As filed with the Securities and Exchange Commission on May 12, 2000
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------------
EXCHANGE APPLICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3338916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
89 SOUTH STREET, BOSTON, MASSACHUSETTS 02111 (617) 737-2244
(Address and telephone number of registrant's principal executive offices)
ANDREW J. FRAWLEY, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXCHANGE APPLICATIONS, INC.
89 SOUTH STREET
BOSTON, MASSACHUSETTS 02111
(617) 737-2244
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service and registrant's principal executive offices)
Copy to:
NEIL W. TOWNSEND, ESQ.
BINGHAM DANA LLP
150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-8000
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: AT SUCH TIME
OR TIMES AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE AS THE SELLING
STOCKHOLDERS MAY DETERMINE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value.. 744,277 $13.16 $9,794,685.32 $2,585.80
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</TABLE>
(1) Calculated in accordance with Rule 457(c) based on the average of the high
and low prices reported on the Nasdaq National Market on May 8, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
<PAGE>
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SaID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE>
Subject to completion, dated May 12, 2000
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFEr OR SALE IS NOT PERMITTED.
744,277 SHARES
EXCHANGE APPLICATIONS, INC.
COMMON STOCK
---------------
The selling stockholders identified in this prospectus may sell up to
744,277 shares of common stock of Exchange Applications. We will not receive
any of the proceeds from the sale of shares by the selling stockholders. Our
common stock is traded on the Nasdaq National Market under the symbol "EXAP".
On May 8, the last reported sale price of our common stock was $12.69.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _______, 2000
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public from the SEC's
Website at http://www.sec.gov.
We have filed with the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, a Registration Statement on Form S-3 (Reg. No.
333-_____) (the "Registration Statement") under the Securities Act of 1933, as
amended, with respect to the common stock offered hereby. This prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits to the Registration Statement. Statements made in this prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete but are complete in all material respects. With
respect to each contract, agreement or other document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved. The Registration Statement and the
exhibits thereto may be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
In addition, we are required to file electronic versions to these
documents with the SEC through their Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. The SEC Website, http://www.sec.gov, contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those other documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
[ ] Our annual report on Form 10-K for the year ended December 31, 1999.
[ ] Our quarterly reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999.
[ ] Our report on Form 8-K filed with the SEC on April 17, 2000.
[ ] Our report on Form 8-KA filed with the SEC on May 12, 2000.
[ ] The description of the common stock contained in our Registration
Statement on Form 8-A filed with the SEC under the Securities Exchange Act
of 1934.
You may request a copy of any and all of these filings and documents at no
cost, by writing or telephoning us at the following address:
Exchange Applications, Inc.
Attention: Investor Relations
89 South Street
Boston, Massachusetts 02111
(617) 737-2244
This prospectus is part of a Registration Statement on Form S-3 we filed
with the SEC to register shares of our common stock. You should rely only on
the information incorporated by reference or provided in this prospectus. No
one else is authorized to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.
<PAGE>
Exchange Applications, Xchange, VALEX, eXstatic, Continuous Customer
Management and the Exchange Applications logo are trademarks of Exchange
Applications. All other trademarks or tradenames referred to in this prospectus
are the property of their respective owners.
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Exchange
Applications and our industry that involves risks and uncertainties. Our
results, performance and achievements may be materially different from those
expressed or implied by the forward-looking statements. We undertake no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
EXCHANGE APPLICATIONS, INC.
Exchange Applications, Inc., doing-business-as Xchange, Inc. (the
"Company"), helps optimize interactive relationships between companies and
their customers. Our eCRM (enterprise Customer Relationship Management)
software helps make customer communications profitable, relevant, timely and
coordinated across on-line and off-line customer channels. By focusing on the
economics of customer relationships, we help to increase return on investment
on eMarketing and eCommerce initiatives.
As part of a re-branding effort in the first half of 2000, our products and
services have been renamed and grouped into suites that comprise our global
eCRM solution. We market our Xchange 4.0 eCRM solution suite to
brick-and-mortar and dot-com companies that are converging toward
click-and-mortar enterprises built around their customers. The Xchange 4.0
suite helps companies cultivate and nurture interactive, personalized
relationships that last. The following product and service groups comprise the
Xchange 4.0 solution:
o Xchange Dialogue( is a family of products that deliver personalized
online and offline customer communications.
o Xchange Optimizer( is a product that performs customer-analytics.
o Xchange Real Time( is a product that synchronizes cross-channel
communications and determines the best message, offer and channel
delivery for real-time interactions between a company and its
customers.
o Xchange Solution Services( is a family of service offerings that help
companies ensure the success of their eCRM initiatives.
