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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>As filed with the Securities and Exchange Commission on
    March&#160;26, 2010</B>
</DIV>

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    <B><!-- /XBRL,dc -->Registration
    <FONT style="white-space: nowrap">No.&#160;333-&#160;&#160;&#160;&#160;&#160;&#160;</FONT></B>
</DIV>

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<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-size: 14pt">UNITED STATES</FONT></B>
</DIV>

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    <B><FONT style="font-size: 14pt">SECURITIES AND EXCHANGE
    COMMISSION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">Washington,&#160;D.C.
    20549</FONT></B>
</DIV>

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<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-size: 18pt"><FONT style="white-space: nowrap">Form&#160;S-1</FONT></FONT></B>
</DIV>

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    <B><FONT style="font-size: 12pt">REGISTRATION
    STATEMENT</FONT></B>
</DIV>

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    <B><FONT style="font-size: 12pt">UNDER THE SECURITIES ACT OF
    1933</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">SCIQUEST, INC.</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Exact name of registrant as
    specified in its charter)</FONT></I>
</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Delaware</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>7372</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>56-2127592</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(State or other Jurisdiction
    of<BR>
    Incorporation or Organization)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(I.R.S. Employer<BR>
    Identification Number) </FONT></I>
</TD>
</TR>
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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>6501&#160;Weston Parkway, Suite&#160;200<BR>
    Cary, North Carolina 27513<BR>
    <FONT style="white-space: nowrap">(919)&#160;659-2100</FONT><BR>
    </B><I><FONT style="font-size: 8pt">(Address, including zip
    code, and telephone number,<BR>
    including area code, of registrant&#146;s principal executive
    offices)</FONT></I>
</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Stephen J. Wiehe<BR>
    President and Chief Executive Officer<BR>
    SciQuest, Inc.<BR>
    6501&#160;Weston Parkway, Suite&#160;200<BR>
    Cary, North Carolina 27513<BR>
    <FONT style="white-space: nowrap">(919)&#160;659-2100</FONT><BR>
    <FONT style="white-space: nowrap">(919)&#160;659-2199</FONT>
    (Facsimile)<BR>
    </B><I><FONT style="font-size: 8pt">(Name, address, including
    zip code, and telephone number,</FONT></I>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">including area code, of agent
    for service)</FONT></I>
</DIV>

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    <B><I>Copies to:</I></B>
</DIV>

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    <B>Grant W. Collingsworth,&#160;Esq.<BR>
    Seth K. Weiner,&#160;Esq.<BR>
    Morris, Manning&#160;&#038; Martin, LLP<BR>
    3343 Peachtree Road, N.E.<BR>
    Atlanta, GA 30326<BR>
    Phone:
    <FONT style="white-space: nowrap">(404)&#160;233-7000</FONT><BR>
    Facsimile:
    <FONT style="white-space: nowrap">(404)&#160;365-9532</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>William B. Asher, Jr.,&#160;Esq.<BR>
    Lee S. Feldman,&#160;Esq.<BR>
    Choate, Hall &#038; Stewart LLP<BR>
    Two International Place<BR>
    Boston, MA 02110<BR>
    Phone: (617) 248-5000<BR>
    Facsimile: (617) 248-4000 </B>
</TD>
</TR>
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</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Approximate date of commencement of proposed sale to the public:
    As soon as practicable after the effectiveness of this
    registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule&#160;415 under the Securities Act of 1933, check the
    following
    box:&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is filed to register additional securities for an
    offering pursuant to Rule&#160;462(b) under the Securities Act,
    check the following box and list the Securities Act registration
    statement number of the earlier effective registration statement
    for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(c) under the Securities Act, check the following
    box and list the Securities Act registration number of the
    earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    &#147;large accelerated filer,&#148; &#147;accelerated
    filer&#148; and &#147;smaller reporting company&#148; in Rule
    <FONT style="white-space: nowrap">12b-2</FONT> of the
    Exchange Act. (Check one):
</DIV>

<DIV style="margin-top: 5pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">Large
    accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
    <TD nowrap align="center">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
    <TD nowrap align="center">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    <FONT style="white-space: nowrap">Non-accelerated</FONT>
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;</FONT>
    </FONT></TD>
    <TD nowrap align="right">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Smaller reporting
    company&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
</TR>

</TABLE>



<DIV align="center" style="margin-left: 22%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 9pt">(Do not check if a smaller
    reporting company)
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 9pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CALCULATION
    OF REGISTRATION FEE</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
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    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
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<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Proposed Maximum<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Amount of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>Title of Securities<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Aggregate<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Registration<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>to be Registered</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Offering Price(1)</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Fee</B>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Shares of Common Stock, $0.001&#160;par value per share
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $75,000,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $5,348
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Estimated solely for the purpose of
    calculating the registration fee pursuant to Rule&#160;457(o)
    under the Securities Act of 1933, as amended.<BR>
    Includes shares of common stock that the underwriters have the
    option to purchase solely to cover overallotments, if any.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant files a further amendment which
    specifically states that this Registration Statement will
    thereafter become effective in accordance with Section&#160;8(a)
    of the Securities Act of 1933 or until this Registration
    Statement becomes effective on such dates as the Commission,
    acting pursuant to said Section&#160;8(a), may determine.</B>
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<TABLE style="color: #FF0000" width="100%" border="1" cellpadding="5"><TR><TD style=text-align:justify>
<B><FONT style="font-size: 10pt; font-family: Arial, Helvetica; color: #E8112D">The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is declared effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers
to buy these securities in any state where the offer or sale is
not permitted.<BR>
</FONT></B>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV><B><FONT style="font-family: Arial, Helvetica; color: #E8112D">SUBJECT
    TO COMPLETION, DATED MARCH 26, 2010</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt; font-family: Arial, Helvetica">PRELIMINARY
    PROSPECTUS</FONT></B>
</DIV>

<DIV style="font-size: 3pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22513g2251300.gif" alt="(SCIQUEST LOGO)"><FONT style="font-size: 11pt">
    </FONT>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt; font-family: Arial, Helvetica">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt; font-family: Arial, Helvetica">Common
    Stock</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt; font-family: Arial, Helvetica">$&#160;&#160;&#160;&#160;&#160;
    per share</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">SciQuest, Inc. is
    selling&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock, and the selling stockholders identified in
    this prospectus are selling an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.
    We will not receive any of the proceeds from the sale of the
    shares of the selling stockholders. We have granted the
    underwriters a
    <FONT style="white-space: nowrap">30-day</FONT>
    option to purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock from us, and the selling stockholders have
    granted the underwriters a 30-day option to purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock, to cover over-allotments, if any.
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">This is an initial
    public offering of our common stock. We currently expect the
    initial public offering price to be between
    $&#160;&#160;&#160;&#160;&#160; and
    $&#160;&#160;&#160;&#160;&#160; per share. We have applied for
    approval for quotation of our common stock on the New York Stock
    Exchange, or NYSE, under the symbol &#147;SQI.&#148;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt; font-family: Arial, Helvetica">INVESTING
    IN OUR COMMON STOCK INVOLVES RISKS. SEE &#147;RISK FACTORS&#148;
    BEGINNING ON PAGE&#160;9.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B><FONT style="font-size: 11pt; font-family: Arial, Helvetica">Per
    Share</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B><FONT style="font-size: 11pt; font-family: Arial, Helvetica">Total</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Initial public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Proceeds, before expenses, to the selling stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">

</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt; font-family: Arial, Helvetica">Neither
    the Securities and Exchange Commission nor any state securities
    commission has approved or disapproved of these securities or
    passed upon the adequacy or accuracy of this prospectus. Any
    representation to the contrary is a criminal offense.</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Thomas
    Weisel Partners LLC</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<TR>
<TD width="1%%" align="center" nowrap>
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">William
    Blair&#160;&#038; Company</FONT></B>
</TD>
<TD width="99%%">
&nbsp;
</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<TR>
<TD width="31%">
&nbsp;
</TD>
<TD width="32%" align="center" nowrap>
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;JMP
    Securities</FONT></B>
</TD>
<TD width="37%">
&nbsp;
</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<TR>
<TD width="99%%">
&nbsp;
</TD>
<TD width="1%%" align="center" nowrap>
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Pacific
    Crest Securities</FONT></B>
</TD>
</TR>
</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 11pt; font-family: Arial, Helvetica">The
    date of this prospectus
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010.
    </FONT>
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 89%; margin-left: 5%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->
<P>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22513g2251310.gif" alt="(SCIQUEST)">
</DIV>
<P>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 89%; margin-left: 5%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>Prospectus Summary</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>Risk Factors</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>Special Note Regarding Forward-Looking Statements
    and Industry Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>Use of Proceeds</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>Dividend Policy</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>Capitalization</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>Dilution</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>Selected Financial Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#110'>Our Business</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    49
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>Management</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>Executive Compensation</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#113'>Certain Relationships and Related Party
    Transactions</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    84
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#114'>Principal and Selling Stockholders</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#115'>Description of Capital Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    88
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#116'>Shares Eligible for Future Sale</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    92
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#117'>Material U.S. Federal Income Tax Considerations
    for <FONT style="white-space: nowrap">Non-U.S.</FONT>
    Holders of Our Common Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#118'>Underwriting</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    98
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#119'>Legal Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#120'>Experts</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#121'>Where You Can Find More Information</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#122'>Reports to Stockholders</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#123'>Index to Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv4w2.htm">EX-4.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w1.htm">EX-10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w2.htm">EX-10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w3.htm">EX-10.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w4.htm">EX-10.4</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w5.htm">EX-10.5</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w6.htm">EX-10.6</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w7.htm">EX-10.7</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w8.htm">EX-10.8</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w9.htm">EX-10.9</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w10.htm">EX-10.10</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w11.htm">EX-10.11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w12.htm">EX-10.12</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w14.htm">EX-10.14</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w15.htm">EX-10.15</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w16.htm">EX-10.16</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w17.htm">EX-10.17</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w18.htm">EX-10.18</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv10w19.htm">EX-10.19</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22513exv23w1.htm">EX-23.1</A></FONT></TD></TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should rely only on the information contained in this
    prospectus, any free writing prospectus prepared by us or
    information to which we have referred you. We have not, and the
    underwriters have not, authorized anyone to provide you with
    additional information or information different from that
    contained in this prospectus. This prospectus is not an offer to
    sell, nor is it seeking offers to buy, shares of our common
    stock in jurisdictions where offers and sales are not permitted.
    The information contained in this prospectus is accurate only as
    of the date of this prospectus, regardless of the time of
    delivery of this prospectus or of any sale of shares of our
    common stock. Our business, prospects, financial condition and
    results of operations may have changed since that date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Through and
    including&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 (the 25th&#160;day after the date of this prospectus), all
    dealers that effect transactions in shares of our common stock,
    whether or not participating in this offering, may be required
    to deliver a prospectus. This is in addition to the
    dealers&#146; obligation to deliver a prospectus when acting as
    underwriters and with respect to their unsold allotments or
    subscriptions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>This prospectus contains registered and unregistered
    trademarks, service marks, trade names and references to
    intellectual property owned by other companies. All trademarks,
    service marks and trade names appearing herein are the property
    of their respective holders. We obtained industry and market
    data used throughout this prospectus through our research,
    surveys and studies conducted by third parties and industry and
    general publications. We have not independently verified market
    and industry data from third-party sources.</I>
</DIV>
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<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<A name='101'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following summary highlights information contained
    elsewhere in this prospectus. This summary is not complete and
    does not contain all of the information that you should consider
    before investing in our common stock. You should read the entire
    prospectus, including the section entitled &#147;Risk
    Factors,&#148; before making a decision to invest in shares of
    our common stock. In this prospectus, references to &#147;our
    company,&#148; &#147;we,&#148; &#147;us,&#148; and
    &#147;our&#148; mean SciQuest, Inc., a Delaware corporation.
    Unless otherwise indicated, the information contained in this
    prospectus assumes (1)&#160;the shares of common stock to be
    sold in this offering are sold at
    $&#160;&#160;&#160;&#160;&#160; per share and (2)&#160;no
    exercise by the underwriters of their overallotment option to
    purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock from us and the selling stockholders.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    SciQuest provides a leading on-demand strategic procurement and
    supplier enablement solution that integrates customers with
    their suppliers to improve procurement of indirect goods and
    services. Our on-demand software enables organizations to
    realize the benefits of strategic procurement by identifying and
    establishing contracts with preferred suppliers, driving spend
    to those contracts and promoting process efficiencies through
    electronic transactions. Using our managed SciQuest Supplier
    Network, our customers do business with more than 30,000 unique
    suppliers and spend billions of dollars annually.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our current target markets are higher education, life sciences,
    healthcare and state and local governments. We tailor our
    solution for each of the vertical markets we serve by offering
    industry-specific functionality, content and supplier
    connections. We serve more than 160 customers operating in 16
    countries and offer our solution in five languages and 22
    currencies. Our value proposition has led to an average annual
    customer renewal rate of over 94% over the last three years. On
    a dollar basis, our annual renewal rate has been 106% over this
    same time period solely as a result of pricing increases at the
    time of renewal. We believe our renewal rates are among the
    highest for on-demand model companies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Customers pay us subscription fees and implementation service
    fees for the use of our solution under multi-year contracts that
    are generally three to five years in length. We typically
    receive subscription payments annually in advance and
    implementation service fees as the services are performed,
    typically within the first three to eight months of contract
    execution. Our revenues have grown to $36.2&#160;million in 2009
    from $20.1&#160;million in 2007, and our Adjusted Free Cash Flow
    increased to $6.8&#160;million from $3.6&#160;million during
    this period. Adjusted Free Cash Flow is not determined in
    accordance with U.S.&#160;generally accepted accounting
    principles, or GAAP, and is not a substitute for or superior to
    financial measures determined in accordance with GAAP. For
    further discussion regarding Adjusted Free Cash Flow and a
    reconciliation of Adjusted Free Cash Flow to cash flows from
    operations, see footnote 4 to the table in &#147;Summary
    Financial Data&#148; included elsewhere in this prospectus
    summary.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    Background</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Indirect goods and services procurement is the purchase of the
    <FONT style="white-space: nowrap">day-to-day</FONT>
    necessities of the workplace such as office supplies, laboratory
    supplies, furniture, computers, MRO (maintenance, repair and
    operations) supplies, and food and beverages. Indirect goods and
    services tend to be low cost but are usually bought in high
    volumes by a wide variety of employees throughout an
    organization.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our target market for strategic procurement of indirect goods
    and services is a subset of the broader supply procurement and
    sourcing application chain management market, which AMR Research
    estimates in a July 2009 report entitled &#147;The Global
    Enterprise Application Market Sizing Report,
    <FONT style="white-space: nowrap">2008-2013&#148;</FONT>
    as a $2.9&#160;billion global opportunity in 2010, growing at an
    8% compounded annual growth rate from 2010 through 2013. Based
    on our own internal analysis, we believe that our current
    addressable market is approximately $1.0&#160;billion within our
    current target markets as follows: higher education
    ($324&#160;million), life sciences ($292&#160;million),
    healthcare ($176&#160;million) and state and local government
    ($244&#160;million).
</DIV>
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    <BR>
    1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The procurement process for indirect goods and services is often
    not well-managed or controlled. Characteristics of traditional
    procurement processes include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Lack of clearly defined procurement guidelines and awareness
    of preferred suppliers.</I>&#160;&#160;In many cases, because
    processes are cumbersome, ill-defined and time consuming, many
    employees have difficulty following the procurement approval
    processes and fail to purchase from preferred suppliers.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Limited ability to analyze spend.</I>&#160;&#160;Given the
    lack of automation and centralized reporting, organizations have
    difficulty analyzing what they are buying from suppliers.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Dissatisfied employees.</I>&#160;&#160;Manual, non-integrated
    processes often lead to excess costs, delays and errors,
    resulting in a frustrating experience for the employee.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Efforts to automate the procurement function for indirect goods
    and services initially consisted of add-on modules to enterprise
    resource planning, or ERP, systems and first generation
    procurement systems developed 10 to 15&#160;years ago. The
    introduction of Software-as-a-Service, or SaaS, strategic
    procurement solutions within the past few years has enabled
    buyers and suppliers to transact with each other online more
    efficiently. However, these offerings still suffer from the fact
    that they are primarily horizontal solutions that neither
    provide functionality and content specific to vertical markets
    nor have a robust supplier network that drives economies of
    scale.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Solution</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer an on-demand strategic procurement and supplier
    enablement solution that enables organizations to more
    efficiently source indirect goods and services, manage their
    spend and obtain the benefits of compliance with purchasing
    policies and negotiating power with suppliers. Our on-demand
    strategic procurement software suite coupled with our managed
    supplier network forms our integrated solution, which is
    designed to achieve rapid and sustainable savings. Our solution
    provides customers with a set of products and services that
    enable them to optimize existing procurement processes by
    automating the entire
    <FONT style="white-space: nowrap">source-to-settle</FONT>
    process. The SciQuest Supplier Network acts as a communications
    hub that connects our customers to their suppliers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our solution provides the following key benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Significant return on investment
    (&#147;ROI&#148;).</I>&#160;&#160;Our customers are able to
    achieve significant returns on investment through savings from
    negotiated discounts, automated requisition/order processing,
    contract lifecycle management, settlement automation and
    sourcing.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Content and functionality specific to our vertical
    markets.</I>&#160;&#160;Our software has specific configurable
    content and functionality that meets the unique needs of our
    targeted vertical markets.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Easier access to customers&#146; supplier
    network.</I>&#160;&#160;Customers can easily access their
    preferred suppliers using a single solution and avoid the costs
    and inefficiencies associated with traditional
    <FONT style="white-space: nowrap">one-to-one</FONT>
    supplier management.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Greater adoption by employees.</I>&#160;&#160;Our intuitive
    shopping interface provides employees with easy and automated
    visibility and access to goods and services.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Greater adoption by suppliers.</I>&#160;&#160;Suppliers
    typically are motivated to join our network due to ease of
    enablement and lack of supplier fees.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Visibility into spending patterns and
    activity.</I>&#160;&#160;Our solution provides granular detail
    into user spending behavior and provides detailed analytics that
    allow organizations to continually improve their purchasing
    practices.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Ease of deployment via integration with existing
    systems.</I>&#160;&#160;Our highly-configurable solution
    integrates with many leading ERP systems to speed deployment and
    facilitate the interchange of transaction, accounting,
    settlement and user data.
</TD>
</TR>

</TABLE>
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    <BR>
    2
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Business Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to our differentiated customer solution, we believe
    our market approach and business model offer specific benefits
    that are instrumental to our successful growth. These include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Focus on customer value.</I>&#160;&#160;We focus extensively
    on ensuring that customers achieve maximum benefit from our
    solution, and we proactively engage with our customers to
    continually improve our software and services.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Expertise in our targeted vertical
    markets.</I>&#160;&#160;Our domain expertise allows us to
    provide our customers with a highly tailored and differentiated
    solution that is difficult for our competitors to replicate.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Extensive content and supplier
    network.</I>&#160;&#160;Suppliers are not charged any fees or
    transaction costs for purchases consummated through the SciQuest
    Supplier Network, which facilitates the growth of our network of
    over 30,000 unique suppliers servicing the higher education,
    life sciences, healthcare and state and local government markets.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Ability to manage costs.</I>&#160;&#160;Our culture of lean
    management principles that extends from our senior management
    throughout our company has kept our capital expenditures low and
    helped lower our operating expenses as a percentage of revenues
    from 95% in 2007 to 72% in 2009.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>High visibility business model.</I>&#160;&#160;The recurring
    nature of our revenues provides high visibility into future
    performance, and the upfront payments result in cash flow
    generation in advance of revenue recognition. For each of the
    last three years, greater than 80% of our revenues were
    recognized from contracts that were in place at the beginning of
    the year.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Growth Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We seek to become the leading provider of strategic procurement
    solutions for indirect goods and services. Our key strategic
    initiatives include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Further penetrating our existing vertical
    markets.</I>&#160;&#160;We will continue to focus our efforts on
    acquiring new customers in our newer healthcare and state and
    local government markets while increasing our emphasis on
    mid-sized customer acquisition opportunities in our core higher
    education and life sciences markets.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Capitalizing on cross-selling opportunities into our
    installed customer base.</I>&#160;&#160;We plan to develop
    <FONT style="white-space: nowrap">and/or</FONT>
    acquire additional modules and products to sell to our existing
    customers by leveraging our position as a trusted strategic
    procurement solution vendor in our targeted verticals.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Selectively expanding into new vertical
    markets.</I>&#160;&#160;We may pursue new vertical expansion
    through internal product development, sales and marketing
    initiatives or strategic acquisitions.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Investing in international expansion to acquire new
    customers.</I>&#160;&#160;We intend to continue our
    international expansion by increasing our international direct
    sales force and establishing additional third-party sales
    relationships.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Selectively pursuing acquisitions.</I>&#160;&#160;We may
    pursue acquisitions to accelerate our growth, enhance the
    capabilities of our existing solution, broaden our solution
    offerings or expand into new verticals or geographies.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    That We Face</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business is subject to a number of risks that you should
    understand before making an investment decision. These risks are
    discussed more fully in the &#147;Risk Factors&#148; section of
    this prospectus and include but are not limited to the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our failure to sustain our historical renewal rates, pricing and
    terms of our customer contracts would adversely affect our
    operating results;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if we are unable to attract new customers, or if our existing
    customers do not purchase additional products or services, the
    growth of our business and cash flows will be adversely affected;
</TD>
</TR>

</TABLE>
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    <BR>
    3
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    continued economic weakness and uncertainty, which may result in
    a significant reduction in spending in our target markets, could
    adversely affect our business, lengthen our sales cycles and
    make it difficult for us to forecast operating results
    accurately;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we may experience service failures or interruptions due to
    defects in the hardware, software, infrastructure, third-party
    components or processes that comprise our solution, any of which
    could adversely affect our business;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if we do not successfully maintain the SciQuest brand in our
    existing vertical markets or successfully market the SciQuest
    brand in new vertical markets, our revenues and earnings could
    be materially adversely affected;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    if we are unable to adapt our products and services to rapid
    technological change, our revenues and profits could be
    materially and adversely affected;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the market for on-demand strategic procurement and supplier
    enablement solutions is at a relatively early stage of
    development; if the market for our solution develops more slowly
    than we expect, our revenues may decline or fail to grow and we
    may incur operating losses;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we have been, and may continue to be, subject to claims that we
    or our technologies infringe upon the intellectual property or
    other proprietary rights of a third party. Any such claims may
    require us to incur significant costs, to enter into royalty or
    licensing agreements or to develop or license substitute
    technology, which may harm our business.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Corporate Information</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were originally incorporated in November 1995. Our principal
    executive offices are located at 6501&#160;Weston Parkway,
    Suite&#160;200, Cary, North Carolina 27513, and our telephone
    number is
    <FONT style="white-space: nowrap">(919)&#160;659-2100.</FONT>
    Our website address is www.sciquest.com. Information contained
    on our website is not a part of this prospectus and the
    inclusion of our website address in this prospectus is an
    inactive textual reference only.
</DIV>
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    <BR>
    4
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">THE
    OFFERING</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by us</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock offered by selling stockholders</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after this offering</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="bottom">
    We estimate that the net proceeds from our sale of shares of
    common stock in this offering will be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million if the underwriters
    exercise their
    <FONT style="white-space: nowrap">over-allotment</FONT>
    option in full. This estimate is based upon an assumed initial
    public offering price of $&#160;&#160;&#160;&#160;&#160; per
    share, the mid-point of our filing range, less estimated
    underwriting discounts and commissions and offering expenses
    payable by us. We will not receive any proceeds from the sale of
    shares of our common stock by the selling stockholders.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    We intend to use approximately $35.5&#160;million of these net
    proceeds to redeem all outstanding shares of our preferred
    stock. We intend to use the remaining net proceeds for working
    capital and general corporate purposes. We may also use a
    portion of the proceeds to acquire complementary businesses,
    products or technologies. We have no agreements or commitments
    with respect to any acquisitions at this time. By establishing a
    public market for our common stock, this offering is also
    intended to facilitate our future access to public markets.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Pending the uses described above, we intend to invest the net
    proceeds of this offering in short- to medium-term,
    investment-grade, interest-bearing securities, certificates of
    deposit or direct or guaranteed obligations of the U.S.
    government.</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Symbol on the New York Stock Exchange</TD>
    <TD></TD>
    <TD valign="bottom">
    &#145;&#145;SQI&#148;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of shares of our common stock outstanding after this
    offering is based on 28,684,596&#160;shares outstanding as of
    December&#160;31, 2009 and excludes:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an aggregate of 887,224&#160;shares issuable upon the exercise
    of then outstanding options at a weighted average exercise price
    of $0.63 per share;
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an aggregate of 443,361&#160;shares issuable upon the exercise
    of then outstanding warrants at a weighted average exercise
    price of $0.04 per share;
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an aggregate of 1,107,623&#160;shares reserved for issuance
    under our 2004 Stock Incentive Plan, subject to increase on an
    annual basis and subject to increase for shares subject to
    awards under our prior equity plans that expire unexercised or
    otherwise do not result in the issuance of shares;
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an assumed maximum
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issuable for no cash consideration under our Exit Event Bonus
    Plan immediately following completion of this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock subject to the underwriters&#146; over-allotment
    option.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as otherwise indicated, information in this prospectus
    assumes no exercise of the underwriters&#146; overallotment
    option to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock from us and up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of common stock from the selling stockholders.
</DIV>
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    <BR>
    5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SUMMARY
    FINANCIAL DATA</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables summarize the financial data for our
    business. You should read this summary financial data in
    conjunction with &#147;Selected Financial Data,&#148;
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; and our financial
    statements and related notes, all included elsewhere in this
    prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The summary financial data under the heading &#147;Statements of
    Operations Data&#148; for each of the three years ended
    December&#160;31, 2007, 2008 and 2009, under the heading
    &#147;Operating Data&#148; relating to Adjusted EBITDA and
    Adjusted Free Cash Flow for each of the three years ended
    December&#160;31, 2007, 2008 and 2009 and under the heading
    &#147;Balance Sheet Data&#148; as of December&#160;31, 2009 have
    been derived from our audited annual financial statements, which
    are included elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The pro forma balance sheet data as of December&#160;31, 2009 is
    unaudited and gives effect to (1)&#160;our receipt of estimated
    net proceeds of $&#160;&#160;&#160;&#160;&#160;&#160;million
    from this offering, based on an assumed initial public offering
    price of $&#160;&#160;&#160;&#160;&#160; per share, which is the
    mid-point of our filing range, after deducting estimated
    underwriting discounts and offering expenses payable by us, and
    (2)&#160;the redemption of all of our outstanding preferred
    stock immediately after the consummation of this offering. The
    pro forma summary financial data is not necessarily indicative
    of what our financial position or results of operations would
    have been if this offering had been completed as of the date
    indicated, nor is this data necessarily indicative of our
    financial position or results of operations for any future date
    or period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>(In thousands,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>except per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Statements of Operations Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,107
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    29,784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    36,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues(1)(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,723
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,494
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,061
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses:(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,908
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,059
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,213
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,717
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Amortization of intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    537
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    403
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,066
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,104
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    995
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,608
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividends on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,207
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,207
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,278
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) attributable to common stockholders per share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted average shares outstanding used in computing per share
    amounts:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,122
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,900
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="77%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Operating Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted EBITDA(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,099
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted Free Cash Flow(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2009</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Pro Forma</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Balance Sheet Data:</B>(5)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working capital excluding deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    37,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,072
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,959
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Amounts include stock-based compensation expense, as follows:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year&#160;Ended&#160;December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    56
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    53
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    150
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    158
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    163
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Cost of revenues includes amortization of capitalized software
    development costs of:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year&#160;Ended&#160;December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Amortization of capitalized software development costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    114
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    154
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    167
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    EBITDA consists of net income (loss) plus depreciation and
    amortization, less interest and other income, net and less
    income tax benefit. Adjusted EBITDA consists of EBITDA plus our
    non-cash, stock-based compensation expense and settlement and
    legal costs related to a patent infringement lawsuit settled in
    2009. We use Adjusted EBITDA as a measure of operating
    performance because it assists us in comparing performance on a
    consistent basis, as it removes from our operating results the
    impact of our capital structure and the one-time costs
    associated with a non-recurring event. We believe Adjusted
    EBITDA is useful to an investor in evaluating our operating
    performance because it and similar measures are widely used to
    measure a company&#146;s operating performance without regard to
    items such as depreciation and amortization, which can vary
    depending upon accounting methods and the book value of assets,
    and to present a meaningful measure </TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    of corporate performance exclusive of our capital structure and
    the method by which assets were acquired. The following table
    provides a reconciliation of net income (loss) to Adjusted
    EBITDA:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="68%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,909
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,285
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (113
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (20
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    EBITDA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,209
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,795
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Non-cash, stock-based compensation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted EBITDA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,099
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    Free Cash Flow consists of net cash provided by operating
    activities, less purchases of property and equipment and less
    capitalization of software development costs. Adjusted Free Cash
    Flow consists of Free Cash Flow plus one-time settlement and
    legal costs related to a patent infringement lawsuit in 2009. We
    use Adjusted Free Cash Flow as a measure of operating
    performance because it assists us in assessing the
    company&#146;s ability to fund its growth through its generation
    of cash. We believe Adjusted Free Cash Flow is useful to an
    investor in evaluating our operating performance because
    Adjusted Free Cash Flow and similar measures are widely used to
    measure a company&#146;s operating performance without regard to
    revenue and expense recognition, which can vary depending upon
    accounting methods. The following table provides a
    reconciliation of net cash provided by operating activities to
    Adjusted Free Cash Flow:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="74%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,582
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,501
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Purchase of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (695
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (480
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (685
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Capitalization of software development costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (362
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (99
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (220
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Free Cash Flow
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,596
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted Free Cash Flow
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    A $1.00 increase (decrease) in the assumed initial public
    offering price of $&#160;&#160;&#160;per share would increase
    (decrease) cash and cash equivalents, working capital excluding
    deferred revenues, total assets and total stockholders&#146;
    equity (deficit) after this offering by approximately
    $&#160;&#160;&#160;million, assuming the number of shares
    offered by us, as set forth on the cover page of this
    prospectus, remains the same and after deducting the estimated
    underwriting discount and estimated offering expenses payable by
    us.</TD>
</TR>

</TABLE>

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    <BR>
    8
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<A name='102'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>An investment in shares of our common stock involves
    significant risks. In addition to other information in this
    prospectus, you should carefully consider the following risks
    before investing in shares of our common stock offered by this
    prospectus. The occurrence of any of the following risks could
    materially and adversely affect our business, prospects,
    financial condition and results of operations, which could cause
    you to lose all or a significant portion of your investment in
    shares of our common stock. Some statements in this prospectus,
    including statements in the following risk factors, constitute
    forward-looking statements. See the section of this prospectus
    entitled &#147;Special Note Regarding Forward-Looking Statements
    and Industry Data&#148; for a discussion of forward-looking
    statements.</I>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Our Business and Industry</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    failure to sustain our historical renewal rates, pricing and
    terms of our customer contracts would adversely affect our
    operating results.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We derive, and expect to continue to derive, substantially all
    of our revenues from our on-demand strategic procurement and
    supplier enablement solution in the higher education, life
    sciences, healthcare and state and local government markets.
    Should our current customers lose confidence in the value or
    effectiveness of our solution, the demand for our products and
    services will likely decline, which could materially and
    adversely affect our renewal rates, pricing and contract terms.
    Our subscription agreements with customers are typically for a
    term of three to five years. Over the past three years,
    customers have renewed at an average annual rate of over 94%. On
    a dollar basis, our annual renewal rate has been 106% over this
    same time period solely as a result of pricing increases at the
    time of renewal. If our customers choose not to renew their
    subscription agreements with us at similar rates and on similar
    or more favorable terms, our business, operating results and
    financial condition may be materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to attract new customers, or if our existing customers do
    not purchase additional products or services, the growth of our
    business and cash flows will be adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To increase our revenues and cash flows, we must regularly add
    new customers and, to a somewhat lesser extent, sell additional
    products and services to our existing customers. If we are
    unable to hire or retain quality sales personnel, unable to sell
    our products and services to companies that have been referred
    to us, unable to generate sufficient sales leads through our
    marketing programs, or if our existing or new customers do not
    perceive our solution to be of sufficiently high value and
    quality, we may not be able to increase sales and our operating
    results would be adversely affected. In addition, if we fail to
    sell new products and services to existing or new customers, our
    operating results will suffer, and our revenue growth, cash
    flows and profitability may be materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Continued
    economic weakness and uncertainty, which may result in a
    significant reduction in spending in our target markets, could
    adversely affect our business, lengthen our sales cycles and
    make it difficult for us to forecast operating results
    accurately.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our revenues depend significantly on economic conditions in our
    target markets as well as the economy as a whole. We have
    experienced, and may experience in the future, reduced spending
    by our customers and potential customers due to the current
    financial turmoil and economic weakness affecting the
    U.S.&#160;and global economy, and other macroeconomic factors
    affecting spending behavior. Many of our customers and potential
    customers, particularly in the higher education market, have
    been facing significant budgetary constraints that have limited
    spending on technology solutions. Continued spending constraints
    in our target markets may result in slower growth, or
    reductions, in revenues and profits in the future. In addition,
    economic conditions or uncertainty may cause customers and
    potential customers to reduce or delay technology purchases,
    including purchases of our solution. Our sales cycle may
    lengthen if purchasing decisions are delayed as a result of
    uncertain budget availability or if contract negotiations become
    more protracted or difficult as customers institute additional
    internal approvals for information technology purchases. These
    economic conditions could result in reductions in sales of our
    products and services, longer sales cycles, difficulties in
    collecting accounts receivable or delayed payments,
</DIV>
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    <BR>
    9
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    slower adoption of new technologies and increased price
    competition. Any of these events or any significant reduction in
    spending in the higher education, life sciences, healthcare and
    state and local government markets would likely harm our
    business, financial condition, operating results and cash flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may
    experience service failures or interruptions due to defects in
    the hardware, software, infrastructure, third-party components
    or processes that comprise our solution, any of which could
    adversely affect our business.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A technology solution as complex as ours may contain undetected
    defects in the hardware, software, infrastructure, third-party
    components or processes that are part of the solution we
    provide. If these defects lead to service failures, we could
    experience delays or lost revenues during the period required to
    correct the cause of the defects. Furthermore, from time to
    time, we have experienced immaterial service disruptions in the
    ordinary course of business. We cannot be certain that defects
    will not be found in new products or upgraded modules or that
    service disruptions will not occur in the future, resulting in
    loss of, or delay in, market acceptance, which could have an
    adverse effect on our business, results of operations and
    financial condition.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because customers use our on-demand strategic procurement and
    supplier enablement solution for critical business processes,
    any defect in our solution, any disruption to our solution or
    any error in execution could cause customers to not renew their
    contracts with us, prevent potential customers from purchasing
    our solution and harm our reputation. Although most of our
    contracts with our customers limit our liability to our
    customers for these defects, disruptions or errors, we
    nonetheless could be subject to litigation for actual or alleged
    losses to our customers&#146; businesses, which may require us
    to spend significant time and money in litigation or arbitration
    or to pay significant settlements or damages. We do not
    currently maintain any warranty reserves. Defending a lawsuit,
    regardless of its merit, could be costly and divert
    management&#146;s attention and could cause our business to
    suffer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The insurers under our existing liability insurance policy could
    deny coverage of a future claim for actual or alleged losses to
    our customers&#146; businesses that results from an error or
    defect in our technology or a resulting disruption in our
    solution, or our existing liability insurance might not be
    adequate to cover all of the damages and other costs of such a
    claim. Moreover, we cannot be assured that our current liability
    insurance coverage will continue to be available to us on
    acceptable terms or at all. The successful assertion against us
    of one or more large claims that exceeds our insurance coverage,
    or the occurrence of changes in our liability insurance policy,
    including an increase in premiums or imposition of large
    deductible or co-insurance requirements, could have an adverse
    effect on our business, financial condition and operating
    results. Even if we succeed in litigation with respect to a
    claim, we are likely to incur substantial costs and our
    management&#146;s attention will be diverted from our operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we do
    not successfully maintain the SciQuest brand in our existing
    vertical markets or successfully market the SciQuest brand in
    new vertical markets, our revenues and earnings could be
    materially adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that developing, maintaining and enhancing the
    SciQuest brand in a cost-effective manner is critical in
    expanding our customer base. Some of our competitors have
    well-established brands. Although we believe that the SciQuest
    brand is well established in the higher education and life
    sciences markets where we have a significant operating history,
    our brand is less well known in the healthcare and state and
    local government markets. Promotion of our brand will depend
    largely on continuing our sales and marketing efforts and
    providing
    <FONT style="white-space: nowrap">high-quality</FONT>
    products and services to our customers. We cannot be assured
    that these efforts will be successful in marketing the SciQuest
    brand, particularly beyond the higher education and life
    sciences markets. If we are unable to successfully promote our
    brand, or if we incur substantial expenses in attempting to do
    so, our revenues and earnings could be materially and adversely
    affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to adapt our products and services to rapid technological
    change, our revenues and profits could be materially and
    adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rapid changes in technology, products and services, customer
    requirements and operating standards occur frequently. These
    changes could render our proprietary technology and systems
    obsolete. Any technological changes that reduce or eliminate the
    need for a solution that connects purchasing organizations with
    their suppliers could
</DIV>
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    <BR>
    10
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    harm our business. We must continually improve the performance,
    features and reliability of our products and services,
    particularly in response to our competition.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our success will depend, in part, on our ability to:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    enhance our existing products and services;
</TD>
</TR>

<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    develop new products, services and technologies that address the
    increasingly sophisticated and varied needs of our target
    markets;&#160;and
</TD>
</TR>

<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    respond to technological advances and emerging industry
    standards and practices on a cost-effective and timely basis.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot be certain of our success in accomplishing the
    foregoing. If we are unable, for technical, legal, financial or
    other reasons, to adapt to changing market conditions or buyer
    requirements, our market share, business and operating results
    could be materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    market for on-demand strategic procurement and supplier
    enablement solutions is at a relatively early stage of
    development. If the market for our solution develops more slowly
    than we expect, our revenues may decline or fail to grow and we
    may incur operating losses.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We derive, and expect in the near-term to continue to derive,
    substantially all of our revenues from our
    <FONT style="white-space: nowrap">on-demand</FONT>
    strategic procurement and supplier enablement solution in the
    higher education, life sciences, healthcare and state and local
    government markets. Our current expectations with respect to
    growth may not prove to be correct. The market for our solution
    is at a relatively early stage of development, making our
    business and future prospects difficult to evaluate. In
    particular, we have only recently entered the healthcare and
    state and local government markets, and our penetration of these
    vertical markets is at a substantially lower level than our
    penetration of the higher education and life sciences vertical
    markets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Should our prospective customers fail to recognize, or our
    current customers lose confidence in, the value or effectiveness
    of our solution, the demand for our products and services will
    likely decline. Any significant price compression in our
    vertical markets as a result of newly introduced solutions or
    consolidation among our competitors could have a material
    adverse effect on our business. A number of factors could affect
    our customers&#146; assessment of the value or effectiveness of
    our solution, including the following:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    their comfort with current purchasing and asset management
    procedures;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the costs and resources required to adopt new business
    procedures;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    reductions in capital expenditures or technology spending
    budgets;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the price, performance and availability of competing solutions;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    security and privacy concerns;&#160;or
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    general reticence about technology or the Internet.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We have
    been, and may continue to be, subject to claims that we or our
    technologies infringe upon the intellectual property or other
    proprietary rights of a third party. Any such claims may require
    us to incur significant costs, to enter into royalty or
    licensing agreements or to develop or license substitute
    technology, which may harm our business.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The on-demand strategic procurement and supplier enablement
    market is characterized by the existence of a large number of
    patents, copyrights, trademarks and trade secrets and by
    litigation based on allegations of infringement or other
    violations of intellectual property rights. As we seek to extend
    our solution, we could be constrained by the intellectual
    property rights of others. We have been, and may in the future
    be, subject to claims that our technologies infringe upon the
    intellectual property or other proprietary rights of a third
    party. While we believe that our products do not infringe upon
    the proprietary rights of third parties, we cannot guarantee
    that third parties will not assert infringement claims against
    us in the future, particularly with respect to technology that
    we acquire through acquisitions of other companies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We might not prevail in any intellectual property infringement
    litigation, given the complex technical issues and inherent
    uncertainties in such litigation. Defending such claims,
    regardless of their merit, could be time-consuming
</DIV>
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    11
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and distracting to management, result in costly litigation or
    settlement, cause development delays, or require us to enter
    into royalty or licensing agreements. We generally provide in
    our customer agreements that we will indemnify our customers
    against third-party infringement claims relating to our
    technology provided to the customer, which could obligate us to
    fund significant additional amounts. If our products are found
    to have violated any third-party proprietary rights, we could be
    required to withdraw those products from the market,
    <FONT style="white-space: nowrap">re-develop</FONT>
    those products or seek to obtain licenses from third parties,
    which might not be available on reasonable terms or at all. Any
    efforts to re-develop our products, obtain licenses from third
    parties on favorable terms or license a substitute technology
    might not be successful and, in any case, might substantially
    increase our costs and harm our business, financial condition
    and operating results. Withdrawal of any of our products from
    the market could have a material adverse effect on our business,
    financial condition and operating results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We are
    subject to a lengthy sales cycle and delays or failures to
    complete sales may harm our business and result in slower
    growth.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our sales cycle may take several months to over a year.
    Furthermore, we expect to experience relatively longer sales
    cycles as we expand into the healthcare and state and local
    government markets. During this sales cycle, we may expend
    substantial resources with no assurance that a sale will
    ultimately result. The length of a customer&#146;s sales cycle
    depends on a number of factors, many of which we may not be able
    to control, including the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    potential customers&#146; internal approval processes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    budgetary constraints for technology spending;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    customers&#146; concerns about implementing new procurement
    methods and strategies;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    seasonal and other timing effects.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any lengthening of the sales cycle could delay our revenue
    recognition and cash generation and could cause us to expend
    more resources than anticipated. If we are unsuccessful in
    closing sales or if we experience delays, it could have a
    material adverse effect on our operating results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our cash
    flows, quarterly revenues and operating results have fluctuated
    in the past and may fluctuate in the future due to a number of
    factors. As a result, we may fail to meet or exceed the
    expectations of securities analysts or investors, which could
    cause our stock price to decline.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cash flows, quarterly revenues and operating results have
    varied in the past and may fluctuate in the future. As a result,
    you should not rely on the results of any one quarter as an
    indication of future performance and
    <FONT style="white-space: nowrap">period-to-period</FONT>
    comparisons of our revenues and operating results may not be
    meaningful.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Fluctuations in our quarterly results of operations may be due
    to a number of factors including, but not limited to, those
    listed below and others identified throughout this &#147;Risk
    Factors&#148; section:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    concentrated sales to large customers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    our ability to retain and increase sales to existing customers
    and to attract new customers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the timing and success of new product and module introductions
    or upgrades by us or our competitors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    changes in our pricing policies or those of our competitors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    renewal rates of existing customers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    potential consolidation among our customers within the life
    sciences market;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    potential foreign currency exchange gains and losses associated
    with expenses and sales denominated in currencies other than the
    U.S.&#160;dollar;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the amount and timing of expenditures related to development,
    adaptation or acquisition of technologies, products or
    businesses;
</TD>
</TR>

</TABLE>
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    <BR>
    12
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    competition, including entry into the industry by new
    competitors and new offerings by existing competitors;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    general economic, industry and market conditions that impact
    expenditures for technology solutions in our target markets.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Such fluctuations might lead analysts to change their models for
    valuing our common stock. As a result, our stock price could
    decline rapidly and we could face costly securities class action
    suits or other unanticipated issues.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    future profitability and cash flows are dependent upon our
    ability to control expenses.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operating plan to maintain profitability is based upon
    estimates of our future expenses. For instance, we expect our
    operating expenses to increase somewhat in 2010 as compared to
    2009 in order to support anticipated revenue growth.
    Furthermore, as a public company upon completion of this
    offering, we will incur significant legal, accounting and other
    expenses that we have not incurred as a private company. If our
    future expenses are greater than anticipated, our ability to
    maintain profitability may be negatively impacted. Greater than
    anticipated expenses may negatively impact our cash flows, which
    could cause us to expend our capital faster than anticipated.
    Also, a large percentage of our expenses are relatively fixed,
    which may make it difficult to reduce expenses significantly in
    the future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    future revenue growth could be impaired if our investment in
    direct and indirect sales channels for our products is
    unsuccessful.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have invested significant time and resources in developing
    our direct sales force and our indirect sales channels. Sales
    through our direct sales force represent the primary source of
    our revenues. We supplement our direct sales force with indirect
    sales channels for our products through relationships with
    suppliers, enterprise resource planning, or ERP, providers,
    technology providers and purchasing consultants and consortia.
    We cannot be assured that our direct or indirect sales channels
    will be successful or that we will be able to develop additional
    indirect sales channels to support our direct sales channel. If
    our direct sales efforts, and to a lesser extent our indirect
    sales efforts, are not effective, our ability to achieve revenue
    growth may be impaired. As we develop additional indirect sales
    channels, we may experience conflicts with our direct sales
    force to the extent that these sales channels target the same
    customer bases. Successful management of these potential
    conflicts will be necessary in order to maximize our revenue
    growth.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to facilitate the use of our implementation services by
    our customers in an optimal manner, the effectiveness of our
    customers&#146; use of our solution would be negatively
    impacted, resulting in harm to our reputation, business and
    financial performance.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The use of our solution typically includes implementation
    services to facilitate the optimal use of our solution. For
    example, in delivering our services, we typically work closely
    with customer personnel to improve the customer&#146;s
    procurement process, enable the customer&#146;s suppliers on the
    SciQuest Supplier Network, assist suppliers in loading product
    catalogs and support organizational activities to assist our
    customer&#146;s transition to our strategic procurement and
    supplier enablement solution. These activities require
    substantial involvement and cooperation from both our customers
    and their suppliers. If we do not receive sufficient support
    from either the customer or its suppliers, then the optimal use
    of our services by the customer may be adversely impacted,
    resulting in lower customer satisfaction and negatively
    affecting our business, reputation and financial performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    not able to successfully create internal efficiencies for our
    customers and their suppliers, our operating costs and
    relationships with our customers and their suppliers will be
    adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A key component of our products and services is the efficiencies
    created for our customers and their suppliers. In order to
    create these efficiencies, it is typically necessary for our
    solution to work together with our customer&#146;s internal
    systems such as inventory, customer service, technical service,
    ERP systems and financial systems. If these systems do not
    create the anticipated efficiencies, relationships with our
    customers will be adversely affected, which could have a
    material adverse affect on our financial condition and results
    of operations.
</DIV>
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    <BR>
    13
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We are
    investing significantly in developing and acquiring new product
    and service offerings with no guarantee of success.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Expanding our product and service offerings is an important
    component of our business strategy. As such, we are expending a
    significant amount of our resources in these development and
    acquisition efforts. Any new offerings that are not favorably
    received by prospective customers could damage our reputation or
    brand name. Expansion of our services will require us to devote
    a significant amount of time and money and may strain our
    management, financial and operating resources. We cannot be
    assured that our development or acquisition efforts will result
    in commercially viable products or services. In addition, we may
    bear development and acquisition costs in current periods that
    do not generate revenues until future periods, if at all. To the
    extent that we incur expenses that do not result in increased
    current or future revenues, our earnings may be materially and
    adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    failure to raise additional capital or generate cash flows
    necessary to expand our operations and invest in new
    technologies could reduce our ability to compete successfully
    and adversely affect our results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have funded our business through our cash flows from
    operations since the going private transaction in 2004. We may
    need to raise additional funds to achieve our future strategic
    objectives, and we may not be able to obtain additional debt or
    equity financing on favorable terms, if at all. If we raise
    additional equity financing, our security holders may experience
    significant dilution of their ownership interests and the value
    of shares of our common stock could decline. If we engage in
    debt financing, we may be required to accept terms that restrict
    our ability to incur additional indebtedness, force us to
    maintain specified liquidity or other ratios or restrict our
    ability to pay dividends or make acquisitions. If we need
    additional capital and cannot raise it on acceptable terms, we
    may not be able to, among other things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    develop and enhance our solution;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    continue to expand our technology development, sales
    <FONT style="white-space: nowrap">and/or</FONT>
    marketing organizations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    hire, train and retain employees;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    respond to competitive pressures or unanticipated working
    capital requirements.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our inability to do any of the foregoing could reduce our
    ability to compete successfully and adversely affect our results
    of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Product
    development delays could damage our reputation and sales
    efforts.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Developing new products and updated versions of our existing
    products for release at regular intervals is important to our
    business efforts. At times, we may experience delays in our
    development process that result in new releases being delayed or
    lacking expected features or functionality. New product or
    version releases that are delayed or do not meet expectations
    may result in customer dissatisfaction, which in turn could
    damage significantly our reputation and sales efforts. Such
    damage to our reputation and sales efforts could negatively
    impact our operating results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    market for on-demand strategic procurement and supplier
    enablement solutions is highly competitive, which makes
    achieving market share and profitability more
    difficult.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market for on-demand strategic procurement and supplier
    enablement solutions is rapidly evolving and intensely
    competitive. We experience competition from multiple sources,
    which makes it difficult for us to develop a comprehensive
    business strategy that addresses all of these competitive
    factors. We face competition from other on-demand strategic
    procurement and supplier enablement solution providers, large
    enterprise application providers, smaller market-specific
    vendors and internally developed and maintained solutions.
    Competition is likely to intensify as this market matures.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As competitive conditions intensify, competitors may:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    devote greater resources to marketing and promotional campaigns;
</TD>
</TR>

</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    14
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

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    devote substantially more resources to product development;
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    secure exclusive arrangements with indirect sales channels that
    impede our sales;
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    develop more extensive client bases and broader client
    relationships than we have;&#160;and
</TD>
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    enter into strategic or commercial relationships with larger,
    more established and well-financed companies.
</TD>
</TR>

</TABLE>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, some of our competitors may have longer operating
    histories and greater name recognition than we have. New
    technologies and the expansion of existing technologies may
    increase competitive pressures. As a result of increased
    competition, we may experience reduced operating margins, as
    well as loss of market share and brand recognition. We may not
    be able to compete successfully against current and future
    competitors. These competitive pressures could have a material
    adverse effect on our revenue growth and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Mergers
    or other strategic transactions involving our competitors could
    weaken our competitive position, limit our growth prospects or
    reduce our revenues.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our industry is highly fragmented and that there
    is likely to be consolidation, which could lead to increased
    price competition and other forms of competition. Increased
    competition may cause pricing pressure and loss of market share,
    either of which could have a material adverse effect on our
    business, limit our growth prospects or reduce our revenues. Our
    competitors may establish or strengthen cooperative
    relationships with strategic partners or other parties.
    Established companies may not only develop their own products
    but may also merge with or acquire our current competitors. It
    is also possible that new competitors or alliances among
    competitors may emerge and rapidly acquire significant market
    share. Any of these circumstances could materially and adversely
    affect our business and operating results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Interruptions
    or delays from third-party data centers could impair the
    delivery of our solution, which could cause our business to
    suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We use two third-party data centers, our primary operating
    center located in Raleigh, North Carolina and a fully redundant
    disaster recovery platform located in Scottsdale, Arizona, to
    conduct our operations. Our solution resides on hardware that we
    own and operate in these locations. Our operations depend on the
    protection of the equipment and information we store in these
    third-party data centers against damage or service interruptions
    that may be caused by fire, flood, severe storm, power loss,
    telecommunications failures, unauthorized intrusion, computer
    viruses and disabling devices, natural disasters, war, criminal
    acts, military action, terrorist attacks and other similar
    events beyond our control. A prolonged service disruption
    affecting our solution for any of the foregoing reasons could
    damage our reputation with current and potential customers,
    expose us to liability and cause us to lose recurring revenue
    customers or otherwise adversely affect our business. We may
    also incur significant costs for using alternative equipment or
    taking other actions in preparation for, or in reaction to,
    events that damage the data centers we use.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our on-demand strategic procurement and supplier enablement
    solution is accessed by a large number of customers at the same
    time. As we continue to expand the number of our customers and
    products and services available to our customers, we may not be
    able to scale our technology to accommodate the increased
    capacity requirements, which may result in interruptions or
    delays in service. In addition, the failure of our third-party
    data centers to meet our capacity requirements could result in
    interruptions or delays in our solution or impede our ability to
    scale our operations. In the event that our data center
    arrangements are terminated, or there is a lapse of service or
    damage to such facilities, we could experience interruptions in
    our solution as well as delays and additional expenses in
    arranging new facilities and services.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to protect our intellectual property rights, our business
    could be materially and adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any misappropriation of our technology or the development of
    competing technology could seriously harm our business. We
    regard a substantial portion of our software products as
    proprietary and rely on a combination of patent, copyright,
    trademark, trade secrets, customer license agreements and
    employee and third-party confidentiality agreements to protect
    our intellectual property rights. These protections may not be
    adequate, and
</DIV>
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    <BR>
    15
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    we cannot be assured that they will prevent misappropriation of
    our intellectual property, particularly in foreign countries
    where the laws may not protect proprietary rights as fully as do
    the laws of the U.S. Other companies could independently develop
    similar or competing technology without violating our
    proprietary rights. The process of enforcing our intellectual
    property rights through legal proceedings would likely be
    burdensome and expensive, and our ultimate success cannot be
    assured. Our failure to protect adequately our intellectual
    property and proprietary rights could adversely affect our
    business, financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We
    utilize proprietary technology licensed from third parties, the
    loss of which could be costly.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We license a portion of the proprietary technology for our
    products and services from third parties. These
    <FONT style="white-space: nowrap">third-party</FONT>
    licenses may not be available to us on favorable terms, or at
    all, in the future. In addition, we must be able to integrate
    successfully this proprietary technology in a timely and
    cost-effective manner to create an effective finished product.
    If we fail to obtain the necessary third-party licenses on
    favorable terms or are unable to integrate successfully this
    proprietary technology on favorable terms, it could have a
    material adverse effect on our business operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    SciQuest Supplier Network incorporates content from suppliers
    that is critical to the effectiveness of our products.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A critical component of our solution is the SciQuest Supplier
    Network, which is the single integration point between our
    customers and all of their suppliers that provides customers
    with on-demand access to comprehensive and
    <FONT style="white-space: nowrap">up-to-date</FONT>
    multi-commodity supplier catalogs. These catalogs and other
    content are provided to us by each supplier for integration into
    our platform, which requires a high degree of involvement and
    cooperation from the suppliers. We must be able to integrate
    successfully this content in a timely manner in order for our
    customers to realize the full benefit of our solution. Also, any
    errors or omissions in the content provided by the suppliers may
    reflect poorly on our solution. If we are unable to successfully
    incorporate supplier content into our platform or if such
    content contains errors or omissions, then our products may not
    meet customer needs or expectations, and our business and
    reputation may be materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">A failure
    to protect the integrity and security of our customers&#146;
    information could expose us to litigation, materially damage our
    reputation and harm our business, and the costs of preventing
    such a failure could adversely affect our results of
    operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business involves the collection and use of confidential
    information of our customers and their trading partners. We
    cannot be assured that our efforts to protect this confidential
    information will be successful. If any compromise of this
    information security were to occur, we could be subject to legal
    claims and government action, experience an adverse effect on
    our reputation and need to incur significant additional costs to
    protect against similar information security breaches in the
    future, each of which could adversely affect our financial
    condition, results of operations and growth prospects. In
    addition, because of the critical nature of data security, any
    perceived breach of our security measures could cause existing
    or potential customers not to use our solution and could harm
    our reputation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our use
    of &#147;open source&#148; software could negatively affect our
    ability to sell our solution and subject us to possible
    litigation.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A portion of the technologies licensed by us incorporate
    so-called &#147;open source&#148; software, and we may
    incorporate open source software in the future. Such open source
    software is generally licensed by its authors or other third
    parties under open source licenses. If we fail to comply with
    these licenses, we may be subject to certain conditions,
    including requirements that we offer the portion of our solution
    that incorporates the open source software for no cost, that we
    make available source code for modifications or derivative works
    we create based upon, incorporating or using the open source
    software
    <FONT style="white-space: nowrap">and/or</FONT> that
    we license such modifications or derivative works under the
    terms of the particular open source license. If an author or
    other third party that distributes such open source software
    were to allege that we had not complied with the conditions of
    one or more of these licenses, we could incur significant legal
    expenses defending against such allegations and could be subject
</DIV>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    to significant damages, enjoined from the sale of our solution
    that contained the open source software and required to comply
    with the foregoing conditions, which could disrupt the
    distribution and sale of our solution.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Further, the terms of many open source licenses to which we are
    subject have not been interpreted by U.S.&#160;or foreign
    courts, and although we believe we comply with the terms of
    those licenses, there is a risk that those licenses could be
    construed in a manner that imposes unanticipated conditions or
    restrictions on our ability to commercialize our solution. In
    that event, we could be required to (i) seek licenses from third
    parties,
    <FONT style="white-space: nowrap">(ii)&#160;re-develop</FONT>
    our solution, (iii)&#160;discontinue sales of our solution, or
    (iv) release our proprietary software code under the terms of an
    open source license, any of which could adversely affect our
    business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we
    fail to attract and retain key personnel, our business may
    suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Given the complex nature of the technology on which our business
    is based and the speed with which such technology advances, our
    future success is dependent, in large part, upon our ability to
    attract and retain highly qualified managerial, technical and
    sales personnel. In particular, Stephen Wiehe, our President and
    Chief Executive Officer, Rudy Howard, our Chief Financial
    Officer, James Duke, our Chief Operating Officer, Jeffrey
    Martini, our Senior Vice President of Worldwide Sales, Jennifer
    Kaelin, our Vice President of Finance and Gamble Heffernan, our
    Vice President of Marketing and Strategy, are critical to the
    management of our business and operations. A key factor of our
    success will be the continued services and performance of our
    executive officers and other key personnel. If we lose the
    services of any of our executive officers, our financial
    condition and results of operations could be materially and
    adversely affected. Our success also depends upon our ability to
    identify, hire and retain other highly skilled technical,
    managerial, editorial, sales, marketing and customer service
    professionals. Competition for such personnel is intense. We
    cannot be certain of our ability to identify, hire and retain
    adequately qualified personnel. Failure to identify, hire and
    retain necessary key personnel could have a material adverse
    effect on our business and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    growth could strain our personnel resources and infrastructure,
    and if we are unable to implement appropriate controls and
    procedures to manage our growth, we will not be able to
    implement our business plan successfully.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have experienced a period of growth in our operations and
    personnel, which places a significant strain on our management,
    administrative, operational and financial infrastructure. Our
    success will depend in part upon the ability of our senior
    management to manage this growth effectively. To do so, we must
    continue to hire, train and manage new employees as needed. If
    our new hires perform poorly, or if we are unsuccessful in
    hiring, training, managing and integrating these new employees,
    or if we are not successful in retaining our existing employees,
    our business would be harmed. To manage the expected growth of
    our operations and personnel, we will need to continue to
    improve our operational, financial and management controls and
    our reporting systems and procedures. The additional headcount
    we may add will increase our cost base, which will make it more
    difficult for us to offset any future revenue shortfalls by
    reducing expenses in the short term. If we fail to successfully
    manage our growth, we will be unable to execute our business
    plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    failure to integrate successfully businesses that we may acquire
    could adversely affect our business.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An element of our strategy is to broaden the scope and content
    of our products and services through the acquisition of existing
    products, technologies, services and businesses. Acquisitions
    entail numerous risks, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
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    <TD align="left">
    the integration of new operations, products, services and
    personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the diversion of resources from our existing businesses, sites
    and technologies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the inability to generate revenues from new products and
    services sufficient to offset associated acquisition costs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the maintenance of uniform standards, controls, procedures and
    policies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    accounting effects that may adversely affect our financial
    results;
</TD>
</TR>

</TABLE>
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    17
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the impairment of employee and customer relations as a result of
    any integration of new management personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    dilution to existing stockholders from the issuance of equity
    securities;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    liabilities or other problems associated with an acquired
    business.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may have difficulty in effectively assimilating and
    integrating these businesses, or any future joint ventures,
    acquisitions or alliances, into our operations, and such
    integration may require a significant amount of time and effort
    by our management team. To the extent we do not successfully
    avoid or overcome the risks or problems related to any
    acquisitions, our business, results of operations and financial
    condition could be adversely affected. Future acquisitions also
    could impact our financial position and capital needs and could
    cause substantial fluctuations in our quarterly and yearly
    results of operations. Acquisitions could include significant
    goodwill and intangible assets, which may result in future
    impairment charges that would reduce our stated earnings.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    international sales efforts will require financial resources and
    management attention and could have a negative effect on our
    earnings.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are investing resources and capital to expand our sales
    internationally. This will require financial resources and
    management attention and may subject us to new or increased
    levels of regulatory, economic, tax and political risks, all of
    which could have a negative effect on our earnings. We cannot be
    assured that we will be successful in creating international
    demand for our products and services. In addition, our
    international business may be subject to a variety of risks,
    including, among other things, increased costs associated with
    maintaining international marketing efforts, applicable
    government regulation, conflicting and changing tax laws,
    economic and political conditions and potential instability in
    various parts of the world, fluctuations in foreign currency,
    increased financial accounting and reporting burdens and
    complexities, difficulties in collecting international accounts
    receivable and the enforcement of intellectual property rights.
    If we continue to expand our business globally, our success will
    depend, in large part, on our ability to anticipate and
    effectively manage these and other risks associated with our
    international operations. Our failure to manage any of these
    risks successfully could adversely affect our operating results
    as a result of increased operating costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    actual operating results may differ significantly from our
    guidance.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    From time to time, we may release guidance in our quarterly
    earnings releases, quarterly earnings conference call, or
    otherwise, regarding our future performance that represents our
    management&#146;s estimates as of the date of release. This
    guidance, which includes forward-looking statements, will be
    based on projections prepared by our management.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither our independent registered public accounting firm nor
    any other independent expert or outside party compiles or
    examines the projections. Accordingly, no such person expresses
    any opinion or any other form of assurance with respect thereto.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Projections are based upon a number of assumptions and estimates
    that, while presented with numerical specificity, are inherently
    subject to significant business, economic and competitive
    uncertainties and contingencies, many of which are beyond our
    control. These projections are also based upon specific
    assumptions with respect to future business decisions, some of
    which will change. We may state possible outcomes as high and
    low ranges, which are intended to provide a sensitivity analysis
    as variables are changed but are not intended to represent that
    actual results could not fall outside of the suggested ranges.
    The principal reason that we release guidance is to provide a
    basis for our management to discuss our business outlook with
    analysts and investors. We do not accept any responsibility for
    any projections or reports published by analysts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Guidance is necessarily speculative in nature, and it can be
    expected that some or all of the assumptions underlying the
    guidance furnished by us will not materialize or will vary
    significantly from actual results. Accordingly, our guidance is
    only an estimate of what management believes is realizable as of
    the date of release. Actual results will vary from our guidance,
    and the variations may be material. In light of the foregoing,
    investors are urged not to rely upon, or otherwise consider, our
    guidance in making an investment decision regarding our common
    stock.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any failure to implement our operating strategy successfully or
    the occurrence of any of the events or circumstances set forth
    under &#147;Risk Factors&#148; in this prospectus could result
    in our actual operating results being different from our
    guidance, and those differences may be adverse and material.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we
    fail to maintain proper and effective internal controls, our
    ability to produce accurate and timely financial statements
    could be impaired, which could harm our operating results, our
    ability to operate our business and investor views of
    us.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Ensuring that we have adequate internal financial and accounting
    controls and procedures in place so that we can produce accurate
    financial statements on a timely basis is a costly and
    time-consuming effort that needs to be re-evaluated frequently.
    Our internal control over financial reporting is a process
    designed to provide reasonable assurance regarding the
    reliability of financial reporting and the preparation of
    financial statements in accordance with generally accepted
    accounting principles. We are in the process of documenting,
    reviewing and improving our internal controls and procedures for
    compliance with Section&#160;404 of the Sarbanes-Oxley Act of
    2002, or the Sarbanes-Oxley Act, which requires annual
    management assessment of the effectiveness of our internal
    control over financial reporting and a report by our independent
    auditors addressing this assessment. To the extent that we are
    not currently in compliance with Section&#160;404, we may be
    required to implement new internal control procedures and
    re-evaluate our financial reporting. We may experience higher
    than anticipated operating expenses as well as increased
    independent auditor fees during the implementation of these
    changes and thereafter. Further, we may need to hire additional
    qualified personnel in order for us to comply with
    Section&#160;404. If we fail to maintain proper and effective
    internal controls, our ability to produce accurate and timely
    financial statements could be impaired, which could harm our
    operating results, harm our ability to operate our business and
    reduce the trading price of our stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Changes
    in financial accounting standards or practices may cause
    adverse, unexpected financial reporting fluctuations and affect
    our reported results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A change in accounting standards or practices can have a
    significant effect on our reported results and may even affect
    our reporting of transactions completed before the change is
    effective. New accounting pronouncements and varying
    interpretations of accounting pronouncements have occurred and
    may occur in the future. Changes to existing rules or the
    questioning of current practices may adversely affect our
    reported financial results or the way in which we conduct our
    business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our costs
    and demands upon management may continue to increase as a result
    of complying with the laws and regulations affecting public
    companies, which could harm our operating results.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to incur significant legal, accounting, investor
    relations and other expenses as a public company that we have
    not incurred as a private company, including costs associated
    with public company reporting requirements. We also have
    incurred and will incur costs associated with current corporate
    governance requirements, including requirements under
    Section&#160;404 and other provisions of the Sarbanes-Oxley Act,
    as well as rules implemented by the Securities and Exchange
    Commission, or SEC, and the NYSE. The expenses incurred by
    public companies for reporting and corporate governance purposes
    have increased dramatically over the past several years. These
    rules and regulations have increased our legal and financial
    compliance costs substantially and have made some activities
    more time-consuming and costly. We are unable currently to
    estimate these future costs with any degree of certainty.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    business and financial performance could be negatively impacted
    by changes in tax laws or regulations.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    New sales, use or other tax laws, statutes, rules, regulations
    or ordinances could be enacted at any time. Those enactments
    could adversely affect our domestic and international business
    operations, and our business and financial performance. Further,
    existing tax laws, statutes, rules, regulations or ordinances
    could be interpreted, changed, modified or applied adversely to
    us. These events could require us or our customers to pay
    additional tax amounts on a prospective or retroactive basis, as
    well as require us or our customers to pay fines
    <FONT style="white-space: nowrap">and/or</FONT>
    penalties and interest for past amounts deemed to be due. If we
    raise our product and maintenance prices to offset the costs of
    these changes, existing customers may elect not to renew their
    agreements and potential customers may elect not
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    to purchase our services. Additionally, new, modified or newly
    interpreted or applied tax laws could increase our
    customers&#146; and our compliance, operating and other costs,
    as well as the costs of our services. Further, these events
    could decrease the capital we have available to operate our
    business. Any or all of these events could adversely impact our
    business and financial performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Government
    regulation of the Internet and
    <FONT style="white-space: nowrap">e-commerce</FONT>
    is evolving, and unfavorable changes or our failure to comply
    with regulations could harm our operating results.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As Internet commerce continues to evolve, increasing regulation
    by federal, state or foreign agencies becomes more likely. For
    example, we believe increased regulation is likely in the area
    of data privacy, and laws and regulations applying to the
    solicitation, collection, processing or use of personal or
    consumer information could affect our customers&#146; ability to
    use and share data, potentially reducing demand for our
    products. In addition, taxation of products and services
    provided over the Internet or other charges imposed by
    government agencies or by private organizations for accessing
    the Internet may also be imposed. Any regulation imposing
    greater fees for Internet use or restricting information
    exchange over the Internet could result in a decline in the use
    of the Internet and the viability of Internet-based services and
    product offerings, which could harm our business and operating
    results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    ability to use U.S. net operating loss carryforwards might be
    limited.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, we had net operating loss
    carryforwards of approximately $200&#160;million for
    U.S.&#160;federal tax purposes, the use of which may be
    substantially limited. These loss carryforwards will begin to
    expire in 2014. To the extent these net operating loss
    carryforwards are available, we intend to use them to reduce the
    corporate income tax liability associated with our operations.
    Section&#160;382 of the U.S.&#160;Internal Revenue Code
    generally imposes an annual limitation on the amount of net
    operating loss carryforwards that might be used to offset
    taxable income when a corporation has undergone significant
    changes in stock ownership. As a result, prior or future changes
    in ownership could put limitations on the availability of our
    net operating loss carryforwards. In addition, our ability to
    utilize the current net operating loss carryforwards might be
    further limited by the issuance of common stock in this
    offering. To the extent our use of net operating loss
    carryforwards is significantly limited, our income could be
    subject to corporate income tax earlier than it would if we were
    able to use net operating loss carryforwards, which could result
    in lower profits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to this Offering and Ownership of Our Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    common stock could trade at prices below the initial public
    offering price.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There has not been a public trading market for shares of our
    common stock since August 2004. An active trading market may not
    develop or be sustained after this offering. If an active
    trading market does not develop, investors may have difficulty
    selling any of our common stock that they buy. The initial
    public offering price for the shares of common stock sold in
    this offering was determined by negotiations between
    representatives of the underwriters and us. This price may not
    be indicative of the price at which our common stock will trade
    after this offering, and our common stock could easily trade
    below the initial public offering price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our stock
    price may be volatile, and investors may be unable to sell their
    shares at or above the initial public offering price.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market price of our common stock has been and could be
    subject to wide fluctuations in response to, among other things,
    the factors described in this &#147;Risk Factors&#148; section
    or elsewhere in this prospectus, and other factors beyond our
    control, including the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    variations in our quarterly operating results;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    decreases in market valuations of similar companies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the failure of securities analysts to cover our common stock
    after this offering or changes in financial estimates by
    analysts who cover us, our competitors or our industry;
</TD>
</TR>

