EXHIBIT 10.1
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SECURITIES PURCHASE AGREEMENT
dated as of January 10, 2001
among
EXCHANGE APPLICATIONS, inc.
(the "Company"),
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and
THE INVESTORS NAMED HEREIN
(the "Investors")
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Table of Contents
Page
ARTICLE I DEFINED TERMS; RULES OF CONSTRUCTION................................1
1.1 DEFINED TERMS.......................................................1
1.2 RULES OF CONSTRUCTION...............................................7
ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING...............................8
2.1 CERTIFICATE OF AMENDMENT............................................8
2.2 AUTHORIZATION OF ISSUANCE OF THE PREFERRED SHARES...................8
2.3 ISSUANCE OF SERIES A PREFERRED STOCK................................8
2.4 THE CLOSING.........................................................8
2.5 USE OF PROCEEDS.....................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................9
3.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING....................9
3.2 CAPITALIZATION......................................................9
3.3 AUTHORIZATION AND EXECUTION........................................10
3.4 AUTHORIZATION OF PREFERRED SHARES AND RESERVED COMMON SHARES.......10
3.5 NO CONFLICTS.......................................................10
3.6 APPROVALS..........................................................11
3.7 COMMISSION FILINGS; FINANCIAL STATEMENTS...........................11
3.8 PRIVATE OFFERING...................................................11
3.9 PROVIDED INFORMATION...............................................12
3.10 CERTAIN CONTRACTS..................................................12
3.11 INTELLECTUAL PROPERTY RIGHTS.......................................12
3.12 LITIGATION AND OTHER PROCEEDINGS OR CLAIMS.........................13
3.13 TERMINATION OF EMPLOYMENT..........................................13
3.14 REGISTRATION RIGHTS................................................13
3.15 BROKERS............................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...................14
4.1 AUTHORIZATION, EXECUTION AND ENFORCEABILITY........................14
4.2 INVESTMENT REPRESENTATIONS.........................................14
4.3 BROKERS............................................................15
ARTICLE V CLOSING DELIVERIES; POST-CLOSING COVENANTS.........................15
5.1 COMPANY CLOSING DELIVERIES.........................................15
5.2 INVESTOR CLOSING DELIVERIES........................................16
5.3 POST-CLOSING COVENANTS.............................................16
ARTICLE VI INDEMNIFICATION...................................................23
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND
COVENANTS, ETC..................................................23
6.2 INDEMNIFICATION....................................................23
ARTICLE VII MISCELLANEOUS....................................................24
7.1 EXPENSES...........................................................24
7.2 PARTIES IN INTEREST; ASSIGNMENT....................................24
7.3 ENTIRE AGREEMENT...................................................24
7.4 NOTICES............................................................24
7.5 AMENDMENTS.........................................................25
7.6 GOVERNING LAW; WAIVER OF JURY TRIAL...............................26
7.7 NO THIRD PARTY RELIANCE............................................26
7.8 SUBMISSION TO JURISDICTION.........................................26
7.9 EXTENSION; WAIVER..................................................27
7.10 SEVERABILITY.......................................................27
7.11 INDEPENDENCE OF AGREEMENTS.........................................27
7.12 COUNTERPARTS; FACSIMILE SIGNATURES.................................27
SCHEDULES
Schedule I - Investors
Schedule 3.1 - Organization
Schedule 3.2 - Capitalization
Schedule 3.7 - Commission Filings; Financial Statements
Schedule 3.11 - Intellectual Property
Schedule 3.12 - Litigation and other Proceedings or Claims
Schedule 3.14 - Registration Rights
EXHIBITS
Exhibit A - Form of Registration Rights Agreement
Exhibit B - Form of Certificate of Designation
Exhibit C - Form of Company Counsel Opinion
-ii-
SECURITIES PURCHASE AGREEMENT, dated as of January 10, 2001,
among EXCHANGE APPLICATIONS, inc., a Delaware corporation (the "Company"), and
the INVESTORS listed on Schedule I (each individually an "Investor" and
collectively, the "Investors").
The Company together with each of its Subsidiaries,
collectively, is primarily in the business of providing marketing automation and
enterprise customer relationship management solutions to companies (the
"Business"). The Company desires to raise equity financing, and the Investors
are willing to purchase certain shares of the Company's capital stock in
connection therewith, all on the terms and subject to the conditions set forth
herein.
ACCORDINGLY, in consideration of the foregoing and the
covenants, agreements, representations and warranties contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
1.1 DEFINED TERMS.
Capitalized terms used and not otherwise defined in this Agreement have
the meanings ascribed to them below or in the other locations of this Agreement
specified below:
"Accountants" has the meaning given to such term in Section
5.3(b)(i)(C).
"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.
"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.
"Best Knowledge" has the meaning given to such term in Section
1.2.
"Board" and "Board of Directors," unless otherwise specified,
means the Board of Directors of the Company.
"Business" has the meaning given to such term in the Preamble
to this Agreement.
"Business Day" means each day, except Saturday, Sunday,
Federal holidays and any other state-recognized holidays in the States of New
York and Massachusetts.
"By-laws" means the by-laws of the Company, as amended and in
effect at the time in question.
"Certificate of Designation" has the meaning given to such
term in Section 2.1.
"Certificate of Incorporation" means the certificate of
incorporation of the Company, as amended and restated and in effect at the time
in question including the Certificate of Designation.
"Change of Control" means the acquisition (whether by merger,
recapitalization, stock purchase or otherwise) by any Person, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 50% of either (i) the then outstanding shares of capital stock of
the Company or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors.
"Claim" means any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or other
proceeding.
"Closing" has the meaning given to such term in Section 2.4.
"Closing Date" has the meaning given to such term in Section
2.4.
"Commission" means the United States Securities and Exchange
Commission.
"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).
"Common Stock" means the common stock, $.001 par value per
share, of the Company.
"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 shares of Common Stock.
"Company" has the meaning given to such term in the caption to
this Agreement.
"Company Contracts" has the meaning given to such term in
Section 3.10.
"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.
"Documents " means the Equity Documents and the Financing
Documents.
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"Encumbrances" mean any liens, charges, encumbrances, claims,
options, proxies, pledges, security interests or other similar rights of any
nature.
"Equity Documents" means this Agreement, the Certificate of
Designation, the Registration Rights Agreement and all other documents or
instruments designated as Equity Documents by the Company and the Investors.
