<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Exchange Applications, Inc.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
EXCHANGE APPLICATIONS, INC.
89 SOUTH STREET
BOSTON, MA 02111
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF EXCHANGE APPLICATIONS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Exchange
Applications, Inc. (the "Company") will be held at the offices of Bingham Dana
LLP, 16(th) Floor, 150 Federal Street, Boston, MA 02110, on Tuesday, February
29, 2000, at 10:00 a.m., local time, for the following purposes:
1. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of shares of common stock, $.001 par value per
share, which the Company is authorized to issued from 30,000,000 shares
to 150,000,000 shares; and
2. To transact such other business as may properly come before the Meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed January 31, 2000 as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting of Stockholders. Accordingly, only stockholders of record at the
close of business on January 31, 2000 will be entitled to notice of, and to vote
at, such meeting or any adjournments thereof.
By order of the Board of Directors
JOHN G. O'BRIEN
Secretary
February 10, 2000
NOTE: THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND PROMPT RETURN OF THE
ACCOMPANYING PROXY. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ACCOMPANYING PROXY AND
PROMPTLY RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT
PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY
YOU AND VOTE YOUR SHARES IN PERSON.
<PAGE> 3
EXCHANGE APPLICATIONS, INC.
89 SOUTH STREET
BOSTON, MA 02111
------------------------------
PROXY STATEMENT
------------------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of the common stock, $.001
par value per share ("Common Stock"), of Exchange Applications, Inc. (the
"Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company for use at the Special Meeting of Stockholders to be
held on February 29, 2000 (the "Meeting"), or at any adjournment or postponement
thereof, pursuant to the accompanying Notice of Special Meeting of Stockholders.
The purposes of the Meeting and the matters to be acted upon are set forth in
the accompanying Notice of Special Meeting of Stockholders. The Board of
Directors knows of no other business that will come before the Meeting.
This Proxy Statement and proxies for use at the Meeting will be first
mailed to stockholders on or about February 10, 2000, and such proxies will be
solicited chiefly by mail, but additional solicitations may be made by telephone
or telegram by the officers or regular employees of the Company. The Company may
enlist the assistance of brokerage houses in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing
proxy material, will be borne by the Company. In addition, the Company has
retained Corporate Investor Communications, Inc. to assist in the solicitation
of proxies for the Meeting and expects to pay approximately $1,700 in connection
with such proxy solicitation.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Meeting and a return envelope for the proxy
are enclosed. Stockholders may revoke the authority granted by their execution
of proxies at any time before their effective exercise by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date or by voting in person at the Meeting. Shares represented by executed
and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote the shares represented thereby to approve Proposal No. 1 as set
forth in the accompanying Notice of Special Meeting of Stockholders and in
accordance with their best judgment on any other matters that may properly come
before the Meeting.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on January 31, 2000,
are entitled to notice of, and to vote at the Meeting, or any adjournment or
postponement thereof. The Company had outstanding on January 31, 2000,
12,344,131 shares of Common Stock, each of which is entitled to one vote upon
the matters to be presented at the Meeting. The presence, in person or by proxy,
of a majority of the issued and outstanding shares of Common Stock will
constitute a quorum for the transaction of business at the Meeting. Abstentions
will be counted as present or represented for purposes of determining the
presence or absence of a quorum for the Meeting, while broker "non-votes" will
not. A broker "non-vote" occurs when a nominee holding shares for a beneficial
owner does not vote on one or more proposals because the nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner. Abstentions are
<PAGE> 4
included in the number of shares present or represented and voting on each
matter. Broker "non-votes" are not so included.
PROPOSAL NO. 1
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
GENERAL
The Company's Amended and Restated Certificate of Incorporation, as
currently in effect (the "Certificate"), provides that the Company's authorized
capital stock shall consist of 30,000,000 shares of Common Stock and 10,000,000
shares of preferred stock, $.001 par value per share. On January 27, 2000, the
Company's Board of Directors approved an amendment to the Certificate (the
"Amendment") in order to increase the number of shares of Common Stock
authorized for issuance under the Certificate by 120,000,000 shares to a total
of 150,000,000 shares. The Board of Directors also approved, contingent upon
stockholder approval of the Amendment, a two-for-one stock split (to be effected
in the form of a stock dividend), to be paid as soon as practicable after the
Meeting to stockholders of record as of a date to be determined by the Board of
Directors (the "Stock Split"). If the Amendment is adopted, it will become
effective upon the filing of the Amendment with the Delaware Secretary of State.
STOCK SPLIT
In connection with the Stock Split, each record holder of the Company's
Common Stock would receive one additional share for each share held. In
addition, the number of shares of Common Stock reserved for issuance or subject
to outstanding options under the Company's 1996 Stock Incentive Plan, 1998 Stock
Incentive Plan, 1998 Director Stock Option Plan, 1998 Employee Stock Purchase
Plan, and 1999 GBI Stock Acquisition Plan (collectively, the "Employee Stock
Plans") would increase by 100% (and the exercise price per share of outstanding
options would correspondingly decrease by 50%). Stockholders are not being asked
to vote on the Stock Split, but the Stock Split will not take place unless the
authorized number of shares of Common Stock is increased as described in this
proposal. If the authorized number of shares of Common Stock is not increased,
the Company will not have enough authorized but unissued shares of Common Stock
to effect the Stock Split.