Today's increasingly competitive business environment is driving many
companies to seek ways to increase profitability through revenue growth. To
efficiently grow revenue, many businesses have begun to adopt software
applications intended to help them acquire new customers and retain and expand
existing customer relationships. With our suite of eCRM solutions, businesses
seek to address six important areas:
1 ELECTRONIC communications through the Internet that present new
opportunities to reach and interact with customers and prospects.
2 The requirement for an ENTERPRISE view of the customer
3 The requirement of EBUSINESSES to re-think their customer relationship
management strategies.
4 The trend toward consumer EMPOWERMENT and the fact that customers and
prospects, rather than the companies they buy from, are making the
rules.
5 The fact that the ECONOMICS of customer relationships (i.e., investing
in relationships based on the anticipated level of return) remains
important.
6 EVALUATION which will enable companies to measure the impact of their
customer-communication initiatives.
Our objective is to be the leading provider of eCRM software and solutions
globally. Our strategy for achieving this objective includes:
Develop or acquire additional eCRM solutions: We intend to develop or
acquire additional products to broaden our offering, particularly in the area
of management of "e" interactions.
Develop additional hosted services for eCRM: Our campaign management and
eMessaging products are currently available in an ASP environment. We intend to
capitalize on the growing market for ASP services by making our other solutions
available in hosted models.
<PAGE>
Further integrate our existing eCRM solutions: Our solutions enable
businesses to optimize customer relationships. We are undertaking several
research and development efforts to design stronger technical links between our
various software applications. As part of this effort, we are re-designing each
of our products' user interfaces to provide a more seamless experience for
users of the multiple products and hosted services provided by us.
Expand Vertical Industry Focus: To date, most of the our revenues have come
from the financial services and telecommunications industries. In 1999,
however, several other verticals for eCRM solutions emerged, including
business-to-business and business-to-consumer internet companies, travel and
tourism, retail, catalog, utilities, non-profit and insurance. We have already
contracted with a number of clients in these emerging verticals, and intend to
further expand our focus as demand for our eCRM solutions grows.
Broaden Distribution Channels and Build Alliances. We will continue to
develop indirect distribution channels. We maintain global re-seller agreements
with IBM, Compaq, Hewlett-Packard, Acxiom and others to leverage these
partners' extensive marketing and distribution channels. We also have
co-marketing relationships with companies such as PricewaterhouseCoopers, SAS
Institute, MicroStrategy, and Sun Microsystems, enabling us to utilize their
extensive customer relationships and, in certain cases, their products and
services. We plan to leverage the professional services resources of these
re-seller and co-marketing organizations to provide certain non-proprietary
professional services required in connection with the implementation of eCRM
solutions. This strategy will allow us to provide and expand our professional
services offerings to most effectively complement our software applications,
and will help increase the efficient implementation of eCRM solutions in
anticipation of increased demands on our services resources.
Increase Direct Sales Globally. We currently maintain, and are expanding,
direct sales forces in North America, Europe and Asia/Pacific. We plan to
expand further in Europe and the Pacific Rim, with particular attention on
territories or industries experiencing trends commensurate with the adoption of
our solution, such as industry deregulation. We also plan to further expand the
direct sales force at our eXstatic subsidiary in Seattle.
We have deployed our solution across many industries, with installations at
over 135 different locations in North and South America, Europe and the Pacific
Rim. Our customers include Ameritrade, Bell Atlantic, Citigroup, Federal
Express, Fidelity Investments, Fleet Bank, Hongkong Telephone, NatWest Bank
(U.K.), Nextel, Staples and U S West. Our products and services are distributed
through our direct sales force, through re-seller relationships with IBM,
Acxiom and others, and through co-marketing arrangements with companies such as
Andersen Consulting, Compaq, Ernst & Young, KPMG, MicroStrategy,
PricewaterhouseCoopers, Renaissance Worldwide, SAS Institute and Sun
Microsystems.
