXXX INC. D/B/A EXSTATIC SOFTWARE
None
5. EXCHANGE APPLICATIONS SECURITIES CORPORATION
None
6. EXCHANGE APPLICATIONS FOREIGN SALES CORPORATION
None
7. XCHANGE K.K.
None
8. XCHANGE UK LTD.
None
9. XCHANGE ASIA PACIFIC PTY LTD.
None
SCHEDULE 4.2
CAPITALIZATION
As of August 29, 2001, the following is a summary of information concerning
options:
COLUMN A COLUMN B COLUMN C
Options Options Reserved Options Outstanding
Reserved for Future Grant
11,834,947 2,604,672 9,230,275
Payment and Registration Rights Agreement, dated as of December 28, 1999,
between the Company and MicroStrategy Incorporated.
Series A Preferred Stock - 5,325,645 shares outstanding.
Securities Purchase Agreement, dated as of January 10, 2001, among the Company
and InSight.
Warrant, dated April 16, 2001, issued by the Company to InSight.
Warrant to Purchase Stock issued on April 24, 2001 by the Company to Silicon
Valley Bank ("SVB").
Warrant to Purchase Stock issued on July 24, 2001 by the Company to Silicon
Valley Bank ("SVB").
Securities Purchase Agreement, dated as of July 26, 2001, among the Company and
InSight.
Warrant, dated August 29, 2001 issued by the Company to InSight.
SCHEDULE 4.6
COMMISSION FILINGS; FINANCIAL STATEMENTS
NONE.
SCHEDULE 4.8B
CERTAIN CONTRACTS
The Company failed to file a registration statement with the SEC on or prior to
June 30, 2001 covering certain shares of the Company's common stock as required
by the terms of Section 2 of the CA Agreement (as defined in Schedule 4.13).
The Company is not current with its registration requirements under the terms of
the MicroStrategy Agreement. MicroStrategy has been informed of this and has not
objected. MicroStrategy, however, has recently inquired about the filing of a
registration statement.
SCHEDULE 4.9
INTELLECTUAL PROPERTY RIGHTS
NONE.
SCHEDULE 4.10
LITIGATION AND OTHER PROCEEDINGS
The Company believes that the following cases are not material to the Company:
1. Xxxxxx and Xxxxxxx Xxxxxxx, individually and on behalf of all others
similarly situated, v. Xchange, Inc. (f/k/a Exchange Applications, Inc.)
Xxxxxx X. Xxxxxxx, F. Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxx X. XxXxxxxxx, Xxxx
X. X'Xxxxx, and Xxxxxx Xxxxxxxx.
2. Valassis Communications v. Exchange Applications, Inc.
SCHEDULE 4.11
TERMINATION OF EMPLOYMENT
None.
SCHEDULE 4.13
REGISTRATION RIGHTS
Payment and Registration Rights Agreement, dated as of December 28, 1999 (the
"MicroStrategy Agreement"), between the Company and MicroStrategy Incorporated.
Registration Rights Agreement, dated as of June 28, 2000 (the "CA Agreement"),
between the Company, and Xxxxx Xxxxxxxxx in his capacity as Shareholder
Representative pursuant to the Agreement and Plan of Merger, dated as of June 6,
2000, among the Company, Customer Analytics Holdings, Inc., CAH Acquisition
Corporation, and certain shareholders of Customer Analytics listed on Exhibit A
attached thereto.
Agreement and Plan of Merger and Reorganization, dated as of March 20, 2000 (the
"KSP Agreement"), between Exchange Applications, Inc., KSP Acquisition Corp.,
Knowledge Stream Partners, Inc., and Xxxxxx van der Hooning.
Registration Rights Agreement, dated as of April 24, 2001, by and between SVB
and the Company.
SCHEDULE 6.5
Financial Covenants
The Issuers shall comply with each of the following covenant(s). Compliance
shall be determined as of the end of each month and quarterly where indicated,
except as otherwise specifically provided below:
(a) EBITDA: The Issuers shall suffer maximum negative EBITDA or maintain a
minimum positive EBITDA per month and per quarter in accordance with the
schedule provided below:
Maximum Negative EBITDA - ($2,600,000)
September 2001 - $3,000,000
3rd Quarter 2001 ($2,000,000)
Maximum Negative EBITDA -
October 2001 - ($3,000,000)
November 2001 - ($1,750,000)
December 2001 - $3,250,000
4th Quarter 2001
Minimum Profit $1.00
Each Quarter thereafter Minimum Profit $1,000,000
(b) The Issuers will at all times maintain (i) cash on the balance sheet of
the Company of a minimum of $2,000,000.00 or (ii) excess "availability" under
the SVB Facility, as determined by the Purchasers based upon the Credit Limit
(as defined in the SVB Facility) restrictions set forth herein, of a minimum of
$2,000,000.00.
SCHEDULE A
----------
Insight Venture Partners IV (Collateral Agent), L.P.
EXHIBIT A
---------
Form of New Debenture
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE
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 DEBENTURE IS SUBJECT TO THE TERMS AND
PROVISIONS OF THE SECURITIES PURCHASE AGREEMENT (THE "PURCHASE AGREEMENT") AMONG
EXCHANGE APPLICATIONS, INC., EXSTATIC SOFTWARE, INC. AND THE PURCHASERS THEREIN,
DATED AS OF AUGUST 29, 2001, AS AMENDED FROM TIME TO TIME, AND THE HOLDERS OF
THIS DEBENTURE ARE ENTITLED TO THE BENEFITS THEREOF.
EXCHANGE APPLICATIONS, INC.
---------------------------
FORM OF
12% SENIOR SECURED SUBORDINATED
CONVERTIBLE DEBENTURE
New York, New York
U.S. [ ] August 29, 2001
SECTION 1. GENERAL; INTEREST; ADJUSTMENTS.
-------------------------------
(a) General. For value received, EXCHANGE APPLICATIONS, INC., a
Delaware corporation (the "Company") and EXSTATIC SOFTWARE, INC. (f/k/a Xxxx
Xxxxxxx, Inc.), a Washington corporation ("eXstatic") (the Company and eXstatic,
including any successors of the Company or eXstatic (by way of merger,
consolidation, sale or otherwise) together, the "Payors"), hereby promise to pay
to the order of [ ] or such payee's assigns (the "Payee"), [ ] or such lesser
principal amount, plus any accrued and unpaid interest thereon, which may be
outstanding hereunder on the earlier to occur of: (i) January 10, 2005 (the
"Maturity Date") and (ii) the date of the occurrence of any event prior to the
Maturity Date, as expressly set forth in Section 2 and Section 3 hereof. The
unpaid principal amount of this Debenture and the accrued and unpaid interest
thereon, shall be payable by wire transfer of immediately available funds to the
account of each Payee or by certified or official bank check payable to each
Payee mailed to each Payee at the address of each Payee as set forth on the
records of the Payors or such other address as shall be designated in writing by
each Payee to the Payors. Capitalized terms used and not otherwise defined
herein have the meanings ascribed
thereto in the Purchase Agreement. Anything to the contrary notwithstanding, in
no event shall the Payee be entitled to convert (in the aggregate) Conversion
Amounts (as defined below) (together with "Conversion Amounts" in respect of PIK
Debentures that may be issued from time to time under this Debenture) in excess
of 75% of the original principal amount of this Debenture 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 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).
(b) Interest. The Payors promise to pay interest on the outstanding
principal amount of this Debenture at the rate of (i) 12% per annum for the
period commencing on the date hereof ending on August 28, 2003 and (ii) 15% per
annum for the period commencing on August 29, 2003 and ending on the Maturity
Date or such earlier date that all obligations under this Debenture have been
paid in full (the "Initial Rate of Interest") ; provided, however, that upon the
occurrence of an Event of Default, the Payors promise to pay interest on the
outstanding principal amount of this Debenture at the rate of the Initial Rate
of Interest plus 2% from the date that such Event of Default has occurred and is
continuing until the date such Event of Default is cured, waived in writing by
the Payees or otherwise satisfied by the Payors in full; provided, further, that
the Initial Rate of Interest shall be increased to 20% or to the maximum rate
allowed under applicable law if raising the Interest Amount (as defined below)
to 20% would violate any law (which increase shall be retroactive to the date
hereof) if either: (i) the Company's stockholders fail to approve an amendment
to the Company's Certificate of Incorporation increasing the authorized number
of shares of Common Stock to at least 225,000,000 (as the same may be adjusted
for any stock split, reverse split, combination, recapitalization or similar
event after the date hereof) (or the 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) on or before December 15, 2001, or (ii) the Company
has failed to comply with all requirements specified in the NASDAQ letter on or
before September 10, 2001. Anything to the contrary notwithstanding, if the
Initial Rate of Interest is increased to 20% in accordance with the last proviso
of the preceding sentence and the failure giving rise to such increase is
subsequently cured, the Initial Rate of Interest shall automatically be reduced
as of the date of such cure to the rate that would otherwise have been in effect
had such failure not occurred. The Payors shall pay interest quarterly in
arrears on each of March 31, June 30, September 30 and December 31 of each year
or, if any such date shall not be a Business Day, on the next succeeding
Business Day to occur after such date (each date upon which interest shall be so
payable, an "Interest Payment Date"). Interest shall be payable, at the option
of the Payors, in (i) cash by wire transfer of immediately available funds equal
to such Interest Amount, (ii) the principal amount of additional Debentures
equal to the aggregate Interest Amount due to the Payees on such Interest
Payment Date ("PIK Debentures") or (iii) a combination of cash and PIK
Debentures. The Payors shall signify their election to make payment of an
Interest Amount in the form of cash or PIK Debentures, or a combination of cash
and PIK Debentures, by notifying each Payee of such election at least 20 days
prior to each Interest Payment Date; provided, however, that if the cash payment
of the Interest Amount is prohibited by the Subordination Agreement, payment
shall be automatically made in PIK Debentures. Interest on this Debenture shall
accrue daily, and compound quarterly, from the date of issuance until the date
of repayment in full of the principal amount of this Debenture, plus any accrued
and unpaid interest thereon. Interest shall be computed on the basis of a
365-day year and the actual number of days elapsed. Subject to applicable law,
any interest that shall accrue on overdue interest on this Debenture as provided
in this 8.16(b) and shall not have been paid in full on or before the next
Interest Payment Date to occur after the Interest Payment Date on which the
overdue interest became due and payable shall itself be deemed to be overdue
interest on this Debenture.
(c) Adjustments. The Payors irrevocably authorize the Payees to make,
or cause to be made, an appropriate notation on the grid attached as Schedule 1
hereto, or the continuation of such grid or any other similar record, including
computer records, to reflect any changes to the allocations among the Payees and
any adjustments thereto, as appropriate. The Payees shall provide to the Payors
an update of Schedule 1 to reflect any such allocations or adjustments. The
outstanding amount of this Debenture set forth on such grid, or the continuation
of such grid, or any other similar record, including computer records maintained
by the Payees with respect to this Debenture, shall be prima facie evidence of
the principal amount, and the accrued interest thereon, owing and unpaid by the
Payors to the Payees, but the failure to record, or any error in so recording
any such amount on any such grid, or any continuation thereof, or other record
shall not limit or otherwise affect the obligation of the Payors hereunder to
make payments of principal and interest on this Debenture when due. Each Payor
can rely on the latest copy of Schedule 1 delivered to each Payor by the Payees.
(d) The Company will not enter into any binding agreement to consummate
a Sale Event if the fair market value of the consideration per share of Common
Stock (assuming the conversion of (i) all of the Aggregate Convertible
Debentures; and (ii) all other securities convertible into Common Stock and with
an exercise price or conversion price less than the fair market value of such
consideration) to be paid in connection with such Liquidity Event is less than
the Conversion Price (as defined below) in effect at such time (assuming the
conversion of all principal and accrued and unpaid interest on all of the
outstanding Aggregate Convertible Debentures) unless the Company has made
arrangements to provide each holder of the Aggregate Convertible Debentures,
pursuant to the definitive documents for such Sale Event, the right to elect and
to receive upon consummation of and out of the consideration to be paid in
connection with such Sale Event, consideration having a fair market value (as
determined below) determined as of the date of the execution and delivery of the
definitive documents for such Sale Event equal to the Conversion Amount (as
defined below) for such holder's Debentures as of such date of execution and
delivery. As used herein "Sale Event" shall mean (i) the issuance, sale or
transfer of the outstanding shares of capital stock or other voting securities
of the Company, or (ii) the merger or consolidation of the Company with another
person or entity, in each case in clauses (i) or (ii) 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 15% 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.
(i) In any of such events, if the consideration received by the
Company is other than cash, its value will be deemed its fair market
value. The fair market value of any securities shall be determined as
follows:
(A) Securities not subject to any other restrictions on free
marketability covered by (B) below:
(1) If traded on a securities exchange or through the Nasdaq
National market, the fair market value shall be deemed to be the
average of the closing prices of the securities on such exchange
or system over the thirty (30) day trading period ending three (3)
days prior to the determination date;
(2) If actively traded over-the-counter, the fair market
value shall be deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the thirty (30) trading days
period ending three (3) days prior to the determination date; and
(3) If there is not active public market, the fair market
value shall be the fair market value thereof, as mutually
determined by the Company and the holders of at least a majority
of the outstanding Aggregate Convertible Debentures acting in good
faith (on a principal amount basis).
(B) The method of valuation of securities subject to any
restrictions on free marketability shall be to make an appropriate
discount from the market value to reflect the approximate fair market
value thereof, as mutually determined by the Company and the holders of
at least a majority of the outstanding Aggregate Convertible Debentures
acting in good faith (on a principal amount basis).
(e) Each Payor shall be jointly and severally liable to the Payees for
all of the monetary and other obligations of the Payors under this Debenture.
SECTION 2. PREPAYMENT.
-----------
(f) Prepayment at the Option of the Payors. The principal amount of
this Debenture, together with the accrued and unpaid interest thereon, may not
be prepaid in whole or in part at the option of the Payors at any time.
(g) Prepayment at Option of the Payees. At any time following the
earliest of (i) the occurrence of each Event of Default (and only during the
continuation of each such Event of Default), (ii) immediately upon (or
immediately prior to) the consummation of a Liquidity Event or (iii) January 10,
2004, each Payee may elect, at any time and from time to time, to have each
Payor prepay in whole or in part the aggregate principal amount of this
Debenture, plus any accrued and unpaid interest thereon (the "Prepayment
Amount"), at a price equal to the sum of (x) the product of (1) the Prepayment
Amount (excluding any accrued and unpaid interest thereon) and (2) 103%, plus
(y) any accrued and unpaid interest thereon calculated on the date (a
"Prepayment Date") of such prepayment (the "Prepayment Price"). Each Payee shall
give written notice to the Payors of such election (the "Notice of Election"),
whereupon the Payors shall be obligated to prepay such Prepayment Amount on such
Prepayment Date, which date shall be determined by the Payors, but in any event
shall not be later than 10 days after the date on which the Notice of Election
is delivered to the Payors. All such prepayments shall be made by wire transfer
of immediately available funds to a bank account designated by each Payee.
(h) General.
(i) The Payees shall not be entitled to any interest accruing on
the Prepayment Amount after the payment of such Prepayment Amount by
the Payors to the Payees on the Prepayment Date.
(ii) Anything contained in this Section 2 to the contrary
notwithstanding, the outstanding principal amount of this Debenture,
plus any accrued but unpaid interest thereon, shall remain subject to
optional prepayment provisions of this Section 2 and the optional
conversion provisions of Section 4 at all times up to the date on which
the full amount of the principal amount of this Debenture, plus any
accrued but unpaid interest thereon, is paid in full to the Payees.
SECTION 3. EVENTS OF DEFAULT.
------------------
(i) Definition. In each case of the happening of the following events
(each of which is an "Event of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time, a
"Default"):
(i) if a default occurs in the due observance or performance of
any covenant or agreement of the Payor to be observed or performed
pursuant to the terms of the Financing Documents and such default shall
continue for more than fifteen (15) days after notice thereof from any
Payee;
(ii) if a default occurs in the payment of any principal or
interest under any of the Aggregate Convertible Debentures, whether at
the stated date of maturity or any accelerated date of maturity or any
other date fixed for payment;
(iii) if any representation or warranty of the Payor or any of its
Subsidiaries in any Financing Document or in any other document or
instrument delivered pursuant to the Purchase Agreement shall prove to
have been false in any material respects (with the foregoing
materiality standard not to be construed in any manner giving
duplicative effect to any materiality standard contained in the terms
of such representation and warranty) upon the date when made or deemed
to have been made;
(iv) if a default occurs in the due observance or performance of
any covenant or agreement on the part of any Payor to be observed or
performed pursuant to the terms of such Payor's or any Subsidiary's
Indebtedness in an aggregate principal amount in excess of $500,000
(other than Indebtedness evidenced by the Loan and Security Agreement,
dated April 25, 2001 (the "SVB Facility") among the Payors and Silicon
Valley Bank ("SVB");
(v) if (i) a default occurs in the payment of any principal or
interest under any senior credit facility provided by a commercial
lender, (ii) any commercial lender accelerates the payment of principal
or interest under any Indebtedness of the Payors or any subsidiary
thereof, or (iii) any commercial lender commences an enforcement action
against any Payor or any Subsidiary thereof to collect such
Indebtedness or otherwise enforce its rights of any amount due under
any Indebtedness;
(vi) if a default occurs in the due observance or performance of
any covenant or agreement, including but not limited to, the failure of
the Company or any Subsidiary to pay any stated amount or any accrued
and unpaid dividends on the Series A Preferred Stock when the same
shall become due or payable at anytime, or the breach of any
representation or warranty on the part of the Company or any Subsidiary
to be observed or performed pursuant to the terms of the documentation
entered into in connection with the issuance of the Series A Preferred
Stock by the Company to the Payees and such default shall continue for
more than fifteen (15) days after the notice thereof from any Payee;
(vii) if any Payor shall (1) discontinue its business, (2) apply
for or consent to the appointment of a receiver, trustee, custodian or
liquidator of it or any of its property, (3) admit in writing its
inability to pay its debts as they mature, (4) make a general
assignment for the benefit of creditors, or (5) file a voluntary
petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or to take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation Laws, or an answer admitting the material
allegations of a petition filed against it in any Proceeding under any
such Law;
(viii) there shall be filed against any Payor an involuntary
petition seeking reorganization of such Payor or the appointment of a
receiver, trustee, custodian or liquidator of such Payor or a
substantial part of its assets, or an involuntary petition under any
bankruptcy, reorganization or insolvency Law of any jurisdiction,
whether now or hereafter in effect and such petition or appointment
shall continue unstayed and in effect for a period of 30 consecutive
days; and
(ix) if final judgment(s) for the payment of money in excess of an
aggregate amount of $500,000 not covered by insurance shall be rendered
against any Payor and shall remain undischarged for a period of 30
consecutive days during which such judgment and any levy or execution
thereof shall not have been effectively stayed or vacated;
then, upon each and every such Event of Default and at any time thereafter
during the continuance of such Event of Default, at the election of a Designated
Investor Majority (as such term is defined in the Collateral Agency and
Intercreditor Agreement), any and all Indebtedness of the Payors to the Payees
under this Debenture shall immediately become due and payable, including as to
principal and interest (including any deferred interest and any accrued and
unpaid interest), without presentment, demand, or protest, all of which are
hereby expressly waived, anything contained herein or in the Purchase Agreement
or other evidence of such indebtedness to the contrary notwithstanding. Anything
to the contrary notwithstanding, no Event of Default shall occur unless the
Payors shall have received written notice to such effect from a Designated
Investor Majority (as defined in the Collateral Agency and Intercreditor
Agreement) with respect to the occurrence of any event set forth above in this
8.16(i); provided, that this provision shall
not apply to any event described in 8.16(i)(vii) or (viii), the occurrence of
which shall automatically be a Default or Event of Default, as the case may be,
and shall result in all amounts hereunder becoming immediately due and payable,
in each without requiring any action by any Investor, group of Investors or the
Collateral Agent. Events of Default may be waived by consent of a Designated
Investor Majority.
(j) Remedies on Default, Etc.
In case any one or more Events of Default shall occur and be continuing
and acceleration of this Debenture or any other Indebtedness of the Payors to
the Payees shall have occurred, each Payee may, among other things, proceed to
protect and enforce its rights by an action at law, suit in equity or other
appropriate Proceeding, whether for the specific performance of any agreement
contained herein or any of the other Financing Documents, or for an injunction
against a violation of any of the terms hereof or thereof or in and of the
exercise of any power granted hereby or thereby or by Law. No right conferred
upon each Payee hereby or by the Purchase Agreement shall be exclusive of any
other right referred to herein or therein or now or hereafter available at law,
in equity, by statute or otherwise. Notwithstanding anything to the contrary,
each Payee acknowledges and agrees that its rights, benefits and remedies and
the exercise thereof are subject to the terms and provisions of the Collateral
Agency and Intercreditor Agreement dated as of the date hereof among the Payee,
the other Purchasers, Insight and the other parties thereto and the
Subordination Letter Agreement dated as of the date hereof among SVB and the
Purchasers.
SECTION 4. CONVERSION OF THIS DEBENTURE.
-----------------------------
(k) Conversion at the Option of the Payees. From and after the 10th day
following the date of mailing of the notice to the Company's stockholders
pursuant to NASD Rule 4350(i)(2), subject to and in compliance with the
applicable provisions of this Section 4, each Payee shall have the right, at
such Payee's option, at any time and from time to time, to convert all or any
portion of this Debenture, plus any accrued and unpaid interest thereon up to
the conversion date (the "Conversion Amount"), into that number of fully paid
and nonassessable shares of Common Stock equal to the quotient obtained by
dividing (1) the sum of (x) the product of (A) the Conversion Amount (excluding
any accrued and unpaid interest thereon) and (B) 103% plus (y) any accrued and
unpaid interest thereon calculated on any conversion date, by (2) the Conversion
Price, as last adjusted and then in effect. The "Conversion Price" shall
initially equal $.3183. The Conversion Price shall be subject to adjustment from
time to time as set forth in paragraph (m) below. The Payors shall give the
Payees not less than 30 Business Days prior notice of a Sale of the Company,
including the price and material terms and conditions thereof, in order to
provide the Payees reasonable opportunity to consider whether to convert the New
Debentures into Common Stock at or prior to such Sale of the Company. If the
price or material terms or conditions of such transaction thereafter change, the
Payors shall promptly deliver written notice to the Payees specifying such
changes. Upon conversion, the Company will issue cash in lieu of fractional
shares of Common Stock.