"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 Compensation Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Securities" means (i) Securities issued or granted
to eligible officers, employees or directors of, or consultants to, the Company
pursuant to the Equity Incentive Plans and any Securities issued upon exercise
of such Securities; (ii) any Securities issued by the Company in a Public
Offering; (iii) Securities issued upon the exercise, conversion or exchange of
any Common Stock Equivalents outstanding on the Closing Date or pursuant to the
MicroStrategy Agreement; (iv) Series A Preferred Stock issued by the Company
pursuant to this Agreement, or Common Stock issued upon conversion thereof; (v)
Securities issued as a stock dividend or upon any stock split, recapitalization
or other subdivision or combination of Common Stock; (vi) Securities issued
pursuant to acquisitions, strategic alliances and joint ventures; and (vii)
Securities deemed Excluded Securities by the Requisite Preferred Holders.
"Financing Documents" means the Note Purchase Agreement, dated
December 15, 2000, among the Company and the Investors (the "Note Purchase
Agreement"), the Bridge Promissory Note Due January 10, 2001, dated December 15,
2000, issued by the Company to the Investors (the "Note") and all other
documents, certificates or instruments executed in connection with the
transactions contemplated thereby.
"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.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Governmental Entity" means any Federal, state, municipal, or
other government, governmental department, commission, board, bureau, agency or
instrumentality, or any court or tribunal.
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"InSight" means, collectively, 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., and their
respective Affiliates.
"Investor" or "Investors" has the meaning given to such term
in the caption to this Agreement.
"Investor Indemnified Person" has the meaning given to such
term in Section 6.2(a).
"Investor Representatives" has the meaning given to such term
in Section 6.2(a).
"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.
"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.
"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.
"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).
"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, since November 14, 2000.
"MicroStrategy Agreement" means the Payment and Registration
Rights Agreement, dated as of December 28, 1999, between the Company and
MicroStrategy Incorporated in effect on the Closing Date or as amended from time
to time.
"NASD" means the National Association of Securities Dealers,
Inc.
"NASD Rules Violation" means the Company issuing voting
Securities of the Company in violation of NASD Rules 4310, 4350(i)(1)(D), 4351
or any similar rule promulgated by the NASD and applicable to the Company,
whether or not the shares of Common Stock are
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then listed with NASDAQ or quoted on the Nasdaq National Market System or traded
in the over-the-counter market. A violation of NASD Rule 4350(i)(1)(D) will
result if, pursuant to any provision of the Certificate of Designation, the
Company issues more than 6,488,781 shares of Common Stock (such number
representing approximately 19.9% of the shares of Common Stock issued and
outstanding immediately prior to the Closing).
"Note" has the meaning given to such term in the definition of
"Financing Documents".
"Note Purchase Agreement" has the meaning given to such term
in the definition of "Financing Documents".
"Observer" has the meaning given to such term n Section
5.3(c)(i).
"Offered Securities" has the meaning given to such term
Section 5.3(a)(i).
"Orders" means judgments, writs, decrees, injunctions, orders,
compliance agreements or settlement agreements of or with any Governmental
Entity or arbitrator.
"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.
"Preemptive Offer Acceptance Notice" has the meaning given to
such term in Section 5.3(a)(ii).
"Preemptive Offer Period" has the meaning given to such term
in Section 5.3(a)(i).
"Preferred Shares" has the meaning given to such term in
Section 2.2.
"Preferred Stock" means the preferred stock, $.001 par value
per share, of the Company.
"Proceeding" means any action, suit, proceeding, complaint,
charge, hearing, inquiry or investigation before or by a Governmental Entity or
an arbitrator or administrator.
"Projections" has the meaning given to such term in Section
3.9.
"Proportionate Percentage" means at any time, with respect to
any Series A Preferred Holder, the fraction, expressed as a percentage, the
numerator of which is the total number of shares of Series A Preferred Stock
purchased on the Closing Date and held by such Series A Preferred Holder and the
denominator of which is the total number of shares of Series A Preferred Stock
purchased on the Closing Date and held by all Series A Preferred Holders, each
at the time of determination.
"Proposed New Investor" has the meaning given to such term in
Section 5.3(a)(i).
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"Public Offering" means the consummation of a public offering
of Common Stock pursuant to a Registration Statement declared effective under
the Securities Act, except that a Public Offering shall not include an offering
of securities to be issued as consideration in connection with a business
acquisition or an offering of Securities issuable pursuant to an employee
benefit plan.
"Refused Securities" has the meaning ascribed to such term in
Section 5.3(a)(iii).
"Registration Statement" means any registration statement of
the Company, 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, filed with the Commission.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Investors (as
defined therein), the form of which is attached hereto as Exhibit A.
"Representative" of a Person shall be construed broadly and
shall include such Person's partners, officers, directors, employees, agents,
counsel, accountants and other representatives.
"Requisite Preferred Holders" means the holders of a majority
of the outstanding shares of Series A Preferred Stock at the time in question.
"Reserved Common Shares" has the meaning given to such term in
Section 2.2.
"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.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Director" has the meaning given to such
term in Section 5.3(c)(ii)(A).
"Series A Preferred Holder" means a holder of outstanding
shares of Series A Preferred Stock.
"Series A Preferred Representative" means Insight Venture
Associates IV, L.L.C., or any successor thereto approved by the Company (which
approval shall not be unreasonably withheld).
"Series A Preferred Stock" means the Series A Convertible
Redeemable Preferred Stock, $.001 par value per share, of the Company.
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"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 the 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.
"Tax" means, with respect to any Person, all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits Taxes, alternative or add-on minimum
Taxes, customs duties and other Taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to Tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on such
Person (if any).
"Trading Day" means any day on which securities are traded on
National Association of Securities Dealers, Inc.'s Automated Quotation System.
1.2 RULES OF CONSTRUCTION.
The term "this Agreement" means this agreement together with all
schedules and exhibits hereto, as the same may from time to time be amended,
modified, supplemented or restated in accordance with the terms hereof. In this
Agreement, the term "Best Knowledge" of the Company means actual knowledge of
the executive officers of the Company, including Xxxxxx Xxxxxxx, Xxxxx
XxXxxxxxx, Xxx Xxxxx, Xxxx XxXxxxxxx, Xxxx X'Xxxxx, Xxxxxx Xxxxxxxxxx and Xxxx
Xxxxxxx, after making reasonable inquiry of the matters in question. The use in
this Agreement of the term "including" means "including, without limitation."