CURRENT USE OF SHARES
As of the record date, the Company had approximately 12,344,131 shares of
Common Stock outstanding and approximately 5,069,863 shares of Common Stock
reserved for issuance under the Company's Employee Stock Plans, of which
approximately 4,027,175 shares are covered by outstanding options and
approximately 1,042,688 shares are available for grant or purchase. Therefore,
the Company's total share requirement prior to the Stock Split is 17,413,994
shares (the "Share Requirement"). In the event stockholder approval of the
proposed Amendment is obtained, following the Stock Split, the Share Requirement
would increase to 34,827,988 shares, and, accordingly, the Company would have a
total of 150,000,000 authorized and 115,172,012 unissued shares of Common Stock
remaining available pursuant to its Certificate.
PURPOSE OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the Company's best interest
to declare the Stock Split in order to lower the per share market price of the
Company's Common Stock, increase its trading activity and broaden its
marketability. The proposed Amendment would provide the Company with a
sufficient number of authorized but unissued shares of Common Stock to effect
the Stock Split and accomplish other proper
2
<PAGE> 5
corporate purposes that may be authorized in the future. Such future activities
may include, without limitation, raising equity capital, adopting additional
employee stock plans or reserving additional shares of Common Stock for issuance
under its existing Employee Stock Plans, and making acquisitions through the
issuance of Common Stock. Other than the Stock Split, the Board of Directors has
no immediate plans, understandings, agreements, or commitments to issue
additional shares of Common Stock for any purpose. The Board of Directors
believes that the proposed increase in the authorized Common Stock will make a
sufficient number of shares available, taking into account the Stock Split,
should the Company decide to use its shares for one or more of such previously
mentioned purposes or otherwise. The Company reserves the right to seek a
further increase in authorized shares from time to time in the future as
considered appropriate by the Board of Directors.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT
If the stockholders approve the proposed Amendment, the Board of Directors
may cause the issuance of additional shares of Common Stock without further vote
of the stockholders except as provided under Delaware corporate law or under the
rules of any national securities exchange on which shares of Common Stock of the
Company are then listed. Under the Company's Certificate, the Company's
stockholders do not have preemptive rights to subscribe to additional securities
that may be issued by the Company, which means that current stockholders do not
have a prior right to purchase any new issue of capital stock of the Company in
order to maintain their proportionate ownership of the Company's Common Stock.
In addition, if the Board of Directors elects to issue additional shares of
Common Stock, such issuance could have a dilutive effect on the earnings per
share, voting power and shareholdings of current stockholders. In addition to
the corporate purposes discussed above, the proposed Amendment could, under
certain circumstances, have an anti-takeover effect, although this is not the
intent of the Board of Directors. For example, it may be possible for the Board
of Directors to delay or impede a takeover or transfer of control of the Company
by causing such additional authorized shares of Common Stock to be issued to
holders who might side with the Board in opposing a takeover bid that the Board
of Directors determines is not in the best interests of the Company and its
stockholders. The Amendment therefore may have the effect of discouraging
unsolicited takeover attempts. By potentially discouraging initiation of any
such unsolicited takeover attempt, the proposed Amendment may limit the
opportunity for the Company's stockholders to dispose of their shares of Common
Stock at the higher price generally available in takeover attempts or that may
be available under a merger proposal. The proposed Amendment may have the effect
of permitting the Company's current management, including the current Board of
Directors, to retain its position, and place it in a better position to resist
changes that stockholders may wish to make if they are dissatisfied with the
conduct of the Company's business. However, the Board of Directors is not aware
of any attempt to take control of the Company and the Board of Directors has not
presented this proposal with the intent that it be utilized as a type of
anti-takeover device.
EFFECT OF THE STOCK SPLIT
In the event that the proposed Amendment is approved by the stockholders,
no change in total stockholders equity will result from the Stock Split. The
amount of capital represented by the outstanding shares of Common Stock will be
increased by $.001 for each share issued to effect the Stock Split and the
Company's Additional Paid-In Capital will be reduced by the same amount. After
the Stock Split, purchases and sales of Common Stock by an individual
stockholder may be subject to higher brokerage charges and applicable stock
transfer taxes than on a pre-split transaction of equivalent market value, due
to the greater number of shares of Common Stock involved after the Stock Split.
In addition, the Company will incur certain expenses in connection with the
Stock Split, such as the cost of preparing and delivering to stockholders new
certificates representing additional shares. The Company will receive no
additional consideration in connection with the Stock Split.
3
<PAGE> 6
CERTAIN FEDERAL TAX CONSEQUENCES OF THE STOCK SPLIT
The following is a brief summary of certain federal tax consequences of the
Stock Split. It is not a complete discussion of the possible federal income tax
consequences and does not address any state, local or foreign tax consequences.
