EXHIBIT 10.16
MERGER AGREEMENT
THIS MERGER AGREEMENT (together with the Exhibits and Schedules hereto, the
"Agreement"), dated July 27, 1999, is entered into by and among XxxXxxxx.xxx,
Inc., a Delaware corporation ("Buyer"), SciQuest Merger Subsidiary, Inc., a
Delaware corporation and a wholly-owned subsidiary of Buyer ("SciQuest Sub"),
Internet Auctioneers International, Inc., a California corporation ("IAI"), and
Xxxx Atlas (the "Founding Stockholder").
WHEREAS, this Agreement contemplates the merger of SciQuest Sub with and
into IAI, with IAI surviving the merger as a wholly-owned subsidiary of Buyer
(the "Merger"); and
WHEREAS, in the Merger, the stockholders of IAI will receive shares of
Series E Convertible Preferred Stock, par value $0.001 per share, of Buyer (the
"Buyer Preferred Stock") in exchange for their capital stock of IAI; and
WHEREAS, this transaction is intended by the parties to be a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements hereinafter set forth, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time, SciQuest Sub shall merge with and
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into IAI through the filing of a Certificate of Merger with the Office of the
Secretary of State of the State of Delaware, in accordance with the applicable
provisions of the Delaware General Corporation Law, and an Agreement of Merger
and related Certificates of Approval of Agreement of Merger with the Office of
the Secretary of State of the State of California, in accordance with the
applicable provisions of the General Corporation Law of the State of California
(the "California Corporation Law") (the time of the later of such filings
(collectively, the "Merger Filings") is hereinafter referred to as the
"Effective Time"). From and after the Effective Time, the separate existence of
SciQuest Sub shall cease and IAI shall continue as the surviving corporation
(the "Surviving Corporation").
1.2 The Closing. The closing of the Merger (the "Closing") shall take
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place at the offices of Xxxxxxxxx & Xxxxx PLLC in Raleigh, North Carolina,
immediately prior to the filing of the Merger Filings. The Closing shall take
place within five (5) business days after the approval of the Merger by the
stockholders of IAI, or on such other date as the parties may agree (the
"Closing Date"). At the Closing, each party shall execute and deliver to the
other all such agreements, documents, and instruments as may be required or
contemplated by this Agreement
or as may be reasonably requested by any party to effect and evidence the
consummation of the Merger, all of which shall be in a form and substance
reasonably satisfactory to the other parties.
1.3 Conversion of IAI Stock; Exchange Ratio.
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(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Buyer, SciQuest Sub, IAI or their respective stockholders,
each share of the capital stock of IAI issued and outstanding immediately prior
to the Effective Time (the "IAI Shares") shall be canceled and converted
automatically into the right to receive a number of unregistered shares of Buyer
Preferred Stock equal to the Exchange Ratio (as defined in Section 1.3(b)
hereof).
(b) The Merger Shares (as defined below) shall constitute all of the
consideration (the "Merger Consideration") to be issued to the stockholders of
IAI (collectively with the Founding Stockholder, the "Stockholders") or any
other person in respect of the shares of capital stock of IAI. The Merger
Consideration shall consist of 115,000 shares of Buyer Preferred Stock (the
"Merger Shares"). The Merger Consideration shall be allocated among the
Stockholders by multiplying the number of IAI shares held by each such
Stockholder immediately prior to the Effective Time by the Exchange Ratio. The
"Exchange Ratio" means the quotient obtained by dividing the aggregate number of
Merger Shares delivered as the Merger Consideration by the number of IAI shares
outstanding immediately prior to the Effective Time. Such number of shares is
set forth for each Stockholder on Schedule 1.3 attached hereto, which schedule
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also sets forth the number of whole shares of Buyer Preferred Stock to be
received by each Stockholder. For purposes of this Agreement, the Exchange
Ratio is 0.030384696.
(c) No fractional shares will be issued as Merger Consideration. Any
Stockholder entitled to receive a fractional share but for the preceding
sentence will, in lieu of such fractional share, receive cash representing such
fractional portion of a full share of Buyer Preferred Stock. The cash payments
due to each Stockholder, if any, in respect of fractional shares are set forth
on Schedule 1.3.
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1.4 Surrender of Certificates for IAI Stock. At the Closing, each
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Stockholder shall deliver to Buyer certificates evidencing all of the IAI Shares
owned by such Stockholder in exchange for certificates representing the shares
of Buyer Preferred Stock to be delivered to such Stockholder in exchange
therefor pursuant to Section 1.3 hereof, subject to the provisions of Section
1.5 hereof and the escrows required by Section 1.8 hereof.
1.5 Delivery of Merger Consideration. Each Stockholder shall be entitled
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to receive at the Effective Time a number of shares of Buyer Preferred Stock
equal to 90% of the Merger Consideration that such Stockholder is entitled to
receive pursuant to Section 1.3 hereof, and the balance of the Merger
Consideration that such Stockholder is entitled to receive pursuant to Section
1.3 hereof shall be deposited into escrow pursuant to Section 1.8(a) hereof.
1.6 Dissenting Shares.
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(a) For purposes of this Agreement, "Dissenting Shares" means IAI
Shares held as of the Effective Time by a Stockholder who has not voted such
Shares in favor of the adoption of this Agreement and the Merger and with
respect to which appraisal shall have been duly demanded and perfected, and not
effectively withdrawn or forfeited, in accordance with the applicable provisions
of the California Corporation Law. Dissenting Shares shall not be converted into
or represent the right to receive the Merger Consideration, unless the
Stockholder holding such Dissenting Shares shall have forfeited such
Stockholder's right to appraisal under the California Corporation Law or
withdrawn such Stockholder's demand for appraisal. If such Stockholder has so
forfeited or withdrawn such Stockholder's right to appraisal of Dissenting
Shares, then, (i) as of the occurrence of such event, such Stockholder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Merger Consideration payable in
respect of such IAI Shares pursuant to Section 1.3 hereof, and (ii) promptly
following the occurrence of such event, the Buyer or the Surviving Corporation
shall deliver to such Stockholder shares of Buyer Preferred Stock representing
90% of the Merger Consideration to which such Stockholder is entitled pursuant
to Section 1.3 hereof and shall deposit with the Escrow Agent (as defined below)
shares of Buyer Preferred Stock representing the balance of the Merger
Consideration to which such Stockholder is entitled pursuant to Section 1.3
hereof.
(b) IAI shall give the Buyer (i) prompt notice of any written demands
for appraisal of any Shares, withdrawals of such demands, and any other
instruments that relate to such demands received by IAI and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the California Corporation Law. IAI shall not, except with the prior
written consent of the Buyer, make any payment with respect to any demands for
appraisal of Shares or offer to settle or settle any such demands.
1.7 Options and Warrants.
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(a) At the Effective Time, (i) each outstanding option to acquire
shares of capital stock of IAI (individually, an "Option" and collectively, the
"Options") shall be cancelled and terminated; (ii) all outstanding warrants to
acquire shares of capital stock of IAI (the "Warrants") shall be cancelled and
terminated; and (iii) all other rights to acquire shares of capital stock of IAI
shall be terminated.
(b) Immediately prior to the Effective Time, IAI shall terminate all
stock option plans and other stock or equity-related plans of IAI (the "Stock
Plans").
1.8 Escrow.
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(a) As of the Effective Time, the Buyer or SciQuest Sub shall deposit
with the Escrow Agent a number of shares of Buyer Preferred Stock equal to 10%
of the total number of shares of Buyer Preferred Stock constituting the Merger
Consideration, as described in Section 1.3 hereof, subject to Section 1.6(a)
hereof and including any amounts to be deposited into escrow pursuant to the
last sentence of Section 1.6(a) (collectively, the "Indemnification Escrowed
Shares"), for the purpose of securing the indemnification obligations of the
Stockholders (including the Founding Stockholder) set forth in Article VII of
this Agreement.
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The number of shares of Buyer Preferred Stock to be placed in the
Indemnification Escrow for each Stockholder is set forth on Schedule 1.3. The
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Indemnification Escrowed Shares shall be held by the Escrow Agent under and
pursuant to the terms of an escrow agreement, in the form of Exhibit A attached
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hereto, by and among the Buyer, the Escrow Agent, the Indemnification
Representative (each as defined herein) and each of the Stockholders (the
"Escrow Agreement"). The Indemnification Escrowed Shares shall remain in escrow
(the "Indemnification Escrow") following the Effective Time, in accordance with
the terms of the Escrow Agreement, in order to secure the Stockholders'
indemnification obligations under Article VII hereof. During such period, all
cash dividends, if any, paid with respect to the Indemnification Escrowed Shares
shall be the property of, and shall be delivered to, the Stockholders, each in
accordance with their respective ownership interests, and each of the
Stockholders shall have the sole power to exercise all voting rights pertaining
to their pro rata portion of Indemnification Escrowed Shares. All shares issued
in respect of the Indemnification Escrowed Shares (including, without
limitation, shares issued in connection with stock dividends, stock splits,
recapitalizations, reorganizations or similar transactions affecting the Buyer
Preferred Stock) shall, upon issuance, be deposited in the Indemnification
Escrow, held subject to the terms and conditions of the Escrow Agreement and
treated for all purposes as Indemnification Escrowed Shares.
(b) The adoption of this Agreement and the approval of the Merger by
the Stockholders shall constitute full approval by the Stockholders of the
Escrow Agreement and the appointment of Centura Bank as the escrow agent under
the Escrow Agreement (the "Escrow Agent") and of all of the arrangements
relating thereto, including, without limitation, the indemnification provisions
and obligations set forth in Article VII of this Agreement, the placement in
escrow of the Indemnification Escrowed Shares, and the appointment of Xxxx Xxxxx
to serve as the Indemnification Representative (the "Indemnification
Representative") to act as the representative of the Stockholders for purposes
of the Escrow Agreement and this Agreement.