The words "herein," "hereof," "hereunder" and other words of similar import
refer to this Agreement as a whole, including the schedules and exhibits, as the
same may from time to time be amended, modified, supplemented or restated, and
not to any particular section, subsection, paragraph, subparagraph or clause
contained in this Agreement. All references to sections, schedules and exhibits
mean the sections of this Agreement and the schedules and exhibits attached to
this Agreement, except where otherwise stated. The title of and the section and
paragraph headings in this Agreement are for convenience of reference only and
shall not govern or affect the interpretation of any of the terms or provisions
of this Agreement. The use herein of the masculine, feminine or neuter forms
shall also denote the 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
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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 SHARES; CLOSING
2.1 CERTIFICATE OF AMENDMENT.
At or prior to the Closing (as defined below), the Company shall file
with the Secretary of State of the State of Delaware a Certificate of
Designation (the "Certificate of Designation"), the form of which is attached
hereto as Exhibit B, which (i) designates 5,330,000 shares of the Company's
capital stock as Series A Preferred Stock and (ii) sets forth the terms,
designations, powers, preferences and relative rights and the qualifications,
limitations and restrictions, of the Series A Preferred Stock.
2.2 AUTHORIZATION OF ISSUANCE OF THE PREFERRED SHARES.
Subject to the terms and conditions hereof, the Company has authorized
(i) the issuance and sale to the Investors of an aggregate of 5,325,645 shares
(the "Preferred Shares") of the Series A Preferred Stock and (ii) the
reservation of an aggregate of up to 6,488,781 shares of Common Stock issuable
upon the conversion of the Preferred Shares (the "Reserved Common Shares").
2.3 ISSUANCE OF SERIES A PREFERRED STOCK.
At the Closing, subject to the receipt of the deliveries set forth in
Article V, (i) the Company shall issue, sell and deliver to each Investor that
number of Preferred Shares set forth opposite such Investor's name on Schedule I
hereto and (ii) (A) each Investor shall purchase from the Company such Preferred
Shares and shall deliver to the Company the amount set forth opposite such
Investor's name on Schedule I, payable by wire transfer of immediately available
funds to a bank account designated in writing by the Company and (B) the
Investors, acting as a group, shall surrender to the Company the Note (which
surrender shall terminate all obligations under the Note and the Company shall
xxxx the Note "Cancelled" or "Paid in Full"), each of (A) and (B) in full
payment of the purchase price for the Preferred Shares.
2.4 THE CLOSING.
The closing of the issuance and sale of the Preferred Shares hereunder
(the "Closing") shall take place simultaneous with the execution and delivery of
this Agreement, at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as is agreed
to by the parties. The date on which the Closing occurs is referred to herein as
the "Closing Date".
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2.5 USE OF PROCEEDS
The proceeds received by the Company from the sale of the Preferred
Shares shall be used by the Company for working capital and general corporate
purposes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
As a material inducement to the Investors to enter into and perform
their respective obligations under this Agreement, the Company hereby represents
and warrants to each of the Investors as follows:
3.1 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 assets and properties and to carry on
its business as presently conducted and as presently 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 set forth on
Schedule 3.1, which constitute all the jurisdictions in which the character of
the property owned, leased or operated by the Company and each of its
Subsidiaries or the nature of the business or activities conducted by the
Company and each of its Subsidiaries makes such qualification necessary, except
where the failure to be so qualified would not have a Material Adverse Effect.
The Company has delivered to the Investors a correct and complete copy of the
Certificate of Incorporation. A copy of the By-laws is filed as an exhibit to
the Commission Filings.
3.2 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
shall be designated as Series A Preferred Stock and validly issued and
outstanding, fully paid and nonassessable; and
(ii) 150,000,000 shares of Common Stock, of which:
(A) 32,606,938 shares shall be validly issued and
outstanding, fully paid and nonassessable;
(B) 6,488,781 shares shall be reserved for issuance upon
conversion of the Series A Preferred Stock;
(C) 366,565 shares shall be reserved as treasury shares;
and
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(D) 12,185,499 shares shall be reserved for issuance in
accordance with the Equity Incentive Plans.
(b) Except as contemplated by the Equity Documents or otherwise set
forth on Schedule 3.2, 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 capital stock or
other securities or (ii) preemptive or similar rights to purchase or otherwise
acquire Securities of the Company pursuant to any provision of Law, the
Company's Fundamental Documents or any Contract to which the Company is a party.
(c) All Securities issued by the Company have been issued in
transactions in accordance in all material respects with applicable state and
federal laws and regulations governing the sale and purchase of Securities.
3.3 AUTHORIZATION AND EXECUTION.
The Company has all requisite corporate power and authority to execute
and deliver each Equity Document to which it is a party, and any and all
instruments necessary or appropriate in order to effectuate fully the terms and
conditions of each such Equity Document and all related transactions, and to
perform its obligations and to consummate the transactions contemplated by each
such Equity Document. The execution, delivery and performance by the Company of
each Equity Document has been duly authorized by all requisite corporate action
by the Company, and each Equity Document has been duly executed and delivered by
the Company. No other corporate or stockholder action on the part of the Company
is necessary for such authorization, execution and delivery. Each Equity
Document constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company 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).
3.4 AUTHORIZATION OF THE PREFERRED SHARES AND RESERVED COMMON SHARES.
The authorization, reservation, issuance, sale and delivery, as
applicable, of the Preferred Shares and the Reserved Common Shares have been
duly and validly authorized by all requisite corporate action on the part of the
Company. The Preferred Shares and the Reserved Common Shares (assuming the
issuance thereof in accordance with the applicable terms of this Agreement),
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 other incidents of record and beneficial ownership pertaining
thereto and not subject to any preemptive rights, rights of first refusal or
other similar rights of the stockholders of the Company.
3.5 NO CONFLICTS.
The execution, delivery and performance by the Company of each Equity
Document to which it is a party, the issuance, sale and delivery of the
Preferred Shares and the Reserved
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Shares, and compliance with the provisions hereof and thereof by the Company,
will not (a) violate any provision of Law or any Order applicable to the Company
or any of its properties or assets or (b) conflict with or result in any breach
of any of the terms, conditions or provisions of, or constitute (with notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of, any
Encumbrance upon any of the properties or assets of the Company under the
Fundamental Documents of the Company or, except as previously disclosed in
writing to the Investors, any material Contract to which it is a party or (c)
conflict with or violate any provision of the Fundamental Documents of the
Company currently in effect.