(l) Conditional Exercise or Exchange. If the Payees so elect, they may
condition the conversion of this Debenture on a Sale of the Company or other
transaction being undertaken by the Company and such conversion shall not be
deemed to have occurred except concurrently
with the Sale of the Company or such other transaction, except that, for
purposes of determining whether such conversion is timely it shall be deemed to
have occurred one day prior to a Sale of the Company or such other transactions.
If any exercise of this Debenture is so conditioned, then, subject to delivery
of the items required by 8.16(n), the Payees shall deliver the certificates and
other evidence of ownership of other securities or other property in such manner
as the Payors shall direct as required in connection with the consummation of a
Sale of the Company or such other transactions upon which the conversion is
conditioned. At any time that the Payors shall give notice to the Payees that
the proposed Sale of the Company or other transaction has been abandoned or the
Company has withdrawn from participation in such transaction, the Payors shall
return the items delivered pursuant to 8.16(n), and the Payees election to
convert this Debenture shall be deemed rescinded.
(m) Adjustments.
(i) No adjustment in the Conversion Price shall be made in respect
of the issuance of additional Securities except as expressly provided
below:
(A) If the Company shall, at any time or from time to time
after the date hereof, issue any Securities (other than Excluded
Securities) (including any shares of Common Stock deemed to have
been issued pursuant to subdivision (C) of clause (ii) below)
without consideration or for a consideration per share less than
the Conversion Price in effect immediately prior to each such
issuance, then such Conversion Price shall forthwith be lowered to
the price equal to the consideration per share received in such
issuance.
(ii) For the purposes of any adjustment of the Conversion Price
pursuant to clause (i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock for cash in
a public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or placement fees payable by
the Company to any underwriter or placement agent in connection
with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall, in the case of any 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) ("Marketable Securities"), be deemed to be the Market Price
and in all other cases, the value of such consideration shall be
set by the Board acting reasonably and in good faith.
(C) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, Securities by their terms
convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or
exchangeable Securities:
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subdivisions (A) and (B) above), if any, received by
the Company upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable Securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable Securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
Securities, options, or rights were issued and for a consideration
equal to the consideration received by the Company for any such
Securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends),
plus the additional consideration, if any, to be received by the
Company upon the conversion or exchange of such Securities or the
exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in subdivisions
(A) and (B) above).
(3) On any change in the number of shares or exercise price
of Common Stock deliverable upon the exercise of any such options
or rights or the conversion or exchange of such convertible or
exchangeable Securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have been obtained
had the adjustment made upon the issuance of such options, rights
or Securities not converted prior to such change or options or
rights related to such Securities not converted prior to such
change been made upon the basis of such change.
(4) On the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable Securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the
adjustment made upon the issuance of such options, rights,
Securities or options or rights related to such Securities been
made upon the basis of the issuance of only the number of shares
of Common Stock actually issued upon the exercise of such options
or rights, upon the conversion or exchange of such convertible or
exchangeable Securities, or upon the exercise of the options or
rights related to such convertible or exchangeable Securities and
subsequent conversion or exchange thereof.
(5) In any case in which shares of Common Stock are deemed
to have been issued pursuant to subdivisions (1) or (2) above, no
further adjustments in the Conversion Price shall be made upon the
subsequent issuance of such Common Stock upon exercise, conversion
or exchange.
(iii) 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
Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of this Debenture shall
be increased in proportion to such increase in outstanding shares of
Common Stock.
(iii) 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 Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of
this Debenture shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.
(iv) 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), or any consolidation or merger of the
Company, this Debenture shall after such reorganization,
reclassification, consolidation or merger be convertible into 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
conversion of this Debenture 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.
(v) If any event occurs of the type similar to those contemplated
by the provisions of this 8.16(n) but not expressly provided for by
such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Board shall make an appropriate reduction in the
Conversion Price so as to protect the rights of the holders of the
Debentures.
(vi) All calculations under this paragraph shall be made to the
nearest one hundredth (1/100) of a cent.
(vii) In any case in which the provisions of this paragraph (c)
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 this Debenture
converted after such record date and before the occurrence of such
event the shares of capital stock issuable upon such conversion by
reason of the adjustment required by such event in addition to the
shares of capital stock issuable upon such conversion 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 pursuant to
paragraph 4(a) or 4(b) above; 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 Conversion Price shall be appropriately adjusted to
eliminate any adjustment previously made on account of such record
date.
(viii) Whenever the Conversion Price shall be adjusted as provided
in this paragraph (c), 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 Conversion Price 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 this Debenture 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 (x)
below.
(ix) If the Company shall propose to take any action of the types
described in clauses (ii), (iii), (iv) or (v) of this paragraph (c),
the Company shall give notice to each holder of this Debenture, in the
manner set forth in paragraph (ix) above, 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 Conversion 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 conversion of this Debentures. 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.
(x) Each Payor will not, 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 such Payor, but will at all times in good faith
assist in the carrying out of all the provisions of this 8.16(m) and in
the taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of this Debenture against
impairment.
(xi) The computations of all amounts under this 8.16(m) shall be
made assuming all other anti-dilution or similar adjustments to be made
to the terms of all other Securities resulting from the transaction
causing an adjustment pursuant to this 8.16(n) have previously been
made so as to maintain the relative economic interest of this Debenture
vis a vis all other securities issued by the Company.
(xii) The Company shall take or cause to be taken such steps as
shall be necessary to ensure that the par value per share of Common
Stock is at all time less than or equal to the Conversion Price.
(xiii) In the event the Company grants, issues or sells any
options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then this Debenture
shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate number or amount of such stock,
warrants, securities or other property which such Payee could have
acquired if such Payee had held the Common Stock acquirable upon
complete conversion of their Debenture immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of the
grant, issue or sale of such Purchase Rights.
(n) Conversion Mechanics. Each conversion of this Debenture into shares
of Common Stock shall be effected by the delivery of written notice and
surrender of this Debenture by the Payees to the Payors stating that such Payees
desire to convert the Conversion Amount into the number of shares of the class
into which such shares may be converted (the "Converted Securities"). Such
notice shall also state the name or names (with addresses) in which the
Converted Securities are to be issued and shall include instructions for the
delivery thereof. A Payee may make any such notice of conversion conditional
upon the happening of any event or the passage of such time as is specified by
such Payee in such conversion notice, and may rescind any notice of conversion
prior to the effective time thereof specified in any such notice. Not less than
5 Business Days after such surrender and the receipt of such written notice of
conversion (each, a "Conversion Payment Date"), the Company will issue, deliver
or pay in accordance with the surrendering Payee's instructions (A) the
certificate or certificates evidencing the Converted Securities issuable upon
such conversion, (B) cash in lieu of fractional shares of Common Stock, as
determined pursuant to this Section 4 and (C) a debenture that represents the
portion of this Debenture which was not converted on terms identical to this
Debenture. Such conversion, to the extent permitted by Law, shall be deemed to
have been effected as of the close of business on the date on which such
debenture or debentures shall have been surrendered and such notice shall have
been received by the Company and becomes effective by its terms (each, a
"Surrender Date") and at such time the rights of each Payee as such Payee shall
cease with respect to the Conversion Amount and the person or persons in whose
name or names the certificate or certificates for the Converted Securities are
to be issued upon such conversion shall be deemed to have become the holder or
holders of record of the Converted Securities. Upon issuance of shares in
accordance with this Section 4, such Converted Securities shall be deemed to be
duly authorized, validly issued, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof and free from all taxes, liens or
charges with respect thereto due to any action of the Company. The Company shall
take all such actions as may be necessary to assure that all such shares may be
so issued without violation of any applicable Law or any requirements of any
domestic securities exchange upon which such shares may be listed (except for
official notice of issuance which will be immediately transmitted by the Company
upon issuance). The Company shall not close its books against the transfer of
securities in any manner which would interfere with the timely conversion of any
securities. The issuance of certificates for Converted Securities shall be made
without charge to the holders of such securities for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such conversion
and/or the issuance of such securities; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Converted Securities. In the event the
holder of shares converted hereunder, in connection with the conversion of
securities hereunder, shall be required to file a notification pursuant to the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, each Payor and the holder
shall take all actions necessary to comply with such notification requirement
and the conversion hereunder of the Conversion Amount shall become effective
upon the expiration of the applicable waiting period. Subject to Sections 4(a)
and (b), no fractional shares of Common Stock or scrip shall be issued upon
conversion of any securities. The number of full shares issuable upon conversion
shall be computed on the basis of the Conversion Amount to be converted by a
Payee. Instead of any fractional shares which would otherwise be issuable upon
conversion of the Conversion Amount, the Company shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the product of (i) the
Market Price of one share of such Common Stock and (ii) such fractional
interest. Subject to Sections 4(a) and (b), the holders of fractional interests
shall not be entitled to any rights as stockholders of the Company in respect of
such fractional interests.
SECTION 5. DEFENSES.
---------
The obligations of the Payors under this Debenture shall not be subject
to reduction, limitation, impairment, termination, defense, set-off,
counterclaim or recoupment for any reason.
SECTION 6. EXCHANGE OR REPLACEMENT OF DEBENTURE.
-------------------------------------
(o) The Payees collectively may, at their option, in person or by duly
authorized attorney, surrender this Debenture for exchange, at the principal
business office of any Payor, and the Payees, or each Payee, as the case may be,
will receive in exchange therefor, a new Debenture or Debentures, as the case
may be, in the same principal amount as the unpaid principal amount of this
Debenture, or such Payees percentage allocation (as set forth on Schedule 1
hereto) of the unpaid principal amount, as the case may be, and bearing interest
at the same annual rate as this Debenture, such new Debenture, or Debentures, as
the case may be, to be dated as of the date of this Debenture and to be in such
principal amount as remains unpaid and payable to such person or persons, or
order, as the Payees may designate in writing.
(p) Upon receipt by the Payors of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Debenture, and (in case of loss,
theft or destruction) of an indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Debenture, if mutilated, the Payors will
deliver a new Debenture of like tenor in lieu of this Debenture. Any Debenture
delivered in accordance with the provisions of this Section 6 shall be dated as
of the date of this Debenture.
SECTION 7. EXTENSION OF MATURITY.
----------------------
Should the principal of or interest on this Debenture become due and
payable on other than a Business Day, the maturity date thereof shall be
extended to the next succeeding Business Day, and, in the case of principal,
interest shall be payable thereon at the rate per annum herein specified during
such extension.
SECTION 8. ATTORNEYS' AND COLLECTION FEES.
-------------------------------
Should the indebtedness evidenced by this Debenture or any part hereof
be collected at law or in equity or in bankruptcy, receivership or other court
proceedings, or this Debenture be placed in the hands of attorneys for
collection, the Payors agree to pay, in addition to principal and interest due
and payable hereon, all reasonable costs of collection, including reasonable
attorneys' fees and expenses, incurred by the Payees in collecting or enforcing
this Debenture.
SECTION 9. WAIVERS.
--------
(q) Each Payor hereby waives presentment, demand for payment, notice of
dishonor, notice of protest and all other notices or demands in connection with
the delivery, acceptance, performance or default of this Debenture.
(r) No delay by any Payee in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise; and no waiver
whatsoever or modification of the terms hereof shall be valid unless set forth
in writing by any Payee and then only to the extent set forth therein.
SECTION 10. AMENDMENTS AND WAIVERS.
-----------------------
Except for amendments that are made to reflect transfers among the
Payee and/or its affiliates, and do not increase the overall amount of
indebtedness hereunder (and such amendments may be made by unanimous agreement
among Payees), no provision of this Debenture may be amended or waived except if
such amendment and waiver is in writing and is signed, in the case of an
amendment, by the Payee, or, in the case of a waiver, by the party against whom
the waiver is to be effective.
SECTION 11. GOVERNING LAW.
--------------
This Debenture is made and delivered in, and 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 12. NOTICES.
--------
The terms and provisions of Section 8.5 of the Purchase Agreement are
expressly incorporated into this Debenture.
SECTION 13. SEVERABILITY.
-------------
If any provision of this Debenture 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 Debenture 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 Debenture or
amending or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 14. ASSIGNMENT.
-----------
Neither the Payors nor the Payee may assign their rights or obligations
hereunder to any Person, except that the Payee may assign any of its rights and
obligations hereunder to its members, limited partners or any Affiliate of such
Payee; provided, that the assignment assigns at least $500,000 in face amount of
this Debenture.
*****
IN WITNESS WHEREOF, each Payor has duly executed and delivered this
Debenture as of the date first written above.
EXCHANGE APPLICATIONS, INC.
By:
-------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By:
-------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXHIBIT B
---------
Form of Warrant
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 HOLDER OF THIS WARRANT IS ENTITLED TO THE BENEFITS THEREOF.
EXCHANGE APPLICATIONS, INC.
---------------------------
FORM OF
WARRANT
NO.: W-[ ] AUGUST 29, 2001
VOID AFTER AUGUST 29, 2011
(OR EARLIER UPON THE OCCURRENCE OF
CERTAIN EVENTS DESCRIBED BELOW)
Section 15. THIS CERTIFIES THAT, FOR VALUE RECEIVED, [ ] OR SUCH
HOLDER'S RESPECTIVE ASSIGNS (THE "HOLDER") 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 [ ] 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 16. Exercise Period. THIS WARRANT MAY BE EXERCISED, IN WHOLE OR
IN PART, BY THE HOLDER 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 HOLDER 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 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 17. Exercise Price. THE EXERCISE PRICE (THE "EXERCISE PRICE")
AT ANY TIME FOR EACH WARRANT SHARE SHALL BE $.3183.
Section 18. Exercise of Warrant; Warrant Shares.
(s) 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 Holder at the address of the 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.
(t) 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 the
Holder or the 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 the Holder a new Warrant, registered
in the name of the Holder, of like tenor to this Warrant, for the balance of the
Warrant Shares that remain after exercise of the Warrant.
(u) 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 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.
(v) 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.
(w) 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.
(x) 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 (v) or (w) 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.
(y) All calculations under this paragraph shall be made to the nearest
one hundredth (1/100) of a cent.
(z) 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 shall be appropriately adjusted to eliminate
any adjustment previously made on account of such record date.
(aa) 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 (bb) below.
(bb) If the Company shall propose to take any action of the types
described in clauses (v), (w) or (x)of this Section 18, 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.
(cc) 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 19. Representations, Warranties and Covenants. THE COMPANY
REPRESENTS AND WARRANTS TO THE 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 HOLDER). 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 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 HOLDER 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 HOLDER. IF REQUESTED BY THE
COMPANY'S BANK LENDERS, THE HOLDER 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 HOLDER TO RECEIVE
PAYMENTS OF CASH FROM THE COMPANY WITH RESPECT TO SUCH NOTES. THE HOLDER AGREES
NOT TO EXERCISE THIS WARRANT UNLESS THE COMPANY HAS SUFFICIENT AUTHORIZED SHARES
TO ISSUE THE HOLDER THE NUMBER OF SHARES OF COMMON STOCK TO WHICH THE HOLDER IS
ENTITLED UNDER THIS WARRANT.
Section 20. No Shareholder Rights. PRIOR TO EXERCISE, THIS WARRANT
SHALL NOT ENTITLE THE HOLDER TO ANY VOTING RIGHTS OR OTHER RIGHTS AS A
SHAREHOLDER OF THE COMPANY.
Section 21. Restrictions on Transfer. THE HOLDER 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 HOLDER 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 HOLDER, (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 22. 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 23. Notices. THE TERMS AND PROVISIONS OF SECTION 8.5 OF THE
PURCHASE AGREEMENT ARE EXPRESSLY INCORPORATED IN THIS WARRANT.
Section 24. 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 25. 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 26. 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 27. 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 HOLDER, OR IN THE
CASE OF A WAIVER, BY THE PARTY AGAINST WHOM THE WAIVER IS TO BE EFFECTIVE.
Section 28. 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.
* * * *
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: _______________________________
Name:
Title:
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
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:
-----------------------------
EXHIBIT C
---------
Form of Fifth Amended and Restated
Registration Rights Agreement
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
(the "Agreement"), dated as of
August 29, 2001, among EXCHANGE
APPLICATIONS, INC., a Delaware
corporation (the "Corporation"),
and INVESTORS (as herein
defined).
Insight and the Corporation are party to the Fourth Amended and
Restated Registration Rights Agreement, dated July 26, 2001 (the "Fourth Amended
and Restated Registration Rights Agreement").
Insight, the other Investors and the Corporation hereby desire to amend
and restate the Fourth Amended and Restated Registration Rights Agreement as
hereinafter set forth.
The Investors own or have the right to purchase or otherwise acquire
shares of the capital stock of the Corporation. The Corporation and the
Investors deem it to be in their respective best interests to set forth the
rights of the Investors in connection with public offerings and sales of the
Common Stock. To that end, the Corporation and the Investors hereby set forth
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the Corporation and the Investors hereby
agree as follows:
SECTION 29. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(dd) "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.
(ee) "April 16 Warrant" means the Warrant dated as of April 16, 2001,
issued by the Corporation to Insight.
(ff) "August 29 Warrants" means the warrants dated as of the date
hereof, issued by the Corporation to certain of the Investors.
(gg) "Business Day" means any day that is not a Saturday, Sunday, legal
holiday or other day on which banks are required to be closed in New York and
Massachusetts.
(hh) "Closing Date" means the date hereof.
(ii) "Commission" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
(jj) "Common Stock" means the common stock, $.001 par value per share,
of the Corporation.
(kk) "Convertible Debentures" means, collectively, the (i) U.S.
$7,318,307.37 million principal amount 12% Senior Subordinated Convertible
Debenture, plus any accrued and unpaid interest thereon, and (ii) U.S.
$5,055,890.41 principal amount 12% Senior Subordinated Convertible Debenture,
plus any accrued and unpaid interest thereon, each of (i) and (ii) dated as of
July 26, 2001, issued by the Corporation and eXstatic to Insight, and (iii) U.S.
$15,500,000 principal amount 12% Senior Subordinated Convertible Debentures,
plus any accrued and unpaid interest thereon, dated the date hereof, issued by
the Corporation and eXstatic to certain Investors.
(ll) "Corporation" shall have the meaning ascribed to such term in the
Caption.
(mm) "Counsel" shall have the meaning ascribed to such term in Section
6(b).
(nn) "Exchange Act" means the Securities Exchange Act of 1934 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
(oo) "eXstatic" means eXstatic Software, Inc., a Washington corporation
and wholly owned subsidiary of the Corporation.
(pp) "Group" means:
(i) in the case of any Investor who is an individual, (i) such
Investor, (ii) the spouse, parent, sibling or descendants of such
Investor, (iii) all trusts for the benefit of such Investor, and (iv)
all Persons principally owned by and/or organized or operating for the
benefit of any of the foregoing and (v) all Affiliates of such
Investor;
(ii) in the case of any Investor that is a partnership, (i) such
Investor, (ii) its limited, special, venture and general partners,
(iii) any Person to which such Investor shall transfer all or
substantially all of its assets, and (iv) all Affiliates and employees
of and consultants to, such Investor or any of its Affiliates; and
(iii) in the case of any Investor which is a corporation or a
limited liability company, (i) such Investor, (ii) its Investors or
members as the case may be, (iii) any Person to which such Investor
shall Transfer all or substantially all of its assets, and (iv) all
Affiliates of such Investor.
(qq) "Information" shall have the meaning ascribed to such term in
Section 6(i).
(rr) "Insight" means, collectively, InSight Venture Partners, IV, L.P.,
InSight Venture Partners (Cayman) IV, L.P., InSight Venture Partners IV (Fund
B), L.P. and InSight Venture Partners IV (Co-Investors), L.P., and their
respective Affiliates.
(ss) "Inspectors" shall have the meaning ascribed to such term in
Section 6(i).
(tt) "Investors" means the Persons set forth on Schedule I and each
additional Person who shall execute a counterpart signature page hereto, and,
subject to Section 15 hereof, includes any successor to, or assignee or
transferee of, any such Person who or which agrees in writing to be treated as
an Investor hereunder and to be bound by the terms and comply with all
applicable provisions hereof.
(uu) "June 1 Warrant" means the Warrant dated June 1, 2001, issued by
the Corporation to Insight.
(vv) "New Insight Warrant" means the Warrant dated as of the date
hereof, issued by the Corporation to Insight.
(ww) "Other Shares" means at any time those shares of Common Stock
which do not constitute Primary Shares or Registrable Shares.
(xx) "Person" means any individual, partnership, corporation, group,
trust, limited liability company or other legal entity.
(yy) "Primary Shares" means at any time the authorized but unissued
shares of Common Stock and shares of Common Stock held by the Corporation in its
treasury.
(zz) "Records" shall have the meaning ascribed to such term in Section
6(i).
(aaa) "Registrable Shares" means, with respect to any Investor, (i) the
shares of Common Stock held by such Investor, (ii) the shares of Common Stock
issuable upon conversion of the Convertible Debentures, (iii) the shares of
Common Stock issuable upon exercise of the April 16 Warrant, (iv) shares of
Common Stock issuable upon exercise of the June 1 Warrant, (v) shares of Common
Stock issuable upon exercise of the New Insight Warrant, (vi) shares of Common
Stock issuable upon exercise of the August 29 Warrants, (vii) the shares of
Common Stock issuable upon exercise of the Series A Preferred Stock, which
shares in each of (i), (ii), (iii), (iv), (v), (vi) and (vii) constitute
Restricted Shares.
(bbb) "Registration Statement" means any registration statement of the
Corporation which covers any of the Registrable Shares, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
(ccc) "Requisite Investors" means any two of the following three
Persons: (1) Insight, (2) THK Private Equities and (3) Boston Pipes.
(ddd) "Restricted Shares" means shares of Common Stock held by the
Investors issued or issuable upon conversion of the Convertible Debentures, the
Series A Preferred Stock or upon exercise of the Warrants which have not been
registered under the Securities Act. As to any particular Restricted Shares,
once issued, such Restricted Shares shall cease to be Restricted Shares when (i)
they have been registered under the Securities Act, the registration statement
in connection therewith has been declared effective and they have been disposed
of pursuant to such effective registration statement, (ii) all such shares are
eligible to be sold or distributed pursuant to Rule 144 within any consecutive
three-month period (including, without limitation, Rule 144(k)), or (iii) they
shall have ceased to be outstanding.
