Exhibit 10.21
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SCIQUEST, INC.,
HIGHERMARKETS ACQUISITION, INC.,
AND
HIGHERMARKETS, INC.
Dated as of June 25, 2002
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of June 25, 2002, by and among SCIQUEST, INC., a Delaware corporation
("SciQuest"), HIGHERMARKETS ACQUISITION, INC., a Delaware corporation and
wholly-owned subsidiary of SciQuest ("Merger Sub") and HIGHERMARKETS, INC., a
Delaware corporation ("Company"). Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article 10. Except as otherwise
specifically stated, references in this Agreement to schedules and exhibits are
the references to the documents attached as schedules and exhibits to this
Agreement, all of which form a part hereof.
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the DGCL (as defined below), SciQuest and Company intend to
enter into a business combination transaction pursuant to which Merger Sub shall
merge with and into Company (the "Merger").
B. The respective Boards of Directors of each of SciQuest, Merger Sub
and Company believe that the Merger is in the best interests of SciQuest, Merger
Sub and Company and their respective stockholders and, in furtherance thereof,
have approved the Merger, this Agreement and the other transactions contemplated
by this Agreement.
C. SciQuest, Merger Sub and Company intend that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code for United States federal income tax purposes.
D. Company, Merger Sub and SciQuest desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, as set forth herein.
E. A portion of the shares of SciQuest Common Stock otherwise issuable
or reserved for issuance by SciQuest in connection with the Merger shall be
placed in escrow by SciQuest, the release of which amount shall be contingent
upon certain events and conditions, as set forth herein and in the Escrow
Agreement in substantially the form attached hereto as Exhibit A (the "Escrow
Agreement").
F. As a condition and an inducement to SciQuest and Merger Sub entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, SciQuest is entering into
(ii) an Investor Representation Letter (the "Investor Representation Letter")
with all holders of Company Series B Preferred Stock in the form of Exhibit B
hereto.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and
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sufficiency of which are hereby acknowledged by the parties), and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE 1.
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the Delaware
General Corporation Law (the "DGCL"), Merger Sub shall be merged with and into
Company, the separate corporate existence of Merger Sub shall cease, and Company
shall continue as the surviving corporation. Company is sometimes referred to
herein as the "Surviving Corporation".
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 9.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than five business days following
the satisfaction or waiver of the conditions set forth in Articles 6 and 7, at
the offices of Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P.,
unless another place or time is agreed to by SciQuest and Company in writing.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing a Certificate of Merger (or like instrument), in
substantially the form attached hereto as Exhibit C (the "Certificate of
Merger"), with the Secretary of State of the State of Delaware, and in
accordance with the relevant provisions of applicable law (the time of
acceptance by the Secretary of State of the State of Delaware of such filing, or
such later time agreed to by the parties and set forth in the Certificate of
Merger, being referred to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Merger Sub and Company shall vest in the Surviving Corporation;
all debts, liabilities, obligations, restrictions and duties of Merger Sub and
Company shall become the debts, liabilities, obligations, restrictions and
duties of the Surviving Corporation; the title to all real estate and other
property owned by either Merger Sub or Company shall be vested in Company as the
Surviving Corporation without reversion or impairment; the Surviving Corporation
shall have all liabilities of Merger Sub and Company; and a proceeding pending
against either Merger Sub or Company may be continued as if the Merger did not
occur or Company as the Surviving Corporation may be substituted in such
proceeding for Company.
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation from and after the
Effective Time until thereafter amended as provided by law and such Certificate
of Incorporation and bylaws of the Surviving Corporation, except that the name
of the Surviving Corporation in such Certificate of Incorporation shall be
changed to HigherMarkets, Inc.
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(b) The bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the Certificate of Incorporation
and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
1.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of SciQuest, Merger Sub, Company or
the shareholders of Company, the shares of capital stock of Merger Sub and
Company shall be converted as follows:
(a) At the Effective Time, each issued and outstanding share of
capital stock of Merger Sub shall be converted into one share of validly issued,
fully paid and non-assessable shares of common stock of the Surviving
Corporation.
(b) At the Effective Time, each share of Company Series B
Preferred Stock (the "Series B Preferred Stock") that is issued and outstanding
immediately prior to the Effective Time (other than any shares of Series B
Preferred Stock, if any, to be canceled pursuant to Section 1.6(c)) shall be
converted automatically into the right to receive that number of shares of
common stock of SciQuest (the "SciQuest Common Stock"), less any fractional
share, which shall be eliminated, equal to the Stock Conversion Factor, subject
to the withholding into escrow described in Section 1.8 below (collectively, the
"Merger Consideration").
(c) Company's Third Amended and Restated Certificate of
Incorporation, as filed with the Delaware Secretary of State on May 2, 2001 (the
"Company Certificate of Incorporation"), which Company hereby represents to
SciQuest and Merger Sub is Company's current certificate of incorporation,
provides that in the event of a deemed liquidation of Company in which the
aggregate consideration to be received by holders of Series B Preferred Stock is
less than the aggregate liquidation preference applicable to the Series B
Preferred Stock (the "Liquidation Preference"), all consideration to be received
by Company's shareholders pursuant to such deemed liquidation shall be delivered
to the holders of the Series B Preferred Stock in proportion to their holdings
thereof, to the exclusion of all other classes and series of Company's capital
stock. The Transaction constitutes a deemed liquidation of Company, as defined
in the Company Certificate of Incorporation, and the Merger Consideration is
less than the Liquidation Preference. Accordingly (i) no class or series of
Company's capital stock other than the Series B Preferred Stock shall be
entitled to receive any Merger Consideration, (ii) all of the Merger
Consideration delivered to shareholders of Company pursuant to the Transaction
shall be delivered to the holders of the Series B Preferred Stock in proportion
to their holdings thereof immediately prior to the Effective Time, or to any
subsequent transferee(s) of such Series B Preferred Stock in proportion to such
transferred shares, as the case may be, and (iii) all issued and outstanding
shares of Company's capital stock, other than the Series B Preferred Stock,
shall be cancelled upon the filing of the Certificate of Merger. Without
limiting the foregoing, any
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and all accrued dividends applicable to the Series B Preferred Stock are waived
by the holders of the Series B Preferred Stock prior to the Effective Date, it
being acknowledged and agreed that the amount of Merger Consideration allocated
to a share of Series B Preferred Stock will not change regardless of whether or
not such dividends are included in computing the amount of Merger Consideration
to be allocated to such share of Series B Preferred Stock.
(d) Each share of capital stock owned by Company immediately
prior to the Effective Time shall be automatically canceled and extinguished
without any conversion thereof and without any further action on the part of
SciQuest or Company.
(e) For purposes of this Agreement:
(i) "Company Capitalization" shall mean the number of
shares of the Company's Series B Preferred Stock issued and outstanding
immediately prior to the Closing.
(ii) "Stock Conversion Factor" shall mean the number
(rounded to five decimal places) determined by dividing the Total Number of
SciQuest Shares (as defined below) by Company Capitalization. In the event that
between the date of this Agreement and the Closing Date, SciQuest shall change
the number of shares of SciQuest Common Stock that are issued and outstanding as
a result of any stock split, reverse stock split, share repurchase, stock
dividend or other recapitalization, the figures and calculations used to
determine the Stock Conversion Factor each shall be proportionately adjusted
correspondingly.
(iii) "Total Number of SciQuest Shares" shall mean Eight
Hundred Sixty-Nine Thousand Five Hundred Sixty-Five (869,565) shares of common
stock of SciQuest.
1.7 Parties' Intent. The parties to this Agreement intend for the
transactions contemplated by this Agreement to qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code for United
States federal income tax purposes, and for this Agreement to constitute the
corresponding plan of reorganization.
1.8 Merger Consideration, Earnout and Set-off.
(a) At the Effective Time of the Merger or as soon thereafter as is
reasonably practicable, the holders of shares of Company Series B Preferred
Stock shall surrender the certificates representing such shares to SciQuest and
in exchange therefor, SciQuest shall deliver seventy-five percent (75%) of the
Merger Consideration (Six Hundred Fifty-Two Thousand One Hundred Seventy-Four
(652,174) shares of common stock of SciQuest) directly to the shareholders of
the Company receiving the Merger Consideration in the amounts set forth opposite
their names on Schedule 1.8(a) hereto and at the addresses for such shareholders
set forth on Schedule 1.8(a) hereto. SciQuest shall not be obligated to deliver
any of such shares of its common stock to any holder of shares of Company Series
B Preferred Stock until such holder surrenders the certificates representing
such holder's shares of Company Series B Preferred Stock to SciQuest.
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(b) At the Effective Time, SciQuest shall deliver to the Escrow
Agent twenty-five percent (25%) of the Merger Consideration (Two Hundred
Seventeen Thousand Three Hundred Ninety-One (217,391) shares of common stock of
SciQuest) (collectively, the "Shareholder Earnout and Indemnification Amount"),
to be held and distributed by the Escrow Agent pursuant to the terms of this
Agreement and the Escrow Agreement in substantially the form attached hereto as
Exhibit A. All shares of SciQuest Common Stock so delivered to the Escrow Agent
shall be issued in the name of the Escrow Agent, as escrow agent under the
Escrow Agreement.
(c) If Revenues as determined in accordance with Section 1.8(d)
hereof are greater than or equal to Two Hundred Fifty Thousand Dollars
($250,000), SciQuest shall instruct the Escrow Agent in writing to deliver the
Shareholder Earnout and Indemnification Amount to the shareholders of Company as
directed by the Shareholder Representative on December 24, 2003; provided,
however, that the Shareholder Earnout and Indemnification Amount shall be
reduced by any set-off for indemnification purposes under Article 8 of this
Agreement. If Revenues as determined in accordance with Section 1.8(d) hereof
are less than Two Hundred Fifty Thousand Dollars ($250,000), SciQuest shall
instruct the Escrow Agent to return the Shareholder Earnout and Indemnification
to SciQuest by October 21, 2003, provided that in the event that Company
disputes the calculation(s) of the Revenues pursuant to Section 1.8(d) below,
the independent accounting firm determines that the Revenues were less than Two
Hundred Fifty Thousand Dollars ($250,000).