3.6 APPROVALS.
No permit, authorization, consent or approval of or by, or any
notification of or filing with, any Person is required in connection with the
execution, delivery or performance by the Company of each Equity Document to
which it is a party.
3.7 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 3.7, 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.
3.8 PRIVATE OFFERING.
Assuming the accuracy of the representations of the Investors in
Section 4.2, the offering, sale, issuance and delivery by the Company of the
Preferred Shares and the Reserved Common Shares (assuming the issuance thereof
in accordance with the applicable terms of this Agreement), are or will be, as
the case may be, exempt from registration under the Securities Act and
applicable state securities laws and the rules and regulations promulgated
thereunder.
11
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.
3.9 PROVIDED INFORMATION.
All written summaries provided by the Company to legal counsel for the
Investors on or about December 26, 2000 with regard to the events leading up to
the Company's press releases of September 29, 2000 and October 2, 2000 are
accurate in all material respects and do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements are made. The financial projections concerning the Company
and its Subsidiaries and the transactions contemplated by this Agreement
contained in the "street plan" projections (the "Projections") that have been
made available to the Investors and its accountants in connection with the
transactions contemplated by this Agreement were at the time they were made
available to the Investors and their accountants prepared on a basis reflecting
the reasonable good faith estimates and judgments of the Company's management as
to the future financial performance of the Company and its Subsidiaries for the
periods covered thereby. The Projections are specifically and expressly limited
and qualified by the underlying written assumptions disclosed therein.
3.10 CERTAIN CONTRACTS.
All material Contracts to which the Company or any of its Subsidiaries
is a party or may be bound that are required by Item 610(b)(10) of Regulation
S-K to be filed as exhibits to, or incorporated by reference in, the Company's
Form 10-K or the Company's Form 10-Q are referred to herein as "Company
Contracts". All Company Contracts are legal, valid and binding and in full force
and effect on the date hereof, except to the extent previously disclosed in
writing to the Investors, 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, neither the Company nor any of its Subsidiaries has violated any provision
of, or committed or failed to perform any act that, with or without notice,
lapse of time, or both, would constitute a default under the provisions of any
Company Contract, except as previously disclosed in writing to the Investors or
for defaults that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
3.11 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 the
Company and its Subsidiaries to carry on its business as presently conducted. To
the Company's
12
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 3.11, 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 3.11, 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 and its Subsidiaries and used by the
Company and its Subsidiaries are owned by the Company or a Subsidiary. Except as
disclosed on Schedule 3.11, 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 3.12, 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.
3.12 LITIGATION AND OTHER PROCEEDINGS OR CLAIMS.
Except as set forth on Schedule 3.12, 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.
3.13 TERMINATION OF EMPLOYMENT.
To the Company's Best Knowledge, 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.
3.14 REGISTRATION RIGHTS.
Except as contemplated by the Registration Rights Agreement and except
as set forth on Schedule 3.14, no Person has any right to cause the Company to
effect the registration under the Securities Act of any shares of Common Stock
or any other Securities of the Company.
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3.15 BROKERS.
The Company has not employed any broker or finder in connection with
the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company as follows:
4.1 AUTHORIZATION, EXECUTION AND ENFORCEABILITY.
Each Investor has the requisite power and authority (corporate or
otherwise) to execute, deliver and perform the Equity Documents to which it is a
party and the transactions contemplated thereby, and the execution, delivery and
performance by such Investor of the Equity Documents to which it is a party have
been duly authorized by all requisite action by such Investor and each such
Equity Document, when executed and delivered by such Investor, constitutes a
legal, valid and binding obligation of such Investor, enforceable against such
Investor 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, as in the
case of enforceability, to general principles of equity (regardless of whether
enforcement is sought in a Proceeding at law or in equity).
4.2 INVESTMENT REPRESENTATIONS.
(a) The Preferred Shares to be purchased by the Investors hereunder are
acquired for their own account, for investment and not with a view to the
distribution thereof in violation of the Securities Act or applicable foreign or
state securities Laws.
(b) Each Investor understands that (i) the Preferred Shares have not
been, and that the Reserved Common Shares 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 Preferred Shares, and the Reserved Common Shares, must be held
by the Investors or each Investor, as the case may be, indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable foreign and state securities Laws or is exempt from registration
thereof. Each Investor is an "accredited investor" (as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act).
(c) Except for the acquisition of the Note by the Investors pursuant to
the Note Purchase Agreement and for the transactions contemplated hereby, no
Investor or any Affiliate has (i) bought or sold Securities, or options to buy
or sell Securities, of the Company, (ii) requested, instructed or knowingly
participated in a plan or arrangement with another Person to buy or sell
Securities, or options to buy or sell Securities, of the Company, at any time
during the period commencing on October 15, 2000 and ending on (and including)
the Closing Date.
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4.3 BROKERS.
None of the Investors have employed any broker or finder in connection
with the transactions contemplated by this Agreement.
ARTICLE V
CLOSING DELIVERIES; POST-CLOSING COVENANTS
5.1 COMPANY CLOSING DELIVERIES.
The obligation of each Investor to purchase and pay for the Preferred
Shares to be purchased hereunder at the Closing is subject to the delivery of
the following items (unless waived by such Investor).
(a) Certificate of Designation. Evidence satisfactory to the Investors
that the Certificate of Designation has been filed with, and accepted by, the
Secretary of State of the State of Delaware.
(b) Issuance of the Preferred Shares. The Company shall have duly
issued and delivered to each Investor the certificate or certificates registered
in the name of such Investor representing the number of Preferred Shares being
purchased by such Investor at the Closing as set forth on Schedule I under the
heading "Preferred Shares."
(c) Reservation of Common Shares. Evidence satisfactory to the
Investors that the Company has reserved the Reserved Common Shares for issuance
upon conversion of the Preferred Shares.
(d) Other Equity Documents. Each of the other Equity Documents shall
have been duly authorized, executed and delivered by the Company and the other
parties thereto and shall be in full force and effect and shall be enforceable
against the Company and such parties in accordance with their respective terms.
(e) Opinion of Counsel. The Investors shall have received a favorable
legal opinion from Xxxxxxx Xxxx LLP, counsel to the Company, addressed to each
of the Investors, dated as of the Closing Date, in a form attached hereto as
Exhibit C.