</TABLE>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    failure by us or our competitors to meet analysts&#146;
    projections or guidance that we or our competitors may give to
    the market;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    fluctuations in stock market prices and volumes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, the stock markets have experienced price and volume
    fluctuations that have affected and continue to affect the
    market prices of equity securities of many companies. These
    fluctuations often have been unrelated or disproportionate to
    the operating performance of those companies. These broad market
    fluctuations, as well as general economic, political and market
    conditions, such as recessions, interest rate changes and
    international currency fluctuations, may negatively affect the
    market price of our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the past, many companies that have experienced volatility in
    the market price of their stock have become subject to
    securities class action litigation. We may be the target of this
    type of litigation in the future. Securities litigation against
    us could result in substantial costs and divert our
    management&#146;s attention from other business concerns, which
    could seriously harm our business. All of these factors could
    cause the market price of our stock to decline, and you may lose
    some or all of your investment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    continued concentration of our capital stock ownership with
    insiders upon completion of this offering will limit your
    ability to influence corporate matters.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that our directors, executive officers and holders
    of more than 5% of our common stock, together with their
    affiliates, will beneficially own, in the aggregate,
    approximately&#160;&#160;&#160;&#160;&#160;% of our common stock
    after this offering. These stockholders may have interests that
    differ from yours, and they may vote in a way with which you
    disagree and that may be adverse to your interests. This
    concentration of share ownership may adversely affect the
    trading price for our common stock because investors often
    perceive disadvantages in owning stock in companies with
    controlling stockholders. Also, these stockholders, acting
    together, will be able to control the outcome of matters
    submitted to our stockholders for approval, including the
    election of directors and the approval of significant corporate
    transactions, such as mergers, consolidations or the sale of
    substantially all of our assets. In addition, these
    stockholders, acting together, would have the ability to control
    the management and affairs of our company. Accordingly, this
    concentration of ownership might harm the market price of our
    common stock by:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    delaying, deferring or preventing a change in corporate control;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    impeding a merger, consolidation, takeover or other business
    combination involving us;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    discouraging a potential acquirer from making a tender offer or
    otherwise attempting to obtain control of us.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our stock
    price could decline due to the large number of outstanding
    shares of our common stock eligible for future sale.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales of substantial amounts of our common stock in the public
    market following this offering, or the perception that these
    sales could occur, could cause the market price of our common
    stock to decline. These sales could also make it more difficult
    for us to sell equity or equity-related securities in the future
    at a time and price that we deem appropriate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    outstanding shares of common stock, assuming no exercise of the
    underwriters&#146; option to purchase additional shares and no
    exercise of outstanding options after December&#160;31, 2009.
    The shares sold in this offering will be immediately tradable
    without restriction. Of the remaining shares:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    no shares will be eligible for sale immediately upon the
    completion of this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    will be eligible for sale upon the expiration of
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements, subject in some cases to volume and other
    restrictions of Rule&#160;144 and Rule&#160;701 under the
    Securities Act of 1933, as amended, or the Securities Act.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The <FONT style="white-space: nowrap">lock-up</FONT>
    agreements expire 180&#160;days after the date of this
    prospectus, except that the
    <FONT style="white-space: nowrap">180-day</FONT>
    period may be extended under certain circumstances where we
    announce or pre-announce earnings or a material event occurs
    within approximately 17&#160;days prior to, or approximately
    15&#160;days after, the termination of the
    <FONT style="white-space: nowrap">180-day</FONT>
    period. The
</DIV>
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    <BR>
    21
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    representatives of the underwriters may, in their sole
    discretion and at any time without notice, release all or any
    portion of the securities subject to
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following this offering, holders of substantially all of the
    shares of our common stock not sold in this offering will be
    entitled to rights with respect to the registration of these
    shares under the Securities Act. See &#147;Description of
    Capital Stock&#160;&#151; Registration Rights.&#148; If we
    register their shares of common stock following the expiration
    of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements, these stockholders could sell those shares in the
    public market without being subject to the volume and other
    restrictions of Rule&#160;144 and Rule&#160;701.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After the closing of this offering, we intend to register
    approximately&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock that have been issued or reserved for future
    issuance under our stock incentive plans. Of these
    shares,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    will be eligible for sale upon the exercise of vested options
    after the expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Investors
    in this offering will experience immediate and substantial
    dilution in the net tangible book value of the common stock they
    purchase in this offering.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Investors in this offering will experience immediate dilution of
    $&#160;&#160;&#160;&#160;&#160; per share, because the price
    that they pay will be substantially greater than the net
    tangible book value per share of common stock that they acquire.
    This dilution is due in large part to the fact that our earlier
    investors paid substantially less than the price of the shares
    being sold in this offering when they purchased their shares of
    our capital stock. If outstanding options to purchase our common
    stock are exercised, investors in this offering will experience
    additional dilution.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We have
    broad discretion in the use of the proceeds of this
    offering.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Approximately $35.5&#160;million of the net proceeds to us from
    this offering will be used to redeem all outstanding shares of
    our preferred stock. The remainder of the net proceeds will be
    used, as determined by management in its sole discretion, for
    working capital and general corporate purposes. We have not,
    however, determined the allocation of those remaining net
    proceeds among such uses. Our management will have broad
    discretion over the use and investment of these net proceeds,
    and, accordingly, you will need to rely upon the judgment of our
    management with respect to our use of these net proceeds, with
    only limited information concerning management&#146;s specific
    intentions. You will not have the opportunity, as part of your
    investment decision, to assess whether our proceeds are being
    used appropriately. We may place the net proceeds in investments
    that do not produce income or that lose value, which may cause
    our stock price to decline.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    charter documents and Delaware law could prevent a takeover that
    stockholders consider favorable and could also reduce the market
    price of our stock.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation and our
    amended and restated bylaws contain provisions that could delay
    or discourage a change in control of our company. These
    provisions could also make it more difficult for stockholders to
    elect directors and take other corporate actions. These
    provisions include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    a classified board of directors with three-year staggered terms;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    not providing for cumulative voting in the election of directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    authorizing the board to issue, without stockholder approval,
    preferred stock with rights senior to those of our common stock;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    prohibiting stockholder action by written consent;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    requiring advance notification of stockholder nominations and
    proposals.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These and other provisions in our amended and restated
    certificate of incorporation and our amended and restated bylaws
    and under Delaware law could discourage potential takeover
    attempts, reduce the price that investors might be willing to
    pay in the future for shares of our common stock and result in
    the market price of our common stock being lower than it would
    be without these provisions. See &#147;Description of Capital
    Stock&#160;&#151; Preferred Stock,&#148; &#147;Description of
    Capital Stock &#151;&#160;Anti-Takeover Effects of Our Amended
    and Restated Certificate
</DIV>
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    <BR>
    22
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    of Incorporation and Amended and Restated Bylaws,&#148; and
    &#147;Description of Capital Stock&#160;&#151; Delaware
    Anti-Takeover Statute.&#148;
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    rights and the rights of our stockholders to take action against
    our directors and officers are limited, which could limit your
    recourse in the event of actions not in your best
    interests.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation provides
    that we will indemnify and advance expenses to our directors,
    officers, employees and other agents to the fullest extent
    permitted by the Delaware General Corporation Law. Therefore, we
    will be obligated to indemnify such persons if they acted in
    good faith and in a manner they reasonably believed to be in, or
    not opposed to, the best interests of the company and, with
    respect to any criminal action or proceeding, had no reasonable
    cause to believe their conduct was unlawful, except that, in the
    case of an action by or in right of the company, no
    indemnification may generally be made in respect of any claim as
    to which such person is adjudged to be liable to the company.
    Furthermore, our amended and restated certificate of
    incorporation provides that our directors are not personally
    liable for breaches of fiduciary duties to the fullest extent
    permitted by the Delaware General Corporation Law. Therefore,
    our directors shall not be personally liable to the company or
    its stockholders for monetary damages for breach of fiduciary
    duties as a director, except for liability for any:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    breach of a director&#146;s duty of loyalty to the corporation
    or its stockholders;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    unlawful payment of dividends or redemption of shares;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    transaction from which the director derives an improper personal
    benefit.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result, we and our stockholders may have more limited
    rights against our directors and officers than might otherwise
    exist absent the current provisions in our amended and restated
    certificate of incorporation or that might exist with other
    companies.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If
    securities analysts do not continue to publish research or
    reports about our business or if they publish negative
    evaluations of our stock, the price of our stock could
    decline.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the trading price for our common stock will be
    affected by research or reports that industry or financial
    analysts publish about us or our business. If one or more of the
    analysts who may elect to cover us downgrade their evaluations
    of our stock, the price of our stock could decline. If one or
    more of these analysts cease coverage of our company, we could
    lose visibility in the market for our stock, which in turn could
    cause our stock price to decline.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We do not
    intend to pay dividends on our common stock in the foreseeable
    future.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not anticipate paying any cash dividends on our common
    stock in the foreseeable future. We currently anticipate that we
    will retain all of our available cash, if any, for working
    capital and other general corporate purposes. Any payment of
    future dividends will be at the discretion of our board of
    directors and will depend upon, among other things, our
    earnings, financial condition, capital requirements, debt
    levels, statutory and contractual restrictions applying to the
    payment of dividends and other considerations that our board of
    directors deems relevant. Investors seeking cash dividends
    should not purchase our common stock.
</DIV>
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    <BR>
    23
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='103'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SPECIAL
    NOTE&#160;REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY
    DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus contains forward-looking statements that are
    based on our management&#146;s beliefs and assumptions and on
    information currently available to our management. The
    forward-looking statements are contained principally in the
    &#147;Prospectus Summary,&#148; &#147;Risk Factors,&#148;
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations,&#148; &#147;Our
    Business&#148; and &#147;Executive Compensation&#148; sections
    of this prospectus. Forward-looking statements include
    information concerning our possible or assumed future results of
    operations, business strategies, financing plans, competitive
    position, industry environment, potential growth opportunities,
    potential market opportunities and the effects of competition.
    Forward-looking statements include all statements that are not
    historical facts and can be identified by terms such as
    &#147;anticipates,&#148; &#147;believes,&#148;
    &#147;could,&#148; &#147;seeks,&#148; &#147;estimates,&#148;
    &#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148;
    &#147;plans,&#148; &#147;potential,&#148; &#147;predicts,&#148;
    &#147;projects,&#148; &#147;should,&#148; &#147;will,&#148;
    &#147;would&#148; or similar expressions and the negatives of
    those terms.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Forward-looking statements involve known and unknown risks,
    uncertainties and other factors that may cause our actual
    results, performance or achievements to be materially different
    from any future results, performance or achievements expressed
    or implied by the forward-looking statements. We discuss these
    risks in greater detail in the &#147;Risk Factors&#148; section
    and elsewhere in this prospectus. Given these uncertainties, you
    should not place undue reliance on these forward-looking
    statements. Also, forward-looking statements represent our
    management&#146;s beliefs and assumptions only as of the date of
    this prospectus. You should read this prospectus and the
    documents that we have filed as exhibits to the registration
    statement, of which this prospectus is a part, completely and
    with the understanding that our actual future results may be
    materially different from what we expect.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as required by law, we assume no obligation to update
    these forward-looking statements publicly or to update the
    reasons actual results could differ materially from those
    anticipated in these forward-looking statements, even if new
    information becomes available in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In this prospectus, we also rely on and refer to information and
    statistics regarding the industries and the markets in which we
    compete. We obtained this information and these statistics from
    various third-party sources. We believe that these sources and
    the estimates contained therein are reliable, but we have not
    independently verified them. Such information involves risks and
    uncertainties and is subject to change based on various factors,
    including those discussed in the &#147;Risk Factors&#148;
    section of this prospectus.
</DIV>
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    <BR>
    24
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='104'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that the net proceeds from our sale of shares of
    common stock in this offering will be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million if the underwriters
    exercise their over-allotment option in full. This estimate is
    based upon an assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share, the
    <FONT style="white-space: nowrap">mid-point</FONT> of
    our filing range, less estimated underwriting discounts and
    commissions and offering expenses payable by us. We will not
    receive any proceeds from the sale of shares of our common stock
    by our selling stockholders. A $1.00 increase (decrease) in the
    assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share would increase
    (decrease) the net proceeds to us from this offering by
    approximately $&#160;&#160;&#160;&#160;&#160;&#160;million,
    assuming the number of shares offered by us, as set forth on the
    cover page of this prospectus, remains the same and after
    deducting the estimated underwriting discounts and estimated
    offering expenses payable by us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to use approximately $35.5&#160;million of these net
    proceeds to redeem all outstanding shares of our preferred
    stock. We intend to use the remaining net proceeds for working
    capital and general corporate purposes. We may also use a
    portion of the proceeds to acquire complementary businesses,
    products or technologies. We have no agreements or commitments
    with respect to any acquisitions at this time. By establishing a
    public market for our common stock, this offering is also
    intended to facilitate our future access to public markets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pending the uses described above, we intend to invest the net
    proceeds of this offering in short- to
    <FONT style="white-space: nowrap">medium-term,</FONT>
    investment-grade, interest-bearing securities, certificates of
    deposit, or direct or guaranteed obligations of the
    U.S.&#160;government.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The amount and timing of what we actually spend may vary
    significantly and will depend on a number of factors, including
    future cash generated from operations as well as other factors
    described in the section titled &#147;Risk Factors.&#148;
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='105'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DIVIDEND
    POLICY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have not historically declared or paid dividends on our
    common stock, and we do not expect to declare or pay dividends
    on our common stock for the foreseeable future. Instead, we
    anticipate that all of our earnings will be used for the
    operation and growth of our business. Any future determination
    to pay dividends on our common stock would be subject to the
    discretion of our board of directors and would depend upon
    various factors, including our earnings, financial condition,
    capital requirements, debt levels, statutory and contractual
    restrictions applying to the payment of dividends and other
    considerations that our board of directors deems relevant.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='106'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our cash and cash equivalents and
    capitalization as of December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    on an actual basis;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    on a pro forma basis to reflect (i) the forgiveness of notes
    receivable from certain employees, (ii) our sale of shares in
    this offering at an assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share, which is the
    mid-point of our filing range, after deducting estimated
    underwriting discounts and commissions and offering expenses
    payable by us, and (iii) the redemption of all outstanding
    preferred stock immediately after the consummation of this
    offering, as if each had occurred as of December&#160;31, 2009.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The information below is illustrative only and our
    capitalization following the completion of this offering will be
    adjusted based on the actual initial public offering price and
    other terms of this offering determined at pricing. You should
    read this table together with &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations&#148; and our financial statements and the related
    notes appearing elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Pro Forma</B>(1)
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>(In thousands, except share<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>and per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current liabilities excluding current portion of deferred
    revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,377
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Redeemable preferred stock:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Redeemable preferred stock: $0.001&#160;par value;
    500,000&#160;shares authorized and 222,073&#160;shares issued
    and outstanding, actual; and 500,000&#160;shares authorized and
    0&#160;shares issued and outstanding, pro forma
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,072
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; equity (deficit):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Common stock: $0.001&#160;par value; 29,500,000&#160;shares
    authorized and 28,684,596&#160;shares issued and outstanding,
    actual;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    authorized
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;issued
    and outstanding, pro forma
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Notes receivable from stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (769
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accumulated deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,219
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,959
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    37,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    A $1.00 increase (decrease) in the assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160;&#160;per share
    would increase (decrease) cash and cash equivalents, additional
    <FONT style="white-space: nowrap">paid-in</FONT>
    capital, total stockholders&#146; equity (deficit) and total
    capitalization by approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, assuming the
    number of shares offered by us, as set forth on the cover page
    of this prospectus, remains the same and after deducting the
    estimated underwriter discount and estimated offering expenses
    payable by us.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The table and calculations above are based on the number of
    shares of common stock outstanding as of December&#160;31, 2009
    and exclude:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an aggregate of 887,224&#160;shares issuable upon the exercise
    of then outstanding options at a weighted average exercise price
    of $0.63 per share;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an aggregate of 443,361&#160;shares issuable upon the exercise
    of then outstanding warrants at a weighted average exercise
    price of $0.04 per share;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an aggregate of 1,107,623&#160;shares reserved for issuance
    under our 2004 Stock Incentive Plan, subject to increase on an
    annual basis and subject to increase for shares subject to
    awards under our prior equity plans that expire unexercised or
    otherwise do not result in the issuance of shares;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an assumed maximum
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issuable for no cash consideration under our Exit Event Bonus
    Plan immediately following completion of this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock subject to the underwriters&#146; over-allotment
    option.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    27
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='107'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DILUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you invest in our common stock, your ownership interest will
    be diluted to the extent of the difference between the initial
    public offering price per share of our common stock and the
    adjusted net tangible book value per share of our common stock
    immediately after completion of this offering. Net tangible book
    value per share represents total tangible assets less total
    liabilities and redeemable preferred stock, divided by the
    number of shares of common stock outstanding. As of
    December&#160;31, 2009, the net tangible book value of our
    common stock was approximately $(42.1)&#160;million, or
    approximately $(1.47)&#160;per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After giving effect to our sale of shares at an assumed initial
    public offering price of $&#160;&#160;&#160;&#160;&#160; per
    share, which is the mid-point of our filing range, deducting
    estimated underwriting discounts and commissions and offering
    expenses payable by us, and applying the net proceeds from this
    sale (including the redemption of all of our outstanding shares
    of preferred stock), the pro forma net tangible book value of
    our common stock, as of December&#160;31, 2009, would have been
    approximately $&#160;&#160;&#160;&#160;&#160;&#160;million, or
    $&#160;&#160;&#160;&#160;&#160; per share. This amount
    represents an immediate increase in net tangible book value to
    our existing stockholders of $&#160;&#160;&#160;&#160;&#160; per
    share and an immediate dilution to new investors of
    $&#160;&#160;&#160;&#160;&#160; per share. The following table
    illustrates this per share dilution:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="85%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Assumed initial public offering price per share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net tangible book value per share as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1.47
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Pro forma increase per share attributable to new investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma net tangible book value per share after this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dilution per share to new investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the underwriters exercise their over-allotment option in
    full, there will be an increase in pro forma net tangible book
    value to existing stockholders of
    $&#160;&#160;&#160;&#160;&#160; per share and an immediate
    dilution in pro forma net tangible book value to new investors
    of $&#160;&#160;&#160;&#160;&#160; per share based on the
    assumed initial public offering price per share. A $1.00
    increase or decrease in the assumed initial public offering
    price per share would increase or decrease, respectively, the
    pro forma net tangible book value per share of common stock
    after this offering by $&#160;&#160;&#160;&#160;&#160; per share
    and increase or decrease, respectively, the pro forma dilution
    per share of common stock to new investors in this offering by
    $&#160;&#160;&#160;&#160;&#160; per share, in each case
    calculated as described above and assuming that the number of
    shares offered by us, as set forth on the cover page of this
    prospectus, remains the same.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes, as of December&#160;31, 2009, on
    a pro forma basis, the number of shares of common stock
    purchased from us, the total consideration paid to us and the
    average price per share paid by our existing stockholders and by
    new investors, based upon an assumed initial public offering
    price of $&#160;&#160;&#160;&#160;&#160; per share and before
    deducting estimated underwriting discounts and commissions and
    offering expenses payable by us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="54%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares&#160;Purchased</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total Consideration</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average Price per<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Share</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Existing stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    New investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The discussion and tables above are based on
    28,684,596&#160;shares of common stock outstanding as of
    December&#160;31, 2009 and exclude:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an aggregate of 887,224&#160;shares issuable upon the exercise
    of then outstanding options at a weighted average exercise price
    of $0.63 per share;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an aggregate of 443,361&#160;shares issuable upon the exercise
    of then outstanding warrants at a weighted average exercise
    price of $0.04 per share;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an aggregate of 1,107,623&#160;shares reserved for issuance
    under our 2004 Stock Incentive Plan, subject to increase on an
    annual basis and subject to increase for shares subject to
    awards under our prior equity plans that expire unexercised or
    otherwise do not result in the issuance of shares;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    28
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an assumed maximum
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issuable for no cash consideration under our Exit Event Bonus
    Plan immediately following completion of this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock subject to the underwriters&#146; over-allotment
    option.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales by the selling stockholders in this offering will cause
    the number of shares held by existing stockholders to be reduced
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    or&#160;&#160;&#160;&#160;&#160;% of the total number of shares
    of our common stock outstanding after this offering. If the
    underwriters&#146; overallotment option is exercised in full,
    the number of shares held by the existing stockholders after
    this offering would be reduced to&#160;&#160;&#160;&#160;&#160;%
    of the total number of shares of our common stock outstanding
    after this offering, and the number of shares held by new
    investors would increase to&#160;&#160;&#160;&#160;&#160;% of
    the total number of shares of our common stock outstanding after
    this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If all our outstanding options and warrants had been exercised
    and the maximum number of shares under our Exit Event Bonus Plan
    had been issued, our pro forma net tangible book value (deficit)
    as of December&#160;31, 2009 would have been
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or
    $&#160;&#160;&#160;&#160;&#160; per share, and the pro forma as
    adjusted net tangible book value after this offering would have
    been $&#160;&#160;&#160;&#160;&#160;&#160;million, or
    $&#160;&#160;&#160;&#160;&#160; per share, causing dilution to
    new investors of $&#160;&#160;&#160;&#160;&#160; per share.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    29
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='108'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SELECTED
    FINANCIAL DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should read the following selected financial data together
    with our financial statements and the related notes appearing at
    the end of this prospectus and &#147;Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations,&#148; which follows immediately after this section.
    Our historical results are not necessarily indicative of our
    results to be expected in any future period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The selected financial data under the heading &#147;Statements
    of Operations Data&#148; for each of the three years ended
    December&#160;31, 2007, 2008 and 2009, under the heading
    &#147;Operating Data&#148; relating to Adjusted EBITDA and
    Adjusted Free Cash Flow for each of the three years ended
    December&#160;31, 2007, 2008 and 2009 and under the heading
    &#147;Balance Sheet Data&#148; as of December&#160;31, 2008 and
    2009 have been derived from our audited financial statements,
    which are included elsewhere in this prospectus. The selected
    financial data under the heading &#147;Statements of Operations
    Data&#148; for each of the two years ended December&#160;31,
    2005 and 2006, under the heading &#147;Operating Data&#148;
    relating to Adjusted EBITDA and Adjusted Free Cash Flow for each
    of the two years ended December&#160;31, 2005 and 2006 and under
    the heading &#147;Balance Sheet Data&#148; as of
    December&#160;31, 2005, 2006 and 2007 have been derived from our
    audited financial statements not included in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The pro forma balance sheet data as of December&#160;31, 2009 is
    unaudited and gives effect to (1)&#160;our receipt of estimated
    net proceeds of $&#160;&#160;&#160;&#160;&#160;&#160;million
    from this offering, based on an assumed initial public offering
    price of $&#160;&#160;&#160;&#160;&#160; per share, which is the
    mid-point of our filing range, after deducting estimated
    underwriting discounts and offering expenses payable by us and
    (2)&#160;the redemption of all of the outstanding preferred
    stock immediately after the consummation of this offering. The
    pro forma summary financial data is not necessarily indicative
    of what our financial position or results of operations would
    have been if this offering had been completed as of the date
    indicated, nor is this data necessarily indicative of our
    financial position or results of operations for any future date
    or period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands, except per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Statements of Operations Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,805
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,183
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,107
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    29,784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    36,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues(1)(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,701
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,766
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,723
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,494
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,104
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,417
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,061
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses:(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,316
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,908
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,059
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,543
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,954
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,213
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,546
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,531
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,717
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Amortization of intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,877
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    537
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    403
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,282
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,240
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,066
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,104
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,178
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,823
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    995
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income (expense), net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (304
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (78
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,482
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,901
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,608
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,482
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,901
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividends on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,877
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,207
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (13,359
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (9,939
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,207
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,278
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<!-- XBRL Table Pagebreak -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands, except per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) attributable to common stockholders per share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.53
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.38
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.53
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.38
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted average shares outstanding used in computing per share
    amounts:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,248
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,122
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,248
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,900
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="61%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="19" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="19" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Operating Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted EBITDA(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (6,626
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,557
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,099
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted Free Cash Flow(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,403
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="41%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2009</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Pro Forma</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Balance Sheet Data:</B>(5)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,041
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,218
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working capital excluding deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,879
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,273
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,309
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,883
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,332
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32,922
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    37,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,853
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,590
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,646
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,778
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,477
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,072
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (16,487
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (26,403
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,461
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,391
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,959
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Amounts include stock-based compensation expense, as follows:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="68%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    56
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    53
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    150
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    158
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    163
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Cost of revenues includes amortization of capitalized software
    development costs of:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="66%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Amortization of capitalized software development costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    235
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    114
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    154
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    167
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    EBITDA consists of net income (loss) plus depreciation and
    amortization, less (plus) interest and other income (expense),
    net and less income tax benefit. Adjusted EBITDA consists of
    EBITDA plus our non-cash, stock-based compensation expense and
    settlement and legal costs related to a patent infringement
    lawsuit </TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    31
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    settled in 2009. We use Adjusted EBITDA as a measure of
    operating performance because it assists us in comparing
    performance on a consistent basis, as it removes from our
    operating results the impact of our capital structure and the
    one-time costs associated with a non-recurring event. We believe
    Adjusted EBITDA is useful to an investor in evaluating our
    operating performance because it and similar measures are widely
    used to measure a company&#146;s operating performance without
    regard to items such as depreciation and amortization, which can
    vary depending upon accounting methods and the book value of
    assets, and to present a meaningful measure of corporate
    performance exclusive of our capital structure and the method by
    which assets were acquired. The following table provides a
    reconciliation of net income (loss) to Adjusted EBITDA:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="52%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (11,482
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,901
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,552
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,909
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,285
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income (expense), net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    304
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (113
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (20
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    EBITDA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,626
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,557
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,209
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,795
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Non-cash, stock-based compensation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted EBITDA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (6,626
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,557
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,099
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    Free Cash Flow consists of net cash provided by (used in)
    operating activities, less purchases of property and equipment
    and less capitalization of software development costs. Adjusted
    Free Cash Flow consists of Free Cash Flow plus one-time
    settlement and legal costs related to a patent infringement
    lawsuit in 2009. We use Adjusted Free Cash Flow as a measure of
    operating performance because it assists us in assessing the
    company&#146;s ability to fund its growth through its generation
    of cash. We believe Adjusted Free Cash Flow is useful to an
    investor in evaluating our operating performance because
    Adjusted Free Cash Flow and similar measures are widely used to
    measure a company&#146;s operating performance without regard to
    revenue and expense recognition, which can vary depending upon
    accounting methods. The following table provides a
    reconciliation of net cash provided by (used in) operating
    activities to Adjusted Free Cash Flow:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="55%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by (used in) operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,748
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,582
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,501
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Purchase of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (594
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (531
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (695
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (480
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (685
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Capitalization of software development costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (61
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (60
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (362
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (99
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (220
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Free Cash Flow
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,403
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,596
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted Free Cash Flow
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,403
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,636
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    A $1.00 increase (decrease) in the assumed initial public
    offering price of $&#160;&#160;&#160;per share would increase
    (decrease) cash and cash equivalents, working capital excluding
    deferred revenues, total assets and total stockholders&#146;
    equity (deficit) after this offering by approximately
    $&#160;&#160;&#160;million, assuming the number of shares
    offered by us, as set forth on the cover page of this
    prospectus, remains the same and after deducting the estimated
    underwriting discount and estimated offering expenses payable by
    us.</TD>
</TR>

</TABLE>
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    32
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='109'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>
    AND RESULTS OF OPERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our financial statements and related notes that
    appear elsewhere in this prospectus. In addition to historical
    financial information, the following discussion contains
    forward-looking statements that reflect our plans, estimates and
    beliefs. Our actual results could differ materially from those
    discussed in the forward-looking statements. Factors that could
    cause or contribute to these differences include those discussed
    below and elsewhere in this prospectus, particularly in
    &#147;Risk Factors.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide a leading on-demand strategic procurement and
    supplier enablement solution that integrates our customers with
    their suppliers to improve procurement of indirect goods and
    services. Our on-demand software enables organizations to
    realize the benefits of strategic procurement by identifying and
    establishing contracts with preferred suppliers, driving spend
    to those contracts and promoting process efficiencies through
    electronic transactions. Strategic procurement is the
    optimization of tasks throughout the cycle of finding,
    procuring, receiving and paying for indirect goods and services,
    which can result in increased efficiency, reduced costs and
    increased insight into an organization&#146;s buying patterns.
    Using our managed SciQuest Supplier Network, our customers do
    business with more than 30,000 unique suppliers and spend
    billions of dollars annually.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We derive our revenues primarily from subscription fees and
    associated implementation services from the sale of our solution
    to entities in the higher education, life sciences, healthcare
    and state and local government markets. Our contracts are
    typically three to five years in length, with total subscription
    fees typically ranging from $450,000 to $1.5&#160;million
    ($150,000 to $300,000 per year) and the associated one-time
    implementation service fees typically ranging from $150,000 to
    $300,000. We sell primarily through our direct sales channel
    and, to a very limited extent, through indirect sales channels.
    We have over 160 customers operating in 16 countries and offer
    our solution in five languages and 22 currencies. Our revenue
    growth is driven primarily through the sale of our solution to
    new customers. For the fiscal year ended December&#160;31, 2009,
    revenues increased 21% to $36.2&#160;million from
    $29.8&#160;million for the year ended December&#160;31, 2008.
    For the fiscal year ended December&#160;31, 2008, revenues
    increased 48% from $20.1&#160;million for the year ended
    December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe Adjusted EBITDA and Adjusted Free Cash Flow are the
    primary non-GAAP financial metrics upon which to measure our
    business. EBITDA consists of net income (loss) plus depreciation
    and amortization, less (plus) interest and other income
    (expense), net and less income tax benefit. Adjusted EBITDA
    consists of EBITDA plus our non-cash, stock-based compensation
    expense and settlement and legal costs related to a patent
    infringement lawsuit settled in 2009. Because Adjusted EBITDA
    excludes certain non-cash expenses such as depreciation,
    amortization and stock-based compensation, as well as the
    one-time impact of the settlement of a patent litigation suit in
    2009, we believe that this measure provides us with additional
    useful information to measure and understand our performance on
    a consistent basis, particularly with respect to changes in
    performance from period to period. Free Cash Flow consists of
    net cash provided by (used in) operating activities, less
    purchases of property and equipment and less capitalization of
    software development costs. Adjusted Free Cash Flow consists of
    Free Cash Flow plus one-time settlement and legal costs related
    to a patent infringement lawsuit in 2009. Because Adjusted Free
    Cash Flow measures the ability of the company to generate cash
    from operations, after investment in software development and
    property and equipment, we believe this is a meaningful
    measurement in which to gauge our ability to fund future growth.
    Our Adjusted Free Cash Flow normally fluctuates quarterly due to
    the combination of the timing of new business and the payment of
    annual bonuses. We use Adjusted EBITDA and Adjusted Free Cash
    Flow in the preparation of our budgets and to measure and
    monitor our performance. Adjusted EBITDA and Adjusted Free Cash
    Flow are not determined in accordance with GAAP and are not
    substitutes for or superior to financial measures determined in
    accordance with GAAP. For further discussion regarding Adjusted
    EBITDA and a reconciliation of Adjusted EBITDA to net income,
    see footnote 3 to the table in &#147;Selected Financial
    Data&#148; included elsewhere in this prospectus. For further
    discussion regarding Adjusted Free Cash Flow and a
    reconciliation of Adjusted Free Cash Flow to cash flows from
    operations, see footnote 4 to the table in &#147;Selected
    Financial Data&#148; included elsewhere in this prospectus.
</DIV>
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    <BR>
    33
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were founded in 1995 as an
    <FONT style="white-space: nowrap">e-commerce</FONT>
    <FONT style="white-space: nowrap">business-to-business</FONT>
    exchange for scientific products and conducted an initial public
    offering in 1999. In 2001, we brought in a new management team,
    exited the
    <FONT style="white-space: nowrap">business-to-business</FONT>
    exchange model and began selling our on-demand strategic
    procurement and supplier enablement solution. Our company was
    subsequently taken private in 2004. Since 2001, we have focused
    on developing our current
    <FONT style="white-space: nowrap">on-demand</FONT>
    business model, building out our technology, acquiring a
    critical mass of customers in our higher education and life
    sciences vertical markets, and selectively expanding our
    solution to serve the healthcare and state and local government
    markets. We have funded our operations since the going private
    transaction through our cash flow from operations. We generated
    Adjusted EBITDA of $(2.1)&#160;million, $2.7&#160;million and
    $7.3&#160;million in 2007, 2008 and 2009, respectively. We
    generated Adjusted Free Cash Flow of $3.6&#160;million,
    $6.0&#160;million and $6.8&#160;million in 2007, 2008 and 2009,
    respectively. We generated a net loss of $(5.0)&#160;million for
    2007 and net income of $1.1&#160;million and $2.6&#160;million
    in 2008 and 2009, respectively. No customer accounted for more
    than 10% of our total revenues in 2007, 2008 and 2009. Our ten
    largest customers accounted for less than 25% of our total
    revenues in 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We plan to continue the growth of our customer base by expanding
    our direct and indirect distribution channels and increasing our
    international market penetration. As a result, we plan to hire
    additional personnel, particularly in sales and implementation
    services, and expand our domestic and international sales and
    marketing activities. We also intend to identify and acquire
    companies that would either expand our solution&#146;s
    functionality, provide access to new customers or markets, or
    both.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Key
    Financial Terms and Metrics</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sources
    of Revenues</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We primarily derive our revenues from sales of our on-demand
    strategic procurement and supplier enablement software solution
    and associated implementation services. Revenues are generated
    from subscription agreements that permit customers to access and
    utilize our procurement solution and related services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our subscription agreements generally contain multiple service
    elements and deliverables. These elements include access to our
    on-demand software, implementation services and, on limited
    occasions, perpetual licenses for certain software modules and
    related maintenance and support (license revenues generated
    through the sales of two software modules on a perpetual license
    basis constituted less than 5% of our revenues for each of the
    last three years). The typical term of our subscription
    agreements is three to five years, and we generally invoice our
    customers in advance of their annual subscription, with payment
    terms that require our customers to pay us within thirty days of
    invoice. We recognize revenues, both from subscription and
    perpetual licenses and related maintenance and support, ratably
    on a daily basis over the term of the agreement. Our agreements
    are generally non-cancelable, though customers have the right to
    terminate their agreements for cause if we materially breach our
    obligations under the agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Implementation services revenues consist primarily of
    configuration, integration, training and change management
    services sold in conjunction with the initial subscription
    agreement as part of a multiple-element arrangement. Typically,
    our implementation services engagements are billed on a fixed
    fee, performance milestone basis with payment terms requiring
    our customers to pay us within thirty days of invoice. Revenues
    from implementation services sold as part of the initial
    agreement are recognized ratably over the remaining subscription
    term once the performance milestones have been met. Revenues
    from services sold separately from subscription agreements are
    recognized as the services are performed and have not been
    material to our business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, we have increased the price of our subscriptions
    upon the renewal of our customers&#146; subscription agreements
    to reflect the increased feature functionality inherent in the
    solution since the initial subscription agreement. Our annual
    customer renewal rate has been over 94% over the last three
    years. On a dollar basis, our annual renewal rate has been 106%
    over this same time period solely as a result of pricing
    increases at the time of renewal. We believe these customer and
    dollar renewal rates reflect our customers&#146; satisfaction
    with our solution and improve the visibility of our revenues.
</DIV>
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    <BR>
    34
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cost of
    Revenues and Operating Expenses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We allocate certain overhead expenses, such as rent, utilities,
    and depreciation of general office assets to cost of revenues
    and operating expense categories based on headcount. As a
    result, an overhead expense allocation is reflected in cost of
    revenues and each operating expense category.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Revenues.</I>&#160;&#160;Cost of revenues consists
    primarily of compensation and related expenses for
    implementation services, supplier enablement services, customer
    support staff and client partners, costs related to hosting the
    subscription software, amortization of capitalized software
    development costs and allocated overhead. Costs of
    implementation services are expensed as incurred. We expect cost
    of revenues to increase in absolute dollars as we continue to
    increase the number of customers over time but remain relatively
    consistent as a percentage of revenues.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Research and Development.</I>&#160;&#160;Research and
    development expenses consist primarily of wages and benefits for
    software application development personnel and allocated
    overhead. We have focused our research and development efforts
    on both improving ease of use and functionality of our existing
    products as well as developing new offerings. We primarily
    expense research and development costs. The small percentage of
    direct development costs related to on-demand software
    enhancements that add functionality are capitalized and
    depreciated as a component of cost of revenues. We expect that
    research and development expenses will increase in absolute
    dollars as we continue to enhance and expand our product
    offerings but decrease as a percentage of revenues over time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing.</I>&#160;&#160;Sales and marketing
    expenses consist primarily of wages and benefits for our sales
    and marketing personnel, sales commissions, marketing programs,
    including lead generation, events and other brand building
    expenses and allocated overhead. We capitalize our sales
    commissions at the time a subscription agreement is executed by
    the customer, and we expense the commissions as a component of
    sales and marketing ratably over the subscription period,
    matching the recognition period of the subscription revenues for
    which the commissions were incurred. In order to continue to
    grow our business and brand awareness, we expect that we will
    continue to invest in our sales and marketing efforts. We expect
    that sales and marketing expenses will increase in absolute
    dollars but decrease as a percentage of revenues over time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative.</I>&#160;&#160;General and
    administrative expenses consist of compensation and related
    expenses for administrative, human resources, finance and
    accounting personnel, professional fees, other taxes and other
    corporate expenses. We expect that general and administrative
    expenses will increase as we continue to add personnel in
    connection with the growth of our business. In addition, we
    anticipate that we will also incur additional personnel expense,
    professional fees, including auditing and legal, and insurance
    costs related to operating as a public company. Therefore, we
    expect that our general and administrative expenses will
    increase in absolute dollars. Over the next two years, we expect
    that our general and administrative expenses also will increase
    as a percentage of revenues.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amortization of Intangible Assets.</I>&#160;&#160;Amortized
    intangible assets consist of acquired technology and customer
    relationships from the going private transaction in 2004. The
    acquired technology was amortized on a straight-line basis over
    the estimated life of three years, and the customer
    relationships are amortized over a ten-year estimated life in a
    pattern consistent with which the economic benefit is expected
    to be realized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Adjusted EBITDA.</I>&#160;&#160;EBITDA consists of net income
    (loss) plus depreciation and amortization, less interest and
    other income, net and less income tax benefit. Adjusted EBITDA
    consists of EBITDA plus our non-cash,
    <FONT style="white-space: nowrap">stock-based</FONT>
    compensation expense and settlement and legal costs related to a
    patent infringement lawsuit in 2009. We use Adjusted EBITDA as a
    measure of operating performance because it assists us in
    comparing performance on a consistent basis, as it removes from
    our operating results the impact of our capital structure and
    the one-time costs associated with a non-recurring event. We
    believe Adjusted EBITDA is useful to an investor in evaluating
    our operating performance because it is widely used to measure a
    company&#146;s operating performance without regard to items
    such as depreciation and amortization, which can vary depending
    upon accounting methods and the book value of assets, and to
    present a meaningful measure of corporate performance exclusive
    of our capital structure
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    35
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and the method by which assets were acquired. The following
    table provides a reconciliation of net income (loss) to Adjusted
    EBITDA:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,909
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,285
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (113
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (20
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    EBITDA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,209
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,795
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Non-cash, stock-based compensation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjusted EBITDA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,099
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Critical
    Accounting Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our financial statements are prepared in accordance with
    accounting principles generally accepted in the United States.
    The preparation of these financial statements requires us to
    make estimates and assumptions that affect the reported amounts
    of assets, liabilities, revenues, costs and expenses and related
    disclosures. We evaluate our estimates and assumptions on an
    ongoing basis. Our actual results may differ from these
    estimates under different assumptions or conditions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that of our significant accounting policies, which
    are described in Note&#160;2 to the financial statements, the
    following accounting policies involve a greater degree of
    judgment and complexity. A critical accounting policy is one
    that is both material to the preparation of our financial
    statements and requires us to make difficult, subjective or
    complex judgments for uncertain matters that could have a
    material effect on our financial condition and results of
    operations. Accordingly, these are the policies we believe are
    the most critical to aid in fully understanding and evaluating
    our financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We primarily derive our revenues from subscription fees for our
    on-demand strategic procurement and supplier enablement software
    solution and associated implementation services. Revenue is
    generated from subscription agreements and related services
    permitting customers to access and utilize our hosted software.
    Customers may on occasion also purchase a perpetual license for
    certain software modules. Revenue is recognized when there is
    persuasive evidence of an agreement, the service has been
    provided or delivered to the customer, the collection of the fee
    is probable and the amount of the fee to be paid by the customer
    is fixed or determinable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our contractual agreements generally contain multiple service
    elements and deliverables. These elements include access to the
    hosted software, implementation services and, on a limited
    basis, perpetual licenses for certain software modules and
    related maintenance and support. Subscription agreements do not
    provide customers the right to take possession of the hosted
    software at any time, with the exception of a triggering event
    in source code escrow arrangements. In applying the multiple
    element revenue recognition guidance, we determined that we do
    not have objective and reliable evidence of the fair value of
    the subscription agreement and related services. We therefore
    account for fees received under multiple-element agreements as a
    single unit of accounting and recognize the agreement
    consideration ratably over the term of the subscription
    agreement, which is generally three to five years. The term of
    the subscription agreement commences on the start date specified
    in the subscription agreement, which is the date access to the
    software is provided to the customer provided all other revenue
    recognition criteria have been met. Fees for professional
    services that are contingent upon future performance are
    recognized ratably over the remaining subscription term once the
    performance milestones have been met. We recognize revenue from
    any professional services that are sold separately as the
    services are performed.
</DIV>
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    <BR>
    36
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred revenue primarily consists of billings or payments
    received in advance of revenue recognition from our software and
    services described above. For multiple year subscription
    agreements, we generally invoice our customers in annual
    installments. Accordingly, the deferred revenue balance does not
    represent the total contract value of these multi-year
    subscription agreements. Our services, such as implementation,
    are generally sold in conjunction with subscription agreements.
    These services are recognized ratably over the remaining term of
    the subscription agreement once any contingent performance
    milestones have been satisfied. The portion of deferred revenue
    that we anticipate will be recognized after the succeeding
    <FONT style="white-space: nowrap">12-month</FONT>
    period is recorded as non-current deferred revenue and the
    remaining portion is recorded as current deferred revenue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock-Based Compensation.</I>&#160;&#160;As of
    January&#160;1, 2006, we adopted new stock-based compensation
    accounting guidance using the prospective application method,
    which requires that all stock-based payments to employees,
    including grants of employee stock options, are recognized in
    the statements of operations based on their fair values.
    Stock-based compensation costs are measured at the grant date
    based on the fair value of the award and are recognized as
    expense on a straight-line basis over the requisite service
    period, which is the vesting period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock-based compensation costs are calculated using the
    Black-Scholes option-pricing model. Determining the appropriate
    fair value model and related assumptions requires judgment,
    including estimating stock price volatility, forfeiture rates
    and expected term. The assumptions used in determining the fair
    value of stock-based awards represent management&#146;s best
    estimates, but these estimates involve inherent uncertainties
    and the application of management judgment. As a result, if
    factors change and we use different assumptions, our stock-based
    compensation could be materially different in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because there has not been a public market for our common stock
    since 2004, we have lacked company-specific historical and
    implied volatility information. Therefore, we estimate our
    expected stock volatility based on that of publicly-traded peer
    companies, and we expect to continue to use this methodology
    until such time as we have adequate historical data regarding
    the volatility of our publicly-traded stock price. We do not
    have information available that is indicative of future exercise
    and post-vesting behavior to estimate the expected term.
    Therefore, the expected term used in our estimated fair value
    calculation represents the average time that options that vest
    are expected to be outstanding based on the mid-point between
    the vesting date and the end of the contractual term of the
    award. We have not paid dividends and do not anticipate paying
    dividends in the foreseeable future and, accordingly, use an
    expected dividend yield of zero. The risk-free interest rate is
    based on the rate of U.S.&#160;Treasury securities with
    maturities consistent with the estimated expected term of the
    awards. Pre-vesting forfeiture rates are estimated based on our
    historical forfeiture data.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The assumptions used in calculating the fair value of common
    stock options granted in 2008 and 2009 are set forth below:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="12%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="12%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Estimated dividend yield
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    0%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    0%
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected stock price volatility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    100.0%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    100.0%
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted-average risk-free interest rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2.6%&#160;&#151; 3.6%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1.9%&#160;&#151; 2.8%
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected life of award (in years)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6.25
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6.25
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We typically grant options on a semi-annual basis. The following
    table summarizes by grant date the number of stock options
    granted from January&#160;1, 2008 through January&#160;31, 2010,
    the per share exercise price of options and the fair value per
    option on each grant date:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="53%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Shares Subject<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Per Share Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Fair Value<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Grant Date</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>to Options Granted</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price of Option(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>per Option(2)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;23, 2008(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    147,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;23, 2008(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;22, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    349,099
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.82
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;22, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.77
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;21, 2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    447,198
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.71
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    37
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The per share exercise price of option represents the
    determination by our board of directors of the fair value of our
    common stock on the date of grant, as determined by taking into
    account our most recent valuation of common stock.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    As described above, the fair value per share of each option was
    estimated for the date of grant using the Black-Scholes
    option-pricing model. This model estimates the fair value by
    applying a series of factors including the exercise price of the
    option, a risk free interest rate, the expected term of the
    option, expected share price volatility of the underlying common
    stock and expected dividends on the underlying common stock.
    Additional information regarding the valuation of our common
    stock and option awards is set forth in Note&#160;8 to our
    financial statements included elsewhere in this prospectus.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents stock options that were amended to reduce the
    exercise price for substantially all of the shares subject to
    stock options granted on January&#160;23, 2008 and July&#160;23,
    2008. The amendments reduced the exercise price of the
    previously granted options to $1.02 per share, which was the
    fair value of our common stock on the date of the amendments.
    The amendments did not affect the vesting provisions or the
    number of shares subject to any of the option awards. For
    financial statement reporting, we treat the previously granted
    options as being forfeited and the amendments as new option
    grants.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of our stock incentive plan, and as set forth in
    Note&#160;8 to our financial statements, we have also allowed
    certain employees to purchase shares of our restricted stock. We
    hold subscription notes receivable for the aggregate purchase
    price of the shares. Upon employee termination, we have the
    option to repurchase the shares. The repurchase price is the
    original purchase price plus interest for unvested restricted
    stock and the current fair value (as determined by our board of
    directors) for vested restricted stock. The shares generally
    vest ratably over two to four years. As of December&#160;31,
    2009, there were 4,496,492&#160;shares of vested and unvested
    restricted stock outstanding. The following table summarizes by
    grant date the number of shares of restricted stock granted from
    January&#160;1, 2008 through January&#160;31, 2010, the per
    share purchase price of restricted stock and the fair value per
    share of restricted stock on each grant date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="10%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Per Share Purchase<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Shares of Restricted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Price(s) of Restricted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Fair Value(s)<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Grant Date</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Granted</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>per Share(2)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;23, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    584,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.69&#160;&#151; $0.91
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;22, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    318,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.71&#160;&#151; $1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;21, 2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    191,724
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="right" valign="bottom">
    $0.59
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The per share purchase price of restricted stock represents the
    determination by our board of directors of the fair value of our
    common stock on the date of grant, as determined by taking into
    account our most recent valuation of common stock.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    As described above, the fair value per share of restricted stock
    was estimated for the date of grant using the Black-Scholes
    option-pricing model since the notes receivable are deemed
    non-recourse for accounting purposes. This model estimates the
    fair value by applying a series of factors including the
    exercise price of the option, a risk free interest rate, the
    expected term of the option, expected share price volatility of
    the underlying common stock and expected dividends on the
    underlying common stock.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Significant
    Factors Used in Determining the Fair Value of Our Common
    Stock</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have historically granted stock-based awards at exercise or
    purchase prices equivalent to the fair value of our common stock
    as of the date of grant, as determined by our board of directors
    taking into account our most recently available valuation of
    common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to June 2008, the annual common stock valuations were
    prepared using the income and market approaches. Under the
    income approach, the fair value of our common stock was
    estimated based upon the present value of a future stream of
    income that can reasonably be expected to be generated by the
    company. Under the market approach, the guideline market
    multiple methodology was applied, which involved the
    multiplication of free cash flows by risk-adjusted multiples.
    Multiples were determined through an analysis of certain
    publicly
</DIV>
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    traded companies, which were selected on the basis of
    operational and economic similarity with our principal business
    operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Commencing in June 2008, we moved to semi-annual common stock
    valuations prepared using the &#147;probability-weighted
    expected return&#148; method. Under this methodology, the fair
    value of our common stock is estimated based upon an analysis of
    future values assuming various outcomes. The fair value is based
    on the probability-weighted present value of expected future
    investment returns considering each of the possible outcomes
    available to us as well as the rights of each share class. The
    possible outcomes considered were continued operation as a
    private company, an initial public offering and a sale of the
    company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The private company scenario analysis utilized averages of the
    market and income approaches. Under the market approach, we
    estimated our enterprise value using the guideline public
    company method, which compares our company to publicly traded
    companies in our industry group after applying a discount for
    lack of marketability. The companies used for comparison under
    the guideline public company method were selected based on a
    number of factors, including but not limited to, the similarity
    of their industry, business model and financial risks. The
    multiples selected were adjusted for differences in expected
    growth, profitability and risk between the company and the
    comparable public companies. Under the income approach, we
    estimated our enterprise value using the discounted future cash
    flow method, which involves applying appropriate discount rates
    to estimated cash flows that are based on forecasts of revenues,
    costs and capital requirements. Our assumptions underlying the
    estimates were consistent with the plans and estimates that we
    use to manage our business. The risks associated with achieving
    our forecasts were assessed in selecting the appropriate
    discount rates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The initial public offering scenario analysis utilized the
    guideline public company method. We estimated our enterprise
    value by comparing our company to publicly traded companies in
    our industry group. The companies used for comparison under the
    guideline public company method were selected based on a number
    of factors, including, but not limited to, the similarity of
    their industry, business model and financial risks to those of
    ours.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The sale scenario analysis utilized the guideline transaction
    enterprise value method. We estimated our enterprise value based
    on a range of values from guideline transactions. The companies
    used for comparison under the guideline transaction method were
    selected based on a number of factors, including, but not
    limited to, the similarity of their industry, business model and
    financial risks to those of ours.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Finally, the present values calculated under each scenario were
    weighted based on our management&#146;s estimates of the
    probability of each scenario occurring. The resulting values
    represented the estimated fair value of our common stock at each
    valuation date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Specific information related to option grants is as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">January
    2008 Grants</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2008, we granted 147,125 stock options with an
    exercise price of $1.30. Additionally, we issued
    584,275&#160;shares of restricted stock with a purchase price of
    $1.30. In the absence of a public trading market for our common
    stock, our board of directors, with input from management,
    considered the factors described below and determined the fair
    value of our common stock in good faith to be $1.30 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We performed a contemporaneous valuation of the fair value of
    our common stock as of December&#160;31, 2007 using the income
    and market approaches. The income approach used a discounted
    cash flow analysis by applying a risk-adjusted discount rate of
    17.1% to estimated debt-free cash flows, based on forecasted
    revenues. The projections used in connection with the income
    approach were based on our expected operating performance over
    the forecast period. There is inherent uncertainty in these
    estimates; if different discount rates or assumptions had been
    used, the valuation would have been different. Under the market
    approach, we reviewed an analysis of comparable publicly traded
    companies to apply the guideline market multiple methodology. In
    this analysis, we applied an average multiple of free cash flow
    to our free cash flow. We then applied a 25% discount for lack
    of marketability. We also considered the rights, preferences and
    privileges of the preferred stock relative to the common stock.
    Based on this analysis, the aggregate fair value of our common
    stock was determined to be $36.9&#160;million, with a per share
    value of $1.30.
</DIV>
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">July 2008
    Grants</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In July 2008, we granted 63,000 stock options with an exercise
    price of $1.58. In the absence of a public trading market for
    our common stock, our board of directors, with input from
    management, considered the factors described below and
    determined the fair value of our common stock in good faith to
    be $1.58 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We performed a contemporaneous valuation of the fair value of
    our common stock as of July&#160;1, 2008 using the
    probability-weighted expected return methodology discussed above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $42.8&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12&#160;months revenue as of
    the estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $57.3&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation preference. We then
    applied a discount rate of 25%. This resulted in an aggregate
    common equity value of $28.8&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We then estimated the probability of each scenario occurring. We
    assigned a 5% probability to the sale scenario, a 50%
    probability to the initial public offering scenario and a 45%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $1.58&#160;per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">January
    2009 Grants</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2009, we granted 349,099 stock options with an
    exercise price of $1.02. Additionally, we issued
    318,053&#160;shares of restricted stock with a purchase price of
    $1.02. In the absence of a public trading market for our common
    stock, our board of directors, with input from management,
    considered the factors described below and determined the fair
    value of our common stock in good faith to be $1.02 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We performed a contemporaneous valuation of the fair value of
    our common stock as of December&#160;31, 2008 using the
    probability-weighted expected return methodology discussed above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $29.0&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12&#160;months revenue as of
    the estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $37.2&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation preference. We then
    applied a discount rate of 25%. This resulted in an aggregate
    common equity value of $38.7&#160;million.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We then estimated the probability of each scenario occurring. We
    assigned a 10% probability to the sale scenario, a 20%
    probability to the initial public offering scenario and a 70%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $1.02&#160;per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">July 2009
    Grants</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In July, 2009, we granted 35,000 stock options with an exercise
    price of $0.95. In the absence of a public trading market for
    our common stock, our board of directors, with input from
    management, considered the factors described below and
    determined the fair value of our common stock in good faith to
    be $0.95 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We performed a contemporaneous valuation of the fair value of
    our common stock as of July&#160;1, 2008 using the
    probability-weighted expected return methodology discussed above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $25.1&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12&#160;months revenue as of
    the estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $36.9&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation preference. We then
    applied a discount rate of 25%. This resulted in an aggregate
    common equity value of $36.4&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We then estimated the probability of each scenario occurring. We
    assigned a 10% probability to the sale scenario, a 25%
    probability to the initial public offering scenario and a 65%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $0.95&#160;per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">January&#160;2010
    Grants</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January, 2010, we granted 447,198 stock options with an
    exercise price of $1.13. Additionally, we issued
    191,724&#160;shares of restricted stock with a purchase price of
    $1.13. In the absence of a public trading market for our common
    stock, our board of directors, with input from management,
    considered the factors described below and determined the fair
    value of our common stock in good faith to be $1.13 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We performed a contemporaneous valuation of the fair value of
    our common stock as of December&#160;31, 2009 using the
    probability-weighted expected return methodology discussed above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $31.1&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12 months revenue as of the
    estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $43.9&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    preference. We then applied a discount rate of 25%. This
    resulted in an aggregate common equity value of
    $44.2&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We then estimated the probability of each scenario occurring. We
    assigned a 5% probability to the sale scenario, a 25%
    probability to the initial public offering scenario and a 70%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $1.13 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Deferred Project Costs.</I>&#160;&#160;We capitalize sales
    commission costs that are directly related to the execution of
    our subscription agreements. The commissions are deferred and
    amortized over the contractual term of the related subscription
    agreement. The deferred commission amounts are recoverable from
    the future revenue streams under the subscription agreements. We
    believe this is the appropriate method of accounting, as the
    commission costs are so closely related to the revenues from the
    subscription agreements that they should be recorded as an asset
    and charged to expense over the same period that the
    subscription revenues are recognized. Amortization of deferred
    commissions is included in sales and marketing expense in the
    statements of operations. The deferred commissions are reflected
    within deferred project costs in the balance sheets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Goodwill.</I>&#160;&#160;Goodwill represents the excess of
    the cost of an acquired entity over the net fair value of the
    identifiable assets acquired and liabilities assumed. We review
    the carrying value of goodwill at least annually to assess
    impairment since it is not amortized. Additionally, we review
    the carrying value of goodwill whenever events or changes in
    circumstances indicate that its carrying amount may not be
    recoverable. We have concluded that we have one reporting unit
    for purposes of our annual goodwill impairment testing. To
    assess goodwill impairment, the first step is to identify if a
    potential impairment exists by comparing the fair value of a
    reporting unit with its carrying amount, including goodwill. If
    the fair value of a reporting unit exceeds its carrying amount,
    goodwill of the reporting unit is not considered to have a
    potential impairment and the second step of the impairment test
    is not necessary.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    However, if the carrying amount of the reporting unit exceeds
    its fair value, the second step is performed to determine if
    goodwill is impaired and to measure the amount of impairment
    loss to recognize, if any. The second step compares the implied
    fair value of goodwill with the carrying amount of goodwill. If
    the implied fair value of goodwill exceeds the carrying amount,
    then goodwill is not considered impaired. However, if the
    carrying amount of goodwill exceeds the implied fair value, an
    impairment loss is recognized in an amount equal to that excess.
    The implied fair value of goodwill is determined in the same
    manner as the amount of goodwill recognized in a business
    combination. The fair value of the reporting unit is allocated
    to all the assets and liabilities, including any previously
    unrecognized intangible assets, as if the reporting unit had
    been acquired in a business combination and the fair value of
    the reporting unit was the purchase price paid to acquire the
    reporting unit. We performed our annual assessment on
    December&#160;31, 2009. The estimated fair value of our
    reporting unit exceeded its carrying amount, including goodwill,
    and as such, no goodwill impairment was recorded.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Income Taxes.</I>&#160;&#160;Deferred income taxes are
    provided using tax rates enacted for periods of expected
    reversal on all temporary differences. Temporary differences
    relate to differences between the book and tax basis of assets
    and liabilities, principally intangible assets, property and
    equipment, deferred subscription revenue, pension assets,
    accruals and stock-based compensation. Valuation allowances are
    established to reduce deferred tax assets to the amount that
    will more likely than not be realized. To the extent that a
    determination is made to establish or adjust a valuation
    allowance, the expense or benefit is recorded in the period in
    which the determination is made.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our company recognizes a tax benefit when it is
    more-likely-than-not, based on the technical merits, that the
    position would be sustained upon examination by a taxing
    authority. The amount to be recognized is measured as the
    largest amount of tax benefit that is greater than 50% likely of
    being realized upon ultimate settlement with a taxing authority
    that has full knowledge of all relevant information. Our company
    records interest or penalties accrued in relation to
    unrecognized tax benefits as income tax expense.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    42
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Results
    of Operations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth, for the periods indicated, our
    results of operations:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,107
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    29,784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    36,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,723
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,494
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,061
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,908
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,059
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,213
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,717
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Amortization of intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    537
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    403
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,066
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,104
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    995
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,608
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth, for the periods indicated, our
    results of operations expressed as a percentage of revenues:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="83%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    77
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Amortization of intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    74
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    72
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
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&nbsp;
</TD>
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&nbsp;
</TD>
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&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
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&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
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&nbsp;
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&nbsp;
</TD>
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<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
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&nbsp;
</TD>
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&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

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</DIV>
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    <BR>
    43
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Year
    Ended December&#160;31, 2009 Compared to Year Ended
    December&#160;31, 2008</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Revenues.</I>&#160;&#160;Revenues for 2009 were
    $36.2&#160;million, an increase of $6.4&#160;million, or 21%,
    over revenues of $29.8&#160;million for 2008. The increase in
    revenues resulted primarily from an increase in the number of
    customers from 127 as of December&#160;31, 2008 to 156 as of
    December&#160;31, 2009, as well as recognition of a full
    year&#146;s revenues for the new customers added in 2008.
    Revenues in 2008 included $0.8&#160;million for a one-time
    termination fee received for the cancellation of a reseller
    agreement recognized in that year. We have increased our
    customer count through our continued efforts to enhance brand
    awareness and our sales and marketing efforts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Revenues.</I>&#160;&#160;Cost of revenues in 2009 was
    $7.5&#160;million, an increase of $0.8&#160;million, or 12%,
    over cost of revenues of $6.7&#160;million in 2008. As a
    percentage of revenues, cost of revenues decreased to 21% in
    2009 from 22% in 2008. The increase in dollar amount primarily
    resulted from a $0.5&#160;million increase in employee-related
    costs attributable to our existing personnel and additional
    implementation service personnel, as well as a $0.1&#160;million
    increase in allocated overhead due to increases in leased square
    footage of office space. We had 56&#160;full-time employee
    equivalents in our implementation services, supplier enablement
    services, customer support and client partner organizations at
    December&#160;31, 2009, compared to 55&#160;full-time employee
    equivalents at December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Research and Development Expenses.</I>&#160;&#160;Research
    and development expenses for 2009 were $8.1&#160;million, a
    decrease of $0.2&#160;million, or 2%, from research and
    development expenses of $8.3&#160;million for 2008. As a
    percentage of revenues, research and development expenses
    decreased to 22% in 2009 from 28% in 2008. The decrease in
    dollar amount was due to an increase in capitalization of
    research and development costs of $0.1&#160;million in 2009 and
    a reduction of $0.1&#160;million in employee-related costs
    attributable to our existing personnel. We had 50&#160;full-time
    employee equivalents in our research and development
    organization at December&#160;31, 2009, compared to
    <FONT style="white-space: nowrap">53&#160;full-time</FONT>
    employee equivalents at December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing Expenses.</I>&#160;&#160;Sales and
    marketing expenses for 2009 were $10.8&#160;million, an increase
    of $1.5&#160;million, or 16%, over sales and marketing expenses
    of $9.3&#160;million for 2008. As a percentage of revenues,
    sales and marketing expenses decreased slightly to 30% in 2009
    from 31% in 2008. The increase in dollar amount is primarily due
    to an increase of $1.0&#160;million in employee-related costs
    from our existing personnel and additional sales and marketing
    headcount, an increase of $0.4&#160;million in amortized
    commission expense and an increase of $0.1&#160;million of
    allocated overhead. We had 45&#160;full-time employee
    equivalents in our sales and marketing organization at
    December&#160;31, 2009, compared to 43&#160;employee equivalents
    at December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative Expenses.</I>&#160;&#160;General
    and administrative expenses for 2009 were $3.7&#160;million, a
    decrease of $0.2&#160;million, or 5%, from general and
    administrative expenses of $3.9&#160;million for 2008. As a
    percentage of revenues, general and administrative expenses
    decreased to 10% in 2009 from 13% in 2008. The decrease in
    dollar amount is due to a reduction in legal expenses of
    $0.4&#160;million primarily due to efforts in 2008 to file 13
    patent applications, a reduction of $0.1&#160;million in
    auditing fees due to the performance of a three-year audit in
    2008 and a reduction of $0.2&#160;million in recruiting costs
    due to bringing our recruiting efforts inside the business
    instead of relying on outside recruiting firms in 2009, offset
    by an increase of $0.4&#160;million in
    <FONT style="white-space: nowrap">employee-related</FONT>
    costs attributable to existing general and administrative
    personnel. We had 11&#160;full-time employee equivalents in our
    general and administrative organization at December&#160;31,
    2009 and December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Litigation Settlement and Associated Legal
    Expenses.</I>&#160;&#160;Litigation settlement and associated
    legal expenses for 2009 were $3.2&#160;million, or 9% of
    revenues, compared to no litigation settlement and associated
    legal expenses for 2008. In 2009, a company filed a patent
    infringement action against us and other, unrelated companies.
    We entered into a settlement agreement in 2009, and the
    settlement and related legal costs of $3.2&#160;million were
    paid and recognized as operating expenses in the year ended
    December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amortization of Intangible
    Assets.</I>&#160;&#160;Amortization of intangible assets for
    2009 was $0.4&#160;million, a decrease of $0.1&#160;million, or
    20%, over amortization of intangible assets of $0.5&#160;million
    for 2008. As a percentage of revenues, amortization of
    intangible assets decreased to 1% in 2009 from 2% in 2008. The
    decrease in dollar amount was the result of the declining
    amortization recognized on the customer relationships asset over
    the <FONT style="white-space: nowrap">10-year</FONT>
    estimated life. The customer relationships asset was recorded as
    a result of the going private transaction in 2004.
</DIV>
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    <BR>
    44
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Income from Operations.</I>&#160;&#160;Income from operations
    for 2009 was $2.6&#160;million, an increase of
    $1.6&#160;million, or 160%, over income from operations of
    $1.0&#160;million for 2008. As a percentage of revenues, income
    from operations increased to 7% in 2009 from 3% in 2008. The
    increase in dollar amount was the result of our increase in
    revenues offset by our increased expenses required to support
    the additional revenues, as well as the one-time impact of the
    litigation settlement and associated legal expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Year
    Ended December&#160;31, 2008 Compared to Year Ended
    December&#160;31, 2007</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Revenues.</I>&#160;&#160;Revenues for 2008 were
    $29.8&#160;million, an increase of $9.7&#160;million, or 48%,
    over revenues of $20.1&#160;million for 2007. The increase in
    revenues resulted primarily from an increase in the number of
    customers from 105 as of December&#160;31, 2007 to 127 as of
    December&#160;31, 2008, as well as recognition of a full
    year&#146;s revenues for the new customers added in 2007.
    Revenues in 2008 included $0.8&#160;million due to a one-time
    termination fee received for the cancellation of a reseller
    agreement recognized in that year. We have increased our
    customer count through our continued efforts to enhance brand
    awareness and our sales and marketing efforts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Revenues.</I>&#160;&#160;Cost of revenues in 2008 was
    $6.7&#160;million, an increase of $0.6&#160;million, or 10%,
    over cost of revenues of $6.1&#160;million in 2007. As a
    percentage of revenues, cost of revenues decreased to 22% in
    2008 from 30% in 2007. The increase in dollar amount primarily
    resulted from a $0.6&#160;million increase in employee-related
    costs attributable to our existing personnel and additional
    implementation service personnel. We had 55&#160;full-time
    employee equivalents in our implementation services, supplier
    enablement services, customer support and client partner
    organizations at December&#160;31, 2008, compared to
    51&#160;full-time employee equivalents at December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Research and Development Expenses.</I>&#160;&#160;Research
    and development expenses for 2008 were $8.3&#160;million, an
    increase of $1.4&#160;million, or 20%, over research and
    development expenses of $6.9&#160;million for 2007. As a
    percentage of revenues, research and development expenses
    decreased to 28% in 2008 from 34% in 2007. The increase in
    dollar amount was primarily due to an increase of
    $1.2&#160;million in employee-related costs attributable to our
    existing personnel and additional research and development
    personnel as well as a decrease in capitalization of research
    and development costs of $0.3&#160;million in 2008. We had
    53&#160;full-time employee equivalents in our research and
    development organization at December&#160;31, 2008, compared to
    48&#160;full-time employee equivalents at December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales and Marketing Expenses.</I>&#160;&#160;Sales and
    marketing expenses for 2008 were $9.3&#160;million, an increase
    of $2.1&#160;million, or 29%, over sales and marketing expenses
    of $7.2&#160;million for 2007. As a percentage of revenues,
    sales and marketing expenses decreased to 31% in 2008 from 36%
    in 2007. The increase in dollar amount is primarily due to an
    increase of $0.9&#160;million in employee-related costs from our
    existing personnel and additional sales and marketing headcount,
    an increase of $0.6&#160;million in amortized commission
    expense, an increase of $0.3&#160;million in travel costs and
    $0.1&#160;million in allocated overhead due to our additional
    personnel and an increase of $0.1&#160;million in additional
    marketing costs for tradeshows. We had 43&#160;full-time
    employee equivalents in our sales and marketing organization at
    December&#160;31, 2008, compared to 30&#160;employee equivalents
    at December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative Expenses.</I>&#160;&#160;General
    and administrative expenses for 2008 were $3.9&#160;million, an
    increase of $1.2&#160;million, or 44%, from general and
    administrative expenses of $2.7&#160;million for 2007. As a
    percentage of revenues, general and administrative expenses was
    13% in both 2008 and 2007. The increase in dollar amount is due
    to an increase in legal expenses of $0.5&#160;million primarily
    due to efforts in 2008 to file 13 patent applications, an
    increase of $0.2&#160;million in auditing fees due to the
    performance of a three-year audit in 2008, an increase of
    $0.3&#160;million in employee-related costs attributable to our
    existing personnel and additional general and administrative
    personnel and an increase of $0.2&#160;million in stock-based
    compensation. We had
    <FONT style="white-space: nowrap">11&#160;full-time</FONT>
    employee equivalents in our general and administrative
    organization at December&#160;31, 2008, compared to eight at
    December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amortization of Intangible
    Assets.</I>&#160;&#160;Amortization of intangible assets for
    2008 was $0.5&#160;million, a decrease of $1.8&#160;million, or
    78%, over amortization of intangible assets of $2.3&#160;million
    for 2007. As a percentage of revenues, amortization of
    intangible assets decreased to 2% in 2008 from 11% in 2007. The
    decrease in dollar amount was the result of final amortization
    of the acquired technology and the declining amortization
    recognized on the
</DIV>
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    <BR>
    45
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    customer relationships asset over the
    <FONT style="white-space: nowrap">10-year</FONT>
    estimated life. Both the acquired technology and the customer
    relationships asset were recorded as a result of the going
    private transaction in 2004.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Income from Operations.</I>&#160;&#160;Income from operations
    for 2008 was $1.0&#160;million, an increase of $6.1&#160;million
    over the loss from operations of $(5.1)&#160;million for 2007.
    As a percentage of revenues, income from operations increased to
    3% in 2008 from (25%) in 2007. The increase in dollar amount was
    the result of our increase in revenues offset by our increased
    expenses required to support the additional revenues.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Liquidity
    and Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since the going private transaction in July 2004, we have funded
    our operations through cash flow generated by the operating
    activities of our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Net Cash
    Flows from Operating Activities</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by operating activities was $4.5&#160;million
    during 2009, $6.6&#160;million during 2008 and $4.7&#160;million
    during 2007. For 2009, net cash provided by operating activities
    was primarily the result of $2.6&#160;million of net income,
    non-cash depreciation and amortization expense of
    $1.2&#160;million and a $2.7&#160;million increase in deferred
    revenues offset by a $1.3&#160;million increase in accounts
    receivable. Increases in deferred revenues are due to continued
    growth in new business, offset by the subscription revenues
    recognized ratably over time. Increases in accounts receivable
    are primarily due to growth in the number of customer
    subscription agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2008, net cash provided by operating activities was
    primarily a result of $1.1&#160;million of net income,
    <FONT style="white-space: nowrap">non-cash</FONT>
    depreciation and amortization expense of $1.3&#160;million and a
    $5.5&#160;million increase in deferred revenues due to growth in
    new business offset by a $0.8&#160;million increase in deferred
    project costs due to increased capitalized commissions from new
    business in 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2007, net cash provided by operating activities was
    primarily a result of a $(5.0)&#160;million net loss, offset by
    $2.9&#160;million in non-cash depreciation and amortization
    expense and a $7.0&#160;million increase in deferred revenues
    due to growth in new business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our deferred revenues were $34.3&#160;million at
    December&#160;31, 2009, $31.6&#160;million at December&#160;31,
    2008 and $26.1&#160;million at December&#160;31, 2007, which
    reflects growth in the total number of customers. Customers are
    invoiced annually in advance for their annual subscription fee
    and the invoices are recorded in accounts receivable and
    deferred revenues, which deferred revenues are then recognized
    ratably over the term of the subscription agreement. With
    respect to implementation services fees, customers are invoiced
    as the services are performed, typically within the first three
    to eight months of contract execution, and the invoices are
    recorded in accounts receivable and deferred revenues, which are
    then recognized ratably over the remaining term of the
    subscription agreement once the performance milestones have been
    met. If our sales increase, we would expect our deferred
    revenues balance to increase.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, we had net operating loss
    carryforwards of approximately $200&#160;million available to
    reduce future federal taxable income. In the future, we may
    fully utilize our available net operating loss carryforwards and
    would begin making income tax payments at that time. In
    addition, the limitations on utilizing net operating loss
    carryforwards and other minimum state taxes may also increase
    our overall tax obligations. We expect that if we generate
    taxable income
    <FONT style="white-space: nowrap">and/or</FONT> we
    are not allowed to use net operating loss carryforwards for
    federal/state income tax purposes, our cash generated from
    operations will be adequate to meet our income tax obligations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Net Cash
    Flows from Investing Activities</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2009, net cash used in investing activities was
    $0.9&#160;million, consisting of various capital expenditures of
    $0.7&#160;million and capitalization of $0.2&#160;million of
    software development costs. In general, our capital expenditures
    are for our network infrastructure to support our customer base
    and growth in new business and for internal use, such as
    equipment for employees. Net cash used in investing activities
    for 2008 was $0.9&#160;million, consisting of capital
    expenditures of $0.5&#160;million, capitalization of software
    development costs of $0.1&#160;million and an increase in
    restricted cash of $0.4&#160;million. The restricted cash
    collateralizes our line of credit, taken out in 2008. Net cash
</DIV>
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    <BR>
    46
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    used in investing activities for 2007 was $1.1&#160;million,
    consisting of $0.7&#160;million for capital expenditures and
    $0.4&#160;million for capitalization of software development
    costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Net Cash
    Flows from Financing Activities</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2009, net cash provided by financing activities was
    $0.03&#160;million and was primarily for the issuance of common
    stock under the 2004 Stock Incentive Plan. For 2008, net cash
    provided by financing activities was $0.06&#160;million and was
    primarily for the issuance of common stock under the 2004 Stock
    Incentive Plan. For 2007, net cash used in financing activities
    was $1.1&#160;million and was primarily for the repayment of the
    remainder of our note payable from the going private transaction.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Line of
    Credit</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, we had a $2.5&#160;million line of
    credit outstanding with $0.4&#160;million drawn down. This
    outstanding line of credit is collateralized by a
    $0.4&#160;million restricted cash deposit which is maintained at
    the granting financial institution. This line of credit renews
    annually in October. The interest rate on the unpaid principal
    balance is the LIBOR Market Index Rate plus 1.5%. As of
    December&#160;31, 2009, the interest rate was 1.7%.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Off-Balance
    Sheet Arrangements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2007, 2008 and 2009, we did not have any
    relationships with unconsolidated entities or financial
    partnerships, such as entities often referred to as structured
    finance or special purpose entities, which would have been
    established for the purpose of facilitating off-balance sheet
    arrangements or other contractually narrow or limited purposes.
    Other than our operating leases for office space, we do not
    engage in off-balance sheet financing arrangements. In addition,
    we do not engage in trading activities involving non-exchange
    traded contracts. As such, we are not materially exposed to any
    financing, liquidity, market or credit risk that could arise if
    we had engaged in these relationships.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Capital
    Resources</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our future capital requirements may vary materially from those
    now planned and will depend on many factors, including the costs
    to develop and implement new products and services, the sales
    and marketing resources needed to further penetrate our targeted
    vertical markets and gain acceptance of new modules we develop,
    the expansion of our operations in the United States and
    internationally and the response of competitors to our products
    and services. Historically, we have experienced increases in our
    expenditures consistent with the growth in our operations and
    personnel, and we anticipate that our expenditures will continue
    to increase as we grow our business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe our cash and cash equivalents, the proceeds from this
    offering, funds available under our line of credit and cash
    flows from our operations will be sufficient to meet our working
    capital and capital expenditure requirements for at least the
    next 12&#160;months.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the last three years, inflation and changing prices have
    not had a material effect on our business, and we do not expect
    that inflation or changing prices will materially affect our
    business in the foreseeable future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Contractual
    and Commercial Commitment Summary</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes our contractual obligations as of
    December&#160;31, 2009. These contractual obligations require us
    to make future cash payments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="15" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Payments Due by Period</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Less Than 1<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>More Than 5<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Contractual Obligations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>1 - 3&#160;Years</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>3 - 5&#160;Years</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Line of credit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating lease commitments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,484
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    771
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,549
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    991
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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    <BR>
    47
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<P><HR noshade><P>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Quantitative
    and Qualitative Disclosures About Market Risk</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Foreign Currency Exchange Risk.</I>&#160;&#160;We bill our
    customers predominately in U.S.&#160;dollars and receive payment
    predominately in U.S.&#160;dollars. Accordingly, our results of
    operations and cash flows are not materially subject to
    fluctuations due to changes in foreign currency exchange rates.
    If we grow sales of our solution outside of the United States,
    our contracts with foreign customers may be denominated in
    foreign currency and may become subject to changes in currency
    exchange rates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Interest Rate Sensitivity.</I>&#160;&#160;Interest income and
    expense are sensitive to changes in the general level of
    U.S.&#160;interest rates. However, based on the nature and
    current level of our investments, which are primarily cash and
    cash equivalents, and our debt obligations, we believe there is
    no material risk of exposure.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Seasonality</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our new business sales normally fluctuate as a result of
    seasonal variations in our business, principally due to the
    timing of client budget cycles. Historically, we have had lower
    new sales in our first and third quarters than in the remainder
    of our year. Our expenses, however, do not vary significantly as
    a result of these factors, but do fluctuate on a quarterly basis
    due to varying timing of expenditures. Our Adjusted Free Cash
    Flow normally fluctuates quarterly due to the combination of the
    timing of new business and the payment of annual bonuses.
    Historically, due to lower new sales in our first quarter,
    combined with the payment of annual bonuses from the prior year
    in our first quarter, our Adjusted Free Cash Flow is lowest in
    our first quarter, and due to the timing of client budget
    cycles, our Adjusted Free Cash Flow is lower in our second
    quarter as compared to our third and fourth quarters. In
    addition, deferred revenues can vary on a seasonal basis for the
    same reasons. This pattern may change, however, as a result of
    acquisitions, new market opportunities or new product
    introductions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">New
    Accounting Pronouncements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the Financial Accounting Standards Board, or FASB,
    issued The FASB Accounting Standards Codification, or
    Codification, which is the single source of authoritative GAAP
    recognized by the FASB to be applied by nongovernmental
    entities. Rules and interpretive releases of the SEC under
    authority of federal securities laws are also sources of
    authoritative GAAP for SEC registrants. The Codification
    supersedes all
    <FONT style="white-space: nowrap">non-SEC</FONT>
    accounting and reporting standards. All other non-grandfathered
    non-SEC accounting literature not included in the Codification
    is non-authoritative. The Codification is effective for
    financial statements issued for interim and annual periods
    ending after September&#160;15, 2009. The Codification did not
    change or alter existing GAAP and, therefore, did not have an
    impact on our balance sheets, statements of operations and cash
    flows.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2009, the FASB&#146;s Emerging Issues Task Force
    revised its guidance on revenue recognition for
    multiple-deliverable revenue arrangements. The amendments in
    this update will, in certain circumstances, enable companies to
    separately account for multiple revenue-generating activities
    (deliverables) that they perform for their customers. Existing
    GAAP requires a company to use vendor-specific objective
    evidence, or VSOE, or third-party evidence of selling price to
    separate deliverables in a multiple-deliverable arrangement. The
    update will allow the use of an estimated selling price if
    neither VSOE nor third-party evidence is available. The update
    will require additional disclosures of information about an
    entity&#146;s multiple-deliverable arrangements. The
    requirements of the update may be applied prospectively for
    revenue arrangements entered into or materially modified in
    fiscal years beginning on or after June&#160;15, 2010, although
    early adoption is permitted. We are currently evaluating the
    impact of the update on our financial position and results of
    operations and do not plan to early or retroactively adopt the
    new guidance.
</DIV>
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    <BR>
    48
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='110'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    BUSINESS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide a leading on-demand strategic procurement and
    supplier enablement solution that integrates our customers with
    their suppliers to improve procurement of indirect goods and
    services. Our on-demand software enables organizations to
    realize the benefits of strategic procurement by identifying and
    establishing contracts with preferred suppliers, driving spend
    to those contracts and promoting process efficiencies through
    electronic transactions. Strategic procurement is the
    optimization of tasks throughout the cycle of finding,
    procuring, receiving and paying for indirect goods and services,
    which can result in increased efficiency, reduced costs and
    increased insight into an organization&#146;s buying patterns.
    Using our managed SciQuest Supplier Network, our customers do
    business with more than 30,000 unique suppliers and spend
    billions of dollars annually.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our current target markets are higher education, life sciences,
    healthcare and state and local governments, and our customers
    are the purchasing organizations and individual employees that
    purchase indirect goods and services using our solution. We
    tailor our solution for each of the vertical markets we serve by
    offering industry-specific functionality, content and supplier
    connections. Once connected to our network, customers and
    suppliers can easily exchange real-time electronic procurement
    information and conduct transactions. We serve more than 160
    customers operating in 16 countries and offer our solution in
    five languages and 22 currencies. Our value proposition has led
    to an average annual customer renewal rate of over 94% over the
    last three years. On a dollar basis, our annual renewal rate has
    been 106% over this same time period solely as a result of
    pricing increases at the time of renewal. We believe our renewal
    rates are among the highest of on-demand model companies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We deliver our solution over the Internet using a
    Software-as-a-Service, or SaaS, model, which enables us to offer
    greater functionality, integration and reliability with less
    cost and risk to the organization than traditional
    <FONT style="white-space: nowrap">on-premise</FONT>
    solutions. Customers pay us subscription fees and implementation
    service fees for the use of our solution under multi-year
    contracts that are generally three to five years in length. We
    typically receive subscription payments annually in advance and
    implementation service fees as the services are performed,
    typically within the first three to eight months of contract
    execution. Unlike many other providers of procurement solutions,
    we do not charge suppliers any fees for the use of our network,
    because suppliers ultimately may pass on such costs to the
    customer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were founded in 1995 as an
    <FONT style="white-space: nowrap">e-commerce</FONT>
    <FONT style="white-space: nowrap">business-to-business</FONT>
    exchange for scientific products and conducted an initial public
    offering in 1999. In 2001, we brought in a new management team,
    exited the
    <FONT style="white-space: nowrap">business-to-business</FONT>
    exchange model and began selling our on-demand strategic
    procurement and supplier enablement solution. Our company was
    subsequently taken private in 2004. Since 2001, we have focused
    on developing our current
    <FONT style="white-space: nowrap">on-demand</FONT>
    business model, building out our technology, acquiring a
    critical mass of customers in our higher education and life
    sciences vertical markets, and selectively expanding our
    solution to serve the healthcare and state and local government
    markets. Our revenues have grown to $36.2&#160;million in 2009
    from $20.1&#160;million in 2007, and our Adjusted Free Cash Flow
    increased to $6.8&#160;million from $3.6&#160;million during
    this period (Adjusted Free Cash Flow is not determined in
    accordance with GAAP and is not a substitute for or superior to
    financial measures determined in accordance with GAAP; for
    further discussion regarding Adjusted Free Cash Flow and a
    reconciliation of Adjusted Free Cash Flow to cash flows from
    operations, see footnote 4 to the table in &#147;Selected
    Financial Data&#148; included elsewhere in this prospectus). No
    customer accounted for more than 10% of our revenues during this
    period. Our high customer retention, combined with our long-term
    contracts, increases the visibility and predictability of our
    revenues compared with traditional perpetual license-based
    software businesses. We manage our business with three key
    principles: focus on customer value, vertical market expertise
    and financial stewardship.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    Background</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">The
    Indirect Goods and Services Procurement Market</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Procurement is an essential activity for virtually every
    organization, encompassing a significant portion of an
    organization&#146;s spending beyond payroll. The procurement
    function is typically split into two categories, direct and
    indirect. Direct goods and services procurement is the purchase
    of goods and services that are directly incorporated
</DIV>
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    into an organization&#146;s products or services, while indirect
    goods and services procurement is the purchase of the
    <FONT style="white-space: nowrap">day-to-day</FONT>
    necessities of the workplace such as office supplies, laboratory
    supplies, furniture, computers, MRO (maintenance, repair and
    operations) supplies, and food and beverages. Indirect goods and
    services tend to be low cost but are usually bought in high
    volumes by a wide variety of employees throughout an
    organization.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The procurement process for indirect goods and services is often
    not well-managed or controlled. Buyers generally follow a
    sequential set of processes, referred to as the
    <FONT style="white-space: nowrap">&#147;source-to-settle&#148;</FONT>
    cycle, which is comprised of the following steps:
</DIV>