1.9 Legend. Each certificate of the Buyer Preferred Stock issued in
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connection with the Merger will bear a legend to evidence restrictions upon its
transferability by virtue of the requirements of the Securities Act of 1933, as
amended (the "Securities Act") and state securities laws. The legend shall read
substantially as follows:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ALL
APPLICABLE STATE SECURITIES LAWS COVERING SUCH SHARES, COMPLIANCE WITH
AN EXEMPTION FROM SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
1.10 Conversion of Subsidiary Stock. At the Effective Time, by virtue of
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the Merger and without any action on the part of the Buyer, SciQuest Sub, IAI or
their respective
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stockholders, each share of Common Stock, having a par value per share of
$0.001, of SciQuest Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation,
and, upon surrender of the certificate(s) representing such shares of SciQuest
Sub Common Stock, the Surviving Corporation shall promptly issue to the owner
thereof a certificate representing the share of Common Stock of the Surviving
Corporation into which it has been converted. Such share shall be the only
issued and outstanding capital stock of the Surviving Corporation and shall be
owned by the Buyer.
1.11 Certificate of Incorporation. After the Effective Time, the Articles
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of Incorporation of IAI as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation until
amended in accordance with applicable law.
1.12 Bylaws. After the Effective Time, the Bylaws of IAI as in effect
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immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until amended or repealed in accordance with the provisions thereof
and applicable law.
1.13 Directors and Officers. Immediately after the Effective Time, the
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directors and officers of SciQuest Sub immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation and shall serve
in such capacities until their respective successors are duly elected and
qualified.
1.14 No Further Rights. As of the Effective Time, the Stockholders shall
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cease to have any rights as stockholders of IAI.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IAI
AND THE FOUNDING STOCKHOLDER
IAI and the Founding Stockholder, jointly and severally, represent and
warrant to Buyer as follows:
2.1 Organization and Good Standing. IAI is a corporation duly organized,
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validly existing and in good standing under the laws of the State of California.
IAI has all requisite power and authority to own, operate and/or license and
lease the IAI Assets (as defined below) and the other properties owned or used
in its business license or (including, without limitation, intangible property)
(collectively with the IAI Assets, the "IAI Business Assets") and to conduct the
operations of its business as presently conducted. IAI is duly qualified to do
business as a foreign corporation and is in good standing in the jurisdictions
listed on Schedule 2.1, which are all the jurisdictions in which it is required
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to be so qualified other than such jurisdictions where the failure to be so
qualified would not have a Material Adverse Effect (as defined in Section 2.4)
on IAI.
2.2 Authority. IAI has all requisite power and authority to execute and
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deliver this Agreement and the other documents, certificates and instruments
contemplated hereby
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(collectively with the Merger Agreement, the "Transaction Documents") to which
it is a party and to perform the transactions contemplated hereby and thereby.
The execution, delivery and performance of the Transaction Documents to which
IAI is a party, and the consummation of the transactions contemplated thereby,
have been duly and validly authorized by all necessary corporate and stockholder
action. The Founding Stockholder has all requisite power and authority to
execute and deliver the Transaction Documents to which he is a party, to perform
his obligations thereunder, and to consummate the transactions contemplated by
the Transaction Documents. The Founding Stockholder has all requisite power and
authority to vote the outstanding shares of IAI Common Stock held by the
Founding Stockholder to approve this Agreement and the transactions contemplated
hereby and in the Transaction Documents and the transactions contemplated hereby
and thereby in compliance with all applicable laws and the Articles and Bylaws
of IAI. Each of the Transaction Documents to which IAI or the Founding
Stockholder is a party has been duly executed and delivered by IAI and the
Founding Stockholder and constitutes a valid and binding obligation of each of
IAI and the Founding Stockholder, enforceable against them in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and by general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
2.3 Capitalization. The authorized capital stock of IAI consists of (a)
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10,000,000 shares of common stock (the "IAI Common Stock"), of which 3,784,800
shares are issued and outstanding and no shares are held in the treasury of IAI,
and (b) 400,000 shares of IAI Common Stock are reserved for issuance upon
exercise of Warrants and Options for the purchase of the IAI Common Stock. No
class or series of preferred stock is authorized or outstanding. Schedule 2.3
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sets forth a complete and accurate list of (i) all stockholders of IAI,
indicating the number of shares held by each stockholder, (ii) all holders of
Options and Warrants and other rights to acquire shares of capital stock of IAI
("Rights"), including the number of shares subject to each Option, Warrant and
Right, and (iii) all of the Stock Plans. All of the issued and outstanding
shares of IAI Common Stock are, and all shares that may be issued prior to the
Effective Time upon exercise of Options, Warrants and Rights will be, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which IAI or the Founding Stockholder is a party or
which are binding upon IAI or the Founding Stockholder providing for the
issuance, disposition or acquisition of any of IAI's capital stock, other than
as listed in Schedule 2.3. There are no plans providing for stock options or
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similar rights other than the Stock Plans listed in Schedule 2.3. There are no
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outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the capital stock of IAI. There are no agreements, voting
trusts, proxies or understandings with respect to the voting, or registration
under the Securities Act, of any shares of IAI other than as listed in Schedule
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2.3. All of the IAI Shares, and the outstanding Options, Warrants and Rights
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were issued in compliance with applicable federal and state securities laws.
2.4 Effect of Agreement. Except as disclosed on Schedule 2.4, the
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execution, delivery and performance of the Transaction Documents to which IAI is
a party do not and will not: (a) conflict with the [Certificate] of
Incorporation or Bylaws of IAI; (b) violate any law or
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any rule or regulation of any governmental body or administrative agency, or
conflict with any judicial or administrative order or decree relating to IAI or
the IAI Business Assets, except for any such violations or conflicts which would
not, individually or in the aggregate, have a material adverse effect on the
business, IAI Business Assets, liabilities, results of operations or condition
(financial or otherwise) (a "Material Adverse Effect") of IAI or impair the
ability of IAI or the Founding Stockholder to consummate the transactions
contemplated by this Agreement; (c) constitute a breach or default under any of
the IAI Contracts (as defined below); (d) create any security interest,
mortgage, lien, claim, or encumbrance of any kind on any of the IAI Business
Assets; or (e) except for the filing of an Agreement of Merger and related
Certificates of Approval of Agreement of Merger with the Secretary of State of
the State of California and a Certificate of Merger with the Secretary of State
of the State of Delaware, require any consent, notice to or filing with any
governmental authority or administrative agency or any third party on behalf of
IAI or the Founding Stockholder. The matters described on Schedule 2.4 are
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referred to as the "IAI Required Consents."
2.5 Financials; Books. Attached hereto as Schedule 2.5 are true and
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complete copies of the unaudited balance sheet (including detailed schedules of
all accounts thereon), statements of operations, changes in stockholders' equity
and cash flows for the fiscal years ended December 31, 1997 and December 31,
1998, and the unaudited balance sheet (including detailed schedules of all
accounts thereon) and statements of operations, changes in stockholders' equity
and cash flows for the six month period ended June 30, 1999 (collectively, the
"IAI Financial Statements"). The Financial Statements (a) are true, complete
and correct in all material respects; (b) are in accordance with the books and
records of IAI; and (c) present fairly, in all material respects, the assets,
liabilities and financial condition of IAI as of the respective dates thereof,
and the results of operations for the periods then ending applied on a
consistent basis throughout the periods involved. IAI has no liability or
obligation that is not reflected or reserved against on the balance sheet for
the twelve months ending December 31, 1998 (the "IAI Balance Sheet"), except for
those that are not required by generally accepted accounting principles to be
included therein or those that have been incurred in the ordinary course of
business since the date of the IAI Balance Sheet (none of which may reasonably
be expected to have a Material Adverse Effect on IAI). The books and records of
IAI are true, accurate and complete in all material respects and have been
maintained on a consistent basis.
2.6 Title to and Sufficiency of Assets and other Property. Set forth on
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Schedule 2.6 is a true and complete list of all material inventory, machinery,
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equipment, furniture, office equipment, supplies, materials, vehicles and other
material items of tangible personal property of every kind owned by IAI and used
in connection with its business (the "IAI Assets"). IAI has good and marketable
title to all of the IAI Business Assets, free and clear of all security
interests, mortgages, liens, claims and encumbrances of every kind except for
liens for current taxes not yet due and payable and as disclosed on Schedule
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2.6. The IAI Business Assets constitute all of the assets of any nature
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required to operate IAI's business in the manner presently operated by IAI. The
IAI Assets (a) are in good operating order, condition and repair (ordinary wear
and tear excepted), (b) are suitable for use in the ordinary course of business
of IAI's business and (c) are free from material defects.
2.7 Real Property. IAI neither owns nor leases any real property.
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2.8 Contracts and Leases. Schedule 2.8 lists all contracts, commitments,
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agreements, understandings, obligations, whether written or oral (including,
without limitation, agreements for the borrowing of money or the extension of
credit that involve a commitment or expenditure by, or revenue to, IAI in excess
of $1,000.00, and agreements with employees, consultants and other contractors),
leases (including, without limitation, leases for the IAI Leased Real Property)
and licenses, whether written or oral, to which IAI or the Founding Stockholder
(on behalf of IAI) is party or by which IAI or the IAI Business Assets or the
Founding Stockholder (on behalf of IAI) is bound (collectively, the "IAI
Contracts"). Each of the IAI Contracts is valid, binding and enforceable in
accordance with its terms and is in full force and effect, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law).
There are no existing defaults on the part of IAI or, to the knowledge of IAI
and the Founding Stockholder, any other party to the IAI Contracts, and, to the
knowledge of IAI and the Founding Stockholder, no events or circumstances have
occurred which, with or without notice or lapse of time or both, would
constitute defaults under any of the IAI Contracts. The execution, delivery and
performance of the Transaction Documents do not and will not, with respect to
any IAI Contract, (a) constitute a default or accelerate the obligations
thereunder, (b) require the consent of any person or party, except for the IAI
Required Consents, or (c) affect the enforceability or validity thereof or the
terms thereof.