(eee) "Rule 144" means Rule 144 promulgated under the Securities Act or
any successor rule thereto or any complementary rule thereto (such as Rule
144A).
(fff) "SEC" means the U.S. Securities and Exchange Commission.
(ggg) "Securities Act" means the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
(hhh) "Series A Preferred Stock" means the Series A Convertible
Redeemable Preferred Stock, $.001 par value per share, of the Corporation.
(iii) "Shelf Registration" shall have the meaning ascribed to it in
8.16(rrr).
(jjj) "Silicon Valley Shares" means collectively the shares of Common
Stock issuable upon exercise of the Warrant, dated (i) April 24, 2001, and (ii)
July 26, 2001, both (i) and (ii) issued by the Corporation to Silicon Valley
Bank.
(kkk) "Warrants" means, collectively, the (i) April 16 Warrant, (ii)
the June 1 Warrant, (iii) the New Insight Warrant and (iv) the August 29
Warrants.
SECTION 30. REQUIRED REGISTRATION.
----------------------
(lll) From and after the Closing Date, if the Requisite Investors shall
in writing state that such holders desire to sell Registrable Shares in the
public securities markets and request the Corporation to effect the registration
under the Securities Act of Registrable Shares, the Corporation shall promptly
use commercially reasonable efforts to effect the registration under the
Securities Act of the Registrable Shares which the Corporation has been so
requested by the Requisite Investors to register.
(mmm) Anything contained in Section 2(a) to the contrary
notwithstanding, the Corporation shall not be obligated to effect any
registration under the Securities Act pursuant to Section 2(a) except in
accordance with the following provisions:
(i) The Corporation shall not be obligated to use commercially
reasonable efforts to file and cause to become effective (A) more than
two Registration Statements initiated pursuant to this Section 2(a);
provided, however, that if the Investors were unable to sell at least
90% of the Registrable Shares requested to be included in the last
registration initiated by such group of Investors pursuant to Section
2(a) as a result of an underwriter's cutback, then additional
registrations shall be added to this Section 2(b) until the foregoing
condition is satisfied for such initiating group of Investors, or (B)
any Registration Statement during any period in which any other
Registration Statement (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto) pursuant to
which Primary Shares or Other Shares are to be or were sold has been
filed and not withdrawn or has been declared effective within the prior
90 days.
(ii) The Corporation may delay the filing or effectiveness of any
Registration Statement for a period of up to 90 days after the date of
a request for registration pursuant to Section 2(a), if at the time of
such request (i) the Corporation is engaged, or has fixed plans to
engage within 90 days of the time of such request, in a firm commitment
underwritten public offering of Primary Shares in which the Investors
holding Registrable Shares may include such Registrable Shares pursuant
to Section 3 or (ii) the Corporation reasonably determines that such
registration and offering would interfere with any material transaction
involving the Corporation; provided, however, that the Corporation may
only delay the filing or effectiveness of a registration statement
pursuant to this Section 2(b) for a total of 90 days after the date of
a request for registration.
(iii) With respect to any registration pursuant to this Section
2(a), the Corporation shall give notice of such registration to the
Investors who do not request registration hereunder and to the holders
of all Other Shares which are entitled to registration rights and the
Corporation may include in such registration any Primary Shares or
Other Shares; provided, however, that if the managing underwriter
advises the Corporation that the inclusion of all Registrable Shares,
Primary Shares and/or Other Shares proposed to be included in such
registration would interfere with the successful marketing (including
pricing) of the Registrable Shares proposed to be included in such
registration, then the number of Registrable Shares, Primary Shares
and/or Other Shares proposed to be included in such registration shall
be included in the following order:
(A) first, pro rata among (x) the Registrable Shares
requested by the Investors to be included in such registration
(or, if necessary, such Registrable Shares pro rata among the
holders thereof based upon the number of Registrable Shares
requested to be registered by each such Investor), (y) the Other
Shares (only to the extent required by an effective Registration
Rights Agreement entered into prior to March 28, 2001 between the
Corporation and the holders of such Other Shares) and (z) the
Silicon Valley Shares;
(B) second, the Primary Shares; and;
(C) third, the Other Shares which are entitled to
registration rights.
(nnn) A requested registration under Section 2(a) may be rescinded as
to all of the Registrable Shares requested to be so registered prior to such
registration being declared effective by the Commission by written notice from
such Requisite Investors to the Corporation; provided, however, that such
rescinded registration shall not be deemed a Registration Statement initiated
pursuant to Section 2(a) for the purpose of Section 2(b)(i)(A) if the
Corporation shall have been reimbursed for all out-of-pocket expenses incurred
by the Corporation in connection with such rescinded registration.
SECTION 31. PIGGYBACK REGISTRATION.
-----------------------
(ooo) From and after the Closing Date, if the Corporation at any time
proposes for any reason to register Primary Shares or Other Shares under the
Securities Act (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), it shall give written notice to
the Investors of its intention to so register such Primary Shares or Other
Shares at least 30 days before the initial filing of such Registration Statement
and, upon the written request, delivered to the Corporation within 20 days after
delivery of any such notice by the Corporation, of the Investors to include in
such registration Registrable Shares (which request shall specify the number of
Registrable Shares proposed to be included in such registration and shall state
that the Investors desire to sell such Registrable Shares in the public
securities markets), the Corporation shall use commercially reasonable efforts
to cause all such Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; provided, however, that if the managing underwriter advises the
Corporation that the inclusion of all Registrable Shares requested to be
included in such registration would interfere with the successful marketing
(including pricing) of the Primary Shares or Other Shares proposed to be
registered by the Corporation, then the number of Primary Shares, Registrable
Shares and Other Shares) proposed to be included in such registration shall be
included in the following order:
(i) first, pro rata among (w) the Corporation and the holders of
Other Shares initiating such registration, as the case may be, (x)
Investors requesting their Registrable Shares be included in such
registration (or, if necessary, such Registrable Shares pro rata among
the holders thereof based upon the number of Registrable Shares
requested to be registered by each such holder), (y) the Other Shares
(only to the extent required by an effective Registration Rights
Agreement entered into prior to March 28, 2001 between the Corporation
and the holders of such Other Shares) and (z) the Silicon Valley
Shares; and
(ii) second, the Other Shares which are entitled to registration
rights and are held by holders who are not initiating such registration
under this Section 3.
(ppp) The number of requests permitted by the Investors pursuant to
this Section 3 shall be unlimited.
SECTION 32. REGISTRATIONS ON FORM S-3 AND PURSUANT TO RULE 415.
---------------------------------------------------
(qqq) Registration on Form S-3. Anything contained in Section 2 to the
contrary notwithstanding, from and after the Closing Date, at such time as the
Corporation shall have qualified for the use of Form S-3 promulgated under the
Securities Act or any successor form thereto, each Investor holding Registrable
Shares then outstanding shall have the right to request in writing that the
Corporation effect the registration of Registrable Shares on Form S-3 or such
successor form, which request or requests shall (i) specify the number of
Registrable Shares intended to be sold or disposed of and the holders thereof
and (ii) state the intended method of disposition of such Registrable Shares.
The Corporation shall use commercially reasonable efforts to promptly effect the
registration under the Securities Act of the Registrable Shares so requested to
be registered. A requested registration on Form S-3 or any such successor form
in compliance with this Section 4(a) shall not count as a registration statement
initiated pursuant to Section 2(a) for purposes of Section 2 (b)(i)(A) and,
except as otherwise expressly provided in this Section 4(a), shall otherwise be
subject to Section 2. The number of requests permitted by the Investors pursuant
to this Section 4(a) shall be unlimited; provided, however, that the Investors
shall not be permitted to effect more than one registration pursuant to this
Section 4(a) during any 180-day period.
(rrr) Registration Pursuant to Rule 415.
(i) Anything contained in Section 30 to the contrary
notwithstanding, from and after the Closing Date, at such time as the
Corporation shall have qualified for use of a registration statement
filed pursuant to Rule 415 of the Securities Act or such successor
rule, the Requisite Investors shall have the right to request in
writing that the Corporation effect a continuous or delayed
registration of Registrable Shares on a registration statement filed
pursuant to Rule 415 of the Securities Act or such successor rule (a
"Shelf Registration"), which request shall (i) specify the number of
Registrable Shares intended to be sold or disposed of and the holders
thereof and (ii) state the intended method of disposition of such
Registrable Shares. The Corporation shall use commercially reasonable
efforts to promptly effect the registration under the Securities Act of
the Registrable Shares so requested to be registered and shall cause
such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale of such
Registrable Securities, but in no event longer than 180 days. A
requested registration made pursuant to this 8.16(rrr) shall not count
as a registration statement initiated pursuant to 8.16(lll) for
purposes of Section 2(b)(i)(A) and, except as otherwise provided on
this 4(b), shall otherwise be subject to Section 30. The number of
requests permitted by the Investors pursuant to this 8.16(rrr) shall be
one.
(ii) If and whenever the Corporation is required by the provisions
of this 8.16(rrr) to effect the registration of Registrable Securities
under Rule 415 of the Securities Act, the Corporation will:
(A) prepare and file with the SEC such amendments to such
Shelf Registration and supplements to the prospectus contained
therein as may be necessary to keep such Shelf Registration
effective for such period as may be reasonably necessary to effect
the sale of such Registrable Securities, but in no event longer
than 180 days;
(A) prepare and promptly file with the SEC and promptly
notify the Investors of the filing of such amendment or supplement
to such Shelf Registration or prospectus as may be necessary to
correct any statements or omission if, at the time when a
prospectus relating to such Registrable Securities is required to
be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of
a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in
which they were made, not misleading and promptly provide to the
Investors sufficient copies of such amended or supplemented
prospectus so that it can be delivered to the Investors of the
Registrable Securities as required by the Securities Act and the
regulations thereunder;
(B) advise the Investors, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such Shelf
Registration or the initiation or threatening of any proceeding
for that purpose, promptly use its commercially reasonable efforts
to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued and promptly notify
the Investors of the forbearance, lifting or withdrawal of such
stop order or proceeding;
SECTION 33. HOLDBACK AGREEMENT.
-------------------
If the Corporation at any time pursuant to Sections 2 or 3 of this
Agreement shall register under the Securities Act Registrable Shares held by the
Investors for sale to the public pursuant to an underwritten offering, the
Corporation shall not effect any public sale or distribution of securities
similar to those being registered, or any securities convertible into or
exercisable or exchangeable for such securities, for such period as shall be
determined by the Corporation and the managing underwriters, which period shall
not be less than 5 days.
SECTION 34. PREPARATION AND FILING.
-----------------------
If and whenever the Corporation is under an obligation pursuant to the
provisions of this Agreement to effect the registration of any Registrable
Shares, the Corporation shall, as expeditiously as practicable:
(sss) use commercially reasonable efforts to cause a Registration
Statement that registers such Registrable Shares to become and remain effective
for a period of 180 days or until all of such Registrable Shares have been
disposed of (if earlier);
(ttt) furnish, at least five Business Days before filing a Registration
Statement that registers such Registrable Shares, a prospectus relating thereto
or any amendments or supplements relating to such a Registration Statement or
prospectus, to one counsel selected by the Investors ("Counsel") copies of all
such documents proposed to be filed (it being understood that such five-Business
Day period need not apply to amendments or successive drafts of the same
document proposed to be filed so long as such amendments or successive drafts
are supplied to Counsel in advance of the proposed filing by a period of time
that is customary and reasonable under the circumstances);
(uuu) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
at least an additional period of 90 days or until all of such Registrable Shares
have been disposed of (if earlier) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of such Registrable
Shares;
(vvv) promptly notify Counsel in writing (i) of the receipt by the
Corporation of any notification with respect to any comments by the Commission
with respect to such registration statement or prospectus or any amendment or
supplement thereto or any request by the Commission for the amending or
supplementing thereof or for additional information with respect thereto, (ii)
of the receipt by the Corporation of any notification with respect to the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by the Corporation of any notification with respect to the
suspension of the qualification of such Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purposes;
(www) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions as the
holders of the Registrable Shares reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
holders to consummate the disposition in such jurisdictions of such holders'
Registrable Shares; provided, however, that the Corporation will not be required
to qualify generally to do business, subject itself to general taxation or
consent to general service of process in any jurisdiction where it would not
otherwise be required to do so but for this paragraph (e);
(xxx) furnish to the holders of such Registrable Shares such number of
copies of a summary prospectus, if any, or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such holders may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Shares;
(yyy) without limiting subsection (e) above, use its best efforts to
cause such Registrable Shares to be registered with or approved by such other
governmental agencies or authorities of the United States as may be necessary by
virtue of the business and operations of the Corporation to enable the holders
of such Registrable Shares to consummate the disposition of such Registrable
Shares;
(zzz) notify the holders of such Registrable Shares on a timely basis
at any time when a prospectus relating to such Registrable Shares is required to
be delivered under the Securities Act within the appropriate period mentioned in
subparagraph (a) of this Section 6, of the happening of any event as a result of
which the prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and, at the request
of such holders, prepare and furnish to such holders a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the offerees of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(aaaa) make available upon reasonable notice and during normal business
hours, for inspection by any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by the underwriter (the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Corporation (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Corporation's officers, directors and employees to supply all information
(together with the Records, the "Information") reasonably requested by any such
Inspector in connection with such Registration Statement. Any of the Information
which the Corporation determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary to avoid
or correct a misstatement or omission in the registration statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (iii) such Information has been made
generally available to the public, and the Investors agree that they will, upon
learning that disclosure of such Information is sought in a court of competent
jurisdiction, give notice to the Corporation and allow the Corporation, at the
Corporation's expense, to undertake appropriate action to prevent disclosure of
the Information deemed confidential;
(bbbb) if required by the underwriters, use commercially reasonable
efforts to obtain from its independent certified public accountants "cold
comfort" letters in customary form and at customary times and covering matters
of the type customarily covered by cold comfort letters;
(cccc) if required by the underwriters, use commercially reasonable
efforts to obtain from its counsel an opinion or opinions in customary form;
(dddd) provide a transfer agent and registrar (which may be the same
entity and which may be the Corporation) for such Registrable Shares;
(eeee) issue to any underwriter to which the holders of such
Registrable Shares may sell shares in such offering certificates evidencing such
Registrable Shares;
(ffff) use commercially reasonable efforts to qualify such Registrable
Shares for listing on the Nasdaq Stock Market or such other national securities
exchange on which the Corporation shall from time to time list its securities;
(gggg) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission; and
(hhhh) subject to all the other provisions of this Agreement, use
commercially reasonable efforts to take all other commercially reasonable steps
necessary to effect the registration of such Registrable Shares contemplated
hereby.
Each holder of the Registrable Shares upon receipt of any notice from
the Corporation of any event of the kind described in Section 6(h) hereof, shall
forthwith discontinue disposition of the Registrable Shares pursuant to the
registration statement covering such Registrable Shares until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 6(h) hereof, and, if so directed by the Corporation, such holder shall
deliver to the Corporation all copies, other than permanent file copies then in
such holder's possession, of the prospectus covering such Registrable Shares at
the time of receipt of such notice.
SECTION 35. EXPENSES.
---------
All expenses incurred by the Corporation in complying with Section 6,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), fees and expenses of complying with securities and blue sky laws,
printing expenses, fees and expenses of the Corporation's counsel and
accountants and reasonable fees and expenses of Counsel shall be paid by the
Corporation.
SECTION 36. INDEMNIFICATION.
----------------
(iiii) In connection with any registration of any Registrable Shares
under the Securities Act pursuant to this Agreement, the Corporation shall
indemnify and hold harmless the holders of Registrable Shares, each underwriter,
broker or any other Person acting on behalf of the holders of Registrable
Shares, and each other Person, if any, who controls any of the foregoing Persons
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several (or actions in respect thereof), to which any of
the foregoing Persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or allegedly untrue
statement of a material fact contained in the registration statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, or any violation by the Corporation of the Securities Act or state
securities or blue sky laws applicable to the Corporation and relating to action
or inaction required of the Corporation in connection with such registration or
qualification under such state securities or blue sky laws; and shall reimburse
the holders of Registrable Shares, such underwriter, such broker or such other
Person acting on behalf of the holders of Registrable Shares and each such
controlling Person for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action (including any legal or other expenses incurred) arises out of or is
based upon an untrue statement or allegedly untrue statement or omission or
alleged omission made in said registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in conformity with
written information furnished to the Corporation by the holders of Registrable
Shares or their counsel or underwriter specifically for use in the preparation
thereof; provided further, however, that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any untrue statement,
allegedly untrue statement, omission or alleged omission made in any preliminary
prospectus but eliminated or remedied in the final prospectus (filed pursuant to
Rule 424 of the Securities Act), such indemnity agreement shall not inure to the
benefit of any Investor, underwriter, broker or other Person acting on behalf of
holders of the Restricted Shares, from whom the Person asserting any loss,
claim, damage, liability or expense purchased the Restricted Shares which are
the subject thereof, if a copy of such final prospectus had been made available
to such Person and such Investor, underwriter, broker or other Person acting on
behalf of holders of the Registrable Shares and such final prospectus was not
delivered to such Person with or prior to the written confirmation of the sale
of such Registrable Shares to such Person.
(jjjj) In connection with any registration of Registrable Shares under
the Securities Act pursuant to this Agreement, each holder of Registrable Shares
shall severally and not jointly indemnify and hold harmless (in the same manner
and to the same extent as set forth in the preceding paragraph of this Section
36) the Corporation, each director of the Corporation, each officer of the
Corporation who shall sign such registration statement, each underwriter, broker
or other Person acting on behalf of the holders of Registrable Shares and each
Person who controls any of the foregoing Persons within the meaning of the
Securities Act with respect to any statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Corporation or such underwriter by such
holder specifically for use in connection with the preparation of such
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document; provided, however, that the maximum amount of liability
in respect of such indemnification shall be limited, in the case of each seller
of Registrable Shares to an amount equal to the net proceeds actually received
by such seller from the sale of Registrable Shares effected pursuant to such
registration.
(kkkk) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 36, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action. The failure of any indemnified
party to notify an indemnifying party of any such action shall not (unless such
failure shall have a material adverse effect on the indemnifying party) relieve
the indemnifying party from any liability in respect of such action that it may
have to such indemnified party on account of this Section 36. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if any indemnified
party shall have reasonably concluded that there may be one or more legal or
equitable defenses available to such indemnified party which are additional to
or conflict with those available to the indemnifying party, or that such claim
or litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 36, the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party (but shall have the right to participate therein with counsel
of its choice) and such indemnifying party shall reimburse such indemnified
party and any Person controlling such indemnified party for that portion of the
fees and expenses of any counsel retained by the indemnified party which is
reasonably related to the matters covered by the indemnity agreement provided in
this Section 36; provided, however, that the maximum amount of liability in
respect of such indemnification shall be limited, in the case of each seller of
Registrable Shares to an amount equal to the net proceeds actually received by
such seller from the sale of Registrable Shares effected pursuant to such
registration. If the indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel with respect to such claim.
(llll) If the indemnification provided for in this Section 36 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, claim, damage, liability or action referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant hereto were determined by pro rata allocation or by any other method or
allocation which does not take account of the equitable considerations referred
to herein. No Person guilty of fraudulent misrepresentation shall be entitled to
contribution from any Person.
SECTION 37. UNDERWRITING AGREEMENT.
-----------------------
Notwithstanding the provisions of Sections 5, 6, 7 and 8, to the extent
that the Investors shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such agreement addressing such issue or
issues shall control; provided, however, that any such agreement to which the
Corporation is not a party shall not be binding upon the Corporation. No holder
may participate in any underwritten registration hereunder unless such holder
(a) agrees to sell such holder's securities on the basis provided in any
underwriting arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably and customarily required under the terms of such underwriting
arrangements.
SECTION 38. INFORMATION.
------------
Each Investor shall furnish to the Corporation such written information
regarding such Person and the distribution proposed by such Person as the
Corporation may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
SECTION 39. EXCHANGE ACT COMPLIANCE.
------------------------
The Corporation shall use commercially reasonable efforts to comply
with all of the reporting requirements of the Exchange Act applicable to it
(whether or not it shall be required to do so) and to comply with all other
public information reporting requirements of the Commission which are conditions
to the availability of Rule 144 for the sale of the Common Stock. The
Corporation shall cooperate with the Investors supplying such information as may
be necessary for the Investors to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of Rule 144.
SECTION 40. NO CONFLICT OF RIGHTS.
----------------------
The Corporation shall not, after the date hereof, grant any
registration rights which conflict with or impair the registration rights
granted hereby.
SECTION 41. TERMINATION.
------------
This Agreement shall terminate and be of no further force or effect
when there shall no longer be any Registrable Shares outstanding.
SECTION 42. SUCCESSORS AND ASSIGNS.
-----------------------
This Agreement shall bind and inure to the benefit of the Corporation
and the Investors and, subject to Section 15, the respective successors and
assigns of the Corporation and the Investors.
SECTION 43. ASSIGNMENT.
-----------
(mmmm) Each Investor may assign its rights hereunder to (i) a member of
the Group of such Investor without the consent of the Corporation or (ii) any
other purchaser or transferee from such Investor of Restricted Shares with the
consent of the Corporation; provided, that any such assignment is in connection
with the assignment of at least 1,000,000 Registrable Shares; provided, further,
however, that any such purchaser or transferee shall, as a condition to the
effectiveness of such assignment, be required to execute a counterpart to this
Agreement agreeing to be treated as an Investor, whereupon such purchaser or
transferee shall have the benefits of, and shall be subject to the restrictions
contained in, this Agreement as if such purchaser or transferee had originally
been a party hereto and was originally included in the definition of an Investor
herein.
SECTION 44. ENTIRE AGREEMENT.
-----------------
This Agreement and the other writings referred to herein or therein or
delivered pursuant hereto or thereto, contain the entire agreement among the
Investors and the Corporation with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto, including, without limitation, the Fourth Amended and Restated
Registration Rights Agreement, all of which are hereby automatically terminated
in their entirety and of no further force or effect, without any action by the
parties thereto.