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    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    identify which suppliers have the required goods and services;
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
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    <TD align="left">
    negotiate purchasing or contractual relationships;
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD align="left">
    establish a mechanism to transact business;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
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    <TD align="left">
    find, compare, approve and order the necessary goods and
    services;
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
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    <TD align="left">
    receive, inspect and pay for the goods and services;&#160;and
</TD>
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<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    analyze spending for potential savings and contract compliance.
</TD>
</TR>

</TABLE>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Organizations with a procurement department establish purchasing
    policies, monitor purchasing activity, designate preferred
    suppliers, negotiate volume discounts and other contractual
    terms and otherwise manage supplier relationships. Although the
    procurement department is responsible for the purchasing
    function, most purchasing activity is conducted outside the
    procurement department by employees throughout the organization.
    These employees are challenged to comply with procurement
    policies to acquire their needed goods and services while
    performing their
    <FONT style="white-space: nowrap">day-to-day</FONT>
    duties. Employees often do not know who the preferred suppliers
    are and must work within antiquated systems that are cumbersome
    and time consuming. As a result, many purchases are not made
    from the available preferred suppliers
    <FONT style="white-space: nowrap">and/or</FONT> the
    purchases are conducted &#147;off-contract,&#148; a behavior
    sometimes referred to as &#147;maverick spending.&#148; This
    results in the organization not taking advantage of negotiated
    discounts. In many cases, the procurement department has limited
    ability to monitor, control or even influence this purchasing
    activity. Procurement departments are seeking ways to have
    greater visibility and control over the organization&#146;s
    purchasing activity, reduce maverick spending and better serve
    the employees who make purchases for the organization.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our target market for strategic procurement of indirect goods
    and services is a subset of the broader supply procurement and
    sourcing application chain management market, which AMR Research
    estimates in a July 2009 report entitled &#147;The Global
    Enterprise Application Market Sizing Report,
    <FONT style="white-space: nowrap">2008-2013&#148;</FONT>
    as a $2.9&#160;billion global opportunity in 2010, growing at an
    8% compounded annual growth rate from 2010 through 2013. Based
    on our own internal analysis, we believe that our current
    addressable market is approximately $1.0&#160;billion within our
    current target markets as follows: higher education
    ($324&#160;million), life sciences ($292&#160;million),
    healthcare ($176&#160;million) and state and local government
    ($244&#160;million).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Manual
    Procurement Processes Are Inefficient</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, efforts and investments to streamline the
    procurement process have tended to focus on direct goods and
    services. The procurement of indirect goods and services, which
    are typically lower cost but higher volume and thus still
    represent a large percentage of overall expenses, remains
    subject to significant inefficiencies. Traditionally,
    procurement organizations and employees have relied on manual,
    catalog-based processes to procure indirect goods and services,
    resulting in inaccuracies, inefficiencies, poor control and
    reduced user productivity. For example, in many instances, users
    may have to pay
    <FONT style="white-space: nowrap">out-of-pocket</FONT>
    for supplies and then seek reimbursement through expense
    reports. In addition, there are often long lead times to fulfill
    orders and an inability to analyze spending and minimize waste.
    Characteristics of these traditional processes include:
</DIV>

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    <I>Lack of clearly defined procurement guidelines and awareness
    of preferred suppliers.</I>&#160;&#160;In many cases, because
    processes are cumbersome, ill-defined and time consuming, many
    employees have difficulty following the procurement approval
    processes and fail to purchase from preferred suppliers. As a
    result, buying the right goods and services from the right
    suppliers at the right prices rarely occurs. Employees
    frequently purchase
</TD>
</TR>

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</TD>
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    indirect materials from a local retail outlet or from a generic
    online retailer, such as Amazon.com. This maverick spending can
    result in the organization purchasing products at unfavorable
    prices.
</TD>
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    <I>Limited ability to analyze spend.</I>&#160;&#160;Given the
    lack of automation and centralized reporting, organizations have
    difficulty analyzing what they are buying from suppliers. This
    limits the ability to negotiate better contracts or understand
    the organization&#146;s compliance with spending limits.
    Additionally, without the proper systems, it is difficult to
    enforce supplier compliance with all negotiated contract terms.
</TD>
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    <I>Dissatisfied employees.</I>&#160;&#160;Employees prefer an
    efficient and user-friendly procurement process. Manual,
    <FONT style="white-space: nowrap">non-integrated</FONT>
    processes often lead to excess costs, delays and errors,
    resulting in a frustrating experience. In addition, employees
    are unable to track the goods and supplies already on-hand, thus
    leading to excess purchases.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Traditional
    Automated Procurement Solutions Have Had Limited
    Effectiveness</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Efforts to automate the procurement function for indirect goods
    and services initially consisted of add-on modules to enterprise
    resource planning, or ERP, systems and first generation
    procurement systems. These systems, initially developed 10 to
    15&#160;years ago, provide efficiencies by allowing
    organizations to automate parts of the procurement process, such
    as requisitioning, authorizing, ordering, receiving and payment.
    However, providers of these systems often have pricing models
    that charge fees to suppliers, which are costs that suppliers
    ultimately may pass on to the customer. These supplier fees
    discourage suppliers from entering the offering platform and
    result in off-platform purchases. Furthermore, most have limited
    effectiveness, because they often:
</DIV>

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    are implemented on-premise, and thus are expensive to deploy and
    maintain;
</TD>
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    are generalized horizontal market solutions with limited
    industry-specific supplier participation, content and
    functionality;
</TD>
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    <TD>    &#149;&#160;&#160;
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    require each organization to have its own customized
    <FONT style="white-space: nowrap">one-to-one</FONT>
    connections to each supplier;&#160;and
</TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
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    <TD align="left">
    lack managed service capabilities to enable suppliers.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The introduction of SaaS-based strategic procurement solutions
    within the past few years has enabled buyers and suppliers to
    transact with each other online more efficiently. These systems
    provide better access to suppliers through a basic
    <FONT style="white-space: nowrap">hub-and-spoke</FONT>
    architecture and offer lower implementation and ongoing costs
    due to their
    <FONT style="white-space: nowrap">on-demand</FONT>
    nature. Yet despite their benefits, many other SaaS procurement
    offerings still suffer from the fact that they are primarily
    horizontal solutions that do not provide functionality and
    content specific to vertical markets, nor do they have a robust
    supplier network that can benefit from economies of scale. In
    addition, existing systems often have complicated interfaces
    that are difficult for employees to navigate. We believe there
    is a substantial market for focused, easy-to-use solutions that
    establish and maintain strong and efficient commercial
    relationships between organizations and suppliers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Solution</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer an on-demand strategic procurement and supplier
    enablement solution that enables organizations to more
    efficiently source indirect goods and services, manage their
    spend and obtain the benefits of compliance with purchasing
    policies and negotiating power with suppliers. Our on-demand
    strategic procurement software suite coupled with our managed
    supplier network forms our integrated solution, which is
    designed to achieve rapid and sustainable savings. Our solution
    provides customers with a set of products and services that
    enable them to optimize existing procurement processes by
    automating the entire
    <FONT style="white-space: nowrap">source-to-settle</FONT>
    process. The SciQuest Supplier Network acts as a communications
    hub that connects over 160 customers to over 30,000 unique
    suppliers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our solution provides the following key benefits:
</DIV>

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    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Significant return on investment
    (&#147;ROI&#148;).</I>&#160;&#160;Our solution enables
    organizations to realize the benefits of strategic procurement
    by identifying and establishing contracts with preferred
    suppliers, driving spend to those contracts and promoting
    process efficiencies through electronic transactions. As a
    result, customers are able to achieve significant returns on
    investment through savings associated with contract compliance
    and
</TD>
</TR>

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    strategic procurement. These savings result from negotiated
    discounts, automated requisition/order processing, contract
    lifecycle management, settlement automation and sourcing (such
    as the ability to conduct on-line bidding processes).
</TD>
</TR>

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    <I>Content and functionality specific to our vertical
    markets.</I>&#160;&#160;While we offer a single solution, our
    software has specific configurable functionality that meets the
    unique needs of our targeted vertical markets. We have a
    critical mass of suppliers to achieve economies of scale, and
    new suppliers can be readily added as the needs of our customers
    dictate.
</TD>
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    <TD>    &#149;&#160;&#160;
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    <I>Easier access to customers&#146; supplier
    network.</I>&#160;&#160;Customers can easily access their
    preferred suppliers using a single solution and avoid the costs
    and inefficiencies associated with traditional
    <FONT style="white-space: nowrap">one-to-one</FONT>
    supplier management.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Greater adoption by employees.</I>&#160;&#160;Our intuitive
    shopping interface provides employees with easy and automated
    visibility and access to goods and services. Streamlining the
    procurement process spurs user adoption and increases the level
    of spend under management, meaning spend that occurs pursuant to
    a
    <FONT style="white-space: nowrap">pre-established</FONT>
    contract with the supplier.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Greater adoption by suppliers.</I>&#160;&#160;Suppliers
    typically are motivated to join our network due to ease of
    enablement and lack of supplier fees. This allows our solution
    to support a robust supplier network in which our customers
    benefit from economies of scale.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Visibility into spending patterns and
    activity.</I>&#160;&#160;Our solution provides granular detail
    into user spending behavior and provides detailed analytics that
    allow organizations to continually improve their purchasing
    practices.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Ease of deployment via integration with existing systems.
    </I>Our highly-configurable solution integrates with many
    leading ERP systems to speed deployment and facilitate the
    interchange of transaction, accounting, settlement and user data.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Business Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to our differentiated customer solution, we believe
    our market approach and business model offer specific benefits
    that are instrumental to our successful growth. These include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Focus on customer value.</I>&#160;&#160;Delivering value to
    our customers is at the core of our business philosophy. We
    focus extensively on ensuring that customers achieve maximum
    benefit from our solution, and we proactively engage with our
    customers to continually improve our software and services. To
    this end, each of our customers is partnered with a member of
    our client partner organization that proactively assists that
    customer to maximize the ROI and related benefits from their
    implementation of our solution. This has led to a 36% compound
    annual growth rate in the average transaction volume by
    customers through our system over the last three years. In
    addition, each customer has access to our separate client
    support staff. Our
    <FONT style="white-space: nowrap">customer-centric</FONT>
    focus, significant domain expertise and integrated solution have
    led to the establishment of consistent long-term customer
    relationships, exemplified by an average annual customer renewal
    rate of over 94% over the last three years. On a dollar basis,
    our annual renewal rate has been 106% over this same time period
    solely as a result of pricing increases at the time of renewal.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Expertise in our targeted vertical
    markets.</I>&#160;&#160;Because we have developed a solution
    that solves specific procurement problems for customers in our
    target vertical markets, we are able to differentiate ourselves
    from other solution providers that are horizontally focused. As
    a result, we are able to drive greater value to customers
    through increased cost savings and improved contract compliance.
    Additionally, our focus on a core set of vertical markets allows
    us to be more efficient in our sales and marketing efforts
    through an understanding of the specific needs and requirements
    of our customers. Our domain expertise allows us to provide our
    customers with a highly tailored and differentiated solution
    that is difficult for our competitors to replicate.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Extensive content and supplier
    network.</I>&#160;&#160;Essential to our solution is building a
    critical mass of suppliers within a vertical market. Suppliers
    are not charged any fees or transaction costs for purchases
    consummated through the SciQuest Supplier Network, which
    facilitates the growth of our network of over 30,000 unique
</TD>
</TR>
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    <BR>
    52
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    suppliers servicing the higher education, life sciences,
    healthcare and state and local government markets. Upon signing
    of a new customer, we seek to add that customer&#146;s suppliers
    to our supplier network. We charge our customers for each of
    their suppliers with whom they interact on our supplier network.
    Therefore, to the extent that a customer&#146;s suppliers are
    already on our supplier network, our costs to enable these
    suppliers are reduced, allowing us to benefit from improved
    operating margins and other economies of scale.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Ability to manage costs.</I>&#160;&#160;While we manage our
    business to maximize customer benefit, we also seek to optimize
    returns to our stockholders and employees by managing our cost
    structure. Our culture of lean management principles extends
    from our senior management throughout our company, including our
    development processes and our professional services engagements.
    This lean management of our cost structure has kept our capital
    expenditures low and helped lower our operating expenses as a
    percentage of revenues from 95% in 2007 to 72% in 2009.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>High visibility business model.</I>&#160;&#160;Our customers
    pay us subscription fees and implementation service fees for the
    use of our solution under multi-year contracts that are
    generally three to five years in length, and we typically
    receive cash payments annually in advance. The recurring nature
    of our revenues provides high visibility into future
    performance, and the upfront payments result in cash flow
    generation in advance of revenue recognition. For each of the
    last three years, greater than 80% of our revenues were
    recognized from contracts that were in place at the beginning of
    the year.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Growth Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We seek to become the leading provider of strategic procurement
    solutions for indirect goods and services. Our key strategic
    initiatives include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Further penetrating our existing vertical
    markets.</I>&#160;&#160;Over 80% of our customers currently come
    from the higher education and life sciences vertical markets,
    where we have a significant operating history, with the
    remainder of our customers coming from our newer healthcare and
    state and local government markets. We will continue to focus
    our efforts on acquiring new customers in our vertical markets,
    including investing in sales and marketing to increase our
    profile in the healthcare and state and local government markets
    while increasing our emphasis on mid-sized customer acquisition
    opportunities in the higher education and life sciences markets.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Capitalizing on cross-selling opportunities into our
    installed customer base.</I>&#160;&#160;As of December&#160;31,
    2009, our solution was being used by over 160 customers in our
    vertical markets. Our existing customer base provides us with a
    significant opportunity to sell additional modules and new
    products that we may develop or acquire. For each of the past
    three years, approximately 20% of new sales have consisted of
    sales of additional modules and services to existing customers.
    We plan to develop
    <FONT style="white-space: nowrap">and/or</FONT>
    acquire additional modules and products to sell to our existing
    customers by leveraging our position as a trusted strategic
    procurement solution vendor in our targeted vertical markets.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Selectively expanding into new vertical
    markets.</I>&#160;&#160;In the future, we intend to selectively
    expand into new vertical markets that are adjacent to, or have
    similarities to, our existing verticals and where we can
    leverage our market expertise. For instance, we expanded into
    the healthcare and state and local government markets because
    they are both adjacent to and have similar procurement
    characteristics as the higher education and life sciences
    markets. Vertical markets where procurement is still
    predominately handled through paper processing, with multiple
    suppliers of high volume, low-cost goods, offer potential
    expansion opportunities. We may pursue such expansion through
    internal product development, sales and marketing initiatives or
    strategic acquisitions.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Investing in international expansion to acquire new
    customers.</I>&#160;&#160;We believe that the market outside the
    United States offers us significant growth potential. Currently,
    we have customers operating in 16 countries and offer our
    solution in five languages and 22 currencies, although many of
    our international sales have consisted of sales to multinational
    organizations based in the United States. To date, sales to
    customers that are not based in the United States have
    represented an insignificant portion of our annual sales. We
    intend to continue our
</TD>
</TR>
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    <BR>
    53
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    international expansion by increasing our international direct
    sales force and establishing additional
    <FONT style="white-space: nowrap">third-party</FONT>
    sales relationships in an effort to leverage our leadership
    position and reputation as a leading provider of strategic
    procurement solutions to organizations with global operations.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    <I>Selectively pursuing acquisitions.</I>&#160;&#160;We may
    pursue acquisitions of businesses, technologies and solutions
    that complement our existing offerings in an effort to
    accelerate our growth, enhance the capabilities of our existing
    solution and broaden our solution offerings. We also may pursue
    acquisitions that allow us to expand into new verticals or
    geographies where we do not have a significant presence.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Products and Services</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our strategic procurement and supplier enablement solution
    automates the
    <FONT style="white-space: nowrap">source-to-settle</FONT>
    process. We provide our solution on-demand over the Internet
    using a SaaS model, which enables us to offer greater
    functionality, integration and reliability with less cost and
    risk than traditional on-premise solutions. We continue to
    evolve our solution based on our interaction with our customers
    around the world.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following diagram provides an overview of our solution:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22513g2251309.gif" alt="(DIAGRAM)">
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our on-demand strategic procurement software suite provides
    customers with a set of products and services that enables them
    to automate the entire
    <FONT style="white-space: nowrap">source-to-settle</FONT>
    process. These integrated modules maximize the benefits
    customers derive from using the SciQuest Supplier Network and
    allow our customers to more efficiently communicate and transact
    with their suppliers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our solution also includes business intelligence features that
    enable organizations to analyze spend at the supplier, commodity
    and requisition levels. These reporting tools help users
    identify and establish contracts with preferred suppliers, drive
    spend to those contracts, and promote process efficiencies
    through electronic transactions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">SciQuest
    Strategic Procurement Software Suite</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our modular strategic procurement software suite optimizes
    processes to reduce costs, improve productivity and increase
    visibility for enterprise spend management. The individual
    modules of our solution can be deployed together or separately
    and integrate with many leading ERP systems.
</DIV>
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    <BR>
    54
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table provides an overview of the modules of our
    solution:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="31%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="67%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
    <B><FONT style="font-size: 10pt">&#160;&#160;Module</FONT></B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
    <B><FONT style="font-size: 10pt">Key Features</FONT></B>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sourcing Manager
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Manages and expedites the
    bid creation process
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Provides ability to create
    auctions, invite supplier participants and monitor and control
    the reverse auction process in real-time
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Provides self-service access
    for registered suppliers to view events, enter responses, review
    award decisions and manage their own profiles
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Graphs and highlights key
    event information
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Spend Director
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Enables a critical mass of
    suppliers
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Promotes preferred suppliers
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Provides an intuitive
    procurement user environment
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Provides visibility into
    spending
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Requisition Manager
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Creates and submits
    error-free requisitions electronically
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Previews approval workflow
    and tracks requisitions online
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Routes requisitions
    electronically based on any requisition attribute
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Provides buyers and managers
    flexible approval options and 24/7 remote access
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Consolidates requisitions to
    minimize shipping fees and maximize discounts
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Analyzes requisition data to
    identify savings opportunities and audit contract compliance
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Order Manager
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Exchanges purchase documents
    electronically and securely with suppliers
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Manages purchase documents
    automatically, eliminating paper processes
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Communicates order status to
    requisitioners electronically
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Tracks order status
    automatically with participating suppliers
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Integrates directly with
    SciQuest Requisition Manager or existing ERP and financial
    systems
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Analyzes order data to
    identify saving opportunities
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Settlement Manager
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Integrates
    order/receipt/invoice data
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Automates receipt creation
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Supports automated matching
    of invoices with purchase orders and/or receipts
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Streamlines invoice
    management
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Avoids error-prone manual
    data entry
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Contract Management
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Creates and manages a
    detailed, accessible and searchable contract repository
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Assigns contract numbers to
    purchases
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Ensures the order price is
    the best price
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Generates proactive alerts
    for key dates and contract milestones
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Enhances visibility into
    contract spending and compliance, including comparison of
    contract budget versus contract spending
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inventory Materials Management
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Provides comprehensive,
    stockroom-level inventory management, reducing backorders and
    stockouts
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Integrates available onsite
    inventory with product searches to avoid redundant purchases
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Maintains trusted inventory
    count
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Manages multiple inventory
    locations
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-left: 1px solid #000000; padding-left: 2pt">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom" style="border-right: 1px solid #000000; padding-right: 2pt">
<DIV style="text-indent: -14pt; margin-left: 14pt">
    &#149;&#160;&#160;&#160;&#160;&#160;Controls user access to
    inventory
</DIV>
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    55
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our solution is priced based primarily on the modules purchased
    and the size of the organization. An organization&#146;s size is
    determined based on its operating budget
    <FONT style="white-space: nowrap">and/or</FONT>
    number of employees. Our typical total subscription fees over
    the three to five year term of the subscription agreement range
    from $450,000 to $1.5&#160;million ($150,000 to $300,000 per
    year), and our typical one-time implementation service fees
    range from $150,000 to $300,000. Customers are not charged based
    on the number of users or transaction volume, which encourages
    organizations to maximize the number of employees using our
    solution, resulting in enhanced efficiencies and customer
    satisfaction.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">SciQuest
    Supplier Network</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The SciQuest Supplier Network is a SaaS communications hub that
    enables efficient and automated transaction interactions between
    our customers and their existing suppliers. It is the single
    integration point between our customers and their suppliers that
    also provides customers with on-demand access to comprehensive
    and
    <FONT style="white-space: nowrap">up-to-date</FONT>
    multi-commodity supplier catalogs. By utilizing the SciQuest
    Supplier Network, our customers and their suppliers can connect
    in a
    <FONT style="white-space: nowrap">hub-and-spoke</FONT>
    configuration versus a
    <FONT style="white-space: nowrap">one-to-one</FONT>
    configuration, dramatically reducing the cost of integration.
    The SciQuest Supplier Network also provides customers with the
    infrastructure to add additional suppliers as needed. The dollar
    volume of transactions conducted through the SciQuest Supplier
    Network has increased from less than $2&#160;billion in 2007 to
    over $6&#160;billion in 2009. The SciQuest Supplier Network
    includes suppliers of broad commodity categories such as:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    IT equipment;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    office supplies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    laboratory and medical supplies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    MRO supplies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    services, such as temporary labor;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    retail (books, CDs, appliances, etc.);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    furniture;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    food and beverages.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While our solution addresses many different commodities and
    markets, our experience in the higher education and life
    sciences verticals has resulted in the ability to create unique
    additional products for these markets such as:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the Science Catalog, which is a list price catalog of
    approximately 400 niche and midsize suppliers that support
    diverse and specialized scientific research;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    catalog consortium contracts which offer preferred pricing
    arrangements with industry-specific buying cooperatives;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    inventory management solutions for specialty materials.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Our
    Service Offerings</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer our customers a number of services, some of which are
    included as part of their annual subscription fee and others,
    such as implementation services, are billed separately.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Client Partners.</I>&#160;&#160;Our client partner
    organization proactively assists customers to maximize the
    benefit from their SciQuest solution. Each of our customers is
    partnered with a member of our client partner organization, who
    monitors the customer&#146;s utilization of our solution and
    tracks performance metrics. Our client partners can identify
    underuse of the solution within the organization and proactively
    assist customers to better integrate our solution into their
    procurement processes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Supplier Enablement Services.</I>&#160;&#160;Our supplier
    enablement organization manages the SciQuest Supplier Network
    and all supplier connections to our customers. This
    organization&#146;s role is to ease the integration of suppliers
    into our network and to increase the efficiency of communication
    between our customers and their suppliers. These
</DIV>
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    <BR>
    56
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    efforts include enabling each new customer&#146;s suppliers on
    the SciQuest Supplier Network, assisting suppliers in loading
    and updating product catalogs and adding new suppliers of
    existing customers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Implementation Services.</I>&#160;&#160;Our client delivery
    organization is responsible for implementing and deploying our
    solution with customers. These services are designed primarily
    to enhance the usability of the software for our customers and
    to assist them with configuration, integration, training and
    change management. Our implementation services include analyzing
    a customer&#146;s current procurement processes, identifying
    specific
    <FONT style="white-space: nowrap">high-value</FONT>
    procurement needs, configuring our software products to the
    customer&#146;s specific business and providing guidance on
    implementing and reinforcing best practices for procurement. In
    order to provide reliable, repeatable and
    <FONT style="white-space: nowrap">cost-effective</FONT>
    implementation and use of our products, we have developed a
    standard methodology to deliver implementation services that is
    milestone-based and emphasizes early knowledge transfer and
    solution usage. We develop project requirements based on the
    customer&#146;s specific needs and set objective project goals,
    such as usage levels, in order to measure success.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Customer Support.</I>&#160;&#160;Our customer support
    organization provides technical product support to our customers
    by phone, email and through our online Solutions Portal. Our
    Solutions Portal provides instant
    <FONT style="white-space: nowrap">24-hour</FONT>
    Internet access to a searchable solutions database that includes
    release notes, answers to frequently asked questions, links to
    release preview webinars and product documentation. The portal
    allows customers to notify us of product software defects and
    incidents and to track our resolutions of such incidents in a
    centralized location.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Customers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We serve more than 160 customers operating in 16 countries and
    offer our solution in five languages and 22 currencies. As of
    February&#160;1, 2010, we had over 112,000 active users of our
    solution within our customer organizations. In 2007, 2008 and
    2009, substantially all of our revenues were derived from
    customers in the United States or United States-based
    multinational companies. No customer accounted for more than 10%
    of our total revenues in 2007, 2008 and 2009. Our ten largest
    customers accounted for less than 25% of our total revenues in
    2009. The markets in which our customers operate include higher
    education, life sciences and more recently, healthcare and state
    and local governments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Higher Education.</I>&#160;&#160;We serve over 100 higher
    education institutions, including research intensive
    universities, state-wide university systems and mid-market
    colleges, at more than 155 campuses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Life Sciences.</I>&#160;&#160;We serve 38 pharmaceutical and
    bio-technology customers, which include 12 of the top 15 global
    pharmaceutical companies as measured by revenue. A majority of
    our life science customers have over $1&#160;billion in annual
    revenue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Healthcare.</I>&#160;&#160;We serve 18 healthcare customers
    which consist of academic medical centers, healthcare services
    and research organizations and group purchasing organizations,
    more than half of which have annual revenues exceeding
    $500&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>State and Local Government.</I>&#160;&#160;We serve two state
    and local government customers and are currently attempting to
    expand our presence within this market. The State of Georgia
    became our first state and local government customer in June
    2008. We are initially targeting all state governments, all of
    which have annual expenditures in excess of $3&#160;billion on
    indirect goods and services, and the 200 largest city and county
    governments, which have annual expenditures in excess of
    $500&#160;million on indirect goods and services.
</DIV>
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    <BR>
    57
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table provides an overview of our representative
    customers by vertical.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="33%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="65%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Vertical</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Representative Customers</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Higher Education
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Bryn Mawr College, East Tennessee State University, Emory
    University, Tulsa Community College, University of Michigan,
    University of Notre Dame, the University of Texas System, Yale
    University
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Life Sciences
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Bristol-Myers Squibb Company, GlaxoSmithKline, Organon
    Laboratories, Roche, Sanofi-Aventis, Scripps Research Institute,
    Wyeth
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Healthcare
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    AmSurg, Cincinnati Children&#146;s Hospital, Memorial
    Sloan-Kettering Cancer Center, University of Texas Health
    Science Center at Houston
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State and Local Government
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Clint Independent School District, State of Georgia
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Customer
    Case Studies</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The case studies below demonstrate how we have helped leading
    organizations transform procurement into a strategic function
    and achieve a return on investment:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Emory University.</I>&#160;&#160;Emory University, the
    largest private employer in Atlanta, is a leading
    U.S.&#160;research university. Emory purchased our solution to
    gain visibility into how much each of its 350 departments was
    paying for everything from pens and paper to furniture and MRO
    supplies. In 2006, Emory implemented our full
    <FONT style="white-space: nowrap">source-to-settle</FONT>
    solution to create an online, one-stop shopping marketplace
    where faculty and staff can order most commonly required
    products and specific services from university contracts. With
    our procurement solution in place, Emory reports the following
    benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    realized 6-to-1 ROI, meaning that they realized $6 in savings
    benefits for every $1 paid to SciQuest for its solution, over
    the first three years of their agreement with SciQuest;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    funded the investment in our solution from the existing
    procurement budget, generated by realized savings, with no
    budget increases or general fund expenses;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    determined that 45% of realized savings resulted from process
    efficiencies and 55% of realized savings resulted from
    negotiated discounts and contract compliance.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>State of Georgia.</I>&#160;&#160;The State of Georgia is the
    ninth most populous state in the country with a
    $17.5&#160;billion operating budget. Approximately
    $4&#160;billion of this operating budget is spent through the
    state&#146;s purchasing department. Government agencies
    typically negotiate sophisticated statewide contracts with
    suppliers, but these contracts are complicated and difficult for
    state employees to access and utilize. The State of Georgia
    first implemented our solution in 2008. The State of Georgia
    acquired our solution in order to apply private-sector
    procurement strategies to address this problem. After deploying
    our solution, the State of Georgia reports the following
    benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    increased spend under management, meaning spend that occurs
    pursuant to a pre-established contract with the supplier, from
    6% to nearly 60% within the first 18&#160;months;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    negotiated new discounts from suppliers ranging from 5% to
    20%;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    reduced paper-based expenses, including some departments going
    almost 100% paperless upon implementation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>East Tennessee State University.</I>&#160;&#160;East
    Tennessee State University, or ETSU, is a mid-sized higher
    education institution. A cost-reduction task force identified
    paper-based ordering and a fully manual procurement process as
    an opportunity for cost savings. The task force found that the
    cost to process each purchase order was too high and that the
    average order turnaround time from requisition to approval was
    9.3&#160;days. ETSU first implemented our solution in 2006. ETSU
    licensed our Spend Director, Requisition Manager and Order
    Manager modules with
</DIV>
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    <BR>
    58
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    our Supplier Network in order to establish a new automated
    procurement process. With our procurement solution in place,
    ETSU reports the following benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    reduced average order turnaround time from 9.3&#160;days to
    3.7&#160;days;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    eliminated paper-based purchasing with 100% of purchase orders
    being processed electronically;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    reallocated two procurement employees to other departments,
    resulting in a 44% reduction in procurement staff;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    improved ability to direct spending, with 41% of purchase orders
    being directed to preferred suppliers and 10% of spending
    directed to diversity suppliers.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sales and
    Marketing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We market and sell our strategic procurement and supplier
    enablement solution through a direct sales force. Our sales
    force is organized by our current target markets of higher
    education, life sciences, healthcare and state and local
    governments, as well as by region. Our sales force also is
    divided into two selling groups: a new accounts group that
    generates qualified sales leads and sells our solution to
    organizations that are not currently our customers, and a sales
    group of account executives that sells additional products to
    our existing customers. Sales through our direct sales force
    represent the largest source of our total revenues.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We supplement our direct sales efforts with strategic partner
    relationships principally in order to increase market awareness
    and generate sales leads. Our strategic partners generally
    consist of suppliers, ERP providers, technology providers and
    purchasing consultants and consortia. The relationships include
    referral and re-seller relationships. We have a business
    development group within our sales organization to manage these
    relationships.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our marketing efforts focus on increasing awareness of our brand
    and products, establishing SciQuest as a thought leader for
    strategic procurement and generating qualified sales leads. Our
    principal marketing initiatives target key executives and
    decision makers within our existing and prospective customer
    base and include sponsorship of, and participation in, industry
    events including user conferences, trade shows and webinars.
    Many sales opportunities are generated by referrals from
    existing customers, particularly in the higher education market.
    We also participate in cooperative marketing efforts with our
    strategic partners and other providers of complementary services
    or technology.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of February&#160;28, 2010, our sales and marketing
    organization consisted of 43 employees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also conduct NextLevel, an annual event that brings the
    procurement community, including industry experts, thought
    leaders and suppliers, together to discuss the latest thinking,
    newest strategies and most innovative solutions. The 2010
    NextLevel conference was attended by approximately 240
    customers, prospects, suppliers, partners and other members of
    the procurement community.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our new business sales normally fluctuate as a result of
    seasonal variations in our business, principally due to the
    timing of client budget cycles. Historically, we have had lower
    new sales in our first and third quarters than in the remainder
    of our year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Competition</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market for strategic procurement and supplier enablement
    solutions is competitive, rapidly evolving and subject to
    changes in technology. We compete with a number of procurement
    software vendors, large software application providers and group
    purchasing organizations. Our current principal competitors are
    Ariba (across all of our vertical markets other than
    healthcare), GHX (healthcare only), large enterprise application
    providers that we believe have limited procurement
    functionality, such as Oracle and SAP, smaller market-specific
    vendors, and internally developed and maintained solutions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the principal competitive factors in our industry
    include the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    breadth, depth and configurability of the solution;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    brand name recognition;
</TD>
</TR>

</TABLE>
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    <BR>
    59
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    ability to meet a customer&#146;s functional requirements and
    provide content specific to a vertical market;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    on-demand software delivery model;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    managed network and supplier services;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    price;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    ease and speed of implementation and use;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    measurability of results, demonstrable
    <FONT style="white-space: nowrap">return-on-investment</FONT>
    and perceived value;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    satisfaction of customer base;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    performance and reliability of the software.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we compete favorably with our competitors on the
    basis of these factors. In addition, many of our customers are
    current users of Oracle and SAP, and integrate our solution into
    their ERP system. However, some of our existing and potential
    competitors have greater financial resources, longer operating
    histories and more name recognition. We may face future
    competition in our markets from other large, established
    companies, as well as emerging companies.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Technology</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For several years, we have applied Lean-Agile product
    development and project management principles to the operational
    areas of our company. The four key principles of respecting the
    individual, focusing on delivering customer value, eliminating
    waste, and continuously improving each and every process are the
    bases for designing, developing, implementing and supporting our
    solution.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We use commercially available operating, application, and
    database management systems and have a significant commitment to
    using open-source systems throughout our technology development
    and delivery stack. We support key industry standards and have
    an overall technology architecture that is highly redundant and
    designed to be highly available, while supporting rapid
    development and deployment of new releases several times per
    year. We have implemented standard practices in the areas of
    development, deployment, production control, administration and
    monitoring.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our product suite is designed for, and primarily delivered over,
    the Internet &#147;on-demand.&#148; We also have two specialty
    inventory management modules that are deployed behind the
    customer&#146;s firewall.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our on-demand solution is web-based and modular, automating each
    step of an organization&#146;s procurement lifecycle. These
    on-demand modules require only a standard Web browser and access
    to the Internet, requiring no
    <FONT style="white-space: nowrap">behind-the-firewall</FONT>
    components.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The multi-tenant, on-demand application environment is developed
    using enterprise-class components:
    <FONT style="white-space: nowrap">Java-based</FONT>
    application code, IBM&#146;s DB2 database management system, and
    an open-source operating environment. The single code-base
    supports thousands of users and delivers robust, scalable,
    secure solutions for customers. Our solution has multiple layers
    of security, with all production operating systems protected
    against unauthorized access, sensitive data encrypted, all
    network/firewall devices actively monitored and updated, and
    user authentication required for system access.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our integration layer is based on technology provided by a
    technology partner, providing flexible, scalable, and deep
    integrations to customers&#146; existing IT systems
    infrastructure (e.g., into customers&#146; authentication,
    financial or ERP systems). This technical architecture
    facilitates true Internet-native standards support, scalability,
    reliability, recoverability, security and ease of maintenance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We own and administer all of our hosted production servers and
    web site hardware, which physically reside in
    <FONT style="white-space: nowrap">tier-1</FONT> data
    center hosting facilities. Our primary data center facility
    offers physical security, redundant power systems, and multiple
    OC3 internet network connections and is located in Research
    Triangle Park, North Carolina. We also have a fully redundant,
    disaster recovery platform in a data center in Scottsdale,
    Arizona which is automatically synchronized, real-time, with the
    system in North Carolina.
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On a nightly basis, a backup of the production environments and
    databases are performed and stored offsite in a vaulted
    location, which enables full business recovery. We test the
    reliability of our fail over systems and have numerous
    contingency plans in place for business continuity. We utilize
    external monitoring and load testing tools to track the
    performance of our production environment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our deployed inventory management modules have a three-tier
    architecture, with an interface component, an application server
    layer, and database layer. These modules are deployed within a
    customer&#146;s network where we provide level&#160;2 and
    level&#160;3 support. We provide regular updates to customers
    with new releases available every
    <FONT style="white-space: nowrap">18-24&#160;months</FONT>
    and maintenance releases available periodically (typically every
    three to six months).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Product
    Development</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our product development organization is responsible for the
    design, development and testing of our software. Our current
    product development efforts are focused on maintenance and new
    releases of existing products as well as development of new
    products and modules.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following our Lean-Agile product development methodology, we
    work closely with our customers in developing all our products.
    Our customer community provides extensive input that we
    incorporate into our products through regular reviews and
    demonstration-based focus groups. Typically, our product
    development organization will conduct four to six focus groups
    and 30 to 40 customer interviews during a release cycle and
    works closely with our implementation and customer support
    organization, which also provides for customer feedback into the
    development process.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of February&#160;28, 2010, our product development
    organization consisted of 42&#160;employees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our research and development expenses were $6.9&#160;million,
    $8.3&#160;million and $8.1&#160;million in 2007, 2008 and 2009,
    respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Intellectual
    Property</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our success and ability to compete is dependent in part on our
    ability to develop and maintain the proprietary aspects of our
    technology and operate without infringing upon the proprietary
    rights of others. We rely primarily on a combination of patent,
    copyright, trade secret, confidentiality procedures, contractual
    provisions and other similar measures to protect our proprietary
    information.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have registered trademarks and service marks in the United
    States and abroad, and have applied for the registration of
    additional trademarks and service marks. Our principal trademark
    is &#147;SciQuest.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have one issued U.S.&#160;patent, which expires in 2023, and
    13 pending U.S.&#160;patent applications. We are not pursuing
    patent protection in any foreign countries. We do not know
    whether any of our pending patent applications will result in
    the issuance of patents or whether the examination process will
    require us to narrow our claims.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also use contractual provisions to protect our intellectual
    property rights. We license our software products directly to
    customers. These license agreements, which address our
    technology, documentation and other proprietary information,
    include restrictions intended to protect and defend our
    intellectual property. We also require all of our employees,
    contractors and many of those with whom we have business
    relationships to sign non-disclosure and confidentiality
    agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The legal protections described above afford only limited
    protection for our technology. Due to rapid technological
    change, we believe that factors such as the technological and
    creative skills of our personnel, new product and service
    developments and enhancements to existing products and services
    are more important than the various legal protections of our
    technology to establishing and maintaining a technology
    leadership position.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our products also include third-party software that we obtain
    the rights to use through license agreements. These third-party
    software applications are commercially available on reasonable
    terms. We believe that we could obtain substitute software, or
    in certain cases develop substitute software, to replace these
    third-party software applications if they were no longer
    available on reasonable terms.
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, a company filed a patent infringement action in the
    United States District Court for the Eastern District of
    Virginia against us and other unrelated companies. In August
    2009, we entered into a settlement agreement under which we made
    a one-time settlement payment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Properties</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our corporate headquarters are located in Cary, North Carolina,
    where we currently lease approximately 32,000&#160;square feet
    of office space. This lease expires in January 2014. We also
    maintain an office in Newtown Square, Pennsylvania, where we
    currently lease approximately 5,500&#160;square feet of space.
    This lease expires in February 2016.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our current facilities are suitable and adequate
    to meet our current needs, and that suitable additional or
    substitute space will be available as needed to accommodate
    future growth.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of February&#160;28, 2010, we had 158&#160;full-time
    employees. None of our employees are represented by labor unions
    or covered by collective bargaining agreements. We consider our
    relationship with our employees to be good.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Legal
    Proceedings</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2001, we were named as a defendant in several securities
    class action complaints filed in the United States District
    Court for the Southern District of New York originating from our
    December 1999 initial public offering. The complaints alleged,
    among other things, that the prospectus used in our initial
    public offering contained material misstatements or omissions
    regarding the underwriters&#146; allocation practices and
    compensation and that the underwriters manipulated the
    aftermarket for our stock. These complaints were consolidated
    along with similar complaints filed against over 300 other
    issuers in connection with their initial public offerings. After
    several years of litigation and appeals related to the
    sufficiency of the pleadings and class certification, the
    parties agreed to a settlement of the entire litigation, which
    was approved by the Court on October&#160;5, 2009. Notices of
    appeal to the Court&#146;s order have been filed by various
    appellants. We have not incurred significant costs to date in
    connection with our defense of these claims since this
    litigation is covered by our insurance policy. We believe we
    have sufficient coverage under our insurance policy to cover our
    obligations under the settlement agreement. Accordingly, we
    believe the ultimate resolution of these matters will not have
    an impact on our financial position and, therefore, we have not
    accrued a contingent liability as of December&#160;31, 2008 and
    2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are not party to any other material legal proceedings at this
    time. From time to time, we may be subject to legal proceedings
    and claims in the ordinary course of business.
</DIV>
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    <BR>
    62
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='111'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Officers and Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the names, ages and positions of
    our executive officers and directors as of March&#160;26, 2010:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="52%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Age</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Position</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Wiehe
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    46
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    President, Chief Executive Officer and Director
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Rudy C. Howard
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    52
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Chief Financial Officer
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James B. Duke
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    46
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Chief Operating Officer
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    51
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Senior Vice President of Worldwide Sales
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    38
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President of Finance
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. Gamble Heffernan
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    48
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President of Marketing and Strategy
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Noel J. Fenton(1)(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    71
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Chairman of the Board of Directors
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Daniel F. Gillis(2)(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    63
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey T. Barber(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    57
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Timothy J. Buckley(1)(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    58
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Member of the audit committee.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Member of the compensation committee.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Member of the nominating and governance committee.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stephen J. Wiehe </I>has served as our President, Chief
    Executive Officer and a member of our board of directors since
    joining SciQuest in February 2001. From 2000 until he joined
    SciQuest, Mr.&#160;Wiehe served as Senior Director, Strategic
    Investments&#160;&#038; Mergers and Acquisitions at SAS
    Institute. Mr.&#160;Wiehe joined SAS as part of its acquisition
    of DataFlux Corporation, a provider of data quality and data
    warehousing solutions, where Mr.&#160;Wiehe had served as
    President and Chief Executive Officer since 1999. From 1998
    until joining DataFlux, Mr.&#160;Wiehe served as Managing
    Director/Europe and Senior Executive Vice President for SunGard
    Treasury Systems, a division of SunGard Data Systems, Inc., a
    software and IT services company. He also served as President
    and Chief Executive Officer of Multinational Computer Models,
    Inc., a provider of Treasury management solutions used by large
    multinational corporations to manage their foreign exchange,
    debt, and investment-related financial hedging instruments, from
    1991 until Multinational Computer Models was sold to SunGard
    Data Systems in 1998. Mr.&#160;Wiehe started his career with
    General Electric Company, serving in various financial positions
    from 1987 to 1991 and graduating from its Financial Management
    Program in 1989. Mr.&#160;Wiehe is a graduate of the University
    of Kentucky. Mr.&#160;Wiehe&#146;s past experience as a software
    industry executive and his long service with us qualify him to
    serve as a director and provides our board of directors with
    deep knowledge of our business and industry.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Rudy C. Howard </I>has served as our Chief Financial Officer
    since joining SciQuest in January 2010. From November 2008 until
    joining SciQuest, Mr.&#160;Howard served as Senior Vice
    President and Chief Financial Officer of MDS Pharma Services, a
    pharmaceutical services company, where he was responsible for
    all financial management functions. From 2003 until joining MDS
    Pharma Services, Mr.&#160;Howard operated his own financial
    consulting company, Rudy C. Howard, CPA Consulting, in
    Wilmington, North Carolina, where his services included advising
    on merger and acquisition transactions, equity and debt
    issuances and other general management matters. From 2001
    through 2003, Mr.&#160;Howard served as Chief Financial Officer
    for Peopleclick, Inc., an international human capital management
    software company. From 2000 until joining Peopleclick,
    Mr.&#160;Howard served as Chief Financial Officer for Marketing
    Services Group, Inc., a marketing and internet technology
    company. From 1995 until 2000, Mr.&#160;Howard served as Chief
    Financial Officer for PPD, Inc., a clinical research
    organization. Prior to joining PPD, Mr.&#160;Howard was a
    partner with PricewaterhouseCoopers. Mr.&#160;Howard holds a
    B.A. in Accounting from North Carolina State University, and he
    is a Certified Public Accountant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>James B. Duke </I>has served as our Chief Operating Officer
    since joining SciQuest in March 2001. From 2000 until he joined
    SciQuest, Mr.&#160;Duke served as Chief Information Officer of
    BuildNet, a solutions provider for the
</DIV>
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    <BR>
    63
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    construction and materials industry. Mr.&#160;Duke served as
    Vice President of Sales and Marketing for GE Capital Mortgage
    from 1999 until joining BuildNet. Mr.&#160;Duke also served as
    Group Vice President for Technology and Alternative Channels for
    First Citizens Bank from 1995 until 1999 and as a management
    consultant with McKinsey&#160;&#038; Co., a leading management
    consultancy, from 1992 until 1995. Mr.&#160;Duke graduated from
    Duke University and also has a master&#146;s degree from
    MIT&#146;s Sloan School of Management.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Jeffrey A. Martini </I>has served as our Senior Vice
    President of Worldwide Sales since joining SciQuest in January
    2005. From 2004 until he joined SciQuest, Mr.&#160;Martini
    served as Vice President of Worldwide Sales for VitualEdge
    Corporation, a leading provider of real-time recruiting software
    for the extended enterprise. Prior to joining VirtualEdge,
    Mr.&#160;Martini had served as Vice President of Worldwide Sales
    at Primavera Systems, a portfolio management vendor, since 2002.
    From 1987 until joining Primavera Systems, Mr.&#160;Martini held
    a variety of sales and sales management roles at SCT
    Corporation, a leading provider of enterprise software
    applications, including serving as Corporate Vice President of
    Sales. Mr.&#160;Martini&#146;s early sales career included
    positions at Highline Data Systems, a provider of human resource
    information systems for the mid-market, in 1986, and Personnel
    Data Systems, a provider of human resources information systems,
    in 1985. Mr.&#160;Martini is a graduate of Gettysburg College.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Jennifer G. Kaelin </I>has served as our Vice President of
    Finance since January 2010 and from joining SciQuest in July
    2005 until January 2008. From January 2008 until December 2009,
    Ms.&#160;Kaelin served as our Chief Financial Officer. From 2003
    until she joined SciQuest, Ms.&#160;Kaelin served as Corporate
    Controller at Art.com, an
    <FONT style="white-space: nowrap">e-tailer</FONT> of
    posters, prints and custom framing. Prior to joining Art.com,
    Ms.&#160;Kaelin had served as Controller for several
    manufacturing sites at Moduslink, a global supply chain
    management company for technology-based manufacturers, since
    1998. Ms.&#160;Kaelin also was a financial analyst for IBM from
    1997 until 1998, and was an auditor for PricewaterhouseCoopers
    from 1994 until 1997. She holds a master&#146;s degree in
    accounting and a bachelor&#146;s degree in business
    administration from the University of North Carolina at Chapel
    Hill, and she is a certified public accountant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>C. Gamble Heffernan </I>has served as our Vice President of
    Marketing and Strategy since joining SciQuest in October 2008.
    From September 2007 until joining SciQuest, Ms.&#160;Heffernan
    served as Senior Vice President of Community Solutions for
    Misys, an application software and services provider to the
    financial services and healthcare industries, where she was
    responsible for the development and management of its community
    services business team. Ms.&#160;Heffernan previously served as
    Senior Vice President, Product Management for Healthcare for
    Misys from October 2005 until September 2007, where she was
    responsible for portfolio and market strategy. Prior to joining
    Misys, Ms.&#160;Heffernan had served as Vice President and
    General Manager of Professional Services and Consulting for
    Cardinal Health and the Director of the ALARIS Center for
    Medication Safety and Clinical Improvement since 2002.
    Ms.&#160;Heffernan also served as Vice President of Services
    Marketing at Ortho-Clinical Diagnostics, a provider of in-vitro
    diagnostic systems, from 2001 until 2002. From 1996 until
    joining
    <FONT style="white-space: nowrap">Ortho-Clinical</FONT>
    Diagnostics, she worked for GE Medical Systems, where she held
    various management positions including General Manager for
    eBusiness, General Manager for Clinical Information Systems and
    Senior Business Unit Manager for Neonatal.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Noel J. Fenton </I>serves as our lead independent director.
    He has been a member of our board of directors since August 2004
    and has served as Chairman since March 2010. Mr.&#160;Fenton
    also served as a member of our board of directors from November
    1998 until February 2004. In 1986, Mr.&#160;Fenton co-founded
    Trinity Ventures, a venture capital firm that made an initial
    investment in our company in 1998, and has served as one of its
    directors since 1998. He also serves as a director of several
    private companies. Prior to co-founding Trinity Ventures, he was
    a <FONT style="white-space: nowrap">co-founder</FONT>
    of three successful technology
    <FONT style="white-space: nowrap">start-ups</FONT>
    and Chief Executive Officer of two of them. Mr.&#160;Fenton is
    actively involved in the World&#146;s Presidents&#146;
    Organization and is a past Chairman of the Northern California
    Chapter of the Young Presidents&#146; Organization and a past
    chairman of the American Electronic Association. Mr.&#160;Fenton
    holds a B.S. from Cornell University and an M.B.A. from the
    Stanford University Graduate School of Business. We believe
    Mr.&#160;Fenton&#146;s qualifications to sit on our board of
    directors include his previous operating experience as a chief
    executive officer, his service on the board of directors of
    approximately 30&#160;companies in
</DIV>
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    <BR>
    64
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    which his venture capital firm invested and, as one of our early
    stage investors, his extensive knowledge of our company and the
    electronic commerce marketplace.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Daniel F. Gillis </I>has been a member of our board of
    directors since October 2005. From 1997 until 2001,
    Mr.&#160;Gillis served as Chief Executive Officer of SAGA
    Systems, a NYSE-traded enterprise software company. Prior to
    joining SAGA Systems, Mr.&#160;Gillis had served as Executive
    Vice President of Falcon Systems, an interactive equipment
    company serving the federal government market. Mr.&#160;Gillis
    also served as a member of the NYSE Listed Companies Advisory
    Board from 1999 until 2001. Mr.&#160;Gillis is a graduate of the
    University of Rhode Island. Mr.&#160;Gillis&#146; executive and
    managerial experience in publicly-held software companies
    qualify him to serve as a director.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Jeffrey T. Barber </I>has been a member of our board of
    directors since March 2010. Mr.&#160;Barber has served as a
    Managing Director of Fennebresque&#160;&#038; Co., an investment
    banking firm, since October 2009. From 1997 until June 2008,
    Mr.&#160;Barber was an audit partner of Pricewaterhouse Coopers
    LLP, where he also served as the managing partner of its
    Raleigh, North Carolina office for a period of 14&#160;years.
    Mr.&#160;Barber has served as a member of the board of directors
    of Ply Gem Holdings, Inc., building products provider, since
    January 2010. Mr.&#160;Barber also serves as chairman of Ply Gem
    Holdings&#146; audit committee. Mr.&#160;Barber has a B.S. in
    accounting from the University of Kentucky. Mr.&#160;Barber is a
    financial expert as contemplated by the rules of the SEC
    implementing Section&#160;407 of the Sarbanes-Oxley Act of 2002.
    Mr.&#160;Barber&#146;s accounting and financial expertise and
    general business acumen qualify him to serve as a director.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Timothy J. Buckley </I>has been a member of our board of
    directors since March 2010. From April 1999 until November 2003,
    Mr.&#160;Buckley served as the chief operating officer for Red
    Hat (NYSE: RHT), a premier open source and Linux provider. As
    chief operating officer, Mr.&#160;Buckley used his insight to
    accelerate the momentum of open source and expand Red Hat&#146;s
    worldwide business operations. From December 1993 until joining
    Red Hat, Mr.&#160;Buckley was senior vice president of worldwide
    sales at Visio Corporation (NASDAQ: VSIO), a software
    application company that was acquired by Microsoft Corporation
    in 2000 in a transaction valued at $1.5&#160;billion. He
    currently serves on the board of directors of several
    privately-held companies. Mr.&#160;Buckley graduated from
    Pennsylvania State University with a degree in liberal arts.
    Mr.&#160;Buckley&#146;s executive and managerial experience in
    the software industry qualify him to serve as a director.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Composition</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors currently consists of five directors. In
    accordance with our amended and restated certificate of
    incorporation, immediately after this offering, our board of
    directors will be divided into three classes with staggered
    three-year terms. At each annual meeting of stockholders, the
    successors to directors whose terms then expire will be elected
    to serve from the time of election and qualification until the
    third annual meeting following election. Our directors will be
    divided among the three classes as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    The Class&#160;I directors will be Messrs.&#160;Buckley and
    Gillis and their terms will expire at the annual meeting of
    stockholders to be held in 2011;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    The Class&#160;II directors will be Messrs.&#160;Barber and
    Wiehe and their terms will expire at the annual meeting of
    stockholders to be held in 2012;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    The Class&#160;III director will be Mr.&#160;Fenton and his term
    will expire at the annual meeting of stockholders to be held in
    2013.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any additional directorships resulting from an increase in the
    number of directors will be distributed among the three classes
    so that, as nearly as possible, each class will consist of
    one-third of the directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The division of our board of directors into three classes with
    staggered three-year terms may delay or prevent a change of our
    management or a change in control.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    65
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is no family relationship between any director, executive
    officer or person nominated to become a director or executive
    officer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Independence</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has determined that four of our five
    directors are independent directors within the meaning of the
    independent director guidelines of the NYSE. The independent
    directors are Messrs.&#160;Barber, Buckley, Fenton and Gillis.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Committees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Audit
    Committee</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The audit committee oversees our corporate accounting and
    financial reporting processes. The audit committee will also:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    evaluate the qualifications, performance and independence of our
    independent auditor and review and approve both audit and
    non-audit services to be provided by the independent auditor;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    discuss with management and our independent auditors any major
    issues as to the adequacy of our internal controls, any actions
    to be taken in light of significant or material control
    deficiencies and the adequacy of disclosures about changes in
    internal control over financial reporting;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    establish procedures for the receipt, retention and treatment of
    complaints regarding accounting, internal accounting controls or
    auditing matters, including the confidential, anonymous
    submission by employees of concerns regarding accounting or
    auditing matters;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    review our financial statements and review our critical
    accounting policies and estimates;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    prepare the audit committee report that SEC rules require to be
    included in our annual proxy statement and annual report on
    <FONT style="white-space: nowrap">Form&#160;10-K.</FONT>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The current members of the audit committee are
    Messrs.&#160;Barber, Buckley and Fenton. Mr.&#160;Barber has
    been appointed to serve as the chairman of the audit committee
    and is a financial expert as contemplated by the rules of the
    SEC implementing Section&#160;407 of the Sarbanes-Oxley Act of
    2002. The composition of the audit committee meets the
    requirements for independence under current NYSE and SEC rules
    and regulations. Our board of directors has adopted an audit
    committee charter. We believe that the audit committee&#146;s
    charter and functioning comply with the applicable requirements
    of NYSE and SEC rules and regulations. We intend to comply with
    future requirements to the extent they become applicable to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following the completion of this offering, copies of the charter
    for our audit committee will be available without charge, upon
    request in writing to SciQuest, Inc., 6501&#160;Weston Parkway,
    Suite&#160;200, Cary, North Carolina 27513, Attn: Secretary, or
    on the investor relations portion of our website,
    www.sciquest.com.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee oversees our corporate compensation
    and benefit programs and has the responsibilities described in
    &#147;Compensation Discussion and Analysis&#148; below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The members of the compensation committee are
    Messrs.&#160;Buckley and Gillis, each of whom our board of
    directors has determined is independent within the meaning of
    the independent director guidelines of the NYSE. Mr.&#160;Gillis
    has been appointed to serve as the chairman of the compensation
    committee. The composition of the compensation committee meets
    the requirements for independence under current NYSE and SEC
    rules and
</DIV>
<!-- XBRL Paragraph Pagebreak -->
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    66
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    regulations. Our board of directors has adopted a compensation
    committee charter. We believe that the compensation committee
    charter and the functioning of the compensation committee comply
    with the applicable requirements of NYSE and SEC rules and
    regulations. We intend to comply with future requirements to the
    extent they become applicable to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following the completion of this offering, copies of the charter
    for our compensation committee will be available without charge,
    upon request in writing to SciQuest, Inc., 6501&#160;Weston
    Parkway, Suite&#160;200, Cary, North Carolina 27513, Attn:
    Secretary, or on the investor relations portion of our website,
    www.sciquest.com.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Nominating
    and Governance Committee</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The nominating and governance committee oversees and assists our
    board of directors in reviewing and recommending nominees for
    election as directors. The nominating and governance committee
    will also:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    assess the performance of the members of our board of directors;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    oversee guidelines for the composition of our board of
    directors;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    review and administer our corporate governance principles.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The current members of the nominating and governance committee
    are Messrs.&#160;Fenton and Gillis, each of whom our board of
    directors has determined is independent within the meaning of
    the independent director guidelines of the NYSE. Mr.&#160;Fenton
    has been appointed to serve as the chairman of the nominating
    and governance committee. The compensation of the nominating and
    governance committee meets the requirements for independence
    under current NYSE and SEC rules and regulations. Our board of
    directors has adopted a nominating and governance committee
    charter to be effective prior to the closing of this offering.
    We believe that the nominating and governance committee charter
    and the functioning of the nominating and governance committee
    will comply with the applicable requirements of NYSE and SEC
    rules and regulations. We intend to comply with future
    requirements to the extent they become applicable to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following the completion of this offering, copies of the charter
    for our nominating and governance committee will be available
    without charge, upon request in writing to SciQuest, Inc.,
    6501&#160;Weston Parkway, Suite&#160;200, Cary, North Carolina
    27513, Attn: Secretary, or on the investor relations portion of
    our website, www.sciquest.com.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors may from time to time establish other
    committees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2010, our board of directors approved the following
    compensation package for our non-employee directors based on the
    recommendation of our Chief Executive Officer and the
    compensation committee of our board of directors:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Annual retainer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    In-person board and committee meeting fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Telephonic board and committee meeting fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Audit committee chair retainer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Compensation committee chair retainer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nominating and governance committee chair retainer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Initial grant of stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Annual grant of stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, we have not paid compensation to any director for
    his service as a director, other than the grant of common stock
    awards to non-employee directors who are not affiliated with any
    of our major stockholders.
</DIV>
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    <BR>
    67
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Gillis is the only director who has qualified to
    receive such stock awards. We have historically reimbursed our
    non-employee directors for reasonable travel and other expenses
    incurred in connection with attending board of director and
    committee meetings.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information regarding
    compensation earned by our qualifying non-employee director
    during 2009.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Compensation Table for Year Ended December&#160;31,
    2009</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="47%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Fees Earned or Paid<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>in Cash</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Awards</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Option Awards</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Daniel F. Gillis
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,025
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,525
</TD>
<TD nowrap align="left" valign="bottom">
    (1)
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    This total is based on a fair value of our common stock as of
    December&#160;31, 2008 of $1.02, as determined by our board of
    directors.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee Interlocks and Insider Participation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The members of our compensation committee are
    Messrs.&#160;Buckley and Gillis. Neither of these members is or
    has at any time during the last completed fiscal year been an
    officer or employee of ours or is a former officer of ours. None
    of our executive officers has served as a member of the board of
    directors, or as a member of the compensation or similar
    committee, of any entity that has one or more executive officers
    who served on our board of directors or compensation committee
    during the last completed fiscal year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Officers</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our executive officers are elected by, and serve at the
    discretion of, our board of directors. There are no familial
    relationships among our directors and officers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Code of
    Business Ethics and Conduct</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has adopted a code of business ethics and
    conduct for all employees, officers and directors. The code of
    business ethics and conduct will be available on our website at
    www.sciquest.com. We expect that any amendments to the code of
    business ethics and conduct, or any waiver of its requirements,
    will be disclosed on our website. The inclusion of our website
    address in this prospectus does not include or incorporate by
    reference the information on our website into this prospectus.
</DIV>
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    <BR>
    68
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='112'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXECUTIVE
    COMPENSATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Discussion and Analysis</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a discussion and analysis of the compensation
    arrangements for our named executive officers for 2009. Our
    named executive officers for 2009 were Stephen Wiehe, our
    President and Chief Executive Officer, James Duke, our Chief
    Operating Officer, Jennifer Kaelin, who served as our Chief
    Financial Officer in 2009 and currently serves as our Vice
    President of Finance, Jeffrey Martini, our Senior Vice President
    of Worldwide Sales, and Gamble Heffernan, our Vice President of
    Marketing and Strategy. Effective January&#160;4, 2010, Rudy
    Howard became our Chief Financial Officer. Mr.&#160;Howard is
    expected to be a named executive officer in 2010 in place of
    Ms.&#160;Kaelin.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Compensation
    Objectives and Process</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our compensation committee&#146;s primary objectives with
    respect to executive compensation are to:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    attract, motivate, reward, and retain high quality executives
    necessary to formulate and execute our business strategy;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    ensure that compensation provided to executive officers is
    closely aligned with our short and long-term business
    objectives, risk profile, financial performance and strategic
    goals;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    build a strong link between an individual&#146;s performance and
    his or her compensation;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    further align the interests of management with our stockholders
    by providing equity incentive compensation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our executive compensation practices are intended to provide
    each executive a total annual compensation that is commensurate
    with the executive&#146;s responsibilities, experience and
    demonstrated performance. We intend our compensation to be
    competitive with companies in our industry and region.
    Variations to this targeted compensation may occur depending on
    the experience level of the individual and market factors, such
    as the demand for executives with similar skills and experience.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee of our board of directors oversees
    our executive compensation program. In this role, the
    compensation committee reviews and approves annually all
    compensation decisions relating to our named executive officers
    other than with respect to equity awards. Our compensation
    committee proposes grants of equity awards for our named
    executive officers and recommends such proposals to our board of
    directors for approval. Our compensation committee believes that
    our compensation program is aligned with our business and risk
    management objectives and does not believe that our compensation
    program is likely to have a material adverse effect on us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our historical executive compensation programs have been
    developed and implemented by our compensation committee
    consistent with practices of other venture-backed,
    privately-held companies. To date, our compensation committee
    has never engaged a compensation consultant. Our board of
    directors and compensation committee has generally established
    our executive compensation on an informal basis by considering
    the employment and compensation history of each executive and
    comparing our executives&#146; compensation to our estimates of
    executive compensation paid by companies in our industry and
    region. These estimates are based on the experience of our board
    and committee members, informal research of pay practices at
    other venture-backed companies and reviews of external
    compensation databases. The board of directors and the
    compensation committee intend to continue to formalize their
    approach to the development and implementation of our executive
    compensation programs. Following the completion of this
    offering, we anticipate that our compensation committee will
    determine executive compensation, at least in part, by reference
    to the compensation information for the executives of a peer
    group of comparable public companies, although no peer group has
    yet been determined.
</DIV>
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    <BR>
    69
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January of each year, our compensation committee typically
    determines our named executive officers&#146; base salaries,
    awards annual cash incentive bonuses based on the achievement of
    bonus criteria in the prior year and sets bonus criteria for the
    upcoming year. The compensation committee also proposes grants
    of equity awards to our named executive officers, which are
    considered and approved by our board of directors in January as
    well. Each year, our chief executive officer provides a report
    to the compensation committee with respect to each named
    executive officer summarizing such officer&#146;s performance in
    the prior year, including his or her achievement of bonus
    criteria. This report also contains the chief executive
    officer&#146;s recommendations for base salaries, bonuses and
    equity awards for each named executive officer. The compensation
    committee then deliberates and makes compensation determinations
    for the named executive officers. Our chief executive officer
    participates in the compensation committee&#146;s deliberations
    with respect to the other named executive officers, but he is
    not present when the compensation committee deliberates and
    determines his own compensation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Compensation
    Components</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The primary elements of our executive compensation program are:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    base salary;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    annual cash incentive bonuses;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    equity incentive awards; and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    insurance and other employee benefits and compensation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not have any formal or informal policy or target for
    allocating compensation between long-term and short-term
    compensation, between cash and non-cash compensation or among
    the different forms of non-cash compensation. Instead, our
    compensation committee relies on the experience of its members,
    its past practices and management input in establishing the
    different forms of compensation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Base
    Salary</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Base salaries are used to recognize the experience, skills,
    knowledge and responsibilities required of our named executive
    officers. None of our named executive officers is currently
    party to an employment agreement that provides for automatic or
    scheduled increases in base salary. Salaries for the named
    executive officers generally are based upon their personal
    performance in light of individual levels of responsibility, our
    overall performance and profitability during the preceding year,
    economic trends that may affect us, and the competitiveness of
    the executive&#146;s salary with the salaries of executives in
    comparable positions at companies of comparable size or with
    similar operational characteristics. While our compensation
    committee considers each of these factors, it does not assign a
    specific value to each factor.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Base salaries are reviewed at least annually by our compensation
    committee, and are adjusted from time to time to realign
    salaries with market trends and levels after taking into account
    the factors discussed above. In addition to these periodic
    reviews, the compensation committee may at any time review the
    salary of an executive who has received a significant promotion
    or whose responsibilities have been increased significantly.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2009, our named executive officers received salary increases
    ranging from approximately 4% to 6% as compared to 2008. In
    January 2010, our named executive officers received salary
    increases from approximately 0% to 5% as compared to 2009.
</DIV>
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    <BR>
    70
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    <I><FONT style="font-family: 'Times New Roman', Times">Annual
    Bonuses</FONT></I>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide our named executive officers an opportunity to
    receive annual discretionary cash incentive bonuses. The annual
    bonuses are intended to compensate for the achievement of our
    strategic, operational and financial goals
    <FONT style="white-space: nowrap">and/or</FONT>
    individual performance objectives of a particular named
    executive officer.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each executive&#146;s bonus is based on a target bonus amount
    and the achievement of bonus criteria, which are specific
    financial or other business goals to promote the growth and
    success of our business. In January of each year, our
    compensation committee typically determines the bonus amount for
    each named executive officer based on the prior year&#146;s
    target bonus amount and achievement of bonus criteria and
    establishes the target bonus amount and the bonus criteria for
    the upcoming year. The compensation committee establishes the
    target bonus amount based on an amount it believes is necessary
    to provide a competitive overall compensation package in light
    of each named executive officer&#146;s base salary and to
    motivate our executives to achieve their goals. The bonus
    criteria vary among the named executive officers, depending on
    their operational responsibilities, as described below.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, when a component of the bonus criteria is
    quantitative, the full targeted bonus amount attributable to
    that component will be paid if the performance falls between 90%
    and 110% of the targeted goal. If performance exceeds 110% of
    the goal, 150% of the target bonus amount attributable to that
    component will be paid. If performance is less than 75% of the
    goal, no bonus amount attributable to that component will be
    paid. If performance is between 75% and 90% of the goal, then
    the bonus amount attributable to that component will be
    determined by the compensation committee in its discretion. When
    determining whether and to what extent bonus criteria have been
    satisfied, our compensation committee uses their reasonable
    discretion and will consider extenuating circumstances when
    appropriate.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Wiehe&#146;s target bonus amount for 2009 was $150,000,
    and his bonus criteria were as follows: 25% based on attainment
    of our budgeted revenues, 25% based on attainment of targeted
    EBITDA, 25% based on attainment of targeted cash generation and
    25% as determined in the discretion of our board of directors.
    For 2009, Mr.&#160;Wiehe received a bonus equal to $145,688,
    based on achieving 96% of budgeted revenues, 106% of targeted
    EBITDA, achieving 89% of targeted cash generation, after taking
    into account certain equitable adjustments, and 100% of the
    discretionary component.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Duke&#146;s target bonus amount for 2009 was $125,000,
    and his bonus criteria were as follows: $40,000 based on
    attainment of company goals, $45,000 based on attainment of his
    departmental goals, $20,000 based on meeting our production
    up-time goals and $20,000 based on meeting goals for new
    services and supplier revenues. For 2009, Mr.&#160;Duke received
    a bonus equal to $119,091, based on achieving 96% of company
    goals, achieving 100% of departmental goals and production
    up-time goals and achieving 84% of new services and supplier
    revenues goals.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Martini&#146;s target bonus amount for 2009 was
    $285,000, and his bonus criteria were based solely on sales
    commissions. For 2009, Mr.&#160;Martini&#146;s bonus would have
    been $183,118 based on sales commissions. The compensation
    committee, however, awarded Mr.&#160;Martini an additional bonus
    of $30,000 in recognition of his leadership of the sales
    organization in a difficult economic environment. Thus,
    Mr.&#160;Martini&#146;s aggregate bonus for 2009 was $213,118.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Ms.&#160;Kaelin&#146;s target bonus amount for 2009 was $65,000,
    and her bonus criteria were as follows: one-third based on
    attainment of our budgeted revenues, one-third based on
    attainment of targeted EBITDA and one-third based on attainment
    of targeted cash generation. For 2009, Ms.&#160;Kaelin received
    a bonus equal to $62,507, based on achieving 96% of budgeted
    revenues, achieving 106% of targeted EBITDA and achieving 89% of
    targeted cash generation, after taking into account certain
    equitable adjustments.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Ms.&#160;Heffernan&#146;s target bonus amount for 2009 was
    $64,750, and her bonus criteria were as follows: 50% based on
    attainment of growth and market expansion goals, 25% based on
    attainment of lead generation goals and 25% based on attainment
    of company goals. For 2009, Ms.&#160;Heffernan received a bonus
    equal to $62,511, based on
</DIV>
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    achieving 95% of growth and market expansion goals, achieving
    100% of lead generation goals and achieving 96% of company goals.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2010, our compensation committee decided to maintain
    the target bonus amounts at the same levels for 2010 as for
    2009. In addition, Mr.&#160;Howard&#146;s bonus target was set
    at $84,000 for 2010. The compensation committee did not set the
    bonus criteria for 2010 at its January meeting, other than for
    Mr.&#160;Martini, and the formulation of those bonus criteria is
    ongoing. Mr.&#160;Martini&#146;s bonus will continue to be
    determined based solely on sales commissions. In general, our
    compensation committee determined to expand the metrics against
    which each named executive officer is measured and to not assign
    a specific weighting of the bonus criteria to each metric. It is
    currently contemplated that the committee would examine each
    named executive officer&#146;s performance against the multiple
    metrics comprising that officer&#146;s bonus criteria and then
    determine the bonus amount based on the entirety of their
    performance.
</DIV>