2.9 Receivables. Attached hereto as Schedule 2.9 hereto is a true,
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complete and accurate detailed listing of all accounts receivable of IAI (the
"IAI Receivables"). The IAI Receivables are, and will be at the Effective Time,
legal, valid and binding obligations and arose in the ordinary course of
business. To the best of IAI's and the Founding Stockholder's knowledge, the
IAI Receivables are not subject to any counterclaim, set off, defense, security
interest, claim or encumbrance. IAI has made available to Buyer complete and
correct copies of all instruments, documents and agreements evidencing such IAI
Receivables, including, without limitation, an aging schedule related to the IAI
Receivables.
2.10 Intellectual Property.
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(a) Intellectual Property Rights. Schedule 2.10(a) hereto sets forth
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a complete and correct list of (i) all patents (the "IAI Patents"), trademarks,
trade names (including all federal and state registrations pertaining thereto,
or applications for such registrations and a description of the status of such
applications), proprietary databases and registered copyrights owned by IAI
(collectively with all unregistered copyrights, the "IAI Proprietary
Intellectual Property") and (ii) all patents, trademarks, trade names,
copyrights, technology and processes used by IAI 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
"IAI Licensed Intellectual Property", and together with the IAI Proprietary
Intellectual Property referred to as "IAI Intellectual Property"). Each of the
federal, state and other governmental registrations with any country pertaining
to the IAI Proprietary Intellectual Property is valid and in full force and
effect. IAI owns, or has the right to use pursuant to valid and effective
agreements, all IAI Intellectual Property, and the consummation of the
transactions contemplated hereby will not materially adversely alter or impair
any such rights. No claims are pending
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against IAI by any person with respect to the use of any IAI Intellectual
Property or challenging or questioning the validity or effectiveness of any
license or agreement relating to the same that would be likely to have a
Material Adverse Effect on IAI, and, to the knowledge of IAI and the Founding
Stockholder, the current use by IAI of the Intellectual Property does not in any
material respect infringe upon the rights of any third party. Schedule 2.10(a)
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sets forth a list of all jurisdictions in which IAI is operating under a trade
name, and each jurisdiction in which any such trade name is registered. No IAI
Patent has been or is now involved in any interference, reissue, reexamination
or opposition proceeding of which IAI has received notice, nor is IAI aware of
any potentially interfering patent or patent application of any third party. To
the knowledge of IAI, no person or entity is presently selling or marketing a
product which is covered by the Patents, and, to the knowledge of IAI, the
Patents have not been challenged or threatened in any way. No current or former
IAI employee is named as an inventor on any pending patent application. All of
the IAI Patents are currently in compliance with formal legal requirements
(including payment of filing, examination and maintenance fees and proofs of
working or use) and to the knowledge of IAI, there is no currently existing
circumstance which would render the IAI Patents invalid or unenforceable, and
they are not subject to any maintenance fees or taxes or actions falling due
within ninety days after the date of Closing.
(b) IAI Computer Software and Hardware.
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(i) Schedule 2.10(b) hereto sets forth a true and complete list
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of: (a) all software and associated documentation owned by or developed by or
for IAI material to the business of IAI (such items set forth on Schedule
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2.10(b) are hereinafter referred to as the "IAI Proprietary Software"); (b) all
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software (other than the IAI Proprietary Software and "shrink-wrap" software)
used by IAI or its employees in connection with the business of IAI (the "IAI
Licensed Software" and together with the IAI Proprietary Software, the "IAI
Software"). IAI has all rights that are necessary or appropriate to distribute,
license or sublicense the IAI Software to third parties and to appoint others to
do any of the foregoing to the extent that distribution, licensing or
sublicensing of such software is necessary to the conduct of business of IAI.
IAI has or has the right to use all technical and descriptive materials to run
its business in accordance with its historical practices, except as would not
have a Material Adverse Effect on IAI. The IAI Proprietary Software consists of:
(a) source and object code embodied in magnetic media; and (b) all Proprietary
development and procedural tools, documentation and manuals necessary to
maintain, enhance, develop derivative works, support and service the IAI
Proprietary Software in accordance with historical practice, including licenses
to use compilers, assemblers, libraries and other aids.
(ii) Except as disclosed on Schedule 2.10(b), IAI has sole and
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exclusive rights, title and interest in and to all intellectual property rights
in the IAI Proprietary Software, including all worldwide copyrights, trade
secrets, trademarks, moral rights and proprietary and confidential information
rights therein. The IAI Proprietary Software is free and clear of all liens,
claims and encumbrances. The use by IAI of the IAI Licensed Software and the use
and distribution of the IAI Proprietary Software in the manner currently used
and distributed by IAI complies with the terms of all contracts and agreements
to which IAI is a party or by which it is bound and is in compliance 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, except where such failure to comply would not have a Material
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Adverse Effect. IAI has been granted under the license agreements relating to
the IAI Licensed Software (the "IAI License Agreements") valid and subsisting
license rights with respect to all software comprising the IAI Licensed Software
and such rights are sufficient in all respects to conduct the business of IAI as
presently conducted and as currently proposed to be conducted. IAI is in
compliance with each of the terms and conditions of each of the IAI License
Agreements except to the extent failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect on IAI. Except at disclosed
on Schedule 2.10(b), in the case of any commercially available "shrink-wrap"
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software programs (such as Lotus 1-2-3 or Microsoft Word), IAI has not made and
is not, to the knowledge of IAI and the Founding Stockholder, using any
unauthorized copies of any such software programs and, to the knowledge of IAI,
none of the employees, agents or representatives of IAI have made or are using
any such unauthorized copies, except as would not have a Material Adverse Effect
on IAI.
(iii) To the best of IAI's and the Founding Stockholder's
knowledge, the IAI Proprietary Software and such of the IAI Licensed Software as
is bundled with or is otherwise an integral part of the IAI 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) IAI has not granted rights in the IAI Software to any third
party other than as set forth on Schedule 2.10(b).
----------------
(v) Except as disclosed on Schedule 2.10(b), there have been no
----------------
problems experienced by IAI in the past twelve (12) months with respect to the
IAI Software, the related computer hardware used by IAI in its operations or the
provision of services to IAI clients which have arisen outside the ordinary
course of business and would have a Material Adverse Effect on IAI.
(vi) Except as disclosed on Schedule 2.10(b), the IAI
----------------
Proprietary Software is, and such of the IAI Licensed Software as is bundled
with or is otherwise an integral part of the IAI Proprietary Software (to the
knowledge of IAI and the Founding Stockholder, after due inquiry of the
licensors of such IAI Licensed Software) is, "Millennium Compliant" (defined
below). For the purposes of this Agreement, "Millennium Compliant" means that
such software accurately accepts and processes date/time data (including, but
not limited to, calculating, comparing, sorting and sequencing) ("Processes")
and returns and displays date/time data in a consistent manner and without
interruption regardless of dates used, whether before, on or after January 1,
2000, and regardless of the date in time which such Processes are performed, and
such software accurately processes all leap year calculations, including without
limitation recognizing the year 2000 as a leap year.
(vii) Prior to any export or re-export either directly or
indirectly by IAI of any software or other technical data, IAI 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.
10
2.11 Litigation. There are no claims, actions, suits or investigations
----------
pending, or to the knowledge of IAI and the Founding Stockholder, threatened,
against IAI or its business or affecting the IAI Business Assets or against the
Founding Stockholder.
2.12 Compliance with Laws; Permits. There is not outstanding or, to the
-----------------------------
knowledge of IAI and the Founding Stockholder, threatened, any order or decree
of any court, governmental agency or arbitration tribunal against or involving
IAI or its business or the IAI Business Assets. IAI is currently, and has been
at all times, in full compliance with all laws, rules, regulations and licensing
requirements of all federal, state, local and, to the best knowledge of IAI and
the Founding Stockholder, foreign authorities applicable to the IAI Business
Assets and operations of its business, except for failures to comply which would
not, individually or in the aggregate, have a Material Adverse Effect on IAI.
IAI has obtained all permits, certificates and licenses required for the conduct
of its business and the ownership of the IAI Business Assets, all of which are
described on Schedule 2.12 (the "IAI Permits"). IAI is not in violation of any
-------------
of the IAI Permits, and no proceedings are pending or, to the knowledge of IAI
and the Founding Stockholder, threatened to revoke or limit any IAI Permit.
2.13 Taxes.
-----
(a) IAI has properly completed and timely filed all federal, state,
local and foreign tax returns and reports required to be filed by it (the "Tax
Returns"). All Tax Returns are accurate, complete and correct as filed, and IAI
has paid in full or made adequate provision in the IAI Financial Statements for
all amounts shown to be due thereon. IAI is not delinquent in the payment of
any tax assessment or other governmental charge (including, without limitation,
withholding taxes).
(b) IAI has not been notified by any governmental authority that an
audit or review of any tax matter is contemplated. IAI knows of no tax
deficiency or claim for additional taxes asserted or threatened to be asserted
against it by any taxing authority and IAI knows of no grounds for any such
assessment. No extension of time with respect to any date on which a tax return
was or is to be filed by IAI is in force, and no waiver or agreement by IAI is
in force for the extension of time for the assessment or payment of any tax.
For purposes of this Agreement, the term "tax" includes all federal, state,
local and foreign taxes or assessments, including income, sales, gross receipts,
excise, use, value added, royalty franchise, payroll, withholding, property and
import taxes and any interest or penalties applicable thereto.
(c) The Seller has not agreed to, and is not required to, make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(d) The Seller is not and has never been a member of a consolidated
group or combined group or combined group of corporations.
(e) There has been no change in ownership of the Seller that would
limit the Buyer's ability to utilize the net operating losses of the Seller.