SECTION 45. NOTICES.
--------
All notices, requests, consents and other communications hereunder to
any party shall be deemed to be sufficient if contained in a written instrument
delivered in person or sent by telecopy, nationally-recognized overnight courier
or first class registered or certified mail, return receipt requested, postage
prepaid, addressed to such party at the address set forth below or such other
address as may hereafter be designated in writing by such party to the other
parties:
(i) if to the Corporation, to:
Exchange Applications, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx 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
(ii) if to the Investors, 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. 00000
Attention: Xxxx X. Nissan, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Boston Pipes, LLC
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
THK Private Equities
x/x Xxxxxxxx X. Xxxxxxxxxxxx
0000 Xx. Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Xxxxxx Xxxxxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
(000) 000-0000
SKP Investments
Xxxxxx Family Foundation
000 Xxx Xxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
(000) 000-0000
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next Business Day following such
dispatch and (c) in the case of mailing, on the third Business Day after the
posting thereof.
SECTION 46. MODIFICATIONS; AMENDMENTS; WAIVERS.
-----------------------------------
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to a writing signed,
in the case of a modification or amendment, by the Corporation and the Investors
holding at least a majority of the outstanding Registrable Shares at such time,
or in the case of a waiver, by the party against whom the waiver is to be
effective; provided, however, that any proposed modification, amendment or
waiver that uniquely and adversely affects an Investor shall require such
Investor's prior written approval.
SECTION 47. COUNTERPARTS.
-------------
This Agreement may be executed in any number of original or facsimile
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 48. HEADINGS.
---------
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
SECTION 49. GOVERNING LAW.
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed wholly therein.
IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amended
and Restated Registration Rights Agreement on the date first written above.
CORPORATION:
EXCHANGE APPLICATIONS, INC.
By: ______________________________
Name:
Title:
INVESTORS:
----------
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:
--------------------------------------------------
Name:
Title:
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Fifth Amended and Restated Registration Rights Agreement as of the date first
written above.
SKP INVESTMENTS LLC
By:
--------------------------------
Name:
Title:
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Fifth Amended and Restated Registration Rights Agreement as of the date first
written above.
THK PRIVATE EQUITIES
By:
--------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxxxx
Title: Principal
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Fifth Amended and Restated Registration Rights Agreement as of the date first
written above.
XXXXXX FAMILY FOUNDATION
By:
--------------------------------
Name: Xxxx Xxxxxx
Title: Trustee
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Fifth Amended and Restated Registration Rights Agreement as of the date first
written above.
BOSTON PIPES, LLC
By:
--------------------------------
Name:
Title:
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Fifth Amended and Restated Registration Rights Agreement as of the date first
written above.
------------------------------------
XXXXX XXXXXXXX
SCHEDULE 1
Investors
---------
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.
SKP Investments LLC
THK Private Equities
Xxxxxx Family Trust
Boston Pipes, LLC
Xxxxxx Xxxxxxxx
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS....................................................1
SECTION 2. REQUIRED REGISTRATION..........................................4
SECTION 3. PIGGYBACK REGISTRATION.........................................6
SECTION 4. REGISTRATIONS ON FORM S-3 AND PURSUANT TO RULE 415.............6
SECTION 5. HOLDBACK AGREEMENT.............................................8
SECTION 6. PREPARATION AND FILING.........................................8
SECTION 7. EXPENSES......................................................11
SECTION 8. INDEMNIFICATION...............................................11
SECTION 9. UNDERWRITING AGREEMENT........................................13
SECTION 10. INFORMATION...................................................13
SECTION 11. EXCHANGE ACT COMPLIANCE.......................................14
SECTION 12. NO CONFLICT OF RIGHTS.........................................14
SECTION 13. TERMINATION...................................................14
SECTION 14. SUCCESSORS AND ASSIGNS........................................14
SECTION 15. ASSIGNMENT....................................................14
SECTION 16. ENTIRE AGREEMENT..............................................14
SECTION 17. NOTICES.......................................................15
SECTION 18. MODIFICATIONS; AMENDMENTS; WAIVERS............................16
SECTION 19. COUNTERPARTS..................................................17
SECTION 20. HEADINGS......................................................17
SECTION 21. GOVERNING LAW.................................................17
================================================================================
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
DATED AS OF AUGUST 29, 2001,
AMONG
EXCHANGE APPLICATIONS, INC.
AND
THE
INVESTORS
IDENTIFIED HEREIN
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EXHIBIT D
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Form of Security Agreement
SECURITY AGREEMENT dated as of
August 29, 2001, among EXCHANGE
APPLICATIONS, INC., a Delaware
corporation (the "Exchange"),
EXSTATIC SOFTWARE, INC. (f/k/a/
Xxxx Xxxxxxx, Inc.), a Washington
corporation ("eXstatic", together
with the Exchange, the
"Grantors"), and INSIGHT VENTURE
PARTNERS IV (COLLATERAL AGENT),
LLC (not in its individual
capacity but solely as the
"Collateral Agent") under the
Collateral Agency and
Intercreditor Agreement for the
benefit of the New Secured
Parties.
Reference is made to the (i) Securities Purchase Agreement, dated as of
August 29, 2001, among the Grantors and the New Secured Parties, as defined
below (the "Purchase Agreement"), (ii) U.S. $15,000,000 million principal amount
12% Senior Secured Convertible Debentures issued by the Grantors to the New
Secured Parties (collectively, the "New Debentures"), and (iii) the Collateral
Agency and Intercreditor Agreement.
The New Secured Parties have agreed to lend U.S. $15,000,000 in cash to
the Grantors, pursuant to, and upon the terms and subject to the conditions
specified in, the New Debenture Documents. The obligations of the New Secured
Parties to consummate the transactions contemplated by the New Debenture
Documents are conditioned upon, among other things, the execution and delivery
by the Grantors of an agreement in the form hereof to secure (A) the due and
punctual payment by the Grantors of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the New Debentures, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each other amount required to be paid by the Grantors under
the New Debentures, when and as due, including payments in respect of
reimbursement of disbursements and interest thereon and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Grantors to the New Secured Parties under
the New Debentures (the monetary and New Debenture Obligations in (i), (ii) and
(iii) collectively, the "Debenture Payment Obligations") and (B) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Grantors under or pursuant to the New Debenture Documents and the
Collateral Agency and Intercreditor Agreement (the "New Debenture Obligations".
The rights and priorities with respect to the Collateral are subject to the
Subordination Agreement and the Collateral Agency and Intercreditor Agreement
(as defined below).
Accordingly, each of the Grantors and the Collateral Agent for the
benefit of the New Secured Parties (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE IX
DEFINITIONS
9.1 DEFINITION OF TERMS USED HEREIN.
--------------------------------
Unless the context otherwise requires, all capitalized terms used but
not defined herein shall have the meanings set forth in the Collateral Agency
and Intercreditor Agreement.
9.2 DEFINITION OF CERTAIN TERMS USED HEREIN.
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As used herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become
obligated to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of the
Grantors to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned or repossessed goods, together with all rights, titles,
securities and guarantees with respect thereto, including any rights to stoppage
in transit, replevin, reclamation and resales, and all related security
interests, liens and pledges, whether voluntary or involuntary, in each case
whether now existing or owned or hereafter arising or acquired.
"Affiliate" shall mean, with respect to any Person, any director,
officer, parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts,
(g) Investment Property, (h) Instruments (as defined in the UCC), and (i)
Proceeds. The Collateral Agent for the benefit of the New Secured Parties may
place a "hold" on any Deposit Account pledged as collateral during the
continuance of an Event of Default (as defined in the New Debentures). In
anticipation of the possible application, in one or more jurisdictions to the
transactions contemplated hereby, of the revised Article 9 of the Uniform
Commercial Code in the form approved by the American Law Institute and the
National Conference of Commissioners on Uniform State Law and contained in the
1999 Official Text of the Uniform Commercial Code ("Revised Article 9"), it is
hereby agreed that applying the law of any jurisdiction which Revised Article 9
is in effect, the Collateral is all personal property and assets of the
Grantors, whether or not within the scope of Revised Article 9. The collateral
shall include, without limitation, the following categories of assets as defined
in Revised Article 9: goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables, and license fees), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, general intangibles
(including payment intangibles and software, but excluding Intellectual
Property), supporting obligations and any and all proceeds of any thereof,
wherever located, whether now owned or hereafter acquired. If the Grantors shall
at any time, whether or not Revised Article 9 is in effect in any particular
jurisdiction, acquire a commercial tort claim, as defined in Revised Article 9,
the Grantors shall promptly notify the Collateral Agent in a writing signed by
the Grantors of the brief details thereof and grant to the Collateral Agent for
the benefit of the New Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance satisfactory to the Collateral Agent.
"Collateral Agent" shall have the meaning assigned to such term in the
Preamble to this Agreement.
"Collateral Agency and Intercreditor Agreement" means the Collateral
Agency and Intercreditor Agreement dated of the date hereof among the Grantors,
the Collateral Agent, the New Secured Parties and the Existing Investors, as
amended, modified, supplemented, restated or replaced from time to time.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an option
on a commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade that
has been designated as a contract market for such a contract pursuant to the
federal commodities laws or (b) traded on a foreign commodity board of trade,
exchange or market, and is carried on the books of a Commodity Intermediary for
a Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a Person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or hereafter
in effect, granting any right to any third party under any Copyright now or
hereafter owned by the Grantors or which the Grantors otherwise has the right to
license, or granting any right to the Grantors under any Copyright now or
hereafter owned by any third party, and all rights of the Grantors under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by the Grantors: (a) all copyright rights in any work subject to the
copyright laws of the United States, whether as author, assignee, transferee or
otherwise, and (b) all registrations and applications for registration of any
such copyright in the United States, including registrations, recordings,
supplemental registrations and pending applications for registration in the
United States Copyright Office.
"Deposit Account" has the meaning set forth in Section 9-102 of the
UCC.
"Documents" shall mean all instruments, files, records, ledger sheets
and documents (including documents as defined in the UCC) covering or relating
to any of the Collateral.
"Entitlement Holder" shall mean a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement against the
Securities Intermediary. If a Person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the UCC, such Person is the Entitlement Holder.
"Equipment" shall mean all equipment, furniture, furnishings,
machinery, molds, machine tools, motors, fixtures, trade fixtures, motor
vehicles, dyes, jigs, goods and other tangible personal property (other than
Inventory) of every kind and description used in the Grantors' operations or
owned by the Grantors and any interest in any of the foregoing, including tools,
parts and supplies of every kind and description, and all attachments,
accessories, improvements, accessions, replacements, substitutions, additions or
appurtenances thereto, that are now or hereafter owned by the Grantors.
"Exchange" shall have the meaning assigned to such term in the Preamble
to this Agreement.
"Exim Agreement" is that certain Export-Import Bank Loan and Security
Agreement dated as of April 25, 2001, by and between the Grantors and SVB and
all documents, instruments and agreements executed in conjunction therewith,
each as may be amended from time to time.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
Person or a share, participation or other interest in a Person or in property or
an enterprise of a Person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the UCC. As
the context requires, the term Financial Asset shall mean either the interest
itself or the means by which a Person's claim to it is evidenced, including a
certificated or uncertificated Security, a certificate representing a Security
or a Security Entitlement.
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of the Grantors of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by the Grantors, including corporate or other business records, Deposit
Accounts, indemnification claims, contract rights (including rights under
leases, whether entered into as lessor or lessee, and other agreements),
Intellectual Property, drawings, blueprints, customer lists, security and other
deposits, goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to the Grantors to secure payment by an Account Debtor of any of the
Accounts Receivable, rights in all litigation presently or hereafter pending for
any cause or claim (whether in contract, tort or otherwise), and all judgments
now or hereafter arising therefrom, all claims of Grantors against Collateral
Agent, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, purchase orders,
and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance).
"Grantors" shall have the meaning assigned to such term in the Preamble
of this Agreement.
"Intellectual Property" shall mean all intellectual and similar
property of the Grantors of every kind and nature now owned or hereafter
acquired by the Grantors, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related documentation
and registrations, and all additions, improvements and accessions to, and books
and records describing or used in connection with, any of the foregoing, to the
extent a security interest has been granted to SVB pursuant to the SVB Security
Interest.
"Inventory" shall mean all goods of the Grantors, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
the Grantors under contracts of service, or consumed in the Grantors' business,
including raw materials, intermediates, work in process, goods in transit,
packaging materials, finished goods, semi-finished inventory, scrap inventory,
manufacturing supplies and spare parts, all materials and supplies of every
kind, nature and description which are or might be used or consumed in the
Grantors' business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, all such goods that have been returned to or repossessed by
or on behalf of the Grantors, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"Investment Property" shall mean all Securities (whether certificated
or uncertificated), Security Entitlements, Securities Accounts, Commodity
Contracts and Commodity Accounts of the Grantors, whether now owned or hereafter
acquired by the Grantors.
"License" shall mean any Patent License, Trademark License, Copyright
License or other franchise agreement, license or sublicense to which any Grantor
is a party.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the business, operations, assets, conditions (financial or
otherwise), operating results, liabilities or prospects of such Person and its
Subsidiaries, taken as a whole.
"New Debentures" shall have the meaning assigned to such term in the
Preamble of this Agreement.
"New Debenture Documents" shall mean each of the Purchase Agreement and
the New Debentures dated as of the date hereof.
"New Debenture Obligations" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"New Debenture Security Interest" shall have the meaning assigned to
such term in Section 2.1.
"New Investors" means the Persons listed on Schedule I hereto.
"New Secured Parties" shall mean the New Investors and the Collateral
Agent, in each case, together with their heirs, successors and permitted
assigns.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by the Grantors or which the Grantors
otherwise has the right to license, is in existence, or granting to the Grantors
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of the Grantors under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter
acquired by the Grantors: (a) all letters patent of the United States, all
registrations and recordings thereof, and all applications for letters patent of
the United States, including registrations, recordings and pending applications
in the United States Patent and Trademark Office, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions thereof,
and the inventions disclosed or claimed therein, including the right to make,
use and/or sell the inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
form of Annex 1 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of the Grantors.
"Permitted Liens" shall mean the following: (i) purchase money security
interests (including, without limitation, any leases which may be deemed
purchase money security interests) in specific items of Equipment; (ii) leases
of specific items of Equipment; (iii) liens for taxes not yet payable; (iv)
additional security interests and liens consented to in writing by the
Collateral Agent for the benefit of the New Secured Parties, which consent shall
not be unreasonably withheld; (v) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vi) liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by liens
of the type described above in clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (vii) liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods; (viii) the SVB Security Interest; (ix) liens arising
from the Exim Agreement; and (x) liens securing the Existing Secured Obligations
or created in connection with the Existing Debenture Documents. The Collateral
Agent, for the benefit of the New Secured Parties, will have the right to
require, as a condition to its consent under subsection (iv) above, that the
holder of the additional security interest or lien sign intercreditor and
subordination agreements satisfactory to the Collateral Agent and the Required
Investors in their sole and absolute judgement.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession of
any Collateral and any payment received from any insurer or other person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, (a) any claim of the Grantors against any third
party for (and the right to xxx and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by the Grantors, or
licensed under a Patent License, (ii) past, present or future infringement or
dilution of any Trademark now or hereafter owned by the Grantors or licensed
under a Trademark License or injury to the goodwill associated with or
symbolized by any Trademark now or hereafter owned by the Grantors, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Purchase Agreement" shall have the meaning assigned to such term in
the Preamble to this Agreement.
"Required Investors" has the meaning ascribed to it in the Collateral
Agency and Intercreditor Agreement.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the UCC.
"Securities Account" shall mean an account to which a Financial Asset
is or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Entitlements" shall mean the rights and property interests of
an Entitlement Holder with respect to a Financial Asset.
"Security Intermediary" shall mean (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"Subordination Agreement" means the Subordination Agreement among the
New Secured Parties and SVB, dated as of the date hereof, as such agreement may
be amended from time to time.
"SVB" shall mean Silicon Valley Bank.
"SVB Facility" shall mean the Loan and Security Agreement, dated April
25, 2001, among the Company, SVB and the other party named therein, as such
agreement may be amended, supplemented or replaced from time to time.
"SVB Security Interest" shall mean the security interest granted by the
Grantors to SVB in connection with the SVB Facility.
"Trademark License" shall mean any written agreement, now or hereafter
in effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to the Grantors any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by the Grantors: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States, and all extensions or renewals thereof, (b) all
goodwill associated therewith or symbolized thereby and (c) all other assets,
rights and interests that uniquely reflect or embody such goodwill.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York.
9.3 RULES OF CONSTRUCTION.
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The rules of construction specified in Section 1.2 of the Purchase
Agreement shall be applicable to this Agreement.
ARTICLE X
SECURITY INTEREST
10.1 SECURITY INTEREST.
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As security for the payment or performance, as the case may be, in full
of the New Debenture Obligations (including, without limitation, obligations
owing to the Collateral Agent under the Collateral Agency and Intercreditor
Agreement), each Grantor hereby bargains, sells, conveys, assigns, sets over,
mortgages, pledges, hypothecates and transfers to the Collateral Agent, its
successors and assigns, for the ratable benefit of the New Secured Parties, and
hereby grants to the Collateral Agent, its successors and assigns, for the
ratable benefit of the New Secured Parties, a security interest in, all of such
Grantor's right, title and interest in, to and under the Collateral (the "New
Debenture Security Interest"). Without limiting the foregoing, the Collateral
Agent for the benefit of the New Secured Parties is hereby authorized to file
one or more financing statements, continuation statements, filings with the
United States Patent and Trademark Office or United States Copyright Office (or
any successor office) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the New Debenture Security
Interest granted by the Grantors, without the signature of the Grantors, and
naming the Grantors as debtors and the Collateral Agent for the benefit of the
New Secured Parties as secured party.
10.2 NO ASSUMPTION OF LIABILITY.
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The New Debenture Security Interest is granted as security only and
shall not subject the Collateral Agent or any other New Secured Party to, or in
any way alter or modify, any obligation or liability of the Grantors with
respect to or arising out of the Collateral.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to the Collateral Agent and the
other New Secured Parties that:
11.1 NAME; TRADE NAMES AND STYLES; STATE OF INCORPORATION.
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The name of each Grantor and state of incorporation set forth in the
Preamble to this Agreement is its correct name and state of incorporation.
Listed on the Schedule are all prior names of each Grantor and all of such
Grantor's present and prior trade names. Each Grantor shall give Collateral
Agent 30 days' prior written notice before changing its name or doing business
under any other name. Each Grantor has complied, and will in the future comply,
with all laws relating to the conduct of business under a fictitious business
name.
11.2 PLACE OF BUSINESS; LOCATION OF COLLATERAL.
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The address set forth in the Notice Section of the Purchase Agreement
is each Grantor's chief executive office. In addition, each Grantor has places
of business and Collateral is located only at the locations set forth on the
Schedule. Each Grantor will give the Collateral Agent at least 30 days' prior
written notice before opening any additional place of business, changing its
chief executive office, changing its state of formation or moving any of the
Collateral to a location other than each Grantor's address or the present
address of such Collateral.
11.3 TITLE AND AUTHORITY.
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Each Grantor has good and valid rights in and title to the Collateral
with respect to which it has purported to grant the New Debenture Security
Interest hereunder and has full power and authority to grant to the Collateral
Agent New Debenture Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained or the failure of which to
obtain could not reasonably be expected to have a Material Adverse Effect.
11.4 VALIDITY OF SECURITY INTEREST.
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New Debenture Security Interest constitutes (a) a legal and valid
security interest in all the Collateral securing the payment and performance of
the New Debenture Obligations, (b) subject to the filings described in Section
10.1, a perfected security interest in all Collateral in which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political
subdivision thereof) pursuant to the Uniform Commercial Code or other applicable
law in such jurisdictions. New Debenture Security Interest is and shall be prior
to any other Lien on any of the Collateral, other than the Permitted Liens
described in clauses (i) and (viii) of the definition thereof or as may arise
nonconsensually by, and have priority solely by operation of applicable laws.
11.5 MAINTENANCE OF COLLATERAL.
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Each Grantor will maintain the Collateral in good working condition,
and each Grantor will not use the Collateral for any unlawful purpose. Each
Grantor will immediately advise the Collateral Agent in writing of any material
loss or damage to the Collateral.
11.6 COMPLIANCE WITH LAW.
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Each Grantor has complied, and will comply, in all material respects,
with all provisions of all foreign, federal, state and local laws and
regulations relating to the Collateral, including, but not limited to, those
relating to such Grantor's ownership of real or personal property, the conduct
and licensing of such Grantor's business, and all environmental matters.
11.7 ABSENCE OF OTHER LIENS.
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The Collateral is owned by the Grantors free and clear of any Lien,
except for Permitted Liens. No Grantor has filed nor consented to the filing of
(a) any financing statement or analogous document under the UCC or any other
applicable laws covering any Collateral, (b) any assignment in which any Grantor
assigns any Collateral or any security agreement or similar instrument covering
any Collateral in the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document is still in effect, except, in each
(a), (b) and (c) above, for filings in connection with Permitted Liens.
ARTICLE XII
COVENANTS
12.1 RECORDS.
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Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail reasonably
satisfactory to the Collateral Agent showing the identity, amount and location
of any and all Collateral.
12.2 PROTECTION OF SECURITY.
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Each Grantor shall, at its own cost and expense, take any and all
actions necessary to defend title to the Collateral against all persons and to
defend the New Debenture Security Interest of the Collateral Agent, for the
benefit of the New Secured Parties, in the Collateral and the priority thereof
against any Lien which is not a Permitted Lien.
12.3 FURTHER ASSURANCES.
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Each Grantor agrees, at its own expense, to execute, acknowledge,
deliver and cause to be duly filed all such further instruments and documents
and take all such actions as the Collateral Agent may from time to time
reasonably request to better assure, preserve, protect and perfect the New
Debenture Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith or therewith. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and delivered
to the Collateral Agent for the benefit of the New Secured Parties, duly
endorsed in a manner satisfactory to the Collateral Agent.
