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Exhibit 3
SECURITIES PURCHASE AGREEMENT (this
"Agreement"), dated as of August 29, 2001,
among EXCHANGE APPLICATIONS, INC. a Delaware
corporation (the "Company"), EXSTATIC
SOFTWARE, INC. (f/k/a XXXX XXXXXXX, INC.), a
Washington corporation ("eXstatic" and
together with the Company, the "Issuers"),
and the purchasers (each a "Purchaser" and
together, the "Purchasers") identified on
the signature page hereto.
WHEREAS, the Issuers desire to sell to the Purchasers and the
Purchasers desire to purchase from the Issuers up to U.S. $15,500,000 in
principal amount of the Issuers' 12% Senior Secured Convertible Debentures (the
"New Debentures"), on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used and not otherwise defined in this Agreement have
the meaning ascribed to them below or in the other locations of this Agreement
specified below:
(a) "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person. As used in this definition, the term "control" (including, with
correlative meaning, the terms "controlling," "controlled by" and "under common
control with") as used with respect to any Person, means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting Securities, by
contract or otherwise.
(b) "Aggregate Convertible Debenture Holders" means the holders of the
Aggregate Convertible Debentures, or any successor to, or assignee or transferee
of, any such holder.
(c) "Aggregate Convertible Debenture Replacement Observers" has the
meaning ascribed to it in Section 6.3.
(d) "Aggregate Convertible Debenture Shares" means the shares of Common
Stock issuable upon conversion of the Aggregate Convertible Debentures.
(e) "Aggregate Convertible Debenture Super Majority" has the meaning
ascribed to it in Section 6.3(a)(i).
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(f) "Aggregate Convertible Debentures" means collectively, the Existing
Debentures and the New Debentures.
(g) "Aggregate Debenture Holders' Directors" has the meaning ascribed
to it in Section 6.3.
(h) "Aggregate Warrants" means the April 16 Warrant, the Insight
Warrant and the Warrants.
(i) "Agreement" has the meaning ascribed to such term in the preamble.
(j) "Annual Budget" has the meaning ascribed to it in Section
6.2(a)(v).
(k) "April 16 Warrants" means the Warrants dated as of April 16, 2001,
issued by the Company to Insight.
(l) "Audit Committee" means the committee of the Board Directors which
shall oversee all financial accounting and auditing activities of the Company
and shall perform such other functions as is customary for companies similar to
the Company, including approving the engagement of the Company's auditors and
approving the audit prior to its issuance each year
(m) "Automatic Affirmative Covenant" has the meaning ascribed to it in
Section 6.1(a).
(n) "Automatic Financial Covenant Amendment" has the meaning ascribed
to it in Section 6.1.
(o) "Board" has the meaning ascribed to it in Section 6.3(a)(i).
(p) "Business" means the providing of marketing automation and
enterprise customer relationship management solutions by the Company and its
Subsidiaries.
(q) "Business Day" means each day except for Saturday, Sunday, Federal
holidays and any other state-recognized holidays in the States of New York and
Massachusetts.
(r) "By-laws" has the meaning ascribed to such term in Section 4.1.
(s) "Certificate Amendment" has the meaning ascribed to it in Section
6.5(d).
(t) "Certificate of Incorporation" has the meaning ascribed to such
term in Section 4.1.
(u) "Claim" means any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or other
proceeding.
(v) "Closing" has the meaning ascribed to such term in Section 3.1(a).
(w) "Collateral" has the meaning ascribed to it in the Security
Agreement.
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(x) "Collateral Agency and Intercreditor Agreement" has the meaning
ascribed to it in Section 3.1(b)(vii).
(y) "Commission" means the United States Securities and Exchange
Commission.
(z) "Commission Filings" means all reports, registration statements and
other filings filed by the Company with the Commission (and all notes, exhibits
and schedules thereto and documents incorporated by reference therein).
(aa) "Common Stock" means the common stock, $.001 par value per share,
of the Company.
(bb) "Common Stock Equivalents" means all shares of Common Stock
outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all Securities of the Company that are convertible, exchangeable or
exercisable for share of Common Stock.
(cc) "Company" has the meaning ascribed to such term in the preamble.
(dd) "Company Contracts" has the meaning ascribed to such term in
Section 4.8.
(ee) "Contract" means any written or oral loan contract, agreement, or
credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase
order, instrument, permit, concession, franchise or license.
(ff) "Default" has the meaning ascribed to it in the New Debentures.
(gg) "Designated Investors" has the meaning ascribed to such term in
the Collateral Agency and Intercreditor Agreement.
(hh) "EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization, each as determined in accordance with generally
accepted accounting principles.
(ii) "Encumbrances" means any liens, charges, encumbrances, claims,
options, proxies, pledges, security interests, or other similar rights of any
nature.
(jj) "Equipment" means all of the Company's present and hereafter
acquired machinery, molds, machine tools, motors, furniture, equipment
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs,
goods and other tangible personal property (other than Inventory) of every kind
and description used in Company's operations or owned by the Company and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
(kk) "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
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Plan, (v) 1998 Stock Incentive Plan, (vi) 1998 Director Stock Option Plan, (vii)
1998 Employee Stock Purchase Plan and (viii) 1996 Stock Incentive Plan, each as
amended, and any other stock option, issuance, appreciation rights or other
equity incentive plan for the directors, officers and employees of, and
consultants to, the Company, which plan has been approved by the Board or
appropriate committee thereof.
(ll) "Event of Default" has the meaning ascribed to such term in the
New Debentures.
(mm) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
(nn) "Excluded Securities" means (i) Securities issued or granted to
eligible officers, employees or directors of, or consultants to, the Corporation
pursuant to the Equity Incentive Plans and any Securities issued upon exercise
of such Securities; (ii) Securities issued upon the exercise, conversion or
exchange of any Common Stock Equivalents outstanding on the Closing Date,
including, without limitation, those Securities issued upon exercise of the
April 16 Warrant, or pursuant to the MicroStrategy Agreement; (iii) Securities
issued as a stock dividend or upon any stock split, recapitalization or other
subdivision or combination of Common Stock; (iv) Securities issued pursuant to
acquisitions, strategic alliances and joint ventures; and (v) Securities deemed
Excluded Securities by each of the Designated Investors.
(oo) "Existing Debenture Shares" means the shares of Common Stock
issuable upon conversion of the Existing Debentures.
(pp) "Existing Debentures" means (i) the Amended and Restated 12%
Convertible Debenture in the aggregate principal amount of U.S. $7,322,251.30,
and (ii) the Amended and Restated 12% Convertible Debenture in the aggregate
principal amount of U.S. $5,055,890.41, both (i) and (ii) issued by the Issuers
to Insight on August 29, 2001(amending, respectively (a) the 12% Convertible
Debenture in the aggregate principal amount of U.S. $7,241,307.37, and (b) the
12% Convertible Debenture in the aggregate principal amount of U.S. $5,000,000,
both (a) and (b) issued by the Issuers to the Existing Investors on July 26,
2001).
(qq) "eXstatic" has the meaning ascribed to it in the preamble.
(rr) "Fifth Amended and Restated Registration Rights Agreement" has the
meaning ascribed to such term in Section 3.1(b)(vi).
(ss) "Financial Covenant" has the meaning ascribed to it in Section
6.1(a).
(tt) "Financing Documents" has the meaning ascribed to such term in
Section 4.3.
(uu) "Four Million Dollar Holder" has the meaning assigned to it in
Section 6.3(b)(i).
(vv) "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.
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(ww) "GAAP" means United States generally accepted accounting
principles, consistently applied.
(xx) "Governmental Entity" means any federal, state, municipal, or
other government, governmental department, commission, board, bureau, agency or
instrumentality, or any court or tribunal.
(yy) "Guaranty" means any obligation, contingent or otherwise, or any
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of payment thereof, (iii) to purchase or otherwise pay for
merchandise, materials supplies, services or other property under an arrangement
which provides that payment for such merchandise, materials, supplies, services
or other property shall be made regardless of whether delivery of such
merchandise, materials, supplies, services or other property is ever made or
tendered, or (iv) to maintain the working capital, equity capital or other
financial statement condition of any primary obligor, provided, however, that
the term Guaranty shall not include endorsement of instruments for deposit and
collection in the ordinary course of business.
(zz) "Indebtedness" of a Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by (or which customarily would be evidenced by) bonds
debentures, notes or similar instruments, (iii) all reimbursement obligations of
such Person with respect to letters of credit and similar instruments, (iv) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (v) all
obligations of such Person incurred, issued or assumed as the deferred purchase
price of property or services other than accounts payable incurred and paid on
terms customary in the business of such Person (it being understood that
"deferred purchase price" in connection with any purchase of property or assets
shall include only that portion of the purchase price which shall be deferred
beyond the date on which the purchase is actually consummated), (vi) all
obligations secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (vii) all obligations of such Person under forward sales,
futures, options and other similar hedging arrangements (including interest rate
hedging or protection agreements), (viii) all Guaranties by such Person of
obligations of others, (ix) all capitalized lease obligations of such Person and
(x) the Indebtedness of any partnership or joint venture in which such Person is
a general partner or a joint venturer, but only to the extent to which there is
recourse to such Person for payment of such Indebtedness.
(aaa) "Insight" means, collectively, InSight Venture Partners, IV,
L.P., InSight Venture Partners (Cayman) IV, L.P., InSight Venture Partners IV
(Fund B), L.P. and InSight Venture Partners IV (Co-Investors), L.P., and their
respective Affiliates.
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(bbb) "Insight Warrants" means the Warrants dated as of the date
hereof, issued by the Company to Insight.