(d) SciQuest shall provide the Shareholder Representative with
copies of SciQuest's unaudited financial reports setting forth the Revenues by
August 31, 2003. If the Shareholder Representative provides written notice to
SciQuest within twenty (20) days of receiving the unaudited financial reports
that it disputes the calculation(s) of the Revenues and provides its own
calculation of Revenues, SciQuest's independent accounting firm shall review the
books, calculation(s) and supporting accounting data of the Surviving
Corporation and/or SciQuest, as applicable, to determine the amount of the
Revenues. The independent accounting firm shall make its determination of
appropriate calculations of the Revenues within thirty (30) days of its
selection. The determination of the independent accounting firm shall be final
and binding on the parties hereto. All costs in connection with such reports or
supporting accounting data, including accountants' fees, shall be borne by the
shareholders of Company if such audit confirms that the Revenues were less than
Two Hundred Fifty Thousand Dollars ($250,000) and by SciQuest if such audit
confirms that the Revenues were Two Hundred Fifty Thousand Dollars ($250,000) or
more.
(e) By virtue of the Merger, and effective as of the Effective
Time, Xxxxxxx Xxxx, Xx. will be irrevocably appointed attorney-in-fact and
authorized to act for and on behalf of any or all of the shareholders of Company
(with full power of substitution in the premises) with respect to all matters
arising in connection with the Shareholder Earnout and Indemnification Amount
set forth in Section 1.8 and the Escrow Agreement, including without limitation
the power and authority on behalf of each shareholder to do or take any one or
more of the actions enumerated in Section 1.4 of the Escrow Agreement (such
representative, or any successor representative appointed under the Escrow
Agreement, the "Shareholder
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Representative"). Each of SciQuest and the Surviving Corporation will be
entitled to rely on such appointment and treat the Shareholder Representative as
the duly appointed attorney-in-fact of each shareholder of Company for all such
purposes.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
SciQuest Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and there shall be no further registration of transfers on the records of
Company of shares of Company Capital Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Company stock
certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 1.
1.10 Exemption from Registration. SciQuest represents and warrant that
the shares of SciQuest Common Stock to be issued pursuant to Sections 1.6 and
1.8 in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act and the rules and regulations promulgated
by the SEC thereunder, by reason of Section 4(2) of the Securities Act, subject
to the truth and accuracy of the representations made by Company herein and by
certain shareholders of Company in the Investor Representation Letter.
1.11 Further Action. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Company, or to effect the assignment to Company of any and all Company
Intellectual Property created by a founder, employee or consultant of Company
(including Intellectual Property created by any of Company's founders prior to
the creation of Company), or to complete and prosecute all domestic and foreign
patent filings related to such Company Intellectual Property, the officers and
directors of the Surviving Corporation are fully authorized to take, and will
take, all such lawful and necessary action.
1.12 Options, Warrants and Stock Plans.
(a) Effective as of the Closing, Company shall have used its best
efforts to obtain (i) waivers of all required notices regarding the Merger (the
"Waivers") from all holders of Stock Acquisition Rights of the Company and (ii)
terminations of all Stock Acquisition Rights (the "Terminations") from all
holders of Stock Acquisition Rights of the Company. Company hereby further
represents, warrants, and covenants that any failure by it to obtain any Waiver
or Termination shall not have any Material Adverse Effect on SciQuest or the
Surviving Corporation. For the avoidance of doubt, any breach of this Section
1.12(a) shall be subject to the indemnification provisions of Section 8.2 of
this Agreement.
(b) Effective as of the Closing, Company shall have taken all
actions necessary to terminate all stock option plans and other stock or
equity-related plans of Company (the "Stock Plans").
(c) Section 2.2 of the Company Disclosure Schedule sets forth the
names of the holders of each option ("Company Stock Option") to purchase common
stock of Company
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granted by Company under the HigherMarkets, Inc. 2000 Stock Plan (the "Stock
Plan") that is outstanding immediately prior to the Closing, as well as the
number of shares of common stock of Company subject to each such Company Stock
Option ("Option Shares") and the exercise price for each such Company Stock
Option. As of the Closing, each such Company Stock Option that has not been
terminated pursuant to Section 1.12(a) above, and remains outstanding shall be
deemed to have been assumed by SciQuest in accordance with the terms of this
Agreement, Section 12(c) of the Stock Plan and the stock option agreement by
which such Company Stock Option is evidenced. Pursuant to Section 12(c) of the
Stock Plan, each holder of such a Company Stock Option shall have the right to
purchase or receive, for each Option Share subject to such a Company Stock
Option immediately prior to the Effective Time of the Merger, the consideration
received in the Merger by the holders of common stock of Company for each share
of common stock of Company. For the avoidance of doubt, as described in Section
1.6(c) above, all issued and outstanding shares of Company capital stock, other
than the Series B Preferred Stock, shall not receive any consideration in the
Merger and shall be cancelled upon the filing of the Certificate of Merger.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
Company hereby represents and warrants to SciQuest and Merger Sub as of
the date hereof and as of the Closing Date, subject to such exceptions as are
specifically disclosed with respect to specific numbered and lettered sections
of this Article 2 in the disclosure schedule and schedule of exceptions (the
"Company Disclosure Schedule") delivered by Company to SciQuest herewith, dated
as of the date hereof, and organized with corresponding numbered and lettered
sections and subsections, as follows:
2.1 Existence and Good Standing. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Company has the power to own its property and to carry on its business
as now being conducted. Company is duly qualified to do business and is in good
standing in each jurisdiction in which the character or location of the
properties owned or leased by Company or the nature of the business conducted by
Company makes such qualification necessary under applicable Law. Section 2.1 of
the Company Disclosure Schedule sets forth each jurisdiction where Company is so
qualified, licensed or admitted to do business and there are no other
jurisdictions in which Company owns or leases real properties or has employees.
2.2 Capitalization. The authorized capital stock of Company consists
exclusively of (a) Twenty-Seven Million Two Hundred Fifty Thousand (27,250,000)
shares of Common Stock, $0.001 par value, of which Seven Million Two Hundred
Forty Two Thousand Six Hundred Six (7,242,606) shares are issued and
outstanding, warrants for Thirty Five Thousand (35,000) shares are issued and
outstanding, and options for Eight Hundred Seventy Five Thousand (875,000) are
issued and outstanding, and (b) Sixteen Million Two Hundred Eighty Thousand
Sixty Nine (16,280,069) shares of Preferred Stock, $0.001 par value (the
"Company Preferred Stock"). The designation and status of the Company Preferred
Stock is as follows: (i) Four Million Eight Hundred Thirty-Nine Thousand Seven
Hundred Forty-Six (4,839,746) shares are designated as Series A Preferred Stock,
of which Three Million Five Hundred Eighty-Nine Thousand Seven
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Hundred Forty Six (3,589,746) shares are issued and outstanding and warrants, or
commitments to issue warrants, for One Million Two Hundred Fifty Thousand
(1,250,000) shares are issued and outstanding, and (ii) Eleven Million Four
Hundred Forty Thousand Three Hundred Twenty-Three (11,440,323) shares are
designated as Series B Preferred Stock, of which Eleven Million One Hundred
Thirty One Thousand Three Hundred Ninety Two (11,131,392) shares are issued and
outstanding and warrants for One Hundred Twenty Four Thousand Nine Hundred
Ninety Nine (124,998) shares are issued and outstanding. All of the issued and
outstanding shares of Company Common Stock and Company Preferred Stock are
validly issued, fully paid and nonassessable, are not subject to any preemptive
rights and have been issued in compliance with all applicable federal, state and
foreign securities Laws. Except as set forth in Section 2.2 of the Company
Disclosure Schedule, no shares of Company Common Stock or Company Preferred
Stock are held in treasury. Section 2.2 of the Company Disclosure Schedule lists
the name of each holder of Company Common Stock and Company Preferred Stock and
the amount of shares of Company Common Stock, Series A Preferred Stock and/or
Series B Preferred Stock held by each holder. For each shareholder of Company
receiving Merger Consideration, Schedule 1.8 hereto lists the name of such
shareholder, his or her state of residence, and the amount of the Merger
Consideration he or she will receive in the Merger. Except as set forth Section
2.2 of the Company Disclosure Schedule, there are (i) no outstanding Stock
Acquisition Rights, (ii) no agreements, arrangements or understandings to which
Company is a party (written or oral) to issue any Stock Acquisition Rights with
respect to Company, (iii) no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of Company Capital Stock created by statute, the Certificate of Incorporation or
bylaws of Company, or any agreement or other arrangement to which Company is a
party or to which it is bound, and (iv) no agreements, arrangements or
understandings to which Company is a party (written or oral) pursuant to which
Company has the right to elect to satisfy any liability by issuing Company
Common Stock or Stock Acquisition Rights. All Stock Acquisition Rights were
issued in compliance with all applicable federal, state and foreign securities
Laws. Except as set forth in Section 2.2 of the Company Disclosure Schedule,
Company is not a party or subject to any agreement or understanding, and, to
Company's knowledge, there is no agreement, arrangement or understanding between
or among any Persons which affects, restricts or relates to voting, giving of
written consents, dividend rights, transferability of shares or repurchase
rights or obligations with respect to Company Capital Stock, including any
voting trust agreement or proxy. No debt securities of Company are issued or
outstanding.