11
2.14 Insurance. Schedule 2.14 describes all insurance policies maintained
--------- -------------
by IAI with respect to its business and the IAI Business Assets. Such policies
are valid, binding and enforceable in accordance with their terms, are in full
force and effect, and all premiums due thereon have been paid.
2.15 Employment and Labor Matters. No employees of IAI have entered into
----------------------------
employment or other agreements regarding compensation with IAI. No employees of
IAI have been or are represented by a union or other labor organization or
covered by any collective bargaining agreement. There is no unfair labor
practice complaint, labor organizational effort, strike, slowdown or similar
labor matter pending or, to the knowledge of IAI and the Founding Stockholder,
threatened against IAI or its business. IAI is in compliance with all federal,
state and local laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, and there is
no unfair labor practice complaint against IAI pending or, to the knowledge of
IAI and the Founding Stockholder, threatened. Upon termination of the
employment of any employees, neither IAI nor the Buyer nor the Surviving
Corporation will by reason of the Merger or anything done prior to the Effective
Time be liable to any of such employees for severance pay or any other payments
(other than accrued salary, vacation or sick pay in accordance with IAI's normal
policies). Set forth on Schedule 2.15 is a true and complete list of all
-------------
current directors, officers, employees or consultants of IAI, including, in each
case, name, current job title, base salary, bonus potential, commissions, and
termination obligations.
2.16 Employee Benefits. Except as set forth on Schedule 2.16, there are no
----------------- -------------
Plans, as defined below, contributed to, maintained or sponsored by IAI, or to
which IAI is obligated to contribute or with respect to which IAI has any
liability or potential liability, whether direct or indirect (including all
Plans contributed to, maintained or sponsored by each member of the controlled
group of companies, within the meaning of Sections 414(b), 414(c), and 414(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), of which IAI is a
member, to the extent IAI has any potential liability with respect to such
Plans). For purposes of this Agreement, the term "Plans" shall mean: (a)
employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not funded and
whether or not terminated, (b) employment agreements, and (c) personnel policies
or fringe benefit plans, policies, programs and arrangements, whether or not
subject to ERISA, whether or not funded, and whether or not terminated,
including without limitation, stock bonus, deferred compensation, pension,
severance, bonus, vacation, travel, incentive, and health, disability and
welfare plans.
2.17 Absence of Changes. Except as disclosed on Schedule 2.17, since
------------------ -------------
December 31, 1998, IAI has conducted the operations of its business only in the
ordinary course, and has not:
(a) Suffered any damage to any IAI Business Asset, whether or not
covered by insurance, except damage that could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on IAI;
12
(b) Sold or disposed of any IAI Business Assets, except such sales or
dispositions made in the ordinary course of business that would not, either
individually or in the aggregate, have a Material Adverse Effect on IAI;
(c) Made any general wage increase for its employees as a group other
than in the ordinary course of business;
(d) Amended or terminated any IAI Contract;
(e) Incurred any obligation or liability, except normal trade or
business obligations incurred in the ordinary course of business;
(f) Introduced any new method of management, operations or
accounting;
(g) Suffered any adverse change in the condition (financial or
otherwise), or any other event, that might reasonably be expected to have
a Material Adverse Effect on IAI; or
(h) Agreed, whether in writing or otherwise, to take any action
described in this Section 2.17.
2.18 Related Party Transactions. Except as set forth on Schedule 2.18,
-------------------------- -------------
the IAI Contracts do not include any agreement with or any other commitment to
(a) any officer or director of IAI; (b) any person related by blood or marriage
to any such officer or director; or (c) any corporation, partnership, trust or
other entity in which IAI or any such officer, director or related person has an
equity or participating interest, and no such other agreement or commitment
exists.
2.19 Disclosure. No representation, warranty or statement made by IAI or
----------
the Founding Stockholder in this Agreement or the exhibits or schedules hereto,
or in any financial statement, other written financial information or schedules,
or any other document, certificate or other instrument furnished or to be
furnished to Buyer by or on behalf of IAI at or prior to the Closing pursuant to
this Agreement, contains or will contain any untrue statement of a Material
fact, or omits to state any material fact necessary, in light of the
circumstances in which they were made, to make the statements contained herein
or therein not misleading. There is no event, fact or condition that has had,
or that reasonably could be expected to have, a material Adverse Effect on IAI,
that has not been set forth in this Agreement or the Schedules hereto.
2.20 Subsidiaries. IAI has no wholly owned or partially owned
------------
subsidiaries.
2.21 Brokers' Fees. Neither IAI nor the Founding Stockholder has retained
-------------
any broker, finder or agent, or has any liability or obligation, nor will either
of them, or anyone on their behalf, incur any liability or obligation, to pay
any fees, commissions or similar payments to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to IAI as follows:
3.1 Organization and Good Standing. Buyer is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite power and authority to own, operate and/or lease the
Buyer Assets (as defined below) and the other properties owned or used in its
business (including, without limitation, intangible property) (collectively with
the Buyer Assets, the "Buyer Business Assets") and to conduct the operations of
its business as presently conducted. Buyer is duly qualified to do business as a
foreign corporation and is in good standing in the jurisdictions listed on
Schedule 3.1, which are all the jurisdictions in which it is required to be so
------------
qualified other than such jurisdictions where the failure to be so qualified
would not have a Material Adverse Effect on Buyer.
3.2 Authority. Each of Buyer and SciQuest Sub has all requisite power and
---------
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the transactions contemplated thereby. The execution,
delivery and performance of the Transaction Documents, and the consummation of
the transactions contemplated thereby, have been duly and validly authorized by
all necessary corporate and stockholder action on the part of each of Buyer and
SciQuest Sub. Each of the Transaction Documents to which Buyer or SciQuest Sub
is a party has been duly executed and delivered by such party and each
constitutes a valid and binding obligation of Buyer and SciQuest Sub,
enforceable against them in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law).
3.3 Capitalization. Immediately prior to the Effective Time, the
--------------
authorized capital stock of Buyer consists of (a) 20,000,000 shares of common
stock, $0.001 par value (the "Buyer Common Stock"), of which 19,749,980 shares
are designated Class A Common Stock, 2,370,726 shares of which are issued and
outstanding, 250,020 shares are designated Class B Common Stock, 250,020 shares
of which are issued and outstanding and no shares are held in the treasury of
Buyer; and (b) 10,000,000 shares of Preferred Stock, $0.001 par value ("Buyer
Preferred"), of which 769,231 shares are designated Series A Convertible
Preferred Stock, 769,221 shares of which are issued and outstanding, of which
3,835,180 shares are designated Series B Convertible Preferred Stock, 3,777,626
shares of which are issued and outstanding, of which 700,000 shares are
designated Series C Convertible Preferred Stock, 635,813 shares of which are
issued and outstanding, of which 3,312,720 shares are designated Series D
Convertible Preferred Stock, 3,312,720 shares of which are issued and
outstanding, and of which 126,500 shares are designated Series E Convertible
Preferred Stock, none of which are issued and outstanding. 1,693,489 shares of
Class A Common Stock are reserved for issuance upon the exercise of outstanding
warrants, options and other rights (collectively, "Rights") for the purchase of
shares of capital stock of Buyer, and 8,745,400 shares of Class A Common Stock
are reserved for issuance upon the conversion of the Buyer Preferred and any
other securities convertible into shares of Class A Common Stock. Schedule 3.3
------------
sets forth a complete and accurate list of (i) all
14
stockholders of Buyer, indicating the number of shares held by each stockholder,
(ii) all holders of Rights, including the number of shares subject to each
Right, and (iii) all of stock option and other stock and equity-related plans of
Buyer. All of the issued and outstanding shares are, and all shares that may be
issued prior to the Effective Time upon exercise of Rights, will be, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which Buyer is a party or which are binding upon
Buyer providing for the issuance, disposition or acquisition of any of its
capital stock, other than as listed in Schedule 3.3. There are no plans
------------
providing for stock options or similar rights other than the Stock Plans listed
in Schedule 3.3. There are with respect to the capital stock of Buyer. Except
------------
as set forth on Schedule 3.3, there are no agreements, voting trusts, proxies or
------------
understandings with respect to the voting, or registration under the Securities
Act of any shares of Buyer. All of the issued and outstanding shares of capital
stock of Buyer, and the outstanding Rights, were issued in compliance with
applicable federal and state securities laws.
3.4 Effect of Agreement. Except as disclosed on Schedule 3.4, the
------------------- ------------
execution, delivery and performance of the Transaction Documents to which Buyer
is a party do not and will not: (a) conflict with the Certificate of
Incorporation or Bylaws of Buyer; (b) violate any law or any rule or regulation
of any governmental body or administrative agency, or conflict with any judicial
or administrative order or decree relating to Buyer or the Buyer Business
Assets, except for any such violations or conflicts which would not,
individually or in the aggregate, have a Material Adverse Effect on Buyer or
impair the ability of Buyer to consummate the transactions contemplated by this
Agreement; (c) constitute a breach or default under any of the Buyer Contracts
(as defined below); (d) create any security interest, mortgage, lien, claim, or
encumbrance of any kind on any of the Buyer Business Assets; or (e) except for
the filing of an Agreement of Merger and related Certificates of Approval of
Agreement of Merger with the Secretary of State of the State of California and a
Certificate of Merger with the Secretary of State of the State of Delaware,
respectively, require any consent, notice to or filing with any governmental
authority or administrative agency or any third party on behalf of Buyer. The
matters described on Schedule 3.4 are referred to as the "Buyer Required
------------
Consents."
3.5 Litigation. Except as set forth on Schedule 3.5, there are no claims,
---------- ------------
actions, suits or investigations pending, or to the knowledge of Buyer,
threatened, against Buyer or its business or affecting the Buyer Business
Assets.