(ccc) "Issuers" has the meaning ascribed to it in the Preamble.
(ddd) "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.
(eee) "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.
(fff) "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.
(ggg) "Liquidity Event" means (i) any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company or (ii) any
Sale of the Company.
(hhh) "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).
(iii) "Market Price" means, as to any Marketable Security, the average
of the closing prices of such Marketable Security's sales on all United States
securities exchanges on which such Security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such Security is not so listed, the average of the
representative bid and asked prices quoted on NASDAQ as of 4:00 P.M., New York
time, on such day, or, if on any day such security is not quoted on NASDAQ, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization, in each such case
averaged over a period of 5 Business Days ending immediately prior to the day as
of which "Market Price" is being determined.
(jjj) "Marketable Securities" means Securities that are traded on an
established United States securities exchange or reported through the NASDAQ, or
otherwise traded over-the-counter or traded on PORTAL (in the case of Securities
eligible for trading pursuant to Rule 144A under the Securities Act).
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(kkk) "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.
(lll) "MicroStrategy Agreement" means the Payment and Registration
Rights Agreement, dated as of December 28, 1999, between the Company and
MicroStrategy Incorporated in effect on January 10, 2001 or as amended from time
to time.
(mmm) "NASDAQ Letter" has the meaning ascribed to it in Section 6.5(e).
(nnn) "New Debenture Representatives" has the meaning ascribed to it in
Section 6.3(b)(i).
(ooo) "New Debenture Shares" means the shares of Common Stock issuable
upon conversion of the New Debentures.
(ppp) "New Debentures" has the meaning ascribed to it in the Preamble
of this Agreement.
(qqq) "Obligations" has the meaning ascribed to it in the Security
Agreement.
(rrr) "Observers" has the meaning ascribed to it in Section 6.3(b)(i)
(sss) "Offered Securities" has the meaning ascribed to it in Section
6.4(a).
(ttt) "Orders" means judgments, writs, decrees, injunctions, orders,
compliance agreements or settlement agreements of or with any Governmental
Entity or arbitrator.
(uuu) "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.
(vvv) "Preemptive Offer Acceptance Notice" has the meaning ascribed to
it in Section 6.4.
(www) "Preemptive Offer Period" has the meaning ascribed to it in
Section 6.4.
(xxx) "Proceeding" means any action, suit, proceeding, complaint,
charge, hearing, inquiry or investigation before or by a Governmental Entity or
an arbitrator or administrator.
(yyy) "Proposed New Investor" has the meaning ascribed to it in Section
6.4.
(zzz) "Purchaser Indemnified Persons" shall have the meaning ascribed
to it in Section 7.2.
(aaaa) "Purchasers" has the meaning ascribed to such term in the
preamble.
(bbbb) "Refused Securities" has the meaning ascribed to it in Section
6.4.
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(cccc) "Representative" of a Person shall be construed broadly and
shall include such Person's partners, officers, directors, employees, agents,
counsel, accountants and other representatives.
(dddd) "Sale of the Company" means (i) the sale of all or substantially
all of the Company's assets, (ii) the issuance, sale or transfer of the
outstanding shares of capital stock or other voting securities of the Company,
or (iii) the merger or consolidation of the Company with another person or
entity, in each case in clauses (ii) and (iii) above under circumstances in
which the holders of the voting power of the outstanding shares of capital stock
and other voting securities of the Company, immediately prior to such
transaction, own less than 50% in voting power of the outstanding shares of
capital stock and other voting securities of the Company or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction. A sale (or multiple sales) of one or more subsidiaries of the
Company (whether by way of merger, consolidation, reorganization or sale of all
or substantially all of the assets or securities) which constitutes all or a
substantial portion of the consolidated assets or revenues of the Company shall
be deemed a Sale of the Company.
(eeee) "Securities" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the Securities Act and includes such
Person's capital stock or other equity interests or any options, warrants or
other securities or rights that are directly or indirectly convertible into, or
exercisable or exchangeable for, such Person's capital stock or other equity
interests.
(ffff) "Securities Act" means the Securities Act of 1933, as amended.
(gggg) "Security Agreement" has the meaning ascribed to it in Section
3.1(b)(vii).
(hhhh) "Series A Preferred Shares" means the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock.
(iiii) "Series A Preferred Stock" means the Series A Convertible
Redeemable Preferred Stock, $.001 par value per share, of the Company.
(jjjj) "Significant Purchasers" shall mean Purchasers who hold more
than $2,000,000 face amount of New Debentures.
(kkkk) "Subject Person" has the meaning ascribed to such term in the
definition of "Subsidiary".
(llll) "Subordination Agreement" has the meaning ascribed to such term
in Section 3.1(b)(viii).
(mmmm) "Subsidiary" means, at any time, with respect to any Person (the
"Subject Person"), (i) any Person of which either (x) more than 50% of the
Securities entitled to vote in the election of directors or comparable Persons
performing similar functions (excluding Securities entitled to vote only upon
the failure to pay dividends thereon or other contingencies) or (y) more than a
50% interest in the profits or capital of such Person, are at the time owned or
controlled directly or indirectly by the Subject Person or through one or more
Subsidiaries of the
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Subject Person or (ii) any Person whose assets, or portions thereof, are
consolidated with the net earnings of the Subject Person and are recorded on the
books of the Subject Person for financial reporting purposes in accordance with
GAAP.
(nnnn) "Subsidiary Board" has the meaning ascribed to it in Section
6.3.
(oooo) "SVB" shall mean Silicon Valley Bank.
(pppp) "SVB Facility" shall mean the Loan and Security Agreement, dated
April 25, 2001, among the Issuers and SVB, as amended.
(qqqq) "Trading Day" means any day on which securities are traded on
National Association of Securities Dealers, Inc.'s Automated Quotation System.
(rrrr) "Transaction Securities" means the Aggregate Convertible
Debenture, the Warrants and InSight Warrants.
(ssss) "Warrant Shares" means the shares of Common Stock issuable upon
the exercise of the Warrants.
(tttt) "Warrants" has the meaning ascribed to such term in Article II.
(uuuu) "Wire Amount" has the meaning ascribed to such term in Article
II.
1.2 RULES OF CONSTRUCTION.
The term "this Agreement" means this agreement together with all
schedules and exhibits hereto, as the same may from time to time be amended,
modified, supplemented or restated in accordance with the terms hereof. In this
Agreement, the term "Best Knowledge" of the Company means actual knowledge of
the executive officers of the Company, including Xxxxxx Xxxxxxx, J. Xxxxx
Xxxxxx, Xxx Xxxxx, and Xxxx Xxxxxxx, after making reasonable inquiry of the
matters in question. The use in this Agreement of the term "including" means
"including, without limitation." The words "herein," "hereof," "hereunder" and
other words of similar import refer to this Agreement as a whole, including the
schedules and exhibits, as the same may from time to time be amended, modified,
supplemented or restated, and not to any particular section, subsection,
paragraph, subparagraph or clause contained in this Agreement. All references to
sections, schedules and exhibits mean the sections of this Agreement and the
schedules and exhibits attached to this Agreement, except where otherwise
stated. The title of and the section and paragraph headings in this Agreement
are for convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Agreement. The use
herein of the masculine, feminine or neuter forms shall also denote the other
forms, as in each case the context may require or permit. Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Unless expressly provided otherwise, the measure of a period of one month
or year for purposes of this Agreement shall be that date of the following month
or year corresponding to the starting date,
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provided that if no corresponding date exists, the measure shall be that date of
the following month or year corresponding to the next day following the starting
date. For example, one month following February 18 is March 18, and one month
following March 31 is May 1.
ARTICLE II
PURCHASE AND SALE OF THE NEW DEBENTURES
AND THE WARRANTS
2.1 NEW DEBENTURES AND WARRANTS.
(a) Issuance of the New Debentures. At the Closing, and subject to
the terms and conditions contained in this Agreement, (i) the Issuers shall
issue, sell and deliver to each Purchaser (A) a New Debenture substantially in
the form of Exhibit A and (B) a Warrant, substantially in the form of Exhibit B
(collectively, the "Warrants") to purchase shares of Common Stock and (ii) each
Purchaser shall pay to one or more accounts designated by the Issuers prior to
the Closing the amount set forth opposite each Purchaser's name on Schedule I
hereto by wire transfer of immediately available funds (the "Wire Amount"). The
Issuers' agreement with each Purchaser is a separate agreement, and the sale of
New Debentures and Warrants to each Purchaser is a separate sale. No Purchaser
shall have any obligation to purchase more than the amount set forth opposite
such Purchaser's name on Schedule I hereto or any New Debentures not purchased
by another Purchaser. Each Issuer shall be jointly and severally liable for all
of the monetary and other obligations of the Issuers under this Agreement and
each other Financing Document. The Company and the Purchasers agree that 99.5%
of the aggregate purchase price to be paid at the Closing by the Purchasers
shall be allocated to the sale and purchase of the New Debentures, with the
remainder thereof allocated to the sale and purchase of the Warrants. No party
hereto shall take a position inconsistent with this allocation unless otherwise
required by Law.
(b) Use of Proceeds. The Issuers shall use the proceeds from the
sale of the New Debentures to pay the fees and expenses of X'Xxxxxxxx LLP,
special counsel to the Purchasers, and Proskauer Rose LLP as required pursuant
to Section 8.16 hereof and for the Company's working capital and general
corporate purposes.