2.3 Power and Authority. Company has all requisite power and authority
to enter into and deliver this Agreement and the other Transaction Documents to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Company's
execution, delivery and performance of this Agreement and the other Transaction
Documents and Company's consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all corporate action required
of Company by applicable Law or its Organizational Documents. This Agreement and
the other Transaction Documents to which Company is a party constitute the valid
and legally binding obligations of Company, enforceable against Company in
accordance with their respective terms.
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2.4 Subsidiaries and Investments. Company does not own, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any Person. Except as disclosed in Section 2.10 of the Company
Disclosure Schedule, Company is not a party to any joint venture or partnership
Contract.
2.6 Financial Statements; No Material Changes; Budget and Projections
(a) Company has furnished SciQuest with true and complete copies
of the balance sheet of Company as of December 31, 2001 (the "Balance Sheet")
and the related statements of income, retained earnings and cash flows for the
year ended December 31, 2001, all audited by Ernst & Young (collectively, the
"Audited Financial Statements"). Company has furnished SciQuest with true and
complete copies of an unaudited balance sheet as of May 31, 2002 and as of the
Closing Date and a statement of operations for Company for the period from
January 1, 2002 through May 31, 2002 and through the Closing Date, which were
prepared on a basis consistent with the corresponding Audited Financial
Statements (the "Interim Financial Statements"). Company has furnished SciQuest
with true and complete copies of its check book register, showing all cash
in-flows and out-flows of Company for the period from January 1, 2002 through
May 31, 2002 and for the period from May 31, 2002 through the Closing Date,
which was prepared on a basis consistent with the corresponding Audited
Financial Statements (the "Check Book Register," and together with the Interim
Financial Statements and the Audited Financial Statements, the "Financial
Statements"). Section 2.6(a) of the Company Disclosure Schedule sets forth these
Financial Statements. The Financial Statements, including the notes thereto,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the period(s) indicated, and are correct,
complete, and consistent with Company's books and records (which are correct and
complete), except for revenue which has been recognized only to the extent cash
has been received to date which may or may not be in compliance with recent
revenue accounting recognition pronouncements, and except that the Interim
Financial Statements lack footnotes and other presentation items and are
presented in summary format. The Financial Statements fairly present the
financial condition of Company for the period(s) covered thereby or the dates
thereof, as applicable, subject in the case of the Interim Financial Statements
to normal year-end adjustments, and reflect all claims against and debts and
liabilities of Company, fixed or contingent, known or unknown, for the period(s)
covered thereby or the dates thereof, as applicable; and the related statements
of income, shareholders' equity and cash flows fairly present the results of the
operations of Company and the changes in its financial position for the periods
indicated. There are no transactions between Company and any stockholder of
Company (or any affiliate thereof), which are not recorded and disclosed in the
Financial Statements.
(b) Section 2.6(b) of the Company Disclosure Schedule lists all
changes in Company's cash flow from May 31, 2002 (the "Balance Sheet Date")
until the Effective Date. Since the Balance Sheet Date, Company has not (i)
incurred any liability or obligation of any nature (whether accrued, absolute,
contingent, known or unknown or otherwise) except in the ordinary course of
business or in an amount less than $5,000 in the aggregate (ii) permitted any of
its assets to be subjected to any Encumbrance, (iii) sold, transferred or
otherwise disposed of any assets except in the ordinary course of business or
for an amount less than $5,000 in the aggregate, (iv) made any capital
expenditure or commitment therefor except in the ordinary
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course of business or in an amount less than $5,000 in the aggregate, (v)
declared or paid any dividend or made any other distribution, or redeemed,
purchased or otherwise acquired any its securities or Stock Acquisition Rights
therefor, (vi) made any bonus or profit sharing distribution or payment of any
kind, (vii) increased its indebtedness for borrowed money, except current
borrowings from banks in the ordinary course of business or in an amount less
than $5,000 in the aggregate, or made any loan to any Person, (viii) written off
as uncollectible any notes or accounts receivable except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate exceeds $5,000, (ix) granted any increase in
the rate of wages, salaries, bonuses or other remuneration of any employee, (x)
cancelled or waived any material claims or rights, (xi) made any change in any
method of accounting or auditing practice, (xii) otherwise conducted its
business or entered into any transaction, except consistent with past practice
in the ordinary course of business, or (xiii) agreed, whether or not in writing,
to do any of the foregoing. Since the Balance Sheet Date, there has been no
event, fact, condition, circumstance or other development which has had or
reasonably could be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company, whether as a result of any Casualty,
termination or impairment of any material Contract or business relationship, the
enactment of any new Law, or otherwise; nor is Company aware of any such event,
fact, condition, circumstance or other development which is reasonably likely to
occur in the foreseeable future.
2.7 Books and Records. The minute books of Company, as previously
provided to SciQuest and its representatives, contain accurate records of all
meetings of and action taken by the holders of Company Capital Stock and board
of directors (including committees thereof) of Company.
2.8 Tangible Assets. Except (i) as reflected in the Financial
Statements, (ii) with respect to any lease disclosed in Section 2.10 of the
Company Disclosure Schedule, (iii) for liens associated with current taxes not
yet due and payable, (iv) for liens imposed by law and incurred in the ordinary
course of business for obligations not past due in favor of warehousemen,
laborers, materialmen and the like, and (v) for liens in respect of pledges or
deposits under workers' compensation laws or similar legislation, Company owns
or otherwise has the legal right to use all tangible assets used by Company in
connection with its business, in each case subject to no Encumbrance other than
any applicable lease disclosed in Section 2.8 of the Company Disclosure
Schedule. Company's tangible assets (whether owned or leased) are in a state of
good maintenance and repair, are adequate and suitable for the purposes for
which they are currently being used, and constitute all of the tangible assets
necessary to conduct Company's business as currently conducted.
2.9 Real Property. Except as described in Section 2.10 of the Company
Disclosure Schedule as to leased real property (the "Company Leased Real
Property") and all buildings, fixtures and improvements thereon (the
"Improvements"), Company does not currently own, and has not at any time owned,
in whole or in part, any interest (direct or indirect) in any real property.
2.10 Contracts. Except as set forth in Section 2.10 of the Company
Disclosure Schedule, Company is neither a party to nor bound by any (a) Contract
relating to the
10
performance by Company of services for or on behalf of any Person, (b) Contract
relating to the engagement as an independent contractor or employment of any
Person by Company, (c) lease (as lessee or lessor), (d) Contract for or
concerning indebtedness for money borrowed, (e) Contract concerning any license,
sublicense or permission to or from Company with respect to any material
Intellectual Property for consideration in excess of $5,000 individually or
$10,000 in the aggregate with all other substantially identical Intellectual
Property (such as multiple licenses for a single computer software product), (f)
Contract which contains restrictions with respect to the payment of dividends or
other distributions by Company, (g) Contract relating to capital expenditures,
(h) loan or advance to, or investment in, any Person or any Contract relating to
the making of any such loan, advance or investment, (i) Contract limiting the
freedom of Company to engage in any line of business in any geographic area, or
to compete with any Person, (j) insurance policy, (k) Contract which might
reasonably be expected to have a Material Adverse Effect on Company, or (l)
Contract which is otherwise material to Company. Each Contract set forth in
Section 2.10 of the Company Disclosure Schedule (or required to be set forth in
Section 2.10 of the Company Disclosure Schedule) was negotiated in good faith
and at arms-length, is valid and is in full force and effect; and there exists
no, and Company has received no notice or other communication asserting the
actual or alleged existence of any, default or event of default or event,
occurrence, condition or act (including the consummation of the transactions
contemplated by this Agreement) which, with the giving of notice, the lapse of
time or the occurrence of any other event or condition would become a default or
event of default thereunder. Company has not violated any of the terms or
conditions of any Contract that would at any time since Company's inception have
been required to be set forth in the Company Disclosure Schedule listing the
types of agreements and instruments set forth in Section 2.10 of the Company
Disclosure Schedule in a manner which has had or might reasonably be expected to
have a Material Adverse Effect on Company.
2.11 No Conflicts. Neither the execution and delivery of this Agreement
or any other applicable Transaction Document by Company, nor the performance of
this Agreement and the other applicable Transaction Documents by Company will
(i) conflict with or violate any provision of the Organizational Documents of
Company, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 2.11 of the Company Disclosure Schedule have been
obtained and all filings and obligations described Section 2.11 of the Company
Disclosure Schedule have been made, conflict with or violate any Law applicable
to Company or (iii) except as set forth in Section 2.11 of the Company
Disclosure Schedule, result in any breach of or constitute a default under,
require any notice, approval or consent to or of any person or entity in
connection with, give to another any right of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any property or asset of Company pursuant to any Contract to which Company is a
party or by which it is bound, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which if occurring, or any such notice, approval or consent if not made or
obtained, would not, individually or in the aggregate, have a Material Adverse
Effect on Company.
2.12 Litigation. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding or investigation by or
before any governmental or other instrumentality or agency pending, or to
Company's knowledge threatened, against or affecting
11
Company, any affiliate of Company, or any of their respective properties or
rights; and Company is not aware of any basis for any such action, proceeding or
investigation. Except as set forth in Section 2.12 of the Company Disclosure
Schedule, neither Company nor any of its affiliates is subject to any judgment,
order or decree entered in any lawsuit or proceeding which may affect any of
Company's operations or business practices, or the ability of Company to acquire
any property or conduct business in any respect.
2.13 Taxes. Except as set forth in Section 2.13 of the Company
Disclosure Schedule, Company has filed or caused to be filed, within the times
and manners prescribed by Law, all federal, state, local and foreign tax
returns, elections and tax reports which are required to be filed by, or with
respect to, Company. All federal, state, local and foreign income, profits,
franchise, sales, use, occupancy, excise and other taxes and assessments
(including interest and penalties) payable by or due from Company have been
fully paid or adequately disclosed and fully provided for in the books and
financial statements of Company. No examination of any tax return of Company is
currently in progress, and no basis for any assessment exists. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return of Company.