(f) Supporting Documents. The Investors shall have received copies of
the following supporting documents (in form and substance reasonably
satisfactory to the Investors):
(i) a certificate of the Secretary of State of the State of
Delaware, dated as of a recent date as to the due incorporation and
good standing of the Company;
(ii) a telegram, telex or other acceptable method of
confirmation from the Secretary of State of the State of Massachusetts
as of the close of business on the next business day preceding the
Closing Date as to the continued good standing of the Company;
15
(iii) a certificate of the Secretary or an Assistant Secretary
of the Company, dated as of the Closing Date and certifying on behalf
of the Company: (1) 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 (each of which shall be in
form and substance reasonably satisfactory to the Investors); (2) that
attached thereto is a true, correct and complete copy of all
resolutions adopted by the Board of Directors (and any committees
thereof) and the stockholders of the Company authorizing the execution,
delivery and performance of the Equity Documents and the issuance,
sale, and delivery of the Preferred Shares, and that all such
resolutions are in full force and effect; (3) that the Fundamental
Documents of the Company have not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i) above; and (4) the incumbency and specimen signature of all
officers of the Company executing the Equity Documents, the stock
certificates representing the Preferred Shares, and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this clause (iii); and
(iv) such additional supporting documents and other
information with respect to the operations and affairs of the Company
and its Subsidiaries as the Investors may reasonably request.
5.2 INVESTOR CLOSING DELIVERIES.
The obligation of the Company to issue, deliver and sell the Preferred
Shares at the Closing is subject to the delivery of the following items (unless
waived by the Company):
(a) Other Equity Documents. Each of the other Equity Documents shall
have been duly authorized, executed and delivered by the Investors and the other
parties thereto and shall be in full force and effect and shall be enforceable
against the Investors and such parties in accordance with their terms.
(b) Wire Transfers. Each Investor shall have delivered by wire transfer
of immediately available funds the amount set forth opposite such Investor's
name on Schedule I hereto under the heading "Cash Purchase Price" to such bank
account as the Company shall designate to each Investor in writing on or prior
to the day immediately preceding the Closing Date.
(c) Tender of the Note. The Investors shall have surrendered to the
Company the Note.
5.3 POST-CLOSING COVENANTS.
(a) Rights To Subscribe For Securities.
(i) For so long as any of the Investors and their Affiliates
own collectively at least 75% of the Series A Preferred Stock purchased
by the Investors on the Closing Date, 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
16
any Subsidiary to any Person (a "Proposed New Investor"), the Company
or any Subsidiary shall deliver to each Series A Preferred Holder 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").
(ii) Each Series A Preferred Holder shall have the option,
exercisable at any time during the first 20 days of the Preemptive
Offer Period by delivering written notice to the Company (a "Preemptive
Offer Acceptance Notice"), to subscribe for (i) the number or amount of
such Offered Securities up to its Proportionate Percentage of the total
number or amount of Offered Securities proposed to be issued and (ii)
up to its Proportionate Percentage of the Offered Securities not
subscribed for by other Series A Preferred Holders as specified in its
Preemptive Offer Acceptance Notice. Any Offered Securities not
subscribed for by the Series A Preferred Holders shall be deemed to be
re-offered to and accepted by the Series A Preferred Holders exercising
their options specified in clause (ii) of the immediately preceding
sentence with respect to the lesser of (A) the amount specified in
their respective Preemptive Offer Acceptance Notices and (B) an amount
equal to their respective Proportionate Percentages (computed without
including Series A Preferred Holders who have not exercised their
option specified in clause (ii) of the immediately preceding sentence)
with respect to such deemed reoffer. Such deemed reoffer and acceptance
procedures described in the immediately preceding sentence shall be
deemed to be repeated until either (x) all of the Offered Securities
are accepted by the Series A Preferred Holders or (y) no Series A
Preferred Holder desires to subscribe for more Offered Securities. The
Company shall notify each Series A Preferred Holder within five days
following the expiration of the Preemptive Offer Period of the number
or amount of Offered Securities which such Investor has subscribed to
purchase.
(iii) If Preemptive Offer Acceptance Notices are not given by
the Series A Preferred Holders for all the Offered Securities, the
Company may issue all or any part of such Offered Securities as to
which Preemptive Offer Acceptances Notices have not been given by the
Series A Preferred Holders (the "Refused Securities") to the Proposed
New Investor, in accordance with the terms set forth in the Preemptive
Offer. Upon the closing, which shall include full payment to the
Company, of the sale to the Proposed New Investor of all the Refused
Securities, the Series A Preferred Holders shall purchase from the
Company, and the Company shall sell to the Series A Preferred Holders,
the Offered Securities with respect to which Preemptive Offer
Acceptance Notices were delivered by the Series A Preferred Holders, at
the terms specified in the Preemptive Offer Acceptance Notice. In each
case, any Offered Securities not purchased within 90 days of the end of
the Preemptive Offer Period by the Proposed New Investor in accordance
with this Section 5.3(a) may not be sold or otherwise disposed of until
they are again offered to the Series A Preferred Holders under the
procedures specified in this Section 5.3(a).
(iv) Notwithstanding the foregoing, no Series A Holder may
exercise its right to subscribe to any Offered Securities pursuant to
this Section 5.3(a) to the extent,
17
and only to the extent, that the result of such exercise would (A)
constitute a Change of Control or (B) result in a NASD Rules Violation.
(b) Information Rights.
(i) Reports. For so long as 25% of the Series A Preferred
Stock remains outstanding, the Company shall furnish to the Series A
Representative the following:
(A) Monthly Statements. As soon as available, but no
later than 30 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:
(1) 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;
(2) balance sheet as at the last day of such monthly
accounting period;
(3) 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;
(4) 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
(5) 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.
18
(B) Quarterly Report. As soon as available, but no later
than 30 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.
(C) 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").
(D) Budget. Within 30 days after the end of each fiscal
year of the Company, an annual updated consolidated budget and
work plan, including projected income statements, balance sheets
and cash flow statements (setting forth in detail the assumptions
therefor) on a quarterly basis for the Company and its
Subsidiaries for the immediately following fiscal year of the
Company, which such budget and work plan shall be approved by the
Board and the Requisite Preferred Holders at the first regularly
scheduled meeting of the Board of the Company thereafter.