(c) Satisfaction of Commitment. The Company hereby acknowledges that
the Purchasers' purchase of the New Debentures and the Warrants fully satisfies
all obligations of Insight to the Company pursuant to the commitment letter
dated April 16, 2001 to provide "Financing" (as defined therein) and that the
Company's obligations to Insight pursuant to such commitment letter remain in
full force and effect.
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ARTICLE III
THE CLOSING; DELIVERY OF DOCUMENTS AT THE CLOSING
3.1 THE CLOSING.
(a) The closing (the "Closing") shall take place simultaneously with
the execution and delivery of this Agreement at the offices of X'Xxxxxxxx LLP,
00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) The obligation of each Purchaser to purchase and pay for the New
Debentures to be purchased hereunder at the Closing is subject to the delivery
by the Issuers of the following items (unless waived by such Purchaser):
(i) the New Debentures, which New Debentures shall have been
duly authorized, executed and delivered by the Issuers and shall be in
full force and effect and enforceable against the Company in accordance
with their terms;
(ii) the Warrants, which Warrants shall have been duly
authorized, executed and delivered by the Company and shall be in full
force and effect and enforceable against the Issuer in accordance with
their terms;
(iii) the opinion of Xxxxxxx Xxxx LLP, counsel to the Company,
addressed to the Purchasers, dated as of the closing, in substantially
the form attached hereto as Exhibit G; and
(iv) evidence satisfactory to the Purchasers that the Company
has reserved the New Debenture Shares for issuance upon conversion of
the New Debentures;
(v) evidence satisfactory to the Purchasers that the Company
has reserved the Warrant Shares for issuance upon exercise of the
Warrants;
(vi) the Fifth Amended and Restated Registration Rights
Agreement in substantially the form attached hereto as Exhibit C (the
"Fifth Amended and Restated Registration Rights Agreement"), which
Fifth Amended and Restated Registration Rights Agreement shall have
been duly authorized, executed and delivered by the Company and shall
be in full force and effect and enforceable against the Company in
accordance with its terms;
(vii) the Security Agreement in substantially the form
attached hereto as Exhibit D (the "Security Agreement") and the
Collateral Agency and Intercreditor Agreement in substantially the form
attached hereto as Exhibit E (the "Collateral Agency and Intercreditor
Agreement"), each of which shall have been duly authorized, executed
and delivered by the Company and shall be in full force and effect and
enforceable against the Company in accordance with its terms;
(viii) the Subordination Agreement in substantially the form
attached hereto as Exhibit F (the "Subordination Agreement"), which
Subordination Agreement shall
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have been duly authorized, executed and delivered by SVB and shall be
in full force and effect and enforceable against SVB in accordance with
its terms;
(ix) all consents, approvals, authorizations, filings and
notices required to consummate the transactions contemplated hereby
shall have been obtained, made or given and shall be in full force and
effect, including, without limitation, the consent and authorization of
the NASD;
(x) receipt of revised cash flow budget through December 31,
2001, acceptable to the Purchasers;
(xi) evidence reasonably satisfactory to the Purchasers that
the Company has made arrangements to provide notice to the Company's
shareholders pursuant to NASD Rule 4350(i)(2).
(xii) evidence satisfactory to the Purchasers of the filings
of all UCC-1 Financing Statements and any other required security
interest filings, which Financing Statements and other filings provide
the Purchasers with a perfected security interest in the Collateral (as
defined in the Security Agreement);
(xiii) a certificate of the Secretary or an Assistant
Secretary of the Company, dated as of the Closing and certifying on
behalf of the Company: (A) that attached thereto is a true, correct and
complete copy of each of the Fundamental Documents of the Company as in
effect on the date of such certification; (B) that attached thereto is
a true, correct and complete copy of all resolutions adopted by the
Board of Directors (and any committees thereof) of the Company
authorizing (1) the execution, delivery and performance of the
Financing Documents, (2) the issuance, sale and delivery of the New
Debentures, and (3) the reservation of the New Debenture Shares for
issuance upon conversion of the New Debentures, and that all such
resolutions in (1), (2) and (3), are in full force and effect; and (C)
the incumbency and specimen signature of all officers of the Company
executing the Financing Documents, and any certificate or instrument
furnished pursuant hereto;
(xiv) a certification by another officer of the Company as to
the incumbency and signature of the officer signing the certificate
referred to in clause (xiii);
(xv) a duly authorized, executed and delivered copy of each of
the other Financing Documents, if any, which shall be in full force and
effect and shall be enforceable against the Issuers or the Company, as
the case may be, and such parties in accordance with their respective
terms;
(xvi) a telegram, telex or other acceptable method of
confirmation from the Secretaries of State of the States of Delaware
and Massachusetts dated on the Closing as to the continued good
standing of the Company and from the Secretaries of State of the State
of Washington as to the due incorporation and good standing of
eXstatic, as applicable; and
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(xvii) such additional supporting documents and other
information with respect to the operations and affairs of the Company
and its Subsidiaries as the Purchasers may reasonably request.
(c) The obligation of the Issuers to issue, deliver and sell the New
Debentures at the Closing is subject to the delivery by the Purchasers of the
following items (unless waived by the Company):
(i) a duly authorized, executed and delivered copy of each of
the other Financing Documents which shall be in full force and effect
and shall be enforceable against the Purchasers and such parties in
accordance with their respective terms; and
(ii) each Purchaser shall deliver or cause to be delivered to
the Company by wire transfer of immediately available funds the Wire
Amount set forth opposite such Purchaser's name on Schedule I hereto to
such bank account as the Issuers shall designate to each Purchaser in
writing on or prior to the day immediately preceding the Closing; and
(iii) all consents, approvals, authorizations, filings and
notices required to consummate the transactions contemplated hereby
shall have been obtained, made or given and shall be in full force and
effect, including, without limitation the (A) consent of SVB, and (B)
consent and authorization of the NASD.
(d) The New Debentures do not constitute a revolving loan and any
amounts repaid or prepaid under the New Debentures may not be reborrowed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each Issuer hereby represents and warrants to each of the
Purchasers as follows:
4.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
Each of the Company and its Subsidiaries is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation and has all requisite corporate or other power and
authority to own, lease and operate its properties and other assets and to carry
on its business as presently conducted and as proposed to be conducted. Each of
the Company and its Subsidiaries is duly qualified and in good standing to
transact business as a foreign Person in those jurisdictions listed on Schedule
4.1, which constitute all the jurisdictions in which the character of the
property owned, leased or operated by the Company or such Subsidiary or the
nature of the activities conducted by the Company or such Subsidiary makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. eXstatic is a wholly owned subsidiary of the
Company. The Company has delivered to the Purchasers a correct and complete copy
of the Amended and Restated Certificate of Incorporation of the Company in
effect on the date hereof (the "Certificate of Incorporation"). A copy of the
Amended and Restated By-laws of the Company in effect on the date hereof (the
"By-laws") is filed as an exhibit to the Commission Filings.
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4.2 CAPITALIZATION.
(a) Immediately upon consummation of the Closing, the authorized,
issued and outstanding capital stock of the Company shall consist of:
(i) 10,000,000 shares of Preferred Stock, of which 5,330,000
are designated as Series A Preferred Stock and 5,325,645 are validly
issued and outstanding, fully paid and nonassessable; and
(ii) 150,000,000 shares of Common Stock, of which:
(A) 34,053,087 shares are validly issued and
outstanding, fully paid and nonassessable;
(B) 22,301,875 shares shall be reserved for issuance
upon conversion of the Series A Preferred Stock;
(C) 37,617,813 shares are reserved as New Debenture
Shares for issuance upon conversion of the New Debentures;
(D) 30,041,202 shares are reserved as Existing
Debenture Shares for issuance upon conversion of the Existing
Debentures;
(E) 24,348,099 shares shall be reserved for issuance
upon exercise of the Warrants subject to the effectiveness of
the Certificate Amendment;
(F) 18,850,141 shares shall be reserved for issuance
upon exercise of the Insight Warrants subject to the
effectiveness of the Certificate Amendment;
(G) 1,179,337 shares are reserved for issuance upon
exercise of the April 16 Warrant;
(H) 366,565 shares are reserved as treasury shares;
and
(I) 11,834,947 shares are reserved for issuance in
accordance with the Equity Incentive Plans.
(b) The Company agrees that the Capitalization Table attached hereto as
Exhibit H accurately reflects the capitalization of the Company (after giving
effect to the transactions contemplated by this Agreement, including the
issuance of the Warrants, the InSight Warrants and the Existing Debentures).
The parties acknowledge and agree that, with respect to the Transaction
Securities, the Capitalization Table attached hereto as Exhibit H assumes that
the Certificate Amendment is effective.
(c) Except as contemplated by the Financing Documents or as otherwise
set forth on Schedule 4.2, there are, and immediately after consummation of the
Closing there will be, no
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(i) outstanding warrants, options, agreements, convertible Securities or other
commitments or instruments pursuant to which the Company is obligated to issue,
sell or otherwise transfer any Securities or (ii) preemptive or similar rights
to purchase or otherwise acquire Securities of the Company pursuant to any
provision of Law, the Company's Fundamental Documents or any Contract to which
the Company is a party.
(d) All Securities issued by the Issuers have been issued in
transactions in accordance in all material respects with applicable state and
federal Laws governing the sale and purchase of Securities.