2.14 Liabilities; Indebtedness. Except as set forth in Section 2.14 of
the Company Disclosure Schedule, there are no liabilities, obligations or
indebtedness of or claims against Company, whether known or unknown, due or not
yet due, asserted or unasserted, fixed, contingent, or otherwise, arising from
or in connection with, or based upon acts, omissions, facts or occurrences
existing on or before the date hereof, whether or not discovered, known, or
asserted by any party or third party on the date hereof, and neither SciQuest
nor the Surviving Corporation shall not suffer or be subject to any Losses (as
defined in Section 8.2(a), below) arising from the foregoing, whether such
Losses occur before or after the date hereof, except: (i) those liabilities set
forth in the Balance Sheet or referred to in the notes thereto, (ii) those
liabilities set forth in the balance sheet included in the Interim Financial
Statements, and (iii) liabilities incurred subsequent to the date of the Interim
Financial Statements in an amount not greater than $5,000 in the aggregate or in
the ordinary course of business.
2.15 Insurance. Company has been covered by one or more policies of
insurance of the types described in Section 2.10 of the Company Disclosure
Schedule continuously since the commencement of its operations.
2.16 Intellectual Property and Software.
(a) Section 2.16(a) of the Company Disclosure Schedule hereto sets
forth a complete and correct list of (i) all patents, trademarks, trade names
(including all federal and state registrations pertaining thereto), proprietary
databases and registered copyrights owned by Company (collectively with all
unregistered copyrights, the "Company Proprietary Intellectual Property") and
(ii) all patents, trademarks, trade names, copyrights, technology and processes
used by Company in its businesses which are material to its business and are
used pursuant to a license or other right granted by a third party, and all
agreements related thereto (collectively, the "Company Licensed Intellectual
Property", and together with the Company Proprietary Intellectual Property
referred to as "Company Intellectual Property"). Except as set forth in Section
2.16(a) of the Company Disclosure Schedule, Company has no reason to
12
believe that its application in the United States Patent and Trademark Office
(the "PTO") for registration of HIGHERMARKETS will not be approved by the PTO.
Company owns, or has the right to use, all Company Intellectual Property, and
the consummation of the transactions contemplated hereby will not materially
adversely alter or impair any such rights. No claims are pending against Company
by any person with respect to the use of any Company Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement relating to the same, and the current use by Company of the Company
Intellectual Property does not in any material respect infringe upon the rights
of any third party. There are no jurisdictions in which Company is operating
under a trade name. No current or former Company employee is named or is
required to be named as an inventor on any pending patent application.
(b) Company Computer Software and Hardware.
(i) Section 2.16(b) of the Company Disclosure Schedule
hereto sets forth a true and complete list of: (a) all software and associated
documentation owned by Company material to the business of Company (other than
custom-developed software developed for and assigned to a Company customer) (the
"Company Proprietary Software"); (b) all software (other than the Company
Proprietary Software and "shrink-wrap" software) used by Company or its
employees in connection with the business of Company (the "Company Licensed
Software" and together with the Company Proprietary Software, the "Company
Software"). Company has all rights that are necessary or appropriate to
distribute, license or sublicense the Company Software to third parties and to
appoint others to do any of the foregoing. Company has or has the right to use
all technical and descriptive materials to run its business. The Company
Software consists of: (a) object code embodied in magnetic or optical media; and
(b) all development and procedural tools, documentation and manuals necessary to
maintain, enhance, develop derivative works, support and service the Company
Proprietary Software, including licenses to use compilers, assemblers, libraries
and other aids.
(ii) Company has a valid right, title and interest in and
to all intellectual property rights in the Company Proprietary Software,
including all worldwide copyrights, trade secrets, trademarks, moral rights and
proprietary and confidential information rights therein. The Company Proprietary
Software is free and clear of all liens, claims and encumbrances. The use by
Company of the Company Licensed Software and the use and distribution of the
Company Proprietary Software by Company complies in all material respects with
the terms of all contracts and agreements to which Company is a party or by
which it is bound and is in compliance in all material respects with all
applicable laws, regulations and codes of any foreign, U.S., state or local
authority, including without limitation, all U.S. Export Administration
Regulations. Company has been granted under the license agreements relating to
the Company Licensed Software (the "Company License Agreements") valid and
subsisting license rights with respect to all software comprising the Company
Licensed Software. Company is in compliance in all material respects with each
of the terms and conditions of each of the Company License Agreements. In the
case of any commercially available "shrink-wrap" software programs (such as
Lotus 1-2-3 or Microsoft Word), Company has not made and is not, to the
knowledge of Company, using any unauthorized copies of any such software
programs and, to the knowledge of Company, none of the employees, agents or
representatives of Company have made or are using any such unauthorized copies.
13
(iii) The Company Proprietary Software and, to the
knowledge of Company, such of the Company Licensed Software as is bundled with
or is otherwise an integral part of the Company Proprietary Software does not
infringe the patent, copyright or trade secret rights or any other intellectual
property right of any third party which may exist anywhere in the world.
(iv) Company has not granted rights in the Company Software
to any third party, except for rights granted to customers in the ordinary
course of business pursuant to licenses with customers.
(v) To the knowledge of Company, the Company Software and
the related computer hardware used by Company in its operations or the provision
of services to Company clients (the "Company Hardware") are adequate in all
material respects, when taken together with the other assets, resources and
personnel of Company, to run the business of Company in the same manner as such
business has been operated. There have been no material problems experienced by
the customers of Company and communicated to Company in the past twelve (12)
months with respect to the Company Software or Company Hardware that have arisen
outside the ordinary course of business.
(vi) Prior to any export or re-export either directly or
indirectly by Company of any software or other technical data, Company has first
obtained the written approval or required export license for such export or
re-export from the United States Department of Commerce or any other agency of
the U.S. Government having jurisdiction over such export or re-export unless the
export or re-export of software or other technical data is covered by a license
exemption.
2.17 Licenses. Company owns or otherwise lawfully uses each license,
franchise, permit, right and other authorization (collectively, "Licenses")
necessary or required by applicable Law to conduct its business as conducted as
of the date of this Agreement, free and clear of all Encumbrances. All of the
Licenses are in full force and effect, not subject to any current default or
right of cancellation, termination or revocation.
2.18 Compliance with Laws. Company is and at all times has been in
compliance with all applicable Laws (including without limitation any applicable
to subject matters addressed by other, more specific sections of this Article
2). To Company's knowledge, there exists no event, occurrence, condition or act,
which, with the giving of notice, the lapse of time or the occurrence of any
further event or condition, would constitute a violation of any applicable Law
by Company.
2.19 Accounts Receivable. The amount of all accounts receivable as set
forth in the Interim Financial Statements, whether billed or unbilled, and other
debts due or recorded in the respective records and books of account of Company
as being due to Company as at the Closing Date (less the amount of any provision
or reserve therefor made in the respective records and books of account of
Company) will be good and collectible in full in the ordinary course of business
and in any event not later than 90 days after the Closing Date; and none of such
accounts receivable or other debts is or will at the Closing Date be subject to
any counterclaim or set-off except to the extent of any such provision or
reserve.
14
2.20 Employee Relations.
(a) Section 2.20(a) of the Company Disclosure Schedule contains an
accurate list of all of Company's employees, showing for each his or her full
name, position, social security number (if applicable), start date of
employment, 2001 compensation, and current annualized salary.
(b) Section 2.20(b) of the Company Disclosure Schedule contains an
accurate list of all of Company's employees who are not naturalized U.S.
citizens, showing for each the authority pursuant to which he or she is in the
United States, the duration of his or her authorized period of stay, the
authority pursuant to which he or she is working in the United States and the
duration of his or her work visa.
(c) Each present and former employee, independent contractor or entity
who has contributed in any way to the creation, development or modification of
any of the Company Intellectual Property or Company Software holds no ownership
rights of any kind in the Company Intellectual Property or Company Software, is
bound by an agreement with Company to which such employee, independent
contractor or entity assigns all rights, if any, held or acquired by he, she or
it in the Company Intellectual Property or Company Software, and Company has
delivered copies of such agreements to SciQuest prior to the Effective Time.
(d) No material employee grievance is pending. Except as set forth in
Section 2.20(d) of the Company Disclosure Schedule, no current employee has
expressed or communicated to Company any material current grievance or any
intent to leave or contemplation of leaving Company's employ. All Company
employees are authorized to live in and work in the United States. Company has
no reason to believe there will be any adverse change in relations with
employees of Company as a result of any announcement or the consummation of the
transactions contemplated by this Agreement.
(e) As of the Effective Date, Company does not owe any current or
former employee or independent contractor (i) any accrued compensation,
commissions, expense reimbursement or payment for any accrued but unused
vacation or sick leave, (ii) any accrued or promised bonus and other benefits,
such as any stock option grant from Company or (iii) any other compensation,
commissions or benefits, rights or privileges, including without limitation,
severance compensation, change in control benefits, or any other benefits
pursuant to any agreement with such employee or independent contractor or
pursuant to any severance plan, policy, or program of Company.
2.21 Employee Benefit Plans.
(a) Section 2.21 of the Company Disclosure Schedule identifies
each Plan sponsored or maintained by the Company or any of its ERISA Affiliates
or to which the Company or any of its ERISA Affiliates contributes.
15
(b) Except as set forth in Section 2.21 of the Company Disclosure
Schedule with respect to each Plan required to be listed in Section 2.21 of the
Company Disclosure Schedule: (i) each Plan has been administered in material
compliance with its terms and is in material compliance with the applicable
provisions of ERISA (including, without limitation, the prohibited transaction
provisions thereof), the Internal Revenue Code and other applicable laws; (ii)
there are no inquiries or proceedings pending or threatened by the IRS, the U.S.