Our principal executive offices are located at 89 South Street, Boston,
Massachusetts 02111, and our telephone number is (617) 737-2244.
<PAGE>
RISK FACTORS
An investment in our common stock is very risky. You should carefully
consider the risks described below and the other information in this prospectus
before purchasing the common stock.
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
We began commercial shipment of the initial Xchange Dialogue for Marketing
product in July 1996. We were not a separate company until November 1996.
Accordingly, we have only a limited operating history for you to evaluate our
business. You must consider the risks, expenses and difficulties that an
early-stage company like ours faces. These risks include our ability to:
o successfully respond to competitive developments;
o continue to upgrade our products and service offerings; and
o continue to attract, retain and motivate qualified personnel.
RECENT TRANSACTIONS WILL RESULT IN SHORT TERM LOSSES.
As a result of the expenses associated with recent transactions with
MicroStrategy Inc., we will report quarterly and annual operating losses for
the foreseeable future.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND YOU SHOULD NOT
RELY ON THEM TO PREDICT OUR FUTURE PERFORMANCE.
Our quarterly revenues, expenses and operating results may vary
significantly from quarter to quarter due to a number of factors. Therefore,
you should not rely on period-to-period comparisons of results of operations as
an indication of future performance. Moreover, our operating results may fall
below market analysts' expectations in some future quarters. This could cause
the trading price of our common stock to decline.
OUR BUSINESS MAY SUFFER IF NEW CUSTOMERS DO NOT ACCEPT OUR SOLUTIONS.
We currently derive all of our revenues from Xchange Dialogue for Marketing
licenses, Xchange Dialogue for eMessaging licenses and services related to our
eCRM solution. We anticipate that these sources will continue to account for a
majority of our revenues for the foreseeable future. As a result, our business
will suffer if the market does not accept our solutions and our future
enhancements of these solutions. If demand for our solutions drops as a result
of competition, technological change or other factors, our business could be
substantially harmed.
The market for eCRM applications is still emerging and it may not continue
to grow. Even if the market does grow, businesses may not adopt our solutions.
We have spent, and intend to continue to spend, considerable resources
educating potential customers about customer optimization software and services
in general and about the features and functions of our products and services in
particular. However, our solutions may not achieve any additional degree of
market acceptance. If the market for our solutions fails to grow or grows more
slowly than we currently anticipate, our business would be materially harmed.
WE DEPEND ON A FEW INDUSTRIES FOR MOST OF OUR SALES, AND WE MAY NOT BE
SUCCESSFUL IN EXPANDING BEYOND THOSE LIMITED MARKETS.
A substantial portion of our revenues has been derived from sales to
telecommunications companies and financial institutions, including retail
banks, credit card issuers and mutual fund companies. We may not continue to be
<PAGE>
successful in these markets. In addition, we may not be successful in achieving
significant market acceptance in other markets that we target.
THE LOSS OF ONE OF OUR LARGEST CUSTOMERS COULD CAUSE OUR REVENUES TO DROP
QUICKLY AND UNEXPECTEDLY.
In fiscal 1998 and 1999, our top five customers accounted for 31.1% and
37.7% of total revenues, respectively. We cannot be certain that our current
customers will continue to do business with us, that business from existing
customers will continue at the levels of previous periods, or that we will be
able to do a significant amount of business with new customers. If we lose one
of our customers, our revenues could drop more quickly than we could reduce
expenses. This could substantially harm our financial results.
WE NEED TO MANAGE OUR GROWTH EFFECTIVELY OR WE MAY NOT SUCCEED.
We have grown rapidly, with total revenues increasing from $6.0 million in
1996, to $13.3 million in 1997, to $26.2 million in 1998 and we recorded $43.3
million in 1999. The number of our employees has increased from 93 at December
31, 1997 to 164 at December 31, 1998 and to 227 at December 31, 1999. Our
operating and financial systems and the geographic distribution of our
operations and customers have also experienced substantial growth over this
period. Our future operating results will depend on the ability of our officers
and other key employees to continue to implement and improve our operational,
customer support and financial control systems, and to expand, train and manage
our employee base. Our failure to expand and integrate these areas in an
efficient manner could cause our expenses to grow, our revenues to decline or
to grow more slowly than expected, and could have a material adverse effect on
our business.