(e) Except with respect to the corporate and other requisite action
necessary to effectuate the Certificate Amendment, the authorization,
reservation, issuance, sale and delivery, as applicable, of the New Debenture
Shares have been duly and validly authorized by all requisite corporate action
on the part of the Company and eXstatic, as the case may be. The New Debenture
Shares and the Warrant Shares (assuming the issuance thereof in accordance with
the applicable terms of the New Debentures or Warrants, as the case may be),
will be duly and validly issued and outstanding, fully paid and nonassessable,
with no personal liability attaching to the ownership thereof, free and clear of
any Encumbrances whatsoever and with no restrictions on the voting rights
thereof and not subject to any preemptive rights, rights of first refusal or
other similar rights of the stockholders of the Company and eXstatic, as the
case may be.
4.3 AUTHORIZATION OF AGREEMENT, ETC.
Except with respect to the corporate and other requisite action
necessary to effectuate the Certificate Amendment, each Issuer, as the case may
be, has or had, as the case may be, all requisite corporate power and authority
to execute and deliver this Agreement, the New Debentures, the Warrants, the
Fifth Amended and Restated Registration Rights Agreement, the Collateral Agency
and Intercreditor Agreement and the Security Agreement and any and all
instruments necessary or appropriate in order to effectuate fully the terms and
conditions of each such agreement and all related transactions (collectively,
the "Financing Documents") and to perform its obligations under and to
consummate the transactions contemplated by each such Financing Document. The
execution, delivery and performance by each Issuer, as the case may be, of each
Financing Document to which it is a party and the issuance, sale and delivery of
the New Debentures and the Warrants has been duly authorized by all requisite
corporate action by each Issuer, as the case may be, and this Agreement and each
other Financing Document has been duly executed and delivered by each Issuer, as
the case may be. No other corporate or stockholder action on the part of any
Issuer, as the case may be, is necessary for such authorization, execution and
delivery. Each of the Financing Documents constitutes a legal, valid and binding
obligation of each Issuer, as the case may be, enforceable against each Issuer,
as the case may be, in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar Laws affecting creditors' rights and remedies generally, and
subject, in the case of enforceability, to general principles of equity
(regardless of whether enforcement is sought in a Proceeding at law or in
equity).
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4.4 NO CONFLICTS.
Except as otherwise disclosed on Schedule 4.4, the execution, delivery
and performance by each Issuer, as the case may be, of this Agreement and each
of the other Financing Documents, the issuance, sale and delivery of the New
Debentures and the Warrants and compliance with the provisions hereof and
thereof by such Issuer, does not or will not, as the case may be, (a) violate
any provision of Law or any Order applicable to any Issuer or any of its
properties or assets or (b) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of, any Encumbrance upon any of
the properties or assets of any Issuer or, except as previously disclosed in
writing to each of the Purchasers, any material Contract to which it is a party
or (c) conflict with or violate any provision of the Fundamental Documents of
any Issuer currently in effect.
4.5 APPROVALS.
Except with respect to the corporate and other requisite action
necessary to effectuate the Certificate Amendment, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any Person
is required in connection with the execution, delivery or performance by each
Issuer, as the case may be, of each Financing Document to which it is a party.
4.6 COMMISSION FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all Commission Filings that it has been
required to file with the Commission under the Securities Act and the Exchange
Act. As of the respective dates of their filing with the Commission, or the date
of any amendment thereto filed on or prior to the date hereof, the Commission
Filings complied as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.
(b) Each of the historical consolidated financial statements of the
Company (including any related notes or schedules) included in the Commission
Filings was prepared in accordance with GAAP (except as may be disclosed
therein), and complied in all material respects with the rules and regulations
of the Commission. Such financial statements fairly present in all material
respects the consolidated financial position of the Company and its Subsidiaries
as of the dates thereof and the consolidated results of operations, cash flows
and changes in stockholders' equity for the periods then ended (subject, in the
case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments). Except as set forth or reflected in the Commission
Filings filed prior to the date hereof or as set forth on Schedule 4.6, neither
the Company nor any of its Subsidiaries have any liabilities or obligations of
any nature (whether accrued, absolute, contingent, unasserted or otherwise) that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
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4.7 PRIVATE OFFERING.
Assuming the accuracy of the representations of the Purchasers in
Section 5.2, the offering, sale, issuance and delivery by the Issuers of the New
Debentures, the Warrants and the Warrant Shares are exempt from the registration
and prospectus delivery requirements of the Securities Act and applicable state
securities laws and the rules and regulations promulgated thereunder. Neither
the Company or its Subsidiaries, nor any Person acting on their behalf, has
offered or sold or will offer or sell any Securities, or has taken or will take
any other action (including, without limitation, any offering of any Securities
of the Company under circumstances that would require, under the Securities Act
or any applicable blue-sky laws, the integration of such offering with the
transactions contemplated by this Agreement), which would subject the
transactions contemplated by this Agreement to the registration provisions of
the Securities Act.
4.8 CERTAIN CONTRACTS.
All material Contracts to which the Company or any of its Subsidiaries
is a party or may be bound that are required by Item 610(b)(10) of Regulation
S-K to be filed as exhibits to, or incorporated by reference in, the Company's
Form 10-K or the Company's Form 10-Q are referred to herein as "Company
Contracts". All Company Contracts are legal, valid and binding and in full force
and effect on the date hereof except as set forth on Schedule 4.8A, to the
extent they have previously expired in accordance with their terms or to the
extent such failure to be so legal, valid and binding would not reasonably be
expected to have a Material Adverse Effect and, except as set forth on Schedule
4.8B, neither the Company nor any of its Subsidiaries has violated any provision
of, or committed or failed to perform any act that, with or without notice,
lapse of time, or both, would constitute a default under the provisions of any
Company Contract, except for defaults that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
4.9 INTELLECTUAL PROPERTY RIGHTS.
(a) To the Company's Best Knowledge, each of the Company and its
Subsidiaries owns or is licensed to use all trademarks, copyrights, service
marks, and applications and registrations therefor, and all trade names, domain
names, web sites, customer lists, trade secrets, proprietary processes and
formulae, inventions, know-how, other confidential and proprietary information,
and other industrial and intellectual property rights necessary to permit each
of the Company and its Subsidiaries to carry on its business as presently
conducted. To the Company's Best Knowledge, each of the Company and its
Subsidiaries has the right to bring infringement actions with respect to all
trademarks, copyrights, service marks, trade names, domain names, trade secrets,
proprietary processes and formulae, inventions, know how and other confidential
and proprietary information that it owns. Except as otherwise disclosed in
Schedule 4.9, all registered patents, copyrights, trademarks, and service marks
owned by the Company and its Subsidiaries are in full force and effect and are
not subject to any taxes or maintenance fees. Except as otherwise disclosed in
Schedule 4.9, there is no pending or, to the Best Knowledge of the Company,
threatened Claim or litigation against the Company or any Subsidiary contesting
the right to use its intellectual property rights, asserting the material misuse
of any thereof, or asserting the material infringement or other material
violation of any intellectual property right
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of a third party. All inventions and know-how conceived by employees of the
Company or its Subsidiaries and used by the Company and its Subsidiaries in the
business of the Company and its Subsidiaries as currently conducted are owned by
the Company or its Subsidiaries. Except as disclosed on Schedule 4.9, each of
the Company and its Subsidiaries has taken reasonable security measures to
protect the secrecy, confidentiality, and value of its trade secrets,
proprietary processes, formulae, inventions, know-how and other confidential and
proprietary information.
(b) Except as otherwise disclosed in Schedule 4.10, no Proceedings or
Claims in which the Company or any Subsidiary alleges that any Person is
materially infringing upon, or otherwise materially violating, any patents,
trademarks, copyrights, service marks, and applications and registrations
therefor are pending, and none have been served by, instituted or asserted by
the Company or any Subsidiary, nor are any Proceedings or Claims threatened
alleging any such material violation or material infringement, nor does the
Company or any Subsidiary know of any valid basis for any such Proceedings or
Claims.
4.10 LITIGATION OTHER PROCEEDINGS OR CLAIMS.
Except as set forth on Schedule 4.10, there are no (i) Proceedings or
Claims pending against or initiated by the Company or any Subsidiary or, to the
best knowledge of the Company, threatened against the Company or any Subsidiary,
whether at law or in equity, whether civil or criminal in nature, except for
Proceedings or Claims that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, or (ii) material
Orders with respect to the Company or any Subsidiary.
4.11 TERMINATION OF EMPLOYMENT.
To the Company's Best Knowledge, except as set forth on Schedule 4.11
no executive officer or key employee, or any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any officer, key employee or group of key employees.
4.12 BROKERS.
Neither the Company nor any of its Subsidiaries have employed or
otherwise retained any broker or finder in connection with the transactions
contemplated by this Agreement.
4.13 REGISTRATION RIGHTS.
Except as contemplated by the Fifth Amended and Restated Registration
Rights Agreement and except as set forth on Schedule 4.13, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any shares of Common Stock or any other Securities of the Company.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company, as to
itself only, as follows:
5.1 AUTHORIZATION OF THE FINANCING DOCUMENTS.
Such Purchaser has the requisite power and authority (corporate or
otherwise) to execute, deliver and perform the Financing Documents to which it
is a party and the transactions contemplated thereby, and the execution,
delivery and performance by such Purchaser of the Financing Documents to which
it is a party have been duly authorized by all requisite action by such
Purchaser and each such Financing Document, when executed and delivered by such
Purchaser, constitutes a legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar Laws affecting creditors' rights and remedies
generally, and subject, in the case of enforceability, to general principles of
equity (regardless of whether enforcement is sought in a Proceeding at law or in
equity).
5.2 INVESTMENT REPRESENTATIONS.
(a) The New Debentures and the Warrants to be purchased by such
Purchaser hereunder are being acquired for its own account, for investment and
not with a view to the distribution thereof in violation of the Securities Act
or applicable foreign or state securities Laws.