3.6 Issuance of Series D Preferred Stock. In May and June 1999, Buyer
------------------------------------
received gross proceeds in the aggregate amount of $37,506,615.00 from the
issuance and sale of shares of its Series D Convertible Preferred Stock (and
attached warrants).
3.7 Disclosure. No representation, warranty or statement made by Buyer in
----------
this Agreement or the exhibits or schedules hereto, or in any other document,
certificate or other instrument furnished or to be furnished to IAI pursuant to
this Agreement, contains or will contain any untrue statement of a material
fact, or omits to state any material fact necessary, in light of the
circumstances in which they were made, to make the statements contained herein
or therein not misleading.
15
3.8 Brokers' Fees. Buyer has not retained any broker, finder or agent,
-------------
nor has any liability or obligation, nor will it, or anyone on its behalf, incur
any liability or obligation, to pay any fees, commissions or similar payments to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
3.9 Buyer Preferred Stock. The shares of Buyer Preferred Stock to be
---------------------
issued in connection with the Merger, when delivered hereunder, will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances. The shares of Buyer Common issuable upon conversion of the Buyer
Preferred Stock have been duly and validly reserved and, upon issuance in
accordance with the Certificate of Incorporation of the Buyer, such shares will
be validly issued, fully paid and nonassessable.
ARTICLE IV
COVENANTS
4.1 Conduct of Business. Between the date of this Agreement and the
-------------------
Effective Time, IAI and the Founding Stockholder shall:
(a) Conduct the operations of IAI's business in the normal and
customary manner in the ordinary course of business;
(b) Maintain the IAI Assets in good operating order, repair and
condition;
(c) Keep in full force and effect the insurance described in Section
2.15;
(d) Perform all of its obligations under all IAI Contracts and not
amend any provision thereof other than amendments that involve a commitment
or expenditure, or revenue to IAI, of less than $500.00;
(e) Use its best efforts to preserve IAI's organization intact and
maintain its relationships with its employees, suppliers and customers;
(f) Promptly advise Buyer of any adverse change in the condition
(financial or otherwise) of IAI's business or the IAI Business Assets;
(g) Promptly advise Buyer of the occurrence of any event or
circumstance which affects the consummation of the transactions
contemplated by this Agreement or which, if in existence on the date of
this Agreement, would have been required to have been disclosed in a
Schedule to this Agreement;
(h) Not create or permit to exist any security interest, mortgage,
lien, claim, or encumbrance of any kind with respect to any of the IAI
Business Assets;
(i) Not sell or dispose of any of the IAI Business Assets, except in
the ordinary course of business of IAI's business;
16
(j) Promptly advise Buyer of any change in the list of employees
referred to in Section 2.16 or in the compensation payable to any such
employee;
(k) Not make any capital improvement or expenditure without the prior
consent of Buyer, other than improvements or expenditures in the ordinary
course of business in amounts of less than $500.00; and
(l) Maintain and collect the IAI Receivables and extend credit terms
to its customers in the ordinary course of business consistent with past
practices.
4.2 Access and Information. IAI and the Founding Stockholder shall permit
----------------------
Buyer and its counsel, accountants and other representatives full access during
normal business hours to all the properties, assets, books, records, agreements
and other documents of IAI. IAI shall furnish to Buyer and its representatives
all information concerning the IAI Business Assets or IAI's business as Buyer
may request. IAI shall permit and facilitate communications between Buyer and
IAI's suppliers, customers, landlords and other persons having relationships
with IAI's business.
4.3 No Other Solicitations. Until the earlier of the Effective Time or
----------------------
the termination of this Agreement, IAI and the Founding Stockholder shall not,
and IAI and the Founding Stockholder shall use their best efforts to cause each
of their respective officers, directors, employees, representatives and agents
or affiliates of such officers, directors, employees, representatives and agents
not to, directly or indirectly, solicit, initiate or encourage any offer,
proposal or inquiry from, or engage in any discussions or negotiations with, any
person regarding the sale or lease of the capital stock of IAI, its business, or
any of the IAI Business Assets. IAI shall immediately notify Buyer of, and
shall disclose to Buyer all details of, any inquiries, discussions or
negotiations of the nature described above.
4.4 Stockholders' Consent.
---------------------
(a) IAI shall, acting through its Board of Directors and in accordance
with the California Corporation Law, as soon as practicable, obtain the
affirmative vote at a meeting of the Stockholders duly noticed and held or
solicit and obtain written consents of the required number of the Stockholders
for the purpose of adopting and approving this Agreement (including without
limitation the matters referred to in Section 1.8 and Article VII hereof) and
the approval of the Merger in accordance with the provisions of the IAI Articles
of Incorporation and the California Corporation Law (the "Stockholders' Vote").
In connection with the Stockholders' Vote, IAI, acting through its Board of
Directors, shall recommend that the Stockholders of IAI consent to the adoption
of this Agreement and the approval of the Merger, shall prepare and send any
information required to be provided to the Stockholders in accordance with
applicable law and not include in the materials sent to the Stockholders any
false or misleading statement or omit to state any fact required to be stated in
order to make the statements therein not false or misleading, and shall
otherwise use its best efforts to obtain the Stockholders' Vote and any other
consents or approvals from the Stockholders necessary to consummate the
transactions contemplated herein.
17
(b) The Founding Stockholder agrees to (i) vote all shares that are
beneficially owned by him, or for which he has voting authority, in favor of the
adoption of this Agreement and the approval of the Merger and (ii) otherwise use
his best efforts to obtain the Stockholders' Vote.
4.5 Agreements. IAI shall use all reasonable efforts to deliver to the
----------
Buyer prior to the Closing Date all agreements of the Stockholders required to
be executed by them under this Agreement.
4.6 Repayment of Working Capital Loans. Within ninety (90) days after the
----------------------------------
date hereof, Buyer will pay in cash the principal amounts owed pursuant to
certain loans made by certain of the Stockholders and other parties to IAI as
set forth on Schedule 4.6 hereto, up to a maximum of $96,000 (plus accrued
------------
interest on such principal amounts).
4.7 Further Assurances. From and after the Closing Date, the parties
------------------
shall take such steps and execute such documents, and instruments as may be
reasonably required to make effective the transactions contemplated hereby.
4.8 Confidentiality. In recognition of the confidential nature of certain
---------------
of the information which will be provided to any party by the other parties,
each of Buyer, IAI and the Founding Stockholder agrees to retain in confidence,
and to require its directors, officers, employees, consultants, professional
representatives and agents (collectively, its "Representatives") to retain in
confidence all information transmitted or disclosed to it by any other party,
and further agrees that it shall not use for its own benefit (other than in
connection with the transactions contemplated by this Agreement) and shall not
use or disclose to any third party, or permit the use or disclosure to any third
party of, any information obtained from or revealed by any other party, except
that each of Buyer, IAI and the Founding Stockholder may disclose the
information to those of its Representatives who need the information for the
proper performance of their assigned duties with respect to the consummation of
the transactions contemplated hereby. In making such information available to
its Representatives, each of Buyer, IAI and the Founding Stockholder shall take
all precautions to ensure that its Representatives use the information only as
permitted hereby. Notwithstanding anything to the contrary in the foregoing
provisions, such information may be disclosed: (a) where it is legally
necessary, to any regulatory authorities or governmental agencies; (b) if it is
required by court order or decree or applicable law; (c) if it is ascertainable
or obtained from public or published information; (d) if it is received from a
third party not known to the recipient to be under an obligation to keep such
information confidential; or (e) if the recipient can demonstrate that such
information was in its possession prior to disclosure thereof in connection with
this Agreement. If any party is required to make disclosure of any such
information by operation of law, such disclosing party will give the other
parties prior notice of the making of such disclosure and will use all
reasonable efforts to afford such other parties an opportunity to contest the
making of such disclosure. In the event that the Closing does not occur, each
of Buyer, IAI and the Founding Stockholder shall immediately deliver, or cause
to be delivered, to the other (without retaining any copies thereof) any and all
documents, statements or other written information obtained from the other that
contain confidential information.
18
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S AND
SCIQUEST SUB'S OBLIGATIONS
The obligations of Buyer and SciQuest Sub to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions on or before the Effective Time:
5.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of IAI and the Founding Stockholder contained in this Agreement shall
have been true and correct on date of this Agreement and shall be true and
correct as of the Effective Time as though made on and as of the Effective Time,
and IAI and the Founding Stockholder shall have duly performed and complied with
all covenants and required by this Agreement to be performed or complied with by
it or them on or prior to the Closing.
5.2 Absence of Litigation. As of the Effective Time, no action or
---------------------
proceeding shall be pending or, in the reasonable opinion of IAI or the Founding
Stockholder, threatened by or before any court or other governmental body or
agency seeking to restrain, prohibit or invalidate the transactions contemplated
by this Agreement or which would adversely affect the right of Buyer to own,
operate or control the IAI Business Assets or IAI's business after the Effective
Time.
5.3 Absence of Change. Between the date of this Agreement and the
-----------------
Effective Time, no adverse change shall have occurred in the business,
operations or financial or other condition of IAI, its business or the IAI
Business Assets, nor shall there have occurred any casualty loss or destruction
of, or damage to, any of the IAI Assets.
5.4 Consents and Approvals. All (a) IAI Required Consents, (b) licenses,
----------------------
(c) other orders or notifications of, or registrations, declarations or filings
with, or expiration of waiting periods imposed by, any applicable governmental
or judicial authority and (d) consents, approvals, authorizations or
notifications of any other third parties, all as required in connection with
consummation of the transactions contemplated by this Agreement, including the
operation of IAI's business by Buyer, shall have been made or obtained or shall
have occurred.
5.5 Stockholders' Vote; Dissenting Shares. This Agreement and the Merger
-------------------------------------
shall have received the Stockholders' Vote and the number of Dissenting Shares
shall not exceed 4% of the number of outstanding shares of IAI Stock as of the
Effective Time.