Department of Labor, the PBGC, or any participant or beneficiary with respect to
the Plans; (iii) each pension plan which is intended to be a qualified plan
within the meaning of Section 401(a) of the Internal Revenue Code has received a
favorable determination from the IRS as to its qualified status or is within the
remedial amendment period (as defined in Section 401(b) of the Internal Revenue
Code taking into account any pronouncements of the IRS relating to such period)
for making any required changes; (iv) each Plan may, without liability, be
amended, terminated or otherwise discontinued, except as specifically provided
by federal law, (v) no Plan provides medical benefits to any Person who is not a
current employee of Company (other than dependents of current employees) and
neither Company nor any of its ERISA Affiliates is contractually or otherwise
obligated to provide any Person who is not a current employee of Company (other
than dependents of current employees) with medical benefits, other than
continuation coverage as required under section 4980B of the Internal Revenue
Code and Part 6 of Subtitle B of Title I of ERISA ("COBRA"); (vi) Company has
made or provided for all contributions required under the terms of such Plans
and any applicable laws for all periods through the Closing Date; (vii) there
have been no "prohibited transactions" (as described in Section 4975 of the
Internal Revenue Code or in Part 4 of Subtitle B of Title I of ERISA) involving
any Plan; (viii) there has been no material violation of the "continuation
coverage requirements" of COBRA with respect to any welfare plan to which such
continuation coverage requirements apply; and (ix) there has been no violation
of the obligations imposed by section 9801 of the Internal Revenue Code and Part
7 of Subtitle B of Title I of ERISA ("HIPAA") with respect to any welfare plan
which is a group health plan (as defined in section 5000(b)(1) of the Internal
Revenue Code or Part 6 of Subtitle B of Title I of ERISA) to which such
obligations apply.
(c) Neither Company nor any of its ERISA Affiliates maintains or
has ever maintained a pension plan which is subject to the minimum funding
requirements of Part 3 of Subtitle B of Title I of ERISA or subject to Section
412 of the Internal Revenue Code.
(d) Neither Company nor any of its ERISA Affiliates, has ever
maintained or been obligated to contribute to any multiemployer plan, as defined
in Section 3(37) of ERISA.
(e) Neither Company nor any of its ERISA Affiliates is bound by
any collective bargaining agreement or legally binding arrangement to maintain
or contribute to any Plan.
(f) Complete and correct copies of the following documents have
been made available or delivered by Company to SciQuest: (i) all current plan
documents and insurance contracts (if any), and amendments thereto, with respect
to each of the Plans, (ii) for each of Company's plan years, all IRS Form 5500
series forms (and any financial statements and other schedules attached thereto)
filed with respect to any Plan, (iii) the most recent IRS determination letter
for each pension plan (if any), and (iv) all current summary plan descriptions
and
16
subsequent summaries of material modifications with respect to each of the Plans
subject to ERISA.
(g) Except as disclosed in Section 2.14 of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, alone or together with any other event, (i) entitle any person to
severance pay, unemployment compensation or any other payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee. No payment made to any officer, director,
employee, or agent of Company ("Recipients") pursuant to any employment
contract, severance agreement, or other arrangement as a consequence of the
transaction described herein will be non-deductible to Company because of the
applicability of the "golden parachute" provisions of Sections 280G and 4999 of
the Internal Revenue Code, nor will Company be required to "gross up" or
otherwise compensate any Recipient because of the imposition of any excise tax
(including any interest or penalties related thereto) on the Recipient as a
result of the applicability of Sections 280G and 4999 of the Internal Revenue
Code.
(h) The participant and beneficiary records with respect to each
Plan are in the custody of Company (or an agent of Company who must, upon
demand, provide such records to Company), and such records accurately state the
benefits to which all participants and beneficiaries under such Plan are
entitled.
2.22 Environmental Matters. During the time that Company has been in
possession of Company Leased Property and Improvements, (i) no substances that
are defined by laws or regulations concerning the environment as toxic
materials, hazardous wastes or hazardous substances (including without
limitation any asbestos, oils, petroleum-derived compound or pesticides)
(collectively, "Hazardous Materials") are or have been located in, on or about
the Company Leased Real Property or the Improvements in violation of any Law or
have been generated, used, released or disposed of by Company in violation of
any Law, (ii) the Company Leased Real Property has not been used for the
storage, manufacture or disposal of Hazardous Materials, and Company has not
used, or provided permission to others to use, the Company Leased Real Property
for the storage, manufacture or disposal of Hazardous Materials, (iii) no
Hazardous Materials have been released, disposed of or transported off site from
the Company Leased Real Property, and (iv) specifically, but without limitation,
there are and have been no storage tanks located on the Company Leased Real
Property. Company does not require any environmental permits for the operation
of its business. Company has complied in all material respects with all federal,
state and local environmental laws and regulations, including but not limited
to, the Comprehensive, Environmental Response Compensation and Liability Act,
the Clean Air Act, the Federal Water Pollution Control Act, the Solid Waste
Disposal Act and the Federal Insecticide, Fungicide and Rodenticide Act.
2.23 Interests in Clients, Suppliers, Etc. Company does not possess,
directly or indirectly, any equity interest in any Person which is a client,
supplier, customer, lessor, lessee, or competitor or potential competitor of
Company.
2.24 Disclosure. None of this Agreement, the Financial Statements, or
any schedule, exhibit or certificate attached hereto or delivered in accordance
with the terms hereof or any
17
document or statement in writing which has been supplied by or on behalf of
Company in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits any statement of a
material fact necessary in order to make the statements contained herein or
therein not misleading. All information concerning Company, which is material to
the transactions contemplated hereby, has been provided to SciQuest. There is no
fact known to Company that might reasonably be expected to have a Material
Adverse Effect on Company, which has not been set forth in this Agreement, the
Financial Statements, or any schedule, exhibit or certificate attached hereto or
delivered in accordance with the terms hereof.
2.25 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of Company is, or will be, entitled to any commission or broker's or
finder's fees in connection with any of the transactions contemplated by this
Agreement.
2.26 Client Relations.
(a) Set forth in Section 2.26(a) of the Company Disclosure Schedule is
a list of all of the clients of Company ranked by the percentage of net revenue
of Company for the year ended December 31, 2001 and from that date through May
31, 2002 attributable to each such client. None of the clients listed in Section
2.26(a) of the Company Disclosure Schedule or any other former client has
registered any material complaint regarding the services rendered by Company,
indicated any desire or intention to reduce the level of services under or to
terminate any Contract with or services performed by Company, or stated orally
or in writing any intention to terminate any Contract with Company.
(b) Set forth on Section 2.26(b) of the Company Disclosure Schedule is
a list of potential clients of Company (the "Potential Clients"). Such list does
not exceed a total of fifty (50) Potential Clients and does not include the
University of Notre Dame, Indiana University or Rensselaer Polytechnic
Institute. All Potential Clients are actual companies or entities with which
Company has had active discussions prior to the Effective Date regarding the
purchase of Company's services.
2.27 Information Delivery. Prior to the Closing Date, Company has
delivered to each shareholder receiving Merger Consideration the following
documents: (i) the Merger Agreement and the exhibits and schedules thereto; (ii)
SciQuest's most recent Annual Report to shareholders for fiscal year ended
December 31, 2001; (iii) SciQuest's Annual Report filed on Form 10-K with the
Securities and Exchange Commission on March 15, 2002; (iv) SciQuest's Definitive
Proxy Statement filed on Schedule 14A with the Securities and Exchange
Commission on March 27, 2002; and (v) SciQuest's Quarterly Report filed on Form
10-Q with the Securities and Exchange Commission on May 10, 2002 (together the
"Informational Documents"). In addition, at the time of delivery of such
Information Documents, Company informed each shareholder receiving the
Information Documents that the exhibits to these Informational Documents will be
provided to such shareholder upon his or her written request to SciQuest.
18
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SCIQUEST AND MERGER SUB
SciQuest and Merger Sub hereby represent and warrant to Company as of the
date hereof and as of the Closing Date:
3.1 Existence and Good Standing.
(a) SciQuest is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. SciQuest has all
requisite power and authority to enter into and deliver this Agreement and the
other Transaction Documents to which SciQuest is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. SciQuest's execution, delivery and performance
of this Agreement and the other Transaction Documents to which SciQuest is a
party, and SciQuest's consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all corporate action required
of SciQuest by applicable Law or its Organizational Documents. This Agreement
and the other Transaction Documents to which SciQuest is a party constitute the
valid and legally binding obligations of SciQuest, enforceable against SciQuest
in accordance with their respective terms.
(b) Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Merger Sub has all
requisite power and authority to enter into and deliver this Agreement and the
other Transaction Documents to which Merger Sub is a party, to perform its
obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. Merger Sub's execution, delivery and
performance of this Agreement and the other Transaction Documents to which
Merger Sub is a party, and Merger Sub's consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
corporate action required of Merger Sub by applicable Law or its Organizational
Documents. This Agreement and the other Transaction Documents to which Merger
Sub is a party constitute the valid and legally binding obligations of Merger
Sub, enforceable against Merger Sub in accordance with their respective terms.
3.2 Capital Stock. Merger Sub has an authorized capitalization
consisting of 1,000 shares of common stock, $0.001 par value per share, of which
100 shares are issued and outstanding and are held by SciQuest.
3.3 Shareholder Shares. The shares of SciQuest Common Stock to be
issued pursuant to Sections 1.6 and 1.8 above have been duly authorized and,
when issued and delivered in accordance with the terms of this Agreement, will
be validly issued, fully paid and non-assessable, free and clear of all
Encumbrances and will have been issued in compliance with all applicable Federal
and state securities laws, subject to the truth and accuracy of the
representations made by Company herein and by certain shareholders of Company in
the Investor Representation Letter.