(b) Such Purchaser understands that (i) the New Debentures and the
Warrants have not been, and the Securities issuable upon conversion or exercise
thereof will not be, registered under the Securities Act or applicable foreign
or state securities Laws, by reason of their issuance by the Company in a
transaction exempt from the registration requirements of the Securities Act and
applicable foreign and state securities Laws and (ii) the New Debentures and the
Warrants, and the Securities issuable upon conversion or exercise thereof, must
be held by the Purchasers or each Purchaser, as the case may be, indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
and applicable foreign and state securities Laws or is exempt from registration
thereof. Such Purchaser is an "accredited investor" (as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act).
(c) Such Purchaser has had a reasonable time prior to the date hereof
to ask questions and receive answers concerning the terms and conditions of the
offering of the New Debentures and the Warrants, and to obtain any additional
information which the Company possesses or could acquire without unreasonable
effort or expense, and has generally such knowledge and experience in business
and financial matters and with respect to investments in securities of privately
held companies as to enable such Purchaser to understand and evaluate the risks
of such investment and form an investment decision with respect thereto.
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(d) Such Purchaser is not relying on any representation, warranty,
statement, document, act (including the fact that Insight is an investor in the
Company) or investment expertise of Insight in making such Purchaser's decision
to purchase the New Debentures and the Warrants. In addition to making the above
representation and warranty to the Company, each Purchaser hereby makes such
representation and warranty to Insight.
(e) Such Purchaser has not employed or otherwise retained any broker or
finder in connection with the transactions contemplated by this Agreement.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 AMENDMENTS TO DEBT DOCUMENTS.
(a) Provided that at least 15% of the original principal amount of the
Aggregate Convertible Debentures are outstanding, neither the Company nor any of
its Subsidiaries shall or shall permit any change, amendment, supplement or
other modification of any terms of the SVB Facility or related documents,
without the prior consent of the Aggregate Convertible Debenture Super Majority
(based on outstanding principal amount) of the Aggregate Convertible Debentures,
if the effect of such change, amendment, supplement or other modification (or
renewal, refinancing, refunding or extension) is to:
(i) increase any applicable margin with respect to the
interest rate in effect on the extensions of credit under the SVB
Facility by more than a rate equal to 2% per annum from those provided
for in the SVB Facility as in effect on the date hereof, or otherwise
change the basis for the calculation of the interest rate thereunder if
such change has the effect of increasing the interest rate charged
thereunder by more than 2% per annum from those provided for in the SVB
Facility as in effect on the date hereof (provided, that nothing herein
shall preclude the imposition of a post-default rate of interest in the
amount and under the circumstances provided in the SVB Facility as in
effect on the date hereof);
(ii) shorten or extend the scheduled maturity of any payment
of any principal amount of the revolving loans under the SVB Facility
from the scheduled maturity thereof as in effect on the date hereof,
except extending the payment schedule of such revolving loans so long
as the final maturity on such loans shall fall on or before 180 days
prior to January 10, 2005 (provided, that nothing herein shall preclude
the Issuers from reducing the amount of commitments under the SVB
Facility);
(iii) add any additional defaults or events of default under
the SVB Facility or permit any modifications to the terms of any
defaults or events of default under the SVB Facility except for any
modifications to make such terms less restrictive on the Issuers and
their Subsidiaries);
(iv) make any numerically based restriction in any one or more
of the financial covenants under the SVB Facility (or related
documents) as in effect on the date hereof more restrictive on the
Issuers and their Subsidiaries by more than 10%; provided,
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that, an amendment to a numerically based restriction in a financial
covenant in the SVB Facility shall result in an automatic equal
percentage amendment (an "Automatic Financial Covenant Amendment") in
the corresponding financial covenant (if any) in the Financing
Documents (and the Issuers agree to execute and deliver promptly
thereafter an amendment thereto that incorporates each such Automatic
Financial Covenant Amendment);
(v) add any financial covenant to the SVB Facility; or
(vi) except in connection with waiving any violation of the
SVB Facility or modifying any covenant to eliminate any violation of
the SVB Facility, add any negative covenant.
For purposes of this Section 6.1, the term "financial covenant" means
any covenant, for which the compliance or noncompliance therewith is based on
the financial performance or financial condition of a Person. Notwithstanding
anything to the contrary contained in this Section 6.1, if an amendment to the
SVB Facility results in the modification or addition of an affirmative covenant,
then such amendment shall result in an automatic amendment to this Agreement,
subject to the consent of the Purchasers (an "Automatic Affirmative Covenant
Amendment") modifying or adding, as the case may be, such affirmative covenant
to this Agreement (and the Issuers agree to execute and deliver promptly
thereafter an amendment hereto that incorporates each such Automatic Affirmative
Covenant Amendment).
6.2 INFORMATION RIGHTS.
(a) Reports. For so long as any of the New Debentures remain
outstanding, the Company shall furnish the following to each of the Significant
Purchasers (unless such Significant Purchaser requests that such information not
be furnished at such time):
(i) Weekly Statements. As soon as available, but no later than
Wednesday after the end of each week, an unaudited internal financial
report of the Company, which report shall be prepared in a manner
consistent with GAAP consistently applied, and otherwise in the form
provided to the Company's senior management, and which shall consist of
cash flow analysis for such weekly accounting period together with a
cumulative cash flow statement from the first day of the current year
to the last day of such weekly accounting period;
(ii) Monthly Statements. As soon as available, but no later
than 20 days after the end of each monthly accounting period, an
unaudited internal financial report of the Company, which report shall
be prepared in a manner consistent with GAAP consistently applied, and
otherwise in the form provided to the Company's senior management, and
which shall include the following:
(A) profit and loss statement for such monthly
accounting period, together with a cumulative profit and loss
statement for the prior twelve-month period and for the
comparable twelve-month period for the prior year;
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(B) balance sheet as at the last day of such monthly
accounting period;
(C) cash flow analysis for such monthly accounting
period together with a cumulative cash flow statement from the
first day of the current year to the last day of such monthly
accounting period;
(D) comparison between all of the actual figures
provided pursuant to clauses (1), (2) and (3) above
(including, in the cases of clauses (1) and (2), the
cumulative statements), for such monthly accounting period and
the comparable figures for the prior year for such monthly
accounting period, with an explanation of any material
differences between them and compared to the budget for such
period; and
(E) a report by management of the Company of the
operating and financial highlights of the Company for such
monthly accounting period and the cumulative period for the
fiscal year to date which shall include a comparison between
operating and financial results and the corresponding plan or
budget and a discussion of the variances between current and
prior periods.
The reports furnished by the Company pursuant to clauses (1)
and (5) of the preceding sentence shall be certified by the
chief financial officer of the Company.
(iii) Quarterly Report. As soon as available, but no later
than 45 days after the end of each calendar quarter, in addition to the
financial statements for the three prior monthly accounting periods,
the Company shall complete a quarterly report, which quarterly report
shall be certified by the chief financial officer of the Company.
(iv) Annual Audit. As soon as available, but not later than 90
days after the end of each fiscal year of the Company, audited
financial statements of the Company, which shall include a statement of
cash flows and statement of operations for such fiscal year and a
balance sheet as at the last day thereof, each prepared in accordance
with GAAP (except as set forth in the notes thereto), and accompanied
by the report of a firm of independent certified public accountants of
nationally recognized standing selected by the Audit Committee (the
"Accountants").
(v) Budget. Within 30 days after the end of each fiscal year
of the Company, an annual updated consolidated budget and work plan
("Annual Budget"), including projected income statements, balance
sheets and cash flow statements (setting forth in detail the
assumptions therefor) on a quarterly basis for the Company and its
Subsidiaries for the immediately following fiscal year of the Company,
which such budget and work plan shall be approved by the Board and the
Purchasers at the first regularly scheduled meeting of the Board of the
Company thereafter. Within 10 days after any amendment to any budget, a
copy of such amendment.
(vi) Subsidiaries. If for any period the Company shall have
any Subsidiary or Subsidiaries whose accounts are consolidated with
those of the Company, then in
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respect of such period the financial statements delivered pursuant to
the foregoing clauses shall be consolidated (and consolidating if
normally prepared by the Company) financial statements of the Company
and all such consolidated Subsidiaries.
(vii) Accountants Reports. Promptly upon becoming available,
copies of all reports prepared for or delivered to the management of
the Company by the Accountants.
(viii) Security Holders Reports. Promptly upon becoming
available, copies of all reports prepared for or delivered to the
Company's lenders or other security holders.
(ix) Material Events. Promptly upon becoming aware of a
Liquidity Event or any other condition or event that could reasonably
be expected to have a Material Adverse Effect on the Company (including
any material defaults, litigation, governmental inquiry, or discovery
of a significant liability but excluding general market conditions),
(1) a report summarizing such condition or event and the Company's
proposed response thereto (2) have the right to retain counsel to
represent the Purchasers (and such counsels' reasonable fees and
expenses shall be paid directly by (or reimbursed by) the Company and
(3) be afforded time to review and comment on any agreements relating
thereto.
(x) Miscellaneous. Promptly upon request, any other
documentation or information reasonably requested by any Purchaser.