Stockholders are urged to consult their tax advisers. The Company has been
advised that, based on current federal tax law, in the event that the Stock
Split is approved and consummated, the Stock Split should not result in any gain
or loss to the Company or the stockholders for federal income tax purposes. The
tax basis of every share of Common Stock held before the Stock Split will be
allocated between the two shares of Common Stock held as a result of the Stock
Split, and the holding period of the new shares of Common Stock will include the
holding period of the shares with respect to which they were issued.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
With respect to the amendment of the Company's Certificate, the affirmative
vote of a majority of shares outstanding as of January 31, 2000, and entitled to
vote on the matter, is necessary for approval. An instruction to abstain from
voting on the proposal will be treated as shares present and entitled to vote
and, for purposes of determining the outcome of the vote, will have the same
effect as a vote against the proposal. Broker "non-votes" will not be treated as
shares present and entitled to vote on a voting matter, but will have the same
effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common stock as of January 20, 2000 of (i) each director of the
Company, (ii) the Company's Chief Executive Officer and its other four most
highly compensated executive officers, (iii) all directors and executive
officers as a group and (iv) each person known to the Company to be the
beneficial owner of more than 5% of the issued and outstanding Common Stock. As
of January 20, 2000, 12,337,749 shares of Common Stock were outstanding.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP OUTSTANDING SHARES OF
NAME** OF COMMON STOCK(1) COMMON STOCK OWNED(1)
------ -------------------- ----------------------
<S> <C> <C>
Andrew J. Frawley(2)................................. 809,501 6.6%
Ramanan Raghavendran................................. 21,018 *
Jeffrey Horing....................................... 73,387 *
Dean F. Goodermote(3)................................ 10,000 *
William Bryant(4).................................... 15,265 *
N. Wayne Townsend(5)................................. 64,126 *
David G. McFarlane(6)................................ 160,766 1.3%
David L. Fitzgerald(7)............................... 49,751 *
F. Daniel Haley(8)................................... 32,501 *
All directors and executive officers as a group
(twelve persons)................................... 1,401,025 11.4%
</TABLE>
- ---------------
* Indicates less than 1% of the outstanding shares of Common Stock.
** Addresses are given only for beneficial owners of more than 5% of the
outstanding shares of Common Stock.
(1) Beneficial ownership is calculated in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or become exercisable within 60 days following January
20, 2000 are deemed outstanding. However, such shares are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person. Unless otherwise indicated in the footnotes to this table, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
(2) Includes 241,200 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000. Mr. Frawley's business
address is c/o Exchange Applications, Inc., 89 South Street, Boston, MA
02111.
(3) Includes 9,000 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000.
(4) Includes 13,755 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000.
(5) Includes 50,250 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000.
(6) Includes 115,765 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000.
5
<PAGE> 8
(7) Includes 49,750 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000.
(8) Includes 32,500 shares of Common Stock subject to options that are
exercisable within 60 days of January 20, 2000.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented
for consideration at the Special Meeting. However, if any other business
properly comes before the Meeting, it is the intention of the persons named in
the enclosed proxy to vote on such matters in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN G. O'BRIEN
Secretary
Exchange Applications, Inc.
89 South Street
Boston, MA 02111
February 10, 2000
6
<PAGE> 9
EXCHANGE APPLICATIONS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
SPECIAL MEETING OF STOCKHOLDERS ON FEBRUARY 29, 2000
The undersigned hereby appoints Andrew J. Frawley and John G. O'Brien
and each of them proxies, each with power of substitution, to vote at the
Special Meeting of Stockholders of EXCHANGE APPLICATIONS, INC. to be held on
February 29, 2000 (including any adjournments or postponements thereof), with
all the powers the undersigned would possess if personally present, as specified
on the ballot below on the matters listed below and, in accordance with their
discretion, on any other business that may come before the meeting, and revokes
all proxies previously given by the undersigned with respect to the shares
covered hereby.
PROPOSAL NO. 1: AMENDMENT OF CERTIFICATE OF INCORPORATION
To approve an amendment to the Company's Certificate of Incorporation
to increase the authorized number of shares of Common Stock from 30,000,000 to
150,000,000.
FOR
--
AGAINST
--
ABSTAIN
--
This proxy when properly executed will be voted in the manner directed
herein by the stockholder. If no contrary specification is made, this proxy will
be voted FOR the amendment of the Certificate of Incorporation and upon such
other business as may properly come before the meeting in the appointed proxies'
discretion.
Please date, sign as name appears below, and return this proxy in the
enclosed envelope, whether or not you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
The undersigned hereby
acknowledge(s) receipt of a copy of
the accompanying Notice of Special
Meeting of Stockholders and related
Proxy Statement
Date: , 2000
----------------
Please
Sign
Here:
-----------------------------
----------------------------------
(Executors, administrators,
trustees, custodians, etc., should
indicate capacity in which signing.
When stock is held in the name of
more than one person, each person
should sign the proxy.)