3.4 No Conflicts.
19
(a) Neither the execution and delivery of this Agreement or any
other applicable Transaction Document by SciQuest, nor the performance of this
Agreement and the other applicable Transaction Documents by SciQuest will (i)
conflict with or violate any provision of the Organizational Documents of
SciQuest, (ii) conflict with or violate any Law applicable to SciQuest or (iii)
result in any breach of or constitute a default under, require any notice,
approval or consent to or of any person or entity in connection with, give to
another any right of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any property or asset of SciQuest
pursuant to any Contract to which SciQuest is a party or by which it is bound,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which if occurring, or any
such notice, approval or consent if not made or obtained, would not,
individually or in the aggregate, have a Material Adverse Effect on SciQuest.
(b) Neither the execution and delivery of this Agreement or any
other applicable Transaction Document by Merger Sub, nor the performance of this
Agreement and the other applicable Transaction Documents by Merger Sub will (i)
conflict with or violate any provision of the Organizational Documents of Merger
Sub, (ii) conflict with or violate any Law applicable to Merger Sub or (iii)
result in any breach of or constitute a default under, require any notice,
approval or consent to or of any person or entity in connection with, give to
another any right of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any property or asset of Merger Sub
pursuant to any Contract to which Merger Sub is a party or by which it is bound,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which if occurring, or any
such notice, approval or consent if not made or obtained, would not,
individually or in the aggregate, have a Material Adverse Effect on Merger Sub.
3.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the SciQuest or Merger Sub is, or will be, entitled to any
commission or broker's or finder's fees in connection with any of the
transactions contemplated herein.
3.6 Disclosure. None of this Agreement or any schedule, exhibit or
certificate attached hereto or delivered in accordance with the terms hereof or
any document or statement in writing which has been supplied by or on behalf of
SciQuest and/or Merger Sub in connection with the transactions contemplated by
this Agreement contains any untrue statement of a material fact or omits any
statement of a material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE 4.
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Company. During the period from the date of
this Agreement to the Closing Date, Company shall conduct its operations only
according to its ordinary and usual course of business and preserve intact its
business organization, keep available the services of its officers and
employees, maintain satisfactory relationships with licensors, suppliers,
distributors, clients and others having business relationships with Company,
20
and perform in all material respects all of Company's obligations under all
Contracts to which Company is a party or by which it or any of its assets or
properties are bound. Without limiting the foregoing, prior to the Closing Date,
except as may be first approved in writing by SciQuest or otherwise permitted or
required by this Agreement, Company shall cause (a) Company's Organizational
Documents to be maintained in their forms on the date of this Agreement, (b) the
compensation payable or to become payable by Company to each officer, employee
or agent of Company to be maintained at their levels on the date of this
Agreement, (c) Company to refrain from making any bonus, pension, retirement or
insurance payment or arrangement to or with any such Persons except those that
may have already been accrued, (d) Company to refrain from entering into any
Contract except Contracts in the ordinary course of business having a value of
less than $5,000 individually or $10,000 in the aggregate, (e) Company to
refrain from making any change affecting any bank, safe deposit or power of
attorney arrangements of Company, (f) Company to refrain from issuing or
selling, or issuing any Stock Acquisition Rights for, or subdividing or
otherwise changing in any respect any securities of Company, and (g) Company to
refrain from taking any of the actions referred to in Section 2.24 hereof.
During the period from the date of this Agreement to the Closing Date, Company
shall confer on a regular and frequent basis with one or more designated
representatives of SciQuest to report on the status of ongoing operations.
Company shall notify SciQuest of any unexpected emergency or other change in the
normal course of Company's business or in the operation of its properties and of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), ad judicatory proceedings, budget
meetings or submissions involving any property of Company, and keep SciQuest
fully informed of such events and permit its representatives prompt access to
all materials prepared in connection therewith. Notwithstanding the foregoing,
nothing in this Agreement shall restrict Company from taking such action as may
be reasonably necessary in order to preserve the operations, business,
properties and assets of Company.
4.2 Exclusive Dealing. During the period from the date of this
Agreement to June 28, 2002, Company shall refrain from taking any action
directly or indirectly to encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person or entity other
than SciQuest concerning any proposal for the sale of the capital stock in, or
substantially all of the assets of Company, or other business combination
involving Company. Company shall notify SciQuest immediately if any proposal
concerning any such proposed transaction involving Company or any significant
assets of Company (any such proposal being referred to herein as an "Acquisition
Proposal") or any request for confidential information regarding Company is
received, and shall provide to SciQuest such information regarding any such
Acquisition Proposal or request as SciQuest shall request.
4.3 Review of Company. SciQuest may, prior to the Closing Date,
directly and through its representatives, review the properties, books and
records of Company and its financial and legal conditions as and to the extent
they deem necessary or advisable to familiarize themselves with such properties
and other matters; such review, and any information known to SciQuest, shall
not, however, affect the binding nature of representations and warranties made
by Company hereunder or the remedies of SciQuest for breaches of those
representations and warranties. Company shall permit SciQuest and its
representatives to have, after the date of this Agreement, full access to the
premises, personnel, accountants and all books and records of Company and cause
the officers of Company to furnish SciQuest with such
21
financial and operating data and other information with respect to the business
and properties of Company as SciQuest from time to time reasonably shall
request. In the event of termination of this Agreement without consummation of
the transactions contemplated hereby, SciQuest shall keep confidential any
material information obtained from Company concerning Company's properties,
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and, at the request of Company, shall return to Company all
copies of any schedules, statements, documents or other written information
obtained in connection therewith.
ARTICLE 5.
ADDITIONAL AGREEMENTS
5.1 Restricted Shares. SciQuest shall use commercially reasonable
efforts to effect the issuance of the shares of SciQuest Common Stock to be
issued pursuant to Sections 1.6 and 1.8 in a private placement pursuant to
Section 4(2) of the Securities Act. The parties hereto acknowledge and agree
that: (i) the shares of SciQuest Common Stock issued pursuant to Sections 1.6
and 1.8 will not be registered under the Securities Act and will constitute
"restricted securities" within the meaning of the Securities Act; (ii) each
shareholder of Company receiving a portion of the Merger Consideration and/or
the Shareholder Earnout and Indemnification Amount shall execute and deliver to
Company an Investor Representation Letter in the form attached hereto as Exhibit
B; and (iii) the certificates representing the shares of SciQuest Common Stock
shall bear appropriate legends to identify such privately placed shares as being
restricted under the Securities Act, to comply with applicable state securities
laws and, if applicable, to notice the restrictions on transfer of such shares.
5.2 Expenses. Except as otherwise provided in this Agreement, whether
or not the Merger is consummated, all fees and expenses incurred in connection
with the Merger including all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties ("Third Party Expenses")
incurred by Company in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of Company immediately preceding the Closing and all
Third Party Expenses incurred by SciQuest in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of SciQuest immediately preceding
Closing
5.3 Public Disclosure. Except as otherwise provided in this Agreement,
or unless otherwise required by Law (including federal and state securities
laws) or, as to SciQuest, by the rules and regulations of the National
Association of Securities Dealers, prior to the Effective Time, no public
disclosure (whether or not in response to any inquiry) of the existence of any
subject matter of, or the terms and conditions of, this Agreement shall be made
by any party hereto unless approved by SciQuest prior to release; provided,
however, that such approval shall not be unreasonably withheld or delayed.
5.4 Approvals. SciQuest and Company shall use all commercially
reasonable efforts required to obtain all approvals from Governmental or
Regulatory Authorities or under any of the Contracts or other agreements as may
be required in connection with the Merger (all of which approvals are set forth
in Schedules hereto) so as to preserve all rights of and benefits to
22
Company thereunder and SciQuest and Company shall provide each other with such
assistance and information as is reasonably required to obtain such approvals.
5.5 Notification of Certain Matters. Company shall give prompt notice
to SciQuest, and SciQuest shall give prompt notice to Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of Company or SciQuest,
respectively, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii) any failure of Company
or SciQuest, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.5
shall not limit or otherwise affect any remedies available to the party
receiving such notice.
5.6 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including all action
reasonably necessary to seek and obtain any and all consents and approvals of
any Government or Regulatory Authority or person required in connection with the
Merger; provided, however, that SciQuest shall not be obligated to consent to
any divestitures or operational limitations or activities in connection
therewith and no party shall be obligated to make a payment of money in excess
of $15,000 as a condition to obtaining any such condition or approval) as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.7 Company's Auditors. Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) as required by SciQuest to comply with
applicable SEC regulations, (ii) the review of any Company audit or review work
papers including the examination of selected audited financial statements and
data, and (iii) the delivery of such representations from Company's independent
accountants as may be reasonably requested by SciQuest or its accountants.
ARTICLE 6.
CONDITIONS TO SCIQUEST'S AND MERGER SUB'S OBLIGATIONS
SciQuest's and Merger Sub's obligations to engage in the Merger are
conditioned upon satisfaction, on or prior to the Closing Date, of each of the
following conditions:
6.1 Opinion of Company's Counsel. Company shall have furnished SciQuest
with an opinion, dated and as of the Closing Date, of Xxxxxx Xxxxx, Esq.,
counsel to Company, in the form of that attached as Exhibit D.
6.2 Truth of Representations and Warranties. The representations and
warranties of Company contained in this Agreement or in any schedule attached
hereto shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and Company shall have delivered to SciQuest a certificate, dated the
Closing Date, to such effect.