IF WE LOSE OUR KEY PERSONNEL, OR FAIL TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, OUR BUSINESS AND GROWTH MAY SUFFER.
Our future success depends on the continued services of a relatively small
number of key technical and senior management personnel, including Andrew J.
Frawley, our Chairman, President and Chief Executive Officer, David G.
McFarlane, our Chief Operating Officer, and Michael D. McGonagle, our Chief
Technology Officer, none of whom presently has an employment contract with us.
Our future success also depends on our continuing ability to attract and retain
other highly qualified technical, sales and managerial personnel. Competition
for these people is intense, and we have at times in the past experienced
difficulty in recruiting qualified personnel. The loss of any member of our key
technical, sales and senior management personnel or the inability to attract
and retain additional qualified personnel could have a material adverse effect
on our business.
OUR BUSINESS WILL NOT GROW IF WE DO NOT KEEP PACE WITH RAPIDLY CHANGING
TECHNOLOGIES.
Because the market for our software products is rapidly changing, our future
success will depend upon our ability to continue to enhance our current product
line. We also must develop and introduce new products that keep pace with
technological developments, satisfy increasingly sophisticated customer
requirements and achieve market acceptance. If we are not successful in
developing and marketing, on a timely and cost-effective basis, fully
functional product enhancements or new products that respond to technological
advances by others, our business will not grow and our financial results will
suffer. In particular, our business could be harmed by:
o any significant errors or "bugs" in our software shipped to customers;
o any delay by customers in making purchasing decisions in anticipation of
the general availability of new or enhanced products;
o significant delays in the general availability of our new products or
releases;
o significant problems in the installation or implementation of our new
products or releases; or
o customer dissatisfaction with our new products or releases.
OUR STOCK PRICE OR OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE
TO EFFICIENTLY INTEGRATE ACQUISITIONS.
We may pursue acquisitions that could provide new technologies, products or
service offerings. Future acquisitions by us may involve potentially dilutive
<PAGE>
issuances of equity securities. We also may incur substantial additional
liabilities and expenses, such as debt or amortization expenses related to
goodwill and other intangible assets. If any of these occur, the market price
of our common stock and our financial results could suffer.
Acquisitions also involve numerous risks, including:
o difficulties in the assimilation of the operations, technologies, products
and personnel of the acquired company;
o the diversion of management's attention from other business concerns;
o risks of entering markets in which we have no or limited prior experience;
and
o the potential loss of key employees of the acquired company.
If we are not successful integrating acquisitions, it could increase our
expenses and harm our business.
COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR BUSINESS.
Our competitors may be able to develop products and services that are more
attractive to businesses than our products and services. Many of our
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, greater name recognition and larger
customer bases. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements. They also may be
able to devote greater resources to the promotion and sale of their products
and services than us. If these companies introduce products and services that
effectively competed with our products and services, they could be in a
position to charge lower prices or to bundle their products and services with
their other products and services. This could give them a competitive advantage
over us.
In order to be successful in the future, we must continue to respond
promptly and effectively to the challenges of technological change and
competitors' innovations. If we cannot compete successfully with existing or
new competitors, we may have to reduce prices on our products, which could lead
to reduced profits. We could also lose market share, which would materially and
adversely affect our business.
IF WE DO NOT SUCCESSFULLY MAINTAIN OUR RELATIONSHIPS WITH INDIRECT DISTRIBUTION
CHANNELS, OUR SALES COULD DECLINE OR COULD GROW MORE SLOWLY THAN EXPECTED.
We expect to increase the amount of our products that we distribute through
various indirect channels. We are unable to predict the extent to which our
distribution partners will be successful in distributing our products. We rely
on the marketing and sales efforts of these organizations, many of whom also
market and sell competitive products. The loss of one or more of our
relationships with these organizations could have a material adverse effect on
our business.
Our future performance will also depend, in part, on our ability to attract
organizations that will be able to market and support our products effectively,
especially in markets in which we have not previously distributed our products.
None of our agreements governing the re-seller or co-marketing relationships
with these organizations includes any commitments on the part of these
organizations to effect any minimum number of sales of our products, or
otherwise to provide us with business. If revenues arising from our
relationships with these organizations do not exceed historical levels, our
business will not grow as expected.