(xi) Access to Records and Properties. For so long as any New
Debentures remain outstanding, the Company shall afford to each
Purchaser and its Representatives, during normal business hours upon 3
Business Days advance notice, the right to (i) visit and inspect the
assets and properties of the Company, (ii) examine upon reasonable
advance notice, the books of accounts and records of the Company and
(iii) make copies of such records and permit such Persons to discuss
all aspects of the Company with any officers, employees or Accountants
of the Company; provided, however, that such investigation shall not
unreasonably interfere with the operations of the Company. The Company
will instruct the Accountants to discuss such aspects of the financial
condition of the Company with each Purchaser and its Representatives as
may reasonably request, and to permit each Purchaser and its
Representatives to inspect, copy and make extracts from such financial
statements, analyses, work papers and other documents and information
(including electronically stored documents and information) prepared by
the Accountants with respect to the Company as may reasonably request.
All costs and expenses incurred by each Purchaser and its
Representatives in connection with exercising such rights of access
shall be borne by each Purchaser, and all out-of-pocket costs and
expenses incurred by the Company in complying with any extraordinary
requests by each Purchaser and its Representatives in connection with
exercising such access rights shall be borne by each Purchaser.
(xii) Confidential Information. Each Purchaser and its
Representatives shall hold in confidence all nonpublic information of
the Company provided or made available to such Purchaser and its
Representatives pursuant to this Section 6.1 until such time as such
information has become publicly available other than as a consequence
of any breach by such Purchaser and its Representatives of its
confidentiality obligations
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hereunder (provided that such information may be disclosed to any other
Purchaser and Representatives who are bound by this provision and in
connection with any Purchaser's compliance with Laws (in which case
Purchaser will provide the Company with prompt written notice so that
it may seek a protective order or other appropriate remedy)) and shall
not (A) trade or otherwise directly or indirectly transfer any
Securities of the Company in violation of the Securities Act or
Exchange Act or (B) use such information for any purpose other than
exercise of its rights as a holder of Securities and its rights under
this Agreement and the Related Documents.
6.3 BOARD OF DIRECTORS; OBSERVATION RIGHTS.
(a) Board of Directors.
(i) The number of directors constituting the Board of
Directors of the Company (the "Board") and the Board of Directors of
each Subsidiary (each, a "Subsidiary Board"), as fixed from time to
time by the Board of Directors of the Company or any Subsidiary in
accordance with the Company's or each Subsidiary's By-laws, shall be
six. At the option of the holders of at least two- thirds (based on
outstanding principal amount) of the Aggregate Convertible Debentures
(the "Aggregate Convertible Debenture Super Majority") at anytime, the
Company shall use its best efforts to cause two individuals appointed
by such Aggregate Convertible Debenture Super Majority to be nominated
and elected to the Board and each Subsidiary Board, and any committee
thereof (the "Aggregate Convertible Debenture Holders' Directors");
provided, however, that if (i) at any time the Aggregate Convertible
Debenture Holders hold less than 25% of the original principal amount
of the Aggregate Convertible Debentures, then the number of Aggregate
Convertible Debenture Holders' Directors shall be automatically reduced
to one, and (ii) if at any time the Aggregate Convertible Debenture
Holders hold less than 15% of the original principal amount of the
Aggregate Convertible Debentures, then the number of Aggregate
Convertible Debenture Holders' Directors shall be automatically reduced
to zero. The Aggregate Convertible Debenture Holders' Directors shall
be removed without cause only with the approval of the Aggregate
Convertible Debenture Super Majority. The rights granted under this
Section 6.3(a)(i) are inclusive of and not in addition to any similar
rights granted to Insight on July 26, 2001.
(ii) The provisions of clause (i) notwithstanding, at any time
and from time to time, a Aggregate Convertible Debenture Super Majority
shall have the right to remove any or both of the Aggregate Debenture
Holders' Directors from the Board and each Subsidiary Board and, in
such case, the Aggregate Convertible Debenture Super Majority shall be
entitled to appoint an observer or observers (in addition to any
Observer rights Insight may have) to serve as an observer or observers
at all meetings of the Board and each Subsidiary Board, and any
committees thereof (the "Aggregate Convertible Debenture Holders'
Replacement Observers"). The Aggregate Convertible Debentures'
Replacement Observers shall have all of the rights of the Observers (as
hereinafter defined). At the election of the Aggregate Convertible
Debenture Super Majority at any time and from time to time, the Company
shall use its best efforts to cause individuals appointed by the
Aggregate Convertible Debenture Super Majority in place of the
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Aggregate Convertible Debenture Holders' Replacement Observers, to be
nominated and elected to the Board and each Subsidiary Board, and any
committee thereof. In no event shall the Aggregate Convertible
Debenture Holders' as a result of this clause (ii) be entitled to
appoint more than two individuals to the Board or each Subsidiary
Board, or any committee thereof, as contemplated by Section 6.3(a)(i).
Such procedure shall be repeated at any time and from time to time at
the option of the Aggregate Convertible Debenture Super Majority.
(iii) The Company shall pay, or reimburse, the Aggregate
Convertible Debenture Holders' Directors or the Aggregate Convertible
Debenture Holders' Replacement Observers, as the case may be, for all
travel and related expenses incurred by the Aggregate Convertible
Debenture Holders' Directors, or the Aggregate Debenture Holders'
Replacement Observers, as the case may be, in connection with attending
such meetings and monitoring the Aggregate Convertible Debenture
Holders' investment in the New Debentures and the Existing Debentures.
The Company shall also pay for, or reimburse, the Aggregate Convertible
Debenture Holders for the travel and related expenses incurred by any
advisors of the Aggregate Convertible Debenture Holders' Directors or
the Aggregate Convertible Debenture Holders' Observers, as the case may
be, in connection with such matters.
(iv) The Company and each Subsidiary shall maintain directors'
and officers' insurance policies from an insurance company rated "A" or
above by A.M. Best and otherwise in form and substance reasonably
satisfactory to the Aggregate Convertible Debenture Holders, which
policies shall name as an insured, or otherwise provide coverage to,
the Aggregate Convertible Debenture Holders' Director. The Company and
each Subsidiary shall maintain such insurance policies for so long as
any Purchasers' Director remains on the Board or any Subsidiary Board.
The Company and each Subsidiary shall otherwise indemnify all of the
members of the Board and each Subsidiary Board to the fullest extent
permissible under applicable law.
(b) Observation Rights.
(i) Any Purchaser that holds at least $4,000,000 in principal
amount of New Debentures (each a "Four Million Dollar Holder") shall be
entitled to appoint 1 representative (the "New Debenture
Representative" and collectively with the Aggregate Convertible
Debenture Holders' Replacement Observers, the "Observers") who shall be
entitled to serve as an observer at all meetings of the Board and each
Subsidiary Board, and any committees thereof. Such right shall from
time to time be exercisable by delivery to the Company of written
notice from each Four Million Dollar Holder specifying the name of the
applicable New Debenture Representative.
(ii) Each Observer shall have all of the rights of a member of
the Board and each Subsidiary Board, provided, that no Observer shall
have the right to vote on matters on which the members of the Board or
any Subsidiary Board are entitled to vote. Each of the Company and its
Subsidiaries will give each Observer reasonable prior notice (it being
agreed that the same prior notice given to the Board and each
Subsidiary Board shall be deemed reasonable prior notice) in any manner
permitted in the Company's or
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each Subsidiary's By-laws for notices to directors of the time and
place of any proposed meeting of each such Board of Directors, such
notice in all cases to include true and complete copies of all
documents furnished to any director in connection with such meeting.
Each Observer will be entitled to be present in person as an observer
at any such meeting or, if a meeting is held by telephone conference,
to participate therein.
(iii) Each of the Company and its Subsidiaries will deliver to
each Observer copies of all papers which may be distributed from time
to time to the members of the Board and each Subsidiary Board at such
time as such papers are so distributed to them, including copies of any
written consent. In addition, from time to time upon the request of
each Observer, the Company or each Subsidiary will furnish to such
Observer such information regarding the business, affairs, prospects
and financial condition of the Company or each Subsidiary as such
Observer may reasonably request.
(iv) Each of the Company and its Subsidiaries shall pay, or
reimburse, the Observers for all travel and related expenses incurred
by the Observers in connection with attending such meetings and
monitoring the Purchasers' investment in the New Debentures.
(v) Each Observer shall hold in confidence all nonpublic
information of the Company provided or made available to such Observer
pursuant to this Section 6.2(b) until such time as such information has
become publicly available other than as a consequence of any breach by
such Observer or any Aggregate Convertible Debenture Holder of its
confidentiality obligations hereunder (provided that such information
may be disclosed to any other Persons who are bound by this provision
and in connection with a Purchaser's compliance with Laws in which case
such Purchaser will provide the Company with prompt written notice so
that it may seek a protective order or other appropriate remedy) and
shall not (1) trade or otherwise directly or indirectly transfer any
Securities of the Company in violation of the Securities Act or
Exchange Act or (2) use such information for any purpose other than
exercise of its rights as a holder of Securities and its rights under
this Agreement and the other Financing Documents.
6.4 RIGHTS TO SUBSCRIBE FOR SECURITIES.
(a) For so long as any of the New Debentures remain outstanding,
in the event that any equity and/or equity-linked Securities (the "Offered
Securities"), other than Excluded Securities, are proposed to be issued by the
Company or any Subsidiary to any Person (a "Proposed New Investor"), the Company
or any Subsidiary shall deliver to each Purchaser a written notice (which notice
shall state the number or amount of the Offered Securities proposed to be
issued, the purchase price therefor and any other terms or conditions of the
proposed issuance) of such issuance at least 30 days prior to the date of the
proposed issuance (the "Preemptive Offer Period").
(b) Each Purchaser shall have the option, exercisable at any time
during the first 20 days of the Preemptive Offer Period by delivering written
notice to the Company (a "Preemptive Offer Acceptance Notice"), to subscribe for
up to a number of Offered Securities that will allow such Purchaser to maintain
its fully-diluted ownership percentage of the
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Company's common stock (assuming conversion of all securities of the Company
that are directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock).