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6.3 Good Standing and Other Certificates. Company shall have delivered
to SciQuest (a) a copy of Company's Certificate of Incorporation, including all
amendments thereto, certified by the Secretary of State of Delaware as of the
Closing Date or any of the fifteen (15) preceding business days, (b) a
certificate from the Secretary of State of Delaware to the effect that Company
is in good standing in Delaware as of the Closing Date or any of the fifteen
(15) preceding business days, (c) certification from the Secretaries of State of
California, New York and Indiana to the effect that Company is authorized to do
business as a foreign corporation in each state and is in good standing in each
state, (d) a copy of the bylaws of Company, certified by the Secretary of
Company as being true and correct and in effect on the Closing Date, and (e) a
copy of resolutions, certified as of the Closing Date by the Secretary of
Company, adopted by the Board of Directors and shareholders of Company and
authorizing the execution and delivery by Company of this Agreement and the
other Transaction Documents to which Company is a party, the performance by
Company of its obligations hereunder and thereunder, and the consummation by
Company of the transactions contemplated hereby and thereby.
6.4 Performance of Agreements. All of the agreements of Company to be
performed on or before the Closing Date pursuant to the terms of this Agreement
shall have been duly performed, and Company shall have delivered to SciQuest a
certificate, dated the Closing Date, to such effect.
6.5 No Litigation Threatened. No action or proceedings shall have been
instituted, or to Company's knowledge threatened, before a court or other
government body or by any public authority, and no claim shall have been
asserted, or to Company's knowledge threatened to be asserted, to restrain or
prohibit any of the transactions contemplated hereby, and Company shall have
delivered to SciQuest a certificate, dated the Closing Date, to such effect.
6.6 No Material Adverse Change. Since the date of this Agreement, no
event, fact, change, condition, circumstance or other development shall have
occurred that has had, or reasonably could be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company, and Company shall have
delivered to SciQuest a certificate, dated the Closing Date, to such effect.
6.7 Governmental and Other Approvals and Consents. All governmental and
other consents and approvals, if any, necessary to permit the consummation of
the transactions contemplated by this Agreement or the transfer of any Contract
described in Article 2 above or to which Company otherwise is a party or by
which Company otherwise is bound shall have been received.
6.8 Employment & Consulting Agreements. Certain key employees of
Company shall have agreed on terms of employment or consulting contracts to the
satisfaction of SciQuest.
6.9 Escrow Agreement. The Shareholder Representative and the Escrow
Agent (as defined in the Escrow Agreement) shall have executed and delivered to
SciQuest the Escrow Agreement substantially in the form of that attached as
Exhibit A, with such modifications thereto as are reasonably requested by the
Escrow Agent prior to execution thereof.
24
6.10 Investor Representation Letter. Shareholders of Company who hold in
the aggregate shares of Company that represent the voting percentage necessary
for approval of the Transaction, including but not limited to Sylvan Ventures
and Armada Venture Group LLC, shall have executed and delivered Investor
Representation Letter to SciQuest in the form of Exhibit B hereto.
6.11 Private Placement. Each shareholder of Company receiving a portion
of the Merger Consideration and/or the Shareholder Earnout and Indemnification
Amount shall have executed and delivered an Investor Representation Letter to
SciQuest in the form of Exhibit B hereto and SciQuest shall be reasonably
satisfied that the shares of SciQuest Common Stock to be issued in connection
with the Merger pursuant are issuable without registration pursuant to Section
4(2) of the Securities Act and SEC rules and regulations promulgated thereunder.
6.12 Resignations. SciQuest shall have received a written resignation,
satisfactory in form and substance to SciQuest, from each officer and director
of Company requested by SciQuest to resign on or prior to the Closing Date.
6.13 Intra-Company Debt. All indebtedness (other than travel and similar
advances outstanding in the ordinary course of business) of the employees of
Company to Company shall have been repaid in full.
6.14 Due Diligence. SciQuest shall have satisfactorily completed its due
diligence investigation of Company and Company shall have resolved any issues
raised by SciQuest's due diligence investigation, to the sole satisfaction of
SciQuest.
6.15 Waiver of Shareholder Loans. Company shall deliver to SciQuest
executed waivers and releases, satisfactory in form and substance to SciQuest,
relating to any loans and accrued interest made by shareholders to Company,
including but not limited to the $160,000 note (including any accrued interest)
from Sylvan Ventures LLC to Company.
6.16 Educational and Institutional Cooperative Service, Inc. Company
shall deliver to SciQuest amendments of any and all agreements with Educational
and Institutional Cooperative Service, Inc. ("E&I"), satisfactory in form and
substance to SciQuest, and shall have successfully transferred the assets known
as "Purchasing Pulse" to E&I.
6.17 Stock Plans and Stock Acquisition Rights. SciQuest shall have
received (i) a copy of the resolutions of the Board of Directors of Company
evidencing termination of all Stock Plans and (ii) a copy of a Termination and
Release Agreement, duly executed by Company and each holder of Stock Acquisition
Rights, evidencing termination of each Stock Acquisition Right.
ARTICLE 7
CONDITIONS TO COMPANY'S OBLIGATIONS
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Company's obligation to engage in the Merger are conditioned upon
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
7.1 Truth of Representations and Warranties. The representations and
warranties of SciQuest and Merger Sub contained in this Agreement shall be true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and
SciQuest shall have delivered to Company a certificate, dated the Closing Date,
to such effect.
7.2 Good Standing and Other Certificates.
(a) SciQuest shall have delivered to Company (i) a copy of
SciQuest's Certificate of Incorporation, including all amendments thereto,
certified by the Secretary of State of Delaware as of the Closing Date or any of
the fifteen (15) preceding business days, (ii) a certificate from the Secretary
of State of Delaware to the effect that SciQuest exists in Delaware and listing
all charter documents of SciQuest on file as of the Closing Date or any of the
fifteen (15) preceding business days, (iii) a copy of the bylaws of SciQuest,
certified by an officer of SciQuest as being true and correct and in effect on
the Closing Date, and (iv) a copy of resolutions, certified as of the Closing
Date by an officer of SciQuest, adopted by the Board of Directors of SciQuest
and authorizing the execution and delivery by SciQuest of this Agreement and the
other Transaction Documents to which SciQuest is a party, the performance by
SciQuest of its obligations hereunder and thereunder, and the consummation by
SciQuest of the transactions contemplated hereby and thereby.
(b) Merger Sub. Merger Sub shall have delivered to Company (i) a
copy of Merger Sub's Certificate of Incorporation, including all amendments
thereto, certified by the Secretary of State of Delaware as of the Closing Date
or any of the fifteen (15) preceding business days, (ii) a certificate from the
Secretary of State of Delaware to the effect that Merger Sub exists in Delaware
and listing all charter documents of Merger Sub on file as of the Closing Date
or any of the fifteen (15) preceding business days, (iii) a copy of the bylaws
of Merger Sub, certified by an officer of Merger Sub as being true and correct
and in effect on the Closing Date, and (iv) a copy of resolutions, certified as
of the Closing Date by an officer of Merger Sub, adopted by the Board of
Directors and shareholder of Merger Sub and authorizing the execution and
delivery by Merger Sub of this Agreement and the other Transaction Documents,
the performance by Merger Sub of its obligations hereunder and thereunder, and
the consummation by Merger Sub of the transactions contemplated hereby and
thereby.
7.3 Governmental and Other Approvals and Consents. All consents and
approvals concerning SciQuest or Merger Sub, if any, necessary to permit the
consummation of the transactions contemplated by this Agreement shall have been
received.
7.4 Performance of Agreements. All of the agreements of SciQuest or
Merger Sub to be performed on or before the Closing Date pursuant to the terms
hereof shall have been duly performed, and SciQuest shall have delivered to
Company a certificate, dated the Closing Date, to such effect.
26
7.5 Litigation Threatened. No action or proceedings shall have been
instituted or threatened before a court or other government body or by any
public authority, and no claim shall have been asserted or threatened to be
asserted, to restrain or prohibit any of the transactions contemplated hereby,
and SciQuest shall have delivered to Company a certificate, dated the Closing
Date, to such effect (to SciQuest's knowledge).
ARTICLE 8.
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
8.1 Survival of Representations. The respective representations and
warranties of Company and SciQuest contained in this Agreement or in any
schedule attached hereto shall survive the consummation of the Merger and the
other transactions contemplated hereby and shall remain in full force and effect
notwithstanding any investigation or examination of, or knowledge with respect
to, the subject matter thereof by or on behalf of Company or SciQuest, as the
case may be, for a period of eighteen (18) months following the Closing Date.
8.2 Indemnification
(a) Subject to the limitations set forth in Sections 8.2(c) and
(d) below, all shareholders of Company who receive Merger Consideration shall
jointly and severally defend, indemnify and hold harmless SciQuest and its
affiliates and all of their respective officers, directors, employees, agents
and shareholders (each, an "Indemnitee"), to the full extent permitted in law or
equity, from and against any and all losses, claims, actions, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses) relating to or arising from or in connection with (i) any
misrepresentation, or any non-fulfillment of any representation, warranty,
covenant, obligation or agreement by Company contained in or made pursuant to
this Agreement or any of the other Transaction Documents or in any other
agreement, officer's certificate or other certificate delivered to SciQuest in
connection with this Agreement, (ii) any matter described in Section 8.2 of the
Company Disclosure Schedule to include all appropriate matters identified in due
diligence, or (iii) the enforcement by SciQuest of its rights pursuant to this
Section 8.2, and any litigation, proceeding or investigation relating to any of
the foregoing (collectively, "Losses").
(b) Notwithstanding subsection (a) above, the Indemnitees shall
not be entitled to indemnification under Section 8.2(a) above for any amount
unless and until the aggregate of all amounts for which the Indemnitees would
otherwise be entitled to be indemnified exceeds $10,000.
(c) The obligations to indemnify and hold harmless SciQuest
pursuant to this Article 8 shall survive the consummation of the transactions
contemplated by this Agreement for a period of eighteen (18) months following
the Closing Date and shall be payable pursuant to the Escrow Agreement solely
with the shares of SciQuest Common Stock transferred to the Escrow Agent
pursuant to Section 1.8 above.