5.6 Compliance Certificate. Each of IAI and the Founding Stockholder
----------------------
shall have delivered to Buyer and SciQuest Sub a certificate (without
qualification as to knowledge or materiality or otherwise except as may be set
forth in the representations and warranties themselves) to the effect that each
of the conditions specified in Sections 5.1 through 5.5 is satisfied in all
respects.
19
5.7 Secretary's Certificate. IAI shall have delivered to Buyer and
-----------------------
SciQuest Sub a certificate of the Secretary of IAI, dated as of the Effective
Time, in form and substance reasonably satisfactory to Buyer and SciQuest Sub,
certifying (i) the names of its officers authorized to sign this Agreement, the
certificates and the other documents and instruments delivered pursuant to this
Agreement by IAI or any of its officers, together with true signatures of such
officers; (ii) that the copies of the Articles of Incorporation and Bylaws of
IAI attached thereto are true, correct and complete; (iii) that the resolutions
of the Board of Directors of IAI attached thereto evidencing the approval of
this Agreement and the transactions contemplated herein were duly adopted, have
not been amended or rescinded and are in full force and effect; and (iv) that
the resolutions of the Stockholders attached thereto evidencing approval of the
Agreement and the transactions contemplated herein were duly adopted, have not
been rescinded or amended and are in full force and effect; (v) that notice of
the action of the Stockholders, if taken by written consent of fewer than all of
the Stockholders, has been sent to the remaining Stockholders in accordance with
the applicable provisions of the General Corporation Law of the State of
California; and (vi) that the number of Dissenting Shares does not exceed four
percent (4%) of the number of outstanding shares of IAI as of the Effective
Time.
5.8 Legal Opinion. Buyer and SciQuest Sub shall have received an opinion
-------------
of Xxxxxxx & Xxxxxxx, counsel to IAI, dated as of the Effective Time, in the
form of Exhibit B attached hereto.
---------
5.9 Inventions Agreements. Buyer shall have received a Non-Disclosure and
---------------------
Invention Agreement in the form of Exhibit C attached hereto (the "Inventions
---------
Agreement"), duly executed by all employees of IAI.
5.10 Stockholder Investment Representation Letter. Buyer shall have
--------------------------------------------
received a Stockholder Investment Representation Letter in the form of Exhibit D
---------
attached hereto, duly executed by each of the Stockholders.
5.11 Escrow Agreement. Buyer shall have received the Escrow Agreement,
----------------
duly executed by the Indemnification Representative and each of the
Stockholders.
5.12 IAI Stock Certificates. Each of the Stockholders shall have endorsed
----------------------
in blank or executed stock powers with respect to the certificates evidencing
the IAI Shares.
5.13 SciQuest Sub Stock Certificate. Buyer shall have received a
------------------------------
certificate evidencing one (1) share of IAI Common Stock, dated the Effective
Time and issued in the name of Buyer.
5.14 Resignations. The Buyer shall have received resignations, duly
------------
executed, by all officers and directors of IAI, of their respective positions
with IAI, effective as of the Effective Time.
5.15 Termination Agreement. Buyer shall have received an agreement in
---------------------
form satisfactory to Buyer terminating all rights under the Stock Buy-Sell
Agreement dated September
20
17, 1997, as amended, by and between IAI and the other signatories thereto, and
all related agreements, duly executed by IAI and the other signatories thereto.
5.16 Stock Plans. Buyer shall have received written evidence,
-----------
satisfactory to Buyer, of the termination of all Stock Plans.
5.17 Employment / Consulting Agreements. Buyer shall have received
----------------------------------
employment and/or consulting agreement in forms reasonably satisfactory to the
Buyer (the "Compensation Agreements"), duly executed by each of the Founding
Stockholder and such other individuals as Buyer may request.
5.18 Stockholder Agreements. Buyer shall have received Confidentiality
----------------------
Agreements between each of the Stockholders and the Buyer, in the form of
Exhibit E attached hereto (the "Stockholder Agreements"), duly executed by each
---------
of the Stockholders.
5.19 Registration Rights Agreement. Buyer shall have received a
-----------------------------
Registration Rights Agreement by and between the Buyer and the Stockholders in
the form of Exhibit F attached hereto (the "Registration Rights Agreement"),
---------
duly executed by all of the Stockholders.
5.20 Buyer Preferred Stock Powers. Buyer shall have received executed
----------------------------
stock powers from each of the Stockholders with respect to the Merger Shares.
5.21. Cybernet Agreement. Buyer shall have received an agreement by and
------------------
between IAI and Cybernet Software Systems, Inc. ("Cybernet") in the form of
Exhibit G attached hereto (the "Cybernet Agreement"), duly executed by IAI and
---------
Cybernet.
5.22 Xxxx Agreement. Buyer shall have received an agreement by and between
--------------
IAI and Xxxxxx Xxxx("Xxxx"), on behalf of Xxxx'x firm, in the form of Exhibit H
---------
attached hereto, duly executed by IAI and Xxxx, as the authorized representative
of such firm.
5.23 Other Documents. Buyer shall have received such other agreements,
---------------
documents, and instruments as Buyer has reasonably requested to effect and
evidence the consummation of the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO IAI's AND
THE FOUNDING STOCKHOLDER'S OBLIGATIONS
The obligations of IAI and the Founding Stockholder to consummate the
transactions contemplated by this Agreement are subject to the satisfaction of
each of the following conditions on or before the Effective Time:
6.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Buyer and SciQuest Sub contained in this Agreement shall have been
true and correct on the date of this Agreement, and shall be true and correct as
if the Effective Time as though made on
21
and as of the Effective Time, and Buyer and SciQuest Sub shall have duly
performed and complied with all covenants and obligations required by this
Agreement to be performed or complied with by it on or before the Closing.
6.2 Compliance Certificate. Each of Buyer and SciQuest Sub shall have
----------------------
delivered to IAI a certificate (without qualification as to knowledge or
materiality or otherwise except as may be set forth in the representations and
warranties themselves) to the effect that each of the conditions specified in
Section 6.1 is satisfied in all respects.
6.3 Absence of Litigation. As of the Effective Time, no action or
---------------------
proceeding shall be pending by or before any court or other governmental body or
agency seeking to restrain, prohibit or invalidate the transactions contemplated
by this Agreement.
6.4 Secretary's Certificates. IAI shall have received a certificate of the
------------------------
Secretary of each of the Buyer and SciQuest Sub, dated as of the Effective Time,
in form and substance reasonably satisfactory to IAI, certifying (i) the names
of its officers authorized to sign this Agreement, the certificates and the
other documents and instruments delivered pursuant to this Agreement by Buyer or
SciQuest Sub, as the case may be, or any of its officers, together with true
signatures of such officers; (ii) that the copies of the Certificate of
Incorporation and Bylaws attached thereto are true, correct and complete; and
(iii) that the resolutions of the Board of Directors attached thereto evidencing
the approval of this Agreement and the transactions contemplated herein were
duly adopted, have not been amended or rescinded and are in full force and
effect.
6.5 Legal Opinion. IAI shall have received an opinion of Xxxxxxxxx &
-------------
Xxxxx PLLC, counsel to Buyer, dated as of the Effective Time, in the form of
Exhibit I attached hereto.
---------
6.6 Escrow Agreement. IAI shall have received the Escrow Agreement, duly
----------------
executed by the Buyer and the Escrow Agent.
6.7 Stock Certificates. The certificates evidencing the shares of Buyer
------------------
Preferred Stock (other than the Escrowed Shares which are being delivered to the
Escrow Agent simultaneously with the Closing) shall have been delivered pursuant
to Sections 1.3 and 1.8 hereof.
6.8 Inventions Agreements. IAI shall have received the Inventions
---------------------
Agreement, duly executed by Buyer.
6.9 Employment / Consulting Agreements. IAI shall have received the
----------------------------------
Compensation Agreements, duly executed by Buyer.
6.10 Stockholder Agreements. IAI shall have received the Stockholder
----------------------
Agreements, duly executed by Buyer.
6.11 Registration Rights Agreement. IAI shall have received the
-----------------------------
Registration Rights Agreement, duly executed by Buyer.
22
6.12 Other Documents. IAI shall have received such other agreements,
---------------
documents, and instruments as IAI has reasonably requested to effect and
evidence the consummation of the transactions contemplated by the Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
---------------
(a) The Stockholders, jointly and severally (including the Founding
Stockholder), shall indemnify the Surviving Corporation and the Buyer (the
"Buyer Indemnified Persons") in respect of, and hold the Buyer Indemnified
Persons harmless against, any and all debts, obligations and other liabilities,
monetary damages, fines, fees, penalties, interest obligations, deficiencies,
losses and expenses (including without limitation amounts paid in settlement,
interest, court costs, costs of investigators, reasonable fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) incurred or suffered by the Buyer Indemnified Persons ("Buyer
Damages"):
(i) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of IAI or the Founding Stockholder contained in this Agreement or the
certificate delivered pursuant to Section 5.6; or
(ii) resulting from any failure of any of the Stockholders to
have good, valid and marketable title to the issued and outstanding IAI Shares
held by any such Stockholder, free and clear of all liens, claims, pledges,
options, adverse claims or charges of any nature whatsoever;
(iii) resulting from any claim by a Stockholder or former security
holder of IAI, or any other person, firm, corporation or entity, seeking to
assert, or based upon: (A) ownership or a right to ownership of any shares of
capital stock of IAI which is claimed to have arisen prior to the Effective
Time; (B) any rights of a stockholder of IAI (other than the right to receive
the Merger Consideration pursuant to this Agreement or appraisal rights under
the applicable provisions of the California Corporation Law), including, without
limitation, rights with respect to any option, preemptive rights or rights to
notice or to vote, in each case with respect to capital stock of IAI owned or
claimed to have been owned prior to the Effective Time; (C) any rights under the
Articles of Incorporation or Bylaws of IAI as in effect at any time prior to the
Effective Time; or (D) any claim that his, her or its shares of IAI were
wrongfully repurchased by IAI prior to the Effective Time; or
(iv) resulting from, relating to or arising out of or in
connection with the inclusion on IAI's web site or in other statements or
information disclosed or disseminated by IAI at any time prior to the Effective
Time of information to the effect that IAI has or uses in connection with its
business a patented escrow process.