(E) 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.
(F) Accountants Reports. Promptly upon becoming
available, copies of all reports prepared for or delivered to the
management of the Company by the Accountants.
(G) Material Events. Promptly upon becoming aware of any
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), a
report summarizing such condition or event and the Company's
proposed response thereto.
(H) Miscellaneous. Promptly upon request, any other
documentation or information reasonably requested by any Series A
Preferred Holder.
19
(ii) Access to Records and Properties. For so long as at least
25% of the Series A Preferred Stock remains outstanding, the Company
shall afford to each of the Series A Preferred Representative 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 the Series A Preferred Representative and its
Representatives as may reasonably request, and to permit the Series A
Preferred Representative 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 the Series A Preferred Representative and its Representatives in
connection with exercising such rights of access shall be borne by the
Series A Preferred Representative, and all out-of-pocket costs and
expenses incurred by the Company in complying with any extraordinary
requests by the Series A Preferred Representative and its
Representatives in connection with exercising such access rights shall
be borne by the Series A Preferred Representative.
(iii) Confidential Information. Each Series A Preferred Holder
and its Representatives shall hold in confidence all nonpublic
information of the Company provided or made available to such Series A
Preferred Holder and its Representatives pursuant to this Section
5.3(b) until such time as such information has become publicly
available other than as a consequence of any breach by such Series A
Preferred Holder and its Representatives of its confidentiality
obligations hereunder (provided that such information may be disclosed
to any other Series A Preferred Holder and Representatives who are
bound by this provision) and shall not (A) trade or otherwise directly
or indirectly transfer any Securities of the Company in violation of
the Securities Act or Exchange Act or (B) use such information for any
purpose other than exercise of its rights as a holder of Securities and
its rights under this Agreement and the Related Documents.
(c) Board of Directors; Committees.
(i) Observation Rights. Two representatives appointed by the
Requisite Preferred Holders (each such representative, an "Observer",
and together, the "Observers") shall be entitled to serve as observers
at all meetings of the Boards of Directors of the Company and each
Subsidiary and all committees thereof. Such right shall from time to
time be exercisable by delivery to the Company of written notice from
the Requisite Preferred Holders specifying the names of the Observers.
Such right of the Requisite Preferred Holders to appoint the Observers
shall expire on the date more than 75% of the shares of Series A
Preferred Stock purchased on the Closing Date have been converted
pursuant to the Certificate of Designation into Common Stock.
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(A) 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 of Directors of the Company
and its Subsidiaries 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 for the purpose of listening thereto.
(B) 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 directors of the Company or each
Subsidiary 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.
(C) Each of the Company and its Subsidiaries shall
reimburse the Observers for all travel and related expenses
incurred by the Observers in connection with attending such
meetings and monitoring the investment of the Series A Preferred
Holders in the Series A Preferred Stock.
(D) Each Observer shall hold in confidence all nonpublic
information of the Company provided or made available to such
Observer pursuant to this Section 5.3(c) until such time as such
information has become publicly available other than as a
consequence of any breach by such Observer or any Investor of its
confidentiality obligations hereunder (provided that such
information may be disclosed to any other Persons who are bound by
this provision) and shall not (1) trade or otherwise directly or
indirectly transfer any Securities of the Company in violation of
the Securities Act or Exchange Act or (2) use such information for
any purpose other than exercise of its rights as a holder of
Securities and its rights under this Agreement and the other
Equity Documents.
(ii) Election of Board Members.
(A) The number of directors constituting the Board of
Directors of the Company and each Subsidiary, 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 initially be not less than five. At the election of the
Requisite Preferred Holders, the Company shall use its best
efforts to cause an Observer or such other individual appointed by
the Requisite Preferred Holders to serve in place of an Observer,
or a replacement thereof, to be nominated and elected to the Board
of Directors of the Company and each Subsidiary, and any
21
committee thereof (the "Series A Preferred Director"); provided,
however, that such right of the Requisite Preferred Holders to
designate and approve a director shall expire on the date of the
regularly scheduled annual meeting of the stockholders of the
Company held immediately after more than 75% of the shares of
Series A Preferred Stock purchased on the Closing Date have been
converted pursuant to this Certificate of Designation into Common
Stock and, at the written request of the Company, the Series A
Director shall resign its position as a director of the Company
and each Subsidiary at such meeting.
(B) The Series A Preferred Director shall be removed
without cause only by the Requisite Preferred Holders.
(C) The Company shall reimburse the Series A Preferred
Director for all travel and related expenses incurred by the
Series A Preferred Director in connection with attending such
meetings and monitoring the investment of the Series A Preferred
Holders in the Series A Preferred Stock.
(D) The Company and each Subsidiary shall maintain
directors' and officers' insurance policies customary for
companies similar to the Company and its Subsidiaries, which
policies shall name as an insured, or otherwise provide insurance
coverage to, the Series A Director.
(d) Work Plan. As soon as practicable after the Closing Date (but in
any event by January 17, 2001), the parties shall work together in good faith to
develop and complete a work plan for the Company and it Subsidiaries, which work
plan shall (i) include a timetable as to the hiring of personnel, product
development and other matters agreed to by the parties and (ii) be included in
the package of materials presented to the Board of the Company at the meeting
scheduled to be held on January 17, 2001.
(e) Senior Financing. At the Company's request, the Investors shall
negotiate in good faith with the Company and its lenders to execute and deliver
reasonable and customary documentation required to subordinate (on reasonable
and customary terms) the right of the Series A Preferred Holders to receive
payments of cash from the Company with respect to their Series A Preferred
Stock.
(f) 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
the Investors, nor any of their respective Representatives, 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
Company and the Investors 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.
(g) Further Assurances. The Parties shall duly execute and deliver, or
cause to be duly executed and delivered, at its own cost and expense, such
further instruments and
22
documents and to take all such action, in each case as may be necessary or
proper in the reasonable judgment of the Company or the Investors to carry out
the provisions and purposes of this Agreement and the other Equity Documents.
ARTICLE VI
INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS, ETC.
All statements contained in any other Equity Document or any closing
certificate delivered by the Company or the Investors pursuant to this Agreement
shall constitute representations and warranties by the Company or the Investors,
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 Company or
an Investor, as applicable, in connection with the transactions contemplated by
this Agreement shall survive the Closing until the fifteenth (15th) month
anniversary of the Closing Date. All agreements and covenants contained in this
Agreement or made in writing by or on behalf of the Company or an Investor, 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.