WE HAVE A LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND
OTHERS COULD INFRINGE ON OR MISAPPROPRIATE OUR PROPRIETARY RIGHTS.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we protect through a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
<PAGE>
that we regard as proprietary. Policing unauthorized use of our products is
difficult and, while we are unable to determine the extent to which piracy of
our software products exists, we expect software piracy to be a problem. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as the laws of the United States. Furthermore, our
competitors may independently develop technology similar to ours.
The number of intellectual property claims may increase as the number of
competing products grows and the functionality of products in different
industry segments overlaps. Although we are not aware that any of our products
infringe upon the proprietary rights of third parties, there can be no
assurance that third parties will not claim infringement by us with respect to
current or future products. Any of these claims, with or without merit, could
be time- consuming to address, result in costly litigation, cause product
shipment delays or require us to enter into royalty or licensing agreements.
These royalty or licensing agreements, if required, might not be available on
terms acceptable to us or at all, which could have a material adverse effect
upon our business.
IF WE DO NOT SUCCESSFULLY GROW AND MANAGE OUR INTERNATIONAL OPERATIONS, OUR
BUSINESS WILL SUFFER.
We have operations in a number of foreign markets. We currently have
customers in more than 28 countries. We believe that we must expand our sales
in international markets in order for our business to grow as planned. In order
to successfully expand international sales, we must establish additional
foreign operations and hire additional personnel. If we are unable to do so in
a timely and effective manner, our growth in international sales will be
limited, and our business could be materially adversely affected. We have begun
to translate our products into different languages and character sets, which
may be more difficult or expensive to complete than expected. In addition,
other markets may have longer selling cycles and different product requirements
than the United States and we may not be able to successfully adapt our
products and methods.
Our international operations are also subject to the risks inherent in any
international business activities, including, in particular:
o management of an organization spread over various countries;
o longer accounts-receivable payment cycles in certain countries;
o compliance with a variety of foreign laws and regulations;
o unexpected changes in regulatory requirements;
o overlap of different tax structures; and
o general economic conditions.
CURRENCY FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS IN OUR FOREIGN MARKETS
MAY IMPACT OUR CUSTOMERS' SPENDING AND THE VALUE OF MONEY OWED TO US.
We have made substantial sales to international customers in Canada,
Denmark, Germany, the Netherlands, Sweden, the United Kingdom and China. Our
revenues from international operations have been denominated in foreign
currencies which historically have been relatively stable in relation to U.S.
dollars. As a result, we have not adopted a policy of hedging foreign currency
risks. If economic conditions in our target markets decline, currencies could
fluctuate relative to the U.S. dollar, and our customers could reduce their
information technology spending.
OUR FOUNDERS, OFFICERS AND PRINCIPAL STOCKHOLDERS HAVE SUBSTANTIAL CONTROL OVER
OUR VOTING STOCK AND HAVE THE ABILITY TO MAKE DECISIONS THAT COULD ADVERSELY
AFFECT OUR STOCK PRICE.
As of January 20, 2000, our current officers, directors and principal
stockholders held approximately 6.3% of our outstanding common stock.
Consequently, this group will be able to control the outcome of all matters
submitted for stockholder action, including the election of members to our
Board of Directors and the approval of significant change in control
transactions, which may have the effect of delaying or preventing a change in
control. Representatives of the existing stockholders constitute all five
directors and will therefore have significant influence in directing the
actions of the Board of Directors. We have not identified candidates for
additional positions on the Board of Directors.
<PAGE>
WE MAY BE SUBJECT TO FUTURE PRODUCT LIABILITY CLAIMS.
While our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims, it is
possible that these provisions may not be effective under the laws of certain
jurisdictions. Although we have not experienced any product liability claims to
date, we may be subject to claims in the future. A successful product liability
claim brought against us could have a material adverse effect on our business.
Moreover, defending these claims, regardless of merit, could entail substantial
expense and require the time and attention of key management personnel.
YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS.
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. As of January 1, 2000,
these date code fields need to accept four-digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and
software used by many companies may need to be upgraded to comply with these
"Year 2000" requirements. Significant uncertainty exists in the software
industry concerning the potential effects associated with the failure to comply
with these requirements. Any failure of third-party equipment or software
comprising any part of our systems to operate properly due to Year 2000
problems could require us to incur unanticipated expenses to address associated
problems, which could have a material adverse effect on our business.