12.4 TAXES; ENCUMBRANCES.
--------------------
At its option, the Collateral Agent for the benefit of the New Secured
Parties may discharge past due taxes, assessments, charges, fees, Liens,
security interests or other encumbrances at any time levied or placed on the
Collateral other than Permitted Liens, and may pay for the maintenance and
preservation of the Collateral to the extent the Grantors fail to do so as
required this Agreement, and the Grantors jointly and severally agree to
reimburse the Collateral Agent on demand for any payment made or any expense
incurred by the Collateral Agent pursuant to the foregoing authorization;
provided, however, that nothing in this Section 12.4 shall be interpreted as
excusing the Grantors from the performance of, or imposing any obligation on the
Collateral Agent to cure or perform, any covenants or other promises of the
Grantors with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
New Debenture Documents.
12.5 ASSIGNMENT OF SECURITY INTEREST.
--------------------------------
If at any time the Grantors shall take a security interest in any
property of an Account Debtor or any other Person to secure payment and
performance of an Account, the Grantors shall promptly assign such security
interest to the Collateral Agent for the benefit of the Secured Parties subject
only to Permitted Liens. Such assignment need not be filed of public record
unless necessary to continue the perfected status of the security interest
against creditors of and transferees from the Account Debtor or other Person
granting the security interest.
12.6 CONTINUING OBLIGATIONS OF THE GRANTORS.
---------------------------------------
The Grantors shall remain liable to observe and perform all the
conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and each Grantor agrees to indemnify and
hold harmless the Collateral Agent from and against any and all liability for
such performance.
12.7 LIMITATION ON MODIFICATION OF ACCOUNTS.
---------------------------------------
During the continuation of an Event of Default, no Grantor shall
without the Collateral Agent's prior written consent, grant any extension of the
time of payment of any of the Accounts Receivable, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
12.8 LEGEND.
-------
Each Grantor shall legend, in form and manner reasonably satisfactory
to the Collateral Agent, its Accounts Receivable and its books, records and
documents evidencing or pertaining thereto with an appropriate reference to the
fact that such Accounts Receivable have been assigned to the Collateral Agent
for the benefit of the New Secured Parties and that the Collateral Agent has a
security interest therein.
12.9 USE AND DISPOSITION OF COLLATERAL.
----------------------------------
No Grantor shall make or permit to be made an assignment, pledge or
hypothecation of the Collateral or shall grant any other Lien in respect of the
Collateral, except for Permitted Liens. Unless and until the Collateral Agent
for the benefit of the New Secured Parties, shall notify the Grantors that (i)
an Event of Default (as defined in the New Debentures) shall have occurred and
be continuing and (ii) during the continuance thereof no Grantor shall sell,
convey, lease, assign, transfer or otherwise dispose of any Collateral (which
notice may be given by telephone if promptly confirmed in writing), each Grantor
may use and dispose of the Collateral in any lawful manner not inconsistent with
the provisions of this Agreement, the New Debentures or any other Financing
Document. Without limiting the generality of the foregoing, each Grantor agrees
that it shall not permit any Collateral to be in the possession or control of
any warehouseman, bailee, agent or processor at any time, other than Collateral
that is in transit by any means, unless such warehouseman, bailee, agent or
processor shall have been notified of the Security Interest and each Grantor
shall have obtained therefrom a written agreement in form and substance
reasonably satisfactory to the Collateral Agent and the Required Investors to
hold the Grantor subject to the New Debenture Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien held by
it with respect to such Collateral, whether arising by operation of law or
otherwise.
12.10 COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.
---------------------------------------------------------------
(a) Each Grantor agrees that it will not, nor will it permit any of its
licensees to, do any act, or omit to do any act, whereby any Patent which is
material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees, to the extent practicable, that it shall
continue to xxxx any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent promptly if it knows
that any Patent, Trademark or Copyright material to the conduct of its business
may become abandoned, lost or dedicated to the public, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office or United States Copyright Office) regarding such Grantor's
ownership of any Patent, Trademark or Copyright, its right to register the same,
or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States, unless it
promptly informs the Collateral Agent, and, upon request of the Collateral
Agent, executes and delivers any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence the Collateral Agent'
security interest in such Patent, Trademark or Copyright, and each Grantor
hereby appoints the Collateral Agent as its attorney-in-fact to execute and file
such writings for the foregoing purposes (and, prior to the occurrence of any
Event of Default or Default (as defined in the New Debentures), such Grantors
shall be notified of such filing), all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States, to maintain and pursue each material
application relating to the Patents, Trademarks and/or Copyrights (and to obtain
the relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantors' business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantors' business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantors promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly xxx for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default (as defined
in the New Debentures), each Grantor shall use its reasonable commercial efforts
to obtain all requisite consents or approvals by the licensor of each Copyright
License, Patent License or Trademark License to effect the assignment of all of
such Grantor's right, title and interest thereunder to the Collateral Agent or
its designees.
ARTICLE XIII
POWER OF ATTORNEY
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent for the benefit of the New Secured Parties (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for each Grantor and in each Grantor's
name or otherwise, for the use and benefit of the Collateral Agent for the
benefit of the New Secured Parties, upon the occurrence and during the
continuance of an Event of Default (as defined in the New Debentures) (a) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral or
any part thereof; (b) to demand, collect, receive payment of, give receipt for
and give discharges and releases of all or any of the Collateral; (c) to sign
the name of any Grantor on any invoice or xxxx of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral; (g)
to notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent for the benefit of the New Secured Parties; and
(h) to use, sell, assign, transfer, pledge, make any agreement with respect to
or otherwise deal with all or any of the Collateral, and to do all other acts
and things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent for the benefit of the New Secured
Parties, were the absolute owner of the Collateral for all purposes; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any Grantor
or (unless such action is the result of gross negligence or willful misconduct)
to any claim or action against the Collateral Agent. It is understood and agreed
that the appointment of the Collateral Agent as the agent and attorney-in-fact
of the Grantors for the purposes set forth above is coupled with an interest and
is irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other New Debenture
Documents with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by the Collateral Agent of any other or further right which it may have on the
date of this Agreement or hereafter, whether hereunder, under any New
Debentures, by law or otherwise.
ARTICLE XIV
REMEDIES
14.1 REMEDIES UPON DEFAULT.
----------------------
(a) Upon the occurrence and during the continuance of an Event of
Default (as defined in the New Debentures), each Grantor agrees to deliver each
item of Collateral to the Collateral Agent for the benefit of the New Secured
Parties on demand, and it is agreed that the Collateral Agent for the benefit of
the New Secured Parties shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the New Debenture
Security Interest to become an assignment, transfer and conveyance of any of or
all such Collateral by the applicable Grantors to the Collateral Agent for the
benefit of the New Secured Parties, or to license or sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any such Collateral throughout the world on such terms and conditions and
in such manner as the Collateral Agent shall determine (other than in violation
of any then-existing licensing or contractual arrangements to the extent that
waivers cannot be obtained), and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Collateral and without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights afforded to a
secured party under the UCC or other applicable law. Without limiting the
generality of the foregoing, each Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
(b) The Collateral Agent shall give the Grantors 10 days' prior written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-611 of the UCC or its equivalent in other jurisdictions) of the
Collateral Agent's intention to make any sale of Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine. The Collateral Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public (or, to the extent permitted by law, private) sale made pursuant to this
Section, any Collateral Agent for the benefit of the New Secured Parties may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
the Collateral or any part thereof offered for sale and may make payment on
account thereof by using any claim then due and payable to such Collateral Agent
from any Grantor as a credit against the purchase price, and such Collateral
Agent may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to any Grantor therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and no Grantor shall be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default (or defined in the New Debentures) shall
have been remedied and the New Debenture Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
14.2 APPLICATION OF PROCEEDS.
------------------------
The Collateral Agent shall apply the proceeds of any collection or sale
of the Collateral, as well as any Collateral consisting of cash, as required
pursuant to the terms of the Collateral Agency and Intercreditor Agreement.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement and the Collateral Agency and Intercreditor Agreement. Upon any sale
of the Collateral by the Collateral Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent, Secured Parties,
or such officer or be answerable in any way for the misapplication thereof.
14.3 GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY.
----------------------------------------------
For the purpose of enabling the Collateral Agent to exercise rights and
remedies under this Article at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to the Collateral Agent for the benefit of the Secured Parties an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to the Grantors) to the extent that such license does not
violate any then existing licensing arrangements (to the extent that waivers
cannot be obtained) to use, license or sub-license any of the Collateral
consisting of Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof and sufficient rights of quality control in
favor of Grantor to avoid the invalidation of the Trademarks subject to the
license. The use of such license by the Collateral Agent shall be exercised, at
the option of the Collateral Agent upon the occurrence and during the
continuation of an Event of Default (as defined in the New Debentures); provided
that any license, sub-license or other transaction entered into by the
Collateral Agent in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default (as defined in the
New Debentures).
ARTICLE XV
MISCELLANEOUS
15.1 NOTICES.
--------
All communications and notices hereunder shall (except as otherwise
expressly permitted herein) be in writing and given as provided in Section 8.3
of the Purchase Agreement. Any notice properly delivered to the Borrower shall
be deemed notice properly delivered to eXstatic.
15.2 SECURITY INTEREST ABSOLUTE.
---------------------------
All rights of the Collateral Agent hereunder, the New Debenture
Security Interest and all obligations of the Grantors hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the New Debentures, any New Debentures Document, any agreement
with respect to any of the New Debenture Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the New Debenture
Obligations, or any other amendment or waiver of or any consent to any departure
from the New Debentures, any New Debentures Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the New
Debenture Obligations, or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Grantors in respect of
the New Debenture Obligations or this Agreement (other than payment in full of
the New Debenture Obligations or the conversion of all (and not part) of the New
Debentures into common stock of Exchange in accordance with the terms hereof).
15.3 SURVIVAL OF AGREEMENT.
----------------------
All covenants, agreements, representations and warranties made by the
Grantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the Collateral Agent and the New Secured Parties and
shall survive the consummation of the transactions contemplated by the New
Debenture Documents, and the execution and delivery to the New Secured Parties
of the New Debentures, regardless of any investigation made by the Collateral
Agent or on their behalf, and shall continue in full force and effect until this
Agreement shall terminate.
15.4 BINDING EFFECT ASSIGNMENT.
--------------------------
This Agreement shall be binding upon the Grantors and the Collateral
Agent for the benefit of the New Secured Parties and their respective successors
and assigns, and shall inure to the benefit of the Grantors, the Collateral
Agent for the benefit of the New Secured Parties and their respective successors
and assigns, except that no Grantor shall have the right to assign or transfer
its rights or obligations hereunder or any interest herein or in the Collateral
(and any such assignment or transfer shall be void) except as expressly
contemplated by this Agreement or the other New Debenture Documents.
15.5 SUCCESSORS AND ASSIGNS.
-----------------------
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Grantors or the Collateral Agent for the benefit of the New Secured Parties that
are contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
15.6 COLLATERAL AGENT' EXPENSES; INDEMNIFICATION.
--------------------------------------------
(a) The Grantors agree to pay upon demand to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees,
disbursements and other charges of its counsel and of any experts or agents,
which the Collateral Agent may incur in connection with (i) the administration
of this Agreement, (ii) the custody or preservation of, or the sale of,
collection from or other realization upon any of the Collateral, (iii) the
exercise, enforcement or protection of any of the rights of the Collateral Agent
hereunder or (iv) the failure of the Grantors to perform or observe any of the
provisions hereof.
(b) Without limitation of its indemnification obligations under the New
Debenture Documents, the Grantors jointly and severally agrees to indemnify the
Collateral Agent against, and hold each of them harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
fees, disbursements and other charges of counsel, incurred by or asserted
against any of them arising out of, in any way connected with, or as a result
of, the execution, delivery or performance of this Agreement or any claim,
litigation, investigation or proceeding relating hereto or to the Collateral is
a party thereto; provided that such indemnity shall not, as to the Collateral
Agent, be available to the extent that such losses, claims, damages, liabilities
or related expenses have resulted from the gross negligence or willful
misconduct of the Collateral Agent.
(c) Any such amounts payable as provided hereunder or under the
Collateral Agency or Intercreditor Agreement shall be additional New Debenture
Obligations secured hereby and by the New Debenture Documents. The provisions of
this Section 15.6 shall remain operative and in full force and effect regardless
of the termination of this Agreement or any other New Debentures, the
consummation of the transactions contemplated hereby, the repayment of any of
the New Debentures, the invalidity or unenforceability of any term or provision
of this Agreement or any New Debentures, or any investigation made by or on
behalf of the Collateral Agent. All amounts due under this Section 15.6 shall be
payable on written demand therefor.
15.7 GOVERNING LAW.
--------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
15.8 WAIVERS; AMENDMENT.
-------------------
(a) No failure or delay of the Collateral Agent in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Collateral Agent hereunder and of the New Secured Parties,
under the New Debenture Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provisions
of this Agreement or any New Debentures Document or consent to any departure by
the Grantors therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Grantors in any case shall entitle the Grantors to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantors with respect to which such
waiver, amendment or modification is to apply.
15.9 WAIVER OF JURY TRIAL.
---------------------
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE NEW DEBENTURE DOCUMENTS. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE NEW DEBENTURE DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.9.
15.10 SEVERABILITY.
-------------
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
15.11 COUNTERPARTS.
-------------
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one contract. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
15.12 HEADINGS.
---------
Article and Section headings used herein are for the purpose of
reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
15.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS.
--------------------------------------------
(a) Each Grantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the New Debenture Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent may otherwise have to bring any action or
proceeding relating to this Agreement or the New Debenture Documents against the
Grantors or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the New Debenture Documents in
any New York State court or Federal court of the United States of America
sitting in New York City. Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
15.14 TERMINATION.
------------
This Agreement and the New Debenture Security Interest shall terminate
when all the New Debenture Obligations have been indefeasibly paid in full or
all (and not part) of the New Debentures have been converted into common stock
of Exchange, at which time the Collateral Agent shall execute and deliver to
each Grantor, at each Grantor's expense, all UCC termination statements and
similar documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 15.14 shall be without recourse to or warranty by the
Collateral Agent.
15.15 RIGHT OF SET-OFF.
-----------------
Each Grantor hereby grants to the Collateral Agent for the benefit of
the New Secured Parties a lien, security interest and right of setoff as
security for all New Debenture Obligations to the New Secured Parties, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Collateral Agent or any entity under the control
of the Collateral Agent. At any time after the occurrence and during the
continuance of an Event of Default (as defined in the New Debentures), without
demand or notice, the Collateral Agent may set off the same or any part thereof
and apply the same to any liability or obligation of the Grantors and any
guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE THE COLLATERAL AGENT
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GRANTORS OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
15.16 COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT CONTROLS.
-------------------------------------------------------
Notwithstanding anything contrary herein or in the New Debenture
Documents, the rights, benefits, priorities and interests of the Collateral
Agent and the New Secured Parties (including, without limitation, with respect
to the Collateral, the Proceeds thereof and exercise of rights, powers and
remedies) shall be subject in all respects to the provisions of the Collateral
Agency and Intercreditor Agreement. Each of the New Secured Parties, by its
acceptance of the benefits hereof, (a) agrees to the terms and provisions hereof
and of the Collateral Agency and Intercreditor Agreement, and (b) together with
each Grantor, hereby acknowledges and agrees that the Collateral Agent (i) is
acting for the benefit and at the direction of the New Secured Parties and, to
the extent provided in the Collateral Agency and Intercreditor Agreement, the
Existing Investors pursuant to the Collateral Agency and Intercreditor Agreement
and (ii) shall have no liabilities or obligations hereunder except as expressly
provided in the Collateral Agency and Intercreditor Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
GRANTORS:
--------
EXCHANGE APPLICATIONS, INC.,
By:
---------------------------
Name: F. Xxxxxx Xxxxx
Title: CFO
EXSTATIC SOFTWARE, INC.
By:
---------------------------
Name: F. Xxxxxx Xxxxx
Title: CFO
COLLATERAL AGENT:
-----------------
INSIGHT VENTURE PARTNERS IV
(Collateral Agent), LLC
By:
---------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
Annex 1 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to the Securities Purchase Agreement dated as of
August 27, 2001, (as amended, supplemented or otherwise modified from time to
time, the "Purchase Agreement"), among EXCHANGE APPLICATIONS, INC., a Delaware
corporation (the "Borrower"), EXSTATIC SOFTWARE, INC., a Washington corporation
("eXstatic", together with the Borrower, the "Grantors") and the secured parties
(each a "Secured Party" and together, the "Secured Parties") identified on the
signature page hereto. Capitalized terms used herein and not defined herein
shall have meanings assigned to such terms in the Purchase Agreement.
The undersigned, a Financial Officer and a Legal Officer, respectively,
of each Grantor, hereby certify to the Secured Parties and each other Secured
Parties:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has
had in the past five years, together with the date of the relevant
change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has
changed its identity or corporate structure in any way within the past
five years. Changes in identity or corporate structure would include
mergers, consolidations and acquisitions, as well as any change in the
form, nature or jurisdiction of corporate organization. If any such
change has occurred, include in Schedule 1 the information required by
Sections 1 and 2 of this certificate as to each acquiree or constituent
party to a merger or consolidation.
(d) The following is a list of all other names (including trade
names or similar appellations) used by each Grantor or any of its
divisions or other business units in connection with the conduct of its
business or the ownership of its properties at any time during the past
five years:
(e) Set forth below is the Federal Taxpayer Identification Number
of each Grantor:
2. Current Locations. (a) The chief executive office of each
Grantor is located at the address set forth opposite its name below:
Grantor Mailing Address County State
------- --------------- ------ -----
(b) Set forth below opposite the name of each Grantor are all
locations where such Grantor maintains any books or records relating to
any Accounts Receivable (with each location at which chattel paper, if
any, is kept being indicated by an "*"):
Grantor Mailing Address County State
------- --------------- ------ -----
(c) Set forth below opposite the name of each Grantor are all the
material places of business of such Grantor not identified in paragraph
(a) or (b) above:
Grantor Mailing Address County State
------- --------------- ------ -----
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified
above:
Grantor Mailing Address County State
------- --------------- ------ -----
(e) Set forth below opposite the name of each Grantor are the
names and addresses of all Persons other than such Grantor that have
possession of any of the Collateral of such Grantor:
Grantor Mailing Address County State
------- --------------- ------ -----
3. Unusual Transactions. All Accounts Receivable have been originated
by the Grantors and all Inventory has been acquired by the Grantors in the
ordinary course of business.
4. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where any Grantor is
domicile.
5. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
6. [INTENTIONALLY OMITTED].
7. Stock Ownership. Attached hereto as Schedule 8 is a true and correct
list of all the duly authorized, issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule 8
is each Subsidiary that represents 50% or less of the equity of the entity in
which such investment was made.
8. Notes. Attached hereto as Schedule 9 is a true and correct list of
all notes held by each Subsidiary and all intercompany notes between each
Grantor and each Subsidiary of such Grantor and between each Subsidiary of such
Grantor and each other such Subsidiary.
9. Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by each Grantor to any Subsidiary of such Grantor or
made by any Subsidiary of such Grantors to such Grantor or any other Subsidiary
of such Grantor, which advances will be on and after the date hereof evidenced
by one or more intercompany notes pledged to the Secured Parties, and (b) a true
and correct list of all unpaid intercompany transfers of goods sold and
delivered by or to any Grantor or any Subsidiary of such Grantor.
10. Mortgage Filings. Attached hereto as Schedule 11 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the corporation that owns such property as such name appears in its
certificate of incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (iii) the filing office in which
a Mortgage with respect to such property must be filed or recorded in order for
the Secured Parties to obtain a perfected security interest therein.
* * * * *
IN WITNESS WHEREOF, the undersigned have duly executed this certificate
on this 27th day of August, 2001.
GRANTORS:
--------
EXCHANGE APPLICATIONS, INC.,
By:
------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By:
------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
COLLATERAL AGENT:
----------------
INSIGHT VENTURE PARTNERS IV
(COLLATERAL AGENT), LLC
By:
------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
SCHEDULE I
----------
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.
SKP INVESTMENTS LLC
THK PRIVATE EQUITIES
XXXXXX FAMILY FOUNDATION
BOSTON PIPES, LLC
XXXXX XXXXXXXX
EXHIBIT E
---------
Form of Collateral Agency and Intercreditor Agreement
COLLATERAL AGENCY AND INTERCREDITOR
AGREEMENT, dated as of August 29, 2001,
among (i) EXCHANGE APPLICATIONS, INC., a
Delaware corporation ("Exchange"), and
EXSTATIC SOFTWARE, INC. (f/k/a Xxxx
Xxxxxxxx, Inc.), a Washington corporation
("eXstatic"; and together with Exchange,
collectively, the "Grantors"); (ii) INSIGHT
VENTURE PARTNERS IV, L.P. ("Partners IV"),
INSIGHT VENTURE PARTNERS (CAYMAN) IV, L.P.
("Cayman IV"), INSIGHT VENTURE PARTNERS IV
(FUND B), L.P. ("Fund B IV"), INSIGHT
VENTURE PARTNERS IV (CO-INVESTORS), L.P.
("Co-Investors IV"; and, together with
Partners IV, Cayman IV, Fund B IV, and their
respective successors and assigns,
collectively, the "Existing Investors");
(iii) the Persons listed on Schedule I
hereto as New Investors which are party
hereto, together with their respective
successors and assigns (the "New
Investors"); and (iv) INSIGHT VENTURE
PARTNERS IV (COLLATERAL AGENT), LLC as
Collateral Agent, together with its
successors, the "Collateral Agent".
WITNESSETH:
-----------
WHEREAS, the Grantors and the Existing Investors have entered into the
Existing Debenture Documents and the Grantors have caused their obligations
thereunder to be secured pursuant to the Existing Security Agreement;
WHEREAS, concurrently herewith, the Grantors and the New Investors are
entering into the New Debenture Documents and the Grantors are causing their
obligations thereunder to be secured pursuant to the New Security Agreement;
WHEREAS, the New Investors desire to appoint the Collateral Agent as
their agent under the New Security Agreement and to hold the Collateral and
exercise rights, powers and remedies for their benefit; and
WHEREAS, the parties hereto desire to set forth certain agreements
among them with respect to the Security Documents, the Collateral, and the
exercise of certain rights, powers and remedies.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE XVI
DEFINITIONS
16.1 DEFINED TERMS.
--------------
As used herein, the following terms, and the single and plural thereof
shall have the following meanings:
"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.