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    <I><FONT style="font-family: 'Times New Roman', Times">Equity
    Awards</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our equity award program is the primary vehicle for offering
    long-term incentives to our executives. Our employees, including
    our named executive officers, are eligible to participate in our
    2004 stock incentive plan. Under the 2004 stock incentive plan,
    our employees, including our named executive officers, are
    eligible to receive grants of stock options, restricted stock
    awards, restricted stock units and stock appreciation rights at
    the discretion of our compensation committee. Historically, we
    have granted restricted stock awards to executive officers and
    stock options to all other employees. Beginning in 2008, we
    began to grant stock options to new executive officers and limit
    restricted stock grants only to executive officers who had
    previously received equity awards in the form of restricted
    stock grants.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We typically grant equity awards to employees, including our
    named executive officers, in connection with their hiring. When
    determining the size of the award, the compensation committee
    considers the individual&#146;s position and responsibilities,
    the equity position of our other similarly situated employees
    and the anticipated future contribution of such individual. Our
    compensation committee has established general guidelines for
    the grant of equity awards for all new hires, including any
    named executive officers, based on the individual&#146;s
    position and responsibilities.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe equity awards are an important element of
    compensation because they provide the recipient with a potential
    ownership interest in our company, which helps align our
    executives&#146; and other employees&#146; interests with those
    of other stockholders. We believe equity awards further align
    the interest of our employees and stockholders because they
    profit from equity awards only if our stock price increases
    relative to the award&#146;s exercise or purchase price. We
    believe that equity awards incentivize recipients, including our
    named executive officers, to incur appropriate risks that are
    consistent with our business strategy but do not encourage undue
    or inappropriate
    <FONT style="white-space: nowrap">risk-taking.</FONT>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Equity awards are also an important element of our employee
    retention strategy because the awards vest over several years
    and vesting depends on the individual&#146;s continued
    employment with us. The typical vesting provisions for equity
    awards provide that one-quarter of the award vests on the first
    anniversary of the grant date, with the remaining shares vesting
    in 36 successive equal monthly installments thereafter upon
    completion of each additional month of service.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our compensation committee recommends the grant of all equity
    awards for approval by the full board of directors. Equity
    awards are typically made twice a year, in January and July.
    Following the completion of this offering, our board of
    directors may consider implementing a different grant date
    policy.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our policy is to grant stock options with an exercise price
    equal to the fair value of our common stock on the date of
    grant. As a private company, the fair value of our common stock
    has been determined by our board of directors, based in large
    part on third-party valuations.
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has adopted an equity award re-grant
    program to reestablish or provide additional incentives to
    retain employees, including employees who had been with us for a
    significant period of time. We believe that granting additional
    equity awards to employees who are significantly vested in their
    existing awards is an important retention tool. All awards under
    the re-grant program are made in January of each year. In order
    to be eligible for the re-grant program, the individual must
    have been employed by the company for at least two years, have
    not received any other significant compensation adjustments, be
    at least 50% vested in their existing equity awards and perform
    in accordance with expectations. Each equity award under the
    re-grant program will equal 25% of that individual&#146;s
    initial equity award at their time of employment. Vesting is in
    48&#160;successive equal monthly installments.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of the decline in the stock market in 2008, the
    board of directors determined that stock options and restricted
    stock awards granted in 2008 had exercise prices or purchase
    prices, as applicable, in excess of the then fair value of our
    common stock. In March 2009, our board of directors approved a
    common stock option
    <FONT style="white-space: nowrap">re-pricing</FONT>
    program whereby 175,625 of our outstanding stock option awards
    and restricted stock awards granted during 2008 were repriced.
    Under this program, qualifying stock options and restricted
    stock awards with original exercise or purchase prices ranging
    from $1.30 to $1.58 per share were cancelled and reissued with
    an exercise price equal to the then-current fair value of our
    common stock, $1.02 per share, as determined by our board of
    directors based in large part on a third-party valuation. Our
    board determined that this repricing program was necessary to
    restore the incentive qualities of these equity awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exit Event Bonus Plan.</I>&#160;&#160;In 2005, we established
    an Exit Event Bonus Plan in order to incentivize our executives
    to grow our company and achieve a favorable investment outcome
    for our stockholders following our going private transaction in
    2004. We have provided more detailed information about this plan
    in the &#147;Executive Compensation&#160;&#151; Equity and Stock
    Option Plans&#148; section of this prospectus. Under this plan
    our executives may be granted units to participate in a bonus
    pool in the event of an initial public offering or sale of our
    company. In the case of a sale of our company, the bonus pool
    would consist of proceeds from the sale in an amount ranging
    from 0% to 3%, depending upon our valuation in such sale. In the
    case of an initial public offering, the bonus pool would consist
    of newly issued shares of our common stock in an amount ranging
    from 0% to 3% of our issued and outstanding shares of common
    stock immediately prior to such offering depending on our
    valuation in such offering. To date, no units have been granted
    under the plan, but we anticipate that units will be granted
    prior to the consummation of this offering. Units will be
    granted by our board of directors based on the relative
    contributions of each executive to our company&#146;s growth
    since the going private transaction in 2004.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Change of Control Benefits.</I>&#160;&#160;Pursuant to change
    of control agreements and our stock incentive plans, certain of
    our named executive officers are entitled to specified benefits
    in the event of the termination of their employment under
    specified circumstances, including termination following a
    change of control of our company. We have provided more detailed
    information about these benefits, along with estimates of their
    value under various circumstances, in the &#147;Executive
    Compensation&#160;&#151; Potential Payments Upon Termination or
    Change of Control&#148; section of this prospectus.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under our 2004 stock incentive plan, the vesting and
    exercisability of all unvested awards automatically accelerate
    by one year in the event of a change of control. In addition, we
    have entered into change of control agreements with
    Messrs.&#160;Wiehe, Duke and Howard. Under each change of
    control agreement, the executive is entitled to receive a
    lump-sum payment equal to one year&#146;s base salary if, in
    connection with a
    <FONT style="white-space: nowrap">change-of-control,</FONT>
    the executive&#146;s employment is terminated by us, other than
    for &#147;cause,&#148; or terminated by the executive with
    &#147;good reason,&#148; as such terms are defined in the
    agreements. Accordingly, these extra benefits are paid only if
    the employment of the executive is terminated during a specified
    period after the change of control. We believe that having this
    benefit structured in this manner improves stockholder value
    because it prevents an unintended windfall to executives in the
    event of a friendly change of control, while still providing
    them appropriate incentives to cooperate in negotiating any
    change of control in which they believe they may lose their jobs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe providing these benefits helps us compete for
    executive talent. We believe that our change of control benefits
    are generally in line with severance packages offered to
    executives in our industry and region.
</DIV>
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    <I><FONT style="font-family: 'Times New Roman', Times">Other
    Compensation</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, our executive officers who are recipients of
    restricted stock awards paid the purchase price for such shares
    by executing promissory notes for such amount, which notes are
    payable in four annual payments due January 1 of each calendar
    year and bear interest at 6%. In March 2010, we canceled all
    such outstanding notes and forgave the indebtedness owed by
    these executive officers. The indebtedness amounts that were
    forgiven are as follows: Stephen Wiehe ($376,612), James Duke
    ($268,965), Jeffrey Martini ($149,345) and Jennifer Kaelin
    ($220,884). Our board of directors made this decision in part to
    comply with the requirements of Section&#160;402 of the
    Sarbanes-Oxley Act of 2002, which prohibits public companies
    from extending loans to its executive officers, and in part for
    other reasons that justified these recipients not paying the
    purchase price for these restricted stock awards. The restricted
    stock awards that gave rise to the forgiven indebtedness were
    issued in connection with the reduction of the potential number
    of shares issuable under our Exit Event Bonus Plan from 5% of
    outstanding shares of common stock to 3%. Had those shares
    remained subject to the Exit Event Bonus Plan rather than being
    issued as restricted stock awards, the recipients would not have
    been required to pay any purchase price for such shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other than a car allowance for Mr. Wiehe, perquisites are not a
    material aspect of our executive compensation plan. All of our
    full-time employees, including our named executive officers, are
    eligible to participate in our 401(k) plan. Pursuant to our
    401(k) plan, employees may elect to reduce their current
    compensation by up to the statutorily prescribed annual limit
    and to have the amount of this reduction contributed to our
    401(k) plan. Our 401(k) plan provides that we will match
    eligible employees&#146; 401(k) contributions equal to 50% of
    the employee&#146;s elective deferrals, up to an amount not to
    exceed $2,500 for each employee. We also offer health and dental
    insurance, life and disability insurance, an employee assistance
    program, maternity and paternity leave plans and standard
    company holidays to our employees, including our named executive
    officers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">2009
    Summary Compensation Table</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table provides information regarding the
    compensation earned in 2009 by our named executive officers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Principal Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Salary</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Bonus(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Awards(2)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Awards(3)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Compensation(4)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total(1)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Wiehe
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    338,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    145,688
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,916
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    40,939
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    620,543
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    <I>President, Chief <BR>
    Executive Officer and Director</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    182,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    62,507
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    47,957
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    294,964
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    <I>Vice President of Finance</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James B. Duke
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    234,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    119,091
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,916
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    451,507
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    <I>Chief Operating Officer</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    185,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    213,118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    55,951
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    456,569
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    <I>Senior Vice President of Worldwide Sales</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. Gamble Heffernan
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    191,667
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    62,511
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    127,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    387,511
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    <I>Vice President of Marketing and Strategy</I>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of cash bonuses paid under the annual cash incentive
    bonus element of our executive compensation program. See the
    &#147;Executive Compensation&#160;&#151; Compensation Discussion
    and Analysis&#160;&#151; Annual Bonuses&#148; section of this
    prospectus for a description of this program. $8,996 of
    Mr.&#160;Duke&#146;s 2009 bonus was paid in </TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    74
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    2009 and $133,505 of Mr.&#160;Martini&#146;s bonus was paid in
    2009. All other bonuses earned in 2009 were paid in January 2010.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    In January 2009, Mr.&#160;Wiehe, Ms.&#160;Kaelin, Mr.&#160;Duke
    and Mr.&#160;Martini were issued 94,035, 47,017, 94,035 and
    54,854&#160;shares of restricted stock, respectively, at a
    purchase price of $1.02 per share. The restricted stock vests
    monthly over a four-year period, beginning on the grant date.
    The price per share of the restricted stock is equal to the fair
    value of our common stock on the date of grant. This reflects
    the fair value of the restricted stock awards.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    In January 2009, Ms.&#160;Heffernan was issued 125,000 stock
    options at an exercise price of $1.02 per share. The stock
    options vest 25% on November&#160;4, 2009 and monthly thereafter
    over a remaining three-year period. The price per share of the
    stock option award is equal to the fair value of our common
    stock on the date of grant, as determined by an outside
    valuation expert and approved by our board of directors. This
    reflects the fair value of the stock option award.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    This represents a 401(k) match of $2,500 for each individual and
    includes a car allowance for Mr.&#160;Wiehe of $38,439.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Grants of
    Plan-Based Awards in 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table provides information regarding grants of
    plan-based awards to our named executive officers in 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="29%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Estimated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>All other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Future<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Grant Date<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Payouts under<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Base Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Fair Value<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Non-Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>of Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>of Stock and<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Incentive Plan<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Shares of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Grant Date</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Target ($)(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($/Share)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Awards&#160;($)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Wiehe
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    January 22, 2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    150,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,035
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,916
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    January 22, 2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    65,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    47,017
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    47,957
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James B. Duke
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    January 22, 2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,035
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,916
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    January 22, 2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    285,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    54,854
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    55,951
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. Gamble Heffernan
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    January 22, 2009
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    64,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    127,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Cash bonuses paid under the cash incentive bonus program for
    2009 are also disclosed in the &#147;Summary Compensation
    Table.&#148;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Outstanding
    Equity Awards at December&#160;31, 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table provides information concerning outstanding
    equity awards held by our named executive officers at
    December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="33%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="15" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Option Awards</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Awards</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Market<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Value<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Shares or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>of Shares<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Units of <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>or Units<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Stock That<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>of Stock<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Expiration<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Have Not<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>That Have<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Unexercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Vested</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Not Vested</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Wiehe
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79,498
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    89,833
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,325
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    123,537
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James B. Duke
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    72,714
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    82,167
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    48,141
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    54,399
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. Gamble Heffernan
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33,855
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,145
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    January 22, 2019(1
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    75
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    This option vested 31,250&#160;shares on November&#160;4, 2009,
    with the remaining shares vesting in equal monthly installments
    of 2,604&#160;shares thereafter beginning December&#160;4, 2009
    until November&#160;4, 2012.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Option
    Exercises and Stock Vested During 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table provides information regarding the exercise
    of stock options and the vesting of stock awards held by our
    named executive officers during 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Awards</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Value<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Shares Acquired<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Realized on<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>on Vesting</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Vesting(1)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Wiehe
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    151,358
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    67,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,858
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James B. Duke
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    84,134
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    22,492
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    75,152
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    40,583
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The value realized on vesting represents (1)&#160;the difference
    between (a)&#160;the value of our common stock (as most recently
    determined by our board of directors as of January&#160;21,
    2010)&#160;and (b)&#160;the per share price (2)&#160;multiplied
    by the number of shares acquired on exercise.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    None of our named executive officers exercised any stock options
    during 2009.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2009, our board of directors approved a common stock
    option re-pricing program whereby 175,625 of our outstanding
    stock option awards and restricted stock awards granted during
    2008 were repriced. Under this program, qualifying stock options
    and restricted stock awards with original exercise or purchase
    prices ranging from $1.30 to $1.58 per share were cancelled and
    reissued with an exercise price equal to the then-current fair
    value of our common stock, $1.02 per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Pension
    Benefits</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not offer pension benefits to our employees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Non-qualified
    Deferred Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not offer non-qualified deferred compensation to our
    employees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Accounting
    and Tax Considerations</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;162(m) of the Internal Revenue Code limits to
    $1.0&#160;million the amount of compensation paid to our Chief
    Executive Officer and to each of our three most highly
    compensated executive officers that may be deducted by us for
    federal income tax purposes in any fiscal year.
    &#147;Performance-based&#148; compensation that has been
    approved by our stockholders is not subject to the
    $1.0&#160;million deduction limit. Although the compensation
    committee cannot predict how the deductibility limit may impact
    our compensation program in future years, the compensation
    committee intends to maintain an approach to executive
    compensation that strongly links pay to performance. In
    addition, although the compensation committee has not adopted a
    formal policy regarding tax deductibility of compensation paid
    to our named executive officers, the compensation committee
    intends to consider tax deductibility under Section&#160;162(m)
    as a factor in compensation decisions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our principal employees, including executive officers, are
    required to sign an agreement prohibiting their disclosure of
    any confidential or proprietary information and restricting
    their ability to compete with us during their employment and for
    a period of one year thereafter, restricting solicitation of
    customers and employees for a
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    76
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    period of one year following their employment with us and
    providing for ownership and assignment of intellectual property
    rights to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stephen J. Wiehe, our chief executive officer, has an employment
    agreement that provides for a one-year term that renews
    automatically for successive one-year terms unless either party
    gives at least 90&#160;days prior notice to the other party of
    non-renewal. If our company terminates Mr.&#160;Wiehe for any
    reason other than for cause during the term of this agreement or
    if Mr.&#160;Wiehe terminates this agreement for good reason,
    Mr.&#160;Wiehe will receive an amount equal to his annual base
    salary then in effect and 18&#160;months of medical coverage.
    The terms &#147;cause&#148; and &#147;good reason&#148; are each
    defined in the employment agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Potential
    Payments upon Termination or Change of Control</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We entered into Change of Control Agreements with Stephen J.
    Wiehe, our chief executive officer, and James B. Duke, our chief
    operating officer, each effective as of January&#160;1, 2004,
    and with Rudy&#160;C. Howard, our chief financial officer,
    effective as of January&#160;1, 2010. Each of these agreements
    provide that such officer will be entitled to receive payment if
    his employment is terminated either by us without
    &#147;cause&#148; or by the officer with &#147;good reason&#148;
    within three months prior to a &#147;change of control&#148; or
    within 24&#160;months following a change of control provided
    that such change of control results in proceeds such that our
    implied enterprise value is at least equal to our market
    capitalization calculated based on the last 30 trading days in
    our fiscal quarter immediately preceding the initial
    announcement of such change of control. The terms
    &#147;cause,&#148; &#147;good reason&#148; and &#147;change of
    control&#148; are each defined in the Change of Control
    Agreements. Upon such a termination, the officer will be
    entitled to receive a payment equal to the highest annual base
    salary received during the two-year period immediately prior to
    such termination.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under our 2004 stock incentive plan, the vesting and
    exercisability of all unvested awards automatically accelerate
    by one year in the event of a change of control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A change of control may also result in payments to participants
    under our Exit Event Bonus Plan if the change of control is a
    sale of our company with aggregate sale consideration of at
    least $210&#160;million. Participants in the Exit Event Bonus
    Plan have not yet been determined, and the Exit Event Bonus Plan
    will terminate immediately following this offering. More
    detailed information regarding the Exit Event Bonus Plan is
    contained in the &#147;Executive Compensation &#151; Equity and
    Stock Option Plans&#148; section of this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The tables below set forth the benefits potentially payable to
    Messrs. Wiehe, Duke and Howard in the event of a change of
    control of our company where the named executive officer&#146;s
    employment is terminated under the circumstances described in
    the tables below. These amounts are calculated on the assumption
    that the employment termination and change of control event both
    took place on December&#160;31, 2009. Amounts in the tables for
    the vesting of unvested stock options or shares of restricted
    stock are calculated based on the number of accelerated stock
    options multiplied by the difference between $1.13, the fair
    value of our common stock as of December&#160;31, 2009, as
    determined by our board of directors, and the exercise price.
    The tables exclude any potential payments under the Exit Event
    Bonus Plan because the payments ultimately depend upon a
    determination of the participants in the plan and the valuation
    of the change of control event.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stephen
    J. Wiehe</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Vesting of Unvested<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Salary, Bonus &#038;<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Health<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Shares of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Triggering Event</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Unused Vacation</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Benefits</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Restricted Stock</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Termination by us without cause
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    700,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Termination by executive for good reason
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    525,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,204
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Death or disability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    350,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    77
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">James B.
    Duke</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Vesting of Unvested<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Shares of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Triggering Event</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Salary</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Restricted&#160;Stock</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Termination by us without cause
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    245,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,948
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Termination by executive for good reason
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    245,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,948
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Death or disability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    245,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,948
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Rudy C.
    Howard</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Vesting of Unvested<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Triggering Event</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Salary</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Options</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Termination by us without cause
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Termination by executive for good reason
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Death or disability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    240,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The table below sets forth the benefits potentially payable to
    Mr.&#160;Martini, Ms.&#160;Kaelin and Ms.&#160;Heffernan in the
    event of a change of control of our company. These amounts are
    calculated on the assumption that the change of control event
    both took place on December&#160;31, 2009. Amounts in the tables
    for the vesting of unvested stock options or shares of
    restricted stock are calculated based on the number of
    accelerated stock options multiplied by the difference between
    $1.13, the fair value of our common stock as of
    December&#160;31, 2009, as determined by our board of directors,
    and the exercise price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Vesting of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Vesting of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unvested Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unvested<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Restricted Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Options</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,968
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. Gamble Heffernan
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,437
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Equity
    Plans</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">2004
    Stock Incentive Plan</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have adopted our 2004 Stock Incentive Plan, or our stock
    incentive plan, which provides for the issuance of equity-based
    awards, including incentive stock options, non-qualified stock
    options, restricted stock awards, restricted stock units and
    stock appreciation rights. No restricted stock units or stock
    appreciation rights have been granted under the stock incentive
    plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The material features of our stock incentive plan are summarized
    below. The complete text of our stock incentive plan is filed as
    an exhibit to the registration statement of which this
    prospectus forms a part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General.</I>&#160;&#160;The total number of shares initially
    reserved for issuance is 6,615,472. Any shares that may be
    issued under our stock incentive plan to any person pursuant to
    an award are counted against this limit as one share for every
    one share granted.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Purposes.</I>&#160;&#160;The purpose of our stock incentive
    plan is to enable us to attract and retain highly qualified
    directors, officers, employees and other parties by providing an
    incentive to work to increase the value of our stock and a stake
    in our future that corresponds to the stake of each of our
    stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration.</I>&#160;&#160;Our stock incentive plan is
    administered by the compensation committee of our board. The
    compensation committee is comprised of individuals intended to
    be, to the extent provided by
    <FONT style="white-space: nowrap">Rule&#160;16b-3</FONT>
    of the
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    78
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Securities and Exchange Act of 1934, &#147;non-employee
    directors&#148; and will, at such times as we are subject to
    Section&#160;162(m) of the Internal Revenue Code, qualify as
    &#147;outside directors&#148; for purposes of
    Section&#160;162(m) of the Internal Revenue Code. Subject to the
    terms of our stock incentive plan, the compensation committee
    may determine the types of awards and the terms and conditions
    of such awards, interpret provisions of our stock incentive plan
    and select participants to receive awards, such grants being
    subject to the approval of our board of directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Source of shares.</I>&#160;&#160;The shares of common stock
    issued or to be issued under our stock incentive plan consist of
    authorized but unissued shares and shares that have been
    reaquired. If any shares covered by an award are not purchased
    or are forfeited, if an award is settled in cash or if an award
    otherwise terminates without delivery of any shares, then the
    number of shares of common stock counted against the aggregate
    number of shares available under our stock incentive plan with
    respect to the award will, to the extent of any such forfeiture
    or termination, again be available for making awards under our
    stock incentive plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility.</I>&#160;&#160;All of our employees and
    non-employee directors are eligible to be granted awards under
    the stock incentive plan. Certain individual consultants,
    advisors and independent contractors who render services to us
    are also eligible to participate in the stock incentive plan.
    Participants in our stock incentive plan will be selected by our
    compensation committee, subject to the approval of our board of
    directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment or termination of our stock incentive
    plan.</I>&#160;&#160;While the compensation committee may
    terminate or amend our stock incentive plan at any time, no
    amendment may adversely impair the rights of grantees with
    respect to outstanding awards without the affected
    participant&#146;s consent in writing to such amendment. In
    addition, an amendment will be contingent on approval of our
    stockholders to the extent required by law. Unless terminated
    earlier, our stock incentive plan will terminate in 2014, but
    will continue to govern unexpired awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Options.</I>&#160;&#160;Our stock incentive plan permits the
    granting of options to purchase shares of common stock intended
    to qualify as &#147;incentive stock options&#148; under the
    Internal Revenue Code, and options that do not qualify as
    incentive stock options are referred to as non-qualified stock
    options. We may grant non-qualified stock options to our
    employees, directors, officers, consultants or advisors in the
    discretion of our board of directors. Incentive stock options
    will only be granted to our employees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exercise price of each incentive stock option may not be
    less than 100% of the fair value of shares of our common stock
    on the date of grant. If we grant incentive stock options to any
    10% stockholder, the exercise price may not be less than 110% of
    the fair value of shares of our common stock on the date of
    grant. The exercise price of any non-qualified stock option will
    be determined by our board of directors and may be less than the
    fair value of shares of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term of each option may not exceed 10 years from the date of
    grant. The compensation committee will determine at what time or
    times each option may be exercised and the period of time, if
    any, after retirement, death, disability or termination of
    employment during which options may be exercised. Options may be
    made exercisable in installments. The vesting and exercisability
    of options may be accelerated by the compensation committee of
    our board. The exercise price of an option may not be amended or
    modified after the grant of the option.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, an optionee may pay the exercise price of an option
    by cash, by tendering shares of our common stock or such other
    methods of payment approved in the sole discretion of the
    compensation committee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Options granted under our stock incentive plan may not be sold,
    transferred, pledged or assigned other than by will or under
    applicable laws of descent and distribution. However, we may
    permit limited transfers of
    <FONT style="white-space: nowrap">non-qualified</FONT>
    options for the benefit of immediate family members of a grantee
    if a grantee is incapacitated and unable to exercise his or her
    option.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Restricted stock awards.</I>&#160;&#160;Restricted stock
    awards consist of shares of common stock that are subject to
    vesting restrictions. Shares subject to restricted stock awards
    may be issued for a purchase price or at no cost, subject to
    vesting restrictions. If the employment of a recipient of a
    restricted stock award is terminated for any reason other than a
    termination by our company for cause, then our company has the
    right to repurchase (1)&#160;all unvested shares subject to the
    restricted stock award at the original purchase price for such
    shares and (2)&#160;all vested shares subject to the restricted
    stock award at the then fair value of such shares. If the
    employment of a recipient of a restricted stock award is
    terminated by our company for cause, then our company has the
    right to repurchase all vested and unvested shares subject to
    the restricted stock award at the original purchase price for
    such shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Restricted stock awards may have restrictions that lapse based
    upon length of service of the recipient or based upon the
    attainment of performance goals. Unless otherwise specified in
    the agreement governing the restricted stock award, all shares
    subject to the restricted stock award shall be entitled to vote
    and shall receive dividends during the periods of restriction.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Adjustments for share dividends and similar
    events.</I>&#160;&#160;We will make appropriate adjustments in
    outstanding awards and the number of shares available for
    issuance under our stock incentive plan, including the
    individual limitations on awards, to reflect share dividends,
    share splits, spin-offs and other similar events.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Extraordinary vesting events.</I>&#160;&#160;If we experience
    a &#147;change of control,&#148; as defined in the stock
    incentive plan, the compensation committee will have full
    authority to determine the effect, if any, on the vesting,
    exercisability, settlement, payment or lapse of restrictions
    applicable to an award. The effect of a change of control may be
    specified in a participant&#146;s award agreement or determined
    at a subsequent time, including, without limitation, the
    substitution of new awards, the termination or the adjustment of
    outstanding awards, the acceleration of awards or the removal of
    restrictions on outstanding awards. In addition, the vesting and
    exercisability of all unvested awards automatically accelerate
    by one year in the event of a change of control. A &#147;change
    of control&#148; under our stock incentive plan means
    (1)&#160;our merger, consolidation or reorganization with one or
    more other entities after which our stockholders prior to the
    consummation of the transaction do not own 50% or more of the
    combined voting power of all classes of our common stock and
    preferred stock; (2)&#160;a sale of all or substantially all of
    our assets to another person or entity; or (3)&#160;any
    transaction (including without limitation a merger or
    reorganization in which we are the surviving entity) which
    results in any person or entity (other than us, any fiduciary of
    one of our employee benefit plans or any corporation directly or
    indirectly owned by our stockholders) owning 50% or more of the
    combined voting power of all classes of our common and preferred
    stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Registration.</I>&#160;&#160;We intend to file with the SEC a
    registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    covering the shares of our common stock issuable under the stock
    incentive plan following completion of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Exit
    Event Bonus Plan</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2005, we established an Exit Event Bonus Plan in order to
    incentivize our executives to grow our company and achieve a
    favorable investment outcome for our stockholders following our
    going private transaction in 2004. We amended the plan in
    September 2007, April 2009 and March 2010. Participants in this
    plan will be eligible to receive payments out of a bonus pool in
    the event of our initial public offering or sale of our company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The material features of our Exit Event Bonus Plan are
    summarized below. The complete text of our Exit Event Bonus Plan
    is filed as an exhibit to the registration statement of which
    this prospectus forms a part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration.</I>&#160;&#160;Our Exit Event Bonus Plan is
    administered by our board of directors. Subject to the terms of
    our Exit Event Bonus Plan, our board of directors may select
    participants to receive units under the plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Source of shares.</I>&#160;&#160;The shares of common stock
    that may be issued under the Exit Event Bonus Plan consist of
    authorized but unissued shares.
</DIV>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility.</I>&#160;&#160;Only executives or other
    employees who would qualify as a highly compensated employee
    within the meaning of the Employee Retirement Income Security
    Act of 1974 are eligible to participate in the Exit Event Bonus
    Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment or termination of our Exit Event Bonus
    Plan.</I>&#160;&#160;Our board of directors may terminate or
    amend the Exit Event Bonus Plan at any time. Unless terminated
    earlier, our Exit Event Bonus Plan will terminate in October
    2010, subject to automatic extension under certain
    circumstances. The Exit Event Bonus Plan will terminate
    immediately following an initial public offering or sale of our
    company. For purposes of this plan, a sale of our company means
    (1)&#160;our merger, consolidation or reorganization with one or
    more other entities after which our stockholders prior to the
    consummation of the transaction do not own 50% or more of the
    combined voting power of all classes of our common stock and
    preferred stock or (2)&#160;a sale of all or substantially all
    of our assets to another person or entity.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Units.</I>&#160;&#160;Participants are awarded units under
    the Exit Event Bonus Plan, which units permit the holder to
    participate in a bonus pool in the event of an initial public
    offering or sale of our company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Bonus Pool.</I>&#160;&#160;In the event of an initial public
    offering, the bonus pool will consist of shares of our common
    stock, the number of which is determined by multiplying
    (i)&#160;the &#147;applicable percentage&#148; by (ii)&#160;the
    number of shares of common stock outstanding on a fully diluted
    basis immediately prior to the initial public offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of a sale of our company, the bonus pool will
    consist of a portion of the aggregate consideration received by
    us <FONT style="white-space: nowrap">and/or</FONT>
    our stockholders in such sale, or the aggregate sale
    consideration, the amount of which is determined by multiplying
    (i)&#160;the &#147;applicable percentage&#148; by (ii)&#160;the
    aggregate sale consideration less the amount of such aggregate
    sale consideration payable in respect of our preferred stock
    outstanding at the time of such sale.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The applicable percentage ranges from 0% to 3%, depending upon
    our valuation in an initial public offering or the aggregate
    sale consideration in a sale of our company, as applicable. If
    the initial public offering valuation or aggregate sale
    consideration is $210&#160;million or less, the applicable
    percentage will be 0%. If the initial public offering valuation
    or aggregate sale consideration is $250&#160;million or greater,
    the applicable percentage will be 3%. For an initial public
    offering valuation or an aggregate sale consideration between
    $210&#160;million and $250&#160;million, the applicable
    percentage will be between 0% and 3% as determined on a
    proportional basis by multiplying 3% by a fraction where the
    numerator is the difference between the applicable valuation or
    aggregate sale consideration and $210&#160;million and the
    denominator is $40&#160;million.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the purposes of the Exit Event Bonus Plan, our valuation in
    an initial public offering will be equal to the sum of:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the number of shares of our common stock outstanding, on a fully
    diluted basis, immediately prior to the initial public offering
    multiplied by the price at which our shares of common stock are
    offered to the public in the initial public offering;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the amount of proceeds of the initial public offering that are
    used to redeem our outstanding preferred stock.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Payments under the plan.</I>&#160;&#160;Participants are
    entitled to participate in the bonus pool on a pro rata basis
    based on the respective number of units held by the
    participants. In the event of a sale of our company,
    participants are entitled to receive their payments under the
    Exit Event Bonus Plan at the same time and upon the same terms
    as our stockholders receive the aggregate sale consideration. In
    the event of an initial public offering, participants will be
    issued their shares of common stock within 30&#160;days
    following the consummation of the initial public offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">401(k)
    Plan</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain a deferred savings and retirement plan for our
    employees. Such plan is intended to qualify as a
    <FONT style="white-space: nowrap">tax-qualified</FONT>
    plan under Section&#160;401 of the Internal Revenue Code. The
    deferred savings and retirement plan
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    provides that each participant may contribute his or her pre-tax
    compensation up to the statutory limit ($16,500 in 2010). For
    employees 50&#160;years of age or older, an additional
    <FONT style="white-space: nowrap">catch-up</FONT>
    contribution of $5,500 is allowable. In 2010, the statutory
    limit for those who qualify for
    <FONT style="white-space: nowrap">catch-up</FONT>
    contributions is $22,000. We match 50% of each employee&#146;s
    contributions up to a maximum of $2,500 per employee. All
    contributions are held in trust and are invested in accordance
    with the terms of the deferred savings and retirement plan.
    Under such plan, each employee is fully vested in his or her
    deferred salary contributions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Limitation
    of Liability and Indemnification of Directors and
    Officers</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, limits the liability of our directors for monetary
    damages to the fullest extent permitted by Delaware law.
    Consequently, no director will be personally liable to us or our
    stockholders for monetary damages for any breach of fiduciary
    duties as a director, except liability for:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    stockholders;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    unlawful payments of dividends or unlawful stock repurchases or
    redemptions as provided in Section&#160;174 of the Delaware
    General Corporation Law;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission. If Delaware law is amended to authorize the further
    elimination or limitation of the liability of a director, then
    the liability of our directors will be eliminated or limited to
    the fullest extent permitted by Delaware law as so amended.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, also provides that:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    we will indemnify our directors and officers to the fullest
    extent permitted by law;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    we may indemnify our other employees and agents to the same
    extent that we indemnify our directors and officers, unless
    otherwise determined by our board of directors;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    we will advance expenses to our directors and officers in
    connection with defending an action, suit or proceeding in
    advance of its final disposition to the fullest extent permitted
    by law.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indemnification provisions contained in our amended and
    restated certificate of incorporation are not exclusive.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;145(g) of the Delaware General Corporation Law and
    our amended and restated certificate of incorporation permit us
    to secure insurance on behalf of any officer, director, employee
    or other agent for any liability arising out of his or her
    actions in connection with their services to us, regardless of
    whether Delaware General Corporation Law permits
    indemnification. We maintain a directors&#146; and
    officers&#146; liability insurance policy.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into indemnification agreements with each of our
    directors and executive officers. These indemnification
    agreements generally provide that we will indemnify them to the
    fullest extent permitted by Delaware law in connection with
    their service to us or on our behalf.
</DIV>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At present, there is no pending litigation or proceeding
    involving any of our directors or officers as to which
    indemnification is required or permitted, and we are not aware
    of any threatened litigation or proceeding that may result in a
    claim for indemnification.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to directors, officers or
    persons controlling our company pursuant to the foregoing
    provisions, or otherwise, the opinion of the SEC is that such
    indemnification is against public policy as expressed in the
    Securities Act and is therefore unenforceable.
</DIV>
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    <BR>
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<A name='113'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since January&#160;1, 2007, we have entered into no transactions
    in which the amount involved exceeded or will exceed $120,000
    and in which any of our directors, executive officers, holders
    of more than five percent of our voting securities, and
    affiliates of our directors, executive officers and five percent
    stockholders, had or will have a direct or indirect material
    interest, other than compensation arrangements with directors
    and executive officers, which are described under the
    &#147;Executive Compensation&#148; section of this prospectus,
    and the transactions described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Loan
    Forgiveness</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010, we canceled aggregate indebtedness from
    Messrs.&#160;Wiehe, Duke and Martini and Ms.&#160;Kaelin in the
    following amounts: Stephen Wiehe ($376,612), James Duke
    ($268,965), Jeffrey Martini ($149,345) and Jennifer Kaelin
    ($220,884). This indebtedness was represented by promissory
    notes used to pay the purchase price for restricted stock awards
    to these individuals. Our board of directors made this decision
    in part to comply with the requirements of Section&#160;402 of
    the Sarbanes-Oxley Act of 2002, which prohibits public companies
    from extending loans to its executive officers, and in part for
    other reasons that justified these recipients not paying the
    purchase price for these restricted stock awards. See the
    section titled &#147;Executive Compensation
    &#151;&#160;Compensation Discussion and Analysis&#148; for
    additional information.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders
    Agreement</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into a stockholders agreement with our preferred
    stockholders and Messrs.&#160;Wiehe, Duke and Gillis. This
    agreement provides for certain governance rights, rights of
    first refusal and co-sale and other rights relating to the
    shares of our common stock, which will terminate upon
    consummation of this offering. This agreement also provides for
    registration rights, which are described in the
    &#147;Description of Capital Stock&#160;&#151; Registration
    Rights&#148; section of this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into indemnification agreements with each of our
    directors and executive officers. These agreements, among other
    things, require us to indemnify each director and executive
    officer to the fullest extent permitted by Delaware law,
    including indemnification of expenses such as attorneys&#146;
    fees, judgments, fines and settlement amounts incurred by the
    director or executive officer in any action or proceeding,
    including any action or proceeding by or in right of us, arising
    out of the person&#146;s services as a director or executive
    officer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreement</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into an employment agreement with
    Mr.&#160;Wiehe. See the section titled &#147;Executive
    Compensation&#160;&#151; Employment Agreements&#148; for
    additional information.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Change of
    Control Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into change of control agreements with
    Messrs.&#160;Wiehe, Duke and Howard. See the section titled
    &#147;Executive Compensation&#160;&#151; Potential Payments upon
    Termination or Change of Control&#148; for additional
    information.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Policy
    for Approval of Related Party Transactions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the completion of this offering, our board of directors
    will adopt a written statement of policy regarding transactions
    with related persons, which we refer to as our related person
    policy. Our related person policy will require that a
    &#147;related person&#148; (as defined in Item&#160;404(a) of
    <FONT style="white-space: nowrap">Regulation&#160;S-K)</FONT>
    must promptly disclose to our Chief Financial Officer any
    &#147;related person transaction&#148; (defined as any
    transaction that is reportable by us under Item&#160;404(a) of
    <FONT style="white-space: nowrap">Regulation&#160;S-K)</FONT>
    and all material facts with respect thereto. The Chief Financial
    Officer will then promptly communicate that information to our
    audit committee. In reviewing a transaction, our audit committee
    will consider all relevant facts and circumstances, including
    (1)&#160;the commercial reasonableness of the terms,
    (2)&#160;the
</DIV>
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    <BR>
    84
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    benefit and perceived benefits, or lack thereof, to us,
    (3)&#160;opportunity costs of alternate transactions,
    (4)&#160;the materiality and character of the related
    person&#146;s interest, and (5) the actual or apparent conflicts
    of interest of the related person. Our audit committee will not
    approve or ratify a related person transaction unless it
    determines that, upon consideration of all relevant information,
    the transaction is in, or is not inconsistent with, the best
    interests of our company and stockholders. No related person
    transaction will be consummated without the approval or
    ratification of our audit committee. It will be our policy that
    directors interested in a related person transaction will recuse
    themselves from any vote relating to a related person
    transaction in which they have an interest.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    85
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='114'>
<DIV style="margin-top: 30pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRINCIPAL
    AND SELLING STOCKHOLDERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information regarding beneficial
    ownership of our common stock as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010, and as adjusted to reflect the shares of common stock to
    be issued and sold in this offering assuming no exercise of the
    underwriters&#146; option to purchase additional shares, by
    (i)&#160;each of our named executive officers; (ii)&#160;each of
    our directors; (iii)&#160;all of our executive officers and
    directors as a group; and (iv)&#160;each person or group of
    affiliated persons known by us to be the beneficial owner of
    more than 5% of our common stock.
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beneficial ownership in this table is determined in accordance
    with the rules of the SEC and does not necessarily indicate
    beneficial ownership for any other purpose. Under these rules,
    the number of shares of common stock deemed outstanding includes
    shares issuable upon exercise of options held by the respective
    person or group that may be exercised within 60&#160;days
    after&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010. For purposes of calculating each person&#146;s or
    group&#146;s percentage ownership, stock options exercisable
    within 60&#160;days
    after&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 are included for that person or group.
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Percentage of beneficial ownership is based
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding after completion of this offering.
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated and subject to applicable community
    property laws, to our knowledge, each stockholder named in the
    following table possesses sole voting and investment power over
    the shares listed, except for those jointly owned with that
    person&#146;s spouse. Unless otherwise noted below, the address
    of each person listed on the table is
    <FONT style="white-space: nowrap">c/o&#160;SciQuest,</FONT>
    Inc., 6501&#160;Weston Parkway, Suite&#160;200, Cary, North
    Carolina 27513. Beneficial ownership representing less than 1%
    is denoted with an asterisk (*).
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="33%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Shares Beneficially<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Owned if <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Shares Beneficially<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Shares Beneficially <BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares to be Sold<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Underwriters&#146;<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Owned Prior to the<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Owned<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>if Underwriters&#146;<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Option is Exercised in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offering</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>After the Offering</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option is<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Full</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offered</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercised in Full</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Named Executive Officers and Directors:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Wiehe(1)
</DIV>
</TD>
<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
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<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    James B. Duke
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
&nbsp;
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&nbsp;
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<TD>
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</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey A. Martini
</DIV>
</TD>
<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
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<TD nowrap align="left" valign="bottom">
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</TD>
<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
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<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jennifer G. Kaelin
</DIV>
</TD>
<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
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</TD>
<TD>
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<TD nowrap align="left" valign="bottom">
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</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. Gamble Hefferman(2)
</DIV>
</TD>
<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD>
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
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<TD>
&nbsp;
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<TD nowrap align="left" valign="bottom">
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<TD nowrap align="right" valign="bottom">
&nbsp;
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Noel J. Fenton(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Daniel F. Gillis
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jeffrey T. Barber
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Timothy J. Buckley
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    All executive officers and directors as a group (10&#160;people)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>5% Stockholders:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Funds associated with Trinity Ventures(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Funds associated with Intersouth Partners(5)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    River&#160;Cities&#160;SBIC&#160;III,&#160;L.P.
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Other Selling Stockholders:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    held by Mr.&#160;Wiehe as custodian for Andrew John Wiehe and
    Stephanie Elizabeth Wiehe, over which Mr.&#160;Wiehe has voting
    and investment power.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    subject to options that are exercisable within 60&#160;days of
    the date of the table.</TD>
</TR>

</TABLE>
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    <BR>
    86
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    held by Trinity Ventures VII, L.P., Trinity VII
    <FONT style="white-space: nowrap">Side-By-Side</FONT>
    Fund, L.P., Trinity Ventures VIII, L.P., Trinity VIII
    <FONT style="white-space: nowrap">Side-By-Side</FONT>
    Fund, L.P. and Trinity VIII Entrepreneurs&#146; Fund, L.P.
    Mr.&#160;Fenton may be deemed to have shared voting and
    investment power over the shares held by these limited
    partnerships, but disclaims beneficial ownership of such shares.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of shares held by Trinity Ventures VII, L.P., Trinity
    VII
    <FONT style="white-space: nowrap">Side-By-Side</FONT>
    Fund, L.P., Trinity Ventures VIII, L.P., Trinity VIII
    <FONT style="white-space: nowrap">Side-By-Side</FONT>
    Fund, L.P. and Trinity VIII Entrepreneurs&#146; Fund, L.P.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of shares held by Intersouth Partners&#160;V, L.P.,
    Intersouth Affiliates&#160;V, L.P., and Intersouth Partners VI,
    L.P.</TD>
</TR>

</TABLE>
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    <BR>
    87
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='115'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF CAPITAL STOCK</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following description of our capital stock and certain
    provisions of our amended and restated certificate of
    incorporation and amended and restated bylaws are summaries and
    are qualified by reference to the amended and restated
    certificate of incorporation and amended and restated bylaws
    that will become effective upon completion of this offering.
    Copies of these documents have been filed with the SEC as
    exhibits to the registration statement of which this prospectus
    forms a part. The descriptions of common stock and preferred
    stock reflect changes to our capital structure that will occur
    upon completion of this offering.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Authorized
    Capital Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, our authorized capital stock
    will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock, $0.001&#160;par value per share,
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of preferred stock, $0.001&#160;par value per share. Concurrent
    with the consummation of this offering, all of our shares of
    preferred stock that are currently outstanding will be redeemed.
    Accordingly, no shares of our preferred stock will be
    outstanding immediately following completion of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of February&#160;28, 2010, there were 28,589,233&#160;shares
    of common stock outstanding held by 49 stockholders of record.
    As of February&#160;28, 2010, there were 222,073&#160;shares of
    preferred stock outstanding held by 10&#160;stockholders of
    record.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Voting.</I>&#160;&#160;Except as otherwise required by
    Delaware law, holders of our common stock are entitled to one
    vote for each share held of record on all matters submitted to a
    vote of the stockholders. There is no cumulative voting in the
    election of directors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Dividend Rights.</I>&#160;&#160;Subject to dividend
    preferences that may be applicable to any outstanding preferred
    stock, holders of our common stock are entitled to receive
    equally, on a per share basis, such dividends or other
    distributions in cash, securities or other property of our
    company as may be declared from time to time by our board of
    directors out of assets and funds legally available for dividend
    payments. It is our present intention not to pay dividends on
    our common stock for the foreseeable future. Our board of
    directors may, at its discretion, modify or repeal our dividend
    policy. See &#147;Dividend Policy.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Liquidation and Preemptive Rights.</I>&#160;&#160;In the
    event of our liquidation, dissolution or
    <FONT style="white-space: nowrap">winding-up,</FONT>
    holders of our common stock are entitled to share equally on a
    per share basis in all assets remaining after payment or
    provision of payment of our debts and amounts payable upon
    shares of preferred stock entitled to a preference, if any, over
    holders of common stock upon a liquidation, dissolution or
    winding up. Holders of our common stock have no conversion,
    exchange, preemption or other subscription rights. There are no
    redemption or sinking fund provisions applicable to our common
    stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Listing.</I>&#160;&#160;We intend to apply to have our common
    stock listed on the NYSE under the symbol &#145;&#145;SQI.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Transfer Agent and Registrar.</I>&#160;&#160;The transfer
    agent and registrar for our common stock
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
    Its address
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    and its telephone number
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors is authorized, without further vote or
    action by the stockholders, to issue from time to time up to an
    aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of preferred stock in one or more series and to fix the
    designations, rights, preferences and privileges and any
    qualifications, limitations or restrictions of the shares of
    each such series of preferred stock, including the dividend
    rights and rates, conversion rights, voting rights, the terms of
    redemption including price and sinking fund provisions,
    liquidation preferences and the number of shares constituting
    any series or designations of that series.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the ability of our board of directors to issue
    one or more series of preferred stock will provide us with
    flexibility in structuring possible future financings and
    acquisitions, and in meeting other corporate needs that may
    arise. The authorized shares of preferred stock, as well as
    authorized and unissued shares of common stock,
</DIV>
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    <BR>
    88
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    will be available for issuance without action by our
    stockholders, unless such action is required by applicable law
    or the rules of any stock exchange or automated quotation system
    on which our securities may be listed or traded.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors may authorize, without stockholder
    approval, the issuance of preferred stock with voting and
    conversion rights that could adversely affect the voting power
    and other rights of holders of common stock. Although our board
    of directors has no current intention of doing so, it could
    issue a series of preferred stock that could have the effect of
    discouraging, delaying or preventing a change in control of us
    or an unsolicited acquisition proposal that some, or a majority,
    of our stockholders might believe to be in their best interests
    or in which stockholders might receive a premium for their stock
    over the then-current market price. Any issuance of preferred
    stock could therefore have the effect of decreasing the market
    price of our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors will make any determination to issue
    shares of preferred stock based on its judgment as to the best
    interests of our company and our stockholders. We have no
    current plans to issue any shares of preferred stock after this
    offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-family: 'Times New Roman', Times">Registration
    Rights</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders, or their transferees, of
    approximately&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock are entitled to certain registration rights
    with respect to these securities as set forth in a stockholders
    agreement, dated July&#160;28, 2004, between us and the holders
    of these securities. The following description of the terms of
    the stockholders agreement is intended as a summary only and is
    qualified in its entirety by reference to the stockholders
    agreement filed as an exhibit to the registration statement, of
    which this prospectus forms a part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Demand Registration Rights.</I>&#160;&#160;At any time after
    the earlier to occur of 180&#160;days after the consummation of
    this offering and expiration of the applicable
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements, the holders of more than 30% of the registrable
    shares may request that we register all or a portion of their
    registrable shares for sale under the Securities Act. We are
    required to effect the registration as requested unless, in the
    good faith judgment of our board of directors, such registration
    should be delayed. We may be required to effect two of these
    registrations. In addition, when we are eligible for the use of
    <FONT style="white-space: nowrap">Form&#160;S-3,</FONT>
    or any successor form, holders of registrable shares may make up
    to two requests in any
    <FONT style="white-space: nowrap">12-month</FONT>
    period that we register all or a portion of their registrable
    shares for sale under the Securities Act on
    <FONT style="white-space: nowrap">Form&#160;S-3,</FONT>
    or any successor form, so long as the aggregate price to the
    public in connection with any such offering is at least
    $1&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Piggyback Registration Rights.</I>&#160;&#160;After the
    completion of this offering, in the event that we propose to
    register any of our securities under the Securities Act (except
    for the registration of securities to be offered pursuant to an
    employee benefit plan on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    or pursuant to a registration made on
    <FONT style="white-space: nowrap">Form&#160;S-4</FONT>
    or any successor forms then in effect), we will include in these
    registrations all securities with respect to which we have
    received written requests for inclusion under our registration
    rights agreement, subject to certain limitations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Expenses of Registration.</I>&#160;&#160;We will pay all
    registration expenses, other than underwriting discounts and
    commissions and any transfer taxes related to any demand or
    piggyback registration. With respect to demand registrations,
    these expenses include all reasonable expenses that any
    stockholder incurs in connection with the registration of its
    securities, subject to certain limitations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Indemnification.</I>&#160;&#160;The stockholders agreement
    contains indemnification provisions pursuant to which we are
    obligated to indemnify the selling stockholders and any person
    who might be deemed to control any selling stockholder in the
    event of material misstatements or omissions in the registration
    statement or related violations of law attributable to us. The
    stockholders agreement requires that, as a condition to
    including their securities in any registration statement filed
    pursuant to demand or piggyback registration rights, the selling
    stockholders indemnify us for material misstatements or
    omissions attributable to them.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Anti-Takeover
    Effects of Our Amended and Restated Certificate of Incorporation
    and Amended and Restated Bylaws</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain provisions (including, among others, those summarized
    below) of our amended and restated certificate of incorporation
    and our amended and restated bylaws, each of which will become
    effective upon the closing of this offering, may delay or
    discourage transactions involving an actual or potential change
    of control of our
</DIV>
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    89
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    company or a change in our management, including transactions in
    which stockholders might otherwise receive a premium for their
    shares or transactions that our stockholders might otherwise
    consider to be in their best interests or in our best interests.
    Therefore, these provisions could adversely affect the price of
    our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Authorized but Unissued Shares.</I>&#160;&#160;The authorized
    but unissued shares of our common stock and preferred stock are
    available for future issuance without stockholder approval,
    subject to any limitations imposed by applicable law or the
    rules of any stock exchange or automated quotation system on
    which our securities may be listed or traded. As discussed
    above, our board of directors may designate the rights,
    preferences and privileges of such authorized but unissued
    preferred stock. These additional shares may be used for a
    variety of corporate purposes, including acquisitions and
    employee benefit plans, but they could also be issued in order
    to deter or prevent an attempt to acquire us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Board Matters.</I>&#160;&#160;Our amended and restated
    certificate of incorporation and amended and restated bylaws
    provide that upon completion of this offering, our board of
    directors will be divided into three classes with staggered
    three-year terms. The board of directors, or its remaining
    members, even if less than a quorum, is empowered to fill
    vacancies on the board of directors occurring for any reason for
    the remainder of the term of the class of directors in which the
    vacancy occurred. The authorized number of directors may be
    changed by resolution of the board of directors. Members of the
    board of directors may only be removed for cause and only by the
    affirmative vote of 75% of our outstanding voting stock. These
    provisions are likely to increase the time required for
    stockholders to change the composition of the board of directors
    and could make it more difficult for a third party to acquire,
    or discourage a third party from seeking to acquire, control of
    our company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>No Cumulative Voting.</I>&#160;&#160;Our amended and restated
    certificate of incorporation and amended and restated bylaws do
    not permit cumulative voting in the election of directors.
    Cumulative voting allows a stockholder to vote a portion or all
    of its shares for one or more candidates for seats on the board
    of directors. The absence of cumulative voting may make it more
    difficult for a minority stockholder to gain a seat on our board
    of directors to influence decisions regarding takeovers or other
    matters.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stockholder Action; Special Meeting of Stockholders; Advance
    Notice Requirements for Stockholder Proposals and Director
    Nominations.</I>&#160;&#160;Our amended and restated certificate
    of incorporation and our amended and restated bylaws provide
    that any action required or permitted to be taken by our
    stockholders at an annual meeting or special meeting may only be
    taken if it is properly brought before such meeting and may not
    be taken by written consent in lieu of a meeting. Our amended
    and restated bylaws provide that, except as otherwise required
    by law, special meetings of stockholders can only be called by
    our chairman of the board, our president or chief executive
    officer or our board of directors. Our amended and restated
    bylaws also provide that stockholders seeking to present
    proposals before a meeting of stockholders or to nominate
    candidates for election as directors at a meeting of
    stockholders must provide notice in writing in a timely manner
    and also specify requirements as to the form and content of a
    stockholder&#146;s notice. These provisions could have the
    effect of delaying until the next stockholder meeting
    stockholder actions that are favored by a majority of our
    standing voting securities. These provisions also may have the
    effect of precluding the conduct of certain business at a
    meeting if the proper procedures are not followed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Super Majority Stockholder Vote Required for Certain
    Actions.</I>&#160;&#160;The Delaware General Corporation Law
    provides generally that the affirmative vote of a majority of
    the shares entitled to vote on any matter is required to amend a
    corporation&#146;s certificate of incorporation or bylaws,
    unless the corporation&#146;s certificate of incorporation or
    bylaws, as the case may be, requires a greater percentage. Our
    amended and restated bylaws may be amended or repealed by a
    majority vote of our board of directors or the affirmative vote
    of the holders of at least 75% of the voting power of all shares
    entitled to vote generally in the election of directors. In
    addition, the affirmative vote of the holders of at least 75% of
    the voting power of all shares entitled to vote generally in the
    election of directors is required to amend or repeal or adopt
    any provision inconsistent with the provisions of our amended
    and restated certificate of incorporation described above.
</DIV>
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    90
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    <B><FONT style="font-family: 'Times New Roman', Times">Delaware
    Anti-Takeover Statute</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are subject to Section&#160;203 of the Delaware General
    Corporation Law. Section&#160;203 prohibits a publicly-held
    Delaware corporation from engaging in a &#147;business
    combination&#148; with an &#147;interested stockholder&#148; for
    a period of three years after the date of the transaction in
    which the person became an interested stockholder, unless:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    prior to the date of the transaction, the board of directors of
    the corporation approved either the business combination or the
    transaction that resulted in the stockholder becoming an
    interested stockholder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    upon completion of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding for purposes of determining the number of shares
    outstanding (1)&#160;shares owned by persons who are directors
    and also officers and (2)&#160;shares owned by employee stock
    plans in which employee participants do not have the right to
    determine confidentially whether shares held subject to the plan
    will be tendered in a tender or exchange offer;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    at or subsequent to the date of the transaction, the business
    combination is approved by the board of directors and authorized
    at an annual or special meeting of stockholders, and not by
    written consent, by the affirmative vote of at least two-thirds
    of the outstanding voting stock that is not owned by the
    interested stockholder.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;203 defines a business combination to include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    any merger or consolidation involving the corporation and the
    interested stockholder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    any sale, transfer, pledge or other disposition involving the
    interested stockholder of 10% or more of the assets of the
    corporation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    subject to exceptions, any transaction that results in the
    issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to various exceptions, an &#147;interested
    stockholder&#148; is a person who, together with his or her
    affiliates and associates, owns, or within the past three years,
    did own, 15% or more of the outstanding voting stock of the
    corporation. Section&#160;203 could discourage mergers or other
    takeover or change of control attempts, including attempts that
    might result in the payment of a premium over the market price
    for shares of our common stock.
</DIV>
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<A name='116'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SHARES&#160;ELIGIBLE
    FOR FUTURE SALE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there was no public market for our
    common stock, and a liquid trading market for the common stock
    may not develop or be sustained after this offering. We cannot
    predict the effect, if any, that market sales of shares of our
    common stock or the availability of shares of our common stock
    for sale will have on the market price of our common stock
    prevailing from time to time. Sales of substantial amounts of
    our common stock in the public market, including shares issued
    upon exercise of outstanding options or in the public market
    after this offering, or the anticipation of these sales, could
    adversely affect the market prices of our common stock and could
    impair our future ability to raise capital through the sale of
    our equity securities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, based on our outstanding
    shares as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010, and assuming no exercise of outstanding options, we will
    have outstanding an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock
    (&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    if the underwriters&#146; over-allotment option is exercised in
    full). Of these shares, all of the shares sold in this offering
    (plus any shares sold as a result of the underwriters&#146;
    exercise of the over-allotment option) will be freely tradable
    without restriction or further registration under the Securities
    Act, unless those shares are purchased by our affiliates as that
    term is defined in Rule&#160;144 under the Securities Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The
    remaining&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock to be outstanding after this offering and the
    443,361&#160;shares issuable upon exercise of outstanding
    warrants will be &#147;restricted securities&#148; under
    Rule&#160;144. Of these restricted
    securities,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    will be subject to transfer restrictions for 180&#160;days from
    the date of this prospectus pursuant to
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements. Restricted securities may be sold in the public
    market only if they have been registered or if they qualify for
    an exemption from registration under Rules&#160;144 or 701 under
    the Securities Act.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">Lock-Up</FONT>
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of our officers and directors, and holders
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock and holders
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock issuable upon exercise of outstanding
    options, have entered into
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements pursuant to which they have agreed, subject to
    limited exceptions, not to offer, sell or otherwise transfer or
    dispose of, directly or indirectly, any shares of common stock
    or securities convertible into or exchangeable or exercisable
    for shares of common stock for a period of 180&#160;days from
    the date of this prospectus without our prior written consent
    or, in some cases, the prior written consent of Thomas Weisel
    Partners LLC. We have agreed, subject to limited exceptions,
    that for a period of 180&#160;days from the date of this
    prospectus, we will not, without the prior written consent of
    Thomas Weisel Partners LLC, offer, sell or otherwise transfer or
    dispose of any shares of common stock or securities convertible
    into or exchangeable or exercisable for shares of common stock,
    except for the shares of common stock offered in this offering
    and the shares of common stock issuable upon exercise or
    conversion of options, warrants or securities outstanding on the
    date of this prospectus and the shares of our common stock that
    are issued under our stock option or employee stock purchase
    plans, provided that such recipients agree to be bound by these
    restrictions during the
    <FONT style="white-space: nowrap">180-day</FONT>
    period. Thomas Weisel Partners LLC has advised us that it has no
    current intent or arrangement to release any of the shares
    subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements prior to the expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period. There are no contractually specified conditions for the
    waiver of
    <FONT style="white-space: nowrap">lock-up</FONT>
    restrictions and any waiver is at the sole discretion of Thomas
    Weisel Partners LLC, which may be granted by Thomas Weisel
    Partners LLC for any reason. The
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT>
    period will be extended automatically if (i)&#160;during the
    last 17&#160;days of the
    <FONT style="white-space: nowrap">180-day</FONT>
    restricted period we issue an earnings release or announce
    material news or a material event or (ii)&#160;prior to the
    expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    restricted period, we announce that we will release earnings
    results during the
    <FONT style="white-space: nowrap">15-day</FONT>
    period following the last day of the
    <FONT style="white-space: nowrap">180-day</FONT>
    period, in which case the restrictions described in this
    paragraph will continue to apply until the expiration of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    announcement of the material news or material event. After the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period, these shares may be sold, subject to applicable
    securities laws. See &#147;Underwriting.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;144 as currently in effect, once we
    have been subject to public company reporting requirements for
    at least 90&#160;days, a person who is not deemed to have been
    one of our affiliates for purposes of the Securities Act at any
    time during the 90&#160;days preceding a sale and who has
    beneficially owned the shares
</DIV>
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    <BR>
    92
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    proposed to be sold for at least six months, including the
    holding period of any prior owner other than our affiliates, is
    entitled to sell those shares without complying with the manner
    of sale, volume limitation or notice provisions of
    Rule&#160;144, subject to compliance with the public information
    requirements of Rule&#160;144. If such a person has beneficially
    owned the shares proposed to be sold for at least one year,
    including the holding period of any prior owner other than our
    affiliates, then that person is entitled to sell those shares
    without complying with any of the requirements of Rule&#160;144.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;144, as currently in effect, our
    affiliates or persons selling shares on behalf of our affiliates
    are entitled to sell upon expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described above, within any three-month period
    beginning 90&#160;days after the date of this prospectus, a
    number of shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    1% of the number of shares of our common stock then
    outstanding;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the average weekly trading volume of the common stock during the
    four calendar weeks preceding the filing of a notice on
    Form&#160;144 with respect to that sale.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales under Rule&#160;144 by our affiliates are also subject to
    manner of sale provisions and notice requirements and to the
    availability of current public information about us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period described
    above,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock will be eligible for sale
    under Rule&#160;144, including shares eligible for resale
    immediately upon the closing of this offering as described
    above. We cannot estimate the number of shares of our common
    stock that our existing stockholders will elect to sell under
    Rule&#160;144.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;701</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rule&#160;701 generally allows a stockholder who purchased
    shares of our common stock pursuant to a written compensatory
    plan or contract and who is not deemed to have been an affiliate
    of our company during the immediately preceding 90&#160;days to
    sell these shares in reliance upon Rule&#160;144, but without
    being required to comply with the public information, holding
    period, volume limitation or notice provisions of Rule&#160;144.
    Rule&#160;701 also permits affiliates of our company to sell
    their Rule&#160;701&#160;shares under Rule&#160;144 without
    complying with the holding period requirements of Rule&#160;144.
    All holders of Rule&#160;701&#160;shares, however, are required
    to wait until 90&#160;days after the date of this prospectus
    before selling those shares pursuant to Rule&#160;701.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stock
    Options and Restricted Stock Awards</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to file a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    under the Securities Act covering all of the shares of our
    common stock subject to options outstanding or reserved for
    issuance under our stock incentive plan and all shares of common
    stock issued pursuant to restricted stock awards under our stock
    incentive plan. We expect to file this registration statement as
    soon as practicable after this offering. In addition, we intend
    to file a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    or such other form as may be required under the Securities Act
    for the resale of shares of our common stock issued upon the
    exercise of options that were not granted under Rule&#160;701.
    We expect to file this registration statement as soon as
    permitted under the Securities Act. However, the shares
    registered on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    will be subject to volume limitations, manner of sale, notice
    and public information requirements of Rule&#160;144 and will
    not be eligible for resale until expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements to which they are subject.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Registration
    Rights</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After the completion of this offering, holders
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock will be entitled to specific rights to register
    those shares for sale in the public market. See
    &#147;Description of Capital Stock&#160;&#151; Registration
    Rights.&#148; Registration of these shares under the Securities
    Act would result in the shares becoming freely tradable without
    restriction under the Securities Act, except for shares
    purchased by affiliates, immediately upon the effectiveness of
    the registration statement relating to such shares.
</DIV>
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    <BR>
    93
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='117'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MATERIAL
    U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR
    <FONT style="white-space: nowrap">NON-U.S.</FONT>
    HOLDERS OF OUR COMMON STOCK</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following discussion summarizes certain material
    U.S.&#160;federal income and estate tax considerations relating
    to the acquisition, ownership and disposition of our common
    stock purchased pursuant to this offering by a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    (as defined below). This discussion is based on the provisions
    of the U.S.&#160;Internal Revenue Code of 1986, as amended,
    final, temporary and proposed U.S.&#160;Treasury regulations
    promulgated thereunder and current administrative rulings and
    judicial decisions, all as in effect as of the date hereof. All
    of these authorities may be subject to differing interpretations
    or repealed, revoked or modified, possibly with retroactive
    effect, which could materially alter the tax consequences to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    described in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There can be no assurance that the IRS will not take a contrary
    position to the tax consequences described herein or that such
    position will not be sustained by a court. No ruling from the
    IRS or opinion of counsel has been obtained with respect to the
    U.S.&#160;federal income or estate tax consequences to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    of the purchase, ownership or disposition of our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>This discussion is for general information only and is not
    tax advice. All prospective
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    of our common stock should consult their own tax advisors with
    respect to the U.S.&#160;federal, state, local and
    <FONT style="white-space: nowrap">non-U.S.&#160;tax</FONT>
    consequences of the purchase, ownership and disposition of our
    common stock.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used in this discussion, the term
    <FONT style="white-space: nowrap">&#147;non-U.S.&#160;holder&#148;</FONT>
    means a beneficial owner of our common stock that is not any of
    the following for U.S.&#160;federal income tax purposes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an individual who is a citizen or a resident of the United
    States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    a corporation or other entity taxable as a corporation for
    U.S.&#160;federal income tax purposes that was created or
    organized in or under the laws of the United States, any state
    thereof or the District of Columbia;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an estate whose income is subject to U.S.&#160;federal income
    taxation regardless of its source;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    a trust (a)&#160;if a U.S.&#160;court is able to exercise
    primary supervision over the trust&#146;s administration and one
    or more U.S.&#160;persons have the authority to control all of
    the trust&#146;s substantial decisions or (b)&#160;that has a
    valid election in effect under applicable U.S.&#160;Treasury
    regulations to be treated as a U.S.&#160;person;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an entity that is disregarded as separate from its owner if all
    of its interests are owned by a single person described above.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An individual may be treated, for U.S.&#160;federal income tax
    purposes, as a resident of the United States in any calendar
    year by being present in the United States on at least
    31&#160;days in that calendar year and for an aggregate of at
    least 183&#160;days during a three-year period ending in the
    current calendar year. The
    <FONT style="white-space: nowrap">183-day</FONT> test
    is determined by counting all of the days the individual is
    treated as being present in the current year, one-third of such
    days in the immediately preceding year and one-sixth of such
    days in the second preceding year. Residents are subject to
    U.S.&#160;federal income tax as if they were U.S.&#160;citizens.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This discussion assumes that a prospective
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will hold shares of our common stock as a capital asset
    (generally, property held for investment). This discussion does
    not address all aspects of U.S.&#160;federal income and estate
    taxation that may be relevant to a particular
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    in light of that
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    individual circumstances. In addition, this discussion does not
    address any aspect of U.S.&#160;state or local or
    <FONT style="white-space: nowrap">non-U.S.&#160;taxes,</FONT>
    or the special tax rules applicable to particular
    <FONT style="white-space: nowrap">non-U.S.&#160;holders,</FONT>
    such as:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    insurance companies and financial institutions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    tax-exempt organizations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    controlled foreign corporations and passive foreign investment
    companies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    partnerships or other pass-through entities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    regulated investment companies or real estate investment trusts;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    pension plans;
</TD>
</TR>

</TABLE>
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    <BR>
    94
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    persons who received our common stock as compensation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    brokers and dealers in securities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    owners that hold our common stock as part of a straddle, hedge,
    conversion transaction, synthetic security or other integrated
    investment;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    former citizens or residents of the United States subject to tax
    as expatriates.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a partnership or other entity treated as a partnership for
    U.S.&#160;federal income tax purposes is a beneficial owner of
    our common stock, the treatment of a partner in the partnership
    generally will depend on the status of the partner and the
    activities of the partnership. We urge any beneficial owner of
    our common stock that is a partnership and partners in that
    partnership to consult their tax advisors regarding the
    U.S.&#160;federal income tax consequences of acquiring, owning
    and disposing of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Distributions
    on Our Common Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any distribution on our common stock paid to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    will generally constitute a dividend for U.S.&#160;federal
    income tax purposes to the extent paid from our current or
    accumulated earnings and profits, as determined under
    U.S.&#160;federal income tax principles. Distributions in excess
    of our current and accumulated earnings and profits will
    generally constitute a return of capital to the extent of the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    adjusted tax basis in our common stock, and will be applied
    against and reduce the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    adjusted tax basis. Any remaining excess will be treated as
    capital gain, subject to the tax treatment described below in
    &#147;&#151;&#160;Gain on Sale, Exchange or Other Disposition of
    Our Common Stock.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dividends paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that are not treated as effectively connected with the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    conduct of a trade or business in the United States generally
    will be subject to withholding of U.S.&#160;federal income tax
    at a rate of 30% on the gross amount paid, unless the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is entitled to an exemption from or reduced rate of withholding
    under an applicable income tax treaty. In order to claim the
    benefit of a tax treaty or to claim an exemption from
    withholding, a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    must provide a properly executed IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    (or successor form) prior to the payment of dividends. A
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    eligible for a reduced rate of withholding pursuant to an income
    tax treaty may be eligible to obtain a refund of any excess
    amounts withheld by timely filing an appropriate claim for a
    refund with the IRS.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dividends paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that are treated as effectively connected with a trade or
    business conducted by the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    within the United States (and, if an applicable income tax
    treaty so provides, are also attributable to a permanent
    establishment or a fixed base maintained within the United
    States by the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder)</FONT>
    are generally exempt from the 30% withholding tax if the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    satisfies applicable certification and disclosure requirements.
    To obtain the exemption, a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    must provide us with a properly executed IRS
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    (or successor form) prior to the payment of the dividend.
    Dividends received by a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that are treated as effectively connected with a U.S.&#160;trade
    or business generally are subject to U.S.&#160;federal income
    tax at rates applicable to U.S.&#160;persons. A
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that is a corporation may, under certain circumstances, be
    subject to an additional &#147;branch profits tax&#148; imposed
    at a rate of 30%, or such lower rate as specified by an
    applicable income tax treaty between the United States and such
    holder&#146;s country of residence.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    who provides us with an IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    or
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    must update the form or submit a new form, as applicable, if
    there is a change in circumstances that makes any information on
    such form incorrect.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Gain On
    Sale, Exchange or Other Disposition of Our Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will not be subject to any U.S.&#160;federal income tax or
    withholding on any gain realized from the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    sale, exchange or other disposition of shares of our common
    stock unless:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the gain is effectively connected with a U.S.&#160;trade or
    business (and, if an applicable income tax treaty so provides,
    is also attributable to a permanent establishment or a fixed
    base maintained within the United States by the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder),</FONT>
    in which case the gain will be taxed on a net income basis
    generally in the
</TD>
</TR>

</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    95
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    same manner as if the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    were a U.S.&#160;person, and, if the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a corporation, the additional branch profits tax described
    above in &#147;&#151;&#160;Distributions on Our Common
    Stock&#148; may also apply;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is an individual who is present in the United States for
    183&#160;days or more in the taxable year of the disposition and
    certain other conditions are met, in which case the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will be subject to a 30% tax on the net gain derived from the
    disposition, which may be offset by
    <FONT style="white-space: nowrap">U.S.-source</FONT>
    capital losses of the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder,</FONT>
    if any;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    we are, or have been at any time during the five-year period
    preceding such disposition (or the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    holding period, if shorter), a &#147;United States real property
    holding corporation.&#148;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally, we will be a &#147;United States real property
    holding corporation&#148; if the fair value of our
    U.S.&#160;real property interests equals or exceeds 50% of the
    sum of the fair values of our worldwide real property interests
    and other assets used or held for use in a trade or business,
    all as determined under applicable U.S.&#160;Treasury
    regulations. We believe that we have not been and are not
    currently, and do not anticipate becoming in the future, a
    &#147;United States real property holding corporation&#148; for
    U.S.&#160;federal income tax purposes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Backup
    Withholding and Information Reporting</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must report annually to the IRS and to each
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    the amount of distributions paid to such holder and the amount
    of tax withheld, if any. Copies of the information returns filed
    with the IRS to report the distributions and withholding may
    also be made available to the tax authorities in a country in
    which the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a resident under the provisions of an applicable income tax
    treaty or agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The United States imposes a backup withholding tax on the gross
    amount of dividends and certain other types of payments
    (currently at a rate of 28%). Dividends paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will not be subject to backup withholding if proper
    certification of foreign status (usually on IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN)</FONT>
    is provided, and we do not have actual knowledge or reason to
    know that the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a U.S.&#160;person. In addition, no backup withholding or
    information reporting will be required regarding the proceeds of
    a disposition of our common stock made by a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    within the United States or conducted through certain
    U.S.&#160;financial intermediaries if we receive the
    certification of foreign status described in the preceding
    sentence and we do not have actual knowledge or reason to know
    that such
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a U.S.&#160;person or the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    otherwise establishes an exemption.
    <FONT style="white-space: nowrap">Non-U.S.&#160;holders</FONT>
    should consult their own tax advisors regarding the application
    of the information reporting and backup withholding rules to
    them.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding is not an additional tax. Amounts withheld
    under the backup withholding rules from a payment to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    can be refunded or credited against the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    U.S.&#160;federal income tax liability, if any, provided that
    certain required information is furnished to the IRS in a timely
    manner.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Federal Estate Tax</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An individual
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    who is treated as the owner, or who has made certain lifetime
    transfers, of an interest in our common stock may be required to
    include the value of the common stock in his or her gross estate
    for U.S.&#160;federal estate tax purposes, and may be subject to
    U.S.&#160;federal estate tax unless an applicable estate tax
    treaty provides otherwise. Under current U.S.&#160;federal law,
    all federal taxes on the value of an individual&#146;s estate at
    death have been temporarily repealed through December&#160;31,
    2010. Beginning January&#160;1, 2011, absent further act by the
    United States Congress, the estate tax automatically will be
    reinstated at 2001 levels. This federal estate tax would apply
    to any individual
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    if such person owned our common stock at the time of his or her
    death on or after January&#160;1, 2011.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, numerous proposals are under review by the United
    States Congress to determine how best to reform the
    U.S.&#160;federal estate tax. None of the current proposals
    support repeal of the estate tax, and all of the proposals
    preserve and continue some form of federal tax on the value of
    an individual&#146;s estate (at tax rates ranging from
    approximately 35% to 45%). Several of the legislative proposals
    provide for a credit or other exemption that would be applied
    before imposing any federal estate tax (for example, one
    proposal provides that no estate tax would be imposed until the
    value of the total estate exceeds approximately $3,500,000
    U.S.&#160;dollars). It is unclear whether such a credit or
    exemption would apply to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    of our common stock. As a result of the widely
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    96
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    differing proposals for federal estate tax reform, it is
    difficult to predict how the tax laws will apply, and all
    prospective
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    are urged to consult their tax advisor to determine possible
    application of the U.S.&#160;federal estate tax, if any.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Obama
    Administration Legislative Proposals</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Obama Administration recently has proposed legislation that
    would limit the ability of a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    to claim relief from U.S.&#160;federal withholding tax in
    respect of dividends paid on the common stock if such holder
    holds the common stock through a
    <FONT style="white-space: nowrap">non-U.S.&#160;intermediary</FONT>
    that is not a &#147;qualified intermediary.&#148; The Obama
    Administration&#146;s proposals also would limit the ability of
    certain
    <FONT style="white-space: nowrap">non-U.S.&#160;entities</FONT>
    to claim relief from U.S.&#160;federal withholding tax in
    respect of dividends paid to such
    <FONT style="white-space: nowrap">non-U.S.&#160;entities</FONT>
    unless those entities have provided documentation of their
    beneficial owners to the withholding agent. In addition, other
    proposals would impose a 20% withholding tax on the gross
    proceeds of the sale of common stock effected through a
    <FONT style="white-space: nowrap">non-U.S.&#160;intermediary</FONT>
    that is not a qualified intermediary and that is not located in
    a jurisdiction with which the United States has a comprehensive
    income tax treaty having a satisfactory exchange of information
    provision. It is unclear whether, or in what form, these
    proposals may be enacted.
    <FONT style="white-space: nowrap">Non-U.S.&#160;holders</FONT>
    are encouraged to consult with their tax advisors regarding the
    possible implications of the Obama Administration&#146;s
    proposals on their investment in respect of the common stock.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    97
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='118'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to the terms and conditions set forth in an underwriting
    agreement, each of the underwriters named below has severally
    agreed to purchase from us and the selling stockholders the
    aggregate number of shares of common stock set forth opposite
    their respective names:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="85%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Underwriters</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number of Shares</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Thomas Weisel Partners LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    William Blair&#160;&#038; Company, L.L.C.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    JMP Securities LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pacific Crest Securities LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Thomas Weisel Partners LLC is the book-running manager and
    William Blair&#160;&#038; Company, L.L.C., JMP Securities LLC
    and Pacific Crest Securities LLC are co-managers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Of
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    to be purchased by the
    underwriters,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    will be purchased from us
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    will be purchased from the selling stockholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriting agreement provides that the obligations of the
    several underwriters are subject to various conditions,
    including approval of legal matters by counsel. The nature of
    the underwriters&#146; obligations commits them to purchase and
    pay for all of the shares of common stock listed above if any
    are purchased.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriting agreement provides that we and the selling
    stockholders will indemnify the underwriters against liabilities
    specified in the underwriting agreement under the Securities
    Act, or will contribute to payments that the underwriters may be
    required to make relating to these liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Thomas Weisel Partners LLC expects to deliver the shares of
    common stock to purchasers on or
    about&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Over-Allotment
    Option</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted a
    <FONT style="white-space: nowrap">30-day</FONT>
    over-allotment option to the underwriters to purchase up to a
    total
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock from us at the initial
    public offering price, less the underwriting discount payable by
    us, as set forth on the cover page of this prospectus. If the
    underwriters exercise this option in whole or in part, then each
    of the underwriters will be separately committed, subject to the
    conditions described in the underwriting agreement, to purchase
    the additional shares of our common stock in proportion to their
    respective commitments set forth in the table above. If any
    additional shares of common stock are purchased, the
    underwriters will offer the additional shares on the same terms
    as those on which the shares are being offered.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Determination
    of Offering Price</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no public market for our
    common stock. The initial public offering price will be
    determined through negotiations between us and the underwriters.
    In addition to prevailing market conditions, the factors to be
    considered in determining the initial public offering price will
    include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the valuation multiples of publicly-traded companies that the
    representatives of the underwriters believe are comparable to us;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    our financial information;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    our history and prospects and the outlook for our industry;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    an assessment of our management, our past and present
    operations, and the prospects for, and timing of, our future
    revenues;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    the above factors in relation to market values and various
    valuation measures of other companies engaged in activities
    similar to ours.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot assure you that an active or orderly trading market
    will develop for our common stock or that our common stock will
    trade in the public markets subsequent to this offering at or
    above the initial offering price.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    98
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Commissions
    and Discounts</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters propose to offer the shares of common stock
    directly to the public at the public offering price set forth on
    the cover page of this prospectus, and at this price less a
    concession not in excess of $&#160;&#160;&#160;&#160;&#160; per
    share of common stock to other dealers specified in a master
    agreement among underwriters who are members of the Financial
    Industry Regulatory Authority, Inc. The underwriters may allow,
    and the other dealers specified may reallow, concessions not in
    excess of $&#160;&#160;&#160;&#160;&#160; per share of common
    stock to these other dealers. After this offering, the offering
    price, concessions and other selling terms may be changed by the
    underwriters. Our common stock is offered subject to receipt and
    acceptance by the underwriters and to other conditions,
    including the right to reject orders in whole or in part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes the compensation to be paid to
    the underwriters by us and the proceeds, before expenses,
    payable to us and the selling stockholders:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="63%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Without Over-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Allotment</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>With Over-Allotment</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to selling stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Underwriters</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We and the selling stockholders will indemnify the underwriters
    against some civil liabilities, including liabilities under the
    Securities Act and liabilities arising from breaches of our
    representations and warranties contained in the underwriting
    agreement. If we or the selling stockholders are unable to
    provide this indemnification, we and the selling stockholders
    will contribute to payments the underwriters may be required to
    make in respect of those liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">No Sales
    of Similar Securities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters will require all of our directors and officers,
    the selling stockholders and certain other of our stockholders
    to agree not to offer, sell, agree to sell, directly or
    indirectly, or otherwise dispose of any shares of common stock
    or any securities convertible into or exchangeable for shares of
    common stock except for the shares of common stock offered in
    this offering without the prior written consent of Thomas Weisel
    Partners LLC for a period of 180&#160;days after the date of
    this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed that for a period of 180&#160;days after the date
    of this prospectus, we will not, without the prior written
    consent of Thomas Weisel Partners LLC, offer, sell or otherwise
    dispose of any shares of common stock, except for the shares of
    common stock offered in this offering and the shares of common
    stock issuable upon exercise of outstanding options on the date
    of this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The <FONT style="white-space: nowrap">180-day</FONT>
    restricted period described in the preceding two paragraphs will
    be automatically extended if: (1)&#160;during the last
    17&#160;days of the l80-day restricted period we issue an
    earnings release or announce material news or a material event
    or (2)&#160;prior to the expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    restricted period, we announce that we will release earnings
    results during the
    <FONT style="white-space: nowrap">15-day</FONT>
    period following the last day of the
    <FONT style="white-space: nowrap">180-day</FONT>
    period, in which case the restrictions described in the
    preceding paragraph will continue to apply until the expiration
    of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    announcement of the material news or material event.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">New York
    Stock Exchange</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have applied to have our common stock listed on the NYSE
    under the symbol &#147;SQI.&#148;
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    99
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Short
    Sales, Stabilizing Transactions and Penalty Bids</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to facilitate this offering, persons participating in
    this offering may engage in transactions that stabilize,
    maintain or otherwise affect the price of our common stock
    during and after this offering. Specifically, the underwriters
    may engage in the following activities in accordance with the
    rules of the SEC.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Short Sales.</I>&#160;&#160;Short sales involve the sales by
    the underwriters of a greater number of shares than they are
    required to purchase in the offering. Covered short sales are
    short sales made in an amount not greater than the
    underwriters&#146; overallotment option to purchase additional
    shares from us in this offering. The underwriters may close out
    any covered short position by either exercising their
    over-allotment option to purchase shares or purchasing shares in
    the open market. In determining the source of shares to close
    out the covered short position, the underwriters will consider,
    among other things, the price of shares available for purchase
    in the open market as compared to the price at which they may
    purchase shares through the over-allotment option. Naked short
    sales are any short sales in excess of such over-allotment
    option. The underwriters must close out any naked short position
    by purchasing shares in the open market. A naked short position
    is more likely to be created if the underwriters are concerned
    that there may be downward pressure on the price of the common
    stock in the open market after pricing that could adversely
    affect investors who purchase in this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stabilizing Transactions.</I>&#160;&#160;The underwriters may
    make bids for or purchases of the shares for the purpose of
    pegging, fixing or maintaining the price of the shares, so long
    as stabilizing bids do not exceed a specified maximum.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Penalty Bids.</I>&#160;&#160;If the underwriters purchase
    shares in the open market in a stabilizing transaction or
    syndicate covering transaction, they may reclaim a selling
    concession from the underwriters and selling group members who
    sold those shares as part of this offering. Stabilization and
    syndicate covering transactions may cause the price of the
    shares to be higher than it would be in the absence of these
    transactions. The imposition of a penalty bid might also have an
    effect on the price of the shares if it discourages presales of
    the shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The transactions above may occur on the NYSE or otherwise.
    Neither we nor the underwriters make any representation or
    prediction as to the effect that the transactions described
    above may have on the price of the shares. If these transactions
    are commenced, they may be discontinued without notice at any
    time.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    100
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='119'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The validity of the shares of common stock offered hereby and
    certain other legal matters will be passed upon for us by
    Morris, Manning&#160;&#038; Martin, LLP, Atlanta, Georgia. The
    underwriters have been represented in connection with this
    offering by Choate, Hall&#160;&#038; Stewart LLP.
</DIV>