(c) The Company may issue all or any part of such Offered
Securities as to which Preemptive Offer Acceptances Notices have not been given
by the Purchasers (the "Refused Securities") to the Proposed New Investor, in
accordance with the terms set forth in the notice delivered pursuant to Section
6.4(a) above. Upon the closing, which shall include full payment to the Company,
of the sale to the Proposed New Investor of all the Refused Securities, the
Purchasers shall purchase from the Company, and the Company shall sell to the
Purchasers, the Offered Securities with respect to which Preemptive Offer
Acceptance Notices were delivered by the Purchasers, on the terms specified in
the Preemptive Offer Acceptance Notice. In each case, any Offered Securities not
purchased within 90 days of the end of the Preemptive Offer Period by the
Proposed New Investor in accordance with this Section 6.4 may not be sold or
otherwise disposed of until they are again offered to the Purchasers under the
procedures specified in this Section 6.4.
6.5 FINANCIAL AND OTHER COVENANTS.
(a) The Issuers shall at all times comply with the financial and
other covenants set forth on Schedule 6.5. To the extent the Issuers enter into
an agreement with SVB providing for the loosening or relaxation of one or more
of the financial covenants in the Credit Agreement, the Issuers and the
Purchasers agree (only with respect to the first agreement after the dates
hereof between SVB and the Issuers) to cause the financial covenants set forth
on Schedule 6.5 to be loosened and or relaxed in the same manner.
(b) Insurance. The Issuers shall, at all times insure its
tangible personal property Collateral in the amount of not less than Ten Million
Dollars ($10,000,000.00) and carry such other business insurance, with insurers
reasonably acceptable to the Purchasers, in such form and amounts as the
Purchasers may reasonably require, and the Issuers shall provide evidence of
such insurance to the Purchasers, so that the Purchasers is satisfied that such
insurance is, at all times, in full force and effect. All such insurance
policies shall name the Purchasers as additional loss payees and shall contain a
lenders loss payee endorsement in form reasonably acceptable to the Purchasers.
Upon receipt of the proceeds of any such insurance, the Purchasers shall apply
such proceeds to the Obligations as the Purchasers shall determine in their
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, the Purchasers shall release to the Company insurance
proceeds with respect to Equipment totaling less than $100,000, which shall be
utilized by the Issuers for the replacement of the Equipment with respect to
which the insurance proceeds were paid. The Purchasers may require reasonable
assurance that the insurance proceeds so released will be so used. If the
Issuers fails to provide or pay for any insurance, the Purchasers may, but is
not obligated to, obtain the same at the Issuers' expense. The Issuers shall
promptly deliver to the Purchasers copies of all reports made to insurance
companies.
(c) Litigation Cooperation. Should any third-party suit or
proceeding be instituted by or against the Purchasers with respect to any
Collateral or in any manner relating to the Issuers, the Issuers shall, without
expense to the Purchasers, make available the Issuers and
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their respective officers, employees and agents and the Issuers' books and
records, to the extent that the Purchasers may deem them reasonably necessary in
order to prosecute or defend any such suit or Proceeding.
(d) The Company shall take all action necessary to obtain all
approvals and consents necessary for it to satisfy all of its obligations under
this Agreement, the Aggregate Convertible Debentures and the Aggregate Warrants.
Without limiting the generality of the foregoing, the Company shall take, in
accordance with applicable law and its Certificate of Incorporation, all action
necessary to convene a meeting of holders of Common Stock as promptly as
practicable, and in no event later than December 15, 2001, to consider and vote
upon an amendment of the Certificate of Incorporation (the "Certificate
Amendment") to increase the number of authorized shares of Common Stock to
permit the Company to satisfy the transactions contemplated hereunder (which
shall be 225,000,000 as the same shall be adjusted for any stock splits, reverse
stock splits, recapitalization etc.). The Company's board of directors shall
recommend approval of the Certificate Amendment and shall take all lawful action
to solicit such approval.
(e) The Company shall take all action necessary to comply with
the requirements specified in the letter addressed to Xxxx Xxxxxxxx from NASDAQ
dated August 23, 2001 (the "NASDAQ Letter").
(f) Anything to the contrary notwithstanding, if the Transaction
Securities are not fully convertible or exercisable, as the case may be, because
the Company has not increased the authorized shares of Common Stock to at least
225,000,000, the Company will not enter into any binding agreement to consummate
a Sale Event (as defined in the Aggregate Convertible Debentures) unless the
Company has made arrangements to provide each holder of the Transaction
Securities, pursuant to the definitive documents for such Company, with the
right to elect to receive upon consummation of and out of the consideration to
be paid in connection with such Sale Event, the same consideration had all of
such holder's Transaction Securities been convertible or exercisable, as the
case may be, immediately prior to such Sale Event.
(g) The Company will not pay any amount (including, without
limitation, the original stated value of and premium, if any, and/or dividend)
on the Series A Convertible Redeemable Preferred Stock, or any other class or
series of capital stock of the Company, or to the holders of any such shares in
respect of any such shares unless and until the Aggregate Convertible
Debentures, together with all accrued interest and any premium thereon, have
been indefeasibly repaid in full or fully converted into equity securities of
the Company.
(h) Each of the parties hereto agrees that all repayments of the
Aggregate Convertible Debentures (including any premium and/or accrued interest
thereon) by the Company (other than by conversion of the Aggregate Convertible
Debentures) will be paid pro rata to the Aggregate Convertible Debenture Holders
based upon the principal amount then outstanding to each of such parties.
(i) Insight agrees that it will not exercise its right to redeem
the Series A Preferred Stock or receive cash dividends in respect thereof until
such time as all the Aggregate
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Convertible Debentures have either been indefeasibly repaid in full or converted
into Common Stock.
ARTICLE VII
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS, ETC.
All statements contained in any other Financing Document or any closing
certificate delivered by the Company, the Issuers, or the Purchasers pursuant to
this Agreement shall constitute representations and warranties by the Issuers,
or the Purchasers, as applicable, under this Agreement. Notwithstanding any
investigation made at any time by or on behalf of any party hereto, all
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Issuers or any Purchaser, as applicable, in connection with
the transactions contemplated by this Agreement shall survive the Closing until
the thirty-sixth (36th) month anniversary of the Closing Date. All agreements
and covenants contained in this Agreement or made in writing by or on behalf of
the Issuers, or any Purchaser, as applicable, in connection with the
transactions contemplated by this Agreement shall survive the Closing
indefinitely or until they are earlier terminated by their terms.
7.2 INDEMNIFICATION.
(a) In addition to all other rights and remedies available to the
Purchasers, the Company and each Subsidiary shall indemnify, defend and hold
harmless each Purchaser and its Affiliates and their respective partners,
officers, directors, employees, agents and representatives (together with such
Purchaser, the "Purchaser Indemnified Persons") against all Losses in connection
with or arising from any Claim asserted against any Person (whenever made)
resulting from or caused by any transaction, status, event, condition,
occurrence or situation relating to, arising out of or in connection with (A)
the status, or conduct of the Business and affairs of, the Issuers, (B) the
execution, delivery and performance by the Issuers of this Agreement and the
other Financing Documents and the transactions contemplated hereby and thereby
or (C) any actions taken by or omitted to be taken by any of the Purchaser
Indemnified Persons in connection with this Agreement and the other Financing
Documents or the transactions contemplated hereby and thereby, except, in each
case, to the extent such Losses result from the gross negligence or willful
misconduct of the Purchaser Indemnified Persons.
(b) All indemnification rights hereunder shall survive
indefinitely the execution and delivery of the Financing Documents and the
consummation of the transactions contemplated herein and therein,
notwithstanding any inquiry or examination made for or on behalf of, or any
knowledge of any of the Purchasers and/or any of the other Purchaser Indemnified
Persons or the acceptance by any such Purchaser of any certificate or opinion.
(c) Notwithstanding anything to the contrary, each Issuer
acknowledges and agrees that its rights, benefits and remedies and the exercise
thereof are subject to the terms and provisions of the Collateral Agency and
Intercreditor Agreement.
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ARTICLE VIII
MISCELLANEOUS
8.1 PARTIES IN INTEREST; THIRD PARTY BENEFICIARIES ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the Issuers, the
Purchasers and their respective successors and assigns. Insight is an intended
third party beneficiary of Section 2.1(c) and the Purchasers' representations
and warranties to the Company set forth in Section 5.2(d) hereof, and the
holders of the Existing Debentures are intended third party beneficiaries of the
rights of the holders of the Aggregate Convertible Debentures as specifically
provided hereunder. No party hereto may assign this Agreement, any other
Financing Document or any of its rights, interests or obligations hereunder or
thereunder without the prior written consent of the other parties; provided,
however, that each Purchaser may assign any of its rights under this Agreement,
any other Financing Document or any other document or investment contemplated
hereby to any Affiliate, member or limited partner of such Purchaser.
8.2 ENTIRE AGREEMENT.
This Agreement, each other Financing Document and the other writings
and agreements referred to herein or delivered pursuant hereto contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto.
8.3 SENIOR FINANCING.
At the Issuers' request, the Purchasers shall negotiate in good faith
with any successor to SVB and the SVB Facility to execute and deliver reasonable
and customary documentation required to subordinate (on reasonable and customary
terms) the right of the Purchasers to receive payments of cash from the Company
with respect to their New Debentures.