"Aggregate Convertible Debentures" has the meaning assigned to it in
the New Purchase Agreement.
"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.
"Code" shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York.
"Collateral" shall mean all the properties and assets of whatever
nature, tangible or intangible, now owned or existing or hereafter acquired or
arising, in which any of the Collateral Agent, the Existing Investors or the New
Secured Parties have been granted a lien or security interest pursuant to any of
the Security Documents and all Proceeds thereof, including, without limitation,
the Existing Collateral and the New Collateral.
"Collateral Agent" shall have the meaning given thereto in the preamble
hereof.
"Debenture Documents" shall mean the Existing Debenture Documents and
the New Debenture Documents, collectively.
"Debenture Obligations" shall mean at any time, the sum (without
duplication) of (a) the Existing Debenture Obligations, and (b) the New
Debenture Obligations (it being understood that Persons who are Existing
Investors may also be New Investors and hold both Existing Debenture Obligations
and New Debenture Obligations and Persons who are New Investors may also be
Existing Investors and hold both Existing Debenture Obligations and New
Debenture Obligations, and, in any such case, there shall not be deemed to be
any duplication).
"Default" shall mean any Default or Event of Default under, and as such
terms are defined in, any Debenture Documents.
"Designated Investor Majority" means any two Designated Investors who
hold Aggregate Convertible Debentures with an aggregate face or principal amount
equal to at least 67% of the aggregate face or principal amount of the Aggregate
Convertible Debentures then held by the third Designated Investor; provided,
however, that if no such Designated Investor Majority exists at such time, then
the term "Designated Investor Majority" shall mean Investors holding at least
40% of the aggregate principal or face amount of Aggregate Convertible
Debentures then outstanding.
"Designated Investors" means Insight, Boston Pipes, LLC and THK Private
Equities, in each case, together will all Affiliates thereof.
"Dollars" and "$" shall mean lawful currency of the United States of
America.
"Existing Collateral" shall mean the Collateral in which a security
interest is created in favor of the Existing Investors under the Existing
Security Agreement.
"Existing Debentures" shall mean, collectively, (i) 12% Convertible
Debenture in the aggregate principal amount of U.S. $7,318,307.37, and (ii) the
12% Convertible Debenture in the aggregate principal amount of U.S.
$5,055,890.41, both (i) and (ii) issued by the Grantors to the Existing
Investors on August 29, 2001 (amending, respectively (a) the 12% Convertible
Debenture in the aggregate principal amount of U.S. $7,241,307.37, and (b) the
12% Convertible Debenture in the aggregate principal amount of U.S. $5,000,000,
both (a) and (b) issued by the Grantors to the Existing Investors on July 26,
2001).
"Existing Debenture Documents" shall mean, collectively, the Existing
Purchase Agreement, the Existing Debentures, the Existing Security Agreement and
all other documents, instruments and agreements in connection therewith.
"Existing Debenture Obligations" shall mean, at any time, the sum
(without duplication) of (a) the aggregate principal or face amount of the
Existing Debentures and the aggregate amount of accrued and unpaid interest
thereon at such time, and (b) the aggregate amount of all other monetary
obligations of the Grantors that are accrued, identified and owing at such time
to any Existing Investor under any Existing Debenture Document, including,
without limitation, indemnification and expense reimbursement obligations.
"Existing Investors" shall have the meaning given thereto in the
preamble hereof.
"Existing Purchase Agreement" shall mean the Securities Purchase
Agreement among the Existing Investors and the Grantors, dated as of July 26,
2001, as amended, modified, supplemented and restated from time to time.
"Existing Secured Obligations" shall mean the Obligations as such term
is defined in the Existing Security Agreement.
"Existing Security Agreement" shall mean the Security Agreement, dated
as of July 26, 2001, among the Grantors and the Existing Investors, as amended,
modified, supplemented and restated from time to time.
"Investors" shall mean the Existing Investors and the New Investors,
collectively (it being understood that Persons who are Existing Investors may
also be New Investors and hold both Existing Debenture Obligations and New
Debenture Obligations and Persons who are New Investors may also be Existing
Investors and hold both Existing Debenture Obligations and New Debenture
Obligations, and, in any such case, there shall not be deemed to be any
duplication).
"New Collateral" shall mean the Collateral in which a security interest
is created in favor of the Collateral Agent for the benefit of the New Secured
Parties under the New Security Agreement.
"New Debentures" shall mean, collectively, the U.S. $15,500,000 in
principal amount 12% Senior Secured Convertible Debentures issued by the
Grantors to the New Investors dated as of the date hereof.
"New Debenture Documents" shall mean, collectively, the New Purchase
Agreement, the New Debentures, the New Security Agreement and all other
documents, instruments and agreements in connection therewith.
"New Debenture Obligations" shall mean, at any time, the sum (without
duplication) of (a) the aggregate principal or face amount of the New Debentures
and the aggregate amount of accrued and unpaid interest thereon at such time,
and (b) the aggregate amount of all other monetary obligations of the Grantors
that are accrued, identified and owing at such time to any New Investor under
any New Debenture Document, including, without limitation, indemnification and
expense reimbursement obligations.
"New Investors" shall have the meaning given thereto in the preamble
hereof.
"New Purchase Agreement" shall mean the Securities Purchase Agreement
among the New Investors and the Grantors, dated as of the date hereof, as
amended, modified, supplemented and restated from time to time.
"New Secured Obligations" shall mean the New Debenture Obligations as
such term is defined in the New Security Agreement.
"New Secured Parties" shall mean the New Investors and the Collateral
Agent.
"New Security Agreement" shall mean the Security Agreement, dated as of
the date hereof, among the Grantors and the New Investors, as amended, modified,
supplemented and restated from time to time.
"Notice of Default" shall have the meaning given thereto in Section
2.1.
"Person" shall mean any individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Proceeds" shall mean all proceeds within the meaning of the Code.
"Ratable Basis" shall mean, with respect to any Investor, the ratable
interest or amount of such Investor determined ratably in accordance with the
portion of the Aggregate Convertible Debentures held by such Investor in
relation to the total amount of the Aggregate Convertible Debentures held by all
Investors collectively.
"Required Investors" shall mean Investors holding more than 51% of the
aggregate principal or face amount of the Debenture Obligations in respect of
the Aggregate Convertible Debentures then outstanding.
"Secured Obligations" shall mean Existing Secured Obligations and the
New Secured Obligations, collectively.
"Secured Parties" shall mean, collectively, the Existing Investors and
the New Secured Parties, collectively.
"Security Documents" shall mean the Existing Security Agreement and the
New Security Agreement, collectively.
16.2 OTHER DEFINITIONAL PROVISIONS.
------------------------------
The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, the words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation".
ARTICLE XVII
DEFAULTS; RIGHTS AND REMEDIES
17.1 NOTICE OF DEFAULT.
------------------
Upon any Grantor becoming aware of the occurrence of any Default, such
Grantor shall promptly notify the Collateral Agent of the Default in writing,
describing in reasonable detail the nature of such Default (any such notice,
"Notice of Default"). Upon acquiring knowledge of any Default, to the extent
that the Investors have not previously received a Notice of Default in respect
of such Default, each Investor shall endeavor to provide the Notice of Default
to the Collateral Agent and each other Investor.
17.2 GENERAL AUTHORITY OF THE COLLATERAL AGENT; REMEDIES NOT EXCLUSIVE.
------------------------------------------------------------------
(a) Upon receipt by the Collateral Agent of a Notice of Default, the
Collateral Agent shall at the request of a Designated Investor Majority and on
behalf of the Secured Parties exercise the rights and remedies and take the
actions as provided in this Agreement, in Security Documents and under
applicable law in accordance with the direction of such Designated Investor
Majority as provided herein. Each Secured Party and each Grantor hereby agrees
that the Collateral Agent shall have the authority and discretion to exercise
all such rights and remedies and take all such action.
(b) No remedy conferred upon or reserved to the Collateral Agent herein
or in any Security Document is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein, in any Security Document or now or
hereafter existing at law or in equity or by statute.
(c) No delay by the Collateral Agent in exercising, or failure by the
Collateral Agent to exercise, any right, remedy or power hereunder or under any
Security Document shall impair any such right, remedy or power or shall be
construed to be a waiver thereof, and every right, power and remedy given to the
Collateral Agent under this Agreement or any Security Document may be exercised
from time to time and as often as may be deemed expedient by the Collateral
Agent or a Designated Investor Majority.
17.3 WAIVER AND ESTOPPEL.
--------------------
(a) To the extent permitted by applicable law, each Grantor hereby
agrees that it will not at any time in any manner whatsoever claim, or take the
benefit or advantage of, any appraisement, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force, which may delay, prevent or otherwise affect the performance or
enforcement of this Agreement or any Security Document and, to the extent
permitted by applicable law, waives all benefit or advantage of all such laws,
and each Grantor hereby covenants that it will not hinder, delay or impede the
execution of any power granted to the Collateral Agent in this Agreement or any
Security Document but will suffer and permit the execution of every such power
as though no such law were in force.
(b) To the extent permitted by applicable law, each Grantor, on behalf
of itself and all who may claim through or under it, including, without
limitation, any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
in any Security Document or pursuant to judicial proceedings or upon any
foreclosure or any enforcement of this Agreement or any Security Document and
consents and agrees that all the Collateral may at any such sale be offered and
sold as an entirety.
(c) Each Grantor waives, to the extent permitted by applicable law,
presentment, demand, protest and any notice of any kind (except notices
explicitly required hereunder or under any Debenture Document or any Security
Document) in connection with this Agreement and the Security Documents, and any
action taken by the Collateral Agent with respect to the Collateral.
17.4 LIMITATION ON COLLATERAL AGENT'S DUTY IN RESPECT OF COLLATERAL.
---------------------------------------------------------------
Beyond its duties as to the custody thereof expressly provided herein
or in any Security Document and to account to the Secured Parties and the
Grantors for monies and other property received by it hereunder or under any
Security Document, the Collateral Agent shall not have any duty to the Grantors
or to the Secured Parties as to any Collateral in its possession or control or
in the possession or control of any of its agents or nominees, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto, except to treat such Collateral in its possession
with the same degree of care as it affords its own property and in accordance
with applicable law.
17.5 LIMITATION BY LAW.
------------------
All rights, remedies and powers provided herein or in any Security
Document may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions hereof are
intended to be subject to all applicable provisions of law which may be
controlling and to be limited to the extent necessary so that they will not
render this Agreement invalid, unenforceable in whole or in part or not entitled
to be recorded, registered or filed under the provisions of any applicable law.
17.6 RIGHTS OF SECURED PARTIES UNDER DEBENTURE DOCUMENTS.
----------------------------------------------------
Notwithstanding any other provision of this Agreement, (a) the right of
each Investor (i) to receive payment of the Debenture Obligations held by such
Investor when due (whether at the stated maturity thereof, by acceleration or
otherwise) as expressed in the related Debenture Document (ii) to convert all or
any portion of the Aggregate Convertible Debentures held by such Investor or
(iii) with respect to any indemnity or reimbursement claim against any Grantor
not arising in connection with any Default, to institute suit or to obtain a
judgment for the collection of such Debenture Obligations or to enforce any such
judgment on or after such due date, and to otherwise exercise the rights and
remedies as a general creditor in accordance with the Debenture Document to
which it is a party, in each case, in accordance with the applicable provisions
of the Debenture Documents; and (b) the obligation of each Grantor to pay such
Debenture Obligation when due, shall not be impaired or affected except as
provided in such Debenture Document.
ARTICLE XVIII
RANKING; REQUIRED INVESTORS; APPLICATIONS
18.1 PARI PASSU OBLIGATIONS.
-----------------------
The Existing Investors hereby consent to the incurrence of the New
Debenture Obligations and the creation of the security interest in the New
Collateral to secure the New Secured Obligations. Notwithstanding anything to
the contrary, each of the Grantors, the Existing Investors and the New Investors
hereby agrees that (i) the (x) Existing Secured Obligations and the (y) New
Secured Obligations shall constitute pari passu obligations of the Grantors,
both x and y shall be senior to all other obligations of the Grantors except as
expressly provided in the Debenture Documents, (ii) as between the Existing
Investors and the New Secured Parties, the security interest in the Existing
Collateral in favor of the Existing Investors and the security interest in the
New Collateral in favor of the Collateral Agent for the benefit of the New
Secured Parties shall be of equal ranking and priority, (iii) the rights and
interests of each Investor in respect of the Debenture Obligations, Secured
Obligations, the Collateral and all other matters related thereto shall be
determined on a Ratable Basis in accordance with the provisions of this
Agreement, (iv) all rights, interests and priorities with respect to the
Collateral, the Proceeds thereof, the exercise of any rights or remedies or the
taking of any action under any Security Document and any matters related thereto
shall be governed by the terms of this Agreement, and (v) the Secured Parties
shall share the Collateral and all Proceeds thereof on a Ratable Basis in
accordance with the terms of this Agreement.
18.2 REQUIRED INVESTORS.
-------------------
Each Investor agrees that (i) it shall not take any action to
accelerate Debenture Obligations or enforce any liens under any Security
Document with respect to any Aggregate Convertible Debentures (except as
permitted in Section 17.6) without the written consent or authorization of a
Designated Investor Majority, (ii) except as provided in Section 17.2, the
Collateral Agent shall not be required to exercise any applicable rights or
remedies, or take any applicable actions, whether under this Agreement, any
Debenture Document, any Security Documents or applicable law, unless directed by
a Designated Investor Majority (except as permitted in Section 17.6), and (iii)
notwithstanding the provisions of clause (ii), the Collateral Agent may exercise
any rights and remedies and take any actions, whether under this Agreement, any
Security Documents or applicable law, in the absence of any such direction,
without liability, if the Collateral Agent believes in good faith that (A) time
is of the essence in preserving the rights and interests of the Secured Parties
hereunder and under the Security Documents and (B) the failure to exercise or
take any such rights, remedies or actions promptly could adversely affect the
rights and interests of the Secured Parties. No Default under any of the
Aggregate Convertible Debentures may be declared or waived, as the case may be,
without the consent of a Designated Investor Majority.
18.3 APPLICATION OF MONIES.
----------------------
(a) Notwithstanding anything to the contrary in any Security Document,
all Proceeds of Collateral and any other monies received by any Investor under,
or in connection with, any Security Document shall be promptly remitted to the
Collateral Agent for application pursuant to this Agreement.
(b) All Proceeds of Collateral and any other moneys received by the
Collateral Agent, whether from any Investor pursuant to Section 3.3(a) or under,
or in connection with, any Security Document, shall be distributed and applied
as follows:
First: to the Collateral Agent, in an amount equal to any unpaid
costs or expenses of the Collateral Agent incurred in performing its
duties hereunder and under any Security Documents;
Second: to the Secured Parties, in an amount equal to all sums
which constitute Secured Obligations then held by the Secured Parties,
on a Ratable Basis, including without limitation the unpaid principal
or face amount of, and unpaid interest on and other charges, if any, in
respect of, the Secured Obligations then outstanding whether or not due
and payable and the costs and expenses of the Secured Parties and their
representatives which are due and payable under the relevant Debenture
Documents and Security Documents; and
Third: any surplus then remaining shall be paid to the Grantors or
its successors or assigns or to whomsoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
18.4 NO LIABILITY.
-------------
The Collateral Agent shall have no liability to the Grantors or any of
the Secured Parties for any actions, distributions or applications taken or made
pursuant to this Article XVIII in good faith. If any Secured Party receives an
amount in excess of the amount to which it was entitled to receive pursuant to
Section 3.3(b), then such Secured Party shall pay such excess to the Collateral
Agent pursuant to Section 3.3(a) for further application in accordance with
Section 3.3(b) as soon as practicable after the existence of such overstatement
shall have been determined. Each Secured Party agrees to act in accordance with
this Agreement and not take any action inconsistent herewith.
ARTICLE XIX
AGREEMENTS WITH COLLATERAL AGENT
19.1 DELIVERY OF AMENDMENTS, ETC.
----------------------------
The Grantors shall deliver to the Collateral Agent, promptly upon the
execution thereof, a true and complete copy of all amendments, supplements or
other modifications to any Debenture Document.
19.2 EXPENSES.
---------
Each Grantor, jointly and severally, agrees to pay to the Collateral
Agent, from time to time upon demand, all of the fees, costs and out-of-pocket
expenses of the Collateral Agent (including, without limitation, the reasonable
fees and disbursements of its counsel and such special counsel as the Collateral
Agent shall reasonably elect to retain) (a) arising in connection with the
preparation, execution, delivery, modification, and termination of or
performance under this Agreement and any Security Document or the enforcement of
any of the provisions hereof or thereof, (b) incurred or required to be advanced
in connection with the administration of the Collateral, the sale or other
disposition of Collateral pursuant to any Security Document and the
preservation, protection, enforcement or defense of the Collateral Agent's
rights under this Agreement and the Security Documents and in and to the
Collateral in accordance with the terms hereof or thereof or (c) incurred by the
Collateral Agent in connection with the replacement of the Collateral Agent as
provided in this Agreement. The obligations of each Grantor under this
subsection shall survive (i) the termination of this Agreement, and (ii) the
resignation or removal of the Collateral Agent.
19.3 STAMP AND OTHER SIMILAR TAXES.
------------------------------
Each Grantor, jointly and severally, agrees to indemnify and hold
harmless the Collateral Agent and each Secured Party from any present or future
claim for liability for any stamp or any other similar tax and any penalties or
interest with respect thereto, which may be assessed, levied or collected by any
jurisdiction in connection with this Agreement, any Security Document, or any
Collateral. The obligations of each Grantor under this subsection shall survive
(i) the termination of this Agreement, and (ii) the resignation or removal of
the Collateral Agent.
19.4 FILING FEES, EXCISE TAXES, ETC.
-------------------------------
Each Grantor, jointly and severally, agrees to pay or to reimburse the
Collateral Agent for any and all payments made by the Collateral Agent in
respect of all search, filing, recording and registration fees, taxes, excise
taxes and other similar imposts which may be payable or determined to be payable
in respect of the execution and delivery of this Agreement and the Security
Documents. The obligations of each Grantor under this subsection shall survive
(i) the termination of this Agreement, and (ii) the resignation or removal of
the Collateral Agent.
19.5 INDEMNIFICATION.
----------------
Each Grantor, jointly and severally, agrees to pay, indemnify, and hold
the Collateral Agent harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, the fees and disbursements and other
charges of counsel) or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement, the Security Documents or any other Debenture Documents or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Collateral Agent under or in connection with any of the foregoing, unless
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements which are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the indemnified party,
including, without limitation, indemnification of the Collateral Agent for
liabilities of the Collateral Agent for the net amount of taxes (after taking
into account any deduction, credit or other tax reduction or benefit available
by reason of the imposition of such tax) in any jurisdiction in which the
Collateral Agent would not otherwise be subject to tax except solely by reason
of acting under this Agreement or any Security Document (directly or through
agents).
In any suit, proceeding or action brought by the Collateral Agent under
or with respect to any contract, agreement, interest or obligation constituting
part of the Collateral for any sum owing thereunder, or to enforce any
provisions thereof in accordance with the provisions hereof and of the Security
Documents, each Grantor, jointly and severally, will save, indemnify and keep
the Collateral Agent harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or reduction
of liability whatsoever of the obligor thereunder, arising out of a breach by
the Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such obligor or
its successors from such Grantor and all such obligations of each Grantor shall
be and remain enforceable against and only against such Grantor and shall not be
enforceable against the Collateral Agent. The obligations of each Grantor under
this Section 19.5 shall survive (i) the termination of this Agreement, and (ii)
the resignation or removal of the Collateral Agent.
19.6 FURTHER ASSURANCES.
-------------------
At any time and from time to time, upon the written request of the
Collateral Agent, and at the expense of the Grantors (on a joint and several
basis), each Grantor and Secured Party will promptly execute and deliver any and
all such further instruments and documents and take such further action as the
Collateral Agent reasonably requests to obtain the full benefits of this
Agreement and the Security Documents and of the rights and powers herein and
therein granted or to cause any Collateral to be subject to a perfected security
interest of the Collateral Agent to be so subject, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens
and security interests granted under the Security Documents. Each Grantor also
hereby authorizes the Collateral Agent to sign and to file any such documents,
instruments or financing or continuation statements without the signature of
such Grantor to the extent permitted by applicable law, but in no way is the
Collateral Agent obligated to do so.
ARTICLE XX
THE COLLATERAL AGENT
20.1 APPOINTMENT.
------------
(a) Each New Investor hereby irrevocably designates and appoints the
Collateral Agent as the agent of such New Investor under this Agreement and the
Security Documents and each New Investor irrevocably (i) directs the Collateral
Agent to enter into this Agreement and the New Security Agreement, and (ii)
authorizes the Collateral Agent, in such capacity, to take such action on its
behalf under the provisions of this Agreement and the Security Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Collateral Agent by the terms of this Agreement and the Security Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any New Investor,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into Agreement and the Security Documents or otherwise
exist against the Collateral Agent.
(b) Each of the Grantors and the Existing Investors hereby agree that,
notwithstanding anything to the contrary in the Existing Security Agreement, the
Existing Investors may execute any of their respective duties, rights, powers
and remedies as secured parties under the Existing Debenture Documents by or
through agents or attorneys-in-fact. Each Existing Investor hereby designates
and appoints the Collateral Agent as the agent and attorney-in-fact of such
Existing Investor under this Agreement and the Security Documents and each
Existing Investor authorizes the Collateral Agent, in such capacity, to take
such action on its behalf under the provisions of this Agreement and the
Security Documents and to exercise such powers and perform such duties as are
expressly delegated to the Collateral Agent by the terms of this Agreement and
the Security Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Existing Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into
Agreement and the Security Documents or otherwise exist against the Collateral
Agent.
20.2 DELEGATION OF DUTIES.
---------------------
The Collateral Agent may execute any of its duties under this
Agreement, the Security Documents and the Guarantee by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys in-fact selected by
it with reasonable care.