<A name='120'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements of SciQuest, Inc. at December&#160;31,
    2008 and 2009, and for each of the three years in the period
    ended December&#160;31, 2009, appearing in this prospectus and
    registration statement have been audited by Ernst&#160;&#038;
    Young LLP, independent registered public accounting firm, as set
    forth in their report thereon appearing elsewhere herein, and
    are included in reliance upon such report given on the authority
    of such firm as experts in accounting and auditing.
</DIV>

<A name='121'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">WHERE YOU
    CAN FIND MORE INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed with the SEC a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1,</FONT>
    including exhibits, schedules and amendments filed with the
    registration statement, of which this prospectus is a part. This
    prospectus does not contain all of the information set forth in
    the registration statement and exhibits and schedules to the
    registration statement. The rules and regulations of the SEC
    allow us to omit from this prospectus certain information
    included in the registration statement. For further information
    with respect to our company and the shares of our common stock
    to be sold in this offering, we refer you to the registration
    statement, including the exhibits and schedules thereto.
    Statements contained in this prospectus as to the contents of
    any contract or other document referred to in this prospectus
    are not necessarily complete and, where that contract or other
    document has been filed as an exhibit to the registration
    statement, each statement in this prospectus is qualified in all
    respects by the exhibit to which the reference relates. Copies
    of the registration statement, including the exhibits and
    schedules to the registration statement, may be examined without
    charge at the public reference room of the SEC,
    100&#160;F&#160;Street, N.E., Washington, DC 20549. You may
    obtain information about the operation of the public reference
    room by calling the SEC at
    <FONT style="white-space: nowrap">1-800-SEC-0330.</FONT>
    Copies of all or a portion of the registration statement can be
    obtained from the public reference room of the SEC upon payment
    of prescribed fees. Our SEC filings, including our registration
    statement, are also available to you, free of charge, on the
    SEC&#146;s website at
    <FONT style="white-space: nowrap">http://www.sec.gov.</FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of this offering, we will become subject to the
    information and periodic reporting requirements of the Exchange
    Act and will file annual, periodic and current reports, proxy
    statements and other information with the SEC. These reports,
    proxy statements and other information will be available for
    inspection and copying at the SEC&#146;s public reference
    facilities and the website of the SEC referred to above.
</DIV>

<A name='122'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORTS
    TO STOCKHOLDERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following this offering, we will file annual, periodic and
    special reports with the SEC as required by the SEC&#146;s rules
    and regulations. In addition, our annual proxy statement will be
    mailed to our stockholders accompanied or preceded by an annual
    report which meets the requirements of the SEC&#146;s rules and
    regulations no later than 120&#160;days following the end of our
    fiscal year. Our periodic quarterly reports will be filed with
    the SEC within 45&#160;days following the end of the quarter,
    unless a shorter period is required by the rules and regulations
    of the SEC. Our annual reports will contain financial statements
    audited by our independent registered public accounting firm.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    101
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='123'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDEX TO
    FINANCIAL STATEMENTS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>SciQuest, Inc. &#151; Financial Statements</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#300'>Report of Ernst&#160;&#038; Young LLP,
    Independent Registered Public Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#301'>Balance Sheets as of December&#160;31, 2008 and
    2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#302'>Statements of Operations for the years ended
    December&#160;31, 2007, 2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#303'>Statements of Stockholders&#146; Deficit for the
    years ended December&#160;31, 2007, 2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#304'>Statements of Cash Flows for the years ended
    December&#160;31, 2007, 2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-6
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#305'>Notes to Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-7
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='300'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Board of Directors and Stockholders of SciQuest, Inc.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying balance sheets of SciQuest,
    Inc. as of December&#160;31, 2008 and 2009, and the related
    statements of operations, stockholders&#146; deficit, and cash
    flows for each of the three years in the period ended
    December&#160;31, 2009. These financial statements are the
    responsibility of the Company&#146;s management. Our
    responsibility is to express an opinion on these financial
    statements based on our audits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. We were not engaged to perform an
    audit of the Company&#146;s internal control over financial
    reporting. Our audits included consideration of internal control
    over financial reporting as a basis for designing audit
    procedures that are appropriate in the circumstances, but not
    for the purpose of expressing an opinion on the effectiveness of
    the Company&#146;s internal control over financial reporting.
    Accordingly, we express no such opinion. An audit includes
    examining, on a test basis, evidence supporting the amounts and
    disclosures in the financial statements. An audit also includes
    assessing the accounting principles used and significant
    estimates made by management, as well as evaluating the overall
    financial statement presentation. We believe that our audits
    provide a reasonable basis for our opinion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, the financial statements referred to above
    present fairly, in all material respects, the financial position
    of SciQuest, Inc. at December&#160;31, 2008 and 2009, and the
    results of its operations and its cash flows for each of the
    three years in the period ended December&#160;31, 2009, in
    conformity with U.S.&#160;generally accepted accounting
    principles.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Ernst&#160;&#038;
    Young LLP</DIV>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Raleigh, North Carolina
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    March&#160;25, 2010
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <B><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,bs --><A name='301'>BALANCE
    SHEETS</FONT></B></A>
</DIV>
<!-- XBRL,body -->
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(In thousands except share and per share amounts)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Restricted cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,506
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Prepaid expenses and other current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    874
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    834
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,232
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,162
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Property and equipment, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,353
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Intangible assets, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,743
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,340
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred project costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,786
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,148
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    32,922
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    37,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
    <B>Liabilities and Redeemable Preferred Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    301
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accrued liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Line of credit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,947
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,066
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,906
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,443
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred revenues, less current portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,643
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Restructuring liability, less current portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    287
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Redeemable preferred stock at redemption value, $0.001&#160;par
    value; 500,000&#160;shares authorized; 222,073&#160;shares
    issued and outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,477
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,072
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Commitments and contingencies
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Stockholders&#146; deficit</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock, $0.001&#160;par value; 29,500,000&#160;shares
    authorized;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    28,352,041 and 28,684,596&#160;shares issued and outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Notes receivable from stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (617
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (769
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,802
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,219
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,391
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,959
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities, redeemable preferred stock, and
    stockholders&#146; deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    32,922
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    37,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The accompanying notes are an integral part of the financial
    statements.</I>
</DIV>
<!-- /XBRL,bs -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <B><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,op --><A name='302'>STATEMENTS
    OF OPERATIONS</FONT></B></A>
</DIV>
<!-- XBRL,body -->
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>(In thousands, except<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>per share amounts)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,107
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    29,784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    36,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,723
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,494
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,061
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,908
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,059
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,213
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,717
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Litigation settlement and associated legal expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Amortization of intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    537
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    403
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,066
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,104
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    995
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,581
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other income (expense):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    37
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (90
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (22
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other expense, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (65
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,608
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividends on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,207
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,207
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,278
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss) attributable to common stockholders per share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted average shares outstanding used in computing per share
    amounts:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,122
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,900
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The accompanying notes are an integral part of the financial
    statements.</I>
</DIV>
<!-- /XBRL,op -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <B><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,se --><A name='303'>STATEMENTS
    OF STOCKHOLDERS&#146; DEFICIT</FONT></B></A>
</DIV>
</A>
<!-- XBRL,body -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="35%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Additional Paid-In<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Notes Receivable<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Stockholders&#146;<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Capital</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>from Stockholders</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Deficit</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Deficit</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="22" align="center" valign="bottom">
    <B>(In thousands except share amounts)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,495,120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (50
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (26,381
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (26,404
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issuance of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    445,055
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (31
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exercise of common stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,296
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Payments on notes receivable from stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dividends accrued on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (141
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,066
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,207
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,963,471
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (42
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,447
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,461
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issuance of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    584,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    760
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (724
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Repurchase of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (260,209
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (229
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (99
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exercise of common stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,273
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Payments on notes receivable from stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issuance of common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,231
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dividends accrued on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (923
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,472
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,395
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,352,041
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (617
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,802
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,391
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issuance of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    318,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    195
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (171
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Repurchase of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15,604
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (16
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exercise of common stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,106
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Payments on notes receivable from stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dividends accrued on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (550
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,045
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,595
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,684,596
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    29
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (769
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (33,219
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (33,959
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The accompanying notes are an integral part of the financial
    statements.</I>
</DIV>
<!-- /XBRL,se -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <B><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,cf --><A name='304'>STATEMENTS
    OF CASH FLOWS</FONT></B></A>
</DIV>
<!-- XBRL,body -->
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="72%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Cash flows from operating activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,909
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,285
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Stock-based compensation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Loss (gain) from disposal of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    140
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Changes in operating assets and liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    694
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (285
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,340
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Prepaid expense and other current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (871
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (117
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Deferred project costs and other assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (550
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (833
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (362
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (181
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (255
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Accrued liabilities and other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (257
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (614
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,960
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,467
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,582
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,501
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Cash flows from investing activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Addition of capitalized software development costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (362
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (99
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (220
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Purchase of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (695
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (480
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (685
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Restricted cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (350
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash used in investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,057
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (929
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (905
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Cash flows from financing activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Issuance of common and restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Repurchases of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (99
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Repayment of notes receivable from stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds from exercise of common stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Issuance of preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Repayment of notes payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,103
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by (used in) financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,063
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net increase in cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,573
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,711
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,630
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents at beginning of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,218
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents at end of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,502
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Supplemental disclosure of cash flow information</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash paid for interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    88
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    22
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Supplemental disclosure of non-cash flow information</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividends on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,207
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The accompanying notes are an integral part of the financial
    statements.</I>
</DIV>
<!-- /XBRL,cf -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<!-- XBRL,ns -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <A name='305'><B><FONT style="font-family: 'Times New Roman', Times">NOTES
    TO FINANCIAL STATEMENTS</FONT></B></A>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    </A><B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>YEARS ENDED DECEMBER&#160;31, 2007, 2008 AND 2009</B>
</DIV>
<!-- XBRL,N -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">1.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Description
    of Business</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    SciQuest, Inc. (the Company) provides an on-demand strategic
    procurement and supplier enablement solution that integrates
    customers with their suppliers to improve procurement of
    indirect goods and services, such as office supplies, laboratory
    supplies, furniture, MRO (maintenance, repair and operations)
    supplies, and food and beverages. The Company&#146;s on-demand
    software enables organizations to more efficiently source
    indirect goods and services, manage their spend, and obtain the
    benefits of compliance with purchasing policies and negotiating
    power with suppliers. The Company&#146;s on-demand strategic
    procurement software suite coupled with its managed supplier
    network forms the Company&#146;s integrated solution, which is
    designed to achieve rapid and sustainable savings. The
    Company&#146;s solution is designed to optimize tasks throughout
    the cycle of finding, procuring, receiving and paying for
    indirect goods and services, which can result in increased
    efficiency, reduced costs and increased insight into an
    organization&#146;s buying patterns. The Company&#146;s current
    target markets are higher education, life sciences, healthcare
    and state and local governments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On April&#160;10, 2004, the Company entered into a definitive
    agreement to be acquired in connection with a going private
    transaction led by Trinity Ventures. After approval by the
    stockholders on July&#160;15, 2004, the acquisition was
    completed on July&#160;28, 2004. As part of this transaction,
    the Company&#146;s outstanding publicly-traded common stock was
    repurchased, converting SciQuest into a privately-held company.
    The Company recorded this acquisition using the purchase method
    of accounting.
</DIV>
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Basis of
    presentation</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements of the Company have been prepared in
    accordance with accounting principles generally accepted in the
    United States.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Use of
    Estimates</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States
    (GAAP) requires management to make estimates and assumptions
    that affect the reported amounts of assets and liabilities at
    the date of the financial statements and the reported amounts of
    revenues and expenses during the reporting period. Actual
    results could differ materially from those estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company primarily derives its revenues from subscription
    fees for its on-demand strategic procurement and supplier
    enablement software solution and associated implementation
    services. Revenue is generated from subscription agreements and
    related services permitting customers to access and utilize the
    Company&#146;s hosted software. Customers may on occasion also
    purchase a perpetual license for certain software modules.
    Revenue is recognized when there is persuasive evidence of an
    agreement, the service has been provided or delivered to the
    customer, the collection of the fee is probable and the amount
    of the fee to be paid by the customer is fixed or determinable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s contractual agreements generally contain
    multiple service elements and deliverables. These elements
    include access to the hosted software, implementation services
    and, on a limited basis, perpetual licenses for certain software
    modules and related maintenance and support. Subscription
    agreements do not provide customers the right to take possession
    of the hosted software at any time, with the exception of a
    triggering event in source code escrow arrangements. In applying
    the multiple element revenue recognition guidance, the Company
    determined that it does not have objective and reliable evidence
    of the fair value of the subscription agreement and related
    services. The Company therefore accounts for fees received under
    multiple element agreements as a single
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    unit of accounting and recognizes the agreement consideration
    ratably over the term of the subscription agreement, which is
    generally three to five years. The term of the subscription
    agreement commences on the start date specified in the
    subscription agreement, which is the date access to the software
    is provided to the customer, provided all other revenue
    recognition criteria have been met. Fees for professional
    services that are contingent upon future performance are
    recognized ratably over the remaining subscription term once the
    performance milestones have been met. The Company recognizes
    revenue from any professional services that are sold separately
    as the services are performed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred revenue primarily consists of billings or payments
    received in advance of revenue recognition from the
    Company&#146;s software and services described above. For
    multiple year subscription agreements, the Company generally
    invoices its customers in annual installments. Accordingly, the
    deferred revenue balance does not represent the total contract
    value of these multi-year subscription agreements. The
    Company&#146;s services, such as implementation, are generally
    sold in conjunction with subscription agreements. These services
    are recognized ratably over the remaining term of the
    subscription agreement once any contingent performance
    milestones have been satisfied. The portion of deferred revenue
    that the Company anticipates will be recognized after the
    succeeding
    <FONT style="white-space: nowrap">12-month</FONT>
    period is recorded as non-current deferred revenue and the
    remaining portion is recorded as current deferred revenue.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cost of
    Revenues</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cost of revenues primarily consists of costs related to hosting
    the Company&#146;s subscription software services, compensation
    and related expenses for implementation services, supplier
    enablement services, customer support staff and client partners,
    amortization of capitalized software development costs, and
    allocated fixed asset depreciation and facilities costs. Cost of
    revenues is expensed as incurred.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Deferred
    Project Costs</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company capitalizes sales commission costs that are directly
    related to the execution of its subscription agreements. The
    commissions are deferred and amortized over the contractual term
    of the related subscription agreement. The deferred commission
    amounts are recoverable from the future revenue streams under
    the subscription agreements. The Company believes this is the
    appropriate method of accounting, as the commission costs are so
    closely related to the revenues from the subscription agreements
    that they should be recorded as an asset and charged to expense
    over the same period that the subscription revenues are
    recognized. Amortization of deferred commissions is included in
    sales and marketing expense in the accompanying statements of
    operations. The deferred commissions are reflected within
    deferred project costs in the accompanying balance sheets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Concentrations</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, three customers comprised 17%, 12%
    and 12%, respectively, of the accounts receivable balance. As of
    December&#160;31, 2008, two customers comprised 14% and 12%,
    respectively, and three customers each comprised 10%, of the
    accounts receivable balance. During each of the years ended
    December&#160;31, 2007, 2008 and 2009, no individual customer
    comprised more than 10% of the Company&#146;s revenues. During
    each of the years ended December&#160;31, 2007, 2008 and 2009,
    approximately 93% of the Company&#146;s revenues were from sales
    transactions originating in the United States.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cash and
    Cash Equivalents</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company considers all highly liquid debt investments with an
    original maturity of three months or less at the date of
    purchase to be cash equivalents. The Company maintains cash
    balances at financial institutions that may at times exceed
    federally insured limits. The Company maintains this cash at
    high credit quality institutions and, as a result, believes
    credit risk related to its cash is minimal. In accordance with
    the Company&#146;s outstanding credit arrangement, the Company
    maintains restricted cash in an amount equal to its outstanding
    line of credit. As of December&#160;31, 2008 and 2009,
    restricted cash totaled $350.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Accounts
    Receivable</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company assesses the need for an allowance for doubtful
    accounts based on estimates of probable credit losses. This
    assessment is based on several factors including aging of
    customer accounts, known customer specific risks, historical
    experience and existing economic conditions. The Company
    generally does not require collateral for receivable balances.
    Accounts would be charged against the allowance after all means
    of collection were exhausted and recovery was considered remote.
    Any required provisions for doubtful accounts would be recorded
    in general and administrative expense. Based on
    management&#146;s analysis of its outstanding accounts
    receivable, the Company concluded no allowance was necessary at
    December&#160;31, 2008 and 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Property
    and Equipment</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property and equipment are recorded at cost and depreciated
    using the straight-line method over their estimated useful lives
    which are usually seven years for furniture and three to five
    years for computer software and equipment. Historically,
    property and equipment have included certain equipment under
    capital leases. These items are depreciated over the shorter of
    the lease period or the estimated useful life of the equipment.
    Leasehold improvements are amortized over the shorter of the
    estimated useful lives of the assets or the expected term of the
    leases. Costs for repairs and maintenance are expensed as
    incurred. Upon retirement or sale, the cost of the disposed
    assets and the related accumulated depreciation are removed from
    the accounts, and any resulting gain or loss is credited or
    charged to operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Software
    Development Costs</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company incurs certain costs associated with the development
    of its on-demand solution, which are accounted for as
    internal-use software. Certain qualifying costs incurred during
    the application development phase are capitalized and amortized
    to expense over the estimated useful life of the related
    applications, which is generally three years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Costs incurred in connection with the development of the
    Company&#146;s licensed software products are accounted for as
    costs of software to be sold, leased or otherwise marketed.
    Capitalization of software development costs begins upon the
    establishment of technological feasibility (based on a working
    model approach), subject to net realizable value considerations.
    To date, the period between achieving technological feasibility
    and the general availability of such software has substantially
    coincided; therefore, software development costs qualifying for
    capitalization have been immaterial. Accordingly, the Company
    has not capitalized any software development costs related to
    its licensed software products and has charged all such costs to
    research and development expense.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Goodwill</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Goodwill represents the excess of the cost of an acquired entity
    over the net fair value of the identifiable assets acquired and
    liabilities assumed. The Company reviews the carrying value of
    goodwill at least annually to assess impairment since it is not
    amortized. Additionally, the Company would also review the
    carrying value of goodwill
</DIV>
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    <BR>
    F-9
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    whenever events or changes in circumstances indicated that its
    carrying amount may not be recoverable. The Company has
    concluded that it has one reporting unit for purposes of its
    annual goodwill impairment testing. To assess goodwill
    impairment, the first step is to identify if a potential
    impairment exists by comparing the fair value of a reporting
    unit with its carrying amount, including goodwill. If the fair
    value of a reporting unit exceeds its carrying amount, goodwill
    of the reporting unit is not considered to have a potential
    impairment and the second step of the impairment test is not
    necessary. The Company performed its annual assessment on
    December&#160;31, 2009. The estimated fair value of the
    Company&#146;s reporting unit exceeded its carrying amount,
    including goodwill, and as such, no potential goodwill
    impairment was recorded.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Long-Lived
    Assets</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company evaluates the recoverability of its property and
    equipment and other long-lived assets, including acquired
    technology and customer relationships, when events change or
    circumstances indicate the carrying amount may not be
    recoverable. If such events or changes in circumstances are
    present, the undiscounted cash flow method is used to determine
    whether the asset is impaired. An impairment loss is recognized
    when, and to the extent, the net book value of such assets
    exceeds the estimated future undiscounted cash flows
    attributable to the assets or the business to which the assets
    relate. Cash flows would include the estimated terminal value of
    the asset and exclude any interest charges. The discount rate
    utilized would be based on the Company&#146;s best estimate of
    the related risks and return at the time the impairment
    assessment is made. As discussed in Note&#160;3, the Company
    recorded an impairment charge for leasehold improvements of $140
    during 2009 in connection with a lease renegotiation. There were
    no other impairments of its long-lived assets during the years
    ended December&#160;31, 2007, 2008 and 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Investment</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2008 and 2009, the Company had
    outstanding warrants to purchase a 15% equity interest in an
    unaffiliated private company for an aggregate consideration of
    one cent at any time until December&#160;31, 2024. Due to the
    lack of quoted prices from an active market for these or similar
    equity instruments of the investee, the Company carries this
    investment at its cost basis of zero in the accompanying balance
    sheets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sales and
    Marketing Expenses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales and marketing expenses consist primarily of costs,
    including salaries and sales commissions, of all personnel
    involved in the sales process. Sales and marketing expenses also
    include costs of advertising, trade shows, certain indirect
    costs, and allocated fixed asset depreciation and facilities
    costs. Advertising costs are expensed as incurred. Advertising
    expense totaled approximately $486, $524 and $433 for the years
    ended December&#160;31, 2007, 2008 and 2009, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock-Based
    Compensation</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of January&#160;1, 2006, the Company adopted new accounting
    guidance using the prospective application method, which
    requires that all stock-based payments to employees, including
    grants of employee stock options, are recognized in the income
    statement based on their fair values. Stock-based compensation
    cost is measured at the grant date based on the fair value of
    the award and is recognized as expense on a straight-line basis
    over the requisite service period, which is the vesting period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock-based compensation costs are based on the fair value of
    the underlying option calculated using the
    <FONT style="white-space: nowrap">Black-Scholes</FONT>
    option-pricing model on the date of grant for stock options.
    Determining the appropriate fair value model and related
    assumptions requires judgment, including estimating stock price
    volatility, forfeiture rates, and expected term. The expected
    volatility rates are estimated based on the actual volatility of
    comparable public
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    companies over the expected term. The expected term for the
    years ended December&#160;31, 2007, 2008 and 2009 represents the
    average time that options that vest are expected to be
    outstanding based on the mid-point between the vesting date and
    the end of the contractual term of the award. The Company has
    not paid dividends and does not anticipate paying a cash
    dividend in the foreseeable future and, accordingly, uses an
    expected dividend yield of zero. The risk-free interest rate is
    based on the rate of U.S.&#160;Treasury securities with
    maturities consistent with the estimated expected term of the
    awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Earnings
    Per Share</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Basic net income (loss) per share is computed by dividing net
    income (loss) attributable to common stockholders by the
    weighted-average number of shares of common stock outstanding
    for the period. Outstanding unvested restricted stock purchased
    by employees is subject to repurchase by the Company and
    therefore is not included in the calculation of the
    weighted-average shares outstanding until vested. Diluted net
    income (loss) per share is computed giving effect to all
    potentially dilutive common stock, including options and
    restricted stock. The dilutive effect of outstanding awards is
    reflected in diluted earnings per share by application of the
    treasury stock method.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summarizes the calculation of basic and diluted
    net income (loss) attributable to common stockholders per share:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,117
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,628
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Less: Dividends on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,207
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income (loss) attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,207
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,278
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Weighted average common shares, basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,984,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,599,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,248,493
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic net income (loss) attributable to common stockholders per
    share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Diluted:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net income (loss) attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (7,207
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,278
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Weighted average common shares, basic
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,984,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,599,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,122,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dilutive effect of:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Options to purchase common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    345,325
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Warrants to purchase common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    426,109
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Nonvested shares of restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,863
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Weighted average common shares&#160;&#151; Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,984,942
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,599,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28,900,311
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Diluted net income (loss) attributable to common stockholders
    per share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.27
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The treasury effect of the following equity instruments has been
    excluded from diluted net income (loss) per common share as
    their effect would be anti-dilutive:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="69%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Unvested restricted stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    680,718
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456,174
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,383
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    466,829
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    593,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    443,361
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    443,361
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,590,908
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,493,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    88,633
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Segment
    Data</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company manages its operations on a consolidated basis for
    purposes of assessing performance and making operating
    decisions. Accordingly, the Company has determined that it has a
    single reporting segment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Fair
    Value of Financial Instruments</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2008, the Company adopted new
    accounting guidance that clarifies the definition of fair value,
    prescribes methods for measuring fair value, establishes a fair
    value hierarchy based on the inputs used to measure fair value
    and expands disclosures about fair value measurements. Inputs
    used in the valuation techniques to derive fair values are
    classified based on a three-level hierarchy, as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="7%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Level&#160;1:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Quoted prices (unadjusted) in active markets that are accessible
    at the measurement date for assets or liabilities. The fair
    value hierarchy gives the highest priority to Level 1 inputs.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Level&#160;2:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Observable prices that are based on inputs not quoted on active
    markets, but corroborated by market data.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Level&#160;3:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Unobservable inputs are used when little or no market data is
    available. The fair value hierarchy gives the lowest priority to
    Level 3 inputs.
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Observable inputs are based on market data obtained from
    independent sources. As of December&#160;31, 2008 and 2009, the
    Company had cash equivalents of $9,013 and $16,776,
    respectively, which consist of money market accounts. These cash
    equivalents are classified within Level&#160;1 of the fair value
    hierarchy since they are valued using quoted market prices. As
    of December&#160;31, 2008 and 2009, the Company did not have any
    financial assets or liabilities without observable market values
    that would require a high level of judgment to determine fair
    value (Level&#160;3).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred income taxes are provided using tax rates enacted for
    periods of expected reversal on all temporary differences.
    Temporary differences relate to differences between the book and
    tax basis of assets and liabilities, principally intangible
    assets, property and equipment, deferred subscription revenues,
    pension assets, accruals, and stock-based compensation.
    Valuation allowances are established to reduce deferred tax
    assets to the amount that will more likely than not be realized.
    To the extent that a determination is made to establish or
    adjust a valuation allowance, the expense or benefit is recorded
    in the period in which the determination is made.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Judgment is required in determining the provision for income
    taxes. Additionally, the income tax provision is based on
    calculations and assumptions that are subject to examination by
    many different tax authorities and to changes in tax law and
    rates in many jurisdictions. The Company would adjust its income
    tax provision in the period in which it becomes probable that
    actual results differ from management estimates.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-12
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On January&#160;1, 2007, the Company adopted new guidance which
    prescribed a recognition threshold and measurement attribute for
    the financial statement recognition and measurement of a tax
    position taken or expected to be taken in a tax return. This
    guidance also provides guidance on derecognition,
    classification, interest and penalties, accounting in interim
    periods, disclosure and transition. The Company&#146;s policy is
    to recognize interest and penalties accrued on any unrecognized
    tax positions as a component of income tax expense. The
    Company&#146;s adoption of this new guidance did not have a
    material effect on its financial position or results of
    operations. The Company does not believe there will be any
    material changes in its unrecognized tax positions over the next
    twelve months. As of the date of adoption of this guidance, the
    Company did not have any accrued interest or penalties
    associated with any unrecognized tax positions, and there were
    no such interest or penalties recognized during the year ended
    December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">New
    Accounting Pronouncements</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the Financial Accounting Standards Board (FASB)
    issued The FASB Accounting Standards Codification
    (Codification), which is the single source of authoritative GAAP
    recognized by the FASB to be applied by nongovernmental
    entities. Rules and interpretive releases of the Securities and
    Exchange Commission (SEC) under authority of federal securities
    laws are also sources of authoritative GAAP for SEC registrants.
    The Codification supersedes all non-SEC accounting and reporting
    standards. All other non-grandfathered non-SEC accounting
    literature not included in the Codification is
    non-authoritative. The Codification is effective for financial
    statements issued for interim and annual periods ending after
    September&#160;15, 2009. The Codification did not change or
    alter existing GAAP and therefore, did not have an impact on the
    Company&#146;s balance sheets, statements of operations and cash
    flows.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2009, the FASB&#146;s Emerging Issues Task Force
    revised its guidance on revenue recognition for
    multiple-deliverable revenue arrangements. The amendments in
    this update will, in certain circumstances, enable companies to
    separately account for multiple revenue-generating activities
    (deliverables) that they perform for their customers. Existing
    U.S.&#160;GAAP requires a company to use vendor-specific
    objective evidence (VSOE) or
    <FONT style="white-space: nowrap">third-party</FONT>
    evidence of selling price to separate deliverables in a
    multiple-deliverable arrangement. The update will allow the use
    of an estimated selling price if neither VSOE nor third-party
    evidence is available. The update will require additional
    disclosures of information about an entity&#146;s
    multiple-deliverable arrangements. The requirements of the
    update may be applied prospectively for revenue arrangements
    entered into or materially modified in fiscal years beginning on
    or after June&#160;15, 2010, although early adoption is
    permitted. The Company is currently evaluating the impact of the
    update on its financial position and results of operations and
    does not plan to early or retroactively adopt the new guidance.
</DIV>
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Property
    and Equipment</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property and equipment consist of the following as of
    December&#160;31, 2008 and 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    505
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    579
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer software and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,016
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,483
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    487
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    231
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,293
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less accumulated depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,655
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,986
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Property and equipment, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,353
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,307
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-13
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Property
    and Equipment&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depreciation expense related to property and equipment
    (excluding capitalized internal-use software) for the years
    ended December&#160;31, 2007, 2008 and 2009 was $509, $594 and
    $644, respectively. The Company disposed of fully-depreciated
    computer software and equipment with a cost of $231 during the
    year ended December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2009, the Company renegotiated a lease, which reduced the
    total leased office space at that property. Accordingly, the
    Company wrote-off leasehold improvements with an original cost
    of $389 and accumulated amortization of $249. The Company
    recognized a loss in the accompanying statements of operations
    of $140 during the year ended December&#160;31, 2009 related to
    the disposal of these leasehold improvements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Computer software and equipment includes capitalized software
    development costs incurred during development of the
    Company&#146;s on-demand solution. The Company capitalized
    software development costs of $362, $99 and $220 during the
    years ended December&#160;31, 2007, 2008 and 2009, respectively.
    Net capitalized software development costs totaled $280 and $333
    as of December&#160;31, 2008 and 2009, respectively.
    Amortization expense for the years ended December&#160;31, 2007,
    2008 and 2009 related to capitalized software development costs
    was $114, $154 and $167, respectively, which is classified
    within cost of revenues in the accompanying statements of
    operations.
</DIV>
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">4.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Goodwill
    and Other Intangible Assets</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company acquired goodwill and certain identifiable
    intangible assets as part of the going private transaction in
    July 2004. A summary of intangible assets as of
    December&#160;31, 2008 and 2009 follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="30%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Net Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Net Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Goodwill
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Acquired technology
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,100
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,100
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Customer relationships
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,887
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,290
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    910
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Trademarks
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    430
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    430
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    430
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    430
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,495
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (11,987
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    20,495
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (12,390
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,105
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Acquired technology was amortized to expense on a straight-line
    basis over the estimated useful life of three years. Related
    amortization expense for the year ended December&#160;31, 2007
    was $1,575 and was included in amortization of intangible assets
    in the accompanying statement of operations for the year ended
    December&#160;31, 2007. This asset was fully amortized as of
    December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The customer relationships asset is being amortized over a
    ten-year estimated life in a pattern consistent with which the
    economic benefit is expected to be realized. Related
    amortization expense was $711, $537 and $403 for the years ended
    December&#160;31, 2007, 2008 and 2009, respectively.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-14
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">4.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Goodwill
    and Other Intangible Assets&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company estimates the following amortization expense related
    to its customer relationships for the years ended December 31:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="94%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    301
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    167
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    92
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    910
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">5.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Accrued
    Liabilities</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Current accrued liabilities are comprised of the following as of
    December&#160;31, 2008 and 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="83%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,321
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued consulting and professional services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    271
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued restructuring charges, current
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    262
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued rent
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    226
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    239
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    236
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    325
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In years prior to 2007, the Company restructured certain
    operations to eliminate excess leased office space and to reduce
    the workforce. As of December&#160;31, 2008, the remaining total
    liability of $549 ($262 current and $287 non-current) reflected
    lease commitments for unused office space. During the year ended
    December&#160;31, 2009, the Company renegotiated the operating
    lease for which the reserve was originally established and
    reduced the total leased office space. As a result, the
    restructuring reserve for unused office space was no longer
    necessary and was reduced to $0 at the time the renegotiation
    was finalized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summarizes the restructuring liability for the
    years ended December&#160;31, 2008 and 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="16%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Restructuring Liability</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    891
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (333
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Change in estimate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (83
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accretion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    74
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    549
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (296
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Decrease in liability due to lease termination
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (287
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accretion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-15
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">5.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Accrued
    Liabilities&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->
<!-- XBRL,n -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">6.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Debt</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On October&#160;30, 2008, the Company entered into a credit
    agreement with a bank which provides for borrowings of up to
    $2,500, of which $350 is outstanding as of December&#160;31,
    2009. Interest accrues on the unpaid principal balance at the
    LIBOR Market Index Rate plus 1.5%. As of December&#160;31, 2009,
    the interest rate was 1.7%. In accordance with the terms of the
    agreement, the Company maintains a restricted cash balance in
    the amount equal to the outstanding credit balance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On July&#160;29, 2004, the Company entered into a senior
    revolving credit facility with an availability of $2,500 which
    was renewable annually. During 2008, this line of credit was
    fully repaid by the Company and closed. In conjunction with this
    facility, a warrant was issued to purchase 52,160&#160;shares of
    the Company&#146;s common stock at a price of $0.04 per share,
    which expires on July&#160;29, 2011 (see Note&#160;8).
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">7.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Redeemable
    Preferred Stock</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Redeemable
    Preferred Stock</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Authorized Shares&#160;&#151; </I>The Company is authorized
    to issue up to 500,000&#160;shares of $0.001&#160;par value
    redeemable preferred stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Issuance of Stock</I>&#160;&#151; As of December&#160;31,
    2008 and 2009, the Company had outstanding 222,073&#160;shares
    of $0.001&#160;par value redeemable preferred stock. All of the
    shares were issued at a price of $100 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Rank</I>&#160;&#151; The Board of Directors is empowered to
    authorize classes of preferred stock and their related rights
    and preferences. The preferred stock ranks senior to all common
    stock with respect to dividend rights and rights on liquidation
    or dissolution.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Dividends</I>&#160;&#151; Holders of redeemable preferred
    stock shall be entitled to receive, when, as and if declared by
    the Board of Directors, dividends at the rate per share of 8% of
    the accreted value per annum, calculated on a fiscal quarter
    basis at a rate of 2%. The accreted value is defined as $100 per
    share plus the cumulative calculated dividends resulting in a
    quarterly compounding effect on previously accrued dividends.
    The accreted value of the redeemable preferred stock dividends
    is recorded on a quarterly basis as an increase to the preferred
    stock value and a decrease to additional paid-in capital. Due to
    the absence of retained earnings, in circumstances where the
    additional paid-in capital balance is reduced to zero, remaining
    accretion amounts are applied to accumulated deficit. As of
    December&#160;31, 2009, cumulative accrued dividends on the
    Company&#146;s redeemable preferred stock totaled $11,864.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Liquidation</I>&#160;&#151; Upon any liquidation (including a
    merger event), the holders of redeemable preferred stock shall
    be entitled to receive for each outstanding share an amount in
    cash equal to the accreted value, including calculated and
    unpaid cumulative dividends. Beyond the accreted value, the
    holders of redeemable preferred stock are not entitled to any
    distribution in liquidation or dissolution. If insufficient
    legally available funds were not available for distribution, the
    payments would be distributed ratably among the holders of the
    redeemable preferred stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Redemption</I>&#160;&#151; The redeemable preferred shares
    are only redeemable at the option of the Company at a price
    equal to the issuance price plus cumulative preferred dividends.
    No portion of the redeemable preferred stock may be redeemed
    unless the full cumulative dividends (whether or not declared)
    on all outstanding shares of redeemable preferred stock shall
    have been paid or contemporaneously are declared and paid or set
    apart for payment for all dividend periods terminating on or
    prior to the applicable redemption date, unless the redemption
    of the shares are being calculated on a pro rata basis due to
    the insufficiency of legally available funds.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-16
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">7.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Redeemable
    Preferred Stock&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Voting</I>&#160;&#151; Holders of shares of redeemable
    preferred stock are not entitled to any voting rights, except in
    actions proposed by the Company that would adversely affect the
    preferences, rights or powers of the redeemable preferred stock
    including the creation of classes of stock with superior rights
    to the preferred and the payment of a dividend or distribution
    on or redemption of shares of equal or fewer rights or powers,
    i.e., other preferred or common classes of stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summarizes preferred stock carrying amount and
    activity for the years ended December&#160;31, 2008 and 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="66%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="15%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Redeemable<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Redeemable Preferred<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Preferred Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    28,986
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    221,115
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issuance of preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    958
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dividends accrued on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,477
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    222,073
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issuance of preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Dividends accrued on redeemable preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,072
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    222,073
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders&#146;
    Deficit</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock
    Incentive Plan</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On August&#160;27, 2004, the Company adopted a stock incentive
    plan (the Plan) which allowed the Company to grant up to
    4,307,815&#160;common stock options, stock appreciation rights
    (SARs) and restricted stock awards to employees, board members
    and others who contribute materially to the success of the
    Company. In February 2007, the Company increased the number of
    shares of common stock reserved for issuance under the Plan by
    500,000 to an aggregate of 4,807,815&#160;shares. In February
    2008, the Company increased the number of shares of common stock
    reserved for issuance under the Plan by 1,807,657 to an
    aggregate of 6,615,472&#160;shares. The Company&#146;s Board of
    Directors approves the terms of stock options granted.
    Individual option grants generally become exercisable ratably
    over a period of four years from the grant date. The contractual
    term of the options is approximately ten years from the date of
    grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company recognizes compensation expense associated with
    restricted stock and common stock options based on the
    grant-date fair value of the award on a straight-line basis over
    the requisite service period of the individual grantees, which
    generally equals the vesting period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Restricted
    Stock</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of the Plan, the Company has issued restricted shares of
    its common stock to certain employees. Upon employee
    termination, the Company has the option to repurchase the
    shares. The repurchase price is the original purchase price plus
    interest for unvested restricted shares and the current fair
    value (as determined by the Board of Directors) for vested
    restricted shares. The shares generally vest ratably over two to
    four years. As of December&#160;31, 2009, there were
    4,496,492&#160;shares of vested and unvested restricted stock
    outstanding.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-17
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders&#146;
    Deficit&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summarizes the activity of nonvested shares of
    restricted stock for the year ended December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="69%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average Grant<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date Fair Value</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested as of December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    456,174
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.51
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    318,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.85
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vested
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (419,438
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.52
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Repurchased
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (793
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.47
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    353,996
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.81
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The total unrecognized compensation cost related to nonvested
    shares of restricted stock is approximately $287 at
    December&#160;31, 2009. This amount is expected to be recognized
    over a weighted-average period of 2.7&#160;years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In conjunction with the issuance of these restricted shares,
    subscription note agreements were executed for certain
    employees. The notes are payable in four annual payments due
    January 1 of each calendar year and bear interest at 6%. As of
    December&#160;31, 2008 and 2009, the balance outstanding for
    these subscription note agreements was $617 and $769,
    respectively. Although the outstanding balance was not modified,
    the payment terms for all outstanding notes receivable issued
    during the year ended December&#160;31, 2008 were amended during
    January 2009 such that the notes become due at the earlier of a
    change in control, as defined by the Plan, or five years from
    the modification date. The outstanding notes receivable as of
    December&#160;31, 2008 and 2009 are considered a separate
    component of additional
    <FONT style="white-space: nowrap">paid-in-capital.</FONT>
    Due to the absence of sufficient additional
    <FONT style="white-space: nowrap">paid-in-capital,</FONT>
    such amounts are presented separately in the accompanying
    balance sheets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company accounts for restricted shares granted prior to the
    adoption of the fair value method as variable awards, and
    accordingly, remeasures the compensation expense for the
    unvested shares each period as of the balance sheet date, based
    on changes in the fair value of these awards. The Company
    recognized stock-based compensation of $91, $83 and $11 during
    the years ended December&#160;31, 2007, 2008 and 2009,
    respectively, related to such awards.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Restricted stock awards granted after December&#160;31, 2005 are
    recognized in the income statement based on their fair values.
    As a result of the notes receivable being deemed nonrecourse for
    accounting purposes and other contractual provisions in the
    agreements, the related restricted stock grants are considered
    stock options for accounting purposes. Stock-based compensation
    expense of $13, $147 and $214 was recorded during the years
    ended December&#160;31, 2007, 2008 and 2009, respectively, in
    connection with these restricted stock awards.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2009, the Company repurchased 15,604&#160;shares of
    vested and unvested restricted stock for $15 in connection with
    the termination of one employee. During 2008, the Company
    repurchased 260&#160;shares of vested and unvested restricted
    stock for $99 in connection with the termination of two
    employees, and recognized additional stock-based compensation
    expense of $60 related to these repurchased shares.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-18
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders&#146;
    Deficit&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock
    Options</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company also issues common stock options under the terms of
    the Plan. The following summarizes stock option activity for the
    years ended December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="30%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Aggregate<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Intrinsic Value<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Remaining<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>as of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Range of Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Contractual<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Prices</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Term (In Years)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    593,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.04-$1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.49
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Options granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    559,724
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.95-$1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Options exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (30,106
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.04-$1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Options canceled
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (236,159
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.05-$1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.24
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    887,224
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.04-$1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.63
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    443
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vested and expected to vest at December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    807,128
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.04-$1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.60
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    426
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercisable as of December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    488,778
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.04-$1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.40
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    359
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2009, the Company approved a common stock option
    re-pricing program whereby 175,625 of the Company&#146;s
    outstanding stock option awards granted during the year ended
    December&#160;31, 2008 were repriced. Under this program,
    qualifying options with an original exercise price, ranging from
    $1.30 to $1.58 per share, were cancelled and reissued with an
    exercise price equal to the then-current estimated fair value of
    the Company&#146;s common stock, $1.02 per share. The
    incremental fair value resulting from the modification of
    unvested awards is being recognized as expense on a
    straight-line basis over the remaining requisite service period,
    which is the vesting period. The incremental fair value
    resulting from the modification of the vested awards was
    recognized as expense at the modification date. The incremental
    compensation expense of approximately $4 recognized in
    connection with this stock option modification was not material
    to the Company&#146;s financial statements. The modified options
    are included as cancellations and grants in the above table for
    the year ended December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The aggregate intrinsic value in the table above represents the
    difference between the exercise price of the underlying awards
    and the estimated fair value of the Company&#146;s common stock
    at December&#160;31, 2009 multiplied by the number of shares
    that would have been received by the option holders had all
    option holders exercised their options on December&#160;31,
    2009. The aggregate intrinsic value of options exercised during
    the years ended December&#160;31, 2007, 2008 and 2009 was $1,
    $47 and $24, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The total unrecognized compensation cost related to outstanding
    stock options is $326 at December&#160;31, 2009. These amounts
    are expected to be recognized over a weighted-average period of
    2.6&#160;years.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-19
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders&#146;
    Deficit&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes information about stock options
    outstanding and exercisable at December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="38%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options Exercisable</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Remaining<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
    <B>Range of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Contractual Life<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Exercise Price</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Yrs.)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.04&#160;&#151; $0.07
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    355,360
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    314,547
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.95&#160;&#151; $1.02
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    521,614
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169,196
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $1.30&#160;&#151; $1.58
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,035
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.36
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    887,224
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.63
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    488,778
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.40
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The fair value of common stock options for employees and
    non-employees is estimated on the date of grant using the
    Black-Scholes option-pricing model with the following
    assumptions used:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Estimated dividend yield
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected stock price volatility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted-average risk-free interest rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2.6%&#160;&#151; 3.6
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.9%&#160;&#151; 2.8
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected life of options (in years)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock-based compensation expense of $6, $56 and $140 was
    recorded during the years ended December&#160;31, 2007, 2008 and
    2009, respectively, related to the Company&#146;s outstanding
    stock options. The weighted average grant date fair value per
    share for stock options granted in 2007, 2008 and 2009 was
    $0.26, $1.12, and $0.91, respectively. The fair value of options
    that vested during the years ended December&#160;31, 2007, 2008
    and 2009 was $2, $53 and $196, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the year ended December&#160;31, 2008, the Company issued
    25,000&#160;shares of unrestricted common stock as employee
    compensation and recognized the estimated fair value of $40 as
    stock-based compensation expense during the period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Warrants</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2008 and 2009, the Company had warrants
    outstanding representing 443,361&#160;shares of common stock,
    with all of the warrants being exercisable as of
    December&#160;31, 2008 and 2009, to purchase the Company&#146;s
    common stock at $0.04 per share. These warrants expire during
    2011. The fair value of each warrant was estimated on the date
    of grant using the Black-Scholes option pricing model with the
    following weighted average assumptions: risk free interest rate
    of 3.47%; expected lives of five years; dividend yield of 0%;
    and volatility factor of 80%. All warrants were issued in
    conjunction with prior credit agreements that have since
    terminated and the fair value of the warrants was recorded as a
    financing cost and amortized to interest expense over the term
    of the related debt.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">9.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred income taxes reflect the net tax effects of temporary
    differences between the carrying amounts of assets and
    liabilities for financial reporting purposes and the amounts
    used for income tax purposes.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">9.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Significant components of the Company&#146;s deferred tax assets
    and liabilities as of December&#160;31, 2008 and 2009 are as
    follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred tax assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net operating loss carryforwards
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    74,493
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    73,587
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development tax credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,547
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Compensation accruals
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    182
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Lease termination
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Deferred revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,952
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    52
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    74
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total gross deferred tax assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,198
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: valuation allowance for deferred tax assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (78,527
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (77,552
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net deferred tax assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    781
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    646
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred tax liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Customer contracts
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    507
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    351
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Trade names
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    166
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    166
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Capitalized software costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    129
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total deferred tax liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    781
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    646
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net deferred tax asset (liability)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has established a valuation allowance against its
    net deferred tax assets due to the uncertainty surrounding the
    realization of such assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, the Company has federal and state
    net operating loss carryforwards of approximately
    $199.4&#160;million and $124.7&#160;million, respectively, which
    will begin to expire in 2014 for federal tax purposes and began
    to expire in 2009 for state tax purposes. The Tax Reform Act of
    1986 contains provisions that limit the ability of companies to
    utilize net operating loss carryforwards and tax credit
    carryovers in the case of certain events including significant
    changes in ownership. These limitations may significantly impact
    the amount of net operating loss and tax credit carryovers
    available to offset future taxable income. The Company believes
    that federal net operating loss carryforwards originating prior
    to July&#160;28, 2004 of approximately $185&#160;million have
    substantial limitations on future utilization.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-21
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">9.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Income taxes computed at the statutory federal income tax rate
    of 34% are reconciled to the provision (benefit) for income
    taxes for the years ended December 31:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="83%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    US federal tax at statutory rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State taxes (net of federal benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Change in valuation allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (39
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (37
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other nondeductible expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Increase in credit carryforwards
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the years ended December&#160;31, 2008 and 2009, the
    Company recorded a benefit from income taxes of $9 and $20 under
    the Housing and Economic Recovery Act of 2008 resulting from a
    research and development credit refund for credits generated
    prior to 2006. Due to the losses incurred in 2007 and the
    recording of the valuation allowance, no tax provision or
    benefit was recorded in the statement of operations for 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2008 and 2009, unrecognized tax benefits of
    $165, net of federal tax benefits, would have increased the
    Company&#146;s deferred tax assets with a corresponding increase
    to the valuation allowance if recognized. There would be no
    effect on the effective tax rate, net of valuation allowance,
    had these tax benefits been recognized as of December&#160;31,
    2008 and 2009. There were no gross increases or settlements of
    the Company&#146;s unrecognized tax benefits during the years
    ended December&#160;31, 2007, 2008, or 2009. The Company&#146;s
    open tax years that are subject to federal examination are
    inception through 2009.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">10.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Commitments
    and Contingencies</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Operating
    Leases</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company leases office space and certain equipment under
    non-cancelable operating leases. The Company did not have any
    capital lease obligations as of December&#160;31, 2009. The
    Company is committed to a lease agreement for office space for
    its headquarters through January 2014 and is also committed to
    another lease through February 2016. Future minimum lease
    payments required under leases in effect as of December&#160;31,
    2009 are as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="85%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Operating Leases</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    771
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    803
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2014 and thereafter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    361
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total future minimum lease payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,484
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rent expense is calculated on a straight-line basis over the
    term of the lease. Rent expense recognized under operating
    leases totaled approximately $652, $717 and $886 for the years
    ended December&#160;31, 2007, 2008 and 2009, respectively.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">10.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Commitments
    and Contingencies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Exit
    Event Bonus Plan</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2005, the Company established an Exit Event Bonus Plan. Under
    the terms of the Exit Event Bonus Plan, upon the occurrence of
    an Exit Event, as defined, a bonus pool will become due and
    payable to the participants in the Exit Event Bonus Plan.
    Participation in the Exit Event Bonus Plan will be limited to
    those employees selected by the Board and awarded units
    thereunder, which has not occurred as of December&#160;31, 2009.
    Accordingly, the Company has not recognized any stock-based
    compensation related to the Exit Event Bonus Plan, since a grant
    date has not occurred as of December&#160;31, 2009. In the case
    of an Exit Event that is an initial public offering, the bonus
    pool will consist of shares of common stock, the number of which
    is determined by multiplying (i)&#160;the applicable percentage,
    as defined, by (ii)&#160;the number of shares of common stock
    outstanding on a fully diluted basis immediately prior to the
    initial public offering. In the event of an Exit Event that is a
    sale of the Company, the bonus pool will consist of a portion of
    the aggregate consideration received by the Company
    <FONT style="white-space: nowrap">and/or</FONT> its
    stockholders in such sale, or the aggregate sale consideration,
    the amount of which is determined by multiplying (i)&#160;the
    applicable percentage, as defined, by (ii)&#160;the aggregate
    sale consideration less the amount of such aggregate sale
    consideration payable to the holders of preferred stock
    outstanding at the time of such sale. The applicable percentage
    ranges from 0% to 3%, depending upon the Company&#146;s
    valuation in the initial public offering or sale of the Company,
    as applicable. If the valuation is $210&#160;million or less,
    the applicable percentage will be 0%. If the valuation is
    $250&#160;million or greater, the applicable percentage will be
    3%. For valuations between $210&#160;million and
    $250&#160;million, the applicable percentage will be between 0%
    and 3% as determined on a proportional basis by multiplying 3%
    by a fraction where the numerator is the difference between the
    applicable valuation and $210&#160;million and the denominator
    is $40&#160;million. During the year ended December&#160;31,
    2009, the Exit Event Bonus Plan was amended to change the
    maximum &#147;applicable percentage&#148; to 3%.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Legal
    Contingencies</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On May&#160;22, 2009, a company filed a patent infringement
    action in the United States District Court for the Eastern
    District of Virginia against SciQuest, Inc. and other, unrelated
    companies. On August&#160;19, 2009, SciQuest, Inc. and the
    company entered into a settlement agreement in exchange for a
    one-time settlement payment. The settlement and related legal
    costs totaling $3,189 were recorded in operating expenses in the
    accompanying statement of operations for the year ended
    December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2001, the Company was named as a defendant in several
    securities class action complaints filed in the United States
    District Court for the Southern District of New York originating
    from its December 1999 initial public offering. The complaints
    alleged, among other things, that the prospectus used in the
    Company&#146;s initial public offering contained material
    misstatements or omissions regarding the underwriters&#146;
    allocation practices and compensation and that the underwriters
    manipulated the aftermarket for the Company&#146;s stock. These
    complaints were consolidated along with similar complaints filed
    against over 300 other issuers in connection with their initial
    public offerings. After several years of litigation and appeals
    related to the sufficiency of the pleadings and class
    certification, the parties agreed to a settlement of the entire
    litigation, which was approved by the Court on October&#160;5,
    2009. Notices of appeal to the Court&#146;s order have been
    filed by various appellants. The Company has not incurred
    significant costs to date in connection with its defense of
    these claims since this litigation is covered by its insurance
    policy. The Company believes it has sufficient coverage under
    its insurance policy to cover its obligations under the
    settlement agreement. Accordingly, the Company believes the
    ultimate resolution of these matters will not have an impact on
    its financial position and, therefore, it has not accrued a
    contingent liability as of December&#160;31, 2008 and 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    From time to time, the Company is subject to legal proceedings
    and claims that arise in the ordinary course of business. The
    Company records an accrual for a contingency when it is both
    probable that a liability has been incurred and the amount of
    the loss can be reasonably estimated. The Company does not
    currently believe the resolution of these actions will have a
    material adverse effect upon the Company&#146;s financial
    position, results of operations or cash flows.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-23
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SCIQUEST,
    INC.<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)</B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">10.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Commitments
    and Contingencies&#160;(continued)</FONT></B>
</TD>
</TR>

</TABLE>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Warranties
    and Indemnification</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s hosting service is typically warranted to
    perform in a manner consistent with general industry standards
    that are reasonably applicable under normal use and
    circumstances. The Company&#146;s arrangements also include
    certain provisions for indemnifying customers against
    liabilities if its products or services infringe a third
    party&#146;s intellectual property rights. The Company to date
    has not incurred costs to settle claims or pay awards under
    these indemnification obligations. The Company accounts for
    these indemnity obligations as contingencies and records a
    liability for these obligations when a loss is probable and
    reasonably estimable. To date, the Company has not incurred any
    material costs as a result of these indemnifications and has not
    accrued any liabilities related to the obligations in the
    accompanying financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company enters into service level agreements with its
    on-demand solution customers warranting certain levels of uptime
    reliability. To date, the Company has not incurred any material
    costs and has not accrued any liabilities related to such
    obligations.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">11.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Employee
    Benefit Plan</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has established a defined contribution plan (the
    Contribution Plan) which qualifies under Section&#160;401(k) of
    the Internal Revenue Code. All employees of the Company who have
    attained 21&#160;years of age are eligible for participation in
    the Contribution Plan after one month of employment. Under the
    Contribution Plan, participating employees may defer up to the
    Internal Revenue Service annual contribution limit. The Company
    may elect to make contributions to the Contribution Plan at its
    discretion. During the years ended December&#160;31, 2008 and
    2009, the Company paid $252 and $277, respectively, in
    discretionary contributions to the Contribution Plan. During the
    year ended December&#160;31, 2007, the Company did not make any
    discretionary contributions to the Contribution Plan.
</DIV>
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">12.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Subsequent
    Events</FONT></B>
</TD>
</TR>

</TABLE>
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company evaluated subsequent events through March&#160;25,
    2010, which is the date the financial statements were available
    to be issued.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On January&#160;21, 2010, in accordance with the Company&#146;s
    stock incentive plan, the Company issued 447,198 options to
    purchase common stock and 191,724&#160;shares of restricted
    stock to certain employees and a director of the Company at a
    grant price of $1.13 per share. Subscription notes receivable of
    $177 were executed in connection with the issuance of shares of
    restricted stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2010, the Company repurchased 287,087&#160;shares of
    vested restricted stock for $273 in connection with the
    termination of one employee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010, the Company fully repaid the outstanding balance
    under its line of credit of $350, plus accrued interest, and
    closed the credit agreement. In accordance with the terms of the
    credit agreement, the restricted cash balance became
    unrestricted upon the repayment and closing of the credit
    agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010, the outstanding warrants to purchase a 15% equity
    interest in an unaffiliated private company were purchased back
    by the unaffiliated company for total cash consideration of
    $1.7&#160;million, which will be recorded as a gain in the
    statement of operations for the three months ended
    March&#160;31, 2010.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010, the Board authorized the forgiveness of the
    outstanding balance under subscription note agreements issued by
    certain employees in connection with their previous purchases of
    the Company&#146;s restricted stock. A total of $1,016 was
    forgiven, which included the outstanding principal note amount
    plus accrued but unpaid interest, which will be recorded as
    additional compensation expense in the statement of operations
    for the three months ended March&#160;31, 2010.
</DIV>
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    <BR>
    F-24
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<P>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22513g2251311.gif" alt="(SCIQUEST)">
</DIV>
<P>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22513g2251300.gif" alt="(SCIQUEST LOGO)">
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt; font-family: Arial, Helvetica">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt; font-family: Arial, Helvetica">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 40%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 13pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: Arial, Helvetica">PROSPECTUS</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 13pt; font-family: Arial, Helvetica">[Month
    Day, Year]</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 40%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Thomas
    Weisel Partners LLC<BR>
    William Blair&#160;&#038; Company<BR>
    JMP Securities<BR>
    Pacific Crest Securities</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">Neither we nor any
    of the underwriters have authorized anyone to provide
    information different from that contained in this prospectus.
    When you make a decision about whether to invest in our common
    stock, you should not rely upon any information other than the
    information in this prospectus. Neither the delivery of this
    prospectus nor the sale of our common stock means that
    information contained in this prospectus is correct after the
    date of this prospectus. This prospectus is not an offer to sell
    or solicitation of an offer to buy these shares of common stock
    in any circumstances under which the offer or solicitation is
    unlawful.
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">Through and
    including&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 (the 25th&#160;day after the date of this prospectus), all
    dealers that effect transactions in shares of our common stock,
    whether or not participating in this offering, may be required
    to deliver a prospectus. This is in addition to the
    dealers&#146; obligation to deliver a prospectus when acting as
    underwriters and with respect to their unsold allotments or
    subscriptions.
    </FONT>
</DIV>
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<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PART&#160;II<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INFORMATION
    NOT REQUIRED IN PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;13.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    expenses of issuance and distribution.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table itemizes the expenses, other than the
    underwriting discounts and commissions, incurred by us in
    connection with the issuance and distribution of the securities
    being registered hereunder. All amounts shown are estimates
    except for the Securities and Exchange Commission, or SEC,
    registration fee, the Financial Industry Regulatory Authority,
    Inc., or FINRA, filing fee and the New York Stock Exchange, or
    NYSE, listing fee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="92%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SEC registration fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,348
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    FINRA filing fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    NYSE listing fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounting fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Printing and engraving expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transfer agent and registrar fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Director and officer liability insurance policy premium
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Miscellaneous expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be completed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;14.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of directors and officers.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a corporation organized under the laws of the State of
    Delaware. Section&#160;145 of the Delaware General Corporation
    Law provides that a corporation may indemnify any person who was
    or is a party or is threatened to be made a party to an action
    by reason of the fact that he or she was a director, officer,
    employee or agent of the corporation or is or was serving at the
    request of the corporation against expenses (including
    attorneys&#146; fees), judgments, fines and amounts paid in
    settlement actually and reasonably incurred by him or her in
    connection with such action if he or she acted in good faith and
    in a manner he or she reasonably believed to be in, or not
    opposed to, the best interests of the corporation and, with
    respect to any criminal action or proceeding, had no reasonable
    cause to believe his or her conduct was unlawful, except that,
    in the case of an action by or in right of the corporation, no
    indemnification may generally be made in respect of any claim as
    to which such person is adjudged to be liable to the
    corporation. Our amended and restated certificate of
    incorporation, in the form that will become effective upon the
    closing of this offering, provides that we will indemnify and
    advance expenses to our directors and officers (and may choose
    to indemnify and advance expenses to other employees and agents)
    to the fullest extent permitted by the Delaware General
    Corporation Law.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;102(b)(7) of the Delaware General Corporation Law
    permits a corporation to provide in its certificate of
    incorporation that a director of the corporation shall not be
    personally liable to the corporation or its stockholders for
    monetary damages for breach of fiduciary duties as a director,
    except for liability for any:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="3%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    breach of a director&#146;s duty of loyalty to the corporation
    or its stockholders;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    unlawful payment of dividends or redemption of shares;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;
</TD>
    <TD align="left">
    transaction from which the director derives an improper personal
    benefit.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, provides that our directors are not personally liable
    for breaches of fiduciary duties to the fullest extent permitted
    by the Delaware General Corporation Law.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;145(g) of the Delaware General Corporation Law and
    our amended and restated certificate of incorporation permit us
    to secure insurance on behalf of any officer, director, employee
    or other agent for any liability arising out of his or her
    actions in connection with their services to us, regardless of
    whether Delaware General Corporation Law permits
    indemnification. We maintain a directors&#146; and
    officers&#146; liability insurance policy.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As permitted by the Delaware General Corporation Law, we have
    entered into indemnity agreements with each of our directors
    that require us to indemnify such persons against various
    actions including, but not limited to, third-party actions where
    such director, by reason of his or her corporate status, is a
    party or is threatened to be made a party to an action, or by
    reason of anything done or not done by such director in any such
    capacity. We indemnify directors against all costs, judgments,
    penalties, fines, liabilities, amounts paid in settlement by or
    on behalf of such directors, and for any expenses actually and
    reasonably incurred by such directors in connection with such
    action, if such directors acted in good faith and in a manner
    they reasonably believed to be in or not opposed to the best
    interests of the corporation, and with respect to any criminal
    proceeding, had no reasonable cause to believe their conduct was
    unlawful. We also advance to our directors expenses (including
    attorney&#146;s fees) incurred by such directors in advance of
    the final disposition of any action after the receipt by the
    corporation of a statement or statements from directors
    requesting such payment or payments from time to time, provided
    that such statement or statements are accompanied by an
    undertaking, by or on behalf of such directors, to repay such
    amount if it shall ultimately be determined that they are not
    entitled to be indemnified against such expenses by the
    corporation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indemnification agreements set forth certain procedures that
    will apply in the event of a claim for indemnification or
    advancement of expenses, including, among others, provisions
    about providing notice to the corporation of any action in
    connection with which a director seeks indemnification or
    advancement of expenses from the corporation, and provisions
    concerning the determination of entitlement to indemnification
    or advancement of expenses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the closing of this offering, we plan to enter into an
    underwriting agreement, which will provide that the underwriters
    are obligated, under some circumstances, to indemnify our
    directors, officers and controlling persons against specified
    liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;15.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Recent
    sales of unregistered securities.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the three years preceding the filing of this registration
    statement, we issued the securities indicated below that were
    not registered under the Securities Act of 1933, as amended, or
    the Securities Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On July&#160;18, 2007, we issued 958&#160;shares of our
    preferred stock and 125,000&#160;shares of our common stock to
    Brad Stevens, our then Vice President of Marketing, for
    aggregate cash consideration of $100,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On September&#160;24, 2008, we issued an aggregate of
    25,000&#160;shares of our common stock for no cash consideration
    to the family members of a recently deceased employee in
    recognition and appreciation of his past services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The above-described sales of securities were made in reliance
    upon the exemption from registration requirements of the
    Securities Act available under Section&#160;4(2) of the
    Securities Act. These sales did not involve any underwriters,
    underwriting discounts or commissions or any public offering.
    The recipients of the securities in these transactions
    represented that they intended to acquire the securities for
    investment only and not with a view to, or for sale in
    connection with, any distribution thereof, and appropriate
    legends were affixed to the share certificates and instruments
    issued in such sales. We believe that the purchasers either
    received adequate information about us or had adequate access,
    through their relationships with us, to such information.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information on stock options
    issued by us to our employees in the three years preceding the
    filing of this registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="57%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Current<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Grant Date<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Grant Date<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date of Issuance</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options Granted</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Fair Value</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;18, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;23, 2008(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    147,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;23, 2008(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;22, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    349,099
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;22, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;21, 2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    447,198
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents stock options that were amended to reduce the
    exercise price for substantially all of the shares subject to
    stock options granted on January&#160;23, 2008 and July&#160;23,
    2008. The amendments reduced the exercise price of the
    previously granted options to $1.02 per share, which was the
    fair value of our common stock on the date of the amendments.
    The amendments did not affect the vesting provisions or the
    number of shares subject to any of the option awards. For
    financial statement reporting, we treat the previously granted
    options as being forfeited and the amendments as new option
    grants.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No consideration was paid to us by any recipient of any of the
    foregoing options for the grant of such options. All of the
    stock options described above were granted under our 2004 Stock
    Incentive Plan to our officers, directors and employees in
    reliance upon an available exemption from the registration
    requirements of the Securities Act, including those contained in
    Rule&#160;701 promulgated under Section&#160;3(b) of the
    Securities Act. Among other things, we relied on the fact that,
    under Rule&#160;701, companies that are not subject to the
    reporting requirements of Section&#160;13 or Section&#160;15(d)
    of the Securities Exchange Act of 1934, as amended, or the
    Exchange Act, are exempt from registration under the Securities
    Act with respect to certain offers and sales of securities
    pursuant to &#147;compensatory benefit plans&#148; as defined
    under that rule. We believe that our 2004 Stock Incentive Plan
    qualifies as a compensatory benefit plan.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information on shares of common
    stock issued to our employees and former employees upon the
    exercise of stock options in the three years preceding the
    filing of this registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Per Share<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date of Issuance</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Issued</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    March&#160;28, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;11, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    August&#160;27, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,421
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    August&#160;28, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    September&#160;25, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    November&#160;30, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December&#160;14, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;16, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,260
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    March&#160;8, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,199
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    March&#160;19, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,063
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    March&#160;26, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,231
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    April&#160;1, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    April&#160;23, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July&#160;17, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    October&#160;1, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December&#160;1, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December&#160;10, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    563
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    February&#160;18, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    March&#160;11, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    April&#160;3, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,599
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    May&#160;8, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,105
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    August&#160;6, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.95
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    November&#160;16, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    826
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December&#160;29, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,451
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of the shares of common stock issued upon the exercise of
    stock options described above were issued in reliance upon an
    available exemption from the registration requirements of the
    Securities Act, including those contained in Rule&#160;701
    promulgated under Section&#160;3(b) of the Securities Act. Among
    other things, we relied on the fact that, under Rule&#160;701,
    companies that are not subject to the reporting requirements of
    Section&#160;13 or Section&#160;15(d) of the Exchange Act are
    exempt from registration under the Securities Act with respect
    to certain offers and sales of securities pursuant to
    &#147;compensatory benefit plans&#148; as defined under that
    rule. We believe that our 2004 Stock Incentive Plan qualifies as
    a compensatory benefit plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information on restricted stock
    awards issued by us to our employees and
    <FONT style="white-space: nowrap">non-employee</FONT>
    directors in the three years preceding the filing of this
    registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="63%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Grant Date<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Grant Date<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date of Issuance</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Issued</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Purchase Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Fair Value</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;23, 2008(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    584,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.30
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;22, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    318,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January&#160;21, 2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    191,724
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents restricted stock awards that were amended to reduce
    the purchase price for such shares issued on January&#160;23,
    2008. The amendments reduced the purchase price of the
    previously issued restricted stock to </TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    $1.02 per share, which was the fair value of our common stock on
    the date of the amendments. The amendments did not affect the
    vesting provisions or the number of shares subject to any of the
    restricted stock awards.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of the restricted stock awards described above were granted
    under our 2004 Stock Incentive Plan to our officers, directors
    and employees in reliance upon an available exemption from the
    registration requirements of the Securities Act, including those
    contained in Rule&#160;701 promulgated under Section&#160;3(b)
    of the Securities Act. Among other things, we relied on the fact
    that, under Rule&#160;701, companies that are not subject to the
    reporting requirements of Section&#160;13 or Section&#160;15(d)
    of the Exchange Act are exempt from registration under the
    Securities Act with respect to certain offers and sales of
    securities pursuant to &#147;compensatory benefit plans&#148; as
    defined under that rule. We believe that our 2004 Stock
    Incentive Plan qualifies as a compensatory benefit plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;16.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Exhibits
    and financial statement schedules.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;<I>Exhibits.</I>&#160;&#160;Reference is made to the
    Exhibit&#160;Index attached hereto, which is made a part hereof
    by reference thereto.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;<I>Financial statement schedules.</I>&#160;&#160;See
    <FONT style="white-space: nowrap">page&#160;F-1</FONT>
    for an index of the financial statements and schedules that are
    being filed as part of this Registration Statement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;17.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Undertakings.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;Insofar as indemnification for liabilities arising
    under the Securities Act may be permitted to directors, officers
    and controlling persons of the registrant pursuant to the
    foregoing provisions, or otherwise, the registrant has been
    advised that in the opinion of the SEC such indemnification is
    against public policy as expressed in the Securities Act and is,
    therefore, unenforceable. In the event that a claim for
    indemnification against such liabilities (other than the payment
    by the registrant of expenses incurred or paid by a director,
    officer or controlling person of the registrant in the
    successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered, the registrant
    will, unless in the opinion of its counsel the matter has been
    settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Act and will be governed by the final adjudication of such
    issue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;The undersigned registrant hereby undertakes to provide
    to the underwriters at the closing specified in the underwriting
    agreement, certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (i)&#160;For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&#160;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&#160;424(b)(1) or (4)&#160;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (ii)&#160;For the purposes determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered herein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SIGNATURES</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, as
    amended, the registrant has duly caused this registration
    statement to be signed on its behalf by the undersigned,
    thereunto duly authorized, in the city of Cary, State of North
    Carolina, on March&#160;26, 2010.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 50%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>SciQuest, Inc.</B>
</DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="3%"></TD>
    <TD width="47%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    By:&#160;
</TD>
    <TD align="center">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Stephen
    J. Wiehe</DIV>
</TD>
</TR>

</TABLE>

<DIV style="font-size: 2pt; margin-left: 53%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV align="center" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stephen J. Wiehe
</DIV>