Year 2000 issues may affect the purchasing patterns of customers and
potential customers in a variety of ways. Many companies are expending
significant resources to replace or remedy their current hardware and software
systems for Year 2000 compliance. These expenditures may result in reduced
funds available to purchase software products such as those we offer.
We believe, based on an internal assessment, that the current versions of
our software products are Year 2000 compliant. However, our products are
generally integrated with enterprise systems and other products of our
customers developed by other vendors. Year 2000 problems in these systems and
products might significantly limit the ability of our customers to realize the
intended benefits offered by our products and services. We have no plan to
determine whether the internal systems and products of our customers are Year
2000 compliant. We may in the future be subject to claims based on Year 2000
problems in others' products or issues arising from the integration of multiple
products within an overall system. Although we have not been involved in any
litigation or proceeding to date involving our products or services related to
Year 2000 issues, we may be required in the future to defend our products or
services or to negotiate resolutions of claims based on Year 2000 issues. The
costs of defending and resolving Year 2000-related disputes, and any
liabilities for Year 2000-related damages, including consequential damages,
could have a material adverse effect on our business.
OUR COMMON STOCK PRICE IS LIKELY TO BE VOLATILE AND COULD DROP UNEXPECTEDLY.
The market for securities of most high technology companies, including our
common stock, has been highly volatile. It is likely that the market price of
the common stock will continue to fluctuate widely in the future. Factors
affecting the trading price of our common stock include:
o responses to quarter-to-quarter variations in our results of operations;
o the announcement of new products or product enhancements by us or our
competitors;
o technological innovation by us or our competitors;
o general market conditions or market conditions specific to particular
industries; and
o changes in earnings estimates by analysts.
<PAGE>
WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS THAT COULD AFFECT THE MARKET PRICE OF
OUR COMMON STOCK OR OUR ABILITY TO SELL OUR BUSINESS.
Certain provisions of our amended and restated certificate of incorporation
and our by-laws could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. In addition, certain
provisions of Delaware law and our stock incentive plans may also have the
effect of discouraging, delaying or preventing a sale.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of common stock
offered by the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of May 12, 2000 by each of the selling
stockholders. The table shows the number of shares being sold by each selling
stockholder and the number and percentage of our outstanding shares each
selling stockholder will own after the offering.
William Bryant serves on our Board of Directors, Robert van der Hooning is
Founder, Knowledge Stream Partners, Inc., Gino Borland is Founder, eXstatic
Software and Susan O'Neil is Vice President of Marketing, eXstatic Software.
None of the other selling stockholders has, or within the past three years has
had, any position, office or other material relationship with Exchange
Applications or any of our predecessors or affiliates.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES BENEFICIALLY SHARES SHARES BENEFICIALLY
OWNED BEFORE BEING OWNED AFTER
OFFERING (2) OFFERED OFFERING
NAME NUMBER (2) PERCENTAGE (1)
Robert G. van der Hooning............................... 685,689 203,328 482,361 *
Robert G. van der Hooning, as Withholding Agent....... 30,682 30,682 0 *
Stephen Gallant......................................... 11,774 3,906 7,868 *
Gareth Gunn............................................. 917 305 612 *
Jodie Imbroglio......................................... 2,592 864 1,728 *
Michael Lurye........................................... 6,347 2,110 4,237 *
Dimitry Manilov......................................... 740 245 495 *
Sophia Margolin......................................... 1399 468 931 *
Anna Margulis........................................... 333 111 222 *
Stephen Marini.......................................... 4,798 1,598 3,200 *
NatashaMarkuzon......................................... 2,603 868 1,735 *
Sullivan McConnell...................................... 8,473 2,817 5,656 *
Peter Nyberg............................................ 4,099 1,366 2,733 *
Peter Ossadnik.......................................... 11,737 4,578 7,159 *
Gregory Piatetsky-Shapiro............................... 11,519 3,826 7,693 *
Dorian Pyle............................................. 2,323 775 1,548 *
Sam Steingold........................................... 1,883 627 1,256 *