6.2 INDEMNIFICATION.
(a) In addition to all other rights and remedies available to the
Investors, the Company and each Subsidiary shall indemnify, defend and hold
harmless each Investor and its Affiliates and their respective partners,
officers, directors, employees, agents and representatives (collectively, the
"Investor Representatives"; and together with such Investor, the "Investor
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 Company, (B) the execution, delivery and performance by the
Company of this Agreement and the other Equity Documents and the transactions
contemplated hereby and thereby or (C) any actions taken by or omitted to be
taken by any of the Investor Indemnified Persons in connection with this
Agreement and the other Equity 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 Investor Indemnified Persons.
(b) All indemnification rights hereunder shall survive indefinitely the
execution and delivery of the Equity 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 Investors
and/or any of the other Investor Indemnified Parties or the acceptance by any
such Investor of any certificate or opinion.
ARTICLE VII
MISCELLANEOUS
7.1 EXPENSES.
(a) The Company agrees to pay, and hold the Investors harmless against
Liability for the payment of: (i) the reasonable out-of-pocket expenses
(including attorneys' and accountants' fees and expenses) of the Investors
arising in connection with its due diligence and the negotiation and execution
of this Agreement and the other Equity Documents and the consummation of the
transactions contemplated by this Agreement and the other Equity Documents which
shall be payable at the Closing and may be netted from the wire transfers
contemplated by Section 2.3, (ii) the reasonable out-of-pocket expenses
(including attorneys' fees and expenses) of the Investors with respect to
documentation of the conversion of the Preferred Shares or any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement, or the other agreements contemplated hereby and (iii) the reasonable
fees and expenses incurred by the Investors with respect to the enforcement by
the Investors or their permitted assigns of their rights granted under this
Agreement, or the agreements contemplated hereby.
(b) The Company further agrees that it will pay, and will save the
Investors harmless from, any and all Liability with respect to any stamp or
similar Taxes which may be determined to be payable in connection with the
execution and delivery and performance of the Equity Documents or any
modification, amendment or alteration of the terms or provisions of the Equity
Documents, and that it will similarly pay and hold the Investors harmless from
all issue Taxes in respect of the issuance of the Reserved Common Shares to the
Investors.
7.2 PARTIES IN INTEREST; ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the Company, the
Investors and their respective successors and assigns. No party hereto may
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written consent of the other parties; provided,
however, that each Investor may assign any of its rights under this Agreement to
any Affiliate of such Investor.
7.3 ENTIRE AGREEMENT.
This Agreement, any other Document and the other writings and
agreements referred to herein or therein 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.
7.4 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:
23
(a) if to the Company, 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, XX 00000-0000
Attention: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to the Investors, to:
InSight Capital Partners
527 Madison Avenue, 10th Floor
New York, N.Y. 10022
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Nissan, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance with the
provisions of this Section 7.4. 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.
7.5 AMENDMENTS.
This Agreement may not be modified or amended, or any of the provisions
hereof be waived, except by written agreement of the Company and the Requisite
Preferred Holders.
24
7.6 GOVERNING LAW; WAIVER OF JURY TRIAL.
(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.
7.7 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company contained in this Agreement (a)
are being given by the Company as an inducement to the Investors to enter into
this Agreement and the other Equity Documents (and the Company acknowledges that
the Investors have expressly relied thereon) and (b) are solely for the benefit
of the Investors. Accordingly, no third party (including, without limitation,
any holder of Securities of the Company) or anyone acting on behalf of such
third party (other than the Investors) shall be a beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Investors or the Company with respect to such
representations or warranties or any matter subject to or resulting in
indemnification under this Agreement or otherwise.
7.8 SUBMISSION TO JURISDICTION.
Any Proceeding with respect to this Agreement or the other Equity
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, the Company hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Company 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. The Company 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
25
prepaid, to it at its address as set forth herein. Nothing herein shall affect
the right of the Investors to serve process in any other manner permitted by Law
or to commence Proceedings or otherwise proceed against the Company in any other
jurisdiction.
7.9 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.
7.10 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement and the other Equity 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 Equity 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 Equity 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 Equity Documents or
affecting the validity or enforceability of such provision in any other
jurisdiction.
7.11 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.
7.12 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
26
7.13 TERMINATION OF THE FINANCING DOCUMENTS.
Upon the execution and delivery by each of the parties of this
Agreement and each of the other Equity Documents, and the consummation of the
transactions contemplated hereby and thereby, each of the Financing Documents
(other than Section 7(b) and 15 of the Note Purchase Agreement, which sections
shall remain in full force and effect) shall be terminated and of no further
force or effect.
7.14 ACTIONS OF THE SERIES A PREFERRED REPRESENTATIVE.
A decision, act, consent or instruction of the Series A Preferred
Representative in respect of any action hereunder shall constitute a decision of
all Investors and shall be final, binding and conclusive upon each such Investor
and the Company may rely upon any decision, act, consent or instruction of the
Series A Preferred Representative hereunder as being the decision, act, consent
or instruction of each and every such Investor. Notice delivered to the Series A
Preferred Representative shall for all purposes constitute notice to all
Investors. The foregoing shall be binding upon all Investors and all transferees
and assignees thereof.
* * * * *
27
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
COMPANY:
--------
EXCHANGE APPLICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
INVESTORS:
----------
INSIGHT CAPITAL PARTNERS IV, L.P.
By: Insight Venture Associates IV, L.L.C., its
General Partner
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Partner
INSIGHT CAPITAL PARTNERS (CAYMAN) IV, L.P.
By: Insight Venture Associates IV, L.L.C., its
General Partner
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Partner
INSIGHT CAPITAL PARTNERS IV (FUND B), L.P.
By: Insight Venture Associates IV, L.L.C., its
General Partner
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Partner
28
INSIGHT CAPITAL PARTNERS IV (CO-INVESTORS), L.P.