<DIV align="center" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    President and Chief Executive Officer
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">POWER OF
    ATTORNEY</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each person whose signature appears below hereby constitutes and
    appoints Stephen J. Wiehe and Rudy C. Howard, and each of them,
    as his attorney-in-fact and agent, with full power of
    substitution and resubstitution for him in any and all
    capacities, to sign any or all amendments or post-effective
    amendments to this registration statement, or any registration
    statement for the same offering that is to be effective upon
    filing pursuant to Rule&#160;462(b) under the Securities Act of
    1933, and to file the same, with exhibits thereto and other
    documents in connection therewith or in connection with the
    registration of the shares of common stock under the Securities
    Exchange Act of 1934, as amended, with the Securities and
    Exchange Commission, granting unto such attorney-in-fact and
    agent full power and authority to do and perform each and every
    act and thing requisite and necessary in connection with such
    matters and hereby ratifying and confirming all that such
    attorney-in-fact and agent or his substitutes may do or cause to
    be done by virtue hereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, as
    amended, this registration statement has been signed by the
    following persons in the capacities and on the dates indicated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="31%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="45%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Signature</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Title</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 12pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Stephen
    J. Wiehe</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Stephen
    J. Wiehe
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    President, Chief Executive Officer and Director <BR>
    (Principal Executive Officer)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    March&#160;26, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Rudy
    C. Howard</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Rudy
    C. Howard
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Chief Financial Officer <BR>
    (Principal Financial and Accounting Officer)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    March&#160;26, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Noel
    J. Fenton</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Noel
    J. Fenton
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Chairman of the Board of Directors
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    March&#160;26, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Daniel
    F. Gillis</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Daniel
    F. Gillis
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    March&#160;26, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Jeffrey
    T. Barber</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Jeffrey
    T. Barber
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    March&#160;26, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Timothy
    J. Buckley</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Timothy
    J. Buckley
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    March&#160;26, 2010
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXHIBIT&#160;LIST</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="89%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Exhibit No.</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Underwriting Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation of SciQuest,
    Inc. to be effective immediately prior to the closing of the
    offering
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Bylaws of SciQuest, Inc. to be effective
    immediately prior to the closing of the offering
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Specimen Certificate representing shares of common stock of
    SciQuest, Inc.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Stockholders Agreement, by and among SciQuest, Inc. and certain
    of its stockholders, dated July&#160;28, 2004
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of Morris, Manning&#160;&#038; Martin, LLP
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    SciQuest, Inc. 2004 Stock Incentive Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No.&#160;2 to SciQuest, Inc. 2004 Stock Incentive
    Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Stock Option Grant Certificate under the SciQuest, Inc.
    2004 Stock Incentive Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Management Subscription Agreement under the SciQuest,
    Inc. 2004 Stock Incentive Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amended and Restated Exit Event Bonus Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amendment No.&#160;1 to Second Amended and Restated Exit Event
    Bonus Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement by and between SciQuest, Inc. and Stephen
    J. Wiehe, dated February&#160;5, 2002**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Change of Control Agreement by and between SciQuest, Inc. and
    Stephen J. Wiehe, dated January&#160;1, 2004**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Change of Control Agreement by and between SciQuest, Inc. and
    James B. Duke, dated January&#160;1, 2004**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Change of Control Agreement by and between SciQuest, Inc. and
    Rudy C. Howard, dated January&#160;1, 2010**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Subscription Agreement by and between
    SciQuest, Inc. and Daniel F. Gillis, dated January&#160;21,
    2010**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .12
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Subscription Agreement by and between SciQuest, Inc. and Daniel
    F. Gillis, dated January&#160;21, 2010**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .13*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Indemnification Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .14
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Office Lease by and between SciQuest, Inc. and Duke Realty
    Limited Partnership, dated May&#160;17, 2005
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .15
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Office Lease by and between SciQuest, Inc.
    and Duke Realty Limited Partnership, dated February&#160;21, 2008
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .16
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amendment to Office Lease by and between SciQuest, Inc.
    and Duke Realty Limited Partnership, dated February&#160;27, 2008
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .17
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Assignment of Lease by and between SciQuest, Inc. and Kroy
    Building Products, Inc., dated February&#160;11, 2008
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .18
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Office Lease by and between Duke Realty Limited Partnership and
    Kroy Building Products, Inc., dated September&#160;29, 2006
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .19
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amendment to Office Lease by and between SciQuest, Inc.
    and Duke Realty Limited Partnership, dated February&#160;21, 2008
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Ernst&#160;&#038; Young LLP
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Morris, Manning&#160;&#038; Martin, LLP (included in
    Exhibit&#160;5.1)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    24
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Power of Attorney (included on
    <FONT style="white-space: nowrap">Page&#160;II-6)</FONT>
</TD>
</TR>
</TABLE>

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    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    *&#160;</TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    ** </TD>
    <TD></TD>
    <TD valign="bottom">
    Indicates management contract or compensatory plan or
    arrangement.</TD>
</TR>

