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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.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
August 29, 2001
Exchange Applications, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to (i) the Securities Purchase Agreement, dated
January 10, 2001 (the "Series A Agreement"), among 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.
(collectively, "Insight") and Exchange Applications, Inc. ("Exchange"), (ii) the
Securities Purchase Agreement, dated as of July 26, 2001 (the "July Agreement"),
among Insight, Exchange and eXstatic Software, Inc. ("eXstatic"), and (iii) the
Securities Purchase Agreement, dated as of the date hereof (the "August
Agreement"), among the Company, eXstatic and the purchasers named therein.
Insight, Exchange and eXstatic hereby agree as follows:
1. Section 5.3(a) of the Series A Agreement shall be of no force
or effect until such time as Section 6.4 of the August
Agreement is no longer in effect.
2. Section 5.3(c) of the Series A Agreement shall be of no force
or effect at any time that at least two Aggregate Convertible
Debenture Holders' Directors are serving in accordance with
Section 6.3 of the August Agreement. In the event of any
conflict between the terms of Section 5.3(c) of the Series A
Agreement and Section 6.3 of the August Agreement, the terms
of Section 6.3 of the August Agreement shall control.
3. Article VI of the July Agreement shall be of no force or
effect until such time as Article VI of the August Agreement
is no longer in effect.
4. Promptly following the execution and delivery of this letter
agreement, (i) the Company and eXstatic shall execute and
deliver to Insight convertible debentures in the forms of
Exhibits A and B attached hereto, respectively (collectively,
the "August Debentures") and (ii) the Company shall execute
and deliver to Insight a warrant in the form of Exhibit C
attached hereto (the "August Warrant"). Insight shall promptly
xxxx the original Convertible Debentures (as defined in the
July Agreement) "cancelled" and return the same to the
Company.
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Exchange Applications, Inc.
August 29, 2001
Page 2
5. The Company and eXstatic shall promptly execute and deliver
such documents, instruments, and agreements as Insight may
reasonably request in order to modify the Financing Documents
(as defined in the July Agreement) to conform the terms
thereof with the terms of the Financing Documents (as defined
in the August Agreement).
6. The Warrant (No.: W-4) dated June 1, 2001 (the "June Warrant")
issued by the Company to Insight is hereby cancelled and of no
further force or effect. Insight shall promptly xxxx the
original June Warrant "cancelled" and return the same to the
Company.
7. The number of Warrant Shares subject to the Warrant (No.: W-4)
dated April 16, 2001 (the "April 16 Warrant") is hereby fixed
at 1,179,337. The Warrant Vesting Date (as defined in the
April 16 Warrant) shall be deemed to have occurred on the date
hereof. The Exercise Price (as defined in the April 16
Warrant) is $0.33. Section 3 of the April 16 Warrant is hereby
amended to include the additional clauses (d) through (k) set
forth on Exhibit D attached hereto.
8. Insight hereby acknowledges and agrees that all
representations and warranties of Insight set forth in Section
5.1 and Section 5.2(a) and (b) of the July Agreement (the
"July Representations") shall be deemed to be incorporated by
reference into this Letter Agreement and made as of the date
hereof as if such representations and warranties were stated
herein in their entirety, except that the following defined
terms used in the July Agreement and appearing in the July
Representations shall have the respective meanings set forth
below opposite such terms:
July Agreement this Letter Agreement
-------------- ---------------------
Financing Documents August Debentures, August Warrant and this
letter agreement
Convertible Debentures August Debentures and August Warrant
Insight agrees that Xxxxxxx Xxxx LLP may rely on such
representations in delivering their opinion dated the date
hereof.
9. Pursuant to Section 3(b) of the Company's Certificate of
Designation dated January 10, 2001, Insight hereby consents to
the transactions contemplated by (i) the August Agreement and
(ii) this Letter Agreement.
10. Except as expressly set forth herein, the documents and
agreements modified hereby shall remain in full force and
effect.
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Exchange Applications, Inc.
August 29, 2001
Page 3
11. This Letter Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New
York.
12. This Letter Agreement may be executed in two or more
counterparts (including by telecopier).
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: /s/ Xxxxx Xxxxxx
---------------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director
ACCEPTED AND AGREED:
EXCHANGE APPLICATIONS, INC.
By: /s/ F. Xxxxxx Xxxxx
---------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By: /s/ F. Xxxxxx Xxxxx
---------------------------------
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
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EXHIBIT D
(d) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up (or if no
record date is set, the date such stock dividend, subdivision of stock split is
consummated), the Exercise Price shall be appropriately decreased, and the
number of shares of Common Stock issuable on exercise of this Warrant shall be
increased, in proportion to such increase in outstanding shares of Common Stock.
(e) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Exercise Price shall be appropriately increased, and the number of shares of
Common Stock issuable on exercise of this Warrant shall be decreased, in
proportion to such decrease in outstanding shares of Common Stock.
(f) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from no par value to par value or from par value to no par value or as a
result of a stock dividend or subdivision, split-up or combination of shares
covered by clause (d) or (e) above, or any consolidation or merger of the
Company, this 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
this Warrant would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers.
(g) All calculations under this paragraph shall be made to the nearest
one hundredth (1/100) of a cent.
(h) In any case in which the provisions of this Section shall require
that an adjustment shall become effective immediately after a record date of an
event, the Company may defer until the occurrence of such event (1) issuing to
the holder of any Warrant exercised after such record date and before the
occurrence of such event the shares of capital stock issuable upon such exercise
by reason of the adjustment required by such event in addition to the shares of
capital stock issuable upon such exercise before giving effect to such
adjustments, and (2) paying to such holder any amount in cash in lieu of a
fractional share of capital stock; provided, however, that the Company shall
deliver to such holder an appropriate instrument evidencing such holder's right
to receive such additional shares and such cash upon the occurrence of such
event. If after the
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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.
(i) Whenever the Exercise Price and the number of shares issuable under
this Warrant shall be adjusted as provided in this Section, the Company shall
make available for inspection during regular business hours, at its principal
executive offices or at such other place as may be designated by the Company, a
statement, signed by its chief executive officer, showing in detail the facts
requiring such adjustment and the Exercise Price and the number of shares
issuable under this Warrant that shall be in effect after such adjustment. The
Company shall also cause a copy of such statement to be sent by first class
certified mail, return receipt requested and postage prepaid, to each holder of
this Warrant at such holder's address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part of
any notice required to be mailed under the provisions of paragraph (j) below.
(j) If the Company shall propose to take any action of the types
described in clauses (d), (e) or (f) of this Section 3, the Company shall give
notice to the holder of this Warrant, in the manner set forth in Section 8.5 of
the Securities Purchase Agreement dated as of July 26, 2001, among the Company,
Exstatic Software, Inc. and the purchasers named therein, 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 this Warrant. In the
case of any action which would require the fixing of a record date, such notice
shall be given at least 10 days prior to the date so fixed, and in case of all
other action, such notice shall be given at least 10 days prior to the taking of
such proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(k) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 3 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 this Warrant against impairment.