8.4 PUBLIC ANNOUNCEMENTS.
Except as otherwise required by Law or by the rules of NASDAQ, so long
as this Agreement is in effect, neither the Company (or any of its Subsidiaries)
nor the Purchasers, will issue or cause the publication of any press release or
make any other public announcement with respect to the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld. The Issuers and the Purchasers will cooperate with
each other in the development and distribution of all press releases and other
public announcements with respect to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such releases
and announcements as far in advance as practicable.
8.5 NOTICES.
All notices, demands and requests of any kind to be delivered to any
party in connection with this Agreement shall be in writing and shall be deemed
to have been duly given if
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personally delivered or if sent by internationally-recognized overnight courier
or by registered or certified mail, return receipt requested and postage
prepaid, addressed as follows:
(a) if to the Issuers, to:
Exchange Applications, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to Purchaser, to the address for such Purchaser set forth
on Schedule I hereto.
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance with the
provisions of this Section 8.5. Any such notice or communication shall be deemed
to have been received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of internationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted.
8.6 AMENDMENTS.
This Agreement may not be modified or amended, or any of the provisions
hereof waived, except by written agreement of the Issuers and the holders of 70%
(based on outstanding principal amount) of the New Debentures; provided,
however, that any such modification or amendment that affects the rights of the
holders of the Aggregate Convertible Debentures shall also require the approval
of the holders of a majority (based on outstanding principal amount) of the
Aggregate Convertible Debentures.
8.7 COUNTERPARTS.
This Agreement may be executed in any number of original or facsimile
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
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8.8 HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.9 GOVERNING LAW.
(a) All questions concerning the construction, interpretation and
validity of this Agreement shall be governed by and construed and enforced in
accordance with the domestic Laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether in the State of New
York or any other jurisdiction) that would cause the application of the Laws of
any jurisdiction other than the State of New York. In furtherance of the
foregoing, the internal Law of the State of New York will control the
interpretation and construction of this Agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive Law of
some other jurisdiction would ordinarily or necessarily apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.
8.10 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Issuers contained in this Agreement (a)
are being given by the Issuers as an inducement to the Purchasers to enter into
this Agreement and the other Financing Documents (and the Issuers acknowledge
that the Purchasers have expressly relied thereon) and (b) are solely for the
benefit of the Purchasers. Accordingly, no third party (including, without
limitation, any holder of Securities of the Issuers) or anyone acting on behalf
of such third party (other than the Purchasers) shall be a beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Purchasers or the Issuers with respect to such
representations or warranties or any matter subject to or resulting in
indemnification under this Agreement or otherwise.
8.11 SUBMISSION TO JURISDICTION.
Any Proceeding with respect to this Agreement or the other Financing
Documents may be brought in the courts of the State of New York and the United
States of America for the Southern District of New York and, by execution and
delivery of this Agreement, each Issuer hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Issuer hereby irrevocably waives, in connection with any
such action or Proceeding, any objection, including, without limitation, any
objection to the
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venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any such action or Proceeding in such
respective jurisdictions. Each Issuer hereby irrevocably consents to the service
of process of any of the aforementioned courts in any such action or Proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at its address as set forth herein. Nothing herein shall affect
the right of the Purchasers to serve process in any other manner permitted by
Law or to commence Proceedings or otherwise proceed against the Issuers in any
other jurisdiction.
8.12 EXTENSION; WAIVER.
The parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement and (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party, and any such
waiver shall not operate or be construed as a waiver of any subsequent breach by
the other party.
8.13 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement and the other Financing Documents be enforced to the fullest extent
permissible under the Law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, in the event that any provision of
this Agreement and the other Financing Documents would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement and the other Financing Documents or
affecting the validity or enforceability of such provision in any jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not be invalid, prohibited or unenforceable in such jurisdiction, it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement and the other Financing Documents or
affecting the validity or enforceability of such provision in any other
jurisdiction.
8.14 INDEPENDENCE OF AGREEMENTS.
All agreements and covenants hereunder shall be given independent
effect so that if a certain action or condition constitutes a default under a
certain agreement or covenant, the fact that such action or condition is
permitted by another agreement or covenant shall not affect the occurrence of
such default, unless expressly permitted under an exception to such covenant. In
addition, all representations and warranties hereunder shall be given
independent effect so that if a particular representation or warranty proves to
be incorrect or is breached, the fact that another representation or warranty
concerning the same or similar subject matter is correct or is not breached will
not affect the incorrectness of or a breach of the representation and warranty
first referred to in this sentence.
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8.15 ACTIONS OF REPRESENTATIVES.
A decision, act, consent or instruction of the Company in
respect of any action hereunder shall constitute a decision of any Issuer and
shall be final, binding and conclusive upon each such Issuer and the Purchasers
may rely upon any decision, act, consent or instruction of the Company hereunder
as being the decision, act, consent or instruction of each and every such
Issuer. Notice delivered to the Company shall for all purposes constitute notice
to all Issuers. The foregoing shall be binding upon all Issuers and all
transferees and assignees thereof.
8.16 EXPENSES.
The Issuers agree to pay, and hold the Purchasers and/or their
representatives harmless against, as incurred, all liability for the payment of
(i) the actual, out-of-pocket costs and expenses incurred by the Purchasers (A)
at or prior to Closing in connection with the transactions contemplated hereby,
including, without limitation, all fees and expenses of counsel, accountants and
other advisors, in connection with the preparation of the Financing Documents,
the purchase of the New Debentures and the Warrants and the consummation of all
of the transactions contemplated by the Financing Documents (including, but not
limited to, the conversion of the New Debentures into New Debenture Shares),
which shall be payable at the Closing and may be netted from the wire transfer
as contemplated by Section 3.1(c)(ii), (ii) the reasonable costs and expenses
(including fees and expenses of counsel, accountants and other advisors)
incurred by the Purchasers in connection with any amendment or waiver of, or
enforcement of, any Financing Documents, (iii) any costs reasonably incurred by
the Purchasers in rendering assistance to the Company or any of its
Subsidiaries, to the extent the Company or such Subsidiary requested such
assistance (it being understood that the Purchasers are not obligated to render,
and may charge additional fees for, such assistance), (iv) the reasonable fees
and expenses incurred by the Purchasers in any filing with any governmental
authority with respect to its investment in the Issuers or in any other filing
with any governmental authority with respect to the Company or any of its
Subsidiaries that mentions the Purchasers or their affiliates, and (v) any stamp
or similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of any of the Financing Documents or any
modification, amendment or alteration of any of the Financing Documents, and all
issue taxes in respect of the issuance of any New Debenture or New Debentures
Shares.
* * * * *
34
35
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
ISSUERS:
EXCHANGE APPLICATIONS, INC.
By: _________________________________
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
EXSTATIC SOFTWARE, INC.
By: _________________________________
Name: F. Xxxxxx Xxxxx
Title: Chief Financial Officer
36
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
PURCHASERS:
INSIGHT VENTURE PARTNERS IV, L.P.
INSIGHT VENTURE PARTNERS (CAYMAN) IV, L.P.
INSIGHT VENTURE PARTNERS IV
(FUND B), L.P.
INSIGHT VENTURE PARTNERS IV
(CO-INVESTORS), L.P.
By: Insight Venture Associates IV, L.L.C., the general
partner of each of the foregoing limited partnerships
By: _________________________________
Name:
Title:
37
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
SKP INVESTMENTS LLC
By: _________________________________
Name:
Title:
38
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
THK PRIVATE EQUITIES
By: _________________________________
Name: Xxxxxxxx X. Xxxxxxxxxxxx
Title: Principal
39
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
XXXXXX FAMILY FOUNDATION
By: _________________________________
Name: Xxxx Xxxxxx
Title: Trustee
40
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
BOSTON PIPES, LLC
By: _________________________________
Name:
Title:
41
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
___________________________________
XXXXX XXXXXXXX
42
EXHIBIT A
Form of New Debenture
43
EXHIBIT B
Form of Warrant
44
EXHIBIT C
Form of Fifth Amended and Restated
Registration Rights Agreement
45
EXHIBIT D
Form of Security Agreement
46
EXHIBIT E
Form of Collateral Agency and Intercreditor Agreement
47
EXHIBIT F
Form of Subordination Agreement
48
EXHIBIT G
Form of Xxxxxxx Xxxx Opinion
49
EXHIBIT H
Capitalization Table
50
SCHEDULE I
PURCHASERS WIRE AMOUNT No. of Warrant
---------- ----------- --------------
Shares
------
Insight Venture Partners IV, L.P. 76.666130% $ 766,661.30
Insight Venture Partners
(Cayman) IV, L.P. 10.537455% $ 105,374.55
Insight Venture Partners IV
(Fund B), L.P. 0.660033% $ 121,363.82
Insight Venture Partners IV
(Co-Investors), L.P. 12.136382% $ 6,600.33
000 Xxxxx Xxxxxx, 0xx Xxxxx Total 100.000000% $1,000,000.00 1,570,845
Xxx Xxxx, X.X. 00000
Xxxxxxxxx: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
X'Xxxxxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Nissan, Esq.
SKP Investments LLC $ 500,000.00 785,422
00 Xxxx Xxxx
Xxxxxxx XX 00000
THK Private Equities $8,000,000.00 12,566,761
x/x Xxxxxxxx X. Xxxxxxxxxxxx
0000 Xx. Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Boston Pipes, LLC $5,000,000.00 7,854,226
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Xxxxx Xxxxxxxx $ 500,000.00 785,422
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
(000) 000-0000
Xxxxxx Family Foundation $ 500,000.00 785,422
000 Xxx Xxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
(000) 000-0000