27
(d) Without limiting the effect of Section 8.2(c), the maximum
amount of Losses for which the shareholders of Company shall be liable under
this Article 8 shall be, in the aggregate, an amount equal to the value of the
Escrow Shares (calculated in accordance with the Escrow Agreement) on the date
that such claim is made in accordance with the Escrow Agreement, and the
exclusive remedy available to each and every Indemnitee for Losses shall be the
delivery of one or more Escrow Shares to such Indemnitee, even though the value
of such Escrow Shares may be less than the amount of the Loss suffered by the
Indemnitee and/or even though the Escrow Shares may have been previously
disbursed to SciQuest due to a failure to meet the Revenue target.
(e) The parties will make appropriate adjustments for any tax
benefits, tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 8, provided that no Indemnitee
shall be obligated to continue pursuing any payment pursuant to the terms of any
insurance policy.
ARTICLE 9.
TERMINATION
9.1 Termination
(a) The parties hereto shall be entitled to terminate this
Agreement as follows, provided that no such termination shall limit or terminate
any liability of one party to another for any breach hereof, and provided
further that the provisions of Sections 5.2(c) (confidentiality) and 10.8
(publicity) shall survive any such termination:
(i) the parties may terminate this Agreement by mutual
written consent at any time;
(ii) SciQuest may terminate this Agreement by written notice
to Company on or prior to the Closing Date if Company shall have breached in any
material respect any representation, warranty or covenant contained in this
Agreement and failed to cure the same within ten (10) days after written notice
thereof from SciQuest;
(iii) Company may terminate this Agreement by written notice
to SciQuest on or prior to the Closing Date if SciQuest shall have breached in
any material respect any representation, warranty or covenant contained in this
Agreement and failed to cure the same within ten (10) days after written notice
thereof from Company;
(iv) SciQuest or Company may terminate this Agreement by
written notice to the other if the consummation of the Merger shall not have
occurred on or before June 28, 2002; provided, however, that the right to
terminate this Agreement pursuant to this subsection (iv) shall not be available
to a party whose (or whose affiliate's) willful action or failure to act shall
have been a principal cause of or resulted in the failure of the Merger to occur
on or before such date; and
28
(v) SciQuest or Company may terminate this Agreement by
written notice to the other parties hereto on or prior to the Closing Date if
any court or other governmental instrumentality of competent jurisdiction shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement.
(b) The parties agree that termination of this Agreement shall
constitute mutual termination and abandonment of the Merger and that, upon any
such termination, neither the Surviving Corporation nor Company shall have any
further rights or obligations under or arising out of the Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Definitions of Certain Terms. As used in this Agreement, the
following capitalized terms shall have the respective meanings set forth below:
"Casualty" shall mean any fire, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act of God or other
public force.
"Contract" shall mean any contract, agreement, indenture,
instrument or other binding commitment or arrangement of any kind to which
Company is a party
"Encumbrance" shall mean any lien, encumbrance, security interest,
mortgage, pledge, lease, option, easement, servitude, covenant, condition,
restriction under any Contract, or other charge, restriction or claim of any
kind.
"ERISA" shall mean the Federal Employee Retirement Income Security
Act of 1974 and all rules and regulations promulgated thereunder from time to
time, in each case as amended.
"ERISA Affiliate" shall refer to any trade or business whether or
not incorporated, under common control with Company or SciQuest, as applicable,
within the meaning of Section 414(b), (c), (m), or (o) of the Internal Revenue
Code or Sections 4001(a) or (b) of ERISA.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986 and all rules and regulations promulgated thereunder from
time to time, in each case as amended.
29
"Law" shall mean any national, federal, state, local or foreign
law, rule, regulation, statute, ordinance, order, judgment, decree, permit,
franchise, license or other governmental restriction or requirement of any kind.
"Material Adverse Effect" shall mean any material adverse effect on
the business, financial condition, results of operations, or prospects of the
affected party, including without limitation any effect, which prevents or
impairs materially such party's performance of its obligations under, or the
consummation of, this Agreement. When the term "material" is used with reference
to Company, SciQuest or the Surviving Corporation, a matter shall be deemed
"material" if the matter involves or affects an amount in excess of $10,000
individually or in the aggregate with other like matters.
"Organizational Document" shall mean any certificate or articles of
incorporation, bylaw, board of directors' or shareholders' resolution, or other
corporate document or action comparable to any of the foregoing currently in
effect.
"Person" shall mean any individual, partnership, joint venture,
corporation, trust, limited liability company, unincorporated organization,
government (or subdivision thereof) or other entity.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Plan" means (i) each of the "employee benefit plans" (as such term
is defined in Section 3(3) of ERISA), of which Company or any ERISA Affiliate is
or ever was a sponsor or participating employer or as to which Company or any of
its ERISA Affiliates makes contributions or is required to make contributions,
and (ii) any similar employment, severance or other arrangement or policy of any
of Company or any of its ERISA Affiliates (whether written or oral) providing
for health, life, vision or dental insurance coverage (including self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits or retirement benefits, fringe
benefits, or for profit sharing, deferred compensation, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits.
"Revenues" shall mean all revenues calculated from the Closing Date
through the June 30, 2003 from the Potential Clients listed in Section 2.26(b)
of the Company Disclosure Schedule who have executed contracts with the
Surviving Corporation or SciQuest during the period from the Closing through
December 31, 2002 for (i) license sales or subscriptions for Company products
and solutions and Company's offering of SciQuest's Select Site product ("Select
Site") or any related or subsequent procurement products of SciQuest, (ii)
professional services directly related to Company products and solutions and
Select Site, and (iii) all professional services directly related to any of the
foregoing, but shall exclude all "pass-through" revenues, such as sales of third
party licenses or services, billable travel expenses and services outsourced to
third parties. Revenues shall be recognized in accordance with generally
accepted accounting principles and in accordance with SciQuest's past practices
and as stated by SciQuest auditors.
30
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" shall mean the United States Securities Act of
1933 and all rules and regulations promulgated thereunder from time to time, in
each case as amended.
"Stock Acquisition Right" shall mean any option, warrant, right
(pre-emptive or otherwise), call, commitment, conversion right, right of
exchange, plan or other agreement of any character providing for the purchase,
conversion, issuance or sale of any securities.
"Transaction Documents" means, collectively, this Agreement, the
Escrow Agreement, the Stock Voting Agreements, the Investor Representation
Letters, and all agreements, instruments, certificates and other documents
executed or delivered in accordance with the terms of this Agreement or any
Transaction Document.
10.2 Construction of Certain Disclosures. No information disclosed in
any schedule to this Agreement shall be deemed to be disclosed for purposes of
any other section hereof or schedule hereto unless otherwise specifically stated
therein. The representations and warranties set forth in Articles 2 and 3 above,
respectively, are cumulative. The subject matter covered by any section of
either such article shall not be exclusive as to such subject matter to the
extent covered by another section of such article, and the specificity of any
representation or warranty shall not affect or limit the generality of any other
representation or warranty made or given by the same party.
10.3 Remedies Not Exclusive. Subject to the provisions of Article 8
hereof and the provisions of the Escrow Agreement, nothing in this Agreement
shall limit or restrict in any manner any other rights or remedies any party
hereto may have against any other party hereto at law, in equity or otherwise,
including without limitation any such rights pursuant to the Escrow Agreement.
10.4 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of North Carolina, without regard to the choice of law principles thereof.
10.5 Further Assurances. In addition to the actions, documents and
instruments specifically required by this Agreement or any other Transaction
Document to be taken or delivered on or before the Closing Date or from time to
time thereafter, each of the parties to this Agreement shall, before and after
the Closing Date, without further consideration, take such other actions and
execute and deliver such other documents and instruments as another party hereto
reasonably may request in order to effect and perfect the transactions
contemplated by this Agreement and the other Transaction Documents.
10.6 Captions. The Article and Section captions used in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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10.7 Notices. Notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by telecopy
or by registered or certified mail or by recognized overnight courier, postage
prepaid, addressed as follows:
If to SciQuest, to:
SciQuest, Inc.
0000 XxXxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: CEO
with a copy to its counsel,
Smith, Anderson, Blount, Dorsett,
Xxxxxxxx & Xxxxxxxx, LLP
Xxxx Xxxxxx Xxx 0000
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
If to Company to:
HigherMarkets, Inc.
0000 Xxxxxx Xxxxxx
The Presidio of Xxx Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to its counsel:
Xxxxxx Xxxxx, Esq.
000 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx X0 (Zip 27401)
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
or to such other address as shall be furnished in writing by any such party in
such manner, and such notice or communication shall be deemed to have been given
as of the date so delivered, sent by telecopier or mailed.
10.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto without the other parties'
prior written consent; provided, however, that SciQuest may transfer or assign
this Agreement to an affiliate of SciQuest without Company's consent. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
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10.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.10 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
10.11 Amendments. This Agreement may be waived, amended, supplemented or
modified only by a written agreement executed by each of the parties hereto. The
parties further agree that any such amendment shall not require further consent
of the stockholders of any such party, provided that such amendment does not (a)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received by the holders of Series B Preferred Stock, (b) alter or
change any term of the certificate of incorporation of the Surviving Corporation
to be effected by the Merger, or (c) alter or change any of the terms and
conditions of this Agreement if such alteration or change would adversely affect
the holders of any class or series thereof of such constituent corporation.
10.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person or entity other than the parties hereto.
[Signatures on Following Page]
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[Signature Page to Merger Agreement]
IN WITNESS WHEREOF, SciQuest, Merger Sub and Company have caused this
Agreement to be signed by their duly authorized representatives, all as of the
date first written above.
SCIQUEST, INC. HIGHERMARKETS ACQUISITION, INC.
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxx
---------------------------------- ---------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxx
Title: President Title: President
HIGHERMARKETS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
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