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sv1
Table of Contents
As filed with the Securities and Exchange Commission on
    March 26, 2010
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE
    COMMISSION
Washington, D.C.
    20549
Form S-1
REGISTRATION
    STATEMENT
UNDER THE SECURITIES ACT OF
    1933
SCIQUEST, INC.
(Exact name of registrant as
    specified in its charter)
Delaware
7372
56-2127592
(State or other Jurisdiction
    of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
6501 Weston Parkway, Suite 200
Cary, North Carolina 27513
(919) 659-2100
(Address, including zip
    code, and telephone number,
including area code, of registrant's principal executive
    offices)
Stephen J. Wiehe
President and Chief Executive Officer
SciQuest, Inc.
6501 Weston Parkway, Suite 200
Cary, North Carolina 27513
(919) 659-2100
(919) 659-2199
(Facsimile)
(Name, address, including
    zip code, and telephone number,
including area code, of agent
    for service)
Copies to:
Grant W. Collingsworth, Esq.
Seth K. Weiner, Esq.
Morris, Manning & Martin, LLP
3343 Peachtree Road, N.E.
Atlanta, GA 30326
Phone:
(404) 233-7000
Facsimile:
(404) 365-9532
William B. Asher, Jr., Esq.
Lee S. Feldman, Esq.
Choate, Hall & Stewart LLP
Two International Place
Boston, MA 02110
Phone: (617) 248-5000
Facsimile: (617) 248-4000
Approximate date of commencement of proposed sale to the public:
    As soon as practicable after the effectiveness of this
    registration statement.
If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule 415 under the Securities Act of 1933, check the
    following
    box:
o
If this Form is filed to register additional securities for an
    offering pursuant to Rule 462(b) under the Securities Act,
    check the following box and list the Securities Act registration
    statement number of the earlier effective registration statement
    for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(c) under the Securities Act, check the following
    box and list the Securities Act registration number of the
    earlier effective registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    "large accelerated filer," "accelerated
    filer" and "smaller reporting company" in Rule
12b-2
of the
    Exchange Act. (Check one):
Large
    accelerated
    filer
o
Accelerated
    filer
o
Non-accelerated
filer
þ
Smaller reporting
    company
o
(Do not check if a smaller
    reporting company)
CALCULATION
    OF REGISTRATION FEE
Proposed Maximum
Amount of
Title of Securities
Aggregate
Registration
to be Registered
Offering Price(1)
Fee
Shares of Common Stock, $0.001 par value per share
$75,000,000
$5,348
(1)
Estimated solely for the purpose of
    calculating the registration fee pursuant to Rule 457(o)
    under the Securities Act of 1933, as amended.
Includes shares of common stock that the underwriters have the
    option to purchase solely to cover overallotments, if any.
The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant files a further amendment which
    specifically states that this Registration Statement will
    thereafter become effective in accordance with Section 8(a)
    of the Securities Act of 1933 or until this Registration
    Statement becomes effective on such dates as the Commission,
    acting pursuant to said Section 8(a), may determine.
Table of Contents
The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is declared effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers
to buy these securities in any state where the offer or sale is
not permitted.
SUBJECT
    TO COMPLETION, DATED MARCH 26, 2010
PRELIMINARY
    PROSPECTUS
Shares
Common
    Stock
$     
    per share
SciQuest, Inc. is
    selling           shares
    of our common stock, and the selling stockholders identified in
    this prospectus are selling an
    additional           shares.
    We will not receive any of the proceeds from the sale of the
    shares of the selling stockholders. We have granted the
    underwriters a
30-day
option to purchase up to an
    additional           shares
    of common stock from us, and the selling stockholders have
    granted the underwriters a 30-day option to purchase up to an
    additional           shares
    of common stock, to cover over-allotments, if any.
This is an initial
    public offering of our common stock. We currently expect the
    initial public offering price to be between
    $      and
    $      per share. We have applied for
    approval for quotation of our common stock on the New York Stock
    Exchange, or NYSE, under the symbol "SQI."
INVESTING
    IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
    BEGINNING ON PAGE 9.
Per
    Share
Total
Initial public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to us
$
$
Proceeds, before expenses, to the selling stockholders
$
$
Neither
    the Securities and Exchange Commission nor any state securities
    commission has approved or disapproved of these securities or
    passed upon the adequacy or accuracy of this prospectus. Any
    representation to the contrary is a criminal offense.
Thomas
    Weisel Partners LLC
William
    Blair & Company
JMP
    Securities
Pacific
    Crest Securities
The
    date of this prospectus
    is          ,
    2010.
Table of Contents
TABLE OF
    CONTENTS
Page
Prospectus Summary
1
Risk Factors
9
Special Note Regarding Forward-Looking Statements
    and Industry Data
24
Use of Proceeds
25
Dividend Policy
26
Capitalization
27
Dilution
28
Selected Financial Data
30
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
33
Our Business
49
Management
63
Executive Compensation
69
Certain Relationships and Related Party
    Transactions
84
Principal and Selling Stockholders
86
Description of Capital Stock
88
Shares Eligible for Future Sale
92
Material U.S. Federal Income Tax Considerations
    for
Non-U.S.
Holders of Our Common Stock
94
Underwriting
98
Legal Matters
101
Experts
101
Where You Can Find More Information
101
Reports to Stockholders
101
Index to Financial Statements
F-1
EX-4.2
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-10.12
EX-10.14
EX-10.15
EX-10.16
EX-10.17
EX-10.18
EX-10.19
EX-23.1
You should rely only on the information contained in this
    prospectus, any free writing prospectus prepared by us or
    information to which we have referred you. We have not, and the
    underwriters have not, authorized anyone to provide you with
    additional information or information different from that
    contained in this prospectus. This prospectus is not an offer to
    sell, nor is it seeking offers to buy, shares of our common
    stock in jurisdictions where offers and sales are not permitted.
    The information contained in this prospectus is accurate only as
    of the date of this prospectus, regardless of the time of
    delivery of this prospectus or of any sale of shares of our
    common stock. Our business, prospects, financial condition and
    results of operations may have changed since that date.
Through and
    including          ,
    2010 (the 25th day after the date of this prospectus), all
    dealers that effect transactions in shares of our common stock,
    whether or not participating in this offering, may be required
    to deliver a prospectus. This is in addition to the
    dealers' obligation to deliver a prospectus when acting as
    underwriters and with respect to their unsold allotments or
    subscriptions.
This prospectus contains registered and unregistered
    trademarks, service marks, trade names and references to
    intellectual property owned by other companies. All trademarks,
    service marks and trade names appearing herein are the property
    of their respective holders. We obtained industry and market
    data used throughout this prospectus through our research,
    surveys and studies conducted by third parties and industry and
    general publications. We have not independently verified market
    and industry data from third-party sources.
Table of Contents
PROSPECTUS
    SUMMARY
The following summary highlights information contained
    elsewhere in this prospectus. This summary is not complete and
    does not contain all of the information that you should consider
    before investing in our common stock. You should read the entire
    prospectus, including the section entitled "Risk
    Factors," before making a decision to invest in shares of
    our common stock. In this prospectus, references to "our
    company," "we," "us," and
    "our" mean SciQuest, Inc., a Delaware corporation.
    Unless otherwise indicated, the information contained in this
    prospectus assumes (1) the shares of common stock to be
    sold in this offering are sold at
    $      per share and (2) no
    exercise by the underwriters of their overallotment option to
    purchase up to an
    additional           shares
    of common stock from us and the selling stockholders.
Our
    Business
Overview
SciQuest provides a leading on-demand strategic procurement and
    supplier enablement solution that integrates customers with
    their suppliers to improve procurement of indirect goods and
    services. Our on-demand software enables organizations to
    realize the benefits of strategic procurement by identifying and
    establishing contracts with preferred suppliers, driving spend
    to those contracts and promoting process efficiencies through
    electronic transactions. Using our managed SciQuest Supplier
    Network, our customers do business with more than 30,000 unique
    suppliers and spend billions of dollars annually.
Our current target markets are higher education, life sciences,
    healthcare and state and local governments. We tailor our
    solution for each of the vertical markets we serve by offering
    industry-specific functionality, content and supplier
    connections. We serve more than 160 customers operating in 16
    countries and offer our solution in five languages and 22
    currencies. Our value proposition has led to an average annual
    customer renewal rate of over 94% over the last three years. On
    a dollar basis, our annual renewal rate has been 106% over this
    same time period solely as a result of pricing increases at the
    time of renewal. We believe our renewal rates are among the
    highest for on-demand model companies.
Customers pay us subscription fees and implementation service
    fees for the use of our solution under multi-year contracts that
    are generally three to five years in length. We typically
    receive subscription payments annually in advance and
    implementation service fees as the services are performed,
    typically within the first three to eight months of contract
    execution. Our revenues have grown to $36.2 million in 2009
    from $20.1 million in 2007, and our Adjusted Free Cash Flow
    increased to $6.8 million from $3.6 million during
    this period. Adjusted Free Cash Flow is not determined in
    accordance with U.S. generally accepted accounting
    principles, or GAAP, and is not a substitute for or superior to
    financial measures determined in accordance with GAAP. For
    further discussion regarding Adjusted Free Cash Flow and a
    reconciliation of Adjusted Free Cash Flow to cash flows from
    operations, see footnote 4 to the table in "Summary
    Financial Data" included elsewhere in this prospectus
    summary.
Industry
    Background
Indirect goods and services procurement is the purchase of the
day-to-day
necessities of the workplace such as office supplies, laboratory
    supplies, furniture, computers, MRO (maintenance, repair and
    operations) supplies, and food and beverages. Indirect goods and
    services tend to be low cost but are usually bought in high
    volumes by a wide variety of employees throughout an
    organization.
Our target market for strategic procurement of indirect goods
    and services is a subset of the broader supply procurement and
    sourcing application chain management market, which AMR Research
    estimates in a July 2009 report entitled "The Global
    Enterprise Application Market Sizing Report,
2008-2013"
as a $2.9 billion global opportunity in 2010, growing at an
    8% compounded annual growth rate from 2010 through 2013. Based
    on our own internal analysis, we believe that our current
    addressable market is approximately $1.0 billion within our
    current target markets as follows: higher education
    ($324 million), life sciences ($292 million),
    healthcare ($176 million) and state and local government
    ($244 million).
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The procurement process for indirect goods and services is often
    not well-managed or controlled. Characteristics of traditional
    procurement processes include:
•
Lack of clearly defined procurement guidelines and awareness
    of preferred suppliers.
In many cases, because
    processes are cumbersome, ill-defined and time consuming, many
    employees have difficulty following the procurement approval
    processes and fail to purchase from preferred suppliers.
•
Limited ability to analyze spend.
Given the
    lack of automation and centralized reporting, organizations have
    difficulty analyzing what they are buying from suppliers.
•
Dissatisfied employees.
Manual, non-integrated
    processes often lead to excess costs, delays and errors,
    resulting in a frustrating experience for the employee.
Efforts to automate the procurement function for indirect goods
    and services initially consisted of add-on modules to enterprise
    resource planning, or ERP, systems and first generation
    procurement systems developed 10 to 15 years ago. The
    introduction of Software-as-a-Service, or SaaS, strategic
    procurement solutions within the past few years has enabled
    buyers and suppliers to transact with each other online more
    efficiently. However, these offerings still suffer from the fact
    that they are primarily horizontal solutions that neither
    provide functionality and content specific to vertical markets
    nor have a robust supplier network that drives economies of
    scale.
Our
    Solution
We offer an on-demand strategic procurement and supplier
    enablement solution that enables organizations to more
    efficiently source indirect goods and services, manage their
    spend and obtain the benefits of compliance with purchasing
    policies and negotiating power with suppliers. Our on-demand
    strategic procurement software suite coupled with our managed
    supplier network forms our integrated solution, which is
    designed to achieve rapid and sustainable savings. Our solution
    provides customers with a set of products and services that
    enable them to optimize existing procurement processes by
    automating the entire
source-to-settle
process. The SciQuest Supplier Network acts as a communications
    hub that connects our customers to their suppliers.
Our solution provides the following key benefits:
•
Significant return on investment
    ("ROI").
Our customers are able to
    achieve significant returns on investment through savings from
    negotiated discounts, automated requisition/order processing,
    contract lifecycle management, settlement automation and
    sourcing.
•
Content and functionality specific to our vertical
    markets.
Our software has specific configurable
    content and functionality that meets the unique needs of our
    targeted vertical markets.
•
Easier access to customers' supplier
    network.
Customers can easily access their
    preferred suppliers using a single solution and avoid the costs
    and inefficiencies associated with traditional
one-to-one
supplier management.
•
Greater adoption by employees.
Our intuitive
    shopping interface provides employees with easy and automated
    visibility and access to goods and services.
•
Greater adoption by suppliers.
Suppliers
    typically are motivated to join our network due to ease of
    enablement and lack of supplier fees.
•
Visibility into spending patterns and
    activity.
Our solution provides granular detail
    into user spending behavior and provides detailed analytics that
    allow organizations to continually improve their purchasing
    practices.
•
Ease of deployment via integration with existing
    systems.
Our highly-configurable solution
    integrates with many leading ERP systems to speed deployment and
    facilitate the interchange of transaction, accounting,
    settlement and user data.
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Our
    Business Strengths
In addition to our differentiated customer solution, we believe
    our market approach and business model offer specific benefits
    that are instrumental to our successful growth. These include:
•
Focus on customer value.
We focus extensively
    on ensuring that customers achieve maximum benefit from our
    solution, and we proactively engage with our customers to
    continually improve our software and services.
•
Expertise in our targeted vertical
    markets.
Our domain expertise allows us to
    provide our customers with a highly tailored and differentiated
    solution that is difficult for our competitors to replicate.
•
Extensive content and supplier
    network.
Suppliers are not charged any fees or
    transaction costs for purchases consummated through the SciQuest
    Supplier Network, which facilitates the growth of our network of
    over 30,000 unique suppliers servicing the higher education,
    life sciences, healthcare and state and local government markets.
•
Ability to manage costs.
Our culture of lean
    management principles that extends from our senior management
    throughout our company has kept our capital expenditures low and
    helped lower our operating expenses as a percentage of revenues
    from 95% in 2007 to 72% in 2009.
•
High visibility business model.
The recurring
    nature of our revenues provides high visibility into future
    performance, and the upfront payments result in cash flow
    generation in advance of revenue recognition. For each of the
    last three years, greater than 80% of our revenues were
    recognized from contracts that were in place at the beginning of
    the year.
Our
    Growth Strategy
We seek to become the leading provider of strategic procurement
    solutions for indirect goods and services. Our key strategic
    initiatives include:
•
Further penetrating our existing vertical
    markets.
We will continue to focus our efforts on
    acquiring new customers in our newer healthcare and state and
    local government markets while increasing our emphasis on
    mid-sized customer acquisition opportunities in our core higher
    education and life sciences markets.
•
Capitalizing on cross-selling opportunities into our
    installed customer base.
We plan to develop
and/or
acquire additional modules and products to sell to our existing
    customers by leveraging our position as a trusted strategic
    procurement solution vendor in our targeted verticals.
•
Selectively expanding into new vertical
    markets.
We may pursue new vertical expansion
    through internal product development, sales and marketing
    initiatives or strategic acquisitions.
•
Investing in international expansion to acquire new
    customers.
We intend to continue our
    international expansion by increasing our international direct
    sales force and establishing additional third-party sales
    relationships.
•
Selectively pursuing acquisitions.
We may
    pursue acquisitions to accelerate our growth, enhance the
    capabilities of our existing solution, broaden our solution
    offerings or expand into new verticals or geographies.
Risks
    That We Face
Our business is subject to a number of risks that you should
    understand before making an investment decision. These risks are
    discussed more fully in the "Risk Factors" section of
    this prospectus and include but are not limited to the following:
•
our failure to sustain our historical renewal rates, pricing and
    terms of our customer contracts would adversely affect our
    operating results;
•
if we are unable to attract new customers, or if our existing
    customers do not purchase additional products or services, the
    growth of our business and cash flows will be adversely affected;
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•
continued economic weakness and uncertainty, which may result in
    a significant reduction in spending in our target markets, could
    adversely affect our business, lengthen our sales cycles and
    make it difficult for us to forecast operating results
    accurately;
•
we may experience service failures or interruptions due to
    defects in the hardware, software, infrastructure, third-party
    components or processes that comprise our solution, any of which
    could adversely affect our business;
•
if we do not successfully maintain the SciQuest brand in our
    existing vertical markets or successfully market the SciQuest
    brand in new vertical markets, our revenues and earnings could
    be materially adversely affected;
•
if we are unable to adapt our products and services to rapid
    technological change, our revenues and profits could be
    materially and adversely affected;
•
the market for on-demand strategic procurement and supplier
    enablement solutions is at a relatively early stage of
    development; if the market for our solution develops more slowly
    than we expect, our revenues may decline or fail to grow and we
    may incur operating losses; and
•
we have been, and may continue to be, subject to claims that we
    or our technologies infringe upon the intellectual property or
    other proprietary rights of a third party. Any such claims may
    require us to incur significant costs, to enter into royalty or
    licensing agreements or to develop or license substitute
    technology, which may harm our business.
Our
    Corporate Information
We were originally incorporated in November 1995. Our principal
    executive offices are located at 6501 Weston Parkway,
    Suite 200, Cary, North Carolina 27513, and our telephone
    number is
(919) 659-2100.
Our website address is www.sciquest.com. Information contained
    on our website is not a part of this prospectus and the
    inclusion of our website address in this prospectus is an
    inactive textual reference only.
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THE
    OFFERING
Common stock offered by us
shares
Common stock offered by selling stockholders
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
shares
Use of proceeds
We estimate that the net proceeds from our sale of shares of
    common stock in this offering will be approximately
    $      million, or approximately
    $      million if the underwriters
    exercise their
over-allotment
option in full. This estimate is based upon an assumed initial
    public offering price of $      per
    share, the mid-point of our filing range, less estimated
    underwriting discounts and commissions and offering expenses
    payable by us. We will not receive any proceeds from the sale of
    shares of our common stock by the selling stockholders.
We intend to use approximately $35.5 million of these net
    proceeds to redeem all outstanding shares of our preferred
    stock. We intend to use the remaining net proceeds for working
    capital and general corporate purposes. We may also use a
    portion of the proceeds to acquire complementary businesses,
    products or technologies. We have no agreements or commitments
    with respect to any acquisitions at this time. By establishing a
    public market for our common stock, this offering is also
    intended to facilitate our future access to public markets.
Pending the uses described above, we intend to invest the net
    proceeds of this offering in short- to medium-term,
    investment-grade, interest-bearing securities, certificates of
    deposit or direct or guaranteed obligations of the U.S.
    government.
Symbol on the New York Stock Exchange
''SQI"
The number of shares of our common stock outstanding after this
    offering is based on 28,684,596 shares outstanding as of
    December 31, 2009 and excludes:
•
an aggregate of 887,224 shares issuable upon the exercise
    of then outstanding options at a weighted average exercise price
    of $0.63 per share;
•
an aggregate of 443,361 shares issuable upon the exercise
    of then outstanding warrants at a weighted average exercise
    price of $0.04 per share;
•
an aggregate of 1,107,623 shares reserved for issuance
    under our 2004 Stock Incentive Plan, subject to increase on an
    annual basis and subject to increase for shares subject to
    awards under our prior equity plans that expire unexercised or
    otherwise do not result in the issuance of shares;
•
an assumed maximum
    of           shares
    issuable for no cash consideration under our Exit Event Bonus
    Plan immediately following completion of this offering; and
•
the           shares
    of common stock subject to the underwriters' over-allotment
    option.
Except as otherwise indicated, information in this prospectus
    assumes no exercise of the underwriters' overallotment
    option to purchase up
    to          
    additional shares of our common stock from us and up
    to          
    additional shares of common stock from the selling stockholders.
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SUMMARY
    FINANCIAL DATA
The following tables summarize the financial data for our
    business. You should read this summary financial data in
    conjunction with "Selected Financial Data,"
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" and our financial
    statements and related notes, all included elsewhere in this
    prospectus.
The summary financial data under the heading "Statements of
    Operations Data" for each of the three years ended
    December 31, 2007, 2008 and 2009, under the heading
    "Operating Data" relating to Adjusted EBITDA and
    Adjusted Free Cash Flow for each of the three years ended
    December 31, 2007, 2008 and 2009 and under the heading
    "Balance Sheet Data" as of December 31, 2009 have
    been derived from our audited annual financial statements, which
    are included elsewhere in this prospectus.
The pro forma balance sheet data as of December 31, 2009 is
    unaudited and gives effect to (1) our receipt of estimated
    net proceeds of $      million
    from this offering, based on an assumed initial public offering
    price of $      per share, which is the
    mid-point of our filing range, after deducting estimated
    underwriting discounts and offering expenses payable by us, and
    (2) the redemption of all of our outstanding preferred
    stock immediately after the consummation of this offering. The
    pro forma summary financial data is not necessarily indicative
    of what our financial position or results of operations would
    have been if this offering had been completed as of the date
    indicated, nor is this data necessarily indicative of our
    financial position or results of operations for any future date
    or period.
Year Ended December 31,
2007
2008
2009
(In thousands,
except per share data)
Statements of Operations Data:
Revenues
$
20,107
$
29,784
$
36,179
Cost of revenues(1)(2)
6,101
6,723
7,494
Gross profit
14,006
23,061
28,685
Operating expenses:(1)
Research and development
6,908
8,307
8,059
Sales and marketing
7,213
9,280
10,750
General and administrative
2,717
3,942
3,703
Litigation settlement and associated legal expenses
—
—
3,189
Amortization of intangible assets
2,286
537
403
Total operating expenses
19,124
22,066
26,104
Income (loss) from operations
(5,118
)
995
2,581
Interest and other income, net
118
113
27
Income (loss) before income taxes
(5,000
)
1,108
2,608
Income tax benefit
—
9
20
Net income (loss)
(5,000
)
1,117
2,628
Dividends on redeemable preferred stock
2,207
2,395
2,595
Net income (loss) attributable to common stockholders
$
(7,207
)
$
(1,278
)
$
33
Net income (loss) attributable to common stockholders per share:
Basic
$
(0.27
)
$
(0.05
)
$
0.00
Diluted
$
(0.27
)
$
(0.05
)
$
0.00
Weighted average shares outstanding used in computing per share
    amounts:
Basic
26,985
27,600
28,122
Diluted
26,985
27,600
28,900
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Year Ended December 31,
2007
2008
2009
(In thousands)
Operating Data:
Adjusted EBITDA(3)
$
(2,099
)
$
2,666
$
7,349
Adjusted Free Cash Flow(4)
$
3,636
$
6,003
$
6,785
As of December 31, 2009
Actual
Pro Forma
(In thousands)
Balance Sheet Data:
(5)
Cash and cash equivalents
$
17,132
Working capital excluding deferred revenues
19,785
Total assets
37,765
Deferred revenues
34,275
Redeemable preferred stock
34,072
Total stockholders' equity (deficit)
(33,959
)
(1)
Amounts include stock-based compensation expense, as follows:
Year Ended December 31,
2007
2008
2009
(In thousands)
Cost of revenues
$
3
$
25
$
33
Research and development
56
53
86
Sales and marketing
42
150
83
General and administrative
9
158
163
$
110
$
386
$
365
(2)
Cost of revenues includes amortization of capitalized software
    development costs of:
Year Ended December 31,
2007
2008
2009
(In thousands)
Amortization of capitalized software development costs
$
114
$
154
$
167
(3)
EBITDA consists of net income (loss) plus depreciation and
    amortization, less interest and other income, net and less
    income tax benefit. Adjusted EBITDA consists of EBITDA plus our
    non-cash, stock-based compensation expense and settlement and
    legal costs related to a patent infringement lawsuit settled in
    2009. We use Adjusted EBITDA as a measure of operating
    performance because it assists us in comparing performance on a
    consistent basis, as it removes from our operating results the
    impact of our capital structure and the one-time costs
    associated with a non-recurring event. We believe Adjusted
    EBITDA is useful to an investor in evaluating our operating
    performance because it and similar measures are widely used to
    measure a company's operating performance without regard to
    items such as depreciation and amortization, which can vary
    depending upon accounting methods and the book value of assets,
    and to present a meaningful measure
7
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of corporate performance exclusive of our capital structure and
    the method by which assets were acquired. The following table
    provides a reconciliation of net income (loss) to Adjusted
    EBITDA:
Year Ended December 31,
2007
2008
2009
(In thousands)
Net income (loss)
$
(5,000
)
$
1,117
$
2,628
Depreciation and amortization
2,909
1,285
1,214
Interest and other income, net
(118
)
(113
)
(27
)
Income tax benefit
—
(9
)
(20
)
EBITDA
(2,209
)
2,280
3,795
Non-cash, stock-based compensation expense
110
386
365
Litigation settlement and associated legal expenses
—
—
3,189
Adjusted EBITDA
$
(2,099
)
$
2,666
$
7,349
(4)
Free Cash Flow consists of net cash provided by operating
    activities, less purchases of property and equipment and less
    capitalization of software development costs. Adjusted Free Cash
    Flow consists of Free Cash Flow plus one-time settlement and
    legal costs related to a patent infringement lawsuit in 2009. We
    use Adjusted Free Cash Flow as a measure of operating
    performance because it assists us in assessing the
    company's ability to fund its growth through its generation
    of cash. We believe Adjusted Free Cash Flow is useful to an
    investor in evaluating our operating performance because
    Adjusted Free Cash Flow and similar measures are widely used to
    measure a company's operating performance without regard to
    revenue and expense recognition, which can vary depending upon
    accounting methods. The following table provides a
    reconciliation of net cash provided by operating activities to
    Adjusted Free Cash Flow:
Year Ended December 31,
2007
2008
2009
(In thousands)
Net cash provided by operating activities
$
4,693
$
6,582
$
4,501
Purchase of property and equipment
(695
)
(480
)
(685
)
Capitalization of software development costs
(362
)
(99
)
(220
)
Free Cash Flow
3,636
6,003
3,596
Litigation settlement and associated legal expenses
—
—
3,189
Adjusted Free Cash Flow
$
3,636
$
6,003
$
6,785
(5)
A $1.00 increase (decrease) in the assumed initial public
    offering price of $   per share would increase
    (decrease) cash and cash equivalents, working capital excluding
    deferred revenues, total assets and total stockholders'
    equity (deficit) after this offering by approximately
    $   million, assuming the number of shares
    offered by us, as set forth on the cover page of this
    prospectus, remains the same and after deducting the estimated
    underwriting discount and estimated offering expenses payable by
    us.
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RISK
    FACTORS
An investment in shares of our common stock involves
    significant risks. In addition to other information in this
    prospectus, you should carefully consider the following risks
    before investing in shares of our common stock offered by this
    prospectus. The occurrence of any of the following risks could
    materially and adversely affect our business, prospects,
    financial condition and results of operations, which could cause
    you to lose all or a significant portion of your investment in
    shares of our common stock. Some statements in this prospectus,
    including statements in the following risk factors, constitute
    forward-looking statements. See the section of this prospectus
    entitled "Special Note Regarding Forward-Looking Statements
    and Industry Data" for a discussion of forward-looking
    statements.
Risks
    Related to Our Business and Industry
Our
    failure to sustain our historical renewal rates, pricing and
    terms of our customer contracts would adversely affect our
    operating results.
We derive, and expect to continue to derive, substantially all
    of our revenues from our on-demand strategic procurement and
    supplier enablement solution in the higher education, life
    sciences, healthcare and state and local government markets.
    Should our current customers lose confidence in the value or
    effectiveness of our solution, the demand for our products and
    services will likely decline, which could materially and
    adversely affect our renewal rates, pricing and contract terms.
    Our subscription agreements with customers are typically for a
    term of three to five years. Over the past three years,
    customers have renewed at an average annual rate of over 94%. On
    a dollar basis, our annual renewal rate has been 106% over this
    same time period solely as a result of pricing increases at the
    time of renewal. If our customers choose not to renew their
    subscription agreements with us at similar rates and on similar
    or more favorable terms, our business, operating results and
    financial condition may be materially and adversely affected.
If we are
    unable to attract new customers, or if our existing customers do
    not purchase additional products or services, the growth of our
    business and cash flows will be adversely affected.
To increase our revenues and cash flows, we must regularly add
    new customers and, to a somewhat lesser extent, sell additional
    products and services to our existing customers. If we are
    unable to hire or retain quality sales personnel, unable to sell
    our products and services to companies that have been referred
    to us, unable to generate sufficient sales leads through our
    marketing programs, or if our existing or new customers do not
    perceive our solution to be of sufficiently high value and
    quality, we may not be able to increase sales and our operating
    results would be adversely affected. In addition, if we fail to
    sell new products and services to existing or new customers, our
    operating results will suffer, and our revenue growth, cash
    flows and profitability may be materially and adversely affected.
Continued
    economic weakness and uncertainty, which may result in a
    significant reduction in spending in our target markets, could
    adversely affect our business, lengthen our sales cycles and
    make it difficult for us to forecast operating results
    accurately.
Our revenues depend significantly on economic conditions in our
    target markets as well as the economy as a whole. We have
    experienced, and may experience in the future, reduced spending
    by our customers and potential customers due to the current
    financial turmoil and economic weakness affecting the
    U.S. and global economy, and other macroeconomic factors
    affecting spending behavior. Many of our customers and potential
    customers, particularly in the higher education market, have
    been facing significant budgetary constraints that have limited
    spending on technology solutions. Continued spending constraints
    in our target markets may result in slower growth, or
    reductions, in revenues and profits in the future. In addition,
    economic conditions or uncertainty may cause customers and
    potential customers to reduce or delay technology purchases,
    including purchases of our solution. Our sales cycle may
    lengthen if purchasing decisions are delayed as a result of
    uncertain budget availability or if contract negotiations become
    more protracted or difficult as customers institute additional
    internal approvals for information technology purchases. These
    economic conditions could result in reductions in sales of our
    products and services, longer sales cycles, difficulties in
    collecting accounts receivable or delayed payments,
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slower adoption of new technologies and increased price
    competition. Any of these events or any significant reduction in
    spending in the higher education, life sciences, healthcare and
    state and local government markets would likely harm our
    business, financial condition, operating results and cash flows.
We may
    experience service failures or interruptions due to defects in
    the hardware, software, infrastructure, third-party components
    or processes that comprise our solution, any of which could
    adversely affect our business.
A technology solution as complex as ours may contain undetected
    defects in the hardware, software, infrastructure, third-party
    components or processes that are part of the solution we
    provide. If these defects lead to service failures, we could
    experience delays or lost revenues during the period required to
    correct the cause of the defects. Furthermore, from time to
    time, we have experienced immaterial service disruptions in the
    ordinary course of business. We cannot be certain that defects
    will not be found in new products or upgraded modules or that
    service disruptions will not occur in the future, resulting in
    loss of, or delay in, market acceptance, which could have an
    adverse effect on our business, results of operations and
    financial condition.
Because customers use our on-demand strategic procurement and
    supplier enablement solution for critical business processes,
    any defect in our solution, any disruption to our solution or
    any error in execution could cause customers to not renew their
    contracts with us, prevent potential customers from purchasing
    our solution and harm our reputation. Although most of our
    contracts with our customers limit our liability to our
    customers for these defects, disruptions or errors, we
    nonetheless could be subject to litigation for actual or alleged
    losses to our customers' businesses, which may require us
    to spend significant time and money in litigation or arbitration
    or to pay significant settlements or damages. We do not
    currently maintain any warranty reserves. Defending a lawsuit,
    regardless of its merit, could be costly and divert
    management's attention and could cause our business to
    suffer.
The insurers under our existing liability insurance policy could
    deny coverage of a future claim for actual or alleged losses to
    our customers' businesses that results from an error or
    defect in our technology or a resulting disruption in our
    solution, or our existing liability insurance might not be
    adequate to cover all of the damages and other costs of such a
    claim. Moreover, we cannot be assured that our current liability
    insurance coverage will continue to be available to us on
    acceptable terms or at all. The successful assertion against us
    of one or more large claims that exceeds our insurance coverage,
    or the occurrence of changes in our liability insurance policy,
    including an increase in premiums or imposition of large
    deductible or co-insurance requirements, could have an adverse
    effect on our business, financial condition and operating
    results. Even if we succeed in litigation with respect to a
    claim, we are likely to incur substantial costs and our
    management's attention will be diverted from our operations.
If we do
    not successfully maintain the SciQuest brand in our existing
    vertical markets or successfully market the SciQuest brand in
    new vertical markets, our revenues and earnings could be
    materially adversely affected.
We believe that developing, maintaining and enhancing the
    SciQuest brand in a cost-effective manner is critical in
    expanding our customer base. Some of our competitors have
    well-established brands. Although we believe that the SciQuest
    brand is well established in the higher education and life
    sciences markets where we have a significant operating history,
    our brand is less well known in the healthcare and state and
    local government markets. Promotion of our brand will depend
    largely on continuing our sales and marketing efforts and
    providing
high-quality
products and services to our customers. We cannot be assured
    that these efforts will be successful in marketing the SciQuest
    brand, particularly beyond the higher education and life
    sciences markets. If we are unable to successfully promote our
    brand, or if we incur substantial expenses in attempting to do
    so, our revenues and earnings could be materially and adversely
    affected.
If we are
    unable to adapt our products and services to rapid technological
    change, our revenues and profits could be materially and
    adversely affected.
Rapid changes in technology, products and services, customer
    requirements and operating standards occur frequently. These
    changes could render our proprietary technology and systems
    obsolete. Any technological changes that reduce or eliminate the
    need for a solution that connects purchasing organizations with
    their suppliers could
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harm our business. We must continually improve the performance,
    features and reliability of our products and services,
    particularly in response to our competition.
Our success will depend, in part, on our ability to:
•
enhance our existing products and services;
•
develop new products, services and technologies that address the
    increasingly sophisticated and varied needs of our target
    markets; and
•
respond to technological advances and emerging industry
    standards and practices on a cost-effective and timely basis.
We cannot be certain of our success in accomplishing the
    foregoing. If we are unable, for technical, legal, financial or
    other reasons, to adapt to changing market conditions or buyer
    requirements, our market share, business and operating results
    could be materially and adversely affected.
The
    market for on-demand strategic procurement and supplier
    enablement solutions is at a relatively early stage of
    development. If the market for our solution develops more slowly
    than we expect, our revenues may decline or fail to grow and we
    may incur operating losses.
We derive, and expect in the near-term to continue to derive,
    substantially all of our revenues from our
on-demand
strategic procurement and supplier enablement solution in the
    higher education, life sciences, healthcare and state and local
    government markets. Our current expectations with respect to
    growth may not prove to be correct. The market for our solution
    is at a relatively early stage of development, making our
    business and future prospects difficult to evaluate. In
    particular, we have only recently entered the healthcare and
    state and local government markets, and our penetration of these
    vertical markets is at a substantially lower level than our
    penetration of the higher education and life sciences vertical
    markets.
Should our prospective customers fail to recognize, or our
    current customers lose confidence in, the value or effectiveness
    of our solution, the demand for our products and services will
    likely decline. Any significant price compression in our
    vertical markets as a result of newly introduced solutions or
    consolidation among our competitors could have a material
    adverse effect on our business. A number of factors could affect
    our customers' assessment of the value or effectiveness of
    our solution, including the following:
•
their comfort with current purchasing and asset management
    procedures;
•
the costs and resources required to adopt new business
    procedures;
•
reductions in capital expenditures or technology spending
    budgets;
•
the price, performance and availability of competing solutions;
•
security and privacy concerns; or
•
general reticence about technology or the Internet.
We have
    been, and may continue to be, subject to claims that we or our
    technologies infringe upon the intellectual property or other
    proprietary rights of a third party. Any such claims may require
    us to incur significant costs, to enter into royalty or
    licensing agreements or to develop or license substitute
    technology, which may harm our business.
The on-demand strategic procurement and supplier enablement
    market is characterized by the existence of a large number of
    patents, copyrights, trademarks and trade secrets and by
    litigation based on allegations of infringement or other
    violations of intellectual property rights. As we seek to extend
    our solution, we could be constrained by the intellectual
    property rights of others. We have been, and may in the future
    be, subject to claims that our technologies infringe upon the
    intellectual property or other proprietary rights of a third
    party. While we believe that our products do not infringe upon
    the proprietary rights of third parties, we cannot guarantee
    that third parties will not assert infringement claims against
    us in the future, particularly with respect to technology that
    we acquire through acquisitions of other companies.
We might not prevail in any intellectual property infringement
    litigation, given the complex technical issues and inherent
    uncertainties in such litigation. Defending such claims,
    regardless of their merit, could be time-consuming
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and distracting to management, result in costly litigation or
    settlement, cause development delays, or require us to enter
    into royalty or licensing agreements. We generally provide in
    our customer agreements that we will indemnify our customers
    against third-party infringement claims relating to our
    technology provided to the customer, which could obligate us to
    fund significant additional amounts. If our products are found
    to have violated any third-party proprietary rights, we could be
    required to withdraw those products from the market,
re-develop
those products or seek to obtain licenses from third parties,
    which might not be available on reasonable terms or at all. Any
    efforts to re-develop our products, obtain licenses from third
    parties on favorable terms or license a substitute technology
    might not be successful and, in any case, might substantially
    increase our costs and harm our business, financial condition
    and operating results. Withdrawal of any of our products from
    the market could have a material adverse effect on our business,
    financial condition and operating results.
We are
    subject to a lengthy sales cycle and delays or failures to
    complete sales may harm our business and result in slower
    growth.
Our sales cycle may take several months to over a year.
    Furthermore, we expect to experience relatively longer sales
    cycles as we expand into the healthcare and state and local
    government markets. During this sales cycle, we may expend
    substantial resources with no assurance that a sale will
    ultimately result. The length of a customer's sales cycle
    depends on a number of factors, many of which we may not be able
    to control, including the following:
•
potential customers' internal approval processes;
•
budgetary constraints for technology spending;
•
customers' concerns about implementing new procurement
    methods and strategies; and
•
seasonal and other timing effects.
Any lengthening of the sales cycle could delay our revenue
    recognition and cash generation and could cause us to expend
    more resources than anticipated. If we are unsuccessful in
    closing sales or if we experience delays, it could have a
    material adverse effect on our operating results.
Our cash
    flows, quarterly revenues and operating results have fluctuated
    in the past and may fluctuate in the future due to a number of
    factors. As a result, we may fail to meet or exceed the
    expectations of securities analysts or investors, which could
    cause our stock price to decline.
Our cash flows, quarterly revenues and operating results have
    varied in the past and may fluctuate in the future. As a result,
    you should not rely on the results of any one quarter as an
    indication of future performance and
period-to-period
comparisons of our revenues and operating results may not be
    meaningful.
Fluctuations in our quarterly results of operations may be due
    to a number of factors including, but not limited to, those
    listed below and others identified throughout this "Risk
    Factors" section:
•
concentrated sales to large customers;
•
our ability to retain and increase sales to existing customers
    and to attract new customers;
•
the timing and success of new product and module introductions
    or upgrades by us or our competitors;
•
changes in our pricing policies or those of our competitors;
•
renewal rates of existing customers;
•
potential consolidation among our customers within the life
    sciences market;
•
potential foreign currency exchange gains and losses associated
    with expenses and sales denominated in currencies other than the
    U.S. dollar;
•
the amount and timing of expenditures related to development,
    adaptation or acquisition of technologies, products or
    businesses;
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•
competition, including entry into the industry by new
    competitors and new offerings by existing competitors; and
•
general economic, industry and market conditions that impact
    expenditures for technology solutions in our target markets.
Such fluctuations might lead analysts to change their models for
    valuing our common stock. As a result, our stock price could
    decline rapidly and we could face costly securities class action
    suits or other unanticipated issues.
Our
    future profitability and cash flows are dependent upon our
    ability to control expenses.
Our operating plan to maintain profitability is based upon
    estimates of our future expenses. For instance, we expect our
    operating expenses to increase somewhat in 2010 as compared to
    2009 in order to support anticipated revenue growth.
    Furthermore, as a public company upon completion of this
    offering, we will incur significant legal, accounting and other
    expenses that we have not incurred as a private company. If our
    future expenses are greater than anticipated, our ability to
    maintain profitability may be negatively impacted. Greater than
    anticipated expenses may negatively impact our cash flows, which
    could cause us to expend our capital faster than anticipated.
    Also, a large percentage of our expenses are relatively fixed,
    which may make it difficult to reduce expenses significantly in
    the future.
Our
    future revenue growth could be impaired if our investment in
    direct and indirect sales channels for our products is
    unsuccessful.
We have invested significant time and resources in developing
    our direct sales force and our indirect sales channels. Sales
    through our direct sales force represent the primary source of
    our revenues. We supplement our direct sales force with indirect
    sales channels for our products through relationships with
    suppliers, enterprise resource planning, or ERP, providers,
    technology providers and purchasing consultants and consortia.
    We cannot be assured that our direct or indirect sales channels
    will be successful or that we will be able to develop additional
    indirect sales channels to support our direct sales channel. If
    our direct sales efforts, and to a lesser extent our indirect
    sales efforts, are not effective, our ability to achieve revenue
    growth may be impaired. As we develop additional indirect sales
    channels, we may experience conflicts with our direct sales
    force to the extent that these sales channels target the same
    customer bases. Successful management of these potential
    conflicts will be necessary in order to maximize our revenue
    growth.
If we are
    unable to facilitate the use of our implementation services by
    our customers in an optimal manner, the effectiveness of our
    customers' use of our solution would be negatively
    impacted, resulting in harm to our reputation, business and
    financial performance.
The use of our solution typically includes implementation
    services to facilitate the optimal use of our solution. For
    example, in delivering our services, we typically work closely
    with customer personnel to improve the customer's
    procurement process, enable the customer's suppliers on the
    SciQuest Supplier Network, assist suppliers in loading product
    catalogs and support organizational activities to assist our
    customer's transition to our strategic procurement and
    supplier enablement solution. These activities require
    substantial involvement and cooperation from both our customers
    and their suppliers. If we do not receive sufficient support
    from either the customer or its suppliers, then the optimal use
    of our services by the customer may be adversely impacted,
    resulting in lower customer satisfaction and negatively
    affecting our business, reputation and financial performance.
If we are
    not able to successfully create internal efficiencies for our
    customers and their suppliers, our operating costs and
    relationships with our customers and their suppliers will be
    adversely affected.
A key component of our products and services is the efficiencies
    created for our customers and their suppliers. In order to
    create these efficiencies, it is typically necessary for our
    solution to work together with our customer's internal
    systems such as inventory, customer service, technical service,
    ERP systems and financial systems. If these systems do not
    create the anticipated efficiencies, relationships with our
    customers will be adversely affected, which could have a
    material adverse affect on our financial condition and results
    of operations.
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We are
    investing significantly in developing and acquiring new product
    and service offerings with no guarantee of success.
Expanding our product and service offerings is an important
    component of our business strategy. As such, we are expending a
    significant amount of our resources in these development and
    acquisition efforts. Any new offerings that are not favorably
    received by prospective customers could damage our reputation or
    brand name. Expansion of our services will require us to devote
    a significant amount of time and money and may strain our
    management, financial and operating resources. We cannot be
    assured that our development or acquisition efforts will result
    in commercially viable products or services. In addition, we may
    bear development and acquisition costs in current periods that
    do not generate revenues until future periods, if at all. To the
    extent that we incur expenses that do not result in increased
    current or future revenues, our earnings may be materially and
    adversely affected.
Our
    failure to raise additional capital or generate cash flows
    necessary to expand our operations and invest in new
    technologies could reduce our ability to compete successfully
    and adversely affect our results of operations.
We have funded our business through our cash flows from
    operations since the going private transaction in 2004. We may
    need to raise additional funds to achieve our future strategic
    objectives, and we may not be able to obtain additional debt or
    equity financing on favorable terms, if at all. If we raise
    additional equity financing, our security holders may experience
    significant dilution of their ownership interests and the value
    of shares of our common stock could decline. If we engage in
    debt financing, we may be required to accept terms that restrict
    our ability to incur additional indebtedness, force us to
    maintain specified liquidity or other ratios or restrict our
    ability to pay dividends or make acquisitions. If we need
    additional capital and cannot raise it on acceptable terms, we
    may not be able to, among other things:
•
develop and enhance our solution;
•
continue to expand our technology development, sales
and/or
marketing organizations;
•
hire, train and retain employees; or
•
respond to competitive pressures or unanticipated working
    capital requirements.
Our inability to do any of the foregoing could reduce our
    ability to compete successfully and adversely affect our results
    of operations.
Product
    development delays could damage our reputation and sales
    efforts.
Developing new products and updated versions of our existing
    products for release at regular intervals is important to our
    business efforts. At times, we may experience delays in our
    development process that result in new releases being delayed or
    lacking expected features or functionality. New product or
    version releases that are delayed or do not meet expectations
    may result in customer dissatisfaction, which in turn could
    damage significantly our reputation and sales efforts. Such
    damage to our reputation and sales efforts could negatively
    impact our operating results.
The
    market for on-demand strategic procurement and supplier
    enablement solutions is highly competitive, which makes
    achieving market share and profitability more
    difficult.
The market for on-demand strategic procurement and supplier
    enablement solutions is rapidly evolving and intensely
    competitive. We experience competition from multiple sources,
    which makes it difficult for us to develop a comprehensive
    business strategy that addresses all of these competitive
    factors. We face competition from other on-demand strategic
    procurement and supplier enablement solution providers, large
    enterprise application providers, smaller market-specific
    vendors and internally developed and maintained solutions.
    Competition is likely to intensify as this market matures.
As competitive conditions intensify, competitors may:
•
devote greater resources to marketing and promotional campaigns;
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•
devote substantially more resources to product development;
•
secure exclusive arrangements with indirect sales channels that
    impede our sales;
•
develop more extensive client bases and broader client
    relationships than we have; and
•
enter into strategic or commercial relationships with larger,
    more established and well-financed companies.
In addition, some of our competitors may have longer operating
    histories and greater name recognition than we have. New
    technologies and the expansion of existing technologies may
    increase competitive pressures. As a result of increased
    competition, we may experience reduced operating margins, as
    well as loss of market share and brand recognition. We may not
    be able to compete successfully against current and future
    competitors. These competitive pressures could have a material
    adverse effect on our revenue growth and results of operations.
Mergers
    or other strategic transactions involving our competitors could
    weaken our competitive position, limit our growth prospects or
    reduce our revenues.
We believe that our industry is highly fragmented and that there
    is likely to be consolidation, which could lead to increased
    price competition and other forms of competition. Increased
    competition may cause pricing pressure and loss of market share,
    either of which could have a material adverse effect on our
    business, limit our growth prospects or reduce our revenues. Our
    competitors may establish or strengthen cooperative
    relationships with strategic partners or other parties.
    Established companies may not only develop their own products
    but may also merge with or acquire our current competitors. It
    is also possible that new competitors or alliances among
    competitors may emerge and rapidly acquire significant market
    share. Any of these circumstances could materially and adversely
    affect our business and operating results.
Interruptions
    or delays from third-party data centers could impair the
    delivery of our solution, which could cause our business to
    suffer.
We use two third-party data centers, our primary operating
    center located in Raleigh, North Carolina and a fully redundant
    disaster recovery platform located in Scottsdale, Arizona, to
    conduct our operations. Our solution resides on hardware that we
    own and operate in these locations. Our operations depend on the
    protection of the equipment and information we store in these
    third-party data centers against damage or service interruptions
    that may be caused by fire, flood, severe storm, power loss,
    telecommunications failures, unauthorized intrusion, computer
    viruses and disabling devices, natural disasters, war, criminal
    acts, military action, terrorist attacks and other similar
    events beyond our control. A prolonged service disruption
    affecting our solution for any of the foregoing reasons could
    damage our reputation with current and potential customers,
    expose us to liability and cause us to lose recurring revenue
    customers or otherwise adversely affect our business. We may
    also incur significant costs for using alternative equipment or
    taking other actions in preparation for, or in reaction to,
    events that damage the data centers we use.
Our on-demand strategic procurement and supplier enablement
    solution is accessed by a large number of customers at the same
    time. As we continue to expand the number of our customers and
    products and services available to our customers, we may not be
    able to scale our technology to accommodate the increased
    capacity requirements, which may result in interruptions or
    delays in service. In addition, the failure of our third-party
    data centers to meet our capacity requirements could result in
    interruptions or delays in our solution or impede our ability to
    scale our operations. In the event that our data center
    arrangements are terminated, or there is a lapse of service or
    damage to such facilities, we could experience interruptions in
    our solution as well as delays and additional expenses in
    arranging new facilities and services.
If we are
    unable to protect our intellectual property rights, our business
    could be materially and adversely affected.
Any misappropriation of our technology or the development of
    competing technology could seriously harm our business. We
    regard a substantial portion of our software products as
    proprietary and rely on a combination of patent, copyright,
    trademark, trade secrets, customer license agreements and
    employee and third-party confidentiality agreements to protect
    our intellectual property rights. These protections may not be
    adequate, and
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we cannot be assured that they will prevent misappropriation of
    our intellectual property, particularly in foreign countries
    where the laws may not protect proprietary rights as fully as do
    the laws of the U.S. Other companies could independently develop
    similar or competing technology without violating our
    proprietary rights. The process of enforcing our intellectual
    property rights through legal proceedings would likely be
    burdensome and expensive, and our ultimate success cannot be
    assured. Our failure to protect adequately our intellectual
    property and proprietary rights could adversely affect our
    business, financial condition and results of operations.
We
    utilize proprietary technology licensed from third parties, the
    loss of which could be costly.
We license a portion of the proprietary technology for our
    products and services from third parties. These
third-party
licenses may not be available to us on favorable terms, or at
    all, in the future. In addition, we must be able to integrate
    successfully this proprietary technology in a timely and
    cost-effective manner to create an effective finished product.
    If we fail to obtain the necessary third-party licenses on
    favorable terms or are unable to integrate successfully this
    proprietary technology on favorable terms, it could have a
    material adverse effect on our business operations.
Our
    SciQuest Supplier Network incorporates content from suppliers
    that is critical to the effectiveness of our products.
A critical component of our solution is the SciQuest Supplier
    Network, which is the single integration point between our
    customers and all of their suppliers that provides customers
    with on-demand access to comprehensive and
up-to-date
multi-commodity supplier catalogs. These catalogs and other
    content are provided to us by each supplier for integration into
    our platform, which requires a high degree of involvement and
    cooperation from the suppliers. We must be able to integrate
    successfully this content in a timely manner in order for our
    customers to realize the full benefit of our solution. Also, any
    errors or omissions in the content provided by the suppliers may
    reflect poorly on our solution. If we are unable to successfully
    incorporate supplier content into our platform or if such
    content contains errors or omissions, then our products may not
    meet customer needs or expectations, and our business and
    reputation may be materially and adversely affected.
A failure
    to protect the integrity and security of our customers'
    information could expose us to litigation, materially damage our
    reputation and harm our business, and the costs of preventing
    such a failure could adversely affect our results of
    operations.
Our business involves the collection and use of confidential
    information of our customers and their trading partners. We
    cannot be assured that our efforts to protect this confidential
    information will be successful. If any compromise of this
    information security were to occur, we could be subject to legal
    claims and government action, experience an adverse effect on
    our reputation and need to incur significant additional costs to
    protect against similar information security breaches in the
    future, each of which could adversely affect our financial
    condition, results of operations and growth prospects. In
    addition, because of the critical nature of data security, any
    perceived breach of our security measures could cause existing
    or potential customers not to use our solution and could harm
    our reputation.
Our use
    of "open source" software could negatively affect our
    ability to sell our solution and subject us to possible
    litigation.
A portion of the technologies licensed by us incorporate
    so-called "open source" software, and we may
    incorporate open source software in the future. Such open source
    software is generally licensed by its authors or other third
    parties under open source licenses. If we fail to comply with
    these licenses, we may be subject to certain conditions,
    including requirements that we offer the portion of our solution
    that incorporates the open source software for no cost, that we
    make available source code for modifications or derivative works
    we create based upon, incorporating or using the open source
    software
and/or
that
    we license such modifications or derivative works under the
    terms of the particular open source license. If an author or
    other third party that distributes such open source software
    were to allege that we had not complied with the conditions of
    one or more of these licenses, we could incur significant legal
    expenses defending against such allegations and could be subject
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to significant damages, enjoined from the sale of our solution
    that contained the open source software and required to comply
    with the foregoing conditions, which could disrupt the
    distribution and sale of our solution.
Further, the terms of many open source licenses to which we are
    subject have not been interpreted by U.S. or foreign
    courts, and although we believe we comply with the terms of
    those licenses, there is a risk that those licenses could be
    construed in a manner that imposes unanticipated conditions or
    restrictions on our ability to commercialize our solution. In
    that event, we could be required to (i) seek licenses from third
    parties,
(ii) re-develop
our solution, (iii) discontinue sales of our solution, or
    (iv) release our proprietary software code under the terms of an
    open source license, any of which could adversely affect our
    business.
If we
    fail to attract and retain key personnel, our business may
    suffer.
Given the complex nature of the technology on which our business
    is based and the speed with which such technology advances, our
    future success is dependent, in large part, upon our ability to
    attract and retain highly qualified managerial, technical and
    sales personnel. In particular, Stephen Wiehe, our President and
    Chief Executive Officer, Rudy Howard, our Chief Financial
    Officer, James Duke, our Chief Operating Officer, Jeffrey
    Martini, our Senior Vice President of Worldwide Sales, Jennifer
    Kaelin, our Vice President of Finance and Gamble Heffernan, our
    Vice President of Marketing and Strategy, are critical to the
    management of our business and operations. A key factor of our
    success will be the continued services and performance of our
    executive officers and other key personnel. If we lose the
    services of any of our executive officers, our financial
    condition and results of operations could be materially and
    adversely affected. Our success also depends upon our ability to
    identify, hire and retain other highly skilled technical,
    managerial, editorial, sales, marketing and customer service
    professionals. Competition for such personnel is intense. We
    cannot be certain of our ability to identify, hire and retain
    adequately qualified personnel. Failure to identify, hire and
    retain necessary key personnel could have a material adverse
    effect on our business and results of operations.
Our
    growth could strain our personnel resources and infrastructure,
    and if we are unable to implement appropriate controls and
    procedures to manage our growth, we will not be able to
    implement our business plan successfully.
We have experienced a period of growth in our operations and
    personnel, which places a significant strain on our management,
    administrative, operational and financial infrastructure. Our
    success will depend in part upon the ability of our senior
    management to manage this growth effectively. To do so, we must
    continue to hire, train and manage new employees as needed. If
    our new hires perform poorly, or if we are unsuccessful in
    hiring, training, managing and integrating these new employees,
    or if we are not successful in retaining our existing employees,
    our business would be harmed. To manage the expected growth of
    our operations and personnel, we will need to continue to
    improve our operational, financial and management controls and
    our reporting systems and procedures. The additional headcount
    we may add will increase our cost base, which will make it more
    difficult for us to offset any future revenue shortfalls by
    reducing expenses in the short term. If we fail to successfully
    manage our growth, we will be unable to execute our business
    plan.
The
    failure to integrate successfully businesses that we may acquire
    could adversely affect our business.
An element of our strategy is to broaden the scope and content
    of our products and services through the acquisition of existing
    products, technologies, services and businesses. Acquisitions
    entail numerous risks, including:
•
the integration of new operations, products, services and
    personnel;
•
the diversion of resources from our existing businesses, sites
    and technologies;
•
the inability to generate revenues from new products and
    services sufficient to offset associated acquisition costs;
•
the maintenance of uniform standards, controls, procedures and
    policies;
•
accounting effects that may adversely affect our financial
    results;
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•
the impairment of employee and customer relations as a result of
    any integration of new management personnel;
•
dilution to existing stockholders from the issuance of equity
    securities; and
•
liabilities or other problems associated with an acquired
    business.
We may have difficulty in effectively assimilating and
    integrating these businesses, or any future joint ventures,
    acquisitions or alliances, into our operations, and such
    integration may require a significant amount of time and effort
    by our management team. To the extent we do not successfully
    avoid or overcome the risks or problems related to any
    acquisitions, our business, results of operations and financial
    condition could be adversely affected. Future acquisitions also
    could impact our financial position and capital needs and could
    cause substantial fluctuations in our quarterly and yearly
    results of operations. Acquisitions could include significant
    goodwill and intangible assets, which may result in future
    impairment charges that would reduce our stated earnings.
Our
    international sales efforts will require financial resources and
    management attention and could have a negative effect on our
    earnings.
We are investing resources and capital to expand our sales
    internationally. This will require financial resources and
    management attention and may subject us to new or increased
    levels of regulatory, economic, tax and political risks, all of
    which could have a negative effect on our earnings. We cannot be
    assured that we will be successful in creating international
    demand for our products and services. In addition, our
    international business may be subject to a variety of risks,
    including, among other things, increased costs associated with
    maintaining international marketing efforts, applicable
    government regulation, conflicting and changing tax laws,
    economic and political conditions and potential instability in
    various parts of the world, fluctuations in foreign currency,
    increased financial accounting and reporting burdens and
    complexities, difficulties in collecting international accounts
    receivable and the enforcement of intellectual property rights.
    If we continue to expand our business globally, our success will
    depend, in large part, on our ability to anticipate and
    effectively manage these and other risks associated with our
    international operations. Our failure to manage any of these
    risks successfully could adversely affect our operating results
    as a result of increased operating costs.
Our
    actual operating results may differ significantly from our
    guidance.
From time to time, we may release guidance in our quarterly
    earnings releases, quarterly earnings conference call, or
    otherwise, regarding our future performance that represents our
    management's estimates as of the date of release. This
    guidance, which includes forward-looking statements, will be
    based on projections prepared by our management.
Neither our independent registered public accounting firm nor
    any other independent expert or outside party compiles or
    examines the projections. Accordingly, no such person expresses
    any opinion or any other form of assurance with respect thereto.
Projections are based upon a number of assumptions and estimates
    that, while presented with numerical specificity, are inherently
    subject to significant business, economic and competitive
    uncertainties and contingencies, many of which are beyond our
    control. These projections are also based upon specific
    assumptions with respect to future business decisions, some of
    which will change. We may state possible outcomes as high and
    low ranges, which are intended to provide a sensitivity analysis
    as variables are changed but are not intended to represent that
    actual results could not fall outside of the suggested ranges.
    The principal reason that we release guidance is to provide a
    basis for our management to discuss our business outlook with
    analysts and investors. We do not accept any responsibility for
    any projections or reports published by analysts.
Guidance is necessarily speculative in nature, and it can be
    expected that some or all of the assumptions underlying the
    guidance furnished by us will not materialize or will vary
    significantly from actual results. Accordingly, our guidance is
    only an estimate of what management believes is realizable as of
    the date of release. Actual results will vary from our guidance,
    and the variations may be material. In light of the foregoing,
    investors are urged not to rely upon, or otherwise consider, our
    guidance in making an investment decision regarding our common
    stock.
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Any failure to implement our operating strategy successfully or
    the occurrence of any of the events or circumstances set forth
    under "Risk Factors" in this prospectus could result
    in our actual operating results being different from our
    guidance, and those differences may be adverse and material.
If we
    fail to maintain proper and effective internal controls, our
    ability to produce accurate and timely financial statements
    could be impaired, which could harm our operating results, our
    ability to operate our business and investor views of
    us.
Ensuring that we have adequate internal financial and accounting
    controls and procedures in place so that we can produce accurate
    financial statements on a timely basis is a costly and
    time-consuming effort that needs to be re-evaluated frequently.
    Our internal control over financial reporting is a process
    designed to provide reasonable assurance regarding the
    reliability of financial reporting and the preparation of
    financial statements in accordance with generally accepted
    accounting principles. We are in the process of documenting,
    reviewing and improving our internal controls and procedures for
    compliance with Section 404 of the Sarbanes-Oxley Act of
    2002, or the Sarbanes-Oxley Act, which requires annual
    management assessment of the effectiveness of our internal
    control over financial reporting and a report by our independent
    auditors addressing this assessment. To the extent that we are
    not currently in compliance with Section 404, we may be
    required to implement new internal control procedures and
    re-evaluate our financial reporting. We may experience higher
    than anticipated operating expenses as well as increased
    independent auditor fees during the implementation of these
    changes and thereafter. Further, we may need to hire additional
    qualified personnel in order for us to comply with
    Section 404. If we fail to maintain proper and effective
    internal controls, our ability to produce accurate and timely
    financial statements could be impaired, which could harm our
    operating results, harm our ability to operate our business and
    reduce the trading price of our stock.
Changes
    in financial accounting standards or practices may cause
    adverse, unexpected financial reporting fluctuations and affect
    our reported results of operations.
A change in accounting standards or practices can have a
    significant effect on our reported results and may even affect
    our reporting of transactions completed before the change is
    effective. New accounting pronouncements and varying
    interpretations of accounting pronouncements have occurred and
    may occur in the future. Changes to existing rules or the
    questioning of current practices may adversely affect our
    reported financial results or the way in which we conduct our
    business.
Our costs
    and demands upon management may continue to increase as a result
    of complying with the laws and regulations affecting public
    companies, which could harm our operating results.
We expect to incur significant legal, accounting, investor
    relations and other expenses as a public company that we have
    not incurred as a private company, including costs associated
    with public company reporting requirements. We also have
    incurred and will incur costs associated with current corporate
    governance requirements, including requirements under
    Section 404 and other provisions of the Sarbanes-Oxley Act,
    as well as rules implemented by the Securities and Exchange
    Commission, or SEC, and the NYSE. The expenses incurred by
    public companies for reporting and corporate governance purposes
    have increased dramatically over the past several years. These
    rules and regulations have increased our legal and financial
    compliance costs substantially and have made some activities
    more time-consuming and costly. We are unable currently to
    estimate these future costs with any degree of certainty.
Our
    business and financial performance could be negatively impacted
    by changes in tax laws or regulations.
New sales, use or other tax laws, statutes, rules, regulations
    or ordinances could be enacted at any time. Those enactments
    could adversely affect our domestic and international business
    operations, and our business and financial performance. Further,
    existing tax laws, statutes, rules, regulations or ordinances
    could be interpreted, changed, modified or applied adversely to
    us. These events could require us or our customers to pay
    additional tax amounts on a prospective or retroactive basis, as
    well as require us or our customers to pay fines
and/or
penalties and interest for past amounts deemed to be due. If we
    raise our product and maintenance prices to offset the costs of
    these changes, existing customers may elect not to renew their
    agreements and potential customers may elect not
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to purchase our services. Additionally, new, modified or newly
    interpreted or applied tax laws could increase our
    customers' and our compliance, operating and other costs,
    as well as the costs of our services. Further, these events
    could decrease the capital we have available to operate our
    business. Any or all of these events could adversely impact our
    business and financial performance.
Government
    regulation of the Internet and
e-commerce
is evolving, and unfavorable changes or our failure to comply
    with regulations could harm our operating results.
As Internet commerce continues to evolve, increasing regulation
    by federal, state or foreign agencies becomes more likely. For
    example, we believe increased regulation is likely in the area
    of data privacy, and laws and regulations applying to the
    solicitation, collection, processing or use of personal or
    consumer information could affect our customers' ability to
    use and share data, potentially reducing demand for our
    products. In addition, taxation of products and services
    provided over the Internet or other charges imposed by
    government agencies or by private organizations for accessing
    the Internet may also be imposed. Any regulation imposing
    greater fees for Internet use or restricting information
    exchange over the Internet could result in a decline in the use
    of the Internet and the viability of Internet-based services and
    product offerings, which could harm our business and operating
    results.
Our
    ability to use U.S. net operating loss carryforwards might be
    limited.
As of December 31, 2009, we had net operating loss
    carryforwards of approximately $200 million for
    U.S. federal tax purposes, the use of which may be
    substantially limited. These loss carryforwards will begin to
    expire in 2014. To the extent these net operating loss
    carryforwards are available, we intend to use them to reduce the
    corporate income tax liability associated with our operations.
    Section 382 of the U.S. Internal Revenue Code
    generally imposes an annual limitation on the amount of net
    operating loss carryforwards that might be used to offset
    taxable income when a corporation has undergone significant
    changes in stock ownership. As a result, prior or future changes
    in ownership could put limitations on the availability of our
    net operating loss carryforwards. In addition, our ability to
    utilize the current net operating loss carryforwards might be
    further limited by the issuance of common stock in this
    offering. To the extent our use of net operating loss
    carryforwards is significantly limited, our income could be
    subject to corporate income tax earlier than it would if we were
    able to use net operating loss carryforwards, which could result
    in lower profits.
Risks
    Related to this Offering and Ownership of Our Common
    Stock
Our
    common stock could trade at prices below the initial public
    offering price.
There has not been a public trading market for shares of our
    common stock since August 2004. An active trading market may not
    develop or be sustained after this offering. If an active
    trading market does not develop, investors may have difficulty
    selling any of our common stock that they buy. The initial
    public offering price for the shares of common stock sold in
    this offering was determined by negotiations between
    representatives of the underwriters and us. This price may not
    be indicative of the price at which our common stock will trade
    after this offering, and our common stock could easily trade
    below the initial public offering price.
Our stock
    price may be volatile, and investors may be unable to sell their
    shares at or above the initial public offering price.
The market price of our common stock has been and could be
    subject to wide fluctuations in response to, among other things,
    the factors described in this "Risk Factors" section
    or elsewhere in this prospectus, and other factors beyond our
    control, including the following:
•
variations in our quarterly operating results;
•
decreases in market valuations of similar companies;
•
the failure of securities analysts to cover our common stock
    after this offering or changes in financial estimates by
    analysts who cover us, our competitors or our industry;
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•
failure by us or our competitors to meet analysts'
    projections or guidance that we or our competitors may give to
    the market; and
•
fluctuations in stock market prices and volumes.
Furthermore, the stock markets have experienced price and volume
    fluctuations that have affected and continue to affect the
    market prices of equity securities of many companies. These
    fluctuations often have been unrelated or disproportionate to
    the operating performance of those companies. These broad market
    fluctuations, as well as general economic, political and market
    conditions, such as recessions, interest rate changes and
    international currency fluctuations, may negatively affect the
    market price of our common stock.
In the past, many companies that have experienced volatility in
    the market price of their stock have become subject to
    securities class action litigation. We may be the target of this
    type of litigation in the future. Securities litigation against
    us could result in substantial costs and divert our
    management's attention from other business concerns, which
    could seriously harm our business. All of these factors could
    cause the market price of our stock to decline, and you may lose
    some or all of your investment.
The
    continued concentration of our capital stock ownership with
    insiders upon completion of this offering will limit your
    ability to influence corporate matters.
We anticipate that our directors, executive officers and holders
    of more than 5% of our common stock, together with their
    affiliates, will beneficially own, in the aggregate,
    approximately     % of our common stock
    after this offering. These stockholders may have interests that
    differ from yours, and they may vote in a way with which you
    disagree and that may be adverse to your interests. This
    concentration of share ownership may adversely affect the
    trading price for our common stock because investors often
    perceive disadvantages in owning stock in companies with
    controlling stockholders. Also, these stockholders, acting
    together, will be able to control the outcome of matters
    submitted to our stockholders for approval, including the
    election of directors and the approval of significant corporate
    transactions, such as mergers, consolidations or the sale of
    substantially all of our assets. In addition, these
    stockholders, acting together, would have the ability to control
    the management and affairs of our company. Accordingly, this
    concentration of ownership might harm the market price of our
    common stock by:
•
delaying, deferring or preventing a change in corporate control;
•
impeding a merger, consolidation, takeover or other business
    combination involving us; or
•
discouraging a potential acquirer from making a tender offer or
    otherwise attempting to obtain control of us.
Our stock
    price could decline due to the large number of outstanding
    shares of our common stock eligible for future sale.
Sales of substantial amounts of our common stock in the public
    market following this offering, or the perception that these
    sales could occur, could cause the market price of our common
    stock to decline. These sales could also make it more difficult
    for us to sell equity or equity-related securities in the future
    at a time and price that we deem appropriate.
Upon completion of this offering, we will
    have          
    outstanding shares of common stock, assuming no exercise of the
    underwriters' option to purchase additional shares and no
    exercise of outstanding options after December 31, 2009.
    The shares sold in this offering will be immediately tradable
    without restriction. Of the remaining shares:
•
no shares will be eligible for sale immediately upon the
    completion of this offering; and
•
shares
    will be eligible for sale upon the expiration of
lock-up
agreements, subject in some cases to volume and other
    restrictions of Rule 144 and Rule 701 under the
    Securities Act of 1933, as amended, or the Securities Act.
The
lock-up
agreements expire 180 days after the date of this
    prospectus, except that the
180-day
period may be extended under certain circumstances where we
    announce or pre-announce earnings or a material event occurs
    within approximately 17 days prior to, or approximately
    15 days after, the termination of the
180-day
period. The
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representatives of the underwriters may, in their sole
    discretion and at any time without notice, release all or any
    portion of the securities subject to
lock-up
agreements.
Following this offering, holders of substantially all of the
    shares of our common stock not sold in this offering will be
    entitled to rights with respect to the registration of these
    shares under the Securities Act. See "Description of
    Capital Stock — Registration Rights." If we
    register their shares of common stock following the expiration
    of the
lock-up
agreements, these stockholders could sell those shares in the
    public market without being subject to the volume and other
    restrictions of Rule 144 and Rule 701.
After the closing of this offering, we intend to register
    approximately           shares
    of common stock that have been issued or reserved for future
    issuance under our stock incentive plans. Of these
    shares,           shares
    will be eligible for sale upon the exercise of vested options
    after the expiration of the
lock-up
agreements.
Investors
    in this offering will experience immediate and substantial
    dilution in the net tangible book value of the common stock they
    purchase in this offering.
Investors in this offering will experience immediate dilution of
    $      per share, because the price
    that they pay will be substantially greater than the net
    tangible book value per share of common stock that they acquire.
    This dilution is due in large part to the fact that our earlier
    investors paid substantially less than the price of the shares
    being sold in this offering when they purchased their shares of
    our capital stock. If outstanding options to purchase our common
    stock are exercised, investors in this offering will experience
    additional dilution.
We have
    broad discretion in the use of the proceeds of this
    offering.
Approximately $35.5 million of the net proceeds to us from
    this offering will be used to redeem all outstanding shares of
    our preferred stock. The remainder of the net proceeds will be
    used, as determined by management in its sole discretion, for
    working capital and general corporate purposes. We have not,
    however, determined the allocation of those remaining net
    proceeds among such uses. Our management will have broad
    discretion over the use and investment of these net proceeds,
    and, accordingly, you will need to rely upon the judgment of our
    management with respect to our use of these net proceeds, with
    only limited information concerning management's specific
    intentions. You will not have the opportunity, as part of your
    investment decision, to assess whether our proceeds are being
    used appropriately. We may place the net proceeds in investments
    that do not produce income or that lose value, which may cause
    our stock price to decline.
Our
    charter documents and Delaware law could prevent a takeover that
    stockholders consider favorable and could also reduce the market
    price of our stock.
Our amended and restated certificate of incorporation and our
    amended and restated bylaws contain provisions that could delay
    or discourage a change in control of our company. These
    provisions could also make it more difficult for stockholders to
    elect directors and take other corporate actions. These
    provisions include:
•
a classified board of directors with three-year staggered terms;
•
not providing for cumulative voting in the election of directors;
•
authorizing the board to issue, without stockholder approval,
    preferred stock with rights senior to those of our common stock;
•
prohibiting stockholder action by written consent; and
•
requiring advance notification of stockholder nominations and
    proposals.
These and other provisions in our amended and restated
    certificate of incorporation and our amended and restated bylaws
    and under Delaware law could discourage potential takeover
    attempts, reduce the price that investors might be willing to
    pay in the future for shares of our common stock and result in
    the market price of our common stock being lower than it would
    be without these provisions. See "Description of Capital
    Stock — Preferred Stock," "Description of
    Capital Stock — Anti-Takeover Effects of Our Amended
    and Restated Certificate
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of Incorporation and Amended and Restated Bylaws," and
    "Description of Capital Stock — Delaware
    Anti-Takeover Statute."
Our
    rights and the rights of our stockholders to take action against
    our directors and officers are limited, which could limit your
    recourse in the event of actions not in your best
    interests.
Our amended and restated certificate of incorporation provides
    that we will indemnify and advance expenses to our directors,
    officers, employees and other agents to the fullest extent
    permitted by the Delaware General Corporation Law. Therefore, we
    will be obligated to indemnify such persons if they acted in
    good faith and in a manner they reasonably believed to be in, or
    not opposed to, the best interests of the company and, with
    respect to any criminal action or proceeding, had no reasonable
    cause to believe their conduct was unlawful, except that, in the
    case of an action by or in right of the company, no
    indemnification may generally be made in respect of any claim as
    to which such person is adjudged to be liable to the company.
    Furthermore, our amended and restated certificate of
    incorporation provides that our directors are not personally
    liable for breaches of fiduciary duties to the fullest extent
    permitted by the Delaware General Corporation Law. Therefore,
    our directors shall not be personally liable to the company or
    its stockholders for monetary damages for breach of fiduciary
    duties as a director, except for liability for any:
•
breach of a director's duty of loyalty to the corporation
    or its stockholders;
•
act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
•
unlawful payment of dividends or redemption of shares; or
•
transaction from which the director derives an improper personal
    benefit.
As a result, we and our stockholders may have more limited
    rights against our directors and officers than might otherwise
    exist absent the current provisions in our amended and restated
    certificate of incorporation or that might exist with other
    companies.
If
    securities analysts do not continue to publish research or
    reports about our business or if they publish negative
    evaluations of our stock, the price of our stock could
    decline.
We believe that the trading price for our common stock will be
    affected by research or reports that industry or financial
    analysts publish about us or our business. If one or more of the
    analysts who may elect to cover us downgrade their evaluations
    of our stock, the price of our stock could decline. If one or
    more of these analysts cease coverage of our company, we could
    lose visibility in the market for our stock, which in turn could
    cause our stock price to decline.
We do not
    intend to pay dividends on our common stock in the foreseeable
    future.
We do not anticipate paying any cash dividends on our common
    stock in the foreseeable future. We currently anticipate that we
    will retain all of our available cash, if any, for working
    capital and other general corporate purposes. Any payment of
    future dividends will be at the discretion of our board of
    directors and will depend upon, among other things, our
    earnings, financial condition, capital requirements, debt
    levels, statutory and contractual restrictions applying to the
    payment of dividends and other considerations that our board of
    directors deems relevant. Investors seeking cash dividends
    should not purchase our common stock.
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SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY
    DATA
This prospectus contains forward-looking statements that are
    based on our management's beliefs and assumptions and on
    information currently available to our management. The
    forward-looking statements are contained principally in the
    "Prospectus Summary," "Risk Factors,"
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations," "Our
    Business" and "Executive Compensation" sections
    of this prospectus. Forward-looking statements include
    information concerning our possible or assumed future results of
    operations, business strategies, financing plans, competitive
    position, industry environment, potential growth opportunities,
    potential market opportunities and the effects of competition.
    Forward-looking statements include all statements that are not
    historical facts and can be identified by terms such as
    "anticipates," "believes,"
    "could," "seeks," "estimates,"
    "expects," "intends," "may,"
    "plans," "potential," "predicts,"
    "projects," "should," "will,"
    "would" or similar expressions and the negatives of
    those terms.
Forward-looking statements involve known and unknown risks,
    uncertainties and other factors that may cause our actual
    results, performance or achievements to be materially different
    from any future results, performance or achievements expressed
    or implied by the forward-looking statements. We discuss these
    risks in greater detail in the "Risk Factors" section
    and elsewhere in this prospectus. Given these uncertainties, you
    should not place undue reliance on these forward-looking
    statements. Also, forward-looking statements represent our
    management's beliefs and assumptions only as of the date of
    this prospectus. You should read this prospectus and the
    documents that we have filed as exhibits to the registration
    statement, of which this prospectus is a part, completely and
    with the understanding that our actual future results may be
    materially different from what we expect.
Except as required by law, we assume no obligation to update
    these forward-looking statements publicly or to update the
    reasons actual results could differ materially from those
    anticipated in these forward-looking statements, even if new
    information becomes available in the future.
In this prospectus, we also rely on and refer to information and
    statistics regarding the industries and the markets in which we
    compete. We obtained this information and these statistics from
    various third-party sources. We believe that these sources and
    the estimates contained therein are reliable, but we have not
    independently verified them. Such information involves risks and
    uncertainties and is subject to change based on various factors,
    including those discussed in the "Risk Factors"
    section of this prospectus.
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USE OF
    PROCEEDS
We estimate that the net proceeds from our sale of shares of
    common stock in this offering will be approximately
    $      million, or approximately
    $      million if the underwriters
    exercise their over-allotment option in full. This estimate is
    based upon an assumed initial public offering price of
    $      per share, the
mid-point
of
    our filing range, less estimated underwriting discounts and
    commissions and offering expenses payable by us. We will not
    receive any proceeds from the sale of shares of our common stock
    by our selling stockholders. A $1.00 increase (decrease) in the
    assumed initial public offering price of
    $      per share would increase
    (decrease) the net proceeds to us from this offering by
    approximately $      million,
    assuming the number of shares offered by us, as set forth on the
    cover page of this prospectus, remains the same and after
    deducting the estimated underwriting discounts and estimated
    offering expenses payable by us.
We intend to use approximately $35.5 million of these net
    proceeds to redeem all outstanding shares of our preferred
    stock. We intend to use the remaining net proceeds for working
    capital and general corporate purposes. We may also use a
    portion of the proceeds to acquire complementary businesses,
    products or technologies. We have no agreements or commitments
    with respect to any acquisitions at this time. By establishing a
    public market for our common stock, this offering is also
    intended to facilitate our future access to public markets.
Pending the uses described above, we intend to invest the net
    proceeds of this offering in short- to
medium-term,
investment-grade, interest-bearing securities, certificates of
    deposit, or direct or guaranteed obligations of the
    U.S. government.
The amount and timing of what we actually spend may vary
    significantly and will depend on a number of factors, including
    future cash generated from operations as well as other factors
    described in the section titled "Risk Factors."
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DIVIDEND
    POLICY
We have not historically declared or paid dividends on our
    common stock, and we do not expect to declare or pay dividends
    on our common stock for the foreseeable future. Instead, we
    anticipate that all of our earnings will be used for the
    operation and growth of our business. Any future determination
    to pay dividends on our common stock would be subject to the
    discretion of our board of directors and would depend upon
    various factors, including our earnings, financial condition,
    capital requirements, debt levels, statutory and contractual
    restrictions applying to the payment of dividends and other
    considerations that our board of directors deems relevant.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and
    capitalization as of December 31, 2009:
•
on an actual basis; and
•
on a pro forma basis to reflect (i) the forgiveness of notes
    receivable from certain employees, (ii) our sale of shares in
    this offering at an assumed initial public offering price of
    $      per share, which is the
    mid-point of our filing range, after deducting estimated
    underwriting discounts and commissions and offering expenses
    payable by us, and (iii) the redemption of all outstanding
    preferred stock immediately after the consummation of this
    offering, as if each had occurred as of December 31, 2009.
The information below is illustrative only and our
    capitalization following the completion of this offering will be
    adjusted based on the actual initial public offering price and
    other terms of this offering determined at pricing. You should
    read this table together with "Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations" and our financial statements and the related
    notes appearing elsewhere in this prospectus.
As of December 31, 2009
Actual
Pro Forma
(1)
(In thousands, except share
and per share data)
Cash and cash equivalents
$
17,132
Current liabilities excluding current portion of deferred
    revenues
$
3,377
Deferred revenues
34,275
Redeemable preferred stock:
Redeemable preferred stock: $0.001 par value;
    500,000 shares authorized and 222,073 shares issued
    and outstanding, actual; and 500,000 shares authorized and
    0 shares issued and outstanding, pro forma
34,072
Stockholders' equity (deficit):
Common stock: $0.001 par value; 29,500,000 shares
    authorized and 28,684,596 shares issued and outstanding,
    actual;
    and           shares
    authorized
    and          issued
    and outstanding, pro forma
29
Additional paid-in capital
—
Notes receivable from stockholders
(769
)
Accumulated deficit
(33,219
)
Total stockholders' equity (deficit)
(33,959
)
Total capitalization
$
37,765
(1)
A $1.00 increase (decrease) in the assumed initial public
    offering price of $      per share
    would increase (decrease) cash and cash equivalents, additional
paid-in
capital, total stockholders' equity (deficit) and total
    capitalization by approximately
    $      million, assuming the
    number of shares offered by us, as set forth on the cover page
    of this prospectus, remains the same and after deducting the
    estimated underwriter discount and estimated offering expenses
    payable by us.
The table and calculations above are based on the number of
    shares of common stock outstanding as of December 31, 2009
    and exclude:
•
an aggregate of 887,224 shares issuable upon the exercise
    of then outstanding options at a weighted average exercise price
    of $0.63 per share;
•
an aggregate of 443,361 shares issuable upon the exercise
    of then outstanding warrants at a weighted average exercise
    price of $0.04 per share;
•
an aggregate of 1,107,623 shares reserved for issuance
    under our 2004 Stock Incentive Plan, subject to increase on an
    annual basis and subject to increase for shares subject to
    awards under our prior equity plans that expire unexercised or
    otherwise do not result in the issuance of shares;
•
an assumed maximum
    of           shares
    issuable for no cash consideration under our Exit Event Bonus
    Plan immediately following completion of this offering; and
•
the           shares
    of common stock subject to the underwriters' over-allotment
    option.
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DILUTION
If you invest in our common stock, your ownership interest will
    be diluted to the extent of the difference between the initial
    public offering price per share of our common stock and the
    adjusted net tangible book value per share of our common stock
    immediately after completion of this offering. Net tangible book
    value per share represents total tangible assets less total
    liabilities and redeemable preferred stock, divided by the
    number of shares of common stock outstanding. As of
    December 31, 2009, the net tangible book value of our
    common stock was approximately $(42.1) million, or
    approximately $(1.47) per share.
After giving effect to our sale of shares at an assumed initial
    public offering price of $      per
    share, which is the mid-point of our filing range, deducting
    estimated underwriting discounts and commissions and offering
    expenses payable by us, and applying the net proceeds from this
    sale (including the redemption of all of our outstanding shares
    of preferred stock), the pro forma net tangible book value of
    our common stock, as of December 31, 2009, would have been
    approximately $      million, or
    $      per share. This amount
    represents an immediate increase in net tangible book value to
    our existing stockholders of $      per
    share and an immediate dilution to new investors of
    $      per share. The following table
    illustrates this per share dilution:
Assumed initial public offering price per share
$
Net tangible book value per share as of December 31, 2009
$
(1.47
)
Pro forma increase per share attributable to new investors
$
Pro forma net tangible book value per share after this offering
$
Dilution per share to new investors
$
If the underwriters exercise their over-allotment option in
    full, there will be an increase in pro forma net tangible book
    value to existing stockholders of
    $      per share and an immediate
    dilution in pro forma net tangible book value to new investors
    of $      per share based on the
    assumed initial public offering price per share. A $1.00
    increase or decrease in the assumed initial public offering
    price per share would increase or decrease, respectively, the
    pro forma net tangible book value per share of common stock
    after this offering by $      per share
    and increase or decrease, respectively, the pro forma dilution
    per share of common stock to new investors in this offering by
    $      per share, in each case
    calculated as described above and assuming that the number of
    shares offered by us, as set forth on the cover page of this
    prospectus, remains the same.
The following table summarizes, as of December 31, 2009, on
    a pro forma basis, the number of shares of common stock
    purchased from us, the total consideration paid to us and the
    average price per share paid by our existing stockholders and by
    new investors, based upon an assumed initial public offering
    price of $      per share and before
    deducting estimated underwriting discounts and commissions and
    offering expenses payable by us.
Shares Purchased
Total Consideration
Average Price per
Number
Percent
Amount
Percent
Share
Existing stockholders
%
$
%
$
New investors
%
$
%
$
Total
100
%
$
100
%
$
The discussion and tables above are based on
    28,684,596 shares of common stock outstanding as of
    December 31, 2009 and exclude:
•
an aggregate of 887,224 shares issuable upon the exercise
    of then outstanding options at a weighted average exercise price
    of $0.63 per share;
•
an aggregate of 443,361 shares issuable upon the exercise
    of then outstanding warrants at a weighted average exercise
    price of $0.04 per share;
•
an aggregate of 1,107,623 shares reserved for issuance
    under our 2004 Stock Incentive Plan, subject to increase on an
    annual basis and subject to increase for shares subject to
    awards under our prior equity plans that expire unexercised or
    otherwise do not result in the issuance of shares;
28
Table of Contents
•
an assumed maximum
    of           shares
    issuable for no cash consideration under our Exit Event Bonus
    Plan immediately following completion of this offering; and
•
the           shares
    of common stock subject to the underwriters' over-allotment
    option.
Sales by the selling stockholders in this offering will cause
    the number of shares held by existing stockholders to be reduced
    to           shares
    or     % of the total number of shares
    of our common stock outstanding after this offering. If the
    underwriters' overallotment option is exercised in full,
    the number of shares held by the existing stockholders after
    this offering would be reduced to     %
    of the total number of shares of our common stock outstanding
    after this offering, and the number of shares held by new
    investors would increase to     % of
    the total number of shares of our common stock outstanding after
    this offering.
If all our outstanding options and warrants had been exercised
    and the maximum number of shares under our Exit Event Bonus Plan
    had been issued, our pro forma net tangible book value (deficit)
    as of December 31, 2009 would have been
    $      million, or
    $      per share, and the pro forma as
    adjusted net tangible book value after this offering would have
    been $      million, or
    $      per share, causing dilution to
    new investors of $      per share.
29
Table of Contents
SELECTED
    FINANCIAL DATA
You should read the following selected financial data together
    with our financial statements and the related notes appearing at
    the end of this prospectus and "Management's
    Discussion and Analysis of Financial Condition and Results of
    Operations," which follows immediately after this section.
    Our historical results are not necessarily indicative of our
    results to be expected in any future period.
The selected financial data under the heading "Statements
    of Operations Data" for each of the three years ended
    December 31, 2007, 2008 and 2009, under the heading
    "Operating Data" relating to Adjusted EBITDA and
    Adjusted Free Cash Flow for each of the three years ended
    December 31, 2007, 2008 and 2009 and under the heading
    "Balance Sheet Data" as of December 31, 2008 and
    2009 have been derived from our audited financial statements,
    which are included elsewhere in this prospectus. The selected
    financial data under the heading "Statements of Operations
    Data" for each of the two years ended December 31,
    2005 and 2006, under the heading "Operating Data"
    relating to Adjusted EBITDA and Adjusted Free Cash Flow for each
    of the two years ended December 31, 2005 and 2006 and under
    the heading "Balance Sheet Data" as of
    December 31, 2005, 2006 and 2007 have been derived from our
    audited financial statements not included in this prospectus.
The pro forma balance sheet data as of December 31, 2009 is
    unaudited and gives effect to (1) our receipt of estimated
    net proceeds of $      million
    from this offering, based on an assumed initial public offering
    price of $      per share, which is the
    mid-point of our filing range, after deducting estimated
    underwriting discounts and offering expenses payable by us and
    (2) the redemption of all of the outstanding preferred
    stock immediately after the consummation of this offering. The
    pro forma summary financial data is not necessarily indicative
    of what our financial position or results of operations would
    have been if this offering had been completed as of the date
    indicated, nor is this data necessarily indicative of our
    financial position or results of operations for any future date
    or period.
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands, except per share data)
Statements of Operations Data:
Revenues
$
8,805
$
15,183
$
20,107
$
29,784
$
36,179
Cost of revenues(1)(2)
3,701
4,766
6,101
6,723
7,494
Gross profit
5,104
10,417
14,006
23,061
28,685
Operating expenses:(1)
Research and development
5,316
6,124
6,908
8,307
8,059
Sales and marketing
4,543
5,954
7,213
9,280
10,750
General and administrative
2,546
2,531
2,717
3,942
3,703
Litigation settlement and associated legal expenses
—
—
—
—
3,189
Amortization of intangible assets
3,877
3,631
2,286
537
403
Total operating expenses
16,282
18,240
19,124
22,066
26,104
Income (loss) from operations
(11,178
)
(7,823
)
(5,118
)
995
2,581
Interest and other income (expense), net
(304
)
(78
)
118
113
27
Income (loss) before income taxes
(11,482
)
(7,901
)
(5,000
)
1,108
2,608
Income tax benefit
—
—
—
9
20
Net income (loss)
(11,482
)
(7,901
)
(5,000
)
1,117
2,628
Dividends on redeemable preferred stock
1,877
2,038
2,207
2,395
2,595
Net income (loss) attributable to common stockholders
$
(13,359
)
$
(9,939
)
$
(7,207
)
$
(1,278
)
$
33
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Table of Contents
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands, except per share data)
Net income (loss) attributable to common stockholders per share:
Basic
$
(0.53
)
$
(0.38
)
$
(0.27
)
$
(0.05
)
$
0.00
Diluted
$
(0.53
)
$
(0.38
)
$
(0.27
)
$
(0.05
)
$
0.00
Weighted average shares outstanding used in computing per share
    amounts:
Basic
25,248
26,116
26,985
27,600
28,122
Diluted
25,248
26,116
26,985
27,600
28,900
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands)
Operating Data:
Adjusted EBITDA(3)
$
(6,626
)
$
(3,557
)
$
(2,099
)
$
2,666
$
7,349
Adjusted Free Cash Flow(4)
$
(2,403
)
$
1,636
$
3,636
$
6,003
$
6,785
As of December 31, 2009
2005
2006
2007
2008
Actual
Pro Forma
(In thousands)
Balance Sheet Data:
(5)
Cash and cash equivalents
$
4,041
$
5,218
$
7,791
$
13,502
$
17,132
Working capital excluding deferred revenues
2,266
5,879
7,631
14,273
19,785
Total assets
24,309
24,883
26,332
32,922
37,765
Deferred revenues
9,853
19,164
26,124
31,590
34,275
Redeemable preferred stock
24,646
26,778
28,985
31,477
34,072
Total stockholders' equity (deficit)
(16,487
)
(26,403
)
(33,461
)
(34,391
)
(33,959
)
(1)
Amounts include stock-based compensation expense, as follows:
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands)
Cost of revenues
$
—
$
—
$
3
$
25
$
33
Research and development
—
—
56
53
86
Sales and marketing
—
—
42
150
83
General and administrative
—
—
9
158
163
$
—
$
—
$
110
$
386
$
365
(2)
Cost of revenues includes amortization of capitalized software
    development costs of:
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands)
Amortization of capitalized software development costs
$
227
$
235
$
114
$
154
$
167
(3)
EBITDA consists of net income (loss) plus depreciation and
    amortization, less (plus) interest and other income (expense),
    net and less income tax benefit. Adjusted EBITDA consists of
    EBITDA plus our non-cash, stock-based compensation expense and
    settlement and legal costs related to a patent infringement
    lawsuit
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settled in 2009. We use Adjusted EBITDA as a measure of
    operating performance because it assists us in comparing
    performance on a consistent basis, as it removes from our
    operating results the impact of our capital structure and the
    one-time costs associated with a non-recurring event. We believe
    Adjusted EBITDA is useful to an investor in evaluating our
    operating performance because it and similar measures are widely
    used to measure a company's operating performance without
    regard to items such as depreciation and amortization, which can
    vary depending upon accounting methods and the book value of
    assets, and to present a meaningful measure of corporate
    performance exclusive of our capital structure and the method by
    which assets were acquired. The following table provides a
    reconciliation of net income (loss) to Adjusted EBITDA:
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands)
Net income (loss)
$
(11,482
)
$
(7,901
)
$
(5,000
)
$
1,117
$
2,628
Depreciation and amortization
4,552
4,266
2,909
1,285
1,214
Interest and other income (expense), net
304
78
(118
)
(113
)
(27
)
Income tax benefit
—
—
(9
)
(20
)
EBITDA
(6,626
)
(3,557
)
(2,209
)
2,280
3,795
Non-cash, stock-based compensation expense
—
—
110
386
365
Litigation settlement and associated legal expenses
—
—
—
—
3,189
Adjusted EBITDA
$
(6,626
)
$
(3,557
)
$
(2,099
)
$
2,666
$
7,349
(4)
Free Cash Flow consists of net cash provided by (used in)
    operating activities, less purchases of property and equipment
    and less capitalization of software development costs. Adjusted
    Free Cash Flow consists of Free Cash Flow plus one-time
    settlement and legal costs related to a patent infringement
    lawsuit in 2009. We use Adjusted Free Cash Flow as a measure of
    operating performance because it assists us in assessing the
    company's ability to fund its growth through its generation
    of cash. We believe Adjusted Free Cash Flow is useful to an
    investor in evaluating our operating performance because
    Adjusted Free Cash Flow and similar measures are widely used to
    measure a company's operating performance without regard to
    revenue and expense recognition, which can vary depending upon
    accounting methods. The following table provides a
    reconciliation of net cash provided by (used in) operating
    activities to Adjusted Free Cash Flow:
Year Ended December 31,
2005
2006
2007
2008
2009
(In thousands)
Net cash provided by (used in) operating activities
$
(1,748
)
$
2,227
$
4,693
$
6,582
$
4,501
Purchase of property and equipment
(594
)
(531
)
(695
)
(480
)
(685
)
Capitalization of software development costs
(61
)
(60
)
(362
)
(99
)
(220
)
Free Cash Flow
(2,403
)
1,636
3,636
6,003
3,596
Litigation settlement and associated legal expenses
—
—
—
—
3,189
Adjusted Free Cash Flow
$
(2,403
)
$
1,636
$
3,636
$
6,003
$
6,785
(5)
A $1.00 increase (decrease) in the assumed initial public
    offering price of $   per share would increase
    (decrease) cash and cash equivalents, working capital excluding
    deferred revenues, total assets and total stockholders'
    equity (deficit) after this offering by approximately
    $   million, assuming the number of shares
    offered by us, as set forth on the cover page of this
    prospectus, remains the same and after deducting the estimated
    underwriting discount and estimated offering expenses payable by
    us.
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Table of Contents
MANAGEMENT'S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our financial statements and related notes that
    appear elsewhere in this prospectus. In addition to historical
    financial information, the following discussion contains
    forward-looking statements that reflect our plans, estimates and
    beliefs. Our actual results could differ materially from those
    discussed in the forward-looking statements. Factors that could
    cause or contribute to these differences include those discussed
    below and elsewhere in this prospectus, particularly in
    "Risk Factors."
Overview
We provide a leading on-demand strategic procurement and
    supplier enablement solution that integrates our customers with
    their suppliers to improve procurement of indirect goods and
    services. Our on-demand software enables organizations to
    realize the benefits of strategic procurement by identifying and
    establishing contracts with preferred suppliers, driving spend
    to those contracts and promoting process efficiencies through
    electronic transactions. Strategic procurement is the
    optimization of tasks throughout the cycle of finding,
    procuring, receiving and paying for indirect goods and services,
    which can result in increased efficiency, reduced costs and
    increased insight into an organization's buying patterns.
    Using our managed SciQuest Supplier Network, our customers do
    business with more than 30,000 unique suppliers and spend
    billions of dollars annually.
We derive our revenues primarily from subscription fees and
    associated implementation services from the sale of our solution
    to entities in the higher education, life sciences, healthcare
    and state and local government markets. Our contracts are
    typically three to five years in length, with total subscription
    fees typically ranging from $450,000 to $1.5 million
    ($150,000 to $300,000 per year) and the associated one-time
    implementation service fees typically ranging from $150,000 to
    $300,000. We sell primarily through our direct sales channel
    and, to a very limited extent, through indirect sales channels.
    We have over 160 customers operating in 16 countries and offer
    our solution in five languages and 22 currencies. Our revenue
    growth is driven primarily through the sale of our solution to
    new customers. For the fiscal year ended December 31, 2009,
    revenues increased 21% to $36.2 million from
    $29.8 million for the year ended December 31, 2008.
    For the fiscal year ended December 31, 2008, revenues
    increased 48% from $20.1 million for the year ended
    December 31, 2007.
We believe Adjusted EBITDA and Adjusted Free Cash Flow are the
    primary non-GAAP financial metrics upon which to measure our
    business. EBITDA consists of net income (loss) plus depreciation
    and amortization, less (plus) interest and other income
    (expense), net and less income tax benefit. Adjusted EBITDA
    consists of EBITDA plus our non-cash, stock-based compensation
    expense and settlement and legal costs related to a patent
    infringement lawsuit settled in 2009. Because Adjusted EBITDA
    excludes certain non-cash expenses such as depreciation,
    amortization and stock-based compensation, as well as the
    one-time impact of the settlement of a patent litigation suit in
    2009, we believe that this measure provides us with additional
    useful information to measure and understand our performance on
    a consistent basis, particularly with respect to changes in
    performance from period to period. Free Cash Flow consists of
    net cash provided by (used in) operating activities, less
    purchases of property and equipment and less capitalization of
    software development costs. Adjusted Free Cash Flow consists of
    Free Cash Flow plus one-time settlement and legal costs related
    to a patent infringement lawsuit in 2009. Because Adjusted Free
    Cash Flow measures the ability of the company to generate cash
    from operations, after investment in software development and
    property and equipment, we believe this is a meaningful
    measurement in which to gauge our ability to fund future growth.
    Our Adjusted Free Cash Flow normally fluctuates quarterly due to
    the combination of the timing of new business and the payment of
    annual bonuses. We use Adjusted EBITDA and Adjusted Free Cash
    Flow in the preparation of our budgets and to measure and
    monitor our performance. Adjusted EBITDA and Adjusted Free Cash
    Flow are not determined in accordance with GAAP and are not
    substitutes for or superior to financial measures determined in
    accordance with GAAP. For further discussion regarding Adjusted
    EBITDA and a reconciliation of Adjusted EBITDA to net income,
    see footnote 3 to the table in "Selected Financial
    Data" included elsewhere in this prospectus. For further
    discussion regarding Adjusted Free Cash Flow and a
    reconciliation of Adjusted Free Cash Flow to cash flows from
    operations, see footnote 4 to the table in "Selected
    Financial Data" included elsewhere in this prospectus.
33
Table of Contents
We were founded in 1995 as an
e-commerce
business-to-business
exchange for scientific products and conducted an initial public
    offering in 1999. In 2001, we brought in a new management team,
    exited the
business-to-business
exchange model and began selling our on-demand strategic
    procurement and supplier enablement solution. Our company was
    subsequently taken private in 2004. Since 2001, we have focused
    on developing our current
on-demand
business model, building out our technology, acquiring a
    critical mass of customers in our higher education and life
    sciences vertical markets, and selectively expanding our
    solution to serve the healthcare and state and local government
    markets. We have funded our operations since the going private
    transaction through our cash flow from operations. We generated
    Adjusted EBITDA of $(2.1) million, $2.7 million and
    $7.3 million in 2007, 2008 and 2009, respectively. We
    generated Adjusted Free Cash Flow of $3.6 million,
    $6.0 million and $6.8 million in 2007, 2008 and 2009,
    respectively. We generated a net loss of $(5.0) million for
    2007 and net income of $1.1 million and $2.6 million
    in 2008 and 2009, respectively. No customer accounted for more
    than 10% of our total revenues in 2007, 2008 and 2009. Our ten
    largest customers accounted for less than 25% of our total
    revenues in 2009.
We plan to continue the growth of our customer base by expanding
    our direct and indirect distribution channels and increasing our
    international market penetration. As a result, we plan to hire
    additional personnel, particularly in sales and implementation
    services, and expand our domestic and international sales and
    marketing activities. We also intend to identify and acquire
    companies that would either expand our solution's
    functionality, provide access to new customers or markets, or
    both.
Key
    Financial Terms and Metrics
Sources
    of Revenues
We primarily derive our revenues from sales of our on-demand
    strategic procurement and supplier enablement software solution
    and associated implementation services. Revenues are generated
    from subscription agreements that permit customers to access and
    utilize our procurement solution and related services.
Our subscription agreements generally contain multiple service
    elements and deliverables. These elements include access to our
    on-demand software, implementation services and, on limited
    occasions, perpetual licenses for certain software modules and
    related maintenance and support (license revenues generated
    through the sales of two software modules on a perpetual license
    basis constituted less than 5% of our revenues for each of the
    last three years). The typical term of our subscription
    agreements is three to five years, and we generally invoice our
    customers in advance of their annual subscription, with payment
    terms that require our customers to pay us within thirty days of
    invoice. We recognize revenues, both from subscription and
    perpetual licenses and related maintenance and support, ratably
    on a daily basis over the term of the agreement. Our agreements
    are generally non-cancelable, though customers have the right to
    terminate their agreements for cause if we materially breach our
    obligations under the agreement.
Implementation services revenues consist primarily of
    configuration, integration, training and change management
    services sold in conjunction with the initial subscription
    agreement as part of a multiple-element arrangement. Typically,
    our implementation services engagements are billed on a fixed
    fee, performance milestone basis with payment terms requiring
    our customers to pay us within thirty days of invoice. Revenues
    from implementation services sold as part of the initial
    agreement are recognized ratably over the remaining subscription
    term once the performance milestones have been met. Revenues
    from services sold separately from subscription agreements are
    recognized as the services are performed and have not been
    material to our business.
Historically, we have increased the price of our subscriptions
    upon the renewal of our customers' subscription agreements
    to reflect the increased feature functionality inherent in the
    solution since the initial subscription agreement. Our annual
    customer renewal rate has been over 94% over the last three
    years. On a dollar basis, our annual renewal rate has been 106%
    over this same time period solely as a result of pricing
    increases at the time of renewal. We believe these customer and
    dollar renewal rates reflect our customers' satisfaction
    with our solution and improve the visibility of our revenues.
34
Table of Contents
Cost of
    Revenues and Operating Expenses
We allocate certain overhead expenses, such as rent, utilities,
    and depreciation of general office assets to cost of revenues
    and operating expense categories based on headcount. As a
    result, an overhead expense allocation is reflected in cost of
    revenues and each operating expense category.
Cost of Revenues.
Cost of revenues consists
    primarily of compensation and related expenses for
    implementation services, supplier enablement services, customer
    support staff and client partners, costs related to hosting the
    subscription software, amortization of capitalized software
    development costs and allocated overhead. Costs of
    implementation services are expensed as incurred. We expect cost
    of revenues to increase in absolute dollars as we continue to
    increase the number of customers over time but remain relatively
    consistent as a percentage of revenues.
Research and Development.
Research and
    development expenses consist primarily of wages and benefits for
    software application development personnel and allocated
    overhead. We have focused our research and development efforts
    on both improving ease of use and functionality of our existing
    products as well as developing new offerings. We primarily
    expense research and development costs. The small percentage of
    direct development costs related to on-demand software
    enhancements that add functionality are capitalized and
    depreciated as a component of cost of revenues. We expect that
    research and development expenses will increase in absolute
    dollars as we continue to enhance and expand our product
    offerings but decrease as a percentage of revenues over time.
Sales and Marketing.
Sales and marketing
    expenses consist primarily of wages and benefits for our sales
    and marketing personnel, sales commissions, marketing programs,
    including lead generation, events and other brand building
    expenses and allocated overhead. We capitalize our sales
    commissions at the time a subscription agreement is executed by
    the customer, and we expense the commissions as a component of
    sales and marketing ratably over the subscription period,
    matching the recognition period of the subscription revenues for
    which the commissions were incurred. In order to continue to
    grow our business and brand awareness, we expect that we will
    continue to invest in our sales and marketing efforts. We expect
    that sales and marketing expenses will increase in absolute
    dollars but decrease as a percentage of revenues over time.
General and Administrative.
General and
    administrative expenses consist of compensation and related
    expenses for administrative, human resources, finance and
    accounting personnel, professional fees, other taxes and other
    corporate expenses. We expect that general and administrative
    expenses will increase as we continue to add personnel in
    connection with the growth of our business. In addition, we
    anticipate that we will also incur additional personnel expense,
    professional fees, including auditing and legal, and insurance
    costs related to operating as a public company. Therefore, we
    expect that our general and administrative expenses will
    increase in absolute dollars. Over the next two years, we expect
    that our general and administrative expenses also will increase
    as a percentage of revenues.
Amortization of Intangible Assets.
Amortized
    intangible assets consist of acquired technology and customer
    relationships from the going private transaction in 2004. The
    acquired technology was amortized on a straight-line basis over
    the estimated life of three years, and the customer
    relationships are amortized over a ten-year estimated life in a
    pattern consistent with which the economic benefit is expected
    to be realized.
Adjusted EBITDA.
EBITDA consists of net income
    (loss) plus depreciation and amortization, less interest and
    other income, net and less income tax benefit. Adjusted EBITDA
    consists of EBITDA plus our non-cash,
stock-based
compensation expense and settlement and legal costs related to a
    patent infringement lawsuit in 2009. We use Adjusted EBITDA as a
    measure of operating performance because it assists us in
    comparing performance on a consistent basis, as it removes from
    our operating results the impact of our capital structure and
    the one-time costs associated with a non-recurring event. We
    believe Adjusted EBITDA is useful to an investor in evaluating
    our operating performance because it is widely used to measure a
    company's operating performance without regard to items
    such as depreciation and amortization, which can vary depending
    upon accounting methods and the book value of assets, and to
    present a meaningful measure of corporate performance exclusive
    of our capital structure
35
Table of Contents
and the method by which assets were acquired. The following
    table provides a reconciliation of net income (loss) to Adjusted
    EBITDA:
Year Ended December 31,
2007
2008
2009
(In thousands)
Net income (loss)
$
(5,000
)
$
1,117
$
2,628
Depreciation and amortization
2,909
1,285
1,214
Interest and other income, net
(118
)
(113
)
(27
)
Income tax benefit
—
(9
)
(20
)
EBITDA
(2,209
)
2,280
3,795
Non-cash, stock-based compensation expense
110
386
365
Litigation settlement and associated legal expenses
—
—
3,189
Adjusted EBITDA
$
(2,099
)
$
2,666
$
7,349
Critical
    Accounting Policies
Our financial statements are prepared in accordance with
    accounting principles generally accepted in the United States.
    The preparation of these financial statements requires us to
    make estimates and assumptions that affect the reported amounts
    of assets, liabilities, revenues, costs and expenses and related
    disclosures. We evaluate our estimates and assumptions on an
    ongoing basis. Our actual results may differ from these
    estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which
    are described in Note 2 to the financial statements, the
    following accounting policies involve a greater degree of
    judgment and complexity. A critical accounting policy is one
    that is both material to the preparation of our financial
    statements and requires us to make difficult, subjective or
    complex judgments for uncertain matters that could have a
    material effect on our financial condition and results of
    operations. Accordingly, these are the policies we believe are
    the most critical to aid in fully understanding and evaluating
    our financial condition and results of operations.
Revenue
    Recognition
We primarily derive our revenues from subscription fees for our
    on-demand strategic procurement and supplier enablement software
    solution and associated implementation services. Revenue is
    generated from subscription agreements and related services
    permitting customers to access and utilize our hosted software.
    Customers may on occasion also purchase a perpetual license for
    certain software modules. Revenue is recognized when there is
    persuasive evidence of an agreement, the service has been
    provided or delivered to the customer, the collection of the fee
    is probable and the amount of the fee to be paid by the customer
    is fixed or determinable.
Our contractual agreements generally contain multiple service
    elements and deliverables. These elements include access to the
    hosted software, implementation services and, on a limited
    basis, perpetual licenses for certain software modules and
    related maintenance and support. Subscription agreements do not
    provide customers the right to take possession of the hosted
    software at any time, with the exception of a triggering event
    in source code escrow arrangements. In applying the multiple
    element revenue recognition guidance, we determined that we do
    not have objective and reliable evidence of the fair value of
    the subscription agreement and related services. We therefore
    account for fees received under multiple-element agreements as a
    single unit of accounting and recognize the agreement
    consideration ratably over the term of the subscription
    agreement, which is generally three to five years. The term of
    the subscription agreement commences on the start date specified
    in the subscription agreement, which is the date access to the
    software is provided to the customer provided all other revenue
    recognition criteria have been met. Fees for professional
    services that are contingent upon future performance are
    recognized ratably over the remaining subscription term once the
    performance milestones have been met. We recognize revenue from
    any professional services that are sold separately as the
    services are performed.
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Deferred revenue primarily consists of billings or payments
    received in advance of revenue recognition from our software and
    services described above. For multiple year subscription
    agreements, we generally invoice our customers in annual
    installments. Accordingly, the deferred revenue balance does not
    represent the total contract value of these multi-year
    subscription agreements. Our services, such as implementation,
    are generally sold in conjunction with subscription agreements.
    These services are recognized ratably over the remaining term of
    the subscription agreement once any contingent performance
    milestones have been satisfied. The portion of deferred revenue
    that we anticipate will be recognized after the succeeding
12-month
period is recorded as non-current deferred revenue and the
    remaining portion is recorded as current deferred revenue.
Stock-Based Compensation.
As of
    January 1, 2006, we adopted new stock-based compensation
    accounting guidance using the prospective application method,
    which requires that all stock-based payments to employees,
    including grants of employee stock options, are recognized in
    the statements of operations based on their fair values.
    Stock-based compensation costs are measured at the grant date
    based on the fair value of the award and are recognized as
    expense on a straight-line basis over the requisite service
    period, which is the vesting period.
Stock-based compensation costs are calculated using the
    Black-Scholes option-pricing model. Determining the appropriate
    fair value model and related assumptions requires judgment,
    including estimating stock price volatility, forfeiture rates
    and expected term. The assumptions used in determining the fair
    value of stock-based awards represent management's best
    estimates, but these estimates involve inherent uncertainties
    and the application of management judgment. As a result, if
    factors change and we use different assumptions, our stock-based
    compensation could be materially different in the future.
Because there has not been a public market for our common stock
    since 2004, we have lacked company-specific historical and
    implied volatility information. Therefore, we estimate our
    expected stock volatility based on that of publicly-traded peer
    companies, and we expect to continue to use this methodology
    until such time as we have adequate historical data regarding
    the volatility of our publicly-traded stock price. We do not
    have information available that is indicative of future exercise
    and post-vesting behavior to estimate the expected term.
    Therefore, the expected term used in our estimated fair value
    calculation represents the average time that options that vest
    are expected to be outstanding based on the mid-point between
    the vesting date and the end of the contractual term of the
    award. We have not paid dividends and do not anticipate paying
    dividends in the foreseeable future and, accordingly, use an
    expected dividend yield of zero. The risk-free interest rate is
    based on the rate of U.S. Treasury securities with
    maturities consistent with the estimated expected term of the
    awards. Pre-vesting forfeiture rates are estimated based on our
    historical forfeiture data.
The assumptions used in calculating the fair value of common
    stock options granted in 2008 and 2009 are set forth below:
2008
2009
Estimated dividend yield
0%
0%
Expected stock price volatility
100.0%
100.0%
Weighted-average risk-free interest rate
2.6% — 3.6%
1.9% — 2.8%
Expected life of award (in years)
6.25
6.25
We typically grant options on a semi-annual basis. The following
    table summarizes by grant date the number of stock options
    granted from January 1, 2008 through January 31, 2010,
    the per share exercise price of options and the fair value per
    option on each grant date:
Number of Shares Subject
Per Share Exercise
Fair Value
Grant Date
to Options Granted
Price of Option(1)
per Option(2)
January 23, 2008(3)
147,125
$
1.30
$
1.05
July 23, 2008(3)
63,000
$
1.58
$
1.28
January 22, 2009
349,099
$
1.02
$
0.82
July 22, 2009
35,000
$
0.95
$
0.77
January 21, 2010
447,198
$
1.13