20.3 EXCULPATORY PROVISIONS.
-----------------------
Neither the Collateral Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or the Security Documents (except to the extent
that any of the foregoing resulted from its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Secured Parties for any recitals, statements, representations or warranties
made by the Grantors or any officer thereof contained in this Agreement, the
Security Documents or any other Debenture Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Collateral Agent under or in connection with, this Agreement, the
Security Documents or any other Debenture Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Security Documents or any other Debenture Documents or for any failure of the
Grantors to perform its obligations hereunder or thereunder. The Collateral
Agent shall not be under any obligation to any Secured Party to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement, the Security Documents or any other
Debenture Documents, or to inspect the properties, books or records of the
Grantors.
20.4 RELIANCE BY COLLATERAL AGENT.
-----------------------------
The Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, upon any instrument, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Grantor or any of its Subsidiaries), independent accountants and other
experts selected by the Collateral Agent with reasonable care. The Collateral
Agent shall be fully justified in failing or refusing to take any action under
this Agreement, or the Debenture Documents unless it shall first receive such
advice or concurrence of a Designated Investor Majority as it deems appropriate
or it shall first be indemnified to its satisfaction by the Secured Parties
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Collateral Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement, or the Debenture Documents in accordance with a request of a
Designated Investor Majority, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Secured Parties and all
future holders of the Secured Obligations.
20.5 NON-RELIANCE ON COLLATERAL AGENT OR OTHER SECURED PARTIES.
----------------------------------------------------------
Each Secured Party expressly acknowledges that neither the Collateral
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates have made any representations or warranties to it and that no act
by the Collateral Agent hereafter taken, including any review of the affairs of
the Grantors or any affiliate thereof, shall be deemed to constitute any
representation or warranty by the Collateral Agent to any Secured Party. Each
Secured Party represents to the Collateral Agent that it has, independently and
without reliance upon the Collateral Agent or any other Secured Party, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Grantors and their
affiliates and made its own decision to extend credit to the Grantors and enter
into this Agreement and the Debenture Documents to which it is a party. Each
Secured Party also represents that it will, independently and without reliance
upon the Collateral Agent or any other Secured Party, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement, the Security Documents or any other Debenture
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Grantors and their affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Secured
Parties by the Collateral Agent hereunder, the Collateral Agent shall not have
any duty or responsibility to provide any Secured Party with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Grantors or any affiliate
which may come into the possession of the Collateral Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
20.6 INDEMNIFICATION.
----------------
The Secured Parties agree to pay, indemnify and hold harmless the
Collateral Agent in its capacity as such (to the extent not reimbursed by the
Grantor after the Collateral Agent shall have reasonably pursued such
reimbursement and without limiting the obligation of the Grantor to do so),
ratably according to the amounts of Secured Obligations held by them on the date
on which indemnification is sought hereunder (or, if indemnification is sought
after the date upon which the Secured Obligations shall have been paid in full,
ratably in accordance with the amounts of Secured Obligations held by them
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including without limitation, the fees and disbursements and other
charges of counsel) or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Debenture Obligations) be imposed on, incurred by or asserted against the
Collateral Agent in any way relating to or arising out of this Agreement, the
Security Documents or any other Debenture Documents or the transactions
contemplated hereby or thereby or any action taken or omitted by the Collateral
Agent under or in connection with any of the foregoing; provided that no Secured
Party shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements which are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from the Collateral
Agent's gross negligence or willful misconduct. The agreements in this Section
20.6 shall survive (i) the termination of this Agreement and (ii) the
resignation of the Collateral Agent.
20.7 COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY.
--------------------------------------------
The Collateral Agent, in its individual capacity, and its affiliates
may make loans to, invest in and generally engage in any kind of business with
the Grantors or any of their affiliates as though the Collateral Agent were not
the Collateral Agent. With respect to Secured Obligations held by it or any of
its affiliates, the Collateral Agent or such affiliate shall have the same
rights and powers under this Agreement, the Security Documents or any other
Debenture Documents as any Secured Party or Investor and may exercise the same
as though it were not the Collateral Agent, and the terms "Secured Party" and
"Secured Parties" shall include the Collateral Agent in its individual capacity.
20.8 SUCCESSOR AGENT.
----------------
The Collateral Agent may resign as Collateral Agent upon 30 days'
notice to the Secured Parties and the Grantors and may be removed at any time by
a Designated Investor Majority. If the Collateral Agent shall resign or be
removed as Collateral Agent under this Agreement, then the Required Investors
shall appoint from among the Secured Parties a successor collateral agent for
the Secured Parties, whereupon such successor agent shall succeed to the rights,
powers and duties of the Collateral Agent, and the term "Collateral Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Collateral Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part of such former
Collateral Agent or any of the parties to this Agreement or any Secured Party.
After any retiring Collateral Agent's resignation or removal as Collateral Agent
hereunder, the provisions of this Article V shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent under
this Agreement, the Security Documents or any other Debenture Documents. The
resigning Collateral Agent will take such actions as shall be reasonably
required to transfer and deliver the Collateral to the successor Collateral
Agent.
ARTICLE XXI
MISCELLANEOUS
21.1 NOTICES.
--------
Unless otherwise specified herein or in the relevant Security Document,
all notices, requests, demands or other communications pursuant to this
Agreement or any Security Document given to any Grantor, the Collateral Agent,
or any Secured Party to be effective shall be given in writing or by facsimile
transmission and shall be deemed to have been duly given when personally
delivered or when duly deposited in the mails, registered or certified mail
postage prepaid, or if transmitted by facsimile transmission, when received in
legible form.
21.2 NO WAIVERS.
-----------
No failure on the part of the Collateral Agent or any Secured Party to
exercise, no course of dealing with respect to, and no delay in exercising, any
right, power or privilege under this Agreement, the Security Documents or any
other Debenture Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
21.3 AMENDMENTS, SUPPLEMENTS, WAIVERS AND RELEASES.
----------------------------------------------
(a) With the written consent of the Required Investors, the Collateral
Agent and the Grantors may, from time to time, enter into written agreements
supplemental hereto for the purpose of adding to, or waiving any provisions of,
this Agreement or changing in any manner the rights of the Collateral Agent, the
Secured Parties or the Grantors hereunder; provided that no such supplemental
agreement shall (i) (A) amend, modify or waive any provision of this Section
21.3 without the written consent of each Secured Party affected thereby, (B)
amend, modify or waive any provision of Article III, Sections 2.2 or 2.6, or the
definitions of "Secured Obligations", "Designated Investors", "Secured Parties",
"Required Investors", "Designated Investor Majority", "Debenture Obligations" or
any other defined term used in such definitions or in such Article or Sections,
without the consent of each of the Designated Investors or (ii) amend, modify,
or waive any provisions of Article III or Article V or alter the duties, rights
or obligations of the Collateral Agent hereunder or under the Security Documents
without the written consent of the Collateral Agent. Any such supplemental
agreement shall be binding upon each Grantor, the Secured Parties and the
Collateral Agent and their respective successors and assigns.
(b) With the written consent of each of the Designated Investors, the
Collateral Agent and the Grantors may, from time to time, enter into written
agreements supplemental to such Security Document for the purpose of adding to,
or waiving any provisions of, such Security Document or changing in any manner
the rights of the Collateral Agent, the Secured Parties or the Grantors
thereunder. Any such supplemental agreement shall be binding upon each Grantor,
the Secured Parties and the Collateral Agent and their respective successors and
assigns.
(c) Without the consent of any Investor or Secured Party, the
Collateral Agent and the Grantors, at any time and from time to time, may enter
into one or more agreements supplemental hereto or to any Security Document, in
form satisfactory to the Collateral Agent, (i) to add to the covenants of the
Grantor for the benefit of the Secured Parties or to surrender any right or
power herein conferred upon the Grantors; or (ii) to cure any ambiguity, to
correct or supplement any provision herein or in any Security Document which may
be defective or inconsistent with any other provision herein or therein, or to
make any other provision with respect to matters or questions arising hereunder
which shall not be inconsistent with any provision hereof.
21.4 HEADINGS.
---------
The headings of Sections have been included herein for convenience only
and should not be considered in interpreting this Agreement.
21.5 SEVERABILITY.
-------------
It is the desire and intent of the parties that the provisions of this
Agreement 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 would be 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 Agreement or affecting the validity or
enforceability of such provision in any other 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 or affecting the validity or enforceability of such
provision in any other jurisdiction.
21.6 SUCCESSORS AND ASSIGNS.
-----------------------
This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and shall inure to the benefit of each of the Secured
Parties and their respective successors and assigns, and nothing herein is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Agreement or any Collateral.
21.7 GOVERNING LAW.
--------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
21.8 SUBMISSION TO JURISDICTION; WAIVERS.
------------------------------------
Each Grantor hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) to the extent permitted by applicable law, consents that any such
action or proceeding may be brought in such courts and waives any objection that
it may now or hereafter have to the venue of any such action or proceeding in
any such court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address set forth on the signature pages hereof or at such other address of
which the parties hereto shall have been notified pursuant hereto; and
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to xxx
in any other jurisdiction.
21.9 COUNTERPARTS.
-------------
This Agreement may be signed in any number of original or facsimile
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
21.10 TERMINATION.
------------
This Agreement shall automatically terminate (except such provisions
which are expressly stated to survive the termination hereof) when (i) the liens
and security interests granted under the Security Documents have terminated and
(ii) the Collateral has been released and the Secured Obligations have been
indefeasibly paid and performed in full.
21.11 WAIVER OF JURY TRIAL.
---------------------
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 PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
EXCHANGE APPLICATIONS, INC.
By:
------------------------------
Name:
Title: Chief Financial Officer
Address for Notices:
Attention:
Fax:
EXSTATIC SOFTWARE, INC.
By:
------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
INSIGHT VENTURE PARTNERS IV
(COLLATERAL AGENT), LLC
as Collateral Agent
By:
------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
Address for Notices:
Attention:
Fax:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
NEW INVESTORS
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 of each of the foregoing limited partnerships
By:
---------------------------------------
Name:
Title:
Address for Notices:
Attention:
Fax:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
SKP INVESTMENTS LLC
By:
-------------------------------
Name:
Title:
Address for Notices:
Attention:
Fax:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
THK PRIVATE EQUITIES
By:
-------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxxxx
Title: Principal
Address for Notices:
THK Private Equities
x/x Xxxxxxxx X. Xxxxxxxxxxxx
0000 Xx. Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
XXXXXX FAMILY FOUNDATION
By:
-------------------------------
Name: Xxxx Xxxxxx
Title: Trustee
Address for Notices:
000 Xxx Xxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
(000) 000-0000
Attention: Xxxx Xxxxxx
Fax:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
BOSTON PIPES, LLC
By:
------------------------------
Name:
Title:
Address for Notices:
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
----------------------------------
XXXXX XXXXXXXX
Address for Notices:
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
EXISTING INVESTORS
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:
------------------------------
Name: Xxxxx Xxxxxx
Title:
Address for Notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxx Xxxxxx
Fax:
Schedule I
----------
New Investors
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.
SKP INVESTMENTS LLC
THK PRIVATE EQUITIES
XXXXXX FAMILY FOUNDATION
BOSTON PIPES, LLC
XXXXXX XXXXXXXX
EXHIBIT F
---------
Form of Subordination Agreement
August 28, 2001
Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Exchange Applications, Inc. ("Exchange")
and eXstatic Software, Inc. ("eXstatic")
Ladies and Gentlemen:
Reference is made to the Subordination Agreement, dated as of April 25,
2001, by and between Insight Capital Partners IV, L.P., Insight Capital Partners
(Cayman) IV, L.P., Insight Capital Partners IV (Fund B), L.P. and Insight
Capital Partners IV (Co-Investors), L.P. (collectively, together with their
successors and assigns, "Insight") and Silicon Valley Bank (the "Bank"), as
amended, supplemented and otherwise modified from time to time (including by the
Letter Agreement, dated June 1, 2001, and the Letter Agreement, dated July 26,
2001 among Insight and the Bank and this Agreement) (the "Subordination
Agreement"). Capitalized terms used and not otherwise defined herein (including
in the acknowledgement set forth on the signature page hereto) shall have the
meanings attributed thereto in the Subordination Agreement.
Pursuant to the terms of the Securities Purchase Agreement, dated
August 27, 2001, among Exchange, eXstatic Software, Inc., a Washington
corporation ("eXstatic" together with Exchange, the "Borrowers"), SKP
Investments LLC, THK Private Equities, Xxxx Xxxxxx, Boston Pipe, LLC and Insight
(collectively, the "Creditors") (the "Securities Purchase Agreement"), the
Creditors intend to purchase $15 million in Senior Secured Convertible
Debentures of the Borrowers (the "Convertible Debentures") bearing interest at
12% per annum and having a January 10, 2005 maturity. The Convertible Debentures
will be evidenced by separate debentures, will be issued pursuant to the
Securities Purchase Agreement and will be secured pursuant to the Security
Agreement, dated August 27, 2001, among the Creditors and the Borrowers (the
"Security Agreement," together with the Securities Purchase Agreement, the
Convertible Debentures and the other documents and instruments contemplated
thereby, the "Financing Documents").
We hereby agree as follows:
All principal and interest payable by the Borrowers to the Creditors
under the Financing Documents, whether presently existing or arising in the
future, shall constitute Subordinated Debt under and as defined in the
Subordination Agreement.
Subject to the proviso at the end of the second sentence of Section 3
of the Subordination Agreement, the Creditors shall be entitled to receive
payments by the Borrowers of expenses incurred in connection with the Financing
Documents as provided for by Section 8.16 of the Securities Purchase Agreement
and Section 8 of the Convertible Debenture.
The Creditors hereby acknowledge and agree that any and all references
in the Subordination Agreement to "Borrower" shall collectively mean and refer
to Exchange and eXstatic, as fully and completely as if eXstatic had been
originally named therein.
*****
Except as modified and supplemented by this Agreement, the
Subordination Agreement is and shall continue to be in full force and effect.
Very truly yours,
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 of each of the foregoing
limited partnerships
By:
--------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
Except as modified and supplemented by this Agreement, the
Subordination Agreement is and shall continue to be in full force and effect.
SKP INVESTMENTS LLC
By:
--------------------------
Name:
Title:
Except as modified and supplemented by this Agreement, the
Subordination Agreement is and shall continue to be in full force and effect.
THK PRIVATE EQUITIES
By:
------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxxxx
Title: Principal
Except as modified and supplemented by this Agreement, the
Subordination Agreement is and shall continue to be in full force and effect.
XXXXXX FAMILY FOUNDATION
By:
--------------------------
Name: Xxxx Xxxxxx
Title: Trustee
Except as modified and supplemented by this Agreement, the
Subordination Agreement is and shall continue to be in full force and effect.
BOSTON PIPES, LLC
By:
--------------------------
Name:
Title:
Except as modified and supplemented by this Agreement, the
Subordination Agreement is and shall continue to be in full force and effect.
------------------------------
XXXXX XXXXXXXX
Acknowledged, agreed and consented:
EXCHANGE APPLICATIONS, INC.
EXSTATIC SOFTWARE, INC.
By execution of this letter, Silicon Valley Bank (the "Bank"), as
lender under the Loan and Security Agreement, dated April 25, 2001, among the
Borrowers and the Bank (as amended, modified and supplemented from time to time,
the "Loan Agreement"), and as the Bank under the Subordination Agreement, hereby
consents to, and waives, any violation or breach of the Loan Agreement and the
Subordination Agreement arising from the execution and delivery of the Financing
Documents (as defined above in this letter) and the consummation of the
transactions contemplated thereby.
SILICON VALLEY BANK
By:
------------------------------
Name:
Title:
cc: Exchange Applications, Inc.
August 29, 2001
Page i
EXHIBIT G
---------
Form of Xxxxxxx Xxxx Opinion
August 29, 2001
To each of the Purchasers party to the
Purchase Agreement referred to below
set forth on Schedule 1 attached hereto
Re: Exchange Applications, Inc.
---------------------------
Ladies and Gentlemen:
We have acted as counsel to Exchange Applications, Inc., a Delaware corporation
(the "Company"), in connection with the execution and delivery by the Company of
the Securities Purchase Agreement, dated as of August 29, 2001 (the "Purchase
Agreement"), among the Company, eXstatic Software, Inc., a Washington
Corporation ("eXstatic"), and the Purchasers listed on the signature pages
thereto (the "Purchasers"), and the transactions contemplated thereby.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings given such terms in the Purchase Agreement. This opinion is
rendered to you pursuant to Section 3.1(b)(iii) of the Purchase Agreement.
Although we act generally as counsel to the Company, our representation is
limited to matters individually referred to us by the Company's management.
As to all matters of fact (including factual conclusions and characterizations
and descriptions of purpose, intention or other state of mind), we have relied,
with your permission, entirely upon (a) the representations and warranties of
the Company and eXstatic set forth in the Purchase Agreement and each of the
other Transaction Documents (as defined below), (b) the representations and
warranties of the Purchasers set forth in the Purchase Agreement and (c)
certificates of certain of the officers of the Company and have assumed, without
independent inquiry, the accuracy of those representations, warranties, and
certificates. For purposes of our opinions rendered in paragraph 1 below, with
respect to the incorporation, organization, existence, qualification, or
standing of the Company, our opinion relies entirely upon and is limited by
those certificates of public officials attached hereto as Exhibit A.
August 29, 2001
Page ii
In connection with this opinion, we have examined originals or copies of the
following documents:
(i) the Purchase Agreement;
(ii) the New Debentures;
(iii) the Warrants;
(iv) the Insight Warrants;
(v) the Fifth Amended and Restated Registration Rights Agreement;
(vi) the Security Agreement;
(vii) the Collateral Agency and Intercreditor Agreement;
(viii) the letter agreement, dated as of August 29 (the "Letter
Agreement"), among Insight, the Company and eXstatic;
(ix) the Uniform Commercial Code financing statement (the "Financing
Statement"), a copy of which is attached hereto as Exhibit B, to
be filed in the State of Delaware, listing the Company, as
debtor, and the Collateral Agent, as secured party;
(x) the Certificate of Incorporation of the Company (the "Charter"),
certified by the Secretary of State of the State of Delaware on
July 23, 2001, and certified by an officer of the Company as of
the date hereof as being true, complete and correct and in full
force and effect;
(xi) the By-Laws of the Company (the "By-Laws") (the Charter and the
By-Laws together being referred to sometimes herein as the
"Governing Documents"), certified by an officer of the Company as
of the date hereof as being true, complete and correct and in
full force and effect;
(xii) the certificate of certain officers of the Company, as of the
date hereof, as to certain actions taken by the Board of
Directors of the Company, and as to the titles, incumbency, and
specimen signatures of certain officers of the Company; and
(xiii) those certificates of certain public officials with respect to
the Company attached hereto as Exhibit A.
August 29, 2001
Page iii
The documents specified in paragraphs (i) through (vii) above are referred to
herein, collectively, as the "Transaction Documents". The documents specified in
paragraphs (ii) and (iii) above are referred to herein, collectively, the "New
Debenture Securities". The documents specified in paragraphs (ii) through (iv)
above are referred to herein, collectively, as the "Transaction Securities". The
documents specified in paragraphs (iii) and (iv) are referred to herein,
collectively, as the "August Warrants". We have examined the documents listed in
the preceding paragraph and such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of this opinion.
We have assumed the genuineness of all signatures, the conformity to the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document.
As used in this opinion, the "UCC" means the Uniform Commercial Code as adopted
and in effect in the State of New York or the State of Delaware, or another
relevant, specified jurisdiction, as the case may be; the "New York UCC" means
the UCC of the State of New York; and the "Delaware UCC" means the UCC of the
State of Delaware.
For purposes of this opinion, we have made such examination of law as we have
deemed necessary. This opinion is limited solely to the internal substantive
laws of the State of New York as applied by courts located in New York without
regard to choice of law, the federal laws of the United States of America
(except for Federal and state tax, antitrust, securities, or blue sky laws, as
to which we express no opinion in this letter, other than as expressly set forth
in paragraphs 8 and 9 below), the Delaware General Corporation Law as applied by
courts located in Delaware (the "DGCL"), and, with respect only to paragraph 7
hereof, the Delaware UCC; and we express no opinion as to the laws of any other
jurisdiction.
Our opinions herein with respect to the Delaware UCC are limited to the official
statutory text thereof and only as it pertains to whether perfection of an
attached security interest may be effected by the filing of an effective UCC
financing statement in the State of Delaware, without any investigation or
review of any legal decisions or other statutory provisions in effect in the
State of Delaware that may affect the filing of a UCC financing statement or the
perfection of a security interest by filing in the State of Delaware.
We note that the Transaction Documents contain provisions stating that they are
to be governed by the laws of the State of New York (each a "Chosen-Law
Provision"). Except to the extent that any such Chosen-Law Provision is made
enforceable by New York General Obligations Law Section 5-1401, as applied by a
New York state court or a federal court sitting in New York and applying New
York choice of law principles, no opinion is given herein as to any
August 29, 2001
Page iv
Chosen-Law Provision, or otherwise as to the choice of law or internal
substantive rules of law that any court or other tribunal may apply to the
transactions contemplated by the Transaction Documents.
Our opinion is further subject to the following exceptions, qualifications and
assumptions, all of which we understand to be acceptable to you:
(a) We have assumed without any independent investigation that (i) each party
to the Transaction Documents, other than the Company, at all times relevant
thereto, is validly existing and in good standing under the laws of the
jurisdiction in which it is organized, and is qualified to do business and
in good standing under the laws of each jurisdiction where such
qualification is required generally or necessary in order for such party to
enforce its rights under such Transaction Documents, (ii) each party to the
Transaction Documents, at all times relevant thereto, had and has the full
power, authority and legal right under its certificate of incorporation,
partnership agreement, by-laws, and other governing organizational
documents, and the applicable corporate, partnership, or other enterprise
legislation and other applicable laws, as the case may be (other than the
Company, with respect to the Governing Documents, the laws of the United
States of America, and the DGCL, but only in each case to the limited
extent the same may be applicable to the Company, and relevant to our
opinions expressed below), to execute, deliver, and perform its obligations
under, the Transaction Documents, and (iii) each party to the Transaction
Documents, other than the Company, has duly authorized, executed, and
delivered each of the Transaction Documents to which it is a party.