23
(b) The Buyer shall indemnify each of the Stockholders (collectively,
the "Seller Indemnified Persons") in respect of, and hold each of the Seller
Indemnified Persons harmless against, any and all debts, obligations and other
liabilities, monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) incurred or suffered by such Seller Indemnified Person ("Seller
Damages" and collectively with the Buyer Damages, the "Damages"), resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of Buyer or SciQuest Sub contained
in this Agreement.
7.2 Method of Asserting Claims.
--------------------------
(a) All claims for indemnification ("Claims") by a Buyer Indemnified
Person or a Seller Indemnified Person (collectively, the "Indemnified Persons")
pursuant to this Article VII shall be made in accordance with the provisions of
this Agreement, Schedule 7.2 hereto (with respect to Claims by Seller
------------
Indemnified Persons) ("Schedule 7.2") and the Escrow Agreement.
(b) If a third party asserts that an Indemnified Person is liable to
such third party for a monetary or other obligation which may constitute or
result in Damages for which such Indemnified Person may be entitled to
indemnification pursuant to this Article VII, and such Indemnified Person
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Person shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnification
Representative (with respect to Claims of Buyer Indemnified Persons) or the
Buyer (with respect to Claims of Seller Indemnified Persons), (ii) such
Indemnified Person may make a Claim for indemnification pursuant to this Article
VII in accordance with the provisions of the Escrow Agreement (if applicable),
this Article VII and Schedule 7.2 (if applicable), and (iii) such Indemnified
Person shall be reimbursed in accordance with the provisions of the Escrow
Agreement (if applicable), this Article VII and Schedule 7.2 (if applicable),
for any such Damages for which it is entitled to indemnification pursuant to
this Article VII (subject to the right of the Indemnification Representative or
the Buyer, as the case may be, to dispute the Indemnified Person's entitlement
to indemnification under the terms of the Escrow Agreement (if applicable), this
Article VII and Schedule 7.2 (if applicable).
(c) The Indemnified Person shall give prompt written notification to
the Indemnification Representative or the Buyer, as the case may be, of the
commencement of any action, suit or proceeding relating to a third party claim
for which indemnification pursuant to this Article VII may be sought; provided,
however, that no delay on the part of the Indemnified Person in notifying the
Indemnification Representative or the Buyer, as the case may be, shall relieve
the Stockholders or the Buyer, as the case may be, of any liability or
obligation hereunder except to the extent of any damage or liability caused by
or arising out of such failure. Within thirty (30) days after delivery of such
notification, the Indemnification Representative or the Buyer, as the case may
be, may, upon written notice thereof to the Indemnified Person, assume control
of the defense of such action, suit or proceeding provided the Indemnification
Representative or the Buyer, as the case may be, acknowledges in writing to the
Indemnified
24
Person that any damages, fines, costs or other liabilities that may be assessed
against the Indemnified Person in connection with such action, suit or
proceeding constitute Damages for which the Indemnified Person shall be entitled
to indemnification pursuant to this Article VII. If the Indemnification
Representative or the Buyer, as the case may be, does not so assume control of
such defense, the Indemnified Person shall control such defense. The party not
controlling such defense may participate therein at its own expense; provided
that if the Indemnification Representative or the Buyer, as the case may be,
assumes control of such defense and the Indemnified Person reasonably concludes
that the indemnifying parties and the Indemnified Person have conflicting
interests or different defenses available with respect to such action, suit or
proceeding, the reasonable fees and expenses of counsel to the Indemnified
Person shall be considered "Damages" for purposes of this Agreement. The party
controlling such defense shall keep the other party advised of the status of
such action, suit or proceeding and the defense thereof. The Indemnified Person
shall not agree to any settlement of such action, suit or proceeding without the
prior written consent of the Indemnification Representative or the Buyer, as the
case may be, which shall not be unreasonably withheld. The Indemnification
Representative or the Buyer, as the case may be, shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Indemnified Person, which shall not be unreasonably withheld.
7.3 Satisfaction and Treatment of Indemnity Payments.
------------------------------------------------
(a) In the event that the Stockholders are required to provide
indemnification hereunder to the Buyer Indemnified Persons, such indemnification
obligations shall be satisfied solely by the delivery of shares of Buyer
Preferred Stock held in the Escrow (with each share valued at the Reference
Price (as defined below)) in accordance with the terms of this Agreement and the
Escrow Agreement. Any payment so made to a Buyer Indemnified Person pursuant to
this Article VII or the Escrow Agreement shall be treated as a reduction in the
Merger Consideration. For purposes of this provision, the "Reference Price"
shall mean (i) the average closing price for the Escrowed Shares quoted on any
national securities exchange or in the Nasdaq trading system, as applicable, for
the ten (10) trading days preceding the date of the notice by the Buyer
Indemnified Person of any Claim (the "Measurement Date"), (ii) if the Buyer's
stock is not publicly traded, the price at which the Buyer issued and sold
shares of its capital stock in its most recent financing, if such financing
occurred within three (3) months of the Measurement Date, or (iii) if no such
financing has occurred, the price determined in good faith by the Board of
Directors of the Buyer.
(b) In the event that the Buyer is required to provide indemnification
hereunder to one or more of the Seller Indemnified Persons, such indemnification
obligations shall be satisfied solely by the issuance to such Seller Indemnified
Persons, at no additional consideration, pro rata in accordance with their
ownership of IAI Stock, of additional shares of Buyer Preferred Stock (the
"Additional Shares") (with each share valued at the Reference Price) in
accordance with the terms of this Agreement and Schedule 7.2. Any payment so
made to a Seller Indemnified Person pursuant to this Article VII shall be
treated as an increase in the Merger Consideration.
7.4. Survival.
--------
25
(a) The representations, warranties and covenants set forth in this
Agreement (the "Representations") shall survive the Closing and the consummation
of the transactions contemplated by this Agreement and continue until the first
anniversary of the Effective Time (the "Termination Date"). If notice of a Claim
is given in accordance with the Escrow Agreement, this Article VII or Schedule
7.2 before the Termination Date, then the Representation applicable to such
Claim shall survive until, but only for purposes of, the resolution of such
Claim.
(b) Notwithstanding the provisions of Section 7.4(a) above, with
respect to any Claims for indemnification by a Buyer Indemnified Person or a
Seller Indemnified Person based on, arising from, resulting from or related to
fraud or willful misrepresentation, the Representations shall survive the
Termination Date and shall remain in force and effect for the duration of the
applicable statute of limitations. All Representations shall be deemed to be
material and relied upon by the party or parties to whom they were made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties.
7.5 Limitation.
----------
(a) Notwithstanding anything to the contrary herein, with respect to
Claims other than claims based on fraud or willful misrepresentation, for which
the liability of the Stockholders shall not be limited in amount or to the
Escrow, the sole and exclusive remedy for indemnification Claims by the Buyer or
SciQuest Sub under this Article VII is the Escrow and the aggregate liability of
the Stockholders for Buyer Damages under this Article VII shall not exceed the
total number of shares of Buyer Preferred Stock held in the Escrow. No
Stockholder shall have any right of contribution against IAI or the Surviving
Corporation with respect to any breach by IAI of any of the representations,
warranties, covenants or agreements.
(b) Notwithstanding anything to the contrary herein, with respect to
Claims other than Claims based on fraud or willful misrepresentations, for which
the liability shall not be limited in amount or to the Additional Shares, the
total liability of the Buyer for Seller Damages under this Article VII shall not
exceed a maximum aggregate number of Additional Shares equal to the total number
of Escrowed Shares placed in the Escrow at Closing as set forth on Schedule 1.3
------------
(as such number of Escrowed Shares may be adjusted from time to time to reflect
stock splits, stock dividends, recapitalizations, reorganizations or similar
transactions affecting the Buyer Preferred Stock), and the sole and exclusive
remedy for indemnification Claims by the Stockholders, or any of them, under
this Article VII is the issuance of the Additional Shares.
ARTICLE VIII
COVENANTS OF FOUNDING STOCKHOLDER
8.1 Covenant Against Competition.
-----------------------------
26
(a) In order to induce the Buyer to enter into this Agreement and
consummate the Merger as provided therein, the Founding Stockholder agrees that,
for a period of three (3) years beginning on the Closing Date and ending at
12:01 a.m. on the day following the third anniversary thereof, neither the
Founding Stockholder nor any business entity directly or indirectly owned or
controlled by the Founding Stockholder shall, without the prior written consent
of the Buyer, for his own account or jointly with another, directly or
indirectly, for or on behalf of any individual, partnership, corporation or
other legal entity, as principal, agent, director, employee, agent, consultant,
member of a partnership, firm, corporation or other entity, or as a holder of or
investor in as much as 5% of any security of any class of any corporation or
other business:
(i) engage in, consult with, assist in the promotion or
development of, or own, control, manage or otherwise participate in the
ownership, control or management of any business other than the business of the
Buyer or IAI engaged in (i) the provision of distribution, auction and/or
buyers' guide services or information for the scientific and/or medical products
market through any electric commerce medium, including, without limitation, the
Internet, any private computer network or otherwise, or (ii) the development,
maintenance, integration and customization of software and World Wide Web sites
for the provision of such services (the "Business"); or
(ii) solicit, call upon, or attempt to solicit, or encourage or
cause others to solicit, call upon or attempt to solicit, the patronage of any
Customers (as defined herein), for the purpose of obtaining the patronage of any
such Customer for the purchase of any products or services comparable to the
products or services of the Business from anyone other than Buyer or IAI; or
otherwise interfere, or seek to interfere or encourage or cause others to
interfere or seek to interfere, with the relationship between Buyer or IAI, or
any affiliate of Buyer or IAI, and any Customer or supplier of IAI existing at
Closing, at any time within the two (2) years preceding the Closing or the three
(3) years following the Closing; or
(iii) solicit or induce, or in any manner attempt to solicit or
induce or encourage or cause others to solicit or induce, any officer or
employee to leave his or her employment with Buyer or IAI, or any affiliate of
Buyer or IAI, whether or not such employment is pursuant to a written contract
or otherwise, or hire or in any other manner interfere, or attempt to interfere,
with the relationship between Buyer or IAI, or any affiliate of Buyer or IAI,
and any such officer or employee.