Robert Vecchione........................................ 6,559 2,172 4,387 *
Richard Wherry.......................................... 1,932 643 1,289 *
Hannah C. van der Hooning Investment Trust.............. 8,459 3,299 5,160 *
Alexandra R. van der Hooning Investment Trust........... 8,459 3,299 5,160 *
Adriana M. van der Hooning Investment Trust............ 8,459 3,299 5,160 *
Gino Borland............................................ 879,449 55,023 824,426 *
Scott Lipsky............................................ 12,753 671 12,082 *
MichaelCockrill......................................... 9,565 503 9,062 *
Chase & Associates, Inc................................. 9,565 503 9,062 *
Susan and Jerry O'Neil.................................. 5,177 335 4,842 *
William Bryant.......................................... 3,187 167 3,020 *
<PAGE>
Marc Lhormer............................................ 3,187 167 3,020 *
Dan Weld................................................ 3,187 167 3,020 *
Linden Rhoads........................................... 3,187 167 3,020 *
Robert Bruce Binger..................................... 1,487 167 1,320 *
Keith Grinstein......................................... 3,187 167 3,020 *
AlexKnight.............................................. 1,342 1,342 0 *
Greg Gottesman.......................................... 1,342 1,342 0 *
NMS Services (Cayman) Inc............................... 412,370 412,370 0 *
</TABLE>
- ----------
* Indicates less than 5% of the outstanding shares of common stock.
(1) Beneficial ownership, for the purposes of this column is calculated in
accordance with the rules of the Securities and Exchange Commission.
(2) Does not include options that are currently exercisable.
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholders in one or more transactions at fixed prices, at market prices at
the time of sale, at varying prices determined at the time of sale or at
negotiated prices. The selling stockholders may offer their shares of common
stock in one or more of the following transactions:
[] on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Stock Market;
[] in the over-the-counter market;
[] in private transactions;
[] through options;
[] by pledge to secure debts and other obligations; or
[] a combination of any of the above transactions.
If required, we will distribute a supplement to this prospectus to
describe material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling stockholders. Alternatively, the selling
stockholders may from time to time offer shares of common stock to or through
underwriters, broker/dealers or agents. The selling stockholders and any
underwriters, broker/dealers or agents that participate in the distribution of
the shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933. Any profits on the resale of shares of
common stock and any compensation received by any underwriter, broker/dealer or
agent may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
To comply with the securities laws of certain jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the common stock may not be
offered or sold unless they have been registered or qualified for sale or an
exemption is available and complied with.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may not simultaneously engage in market-making
activities with respect to the common stock for nine business days prior to the
<PAGE>
start of the distribution. In addition, each selling stockholder and any other
person participating in a distribution will be subject to the Securities
Exchange Act of 1934, which may limit the timing of purchases and sales of
common stock by the selling stockholders or any such other person. These
factors may affect the marketability of the common stock and the ability of
brokers or dealers to engage in market-making activities.
All expenses of this registration will be paid by Exchange Applications.
These expenses include the SEC's filing fees and fees under state securities or
"blue sky" laws. The selling stockholders will pay all underwriting discounts
and selling commissions, if any.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Bingham Dana LLP, Boston, Massachusetts.
EXPERTS
Arthur Andersen LLP, independent auditors, have audited our consolidated
financial statements (and schedule) included in our Annual Report on Form 10-K
for the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements (and schedule) are incorporated by
reference in reliance upon Arthur Andersen LLP's report, given on their
authority as experts in accounting and auditing.
<PAGE>
744,277 SHARES
EXCHANGE APPLICATIONS, INC.
Common Stock
---------------
PROSPECTUS
---------------
__________, 2000
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
THIS PROSPECTUS IS NOT AN OFFER OF THESE SECURITIES IN ANY STATE WHERE AN OFFER
IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF MAY 12,
2000. YOU SHOULD NOT ASSUME THAT THIS PROSPECTUS IS ACCURATE AS OF ANY OTHER
DATE.