(b) We have assumed without any independent investigation (i) that the Company
has received the agreed to and stated consideration for the incurrence of
the obligations applicable to it under the terms of the Transaction
Documents, and accordingly has received "value" (as such term is used in
Article 9 of the New York UCC or the Delaware UCC, as applicable) in
respect thereof, (ii) that each of the Transaction Documents is a valid and
binding obligation of each party thereto other than the Company, and (iii)
that each of the Transaction Documents is a valid and binding obligation of
the Company to the extent that laws other than those of the State of New
York are relevant thereto (other than the laws of the United States of
America, and the DGCL, but only to the limited extent the same may be
applicable to the Company and relevant to our opinions expressed below).
(c) The enforcement of any obligations of, or any security interest granted by,
the Company or any other Person, whether under any of the Transaction
Documents or otherwise, may be limited by bankruptcy, insolvency,
reorganization, moratorium, marshaling or other laws and rules of law
affecting the enforcement generally of creditors' rights and remedies
August 29, 2001
Page v
(including such as may deny giving effect to waivers of debtors' or
guarantors' rights); and we express no opinion as to the status under any
fraudulent conveyance laws or fraudulent transfer laws of any of the
obligations of, or any security interest granted by, the Company or any
other Person, whether under any of the Transaction Documents or otherwise.
(d) We express no opinion as to the enforceability of any particular provision
of any of the Transaction Documents relating to remedies after default.
(e) We express no opinion as to the availability of any specific or equitable
relief of any kind.
(f) The enforcement of any of your rights may in all cases be subject to an
implied duty of good faith and fair dealing and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity) and, as to any of your rights to collateral
security, will be subject to a duty to act in a commercially reasonable
manner.
(g) We express no opinion as to the enforceability of any particular provision
of any of the Transaction Documents relating to or constituting (i) waivers
of rights to object to jurisdiction or venue, consents to jurisdiction or
venue, or waivers of rights to (or methods of) service of process, (ii)
waivers of rights to trial by jury, or other rights or benefits bestowed by
operation of law, (iii) waivers of any applicable defenses, setoffs,
recoupments, or counterclaims, (iv) waivers or variations of provisions
which are not capable of waiver or variation under Sections 1-102, 9-602,
9-603, or other applicable provisions of the New York UCC or the Delaware
UCC, as the case may be, (v) provisions in the Transaction Documents
rendered ineffective or unenforceable by Sections 2A-303, 9-406, 9-407, or
9-408 of the applicable UCC, (vi) the grant of powers of attorney or
proxies, (vii) exculpation or exoneration clauses, and clauses relating to
releases or waivers of unmatured claims or rights, (viii) the imposition or
collection of interest on overdue interest or providing for a penalty rate
of interest or late charges on overdue or defaulted obligations, or the
payment of any premium, liquidated damages, or other amount which may be
held by any court to be a "penalty" or a "forfeiture", or (ix) so-called
"usury savings" clauses. We express no opinion as to the effect of
suretyship defenses, or defenses in the nature thereof, with respect to the
obligations of any applicable guarantor, joint obligor, surety,
accommodation party, or other secondary obligor.
(h) We express no opinion as to the enforceability of any particular provision
of the Transaction Documents relating to indemnification or contribution
obligations.
August 29, 2001
Page vi
(i) We assume that at least $2,500,000 will be advanced to the Company, in one
or more installments, pursuant to the Transaction Documents. No opinion is
given herein as to the usury laws, or other laws regulating the maximum
rate of interest which may be charged, taken or received, of any
jurisdiction other than New York.
(j) We note that, under the laws of the State of New York, the remedies
available in the State of New York for the enforcement of the Transaction
Documents could be affected by any failure of any Purchaser not organized
in New York (i) to become authorized, under Article 13 of the New York
Business Corporation Law, to do business in the New York or (ii) to become
authorized, under Article 5 of the New York Banking Law, to transact
business in New York as a foreign banking corporation. Further, no opinion
is given herein as to any other similar laws or requirements in any other
jurisdiction.
(k) When any opinion set forth below is given to our knowledge, or to the best
of our knowledge, or with reference to matters of which we are aware or
which are known to us, or with a similar qualification, that knowledge is
limited to the actual knowledge of the individual lawyers in this firm who
have participated directly and substantively in the specific transactions
to which this opinion relates and without any special or additional
investigation undertaken for the purposes of this opinion.
(l) We express no opinion as to the effect of events occurring, circumstances
arising, or changes of law becoming effective or occurring, after the date
hereof on the matters addressed in this opinion letter, and we assume no
responsibility to inform you of additional or changed facts, or changes in
law, of which we may become aware.
(m) We have assumed that (i) the Company is the corporate parent of eXstatic,
owning all of its outstanding stock; and (ii) the Transaction Documents are
necessary or convenient to the conduct, promotion or attainment of the
business of eXstatic.
We express no opinion as to whether the Company may validly guarantee or
otherwise become liable for, or grant a security interest in its assets to
secure, indebtedness incurred by eXstatic except to the extent the Company
may be determined to have benefited from the incurrence of such
indebtedness by eXstatic sufficiently that such undertaking by the Company
is necessary or convenient to the conduct, promotion or attainment of the
business of the Company.
August 29, 2001
Page vii
(n) We have assumed that neither the Company nor any Person acting on behalf of
the Company has engaged in any form of general solicitation or general
advertising in contravention of Rule 502(c) of Regulation D promulgated
under the Securities Act of 1933, as amended.
(o) We have made no examination of, and no opinion is given herein as to, the
Company's title to or other ownership rights in, the accuracy or
sufficiency of the descriptions of, or the existence of any liens, charges,
encumbrances, restrictions or limitations on, or adverse claims against,
any of the property or assets of the Company. We have assumed without any
independent investigation that the Company has rights in the Collateral and
any other assets in which it purports to grant a security interest under
the Security Agreement, and that the Security Agreement creates a valid
security interest in such portion of the Collateral and any such other
assets in which a security interest may be created by contract to secure
the obligations of the Company to the extent that laws other than those of
the State of New York are relevant thereto. We express no opinion as to the
priority or (except to the extent specifically set forth in paragraphs 6
and 7 below) the attachment, validity, enforceability, or perfection of any
security interest, mortgage, or other lien or encumbrance with respect to
any of the property or assets of the Company. Without limiting the
generality of the foregoing, we express no opinion as to the priority of
the security interests purported to be established by Section 3.1 of the
Collateral Agency and Intercreditor Agreement. Further, we express no
opinion as to any security interest in any Collateral or any other assets
excluded from, or not governed by, Article 9 of the New York UCC (or, in
the case of perfection by filing a financing statement in the State of
Delaware, the Delaware UCC). We call your attention to the following:
(i) the effectiveness of any UCC financing statement filed in the State of
Delaware or the State of New York terminates five years after the date
of filing (or at the end of such longer period as may be applicable in
certain cases under Section 9-515 of the UCC) unless a continuation
statement is filed within the period of six months prior to such
termination in accordance with Section 9-515 of the UCC;
(ii) Section 9-507 of the Delaware UCC provides that if the relevant debtor
so changes its name that a filed UCC financing statement becomes
seriously misleading, such UCC financing statement is not effective to
perfect a security interest in collateral acquired by such debtor more
than four months after such change unless an appropriate amendment to
the relevant UCC financing statement is filed before the expiration of
that period;
August 29, 2001
Page viii
(iii) if the debtor changes its "location" as determined under Section
9-307 of the New York UCC or the Delaware UCC, as applicable, or if a
"new debtor" becomes bound by the relevant security agreement under
Section 9-203(d) of the applicable UCC, certain actions (in or out of
New York or Delaware, as the case may be) may be required under
Section 9-316 of the UCC to continue the perfection of a security
interest perfected at the time of the change of the debtor's location
or of the new debtor becoming so bound; and, in addition, certain
actions may be required under Section 9-508 and other provisions of
Article 9 of the applicable UCC to perfect a security interest in
collateral acquired by the debtor after the time of the change of its
location or by the new debtor after the time of the new debtor
becoming bound;
(iv) there exist certain limitations, resulting from the operation of
Section 9-315 of the New York UCC or the Delaware UCC, as applicable,
on the perfection of any security interest in proceeds of collateral,
such that further action (in or out of New York or Delaware, as the
case may be) may be necessary to maintain perfection of such
interests;
(v) under Sections 9-320, 9-321, 9-330, and 9-331 of the applicable UCC,
purchasers, licensees, or lessees of certain types of collateral may
take the same free of a perfected security interest; and, to the
extent that "transferable records" (as that term is used in the
federal Electronic Signatures in Global and National Commerce Act
("E-SIGN") or the Uniform Electronic Transactions Act of any
applicable jurisdiction ("UETA")) constitute collateral, certain
persons in "control" (as that term is used in E-SIGN or UETA) of such
transferable records may take them free of a perfected security
interest;
(vi) Section 552 of the federal Bankruptcy Code limits the extent to which
property acquired by a debtor after the commencement of a case under
the Bankruptcy Code may be subject to a security interest resulting
from any security agreement entered into by the debtor before the
commencement of the case; and under Section 547 of the Bankruptcy
Code, a security interest that is deemed transferred within the
relevant period set forth in Section 547(b)(4) of the Bankruptcy Code
may be avoidable under certain circumstances;
(vii) the filing of UCC financing statements will not result in the
perfection of a security interest in items of collateral (such as
motor vehicles) which are subject to a certificate of title or
registration statute or other statute or treaty which specifies a
method of security interest perfection different than the filing of
UCC financing statements;
August 29, 2001
Page ix
(viii) a security interest may not attach or become enforceable or be
perfected as to contracts, licenses, permits, or other rights or
benefits which are not assignable under applicable law, or are not
assignable by their terms, or which are assignable only with the
consent of government agencies or officers, except to the extent
provided in Sections 2A-303, 9-406, 9-407, or 9-408 of the New York
UCC or the Delaware UCC, as applicable;
(ix) under Section 8-303 of the applicable UCC, a "protected purchaser" (as
defined in such Section 8-303) of a security, or of an interest
therein, may acquire its interest in such security free of any adverse
claim thereto; we express no opinion herein as to whether the
Purchasers, or any other person or entity, may be a protected
purchaser with respect to the securities included within the
Collateral (the "Collateral Securities"); and we point out that, under
Section 8-110(c) of the applicable UCC and in the event that the
Collateral Securities constitute "certificated securities" (within the
meaning given such term in the applicable UCC), the local law of the
jurisdiction in which the security certificates evidencing the
Collateral Securities are delivered to the Collateral Agent governs
whether an adverse claim with respect thereto may be asserted against
the Collateral Agent;
(x) we assume that neither the Company nor eXstatic is a "transmitting
utility" (as such term is defined in Article 9 of the applicable UCC);
(xi) we assume that the Collateral does not include any "cooperative
interests" (as such term is defined in Article 9 of the New York UCC;
(xii) we express no opinion herein as to whether the Collateral Agent, or
any other person or entity, may be a "holder in due course" (as
defined in the applicable UCC) of any applicable negotiable
instrument, or a holder to whom any applicable negotiable document of
title has been duly negotiated;
(xiii) a purchaser may obtain priority over or take free of a perfected
security interest under Section 9-338 or Section 9-516(d) of the
applicable UCC; and a security interest perfected by filing may be
junior to a security interest that was perfected by an earlier
effective filing mis-indexed by the applicable UCC filing office;
August 29, 2001
Page x
(xiv) any security interests in the Collateral may be subject to the
limitations set forth in Sections 9-404, 9-405, and 9-408 of the
applicable UCC; and, in any event, any security interests in the
assets of the Company may be subject to the economic effects of valid
recoupments, offsets, counterclaims, and similar rights of account
debtors, lessees, or other contractual parties, the terms of leases
and other contracts between the Company and such lessees or other
parties, and any claims or defenses of such lessees or other parties
against the Company arising under or extrinsic to such leases or other
contracts;
(xv) the rights of the Collateral Agent and the Purchasers with respect to
collateral consisting of obligations as to which a governmental or
similar entity is the account debtor or other obligor may be subject
to compliance by the Collateral Agent and the Purchasers with the
Federal Assignment of Claims Act or similar Federal or state laws;
(xvi) we call to your attention that the priority of security interests
provided for in the Transaction Documents may be affected by actions
taken before July 1, 2001, in or out of New York or Delaware, which
perfected a security interest of another party in Collateral described
in the Security Agreement; and
(xvii) we call to your attention that different versions of Article 9 of
the Uniform Commercial Code may currently be in effect in other
jurisdictions (other than New York and Delaware), under which other or
further action may be required under the laws of other jurisdictions
for the Collateral Agent and the Purchasers with respect to the
attachment, perfection and priority of their security interests
provided for in the Transaction Documents; we have not analyzed in
this transaction, and express no opinion herein as to, what further
actions, if any, may be so required.
(p) With respect to our opinions set forth below relating to stockholder
approval, we note that pursuant to letters dated August 6 and August 23,
2001, respectively, the Company received an exception under Nasdaq Rule
4350(i)(2)(A) 1 from the stockholder approval requirements that would
otherwise have been required under Nasdaq Rule 4350(i).
________________________________
1 Nasdaq Rule 4350(i)(2)(A) provides that exceptions to the stockholder
approval requirement "may be made upon application to Nasdaq when the delay in
securing stockholder approval would seriously jeopardize the financial viabilty
of the enterprise."
August 29, 2001
Page xi
(q) We call your attention to the fact that (i) the New Debentures provide that
only a portion of the principal of and accrued interest on the New
Debentures is convertible into Common Stock until such time as the Company
has increased the number of authorized shares of Common Stock to at least
225,000,000 (or the 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 transaction securities
outstanding at such time) (the "Authorized Share Increase") and (ii) the
August Warrants provide that they are not exercisable until the Authorized
Share Increase has occurred. We note that with respect to our opinions set
forth below relating to corporate action, the Company has not obtained
approval of its Board of Directors or its stockholders for the Authorized
Share Increase.
Based upon the foregoing, and subject to the limitations and qualifications set
forth below, we are of the opinion that:
1. The Company is a corporation validly existing and in corporate good
standing under the laws of the State of Delaware. The Company is duly
qualified (or, as applicable, is authorized to do business) and is in
good corporate standing, as applicable, in each case solely if and to
the extent described in the applicable certificates of public officials
attached hereto as Exhibit A in the jurisdictions listed therein.
2. The execution and delivery by the Company of each Transaction Document,
and the performance by the Company of its obligations under each
Transaction Document, are within the Company's corporate powers and
have been duly authorized by all requisite corporate action on the part
of the Company. The Company has duly executed and delivered each of the
Transaction Documents.
3. Each of the Transaction Documents constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its respective terms.
4. The authorized capital stock of the Company consists of (i) 150,000,000
shares of common stock, $.001 par value per share ("Common Stock"), and
(ii) 10,000,000 shares of preferred stock, $0.001 par value per share,
of which 5,330,000 are designated as Series A Convertible Redeemable
Preferred Stock. All issued and outstanding shares of Common Stock
(other than those issued upon the exercise of stock options) are duly
and validly issued, fully paid and nonassessable. The issuance, sale
and delivery of the New Debentures, and (except to the extent set forth
herein) subject to completion of the Authorized Share Increase in
accordance with the DGCL, the issuance and delivery of the shares of
Common Stock issuable upon conversion of the New Debentures in
accordance with the terms of the New Debentures have been duly
August 29, 2001
Page xii
authorized by all requisite corporate action on the part of the
Company, and all such shares of Common Stock have been duly reserved
for issuance. All such shares of Common Stock when so issued and
delivered upon conversion of the New Debentures in accordance with the
terms thereof, will be duly and validly issued, fully paid and
nonassessable. The issuance, sale and delivery of the August Warrants,
and subject to completion of the Authorized Share Increase in
accordance with the DGCL, the issuance and delivery of the shares of
Common Stock issuable upon exercise of the August Warrants in
accordance with the terms of the August Warrants have been duly
authorized by all requisite corporate action on the part of the
Company, and all such shares of Common Stock have been duly reserved
for issuance. All such shares of Common Stock when so issued and
delivered upon exercise of the August Warrants in accordance with the
terms thereof, will be duly and validly issued, fully paid and
nonassessable.
5. The execution and delivery by the Company of each Transaction Document
and the consummation of the transactions contemplated thereby, and
compliance by the Company with the provisions thereof (i) will not, to
the best of our knowledge, result in a breach or default (or give rise
to any right of termination, cancellation or acceleration) under any
Company Contract, (ii) will not violate any of the provisions of the
Governing Documents of the Company or any law, statute, rule or
regulation of the State of New York, or, to the best of our knowledge,
any judgment, order, writ, injunction or decree of any court or other
tribunal located in the State of New York, applicable to the Company
and (iii) to the best of our knowledge, will not result in the creation
or imposition of any Lien (other than Liens created by the Transaction
Documents in favor of the Collateral Agent and the Purchasers) on any
asset of the Company. Except for filings or recordings that may be
necessary to create, record or perfect, or maintain the perfection of,
or (with respect to any applicable pledged securities) to enforce, the
security interests created by the Security Agreement, to the best of
our knowledge, no consent or approval by, or any notification of or
filing with, any court, public body or authority of the State of New
York is required to be obtained or effected by the Company in
connection with the execution, delivery and performance by the Company
of each of the Transaction Documents or the consummation by the Company
of the transactions contemplated thereby.
6. The provisions of the Security Agreement are effective under the New
York UCC to create a valid, attached security interest in favor of the
Collateral Agent, for the benefit of the Collateral Agent and the
Purchasers, in all right, title and interest of the Company in those
items and types of Collateral described in the Security Agreement to
which Article 9 of the New York UCC is applicable.
7. Upon the proper filing (as defined in Section 9-516 of the Delaware
UCC) of the Financing Statement in the applicable filing office in the
State of Delaware listed on Exhibit C hereto, including the payment of
August 29, 2001
Page xiii
any requisite filing or recording fees, the Collateral Agent, for the
benefit of the Collateral Agent and the Purchasers, will have a
perfected security interest under Article 9 of the Delaware UCC in the
Collateral described in the Security Agreement and the Financing
Statement which is subject to Article 9 of the applicable UCC and in
which a security interest can be perfected by the filing of UCC
financing statements in the State of Delaware under Article 9 of the
Delaware UCC. For purposes of this paragraph, we have assumed that the
Collateral covered by the Financing Statement does not include any
timber to be cut or "as-extracted collateral", as such terms are used
in Section 9-501 of the Delaware UCC.
8. The offer, issuance and sale of the New Debenture Securities pursuant
to the Purchase Agreement and, assuming the continuing accuracy of the
representations and warranties of the Purchasers set forth in the
Purchase Agreement and based solely on the current rules and
interpretations of the Securities and Exchange Commission, the issuance
of the Common Stock to the Purchasers upon conversion or exercise, as
the case may be, of the New Debenture Securities in accordance with the
applicable terms thereof do not require registration under the
Securities Act of 1933, as amended.
9. The offer, issuance and sale of the Insight Warrants pursuant to the
Letter Agreement and, assuming the continuing accuracy of the
representations and warranties of Insight set forth in the Letter
Agreement and based solely on the current rules and interpretations of
the Securities and Exchange Commission, the issuance of the Common
Stock to Insight upon exercise of the Insight Warrants in accordance
with the applicable terms thereof do not require registration under the
Securities Act of 1933, as amended.
This opinion is delivered solely to you and for your benefit in connection with
the Purchase Agreement and the other Transaction Documents and may not be relied
upon by you for any other purpose or furnished or referred to, or relied upon,
by any other person or entity for any reason without our prior written consent.
Very truly yours,
XXXXXXX XXXX LLP
EXHIBIT H
---------
Capitalization Table
Summary Capitalization Table
--------------------------------------------------------------------------------
Deal Date 8/29/01
Current Stock Price $ 0.3441
Discounted Stock Price $ 0.3183
Dollars Warrants
------------- -------------
New Investors $14,500,000 45,554,508
New Insight 1,000,000 3,141,690
------------- -------------
Total Investment 15,500,000 48,696,199
Dollars Warrants
------------- -------------
Insight Warrant Coverage $ 6,500,000 20,420,986
New Investor Warrant Coverage 7,250,000 22,777,254
------------- -------------
Total Warrants Issued 13,750,000 43,198,241
FULLY DILUTED @ FULLY DILUTED @ FULLY DILUTED @
0.43447 0.3183 0.3183
PRIMARY SHARES DEBENTURE PRICE DEBENTURE PRICE CONVERSION PRICE
-------------- --------------- --------------- ----------------
IVP Series A Preferred Stock - 22,301,875 22,301,875 22,301,875 11.13%
IVP Convertible Debentures - 29,344,917 40,054,935 40,054,935 20.00%
IVP Warrants - 1,179,337 1,179,337 1,179,337 0.59%
New IVP Conv. Debentures - - - 3,235,941 1.62%
New IVP Warrants - - - 20,420,986 10.20%
New Convertible Debentures - - - 46,921,144 23.43%
New Warrants - - - 22,777,254 11.37%
Common Shares 34,053,087 34,053,087 34,053,087 34,053,087 17.00%
Options (2) - 9,230,275 9,230,275 9,230,275 4.61%
Other - 120,094 120,094 120,094 0.06%
-------------- --------------- --------------- ----------------
Total Shares 34,053,087 96,229,585 106,939,604 200,294,929 100.00%
Total authorized pool 150,000,000
----------------
Common share shortfall (50,294,929)
-------------------------------------------
(1) Assumes 7.5% discount off the current stock price.
(2) The weighted average exercise price for all stock options is $4.46.
SCHEDULE I
Purchasers
Insight Venture Partners IV, L.P. 76.666130% $766,661.30
Insight Venture Partners (Cayman) IV, L.P. 10.537455% $105,374.55
Insight Venture Partners IV (Fund B), L.P. 0.660033% $121,363.82
Insight Venture Partners IV(Co-Investors), L.P. 12.136382% $6,600.33
000 Xxxxx Xxxxxx, 0xx Xxxxx Total 100.000000% $1,000,000.00
Xxx Xxxx, X.X. 00000
Xxxxxxxxx: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SKP Investments LLC $500,000.00
00 Xxxx Xxxx
Xxxxxxx XX 00000
THK Private Equities $8,000,000.00
x/x Xxxxxxxx X. Xxxxxxxxxxxx
0000 Xx. Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Boston Pipes, LLC $5,000,000.00
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Xxxxx Xxxxxxxx $500,000.00
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
(000) 000-0000
Xxxxxx Family Foundation $500,000.00
000 Xxx Xxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
(000) 000-0000