(b) For purposes of this Section 8.1, "Customer" shall mean any
individual, partnership, corporation or other entity to whom the Buyer or IAI
sold or distributed or attempted to sell or otherwise distribute any products or
services of the Business (as defined herein) during the two (2) year period
immediately preceding the Closing Date, or sells or attempts to sell or
otherwise distributes any products or services of the Business (as defined
herein) during the three (3) year period following the Closing.
(c) The Founding Stockholder agrees that neither he nor any business
entity directly or indirectly owned or controlled by him shall, without the
prior written consent of the Buyer, for its own account or jointly with another,
directly or indirectly, for or on behalf of any
27
individual, partnership, corporation or other entity, as principal, agent or
otherwise, use or authorize any other person to use the name "SciQuest" or
"IAI," or any name similar thereto, in connection with a business which competes
with the Business.
(d) Notwithstanding anything herein to the contrary, it shall not be a
breach of the covenants contained in this Section 8.1 for the Founding
Stockholder, or any business entity directly or indirectly owned or controlled
by the Founding Stockholder, to own not more than five percent (5%) of the
capital stock of any corporation whose shares are publicly traded.
8.2 Reasonableness of Restrictions. The Founding Stockholder has carefully
------------------------------
read and considered the provisions of Section 8.1 and, having done so, agrees
that the restrictions set forth therein are fair and reasonable, do not unfairly
restrict or penalize the Founding Stockholder and are reasonably required for
the protection of the interests of Buyer and IAI in consummating the
transactions contemplated in this Agreement. In the event that, notwithstanding
the foregoing, any of the covenants set forth in Section 8.1 hereof shall be
deemed to be too restrictive in any court proceeding, the parties agree that the
court may reduce such restrictions to ones which it deems reasonable under the
circumstances.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time:
(a) By the mutual written consent of all of the parties to this
Agreement;
(b) By Buyer (if it is not then in breach of any term of this
Agreement), if IAI or the Founding Stockholder: (i) fail(s) to perform in any
material respect their agreements contained herein required to be performed on
or prior to the Effective Time, or (ii) materially breaches any of their
representations or warranties contained herein, which failure or breach is not
cured within ten (10) days after Buyer shall have notified IAI and the Founding
Stockholder of its intent to terminate this Agreement pursuant to this
subparagraph;
(c) By IAI or the Founding Stockholder (if they are not then in breach
of any term of this Agreement), if Buyer: (i) fails to perform in any material
respect its agreements contained herein required to be performed on or prior to
the Effective Time, or (ii) materially breaches any of its representations or
warranties contained herein, which failure or breach is not cured within ten
(10) days after IAI and the Founding Stockholder have notified Buyer of their
intent to terminate this Agreement pursuant to this subparagraph;
(d) By any of the parties, if there is any order, writ, injunction or
decree of any court or governmental or regulatory agency binding on such party
which prohibits or restrains such party from consummating the transactions
contemplated hereby; or
(e) By either the Buyer or IAI, if the requisite Stockholders' Vote is
not obtained; or
28
(f) By any of the parties, if the Closing has not occurred by July 31,
1999, for any reason other than delay or nonperformance of the party seeking
such termination.
9.2 Effect on Obligations. Termination of this Agreement pursuant to this
---------------------
Article VIII shall terminate all obligations of the parties hereunder, except
for the obligations under Sections 10.1 (with respect to expenses), 10.2 (with
respect to publicity), and 4.7 (with respect to confidentiality); provided,
however, that termination pursuant to subparagraphs (b) or (c) of Section 9.1
hereof shall not relieve the defaulting or breaching party from any liability to
the other parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, whether or not the Merger is consummated; provided,
--------
however, that if the Merger is consummated, any legal fees and expenses incurred
-------
by IAI coded `IAII/SCIQ' which are solely and directly related to the Merger, up
to a maximum of $27,000, shall be paid by Buyer to Xxxxxxx & Xxxxxxx, A
Professional Corporation, at the Effective Time; any additional legal fees and
expenses, any investment banking, accounting and other out-of-pocket fees and
expenses incurred by IAI in excess of $27,000 and all other expenses of IAI or
the Stockholders of any kind shall be paid directly by the Stockholders, and
neither the Buyer nor the Surviving Corporation shall have any liability or
obligation therefor.
10.2 Publicity. No party to this Agreement shall issue any press release
---------
or public disclosure relating to the subject matter of this Agreement or the
terms hereof without the prior written approval of the Buyer. Any press
releases or other announcements concerning the transactions contemplated by this
Agreement shall be approved by the Buyer prior to their issuance.
10.3 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two (2)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, one (1) business day after it is sent via a
reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
If to IAI: Copy to:
--------- -------
Internet Auctioneers International, Inc. Xxxxxxx & Xxxxxxx
00000 Xxxxxx Xxxxxx Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 000 Xxx Xxxxxxx Xxxxxx,
Xxxx: Xxxx Atlas Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx, Esq.
29
If to the Buyer: Copy to:
--------------- -------
XxxXxxxx.xxx, Inc. Xxxxxxxxx & Xxxxx PLLC
0000 XxXxxxxxx Xxxxxxx 0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000 Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Xx. Attn: Xxxxx X. Xxxxxxxx, Esq.
If to SciQuest Sub: Copy to:
------------------ -------
SciQuest Merger Subsidiary, Inc. Xxxxxxxxx & Xxxxx PLLC
0000 XxXxxxxxx Xxxxxxx 0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000 Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Xx. Attn: Xxxxx X. Xxxxxxxx, Esq.
Any party to this Agreement may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Agreement.
10.4 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of North Carolina applicable to agreements made and to be performed
entirely within such state.
10.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.6 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any of the parties hereto without
the prior written consent of all other parties hereto, and any purported
assignment without such consent shall be void.
10.7 Headings. The Article and Section headings contained in this
--------
Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.
10.8 Amendments. Any waiver, amendment, modification or supplement of or
----------
to any term or condition of this Agreement shall be effective only if in writing
and signed by a majority in interest of the Stockholders and by all parties
hereto, and the parties hereto waive the right to amend the provisions of this
Section orally. Any amendment effected subsequent to the Stockholders' Consent
shall be subject to the restrictions contained in the Delaware General
30
Corporation Law. No waiver of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
10.9 Severability. In the event that any provision in this Agreement
------------
shall be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added in lieu thereof a provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.
10.10 Entire Agreement. This Agreement, and the Schedules and Exhibits
----------------
hereto, constitute the entire Agreement between the parties hereto pertaining to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings between the parties with respect to such subject
matter.
10.11 Risk of Loss. The risk of loss, damage or condemnation of any of the
------------
IAI Business Assets from any cause whatsoever shall be borne by IAI at all
times prior to the Effective Time.
10.12 Best Efforts. Each party agrees to use its best efforts to satisfy
------------
the conditions to the Closing set forth in this Agreement and otherwise to
consummate the transactions contemplated by this Agreement.
10.13 Letter of Intent. This Agreement supersedes and replaces the letter
----------------
agreement between the Buyer and IAI dated May 24, 1999, which shall be of no
further force and effect.
[Remainder of this page intentionally left blank]
31
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed by its duly authorized officer as of the date first above written.
BUYER:
XXXXXXXX.XXX, INC.
By: /s/ M. Xxxxx Xxxxxxx
-------------------------------------
M. Xxxxx Xxxxxxx
President and Chief Executive Officer
SCIQUEST SUB:
SCIQUEST MERGER SUBSIDIARY, INC.
By: /s/ M. Xxxxx Xxxxxxx
-------------------------------------
M. Xxxxx Xxxxxxx
President and Chief Executive Officer
IAI:
INTERNET AUCTIONEERS
INTERNATIONAL, INC.
By: /s/ Xxxx Atlas
-------------------------------------
Xxxx Atlas
President
FOUNDING STOCKHOLDER:
/s/ Xxxx Atlas
-----------------------------------------
Xxxx Atlas
32
List of Exhibits and Schedules for Merger Agreement
----------------------------------------------------
Dated July 27, 1999 By and Among
--------------------------------
XxxXxxxx.xxx, Inc., SciQuest Merger Subsidiary, Inc.,
-----------------------------------------------------
Internet Auctioneers International, Inc., and Xxxx Atlas
--------------------------------------------------------
Exhibits:
--------
Exhibit A Escrow Agreement
Exhibit B Legal Opinion of Xxxxxxx & Xxxxxxx
Exhibit C Non-Disclosure and Invention Agreements
Exhibit D Stockholder Investment Representation Letter
Exhibit E Confidentiality Agreements
Exhibit F Registration Rights Agreement
Exhibit G Cybernet Agreement
Exhibit H Xxxx Agreement
Exhibit I Legal Opinion of Xxxxxxxxx & Xxxxx PLLC
Schedules:
---------
Schedule 1.3 Allocation of Merger Consideration
Disclosure Schedules for Internet Auctioneers International, Inc.
Disclosure Schedules for XxxXxxxx.xxx, Inc.
Schedule 4.6 Schedule Regarding Payment of Working Capital Loans
Schedule 7.2 Procedures for Indemnification