TABLE OF CONTENTS
- -------------------------------------
Page
Where You Can Find More
Information................. 2
Forward Looking Statements.. 3
Exchange Applications, Inc.. 3
Risk Factors................ 5
Use of Proceeds............. 10
Recent Developments......... 10
Selling stockholders........ 10
Plan of Distribution........ 11
Legal Matters............... 11
Experts..................... 11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered are estimated as follows:
TOTAL
SEC Registration Fee................................................ $ 2,585.80
NASD Fees........................................................... $ 7,442.77
Miscellaneous Costs................................................. $ 5,000.00
Total.......................................................... $15,028.57
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons
to the extent and under the circumstances set forth therein.
The Amended and Restated Certificate of Incorporation of the Company and the
Amended and Restated By-laws of the Company provide for indemnification of
officers and directors of the Company and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.
ITEM 16. EXHIBITS
The following is a list of exhibits filed as a part of this registration
statement:
5.1 Opinion of Bingham Dana LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bingham Dana LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
<PAGE>
ITEM 17. UNDERTAKINGS
(A) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(B) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(C) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(D) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(E) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a posteffective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such posteffective amendment shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a posteffective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Exchange Applications, Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement on Form S-3 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on this 12st day of May, 2000.
EXCHANGE APPLICATIONS, INC.
By: /s/ Andrew J. Frawley
------------------------------------
Andrew J. Frawley
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Andrew J.
Frawley and John G. O'Brien, and each of them singly, acting alone and without
the other, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution in each of them, for him and his name, place
and stead, and in any and all capacities, to do and perform any and all acts
and to sign any and all amendments (including without limitation post-effective
amendments) to this registration statement on Form S-3 and to file the same,
with all exhibits thereto and other documents in connection therewith necessary
or advisable to enable the Registrant to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, which amendments may make such
other changes in the Registration Statement as the aforesaid attorney-in-fact
executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/ Andrew J. Frawley Chairman of the Board, President, May 12, 2000
- --------------------------------------- Chief Executive Officer and Director
Andrew J. Frawley (Principal Executive Officer)
/s/ Dean F. Goodermote Director May 12, 2000
- ---------------------------------------
Dean F. Goodermote
/s/ Jeffrey Horing Director May 12, 2000
- ---------------------------------------
Jeffrey Horing
/s/ Ramanan Raghavendran Director May 12, 2000
- ---------------------------------------
Ramanan Raghavendran
/s/ William Bryant Director May 12, 2000
- ---------------------------------------
William Bryant
/s/ John G. O'Brien Vice President, Chief Financial Officer, May 12, 2000
- --------------------------------------- Treasurer and Secretary (Principal Financial
John G. O'Brien and Accounting Officer)
</TABLE>
EXHIBIT INDEX
EXHIBITS
5.1 Opinion of Bingham Dana LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bingham Dana LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
<PAGE>
EXHIBIT 5.1
BINGHAM DANA LLP
150 Federal Street
Boston, MA 02110
May 12, 2000
Exchange Applications, Inc.
89 South Street
Boston, MA 02111
Re: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel for Exchange Applications, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of 744,277 shares of common
stock, $0.001 par value per share, of the Company (the "Shares"), to be offered
by certain stockholders of the Company (the "Selling Stockholders"), pursuant
to a Registration Statement on Form S-3, filed by the Company with the
Securities and Exchange Commission on May 12, 2000.
We have reviewed the corporate proceedings of the Company with respect to
the authorization of the issuance of the Shares. We have also examined and
relied upon originals or copies of such agreements, instruments, corporate
records, certificates and other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed. In our
examination, we have assumed the genuineness of all signatures, the conformity
to the originals of all documents reviewed by us as copies, the authenticity
and completeness of all original documents reviewed by us in original or copy
form, and the legal competence of each individual executing any document. We
have further assumed that the registration requirements of the Act and all
applicable requirements of state laws regulating the sale of securities will
have been duly satisfied.
Subject to the limitations set forth below, we have made such examination
of law as we have deemed necessary for the purposes of this opinion. This
opinion is limited solely to the Delaware General Corporation Law as applied by
courts located in Delaware.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized and validly issued and are fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Bingham Dana LLP
BINGHAM DANA LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 28, 2000
(except with respect to the matters discussed in Note 12(a), as to which the
date is February 29, 2000), included in Exchange Applications, Inc.'s Form 10-K
for the year ended December 31, 1999 and to all references to our Firm included
in this registration statement.
Arthur Andersen LLP
Boston, Massachusetts
May 12, 2000