By: Insight Venture Associates IV, L.L.C., its
General Partner
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Partner
29
SCHEDULE I
INVESTORS
---------
PREFERRED NOTE
NAME AND ADDRESS SHARES CASH PURCHASE PRICE AMOUNT
---------------- ------ ------------------- ------
INSIGHT CAPITAL PARTNERS IV, L.P. 4,125,449 $4,047,659.59 $1,161,957.41
c/o InSight Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
INSIGHT CAPITAL PARTNERS (CAYMAN) IV, L.P. 471,825 $462,928.25 $132,892.36
c/o InSight Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
INSIGHT CAPITAL PARTNERS IV 35,828 $35,152.31 $10,091.29
(FUND B), L.P.
c/o InSight Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
INSIGHT CAPITAL PARTNERS IV (CO-INVESTORS), L.P. 692,543 $679,484.36 $195,058.94
c/o InSight Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
TOTAL: 5,325,645 5,225,224.51 $1,500,000.00
============ =============
SCHEDULE 3.1
ORGANIZATION
1. EXCHANGE APPLICATIONS, INC.
Massachusetts
2. CUSTOMER ANALYTICS, INC.
Massachusetts
Texas
3. KNOWLEDGE STREAM PARTNERS, INC.
Illinois
Massachusetts
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 3.2
CAPITALIZATION
As of January 9, 2001, the following is a summary of information concerning
options:
COLUMN A COLUMN B COLUMN C
Options Options Options Outstanding
Reserved Reserved for Future Grant
12,185,499 7,577,823 4,607,676
Payment and Registration Rights Agreement, dated as of December 28, 1999,
between the Company and Microstrategy Incorporated.
The Company has implemented an Option Exchange Program. Pursuant to such
Program, certain employees may elect to have certain of their options cancelled
in exchange for an agreement by the Company to grant new options six months
after the date of such cancellation. The deadline for participation in this
Program was December 16, 2000. As of that date, 3,108,036 options had been
returned by employees for cancellation. The 3,108,036 figure represents the
total options covered by the Program.
SCHEDULE 3.7
COMMISSION FILINGS; FINANCIAL STATEMENTS
NONE.
SCHEDULE 3.11
INTELLECTUAL PROPERTY RIGHTS
NONE.
SCHEDULE 3.12
LITIGATION AND OTHER PROCEEDINGS
NONE.
SCHEDULE 3.14
REGISTRATION RIGHTS
Payment and Registration Rights Agreement, dated as of December 28,
1999, between the Company and Microstrategy Incorporated.
Registration Rights Agreement, dated as of June 28, 2000, 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, between Exchange Applications, Inc., KSP Acquisition Corp.,
Knowledge Stream Partners, Inc., and Xxxxxx van der Hooning (Section
5.2 "Registration Statement").
EXHIBIT A
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
See attached Exhibit 10.2 to this 8-K filed January 24, 2001.
EXHIBIT B
---------
CERTIFICATE OF DESIGNATION
--------------------------
See attached Exhibit 4.1 to this 8-K filed January 24, 2001.
EXHIBIT C
---------
FORM OF OPINION
---------------
January 10, 2001
To the Investors referred to below
c/o InSight Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
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 January 10, 2001 (the "Purchase
Agreement"), among the Company and the Investors listed on Schedule I thereto
(the "Investors"), 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 5.1(e) Purchase Agreement.
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 set forth in the Purchase Agreement and each of the other
Transaction Documents (as defined below), (b) the representations and warranties
of the Investors 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 opinion 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.
Although we act generally as counsel to the Company, our representation is
limited to matters individually referred to us by the Company's management.
In connection with this opinion, we have examined originals or copies of the
following documents:
(i) the Purchase Agreement;
(ii) the Registration Rights Agreement;
(iii) the Certificate of Incorporation of the Company (including the
Certificate of Designation) (collectively (the "Charter"),
certified by the Secretary of State of the State of Delaware
on January 10, 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;
(iv) 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;
(v) 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
(vi) those certificates of certain public officials with respect to
the Company attached hereto as Exhibit A.
The documents specified in paragraphs (i) and (ii) above are referred to herein,
collectively, as the "Transaction Documents". 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.
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 securities or blue sky laws, as to which we
express no opinion in this letter, other than as expressly set forth in
Paragraph 6 below), and the Delaware General Corporation Law as applied by
courts located in Delaware (the "DGCL"), and we express no
opinion as to the laws of any other jurisdiction. No opinion is given herein as
to any contractual choice of 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 the Transaction
Documents, (ii) each party to the Transaction Documents, other
than the Company, 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, 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, (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); and we express no opinion as to the status
under any fraudulent conveyance laws or fraudulent transfer
laws of any of the obligations of the Company or any other
Person, whether under any of the Transaction Documents or
otherwise.
(c) The enforcement of any obligations of 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 (including such as may deny giving effect
to waivers of debtors' or guarantors' rights).
(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).
(g) We express no opinion as to the enforceability of any
particular provision of any of the Transaction Documents
relating to (i) waivers of rights to object to jurisdiction or
venue, or consents to jurisdiction or venue, (ii) waivers of
rights to (or methods of) service of process, or 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(3), 9-501(3), or other
provisions of the Uniform Commercial Code ("UCC") of the State
of New York (the "New York UCC"), (v) exculpation or
exoneration clauses, indemnity clauses, and clauses relating
to releases or waivers of unmatured claims or rights,
including provisions for indemnification or for contribution
in lieu thereof, or (vi) the the payment of any premium,
liquidated damages, or other amount which may be held by any
court to be a "penalty" or a "forfeiture".
(h) 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.
(i) 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.
(j) 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.
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 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
standing, as applicable, in each case 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 Preferred Shares in accordance with the terms of
the Purchase Agreement, and the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Preferred Shares in
accordance with the terms of the Charter 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 of the
Preferred Shares, when so issued, sold and delivered against payment
therefor in accordance with the terms of the Purchase Agreement and
such shares of Common Stock, when issued upon such conversion, 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, conflict with or result in a breach or
default (or give rise to any right of termination, cancellation or
acceleration) under any Company Contract, except for certain
circumstances previously disclosed in writing to the Investors on
December 15, 2000, (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 or
any of its properties or assets and (iii) to the best of our knowledge,
will not result in the creation or imposition of any Lien on any
property or asset of the Company. 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 offer, issuance and sale of the Preferred Shares at the Closing
pursuant to the Purchase Agreement and, assuming the continuing
accuracy of the representations and warranties of the Investors 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 Investors upon conversion of the
Preferred Shares in accordance with the terms of the Charter 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 A
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Certificate of Good Standing for the Company issued by the Secretary of State of
Delaware on January 8, 2001
Certificate of Good Standing for the Company issued by the Commonwealth of
Massachusetts on January 8, 2001