$
0.71
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(1)
The per share exercise price of option represents the
    determination by our board of directors of the fair value of our
    common stock on the date of grant, as determined by taking into
    account our most recent valuation of common stock.
(2)
As described above, the fair value per share of each option was
    estimated for the date of grant using the Black-Scholes
    option-pricing model. This model estimates the fair value by
    applying a series of factors including the exercise price of the
    option, a risk free interest rate, the expected term of the
    option, expected share price volatility of the underlying common
    stock and expected dividends on the underlying common stock.
    Additional information regarding the valuation of our common
    stock and option awards is set forth in Note 8 to our
    financial statements included elsewhere in this prospectus.
(3)
Represents stock options that were amended to reduce the
    exercise price for substantially all of the shares subject to
    stock options granted on January 23, 2008 and July 23,
    2008. The amendments reduced the exercise price of the
    previously granted options to $1.02 per share, which was the
    fair value of our common stock on the date of the amendments.
    The amendments did not affect the vesting provisions or the
    number of shares subject to any of the option awards. For
    financial statement reporting, we treat the previously granted
    options as being forfeited and the amendments as new option
    grants.
As part of our stock incentive plan, and as set forth in
    Note 8 to our financial statements, we have also allowed
    certain employees to purchase shares of our restricted stock. We
    hold subscription notes receivable for the aggregate purchase
    price of the shares. Upon employee termination, we have the
    option to repurchase the shares. The repurchase price is the
    original purchase price plus interest for unvested restricted
    stock and the current fair value (as determined by our board of
    directors) for vested restricted stock. The shares generally
    vest ratably over two to four years. As of December 31,
    2009, there were 4,496,492 shares of vested and unvested
    restricted stock outstanding. The following table summarizes by
    grant date the number of shares of restricted stock granted from
    January 1, 2008 through January 31, 2010, the per
    share purchase price of restricted stock and the fair value per
    share of restricted stock on each grant date.
Per Share Purchase
Number of Shares of Restricted
Price(s) of Restricted
Fair Value(s)
Grant Date
Stock Granted
Stock(1)
per Share(2)
January 23, 2008
584,275
$
1.30
$
0.69 — $0.91
January 22, 2009
318,053
$
1.02
$
0.71 — $1.02
January 21, 2010
191,724
$
1.13
$0.59
(1)
The per share purchase price of restricted stock represents the
    determination by our board of directors of the fair value of our
    common stock on the date of grant, as determined by taking into
    account our most recent valuation of common stock.
(2)
As described above, the fair value per share of restricted stock
    was estimated for the date of grant using the Black-Scholes
    option-pricing model since the notes receivable are deemed
    non-recourse for accounting purposes. This model estimates the
    fair value by applying a series of factors including the
    exercise price of the option, a risk free interest rate, the
    expected term of the option, expected share price volatility of
    the underlying common stock and expected dividends on the
    underlying common stock.
Significant
    Factors Used in Determining the Fair Value of Our Common
    Stock
We have historically granted stock-based awards at exercise or
    purchase prices equivalent to the fair value of our common stock
    as of the date of grant, as determined by our board of directors
    taking into account our most recently available valuation of
    common stock.
Prior to June 2008, the annual common stock valuations were
    prepared using the income and market approaches. Under the
    income approach, the fair value of our common stock was
    estimated based upon the present value of a future stream of
    income that can reasonably be expected to be generated by the
    company. Under the market approach, the guideline market
    multiple methodology was applied, which involved the
    multiplication of free cash flows by risk-adjusted multiples.
    Multiples were determined through an analysis of certain
    publicly
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traded companies, which were selected on the basis of
    operational and economic similarity with our principal business
    operations.
Commencing in June 2008, we moved to semi-annual common stock
    valuations prepared using the "probability-weighted
    expected return" method. Under this methodology, the fair
    value of our common stock is estimated based upon an analysis of
    future values assuming various outcomes. The fair value is based
    on the probability-weighted present value of expected future
    investment returns considering each of the possible outcomes
    available to us as well as the rights of each share class. The
    possible outcomes considered were continued operation as a
    private company, an initial public offering and a sale of the
    company.
The private company scenario analysis utilized averages of the
    market and income approaches. Under the market approach, we
    estimated our enterprise value using the guideline public
    company method, which compares our company to publicly traded
    companies in our industry group after applying a discount for
    lack of marketability. The companies used for comparison under
    the guideline public company method were selected based on a
    number of factors, including but not limited to, the similarity
    of their industry, business model and financial risks. The
    multiples selected were adjusted for differences in expected
    growth, profitability and risk between the company and the
    comparable public companies. Under the income approach, we
    estimated our enterprise value using the discounted future cash
    flow method, which involves applying appropriate discount rates
    to estimated cash flows that are based on forecasts of revenues,
    costs and capital requirements. Our assumptions underlying the
    estimates were consistent with the plans and estimates that we
    use to manage our business. The risks associated with achieving
    our forecasts were assessed in selecting the appropriate
    discount rates.
The initial public offering scenario analysis utilized the
    guideline public company method. We estimated our enterprise
    value by comparing our company to publicly traded companies in
    our industry group. The companies used for comparison under the
    guideline public company method were selected based on a number
    of factors, including, but not limited to, the similarity of
    their industry, business model and financial risks to those of
    ours.
The sale scenario analysis utilized the guideline transaction
    enterprise value method. We estimated our enterprise value based
    on a range of values from guideline transactions. The companies
    used for comparison under the guideline transaction method were
    selected based on a number of factors, including, but not
    limited to, the similarity of their industry, business model and
    financial risks to those of ours.
Finally, the present values calculated under each scenario were
    weighted based on our management's estimates of the
    probability of each scenario occurring. The resulting values
    represented the estimated fair value of our common stock at each
    valuation date.
Specific information related to option grants is as follows:
January
    2008 Grants
In January 2008, we granted 147,125 stock options with an
    exercise price of $1.30. Additionally, we issued
    584,275 shares of restricted stock with a purchase price of
    $1.30. In the absence of a public trading market for our common
    stock, our board of directors, with input from management,
    considered the factors described below and determined the fair
    value of our common stock in good faith to be $1.30 per share.
We performed a contemporaneous valuation of the fair value of
    our common stock as of December 31, 2007 using the income
    and market approaches. The income approach used a discounted
    cash flow analysis by applying a risk-adjusted discount rate of
    17.1% to estimated debt-free cash flows, based on forecasted
    revenues. The projections used in connection with the income
    approach were based on our expected operating performance over
    the forecast period. There is inherent uncertainty in these
    estimates; if different discount rates or assumptions had been
    used, the valuation would have been different. Under the market
    approach, we reviewed an analysis of comparable publicly traded
    companies to apply the guideline market multiple methodology. In
    this analysis, we applied an average multiple of free cash flow
    to our free cash flow. We then applied a 25% discount for lack
    of marketability. We also considered the rights, preferences and
    privileges of the preferred stock relative to the common stock.
    Based on this analysis, the aggregate fair value of our common
    stock was determined to be $36.9 million, with a per share
    value of $1.30.
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July 2008
    Grants
In July 2008, we granted 63,000 stock options with an exercise
    price of $1.58. In the absence of a public trading market for
    our common stock, our board of directors, with input from
    management, considered the factors described below and
    determined the fair value of our common stock in good faith to
    be $1.58 per share.
We performed a contemporaneous valuation of the fair value of
    our common stock as of July 1, 2008 using the
    probability-weighted expected return methodology discussed above.
Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $42.8 million.
Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12 months revenue as of
    the estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $57.3 million.
Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation preference. We then
    applied a discount rate of 25%. This resulted in an aggregate
    common equity value of $28.8 million.
We then estimated the probability of each scenario occurring. We
    assigned a 5% probability to the sale scenario, a 50%
    probability to the initial public offering scenario and a 45%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $1.58 per share.
January
    2009 Grants
In January 2009, we granted 349,099 stock options with an
    exercise price of $1.02. Additionally, we issued
    318,053 shares of restricted stock with a purchase price of
    $1.02. In the absence of a public trading market for our common
    stock, our board of directors, with input from management,
    considered the factors described below and determined the fair
    value of our common stock in good faith to be $1.02 per share.
We performed a contemporaneous valuation of the fair value of
    our common stock as of December 31, 2008 using the
    probability-weighted expected return methodology discussed above.
Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $29.0 million.
Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12 months revenue as of
    the estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $37.2 million.
Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation preference. We then
    applied a discount rate of 25%. This resulted in an aggregate
    common equity value of $38.7 million.
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We then estimated the probability of each scenario occurring. We
    assigned a 10% probability to the sale scenario, a 20%
    probability to the initial public offering scenario and a 70%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $1.02 per share.
July 2009
    Grants
In July, 2009, we granted 35,000 stock options with an exercise
    price of $0.95. In the absence of a public trading market for
    our common stock, our board of directors, with input from
    management, considered the factors described below and
    determined the fair value of our common stock in good faith to
    be $0.95 per share.
We performed a contemporaneous valuation of the fair value of
    our common stock as of July 1, 2008 using the
    probability-weighted expected return methodology discussed above.
Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $25.1 million.
Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12 months revenue as of
    the estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $36.9 million.
Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation preference. We then
    applied a discount rate of 25%. This resulted in an aggregate
    common equity value of $36.4 million.
We then estimated the probability of each scenario occurring. We
    assigned a 10% probability to the sale scenario, a 25%
    probability to the initial public offering scenario and a 65%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $0.95 per share.
January 2010
    Grants
In January, 2010, we granted 447,198 stock options with an
    exercise price of $1.13. Additionally, we issued
    191,724 shares of restricted stock with a purchase price of
    $1.13. In the absence of a public trading market for our common
    stock, our board of directors, with input from management,
    considered the factors described below and determined the fair
    value of our common stock in good faith to be $1.13 per share.
We performed a contemporaneous valuation of the fair value of
    our common stock as of December 31, 2009 using the
    probability-weighted expected return methodology discussed above.
Under the private company scenario, we applied the income and
    market approaches. Under the income approach, we used a
    discounted cash flow analysis. Under the market approach, we
    used a weighted-average of the public guideline company method
    and the guideline transaction method. We then subtracted debt
    and the aggregate preferred stock liquidation preference. We
    then applied a 25% discount rate for lack of marketability. This
    resulted in a common equity valuation of $31.1 million.
Under the initial public offering scenario, we applied a
    multiple to our forecasted trailing 12 months revenue as of the
    estimated future date of an initial public offering. The
    multiple was based on a review of guideline public companies. We
    then subtracted debt and the aggregate preferred stock
    liquidation preference. We then applied a discount rate of 20%.
    This resulted in an aggregate common equity value of
    $43.9 million.
Under the sale scenario, we reviewed an analysis of selected
    guideline transactions and applied a median revenue multiple to
    determine our enterprise value. We then subtracted debt and the
    aggregate preferred stock liquidation
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preference. We then applied a discount rate of 25%. This
    resulted in an aggregate common equity value of
    $44.2 million.
We then estimated the probability of each scenario occurring. We
    assigned a 5% probability to the sale scenario, a 25%
    probability to the initial public offering scenario and a 70%
    probability to the private company scenario. Based on these
    approaches, the fair value of our common equity was determined
    to be $1.13 per share.
Deferred Project Costs.
We capitalize sales
    commission costs that are directly related to the execution of
    our subscription agreements. The commissions are deferred and
    amortized over the contractual term of the related subscription
    agreement. The deferred commission amounts are recoverable from
    the future revenue streams under the subscription agreements. We
    believe this is the appropriate method of accounting, as the
    commission costs are so closely related to the revenues from the
    subscription agreements that they should be recorded as an asset
    and charged to expense over the same period that the
    subscription revenues are recognized. Amortization of deferred
    commissions is included in sales and marketing expense in the
    statements of operations. The deferred commissions are reflected
    within deferred project costs in the balance sheets.
Goodwill.
Goodwill represents the excess of
    the cost of an acquired entity over the net fair value of the
    identifiable assets acquired and liabilities assumed. We review
    the carrying value of goodwill at least annually to assess
    impairment since it is not amortized. Additionally, we review
    the carrying value of goodwill whenever events or changes in
    circumstances indicate that its carrying amount may not be
    recoverable. We have concluded that we have one reporting unit
    for purposes of our annual goodwill impairment testing. To
    assess goodwill impairment, the first step is to identify if a
    potential impairment exists by comparing the fair value of a
    reporting unit with its carrying amount, including goodwill. If
    the fair value of a reporting unit exceeds its carrying amount,
    goodwill of the reporting unit is not considered to have a
    potential impairment and the second step of the impairment test
    is not necessary.
However, if the carrying amount of the reporting unit exceeds
    its fair value, the second step is performed to determine if
    goodwill is impaired and to measure the amount of impairment
    loss to recognize, if any. The second step compares the implied
    fair value of goodwill with the carrying amount of goodwill. If
    the implied fair value of goodwill exceeds the carrying amount,
    then goodwill is not considered impaired. However, if the
    carrying amount of goodwill exceeds the implied fair value, an
    impairment loss is recognized in an amount equal to that excess.
    The implied fair value of goodwill is determined in the same
    manner as the amount of goodwill recognized in a business
    combination. The fair value of the reporting unit is allocated
    to all the assets and liabilities, including any previously
    unrecognized intangible assets, as if the reporting unit had
    been acquired in a business combination and the fair value of
    the reporting unit was the purchase price paid to acquire the
    reporting unit. We performed our annual assessment on
    December 31, 2009. The estimated fair value of our
    reporting unit exceeded its carrying amount, including goodwill,
    and as such, no goodwill impairment was recorded.
Income Taxes.
Deferred income taxes are
    provided using tax rates enacted for periods of expected
    reversal on all temporary differences. Temporary differences
    relate to differences between the book and tax basis of assets
    and liabilities, principally intangible assets, property and
    equipment, deferred subscription revenue, pension assets,
    accruals and stock-based compensation. Valuation allowances are
    established to reduce deferred tax assets to the amount that
    will more likely than not be realized. To the extent that a
    determination is made to establish or adjust a valuation
    allowance, the expense or benefit is recorded in the period in
    which the determination is made.
Our company recognizes a tax benefit when it is
    more-likely-than-not, based on the technical merits, that the
    position would be sustained upon examination by a taxing
    authority. The amount to be recognized is measured as the
    largest amount of tax benefit that is greater than 50% likely of
    being realized upon ultimate settlement with a taxing authority
    that has full knowledge of all relevant information. Our company
    records interest or penalties accrued in relation to
    unrecognized tax benefits as income tax expense.
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Table of Contents
Results
    of Operations
The following table sets forth, for the periods indicated, our
    results of operations:
Year Ended December 31,
2007
2008
2009
(In thousands)
Revenues
$
20,107
$
29,784
$
36,179
Cost of revenues
6,101
6,723
7,494
Gross profit
14,006
23,061
28,685
Operating expenses:
Research and development
6,908
8,307
8,059
Sales and marketing
7,213
9,280
10,750
General and administrative
2,717
3,942
3,703
Litigation settlement and associated legal expenses
—
—
3,189
Amortization of intangible assets
2,286
537
403
Total operating expenses
19,124
22,066
26,104
Income (loss) from operations
(5,118
)
995
2,581
Interest and other income, net
118
113
27
Income (loss) before income taxes
(5,000
)
1,108
2,608
Income tax benefit
—
9
20
Net income (loss)
$
(5,000
)
$
1,117
$
2,628
The following table sets forth, for the periods indicated, our
    results of operations expressed as a percentage of revenues:
Year Ended December 31,
2007
2008
2009
Revenues
100
%
100
%
100
%
Cost of revenues
30
23
21
Gross profit
70
77
79
Operating expenses:
Research and development
34
28
22
Sales and marketing
36
31
30
General and administrative
14
13
10
Litigation settlement and associated legal expenses
—
—
9
Amortization of intangible assets
11
2
1
Total operating expenses
95
74
72
Income (loss) from operations
(25
)
3
7
Interest and other income, net
1
—
—
Income (loss) before income taxes
(25
)
4
7
Income tax benefit
—
—
—
Net income (loss)
(25
)%
4
%
7
%
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Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
Revenues.
Revenues for 2009 were
    $36.2 million, an increase of $6.4 million, or 21%,
    over revenues of $29.8 million for 2008. The increase in
    revenues resulted primarily from an increase in the number of
    customers from 127 as of December 31, 2008 to 156 as of
    December 31, 2009, as well as recognition of a full
    year's revenues for the new customers added in 2008.
    Revenues in 2008 included $0.8 million for a one-time
    termination fee received for the cancellation of a reseller
    agreement recognized in that year. We have increased our
    customer count through our continued efforts to enhance brand
    awareness and our sales and marketing efforts.
Cost of Revenues.
Cost of revenues in 2009 was
    $7.5 million, an increase of $0.8 million, or 12%,
    over cost of revenues of $6.7 million in 2008. As a
    percentage of revenues, cost of revenues decreased to 21% in
    2009 from 22% in 2008. The increase in dollar amount primarily
    resulted from a $0.5 million increase in employee-related
    costs attributable to our existing personnel and additional
    implementation service personnel, as well as a $0.1 million
    increase in allocated overhead due to increases in leased square
    footage of office space. We had 56 full-time employee
    equivalents in our implementation services, supplier enablement
    services, customer support and client partner organizations at
    December 31, 2009, compared to 55 full-time employee
    equivalents at December 31, 2008.
Research and Development Expenses.
Research
    and development expenses for 2009 were $8.1 million, a
    decrease of $0.2 million, or 2%, from research and
    development expenses of $8.3 million for 2008. As a
    percentage of revenues, research and development expenses
    decreased to 22% in 2009 from 28% in 2008. The decrease in
    dollar amount was due to an increase in capitalization of
    research and development costs of $0.1 million in 2009 and
    a reduction of $0.1 million in employee-related costs
    attributable to our existing personnel. We had 50 full-time
    employee equivalents in our research and development
    organization at December 31, 2009, compared to
53 full-time
employee equivalents at December 31, 2008.
Sales and Marketing Expenses.
Sales and
    marketing expenses for 2009 were $10.8 million, an increase
    of $1.5 million, or 16%, over sales and marketing expenses
    of $9.3 million for 2008. As a percentage of revenues,
    sales and marketing expenses decreased slightly to 30% in 2009
    from 31% in 2008. The increase in dollar amount is primarily due
    to an increase of $1.0 million in employee-related costs
    from our existing personnel and additional sales and marketing
    headcount, an increase of $0.4 million in amortized
    commission expense and an increase of $0.1 million of
    allocated overhead. We had 45 full-time employee
    equivalents in our sales and marketing organization at
    December 31, 2009, compared to 43 employee equivalents
    at December 31, 2008.
General and Administrative Expenses.
General
    and administrative expenses for 2009 were $3.7 million, a
    decrease of $0.2 million, or 5%, from general and
    administrative expenses of $3.9 million for 2008. As a
    percentage of revenues, general and administrative expenses
    decreased to 10% in 2009 from 13% in 2008. The decrease in
    dollar amount is due to a reduction in legal expenses of
    $0.4 million primarily due to efforts in 2008 to file 13
    patent applications, a reduction of $0.1 million in
    auditing fees due to the performance of a three-year audit in
    2008 and a reduction of $0.2 million in recruiting costs
    due to bringing our recruiting efforts inside the business
    instead of relying on outside recruiting firms in 2009, offset
    by an increase of $0.4 million in
employee-related
costs attributable to existing general and administrative
    personnel. We had 11 full-time employee equivalents in our
    general and administrative organization at December 31,
    2009 and December 31, 2008.
Litigation Settlement and Associated Legal
    Expenses.
Litigation settlement and associated
    legal expenses for 2009 were $3.2 million, or 9% of
    revenues, compared to no litigation settlement and associated
    legal expenses for 2008. In 2009, a company filed a patent
    infringement action against us and other, unrelated companies.
    We entered into a settlement agreement in 2009, and the
    settlement and related legal costs of $3.2 million were
    paid and recognized as operating expenses in the year ended
    December 31, 2009.
Amortization of Intangible
    Assets.
Amortization of intangible assets for
    2009 was $0.4 million, a decrease of $0.1 million, or
    20%, over amortization of intangible assets of $0.5 million
    for 2008. As a percentage of revenues, amortization of
    intangible assets decreased to 1% in 2009 from 2% in 2008. The
    decrease in dollar amount was the result of the declining
    amortization recognized on the customer relationships asset over
    the
10-year
estimated life. The customer relationships asset was recorded as
    a result of the going private transaction in 2004.
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Income from Operations.
Income from operations
    for 2009 was $2.6 million, an increase of
    $1.6 million, or 160%, over income from operations of
    $1.0 million for 2008. As a percentage of revenues, income
    from operations increased to 7% in 2009 from 3% in 2008. The
    increase in dollar amount was the result of our increase in
    revenues offset by our increased expenses required to support
    the additional revenues, as well as the one-time impact of the
    litigation settlement and associated legal expenses.
Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
Revenues.
Revenues for 2008 were
    $29.8 million, an increase of $9.7 million, or 48%,
    over revenues of $20.1 million for 2007. The increase in
    revenues resulted primarily from an increase in the number of
    customers from 105 as of December 31, 2007 to 127 as of
    December 31, 2008, as well as recognition of a full
    year's revenues for the new customers added in 2007.
    Revenues in 2008 included $0.8 million due to a one-time
    termination fee received for the cancellation of a reseller
    agreement recognized in that year. We have increased our
    customer count through our continued efforts to enhance brand
    awareness and our sales and marketing efforts.
Cost of Revenues.
Cost of revenues in 2008 was
    $6.7 million, an increase of $0.6 million, or 10%,
    over cost of revenues of $6.1 million in 2007. As a
    percentage of revenues, cost of revenues decreased to 22% in
    2008 from 30% in 2007. The increase in dollar amount primarily
    resulted from a $0.6 million increase in employee-related
    costs attributable to our existing personnel and additional
    implementation service personnel. We had 55 full-time
    employee equivalents in our implementation services, supplier
    enablement services, customer support and client partner
    organizations at December 31, 2008, compared to
    51 full-time employee equivalents at December 31, 2007.
Research and Development Expenses.
Research
    and development expenses for 2008 were $8.3 million, an
    increase of $1.4 million, or 20%, over research and
    development expenses of $6.9 million for 2007. As a
    percentage of revenues, research and development expenses
    decreased to 28% in 2008 from 34% in 2007. The increase in
    dollar amount was primarily due to an increase of
    $1.2 million in employee-related costs attributable to our
    existing personnel and additional research and development
    personnel as well as a decrease in capitalization of research
    and development costs of $0.3 million in 2008. We had
    53 full-time employee equivalents in our research and
    development organization at December 31, 2008, compared to
    48 full-time employee equivalents at December 31, 2007.
Sales and Marketing Expenses.
Sales and
    marketing expenses for 2008 were $9.3 million, an increase
    of $2.1 million, or 29%, over sales and marketing expenses
    of $7.2 million for 2007. As a percentage of revenues,
    sales and marketing expenses decreased to 31% in 2008 from 36%
    in 2007. The increase in dollar amount is primarily due to an
    increase of $0.9 million in employee-related costs from our
    existing personnel and additional sales and marketing headcount,
    an increase of $0.6 million in amortized commission
    expense, an increase of $0.3 million in travel costs and
    $0.1 million in allocated overhead due to our additional
    personnel and an increase of $0.1 million in additional
    marketing costs for tradeshows. We had 43 full-time
    employee equivalents in our sales and marketing organization at
    December 31, 2008, compared to 30 employee equivalents
    at December 31, 2007.
General and Administrative Expenses.
General
    and administrative expenses for 2008 were $3.9 million, an
    increase of $1.2 million, or 44%, from general and
    administrative expenses of $2.7 million for 2007. As a
    percentage of revenues, general and administrative expenses was
    13% in both 2008 and 2007. The increase in dollar amount is due
    to an increase in legal expenses of $0.5 million primarily
    due to efforts in 2008 to file 13 patent applications, an
    increase of $0.2 million in auditing fees due to the
    performance of a three-year audit in 2008, an increase of
    $0.3 million in employee-related costs attributable to our
    existing personnel and additional general and administrative
    personnel and an increase of $0.2 million in stock-based
    compensation. We had
11 full-time
employee equivalents in our general and administrative
    organization at December 31, 2008, compared to eight at
    December 31, 2007.
Amortization of Intangible
    Assets.
Amortization of intangible assets for
    2008 was $0.5 million, a decrease of $1.8 million, or
    78%, over amortization of intangible assets of $2.3 million
    for 2007. As a percentage of revenues, amortization of
    intangible assets decreased to 2% in 2008 from 11% in 2007. The
    decrease in dollar amount was the result of final amortization
    of the acquired technology and the declining amortization
    recognized on the
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customer relationships asset over the
10-year
estimated life. Both the acquired technology and the customer
    relationships asset were recorded as a result of the going
    private transaction in 2004.
Income from Operations.
Income from operations
    for 2008 was $1.0 million, an increase of $6.1 million
    over the loss from operations of $(5.1) million for 2007.
    As a percentage of revenues, income from operations increased to
    3% in 2008 from (25%) in 2007. The increase in dollar amount was
    the result of our increase in revenues offset by our increased
    expenses required to support the additional revenues.
Liquidity
    and Capital Resources
Since the going private transaction in July 2004, we have funded
    our operations through cash flow generated by the operating
    activities of our business.
Net Cash
    Flows from Operating Activities
Net cash provided by operating activities was $4.5 million
    during 2009, $6.6 million during 2008 and $4.7 million
    during 2007. For 2009, net cash provided by operating activities
    was primarily the result of $2.6 million of net income,
    non-cash depreciation and amortization expense of
    $1.2 million and a $2.7 million increase in deferred
    revenues offset by a $1.3 million increase in accounts
    receivable. Increases in deferred revenues are due to continued
    growth in new business, offset by the subscription revenues
    recognized ratably over time. Increases in accounts receivable
    are primarily due to growth in the number of customer
    subscription agreements.
For 2008, net cash provided by operating activities was
    primarily a result of $1.1 million of net income,
non-cash
depreciation and amortization expense of $1.3 million and a
    $5.5 million increase in deferred revenues due to growth in
    new business offset by a $0.8 million increase in deferred
    project costs due to increased capitalized commissions from new
    business in 2008.
For 2007, net cash provided by operating activities was
    primarily a result of a $(5.0) million net loss, offset by
    $2.9 million in non-cash depreciation and amortization
    expense and a $7.0 million increase in deferred revenues
    due to growth in new business.
Our deferred revenues were $34.3 million at
    December 31, 2009, $31.6 million at December 31,
    2008 and $26.1 million at December 31, 2007, which
    reflects growth in the total number of customers. Customers are
    invoiced annually in advance for their annual subscription fee
    and the invoices are recorded in accounts receivable and
    deferred revenues, which deferred revenues are then recognized
    ratably over the term of the subscription agreement. With
    respect to implementation services fees, customers are invoiced
    as the services are performed, typically within the first three
    to eight months of contract execution, and the invoices are
    recorded in accounts receivable and deferred revenues, which are
    then recognized ratably over the remaining term of the
    subscription agreement once the performance milestones have been
    met. If our sales increase, we would expect our deferred
    revenues balance to increase.
As of December 31, 2009, we had net operating loss
    carryforwards of approximately $200 million available to
    reduce future federal taxable income. In the future, we may
    fully utilize our available net operating loss carryforwards and
    would begin making income tax payments at that time. In
    addition, the limitations on utilizing net operating loss
    carryforwards and other minimum state taxes may also increase
    our overall tax obligations. We expect that if we generate
    taxable income
and/or
we
    are not allowed to use net operating loss carryforwards for
    federal/state income tax purposes, our cash generated from
    operations will be adequate to meet our income tax obligations.
Net Cash
    Flows from Investing Activities
For 2009, net cash used in investing activities was
    $0.9 million, consisting of various capital expenditures of
    $0.7 million and capitalization of $0.2 million of
    software development costs. In general, our capital expenditures
    are for our network infrastructure to support our customer base
    and growth in new business and for internal use, such as
    equipment for employees. Net cash used in investing activities
    for 2008 was $0.9 million, consisting of capital
    expenditures of $0.5 million, capitalization of software
    development costs of $0.1 million and an increase in
    restricted cash of $0.4 million. The restricted cash
    collateralizes our line of credit, taken out in 2008. Net cash
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used in investing activities for 2007 was $1.1 million,
    consisting of $0.7 million for capital expenditures and
    $0.4 million for capitalization of software development
    costs.
Net Cash
    Flows from Financing Activities
For 2009, net cash provided by financing activities was
    $0.03 million and was primarily for the issuance of common
    stock under the 2004 Stock Incentive Plan. For 2008, net cash
    provided by financing activities was $0.06 million and was
    primarily for the issuance of common stock under the 2004 Stock
    Incentive Plan. For 2007, net cash used in financing activities
    was $1.1 million and was primarily for the repayment of the
    remainder of our note payable from the going private transaction.
Line of
    Credit
As of December 31, 2009, we had a $2.5 million line of
    credit outstanding with $0.4 million drawn down. This
    outstanding line of credit is collateralized by a
    $0.4 million restricted cash deposit which is maintained at
    the granting financial institution. This line of credit renews
    annually in October. The interest rate on the unpaid principal
    balance is the LIBOR Market Index Rate plus 1.5%. As of
    December 31, 2009, the interest rate was 1.7%.
Off-Balance
    Sheet Arrangements
As of December 31, 2007, 2008 and 2009, we did not have any
    relationships with unconsolidated entities or financial
    partnerships, such as entities often referred to as structured
    finance or special purpose entities, which would have been
    established for the purpose of facilitating off-balance sheet
    arrangements or other contractually narrow or limited purposes.
    Other than our operating leases for office space, we do not
    engage in off-balance sheet financing arrangements. In addition,
    we do not engage in trading activities involving non-exchange
    traded contracts. As such, we are not materially exposed to any
    financing, liquidity, market or credit risk that could arise if
    we had engaged in these relationships.
Capital
    Resources
Our future capital requirements may vary materially from those
    now planned and will depend on many factors, including the costs
    to develop and implement new products and services, the sales
    and marketing resources needed to further penetrate our targeted
    vertical markets and gain acceptance of new modules we develop,
    the expansion of our operations in the United States and
    internationally and the response of competitors to our products
    and services. Historically, we have experienced increases in our
    expenditures consistent with the growth in our operations and
    personnel, and we anticipate that our expenditures will continue
    to increase as we grow our business.
We believe our cash and cash equivalents, the proceeds from this
    offering, funds available under our line of credit and cash
    flows from our operations will be sufficient to meet our working
    capital and capital expenditure requirements for at least the
    next 12 months.
During the last three years, inflation and changing prices have
    not had a material effect on our business, and we do not expect
    that inflation or changing prices will materially affect our
    business in the foreseeable future.
Contractual
    and Commercial Commitment Summary
The following table summarizes our contractual obligations as of
    December 31, 2009. These contractual obligations require us
    to make future cash payments.
Payments Due by Period
Less Than 1
More Than 5
Contractual Obligations
Total
Year
1 - 3 Years
3 - 5 Years
Years
(In thousands)
Line of credit
$
350
$
350
$
—
$
—
$
—
Operating lease commitments
3,484
771
1,549
991
173
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Quantitative
    and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk.
We bill our
    customers predominately in U.S. dollars and receive payment
    predominately in U.S. dollars. Accordingly, our results of
    operations and cash flows are not materially subject to
    fluctuations due to changes in foreign currency exchange rates.
    If we grow sales of our solution outside of the United States,
    our contracts with foreign customers may be denominated in
    foreign currency and may become subject to changes in currency
    exchange rates.
Interest Rate Sensitivity.
Interest income and
    expense are sensitive to changes in the general level of
    U.S. interest rates. However, based on the nature and
    current level of our investments, which are primarily cash and
    cash equivalents, and our debt obligations, we believe there is
    no material risk of exposure.
Seasonality
Our new business sales normally fluctuate as a result of
    seasonal variations in our business, principally due to the
    timing of client budget cycles. Historically, we have had lower
    new sales in our first and third quarters than in the remainder
    of our year. Our expenses, however, do not vary significantly as
    a result of these factors, but do fluctuate on a quarterly basis
    due to varying timing of expenditures. Our Adjusted Free Cash
    Flow normally fluctuates quarterly due to the combination of the
    timing of new business and the payment of annual bonuses.
    Historically, due to lower new sales in our first quarter,
    combined with the payment of annual bonuses from the prior year
    in our first quarter, our Adjusted Free Cash Flow is lowest in
    our first quarter, and due to the timing of client budget
    cycles, our Adjusted Free Cash Flow is lower in our second
    quarter as compared to our third and fourth quarters. In
    addition, deferred revenues can vary on a seasonal basis for the
    same reasons. This pattern may change, however, as a result of
    acquisitions, new market opportunities or new product
    introductions.
New
    Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board, or FASB,
    issued The FASB Accounting Standards Codification, or
    Codification, which is the single source of authoritative GAAP
    recognized by the FASB to be applied by nongovernmental
    entities. Rules and interpretive releases of the SEC under
    authority of federal securities laws are also sources of
    authoritative GAAP for SEC registrants. The Codification
    supersedes all
non-SEC
accounting and reporting standards. All other non-grandfathered
    non-SEC accounting literature not included in the Codification
    is non-authoritative. The Codification is effective for
    financial statements issued for interim and annual periods
    ending after September 15, 2009. The Codification did not
    change or alter existing GAAP and, therefore, did not have an
    impact on our balance sheets, statements of operations and cash
    flows.
In October 2009, the FASB's Emerging Issues Task Force
    revised its guidance on revenue recognition for
    multiple-deliverable revenue arrangements. The amendments in
    this update will, in certain circumstances, enable companies to
    separately account for multiple revenue-generating activities
    (deliverables) that they perform for their customers. Existing
    GAAP requires a company to use vendor-specific objective
    evidence, or VSOE, or third-party evidence of selling price to
    separate deliverables in a multiple-deliverable arrangement. The
    update will allow the use of an estimated selling price if
    neither VSOE nor third-party evidence is available. The update
    will require additional disclosures of information about an
    entity's multiple-deliverable arrangements. The
    requirements of the update may be applied prospectively for
    revenue arrangements entered into or materially modified in
    fiscal years beginning on or after June 15, 2010, although
    early adoption is permitted. We are currently evaluating the
    impact of the update on our financial position and results of
    operations and do not plan to early or retroactively adopt the
    new guidance.
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OUR
    BUSINESS
Overview
We provide a leading on-demand strategic procurement and
    supplier enablement solution that integrates our customers with
    their suppliers to improve procurement of indirect goods and
    services. Our on-demand software enables organizations to
    realize the benefits of strategic procurement by identifying and
    establishing contracts with preferred suppliers, driving spend
    to those contracts and promoting process efficiencies through
    electronic transactions. Strategic procurement is the
    optimization of tasks throughout the cycle of finding,
    procuring, receiving and paying for indirect goods and services,
    which can result in increased efficiency, reduced costs and
    increased insight into an organization's buying patterns.
    Using our managed SciQuest Supplier Network, our customers do
    business with more than 30,000 unique suppliers and spend
    billions of dollars annually.
Our current target markets are higher education, life sciences,
    healthcare and state and local governments, and our customers
    are the purchasing organizations and individual employees that
    purchase indirect goods and services using our solution. We
    tailor our solution for each of the vertical markets we serve by
    offering industry-specific functionality, content and supplier
    connections. Once connected to our network, customers and
    suppliers can easily exchange real-time electronic procurement
    information and conduct transactions. We serve more than 160
    customers operating in 16 countries and offer our solution in
    five languages and 22 currencies. Our value proposition has led
    to an average annual customer renewal rate of over 94% over the
    last three years. On a dollar basis, our annual renewal rate has
    been 106% over this same time period solely as a result of
    pricing increases at the time of renewal. We believe our renewal
    rates are among the highest of on-demand model companies.
We deliver our solution over the Internet using a
    Software-as-a-Service, or SaaS, model, which enables us to offer
    greater functionality, integration and reliability with less
    cost and risk to the organization than traditional
on-premise
solutions. Customers pay us subscription fees and implementation
    service fees for the use of our solution under multi-year
    contracts that are generally three to five years in length. We
    typically receive subscription payments annually in advance and
    implementation service fees as the services are performed,
    typically within the first three to eight months of contract
    execution. Unlike many other providers of procurement solutions,
    we do not charge suppliers any fees for the use of our network,
    because suppliers ultimately may pass on such costs to the
    customer.
We were founded in 1995 as an
e-commerce
business-to-business
exchange for scientific products and conducted an initial public
    offering in 1999. In 2001, we brought in a new management team,
    exited the
business-to-business
exchange model and began selling our on-demand strategic
    procurement and supplier enablement solution. Our company was
    subsequently taken private in 2004. Since 2001, we have focused
    on developing our current
on-demand
business model, building out our technology, acquiring a
    critical mass of customers in our higher education and life
    sciences vertical markets, and selectively expanding our
    solution to serve the healthcare and state and local government
    markets. Our revenues have grown to $36.2 million in 2009
    from $20.1 million in 2007, and our Adjusted Free Cash Flow
    increased to $6.8 million from $3.6 million during
    this period (Adjusted Free Cash Flow is not determined in
    accordance with GAAP and is not a substitute for or superior to
    financial measures determined in accordance with GAAP; for
    further discussion regarding Adjusted Free Cash Flow and a
    reconciliation of Adjusted Free Cash Flow to cash flows from
    operations, see footnote 4 to the table in "Selected
    Financial Data" included elsewhere in this prospectus). No
    customer accounted for more than 10% of our revenues during this
    period. Our high customer retention, combined with our long-term
    contracts, increases the visibility and predictability of our
    revenues compared with traditional perpetual license-based
    software businesses. We manage our business with three key
    principles: focus on customer value, vertical market expertise
    and financial stewardship.
Industry
    Background
The
    Indirect Goods and Services Procurement Market
Procurement is an essential activity for virtually every
    organization, encompassing a significant portion of an
    organization's spending beyond payroll. The procurement
    function is typically split into two categories, direct and
    indirect. Direct goods and services procurement is the purchase
    of goods and services that are directly incorporated
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into an organization's products or services, while indirect
    goods and services procurement is the purchase of the
day-to-day
necessities of the workplace such as office supplies, laboratory
    supplies, furniture, computers, MRO (maintenance, repair and
    operations) supplies, and food and beverages. Indirect goods and
    services tend to be low cost but are usually bought in high
    volumes by a wide variety of employees throughout an
    organization.
The procurement process for indirect goods and services is often
    not well-managed or controlled. Buyers generally follow a
    sequential set of processes, referred to as the
"source-to-settle"
cycle, which is comprised of the following steps:
•
identify which suppliers have the required goods and services;
•
negotiate purchasing or contractual relationships;
•
establish a mechanism to transact business;
•
find, compare, approve and order the necessary goods and
    services;
•
receive, inspect and pay for the goods and services; and
•
analyze spending for potential savings and contract compliance.
Organizations with a procurement department establish purchasing
    policies, monitor purchasing activity, designate preferred
    suppliers, negotiate volume discounts and other contractual
    terms and otherwise manage supplier relationships. Although the
    procurement department is responsible for the purchasing
    function, most purchasing activity is conducted outside the
    procurement department by employees throughout the organization.
    These employees are challenged to comply with procurement
    policies to acquire their needed goods and services while
    performing their
day-to-day
duties. Employees often do not know who the preferred suppliers
    are and must work within antiquated systems that are cumbersome
    and time consuming. As a result, many purchases are not made
    from the available preferred suppliers
and/or
the
    purchases are conducted "off-contract," a behavior
    sometimes referred to as "maverick spending." This
    results in the organization not taking advantage of negotiated
    discounts. In many cases, the procurement department has limited
    ability to monitor, control or even influence this purchasing
    activity. Procurement departments are seeking ways to have
    greater visibility and control over the organization's
    purchasing activity, reduce maverick spending and better serve
    the employees who make purchases for the organization.
Our target market for strategic procurement of indirect goods
    and services is a subset of the broader supply procurement and
    sourcing application chain management market, which AMR Research
    estimates in a July 2009 report entitled "The Global
    Enterprise Application Market Sizing Report,
2008-2013"
as a $2.9 billion global opportunity in 2010, growing at an
    8% compounded annual growth rate from 2010 through 2013. Based
    on our own internal analysis, we believe that our current
    addressable market is approximately $1.0 billion within our
    current target markets as follows: higher education
    ($324 million), life sciences ($292 million),
    healthcare ($176 million) and state and local government
    ($244 million).
Manual
    Procurement Processes Are Inefficient
Historically, efforts and investments to streamline the
    procurement process have tended to focus on direct goods and
    services. The procurement of indirect goods and services, which
    are typically lower cost but higher volume and thus still
    represent a large percentage of overall expenses, remains
    subject to significant inefficiencies. Traditionally,
    procurement organizations and employees have relied on manual,
    catalog-based processes to procure indirect goods and services,
    resulting in inaccuracies, inefficiencies, poor control and
    reduced user productivity. For example, in many instances, users
    may have to pay
out-of-pocket
for supplies and then seek reimbursement through expense
    reports. In addition, there are often long lead times to fulfill
    orders and an inability to analyze spending and minimize waste.
    Characteristics of these traditional processes include:
•
Lack of clearly defined procurement guidelines and awareness
    of preferred suppliers.
In many cases, because
    processes are cumbersome, ill-defined and time consuming, many
    employees have difficulty following the procurement approval
    processes and fail to purchase from preferred suppliers. As a
    result, buying the right goods and services from the right
    suppliers at the right prices rarely occurs. Employees
    frequently purchase
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indirect materials from a local retail outlet or from a generic
    online retailer, such as Amazon.com. This maverick spending can
    result in the organization purchasing products at unfavorable
    prices.
•
Limited ability to analyze spend.
Given the
    lack of automation and centralized reporting, organizations have
    difficulty analyzing what they are buying from suppliers. This
    limits the ability to negotiate better contracts or understand
    the organization's compliance with spending limits.
    Additionally, without the proper systems, it is difficult to
    enforce supplier compliance with all negotiated contract terms.
•
Dissatisfied employees.
Employees prefer an
    efficient and user-friendly procurement process. Manual,
non-integrated
processes often lead to excess costs, delays and errors,
    resulting in a frustrating experience. In addition, employees
    are unable to track the goods and supplies already on-hand, thus
    leading to excess purchases.
Traditional
    Automated Procurement Solutions Have Had Limited
    Effectiveness
Efforts to automate the procurement function for indirect goods
    and services initially consisted of add-on modules to enterprise
    resource planning, or ERP, systems and first generation
    procurement systems. These systems, initially developed 10 to
    15 years ago, provide efficiencies by allowing
    organizations to automate parts of the procurement process, such
    as requisitioning, authorizing, ordering, receiving and payment.
    However, providers of these systems often have pricing models
    that charge fees to suppliers, which are costs that suppliers
    ultimately may pass on to the customer. These supplier fees
    discourage suppliers from entering the offering platform and
    result in off-platform purchases. Furthermore, most have limited
    effectiveness, because they often:
•
are implemented on-premise, and thus are expensive to deploy and
    maintain;
•
are generalized horizontal market solutions with limited
    industry-specific supplier participation, content and
    functionality;
•
require each organization to have its own customized
one-to-one
connections to each supplier; and
•
lack managed service capabilities to enable suppliers.
The introduction of SaaS-based strategic procurement solutions
    within the past few years has enabled buyers and suppliers to
    transact with each other online more efficiently. These systems
    provide better access to suppliers through a basic
hub-and-spoke
architecture and offer lower implementation and ongoing costs
    due to their
on-demand
nature. Yet despite their benefits, many other SaaS procurement
    offerings still suffer from the fact that they are primarily
    horizontal solutions that do not provide functionality and
    content specific to vertical markets, nor do they have a robust
    supplier network that can benefit from economies of scale. In
    addition, existing systems often have complicated interfaces
    that are difficult for employees to navigate. We believe there
    is a substantial market for focused, easy-to-use solutions that
    establish and maintain strong and efficient commercial
    relationships between organizations and suppliers.
Our
    Solution
We offer an on-demand strategic procurement and supplier
    enablement solution that enables organizations to more
    efficiently source indirect goods and services, manage their
    spend and obtain the benefits of compliance with purchasing
    policies and negotiating power with suppliers. Our on-demand
    strategic procurement software suite coupled with our managed
    supplier network forms our integrated solution, which is
    designed to achieve rapid and sustainable savings. Our solution
    provides customers with a set of products and services that
    enable them to optimize existing procurement processes by
    automating the entire
source-to-settle
process. The SciQuest Supplier Network acts as a communications
    hub that connects over 160 customers to over 30,000 unique
    suppliers.
Our solution provides the following key benefits:
•
Significant return on investment
    ("ROI").
Our solution enables
    organizations to realize the benefits of strategic procurement
    by identifying and establishing contracts with preferred
    suppliers, driving spend to those contracts and promoting
    process efficiencies through electronic transactions. As a
    result, customers are able to achieve significant returns on
    investment through savings associated with contract compliance
    and
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strategic procurement. These savings result from negotiated
    discounts, automated requisition/order processing, contract
    lifecycle management, settlement automation and sourcing (such
    as the ability to conduct on-line bidding processes).
•
Content and functionality specific to our vertical
    markets.
While we offer a single solution, our
    software has specific configurable functionality that meets the
    unique needs of our targeted vertical markets. We have a
    critical mass of suppliers to achieve economies of scale, and
    new suppliers can be readily added as the needs of our customers
    dictate.
•
Easier access to customers' supplier
    network.
Customers can easily access their
    preferred suppliers using a single solution and avoid the costs
    and inefficiencies associated with traditional
one-to-one
supplier management.
•
Greater adoption by employees.
Our intuitive
    shopping interface provides employees with easy and automated
    visibility and access to goods and services. Streamlining the
    procurement process spurs user adoption and increases the level
    of spend under management, meaning spend that occurs pursuant to
    a
pre-established
contract with the supplier.
•
Greater adoption by suppliers.
Suppliers
    typically are motivated to join our network due to ease of
    enablement and lack of supplier fees. This allows our solution
    to support a robust supplier network in which our customers
    benefit from economies of scale.
•
Visibility into spending patterns and
    activity.
Our solution provides granular detail
    into user spending behavior and provides detailed analytics that
    allow organizations to continually improve their purchasing
    practices.
•
Ease of deployment via integration with existing systems.
Our highly-configurable solution integrates with many
    leading ERP systems to speed deployment and facilitate the
    interchange of transaction, accounting, settlement and user data.
Our
    Business Strengths
In addition to our differentiated customer solution, we believe
    our market approach and business model offer specific benefits
    that are instrumental to our successful growth. These include:
•
Focus on customer value.
Delivering value to
    our customers is at the core of our business philosophy. We
    focus extensively on ensuring that customers achieve maximum
    benefit from our solution, and we proactively engage with our
    customers to continually improve our software and services. To
    this end, each of our customers is partnered with a member of
    our client partner organization that proactively assists that
    customer to maximize the ROI and related benefits from their
    implementation of our solution. This has led to a 36% compound
    annual growth rate in the average transaction volume by
    customers through our system over the last three years. In
    addition, each customer has access to our separate client
    support staff. Our
customer-centric
focus, significant domain expertise and integrated solution have
    led to the establishment of consistent long-term customer
    relationships, exemplified by an average annual customer renewal
    rate of over 94% over the last three years. On a dollar basis,
    our annual renewal rate has been 106% over this same time period
    solely as a result of pricing increases at the time of renewal.
•
Expertise in our targeted vertical
    markets.
Because we have developed a solution
    that solves specific procurement problems for customers in our
    target vertical markets, we are able to differentiate ourselves
    from other solution providers that are horizontally focused. As
    a result, we are able to drive greater value to customers
    through increased cost savings and improved contract compliance.
    Additionally, our focus on a core set of vertical markets allows
    us to be more efficient in our sales and marketing efforts
    through an understanding of the specific needs and requirements
    of our customers. Our domain expertise allows us to provide our
    customers with a highly tailored and differentiated solution
    that is difficult for our competitors to replicate.
•
Extensive content and supplier
    network.
Essential to our solution is building a
    critical mass of suppliers within a vertical market. Suppliers
    are not charged any fees or transaction costs for purchases
    consummated through the SciQuest Supplier Network, which
    facilitates the growth of our network of over 30,000 unique
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suppliers servicing the higher education, life sciences,
    healthcare and state and local government markets. Upon signing
    of a new customer, we seek to add that customer's suppliers
    to our supplier network. We charge our customers for each of
    their suppliers with whom they interact on our supplier network.
    Therefore, to the extent that a customer's suppliers are
    already on our supplier network, our costs to enable these
    suppliers are reduced, allowing us to benefit from improved
    operating margins and other economies of scale.
•
Ability to manage costs.
While we manage our
    business to maximize customer benefit, we also seek to optimize
    returns to our stockholders and employees by managing our cost
    structure. Our culture of lean management principles extends
    from our senior management throughout our company, including our
    development processes and our professional services engagements.
    This lean management of our cost structure has kept our capital
    expenditures low and helped lower our operating expenses as a
    percentage of revenues from 95% in 2007 to 72% in 2009.
•
High visibility business model.
Our customers
    pay us subscription fees and implementation service fees for the
    use of our solution under multi-year contracts that are
    generally three to five years in length, and we typically
    receive cash payments annually in advance. The recurring nature
    of our revenues provides high visibility into future
    performance, and the upfront payments result in cash flow
    generation in advance of revenue recognition. For each of the
    last three years, greater than 80% of our revenues were
    recognized from contracts that were in place at the beginning of
    the year.
Our
    Growth Strategy
We seek to become the leading provider of strategic procurement
    solutions for indirect goods and services. Our key strategic
    initiatives include:
•
Further penetrating our existing vertical
    markets.
Over 80% of our customers currently come
    from the higher education and life sciences vertical markets,
    where we have a significant operating history, with the
    remainder of our customers coming from our newer healthcare and
    state and local government markets. We will continue to focus
    our efforts on acquiring new customers in our vertical markets,
    including investing in sales and marketing to increase our
    profile in the healthcare and state and local government markets
    while increasing our emphasis on mid-sized customer acquisition
    opportunities in the higher education and life sciences markets.
•
Capitalizing on cross-selling opportunities into our
    installed customer base.
As of December 31,
    2009, our solution was being used by over 160 customers in our
    vertical markets. Our existing customer base provides us with a
    significant opportunity to sell additional modules and new
    products that we may develop or acquire. For each of the past
    three years, approximately 20% of new sales have consisted of
    sales of additional modules and services to existing customers.
    We plan to develop
and/or
acquire additional modules and products to sell to our existing
    customers by leveraging our position as a trusted strategic
    procurement solution vendor in our targeted vertical markets.
•
Selectively expanding into new vertical
    markets.
In the future, we intend to selectively
    expand into new vertical markets that are adjacent to, or have
    similarities to, our existing verticals and where we can
    leverage our market expertise. For instance, we expanded into
    the healthcare and state and local government markets because
    they are both adjacent to and have similar procurement
    characteristics as the higher education and life sciences
    markets. Vertical markets where procurement is still
    predominately handled through paper processing, with multiple
    suppliers of high volume, low-cost goods, offer potential
    expansion opportunities. We may pursue such expansion through
    internal product development, sales and marketing initiatives or
    strategic acquisitions.
•
Investing in international expansion to acquire new
    customers.
We believe that the market outside the
    United States offers us significant growth potential. Currently,
    we have customers operating in 16 countries and offer our
    solution in five languages and 22 currencies, although many of
    our international sales have consisted of sales to multinational
    organizations based in the United States. To date, sales to
    customers that are not based in the United States have
    represented an insignificant portion of our annual sales. We
    intend to continue our
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international expansion by increasing our international direct
    sales force and establishing additional
third-party
sales relationships in an effort to leverage our leadership
    position and reputation as a leading provider of strategic
    procurement solutions to organizations with global operations.
•
Selectively pursuing acquisitions.
We may
    pursue acquisitions of businesses, technologies and solutions
    that complement our existing offerings in an effort to
    accelerate our growth, enhance the capabilities of our existing
    solution and broaden our solution offerings. We also may pursue
    acquisitions that allow us to expand into new verticals or
    geographies where we do not have a significant presence.
Our
    Products and Services
Our strategic procurement and supplier enablement solution
    automates the
source-to-settle
process. We provide our solution on-demand over the Internet
    using a SaaS model, which enables us to offer greater
    functionality, integration and reliability with less cost and
    risk than traditional on-premise solutions. We continue to
    evolve our solution based on our interaction with our customers
    around the world.
The following diagram provides an overview of our solution:
Our on-demand strategic procurement software suite provides
    customers with a set of products and services that enables them
    to automate the entire
source-to-settle
process. These integrated modules maximize the benefits
    customers derive from using the SciQuest Supplier Network and
    allow our customers to more efficiently communicate and transact
    with their suppliers.
Our solution also includes business intelligence features that
    enable organizations to analyze spend at the supplier, commodity
    and requisition levels. These reporting tools help users
    identify and establish contracts with preferred suppliers, drive
    spend to those contracts, and promote process efficiencies
    through electronic transactions.
SciQuest
    Strategic Procurement Software Suite
Our modular strategic procurement software suite optimizes
    processes to reduce costs, improve productivity and increase
    visibility for enterprise spend management. The individual
    modules of our solution can be deployed together or separately
    and integrate with many leading ERP systems.
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The following table provides an overview of the modules of our
    solution:
Module
Key Features
Sourcing Manager
•     Manages and expedites the
    bid creation process
•     Provides ability to create
    auctions, invite supplier participants and monitor and control
    the reverse auction process in real-time
•     Provides self-service access
    for registered suppliers to view events, enter responses, review
    award decisions and manage their own profiles
•     Graphs and highlights key
    event information
Spend Director
•     Enables a critical mass of
    suppliers
•     Promotes preferred suppliers
•     Provides an intuitive
    procurement user environment
•     Provides visibility into
    spending
Requisition Manager
•     Creates and submits
    error-free requisitions electronically
•     Previews approval workflow
    and tracks requisitions online
•     Routes requisitions
    electronically based on any requisition attribute
•     Provides buyers and managers
    flexible approval options and 24/7 remote access
•     Consolidates requisitions to
    minimize shipping fees and maximize discounts
•     Analyzes requisition data to
    identify savings opportunities and audit contract compliance
Order Manager
•     Exchanges purchase documents
    electronically and securely with suppliers
•     Manages purchase documents
    automatically, eliminating paper processes
•     Communicates order status to
    requisitioners electronically
•     Tracks order status
    automatically with participating suppliers
•     Integrates directly with
    SciQuest Requisition Manager or existing ERP and financial
    systems
•     Analyzes order data to
    identify saving opportunities
Settlement Manager
•     Integrates
    order/receipt/invoice data
•     Automates receipt creation
•     Supports automated matching
    of invoices with purchase orders and/or receipts
•     Streamlines invoice
    management
•     Avoids error-prone manual
    data entry
Contract Management
•     Creates and manages a
    detailed, accessible and searchable contract repository
•     Assigns contract numbers to
    purchases
•     Ensures the order price is
    the best price
•     Generates proactive alerts
    for key dates and contract milestones
•     Enhances visibility into
    contract spending and compliance, including comparison of
    contract budget versus contract spending
Inventory Materials Management
•     Provides comprehensive,
    stockroom-level inventory management, reducing backorders and
    stockouts
•     Integrates available onsite
    inventory with product searches to avoid redundant purchases
•     Maintains trusted inventory
    count
•     Manages multiple inventory
    locations
•     Controls user access to
    inventory
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Our solution is priced based primarily on the modules purchased
    and the size of the organization. An organization's size is
    determined based on its operating budget
and/or
number of employees. Our typical total subscription fees over
    the three to five year term of the subscription agreement range
    from $450,000 to $1.5 million ($150,000 to $300,000 per
    year), and our typical one-time implementation service fees
    range from $150,000 to $300,000. Customers are not charged based
    on the number of users or transaction volume, which encourages
    organizations to maximize the number of employees using our
    solution, resulting in enhanced efficiencies and customer
    satisfaction.
SciQuest
    Supplier Network
The SciQuest Supplier Network is a SaaS communications hub that
    enables efficient and automated transaction interactions between
    our customers and their existing suppliers. It is the single
    integration point between our customers and their suppliers that
    also provides customers with on-demand access to comprehensive
    and
up-to-date
multi-commodity supplier catalogs. By utilizing the SciQuest
    Supplier Network, our customers and their suppliers can connect
    in a
hub-and-spoke
configuration versus a
one-to-one
configuration, dramatically reducing the cost of integration.
    The SciQuest Supplier Network also provides customers with the
    infrastructure to add additional suppliers as needed. The dollar
    volume of transactions conducted through the SciQuest Supplier
    Network has increased from less than $2 billion in 2007 to
    over $6 billion in 2009. The SciQuest Supplier Network
    includes suppliers of broad commodity categories such as:
•
IT equipment;
•
office supplies;
•
laboratory and medical supplies;
•
MRO supplies;
•
services, such as temporary labor;
•
retail (books, CDs, appliances, etc.);
•
furniture; and
•
food and beverages.
While our solution addresses many different commodities and
    markets, our experience in the higher education and life
    sciences verticals has resulted in the ability to create unique
    additional products for these markets such as:
•
the Science Catalog, which is a list price catalog of
    approximately 400 niche and midsize suppliers that support
    diverse and specialized scientific research;
•
catalog consortium contracts which offer preferred pricing
    arrangements with industry-specific buying cooperatives; and
•
inventory management solutions for specialty materials.
Our
    Service Offerings
We offer our customers a number of services, some of which are
    included as part of their annual subscription fee and others,
    such as implementation services, are billed separately.
Client Partners.
Our client partner
    organization proactively assists customers to maximize the
    benefit from their SciQuest solution. Each of our customers is
    partnered with a member of our client partner organization, who
    monitors the customer's utilization of our solution and
    tracks performance metrics. Our client partners can identify
    underuse of the solution within the organization and proactively
    assist customers to better integrate our solution into their
    procurement processes.
Supplier Enablement Services.
Our supplier
    enablement organization manages the SciQuest Supplier Network
    and all supplier connections to our customers. This
    organization's role is to ease the integration of suppliers
    into our network and to increase the efficiency of communication
    between our customers and their suppliers. These
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efforts include enabling each new customer's suppliers on
    the SciQuest Supplier Network, assisting suppliers in loading
    and updating product catalogs and adding new suppliers of
    existing customers.
Implementation Services.
Our client delivery
    organization is responsible for implementing and deploying our
    solution with customers. These services are designed primarily
    to enhance the usability of the software for our customers and
    to assist them with configuration, integration, training and
    change management. Our implementation services include analyzing
    a customer's current procurement processes, identifying
    specific
high-value
procurement needs, configuring our software products to the
    customer's specific business and providing guidance on
    implementing and reinforcing best practices for procurement. In
    order to provide reliable, repeatable and
cost-effective
implementation and use of our products, we have developed a
    standard methodology to deliver implementation services that is
    milestone-based and emphasizes early knowledge transfer and
    solution usage. We develop project requirements based on the
    customer's specific needs and set objective project goals,
    such as usage levels, in order to measure success.
Customer Support.
Our customer support
    organization provides technical product support to our customers
    by phone, email and through our online Solutions Portal. Our
    Solutions Portal provides instant
24-hour
Internet access to a searchable solutions database that includes
    release notes, answers to frequently asked questions, links to
    release preview webinars and product documentation. The portal
    allows customers to notify us of product software defects and
    incidents and to track our resolutions of such incidents in a
    centralized location.
Customers
We serve more than 160 customers operating in 16 countries and
    offer our solution in five languages and 22 currencies. As of
    February 1, 2010, we had over 112,000 active users of our
    solution within our customer organizations. In 2007, 2008 and
    2009, substantially all of our revenues were derived from
    customers in the United States or United States-based
    multinational companies. No customer accounted for more than 10%
    of our total revenues in 2007, 2008 and 2009. Our ten largest
    customers accounted for less than 25% of our total revenues in
    2009. The markets in which our customers operate include higher
    education, life sciences and more recently, healthcare and state
    and local governments.
Higher Education.
We serve over 100 higher
    education institutions, including research intensive
    universities, state-wide university systems and mid-market
    colleges, at more than 155 campuses.
Life Sciences.
We serve 38 pharmaceutical and
    bio-technology customers, which include 12 of the top 15 global
    pharmaceutical companies as measured by revenue. A majority of
    our life science customers have over $1 billion in annual
    revenue.
Healthcare.
We serve 18 healthcare customers
    which consist of academic medical centers, healthcare services
    and research organizations and group purchasing organizations,
    more than half of which have annual revenues exceeding
    $500 million.
State and Local Government.
We serve two state
    and local government customers and are currently attempting to
    expand our presence within this market. The State of Georgia
    became our first state and local government customer in June
    2008. We are initially targeting all state governments, all of
    which have annual expenditures in excess of $3 billion on
    indirect goods and services, and the 200 largest city and county
    governments, which have annual expenditures in excess of
    $500 million on indirect goods and services.
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The following table provides an overview of our representative
    customers by vertical.
Vertical
Representative Customers
Higher Education
Bryn Mawr College, East Tennessee State University, Emory
    University, Tulsa Community College, University of Michigan,
    University of Notre Dame, the University of Texas System, Yale
    University
Life Sciences
Bristol-Myers Squibb Company, GlaxoSmithKline, Organon
    Laboratories, Roche, Sanofi-Aventis, Scripps Research Institute,
    Wyeth
Healthcare
AmSurg, Cincinnati Children's Hospital, Memorial
    Sloan-Kettering Cancer Center, University of Texas Health
    Science Center at Houston
State and Local Government
Clint Independent School District, State of Georgia
Customer
    Case Studies
The case studies below demonstrate how we have helped leading
    organizations transform procurement into a strategic function
    and achieve a return on investment:
Emory University.
Emory University, the
    largest private employer in Atlanta, is a leading
    U.S. research university. Emory purchased our solution to
    gain visibility into how much each of its 350 departments was
    paying for everything from pens and paper to furniture and MRO
    supplies. In 2006, Emory implemented our full
source-to-settle
solution to create an online, one-stop shopping marketplace
    where faculty and staff can order most commonly required
    products and specific services from university contracts. With
    our procurement solution in place, Emory reports the following
    benefits:
•
realized 6-to-1 ROI, meaning that they realized $6 in savings
    benefits for every $1 paid to SciQuest for its solution, over
    the first three years of their agreement with SciQuest;
•
funded the investment in our solution from the existing
    procurement budget, generated by realized savings, with no
    budget increases or general fund expenses; and
•
determined that 45% of realized savings resulted from process
    efficiencies and 55% of realized savings resulted from
    negotiated discounts and contract compliance.
State of Georgia.
The State of Georgia is the
    ninth most populous state in the country with a
    $17.5 billion operating budget. Approximately
    $4 billion of this operating budget is spent through the
    state's purchasing department. Government agencies
    typically negotiate sophisticated statewide contracts with
    suppliers, but these contracts are complicated and difficult for
    state employees to access and utilize. The State of Georgia
    first implemented our solution in 2008. The State of Georgia
    acquired our solution in order to apply private-sector
    procurement strategies to address this problem. After deploying
    our solution, the State of Georgia reports the following
    benefits:
•
increased spend under management, meaning spend that occurs
    pursuant to a pre-established contract with the supplier, from
    6% to nearly 60% within the first 18 months;
•
negotiated new discounts from suppliers ranging from 5% to
    20%; and
•
reduced paper-based expenses, including some departments going
    almost 100% paperless upon implementation.
East Tennessee State University.
East
    Tennessee State University, or ETSU, is a mid-sized higher
    education institution. A cost-reduction task force identified
    paper-based ordering and a fully manual procurement process as
    an opportunity for cost savings. The task force found that the
    cost to process each purchase order was too high and that the
    average order turnaround time from requisition to approval was
    9.3 days. ETSU first implemented our solution in 2006. ETSU
    licensed our Spend Director, Requisition Manager and Order
    Manager modules with
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our Supplier Network in order to establish a new automated
    procurement process. With our procurement solution in place,
    ETSU reports the following benefits:
•
reduced average order turnaround time from 9.3 days to
    3.7 days;
•
eliminated paper-based purchasing with 100% of purchase orders
    being processed electronically;
•
reallocated two procurement employees to other departments,
    resulting in a 44% reduction in procurement staff; and
•
improved ability to direct spending, with 41% of purchase orders
    being directed to preferred suppliers and 10% of spending
    directed to diversity suppliers.
Sales and
    Marketing
We market and sell our strategic procurement and supplier
    enablement solution through a direct sales force. Our sales
    force is organized by our current target markets of higher
    education, life sciences, healthcare and state and local
    governments, as well as by region. Our sales force also is
    divided into two selling groups: a new accounts group that
    generates qualified sales leads and sells our solution to
    organizations that are not currently our customers, and a sales
    group of account executives that sells additional products to
    our existing customers. Sales through our direct sales force
    represent the largest source of our total revenues.
We supplement our direct sales efforts with strategic partner
    relationships principally in order to increase market awareness
    and generate sales leads. Our strategic partners generally
    consist of suppliers, ERP providers, technology providers and
    purchasing consultants and consortia. The relationships include
    referral and re-seller relationships. We have a business
    development group within our sales organization to manage these
    relationships.
Our marketing efforts focus on increasing awareness of our brand
    and products, establishing SciQuest as a thought leader for
    strategic procurement and generating qualified sales leads. Our
    principal marketing initiatives target key executives and
    decision makers within our existing and prospective customer
    base and include sponsorship of, and participation in, industry
    events including user conferences, trade shows and webinars.
    Many sales opportunities are generated by referrals from
    existing customers, particularly in the higher education market.
    We also participate in cooperative marketing efforts with our
    strategic partners and other providers of complementary services
    or technology.
As of February 28, 2010, our sales and marketing
    organization consisted of 43 employees.
We also conduct NextLevel, an annual event that brings the
    procurement community, including industry experts, thought
    leaders and suppliers, together to discuss the latest thinking,
    newest strategies and most innovative solutions. The 2010
    NextLevel conference was attended by approximately 240
    customers, prospects, suppliers, partners and other members of
    the procurement community.
Our new business sales normally fluctuate as a result of
    seasonal variations in our business, principally due to the
    timing of client budget cycles. Historically, we have had lower
    new sales in our first and third quarters than in the remainder
    of our year.
Competition
The market for strategic procurement and supplier enablement
    solutions is competitive, rapidly evolving and subject to
    changes in technology. We compete with a number of procurement
    software vendors, large software application providers and group
    purchasing organizations. Our current principal competitors are
    Ariba (across all of our vertical markets other than
    healthcare), GHX (healthcare only), large enterprise application
    providers that we believe have limited procurement
    functionality, such as Oracle and SAP, smaller market-specific
    vendors, and internally developed and maintained solutions.
We believe the principal competitive factors in our industry
    include the following:
•
breadth, depth and configurability of the solution;
•
brand name recognition;
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•
ability to meet a customer's functional requirements and
    provide content specific to a vertical market;
•
on-demand software delivery model;
•
managed network and supplier services;
•
price;
•
ease and speed of implementation and use;
•
measurability of results, demonstrable
return-on-investment
and perceived value;
•
satisfaction of customer base; and
•
performance and reliability of the software.
We believe we compete favorably with our competitors on the
    basis of these factors. In addition, many of our customers are
    current users of Oracle and SAP, and integrate our solution into
    their ERP system. However, some of our existing and potential
    competitors have greater financial resources, longer operating
    histories and more name recognition. We may face future
    competition in our markets from other large, established
    companies, as well as emerging companies.
Technology
For several years, we have applied Lean-Agile product
    development and project management principles to the operational
    areas of our company. The four key principles of respecting the
    individual, focusing on delivering customer value, eliminating
    waste, and continuously improving each and every process are the
    bases for designing, developing, implementing and supporting our
    solution.
We use commercially available operating, application, and
    database management systems and have a significant commitment to
    using open-source systems throughout our technology development
    and delivery stack. We support key industry standards and have
    an overall technology architecture that is highly redundant and
    designed to be highly available, while supporting rapid
    development and deployment of new releases several times per
    year. We have implemented standard practices in the areas of
    development, deployment, production control, administration and
    monitoring.
Our product suite is designed for, and primarily delivered over,
    the Internet "on-demand." We also have two specialty
    inventory management modules that are deployed behind the
    customer's firewall.
Our on-demand solution is web-based and modular, automating each
    step of an organization's procurement lifecycle. These
    on-demand modules require only a standard Web browser and access
    to the Internet, requiring no
behind-the-firewall
components.
The multi-tenant, on-demand application environment is developed
    using enterprise-class components:
Java-based
application code, IBM's DB2 database management system, and
    an open-source operating environment. The single code-base
    supports thousands of users and delivers robust, scalable,
    secure solutions for customers. Our solution has multiple layers
    of security, with all production operating systems protected
    against unauthorized access, sensitive data encrypted, all
    network/firewall devices actively monitored and updated, and
    user authentication required for system access.
Our integration layer is based on technology provided by a
    technology partner, providing flexible, scalable, and deep
    integrations to customers' existing IT systems
    infrastructure (e.g., into customers' authentication,
    financial or ERP systems). This technical architecture
    facilitates true Internet-native standards support, scalability,
    reliability, recoverability, security and ease of maintenance.
We own and administer all of our hosted production servers and
    web site hardware, which physically reside in
tier-1
data
    center hosting facilities. Our primary data center facility
    offers physical security, redundant power systems, and multiple
    OC3 internet network connections and is located in Research
    Triangle Park, North Carolina. We also have a fully redundant,
    disaster recovery platform in a data center in Scottsdale,
    Arizona which is automatically synchronized, real-time, with the
    system in North Carolina.
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On a nightly basis, a backup of the production environments and
    databases are performed and stored offsite in a vaulted
    location, which enables full business recovery. We test the
    reliability of our fail over systems and have numerous
    contingency plans in place for business continuity. We utilize
    external monitoring and load testing tools to track the
    performance of our production environment.
Our deployed inventory management modules have a three-tier
    architecture, with an interface component, an application server
    layer, and database layer. These modules are deployed within a
    customer's network where we provide level 2 and
    level 3 support. We provide regular updates to customers
    with new releases available every
18-24 months
and maintenance releases available periodically (typically every
    three to six months).
Product
    Development
Our product development organization is responsible for the
    design, development and testing of our software. Our current
    product development efforts are focused on maintenance and new
    releases of existing products as well as development of new
    products and modules.
Following our Lean-Agile product development methodology, we
    work closely with our customers in developing all our products.
    Our customer community provides extensive input that we
    incorporate into our products through regular reviews and
    demonstration-based focus groups. Typically, our product
    development organization will conduct four to six focus groups
    and 30 to 40 customer interviews during a release cycle and
    works closely with our implementation and customer support
    organization, which also provides for customer feedback into the
    development process.
As of February 28, 2010, our product development
    organization consisted of 42 employees.
Our research and development expenses were $6.9 million,
    $8.3 million and $8.1 million in 2007, 2008 and 2009,
    respectively.
Intellectual
    Property
Our success and ability to compete is dependent in part on our
    ability to develop and maintain the proprietary aspects of our
    technology and operate without infringing upon the proprietary
    rights of others. We rely primarily on a combination of patent,
    copyright, trade secret, confidentiality procedures, contractual
    provisions and other similar measures to protect our proprietary
    information.
We have registered trademarks and service marks in the United
    States and abroad, and have applied for the registration of
    additional trademarks and service marks. Our principal trademark
    is "SciQuest."
We have one issued U.S. patent, which expires in 2023, and
    13 pending U.S. patent applications. We are not pursuing
    patent protection in any foreign countries. We do not know
    whether any of our pending patent applications will result in
    the issuance of patents or whether the examination process will
    require us to narrow our claims.
We also use contractual provisions to protect our intellectual
    property rights. We license our software products directly to
    customers. These license agreements, which address our
    technology, documentation and other proprietary information,
    include restrictions intended to protect and defend our
    intellectual property. We also require all of our employees,
    contractors and many of those with whom we have business
    relationships to sign non-disclosure and confidentiality
    agreements.
The legal protections described above afford only limited
    protection for our technology. Due to rapid technological
    change, we believe that factors such as the technological and
    creative skills of our personnel, new product and service
    developments and enhancements to existing products and services
    are more important than the various legal protections of our
    technology to establishing and maintaining a technology
    leadership position.
Our products also include third-party software that we obtain
    the rights to use through license agreements. These third-party
    software applications are commercially available on reasonable
    terms. We believe that we could obtain substitute software, or
    in certain cases develop substitute software, to replace these
    third-party software applications if they were no longer
    available on reasonable terms.
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In May 2009, a company filed a patent infringement action in the
    United States District Court for the Eastern District of
    Virginia against us and other unrelated companies. In August
    2009, we entered into a settlement agreement under which we made
    a one-time settlement payment.
Properties
Our corporate headquarters are located in Cary, North Carolina,
    where we currently lease approximately 32,000 square feet
    of office space. This lease expires in January 2014. We also
    maintain an office in Newtown Square, Pennsylvania, where we
    currently lease approximately 5,500 square feet of space.
    This lease expires in February 2016.
We believe that our current facilities are suitable and adequate
    to meet our current needs, and that suitable additional or
    substitute space will be available as needed to accommodate
    future growth.
Employees
As of February 28, 2010, we had 158 full-time
    employees. None of our employees are represented by labor unions
    or covered by collective bargaining agreements. We consider our
    relationship with our employees to be good.
Legal
    Proceedings
In 2001, we were named as a defendant in several securities
    class action complaints filed in the United States District
    Court for the Southern District of New York originating from our
    December 1999 initial public offering. The complaints alleged,
    among other things, that the prospectus used in our initial
    public offering contained material misstatements or omissions
    regarding the underwriters' allocation practices and
    compensation and that the underwriters manipulated the
    aftermarket for our stock. These complaints were consolidated
    along with similar complaints filed against over 300 other
    issuers in connection with their initial public offerings. After
    several years of litigation and appeals related to the
    sufficiency of the pleadings and class certification, the
    parties agreed to a settlement of the entire litigation, which
    was approved by the Court on October 5, 2009. Notices of
    appeal to the Court's order have been filed by various
    appellants. We have not incurred significant costs to date in
    connection with our defense of these claims since this
    litigation is covered by our insurance policy. We believe we
    have sufficient coverage under our insurance policy to cover our
    obligations under the settlement agreement. Accordingly, we
    believe the ultimate resolution of these matters will not have
    an impact on our financial position and, therefore, we have not
    accrued a contingent liability as of December 31, 2008 and
    2009.
We are not party to any other material legal proceedings at this
    time. From time to time, we may be subject to legal proceedings
    and claims in the ordinary course of business.
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MANAGEMENT
Executive
    Officers and Directors
The following table sets forth the names, ages and positions of
    our executive officers and directors as of March 26, 2010:
Name
Age
Position
Stephen J. Wiehe
46
President, Chief Executive Officer and Director
Rudy C. Howard
52
Chief Financial Officer
James B. Duke
46
Chief Operating Officer
Jeffrey A. Martini
51
Senior Vice President of Worldwide Sales
Jennifer G. Kaelin
38
Vice President of Finance
C. Gamble Heffernan
48
Vice President of Marketing and Strategy
Noel J. Fenton(1)(3)
71
Chairman of the Board of Directors
Daniel F. Gillis(2)(3)
63
Director
Jeffrey T. Barber(1)
57
Director
Timothy J. Buckley(1)(2)
58
Director
(1)
Member of the audit committee.
(2)
Member of the compensation committee.
(3)
Member of the nominating and governance committee.
Stephen J. Wiehe
has served as our President, Chief
    Executive Officer and a member of our board of directors since
    joining SciQuest in February 2001. From 2000 until he joined
    SciQuest, Mr. Wiehe served as Senior Director, Strategic
    Investments & Mergers and Acquisitions at SAS
    Institute. Mr. Wiehe joined SAS as part of its acquisition
    of DataFlux Corporation, a provider of data quality and data
    warehousing solutions, where Mr. Wiehe had served as
    President and Chief Executive Officer since 1999. From 1998
    until joining DataFlux, Mr. Wiehe served as Managing
    Director/Europe and Senior Executive Vice President for SunGard
    Treasury Systems, a division of SunGard Data Systems, Inc., a
    software and IT services company. He also served as President
    and Chief Executive Officer of Multinational Computer Models,
    Inc., a provider of Treasury management solutions used by large
    multinational corporations to manage their foreign exchange,
    debt, and investment-related financial hedging instruments, from
    1991 until Multinational Computer Models was sold to SunGard
    Data Systems in 1998. Mr. Wiehe started his career with
    General Electric Company, serving in various financial positions
    from 1987 to 1991 and graduating from its Financial Management
    Program in 1989. Mr. Wiehe is a graduate of the University
    of Kentucky. Mr. Wiehe's past experience as a software
    industry executive and his long service with us qualify him to
    serve as a director and provides our board of directors with
    deep knowledge of our business and industry.
Rudy C. Howard
has served as our Chief Financial Officer
    since joining SciQuest in January 2010. From November 2008 until
    joining SciQuest, Mr. Howard served as Senior Vice
    President and Chief Financial Officer of MDS Pharma Services, a
    pharmaceutical services company, where he was responsible for
    all financial management functions. From 2003 until joining MDS
    Pharma Services, Mr. Howard operated his own financial
    consulting company, Rudy C. Howard, CPA Consulting, in
    Wilmington, North Carolina, where his services included advising
    on merger and acquisition transactions, equity and debt
    issuances and other general management matters. From 2001
    through 2003, Mr. Howard served as Chief Financial Officer
    for Peopleclick, Inc., an international human capital management
    software company. From 2000 until joining Peopleclick,
    Mr. Howard served as Chief Financial Officer for Marketing
    Services Group, Inc., a marketing and internet technology
    company. From 1995 until 2000, Mr. Howard served as Chief
    Financial Officer for PPD, Inc., a clinical research
    organization. Prior to joining PPD, Mr. Howard was a
    partner with PricewaterhouseCoopers. Mr. Howard holds a
    B.A. in Accounting from North Carolina State University, and he
    is a Certified Public Accountant.
James B. Duke
has served as our Chief Operating Officer
    since joining SciQuest in March 2001. From 2000 until he joined
    SciQuest, Mr. Duke served as Chief Information Officer of
    BuildNet, a solutions provider for the
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construction and materials industry. Mr. Duke served as
    Vice President of Sales and Marketing for GE Capital Mortgage
    from 1999 until joining BuildNet. Mr. Duke also served as
    Group Vice President for Technology and Alternative Channels for
    First Citizens Bank from 1995 until 1999 and as a management
    consultant with McKinsey & Co., a leading management
    consultancy, from 1992 until 1995. Mr. Duke graduated from
    Duke University and also has a master's degree from
    MIT's Sloan School of Management.
Jeffrey A. Martini
has served as our Senior Vice
    President of Worldwide Sales since joining SciQuest in January
    2005. From 2004 until he joined SciQuest, Mr. Martini
    served as Vice President of Worldwide Sales for VitualEdge
    Corporation, a leading provider of real-time recruiting software
    for the extended enterprise. Prior to joining VirtualEdge,
    Mr. Martini had served as Vice President of Worldwide Sales
    at Primavera Systems, a portfolio management vendor, since 2002.
    From 1987 until joining Primavera Systems, Mr. Martini held
    a variety of sales and sales management roles at SCT
    Corporation, a leading provider of enterprise software
    applications, including serving as Corporate Vice President of
    Sales. Mr. Martini's early sales career included
    positions at Highline Data Systems, a provider of human resource
    information systems for the mid-market, in 1986, and Personnel
    Data Systems, a provider of human resources information systems,
    in 1985. Mr. Martini is a graduate of Gettysburg College.
Jennifer G. Kaelin
has served as our Vice President of
    Finance since January 2010 and from joining SciQuest in July
    2005 until January 2008. From January 2008 until December 2009,
    Ms. Kaelin served as our Chief Financial Officer. From 2003
    until she joined SciQuest, Ms. Kaelin served as Corporate
    Controller at Art.com, an
e-tailer
of
    posters, prints and custom framing. Prior to joining Art.com,
    Ms. Kaelin had served as Controller for several
    manufacturing sites at Moduslink, a global supply chain
    management company for technology-based manufacturers, since
    1998. Ms. Kaelin also was a financial analyst for IBM from
    1997 until 1998, and was an auditor for PricewaterhouseCoopers
    from 1994 until 1997. She holds a master's degree in
    accounting and a bachelor's degree in business
    administration from the University of North Carolina at Chapel
    Hill, and she is a certified public accountant.
C. Gamble Heffernan
has served as our Vice President of
    Marketing and Strategy since joining SciQuest in October 2008.
    From September 2007 until joining SciQuest, Ms. Heffernan
    served as Senior Vice President of Community Solutions for
    Misys, an application software and services provider to the
    financial services and healthcare industries, where she was
    responsible for the development and management of its community
    services business team. Ms. Heffernan previously served as
    Senior Vice President, Product Management for Healthcare for
    Misys from October 2005 until September 2007, where she was
    responsible for portfolio and market strategy. Prior to joining
    Misys, Ms. Heffernan had served as Vice President and
    General Manager of Professional Services and Consulting for
    Cardinal Health and the Director of the ALARIS Center for
    Medication Safety and Clinical Improvement since 2002.
    Ms. Heffernan also served as Vice President of Services
    Marketing at Ortho-Clinical Diagnostics, a provider of in-vitro
    diagnostic systems, from 2001 until 2002. From 1996 until
    joining
Ortho-Clinical
Diagnostics, she worked for GE Medical Systems, where she held
    various management positions including General Manager for
    eBusiness, General Manager for Clinical Information Systems and
    Senior Business Unit Manager for Neonatal.
Noel J. Fenton
serves as our lead independent director.
    He has been a member of our board of directors since August 2004
    and has served as Chairman since March 2010. Mr. Fenton
    also served as a member of our board of directors from November
    1998 until February 2004. In 1986, Mr. Fenton co-founded
    Trinity Ventures, a venture capital firm that made an initial
    investment in our company in 1998, and has served as one of its
    directors since 1998. He also serves as a director of several
    private companies. Prior to co-founding Trinity Ventures, he was
    a
co-founder
of three successful technology
start-ups
and Chief Executive Officer of two of them. Mr. Fenton is
    actively involved in the World's Presidents'
    Organization and is a past Chairman of the Northern California
    Chapter of the Young Presidents' Organization and a past
    chairman of the American Electronic Association. Mr. Fenton
    holds a B.S. from Cornell University and an M.B.A. from the
    Stanford University Graduate School of Business. We believe
    Mr. Fenton's qualifications to sit on our board of
    directors include his previous operating experience as a chief
    executive officer, his service on the board of directors of
    approximately 30 companies in
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which his venture capital firm invested and, as one of our early
    stage investors, his extensive knowledge of our company and the
    electronic commerce marketplace.
Daniel F. Gillis
has been a member of our board of
    directors since October 2005. From 1997 until 2001,
    Mr. Gillis served as Chief Executive Officer of SAGA
    Systems, a NYSE-traded enterprise software company. Prior to
    joining SAGA Systems, Mr. Gillis had served as Executive
    Vice President of Falcon Systems, an interactive equipment
    company serving the federal government market. Mr. Gillis
    also served as a member of the NYSE Listed Companies Advisory
    Board from 1999 until 2001. Mr. Gillis is a graduate of the
    University of Rhode Island. Mr. Gillis' executive and
    managerial experience in publicly-held software companies
    qualify him to serve as a director.
Jeffrey T. Barber
has been a member of our board of
    directors since March 2010. Mr. Barber has served as a
    Managing Director of Fennebresque & Co., an investment
    banking firm, since October 2009. From 1997 until June 2008,
    Mr. Barber was an audit partner of Pricewaterhouse Coopers
    LLP, where he also served as the managing partner of its
    Raleigh, North Carolina office for a period of 14 years.
    Mr. Barber has served as a member of the board of directors
    of Ply Gem Holdings, Inc., building products provider, since
    January 2010. Mr. Barber also serves as chairman of Ply Gem
    Holdings' audit committee. Mr. Barber has a B.S. in
    accounting from the University of Kentucky. Mr. Barber is a
    financial expert as contemplated by the rules of the SEC
    implementing Section 407 of the Sarbanes-Oxley Act of 2002.
    Mr. Barber's accounting and financial expertise and
    general business acumen qualify him to serve as a director.
Timothy J. Buckley
has been a member of our board of
    directors since March 2010. From April 1999 until November 2003,
    Mr. Buckley served as the chief operating officer for Red
    Hat (NYSE: RHT), a premier open source and Linux provider. As
    chief operating officer, Mr. Buckley used his insight to
    accelerate the momentum of open source and expand Red Hat's
    worldwide business operations. From December 1993 until joining
    Red Hat, Mr. Buckley was senior vice president of worldwide
    sales at Visio Corporation (NASDAQ: VSIO), a software
    application company that was acquired by Microsoft Corporation
    in 2000 in a transaction valued at $1.5 billion. He
    currently serves on the board of directors of several
    privately-held companies. Mr. Buckley graduated from
    Pennsylvania State University with a degree in liberal arts.
    Mr. Buckley's executive and managerial experience in
    the software industry qualify him to serve as a director.
Board
    Composition
Our board of directors currently consists of five directors. In
    accordance with our amended and restated certificate of
    incorporation, immediately after this offering, our board of
    directors will be divided into three classes with staggered
    three-year terms. At each annual meeting of stockholders, the
    successors to directors whose terms then expire will be elected
    to serve from the time of election and qualification until the
    third annual meeting following election. Our directors will be
    divided among the three classes as follows:
•
The Class I directors will be Messrs. Buckley and
    Gillis and their terms will expire at the annual meeting of
    stockholders to be held in 2011;
•
The Class II directors will be Messrs. Barber and
    Wiehe and their terms will expire at the annual meeting of
    stockholders to be held in 2012; and
•
The Class III director will be Mr. Fenton and his term
    will expire at the annual meeting of stockholders to be held in
    2013.
Any additional directorships resulting from an increase in the
    number of directors will be distributed among the three classes
    so that, as nearly as possible, each class will consist of
    one-third of the directors.
The division of our board of directors into three classes with
    staggered three-year terms may delay or prevent a change of our
    management or a change in control.
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There is no family relationship between any director, executive
    officer or person nominated to become a director or executive
    officer.
Director
    Independence
Our board of directors has determined that four of our five
    directors are independent directors within the meaning of the
    independent director guidelines of the NYSE. The independent
    directors are Messrs. Barber, Buckley, Fenton and Gillis.
Board
    Committees
Audit
    Committee
The audit committee oversees our corporate accounting and
    financial reporting processes. The audit committee will also:
•
evaluate the qualifications, performance and independence of our
    independent auditor and review and approve both audit and
    non-audit services to be provided by the independent auditor;
•
discuss with management and our independent auditors any major
    issues as to the adequacy of our internal controls, any actions
    to be taken in light of significant or material control
    deficiencies and the adequacy of disclosures about changes in
    internal control over financial reporting;
•
establish procedures for the receipt, retention and treatment of
    complaints regarding accounting, internal accounting controls or
    auditing matters, including the confidential, anonymous
    submission by employees of concerns regarding accounting or
    auditing matters;
•
review our financial statements and review our critical
    accounting policies and estimates; and
•
prepare the audit committee report that SEC rules require to be
    included in our annual proxy statement and annual report on
Form 10-K.
The current members of the audit committee are
    Messrs. Barber, Buckley and Fenton. Mr. Barber has
    been appointed to serve as the chairman of the audit committee
    and is a financial expert as contemplated by the rules of the
    SEC implementing Section 407 of the Sarbanes-Oxley Act of
    2002. The composition of the audit committee meets the
    requirements for independence under current NYSE and SEC rules
    and regulations. Our board of directors has adopted an audit
    committee charter. We believe that the audit committee's
    charter and functioning comply with the applicable requirements
    of NYSE and SEC rules and regulations. We intend to comply with
    future requirements to the extent they become applicable to us.
Following the completion of this offering, copies of the charter
    for our audit committee will be available without charge, upon
    request in writing to SciQuest, Inc., 6501 Weston Parkway,
    Suite 200, Cary, North Carolina 27513, Attn: Secretary, or
    on the investor relations portion of our website,
    www.sciquest.com.
Compensation
    Committee
The compensation committee oversees our corporate compensation
    and benefit programs and has the responsibilities described in
    "Compensation Discussion and Analysis" below.
The members of the compensation committee are
    Messrs. Buckley and Gillis, each of whom our board of
    directors has determined is independent within the meaning of
    the independent director guidelines of the NYSE. Mr. Gillis
    has been appointed to serve as the chairman of the compensation
    committee. The composition of the compensation committee meets
    the requirements for independence under current NYSE and SEC
    rules and
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regulations. Our board of directors has adopted a compensation
    committee charter. We believe that the compensation committee
    charter and the functioning of the compensation committee comply
    with the applicable requirements of NYSE and SEC rules and
    regulations. We intend to comply with future requirements to the
    extent they become applicable to us.
Following the completion of this offering, copies of the charter
    for our compensation committee will be available without charge,
    upon request in writing to SciQuest, Inc., 6501 Weston
    Parkway, Suite 200, Cary, North Carolina 27513, Attn:
    Secretary, or on the investor relations portion of our website,
    www.sciquest.com.
Nominating
    and Governance Committee
The nominating and governance committee oversees and assists our
    board of directors in reviewing and recommending nominees for
    election as directors. The nominating and governance committee
    will also:
•
assess the performance of the members of our board of directors;
•
oversee guidelines for the composition of our board of
    directors; and
•
review and administer our corporate governance principles.
The current members of the nominating and governance committee
    are Messrs. Fenton and Gillis, each of whom our board of
    directors has determined is independent within the meaning of
    the independent director guidelines of the NYSE. Mr. Fenton
    has been appointed to serve as the chairman of the nominating
    and governance committee. The compensation of the nominating and
    governance committee meets the requirements for independence
    under current NYSE and SEC rules and regulations. Our board of
    directors has adopted a nominating and governance committee
    charter to be effective prior to the closing of this offering.
    We believe that the nominating and governance committee charter
    and the functioning of the nominating and governance committee
    will comply with the applicable requirements of NYSE and SEC
    rules and regulations. We intend to comply with future
    requirements to the extent they become applicable to us.
Following the completion of this offering, copies of the charter
    for our nominating and governance committee will be available
    without charge, upon request in writing to SciQuest, Inc.,
    6501 Weston Parkway, Suite 200, Cary, North Carolina
    27513, Attn: Secretary, or on the investor relations portion of
    our website, www.sciquest.com.
Our board of directors may from time to time establish other
    committees.
Director
    Compensation
In 2010, our board of directors approved the following
    compensation package for our non-employee directors based on the
    recommendation of our Chief Executive Officer and the
    compensation committee of our board of directors:
Annual retainer
$
20,000
In-person board and committee meeting fees
$
2,000
Telephonic board and committee meeting fees
$
500
Audit committee chair retainer
$
10,000
Compensation committee chair retainer
$
5,000
Nominating and governance committee chair retainer
$
5,000
Initial grant of stock options
45,000
Annual grant of stock options
27,500
Historically, we have not paid compensation to any director for
    his service as a director, other than the grant of common stock
    awards to non-employee directors who are not affiliated with any
    of our major stockholders.
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Mr. Gillis is the only director who has qualified to
    receive such stock awards. We have historically reimbursed our
    non-employee directors for reasonable travel and other expenses
    incurred in connection with attending board of director and
    committee meetings.
The following table sets forth information regarding
    compensation earned by our qualifying non-employee director
    during 2009.
Director
    Compensation Table for Year Ended December 31,
    2009
Fees Earned or Paid
Name
in Cash
Stock Awards
Option Awards
Total
Daniel F. Gillis
$
0
25,025
0
$
25,525
(1)
(1)
This total is based on a fair value of our common stock as of
    December 31, 2008 of $1.02, as determined by our board of
    directors.
Compensation
    Committee Interlocks and Insider Participation
The members of our compensation committee are
    Messrs. Buckley and Gillis. Neither of these members is or
    has at any time during the last completed fiscal year been an
    officer or employee of ours or is a former officer of ours. None
    of our executive officers has served as a member of the board of
    directors, or as a member of the compensation or similar
    committee, of any entity that has one or more executive officers
    who served on our board of directors or compensation committee
    during the last completed fiscal year.
Executive
    Officers
Our executive officers are elected by, and serve at the
    discretion of, our board of directors. There are no familial
    relationships among our directors and officers.
Code of
    Business Ethics and Conduct
Our board of directors has adopted a code of business ethics and
    conduct for all employees, officers and directors. The code of
    business ethics and conduct will be available on our website at
    www.sciquest.com. We expect that any amendments to the code of
    business ethics and conduct, or any waiver of its requirements,
    will be disclosed on our website. The inclusion of our website
    address in this prospectus does not include or incorporate by
    reference the information on our website into this prospectus.
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EXECUTIVE
    COMPENSATION
Compensation
    Discussion and Analysis
The following is a discussion and analysis of the compensation
    arrangements for our named executive officers for 2009. Our
    named executive officers for 2009 were Stephen Wiehe, our
    President and Chief Executive Officer, James Duke, our Chief
    Operating Officer, Jennifer Kaelin, who served as our Chief
    Financial Officer in 2009 and currently serves as our Vice
    President of Finance, Jeffrey Martini, our Senior Vice President
    of Worldwide Sales, and Gamble Heffernan, our Vice President of
    Marketing and Strategy. Effective January 4, 2010, Rudy
    Howard became our Chief Financial Officer. Mr. Howard is
    expected to be a named executive officer in 2010 in place of
    Ms. Kaelin.
Compensation
    Objectives and Process
Our compensation committee's primary objectives with
    respect to executive compensation are to:
•
attract, motivate, reward, and retain high quality executives
    necessary to formulate and execute our business strategy;
•
ensure that compensation provided to executive officers is
    closely aligned with our short and long-term business
    objectives, risk profile, financial performance and strategic
    goals;
•
build a strong link between an individual's performance and
    his or her compensation; and
•
further align the interests of management with our stockholders
    by providing equity incentive compensation.
Our executive compensation practices are intended to provide
    each executive a total annual compensation that is commensurate
    with the executive's responsibilities, experience and
    demonstrated performance. We intend our compensation to be
    competitive with companies in our industry and region.
    Variations to this targeted compensation may occur depending on
    the experience level of the individual and market factors, such
    as the demand for executives with similar skills and experience.
The compensation committee of our board of directors oversees
    our executive compensation program. In this role, the
    compensation committee reviews and approves annually all
    compensation decisions relating to our named executive officers
    other than with respect to equity awards. Our compensation
    committee proposes grants of equity awards for our named
    executive officers and recommends such proposals to our board of
    directors for approval. Our compensation committee believes that
    our compensation program is aligned with our business and risk
    management objectives and does not believe that our compensation
    program is likely to have a material adverse effect on us.
Our historical executive compensation programs have been
    developed and implemented by our compensation committee
    consistent with practices of other venture-backed,
    privately-held companies. To date, our compensation committee
    has never engaged a compensation consultant. Our board of
    directors and compensation committee has generally established
    our executive compensation on an informal basis by considering
    the employment and compensation history of each executive and
    comparing our executives' compensation to our estimates of
    executive compensation paid by companies in our industry and
    region. These estimates are based on the experience of our board
    and committee members, informal research of pay practices at
    other venture-backed companies and reviews of external
    compensation databases. The board of directors and the
    compensation committee intend to continue to formalize their
    approach to the development and implementation of our executive
    compensation programs. Following the completion of this
    offering, we anticipate that our compensation committee will
    determine executive compensation, at least in part, by reference
    to the compensation information for the executives of a peer
    group of comparable public companies, although no peer group has
    yet been determined.
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In January of each year, our compensation committee typically
    determines our named executive officers' base salaries,
    awards annual cash incentive bonuses based on the achievement of
    bonus criteria in the prior year and sets bonus criteria for the
    upcoming year. The compensation committee also proposes grants
    of equity awards to our named executive officers, which are
    considered and approved by our board of directors in January as
    well. Each year, our chief executive officer provides a report
    to the compensation committee with respect to each named
    executive officer summarizing such officer's performance in
    the prior year, including his or her achievement of bonus
    criteria. This report also contains the chief executive
    officer's recommendations for base salaries, bonuses and
    equity awards for each named executive officer. The compensation
    committee then deliberates and makes compensation determinations
    for the named executive officers. Our chief executive officer
    participates in the compensation committee's deliberations
    with respect to the other named executive officers, but he is
    not present when the compensation committee deliberates and
    determines his own compensation.
Compensation
    Components
The primary elements of our executive compensation program are:
•
base salary;
•
annual cash incentive bonuses;
•
equity incentive awards; and
•
insurance and other employee benefits and compensation.
We do not have any formal or informal policy or target for
    allocating compensation between long-term and short-term
    compensation, between cash and non-cash compensation or among
    the different forms of non-cash compensation. Instead, our
    compensation committee relies on the experience of its members,
    its past practices and management input in establishing the
    different forms of compensation.
Base
    Salary
Base salaries are used to recognize the experience, skills,
    knowledge and responsibilities required of our named executive
    officers. None of our named executive officers is currently
    party to an employment agreement that provides for automatic or
    scheduled increases in base salary. Salaries for the named
    executive officers generally are based upon their personal
    performance in light of individual levels of responsibility, our
    overall performance and profitability during the preceding year,
    economic trends that may affect us, and the competitiveness of
    the executive's salary with the salaries of executives in
    comparable positions at companies of comparable size or with
    similar operational characteristics. While our compensation
    committee considers each of these factors, it does not assign a
    specific value to each factor.
Base salaries are reviewed at least annually by our compensation
    committee, and are adjusted from time to time to realign
    salaries with market trends and levels after taking into account
    the factors discussed above. In addition to these periodic
    reviews, the compensation committee may at any time review the
    salary of an executive who has received a significant promotion
    or whose responsibilities have been increased significantly.
For 2009, our named executive officers received salary increases
    ranging from approximately 4% to 6% as compared to 2008. In
    January 2010, our named executive officers received salary
    increases from approximately 0% to 5% as compared to 2009.
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Annual
    Bonuses
We provide our named executive officers an opportunity to
    receive annual discretionary cash incentive bonuses. The annual
    bonuses are intended to compensate for the achievement of our
    strategic, operational and financial goals
and/or
individual performance objectives of a particular named
    executive officer.
Each executive's bonus is based on a target bonus amount
    and the achievement of bonus criteria, which are specific
    financial or other business goals to promote the growth and
    success of our business. In January of each year, our
    compensation committee typically determines the bonus amount for
    each named executive officer based on the prior year's
    target bonus amount and achievement of bonus criteria and
    establishes the target bonus amount and the bonus criteria for
    the upcoming year. The compensation committee establishes the
    target bonus amount based on an amount it believes is necessary
    to provide a competitive overall compensation package in light
    of each named executive officer's base salary and to
    motivate our executives to achieve their goals. The bonus
    criteria vary among the named executive officers, depending on
    their operational responsibilities, as described below.
In general, when a component of the bonus criteria is
    quantitative, the full targeted bonus amount attributable to
    that component will be paid if the performance falls between 90%
    and 110% of the targeted goal. If performance exceeds 110% of
    the goal, 150% of the target bonus amount attributable to that
    component will be paid. If performance is less than 75% of the
    goal, no bonus amount attributable to that component will be
    paid. If performance is between 75% and 90% of the goal, then
    the bonus amount attributable to that component will be
    determined by the compensation committee in its discretion. When
    determining whether and to what extent bonus criteria have been
    satisfied, our compensation committee uses their reasonable
    discretion and will consider extenuating circumstances when
    appropriate.
Mr. Wiehe's target bonus amount for 2009 was $150,000,
    and his bonus criteria were as follows: 25% based on attainment
    of our budgeted revenues, 25% based on attainment of targeted
    EBITDA, 25% based on attainment of targeted cash generation and
    25% as determined in the discretion of our board of directors.
    For 2009, Mr. Wiehe received a bonus equal to $145,688,
    based on achieving 96% of budgeted revenues, 106% of targeted
    EBITDA, achieving 89% of targeted cash generation, after taking
    into account certain equitable adjustments, and 100% of the
    discretionary component.
Mr. Duke's target bonus amount for 2009 was $125,000,
    and his bonus criteria were as follows: $40,000 based on
    attainment of company goals, $45,000 based on attainment of his
    departmental goals, $20,000 based on meeting our production
    up-time goals and $20,000 based on meeting goals for new
    services and supplier revenues. For 2009, Mr. Duke received
    a bonus equal to $119,091, based on achieving 96% of company
    goals, achieving 100% of departmental goals and production
    up-time goals and achieving 84% of new services and supplier
    revenues goals.
Mr. Martini's target bonus amount for 2009 was
    $285,000, and his bonus criteria were based solely on sales
    commissions. For 2009, Mr. Martini's bonus would have
    been $183,118 based on sales commissions. The compensation
    committee, however, awarded Mr. Martini an additional bonus
    of $30,000 in recognition of his leadership of the sales
    organization in a difficult economic environment. Thus,
    Mr. Martini's aggregate bonus for 2009 was $213,118.
Ms. Kaelin's target bonus amount for 2009 was $65,000,
    and her bonus criteria were as follows: one-third based on
    attainment of our budgeted revenues, one-third based on
    attainment of targeted EBITDA and one-third based on attainment
    of targeted cash generation. For 2009, Ms. Kaelin received
    a bonus equal to $62,507, based on achieving 96% of budgeted
    revenues, achieving 106% of targeted EBITDA and achieving 89% of
    targeted cash generation, after taking into account certain
    equitable adjustments.
Ms. Heffernan's target bonus amount for 2009 was
    $64,750, and her bonus criteria were as follows: 50% based on
    attainment of growth and market expansion goals, 25% based on
    attainment of lead generation goals and 25% based on attainment
    of company goals. For 2009, Ms. Heffernan received a bonus
    equal to $62,511, based on
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achieving 95% of growth and market expansion goals, achieving
    100% of lead generation goals and achieving 96% of company goals.
In January 2010, our compensation committee decided to maintain
    the target bonus amounts at the same levels for 2010 as for
    2009. In addition, Mr. Howard's bonus target was set
    at $84,000 for 2010. The compensation committee did not set the
    bonus criteria for 2010 at its January meeting, other than for
    Mr. Martini, and the formulation of those bonus criteria is
    ongoing. Mr. Martini's bonus will continue to be
    determined based solely on sales commissions. In general, our
    compensation committee determined to expand the metrics against
    which each named executive officer is measured and to not assign
    a specific weighting of the bonus criteria to each metric. It is
    currently contemplated that the committee would examine each
    named executive officer's performance against the multiple
    metrics comprising that officer's bonus criteria and then
    determine the bonus amount based on the entirety of their
    performance.
Equity
    Awards
Our equity award program is the primary vehicle for offering
    long-term incentives to our executives. Our employees, including
    our named executive officers, are eligible to participate in our
    2004 stock incentive plan. Under the 2004 stock incentive plan,
    our employees, including our named executive officers, are
    eligible to receive grants of stock options, restricted stock
    awards, restricted stock units and stock appreciation rights at
    the discretion of our compensation committee. Historically, we
    have granted restricted stock awards to executive officers and
    stock options to all other employees. Beginning in 2008, we
    began to grant stock options to new executive officers and limit
    restricted stock grants only to executive officers who had
    previously received equity awards in the form of restricted
    stock grants.
We typically grant equity awards to employees, including our
    named executive officers, in connection with their hiring. When
    determining the size of the award, the compensation committee
    considers the individual's position and responsibilities,
    the equity position of our other similarly situated employees
    and the anticipated future contribution of such individual. Our
    compensation committee has established general guidelines for
    the grant of equity awards for all new hires, including any
    named executive officers, based on the individual's
    position and responsibilities.
We believe equity awards are an important element of
    compensation because they provide the recipient with a potential
    ownership interest in our company, which helps align our
    executives' and other employees' interests with those
    of other stockholders. We believe equity awards further align
    the interest of our employees and stockholders because they
    profit from equity awards only if our stock price increases
    relative to the award's exercise or purchase price. We
    believe that equity awards incentivize recipients, including our
    named executive officers, to incur appropriate risks that are
    consistent with our business strategy but do not encourage undue
    or inappropriate
risk-taking.
Equity awards are also an important element of our employee
    retention strategy because the awards vest over several years
    and vesting depends on the individual's continued
    employment with us. The typical vesting provisions for equity
    awards provide that one-quarter of the award vests on the first
    anniversary of the grant date, with the remaining shares vesting
    in 36 successive equal monthly installments thereafter upon
    completion of each additional month of service.
Our compensation committee recommends the grant of all equity
    awards for approval by the full board of directors. Equity
    awards are typically made twice a year, in January and July.
    Following the completion of this offering, our board of
    directors may consider implementing a different grant date
    policy.
Our policy is to grant stock options with an exercise price
    equal to the fair value of our common stock on the date of
    grant. As a private company, the fair value of our common stock
    has been determined by our board of directors, based in large
    part on third-party valuations.
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Our board of directors has adopted an equity award re-grant
    program to reestablish or provide additional incentives to
    retain employees, including employees who had been with us for a
    significant period of time. We believe that granting additional
    equity awards to employees who are significantly vested in their
    existing awards is an important retention tool. All awards under
    the re-grant program are made in January of each year. In order
    to be eligible for the re-grant program, the individual must
    have been employed by the company for at least two years, have
    not received any other significant compensation adjustments, be
    at least 50% vested in their existing equity awards and perform
    in accordance with expectations. Each equity award under the
    re-grant program will equal 25% of that individual's
    initial equity award at their time of employment. Vesting is in
    48 successive equal monthly installments.
As a result of the decline in the stock market in 2008, the
    board of directors determined that stock options and restricted
    stock awards granted in 2008 had exercise prices or purchase
    prices, as applicable, in excess of the then fair value of our
    common stock. In March 2009, our board of directors approved a
    common stock option
re-pricing
program whereby 175,625 of our outstanding stock option awards
    and restricted stock awards granted during 2008 were repriced.
    Under this program, qualifying stock options and restricted
    stock awards with original exercise or purchase prices ranging
    from $1.30 to $1.58 per share were cancelled and reissued with
    an exercise price equal to the then-current fair value of our
    common stock, $1.02 per share, as determined by our board of
    directors based in large part on a third-party valuation. Our
    board determined that this repricing program was necessary to
    restore the incentive qualities of these equity awards.
Exit Event Bonus Plan.
In 2005, we established
    an Exit Event Bonus Plan in order to incentivize our executives
    to grow our company and achieve a favorable investment outcome
    for our stockholders following our going private transaction in
    2004. We have provided more detailed information about this plan
    in the "Executive Compensation — Equity and Stock
    Option Plans" section of this prospectus. Under this plan
    our executives may be granted units to participate in a bonus
    pool in the event of an initial public offering or sale of our
    company. In the case of a sale of our company, the bonus pool
    would consist of proceeds from the sale in an amount ranging
    from 0% to 3%, depending upon our valuation in such sale. In the
    case of an initial public offering, the bonus pool would consist
    of newly issued shares of our common stock in an amount ranging
    from 0% to 3% of our issued and outstanding shares of common
    stock immediately prior to such offering depending on our
    valuation in such offering. To date, no units have been granted
    under the plan, but we anticipate that units will be granted
    prior to the consummation of this offering. Units will be
    granted by our board of directors based on the relative
    contributions of each executive to our company's growth
    since the going private transaction in 2004.
Change of Control Benefits.
Pursuant to change
    of control agreements and our stock incentive plans, certain of
    our named executive officers are entitled to specified benefits
    in the event of the termination of their employment under
    specified circumstances, including termination following a
    change of control of our company. We have provided more detailed
    information about these benefits, along with estimates of their
    value under various circumstances, in the "Executive
    Compensation — Potential Payments Upon Termination or
    Change of Control" section of this prospectus.
Under our 2004 stock incentive plan, the vesting and
    exercisability of all unvested awards automatically accelerate
    by one year in the event of a change of control. In addition, we
    have entered into change of control agreements with
    Messrs. Wiehe, Duke and Howard. Under each change of
    control agreement, the executive is entitled to receive a
    lump-sum payment equal to one year's base salary if, in
    connection with a
change-of-control,
the executive's employment is terminated by us, other than
    for "cause," or terminated by the executive with
    "good reason," as such terms are defined in the
    agreements. Accordingly, these extra benefits are paid only if
    the employment of the executive is terminated during a specified
    period after the change of control. We believe that having this
    benefit structured in this manner improves stockholder value
    because it prevents an unintended windfall to executives in the
    event of a friendly change of control, while still providing
    them appropriate incentives to cooperate in negotiating any
    change of control in which they believe they may lose their jobs.
We believe providing these benefits helps us compete for
    executive talent. We believe that our change of control benefits
    are generally in line with severance packages offered to
    executives in our industry and region.
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Other
    Compensation
Historically, our executive officers who are recipients of
    restricted stock awards paid the purchase price for such shares
    by executing promissory notes for such amount, which notes are
    payable in four annual payments due January 1 of each calendar
    year and bear interest at 6%. In March 2010, we canceled all
    such outstanding notes and forgave the indebtedness owed by
    these executive officers. The indebtedness amounts that were
    forgiven are as follows: Stephen Wiehe ($376,612), James Duke
    ($268,965), Jeffrey Martini ($149,345) and Jennifer Kaelin
    ($220,884). Our board of directors made this decision in part to
    comply with the requirements of Section 402 of the
    Sarbanes-Oxley Act of 2002, which prohibits public companies
    from extending loans to its executive officers, and in part for
    other reasons that justified these recipients not paying the
    purchase price for these restricted stock awards. The restricted
    stock awards that gave rise to the forgiven indebtedness were
    issued in connection with the reduction of the potential number
    of shares issuable under our Exit Event Bonus Plan from 5% of
    outstanding shares of common stock to 3%. Had those shares
    remained subject to the Exit Event Bonus Plan rather than being
    issued as restricted stock awards, the recipients would not have
    been required to pay any purchase price for such shares.
Other than a car allowance for Mr. Wiehe, perquisites are not a
    material aspect of our executive compensation plan. All of our
    full-time employees, including our named executive officers, are
    eligible to participate in our 401(k) plan. Pursuant to our
    401(k) plan, employees may elect to reduce their current
    compensation by up to the statutorily prescribed annual limit
    and to have the amount of this reduction contributed to our
    401(k) plan. Our 401(k) plan provides that we will match
    eligible employees' 401(k) contributions equal to 50% of
    the employee's elective deferrals, up to an amount not to
    exceed $2,500 for each employee. We also offer health and dental
    insurance, life and disability insurance, an employee assistance
    program, maternity and paternity leave plans and standard
    company holidays to our employees, including our named executive
    officers.
2009
    Summary Compensation Table
The following table provides information regarding the
    compensation earned in 2009 by our named executive officers.
Stock
Option
All Other
Name and Principal Position
Year
Salary
Bonus(1)
Awards(2)
Awards(3)
Compensation(4)
Total(1)
Stephen J. Wiehe
2009
$
338,000
$
145,688
$
95,916
—
$
40,939
$
620,543
President, Chief
Executive Officer and Director
Jennifer G. Kaelin
2009
$
182,000
$
62,507
$
47,957
—
$
2,500
$
294,964
Vice President of Finance
James B. Duke
2009
$
234,000
$
119,091
$
95,916
—
$
2,500
$
451,507
Chief Operating Officer
Jeffrey A. Martini
2009
$
185,000
$
213,118
$
55,951
—
$
2,500
$
456,569
Senior Vice President of Worldwide Sales
C. Gamble Heffernan
2009
$
191,667
$
62,511
—
$
127,500
$
2,500
$
387,511
Vice President of Marketing and Strategy
(1)
Consists of cash bonuses paid under the annual cash incentive
    bonus element of our executive compensation program. See the
    "Executive Compensation — Compensation Discussion
    and Analysis — Annual Bonuses" section of this
    prospectus for a description of this program. $8,996 of
    Mr. Duke's 2009 bonus was paid in
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2009 and $133,505 of Mr. Martini's bonus was paid in
    2009. All other bonuses earned in 2009 were paid in January 2010.
(2)
In January 2009, Mr. Wiehe, Ms. Kaelin, Mr. Duke
    and Mr. Martini were issued 94,035, 47,017, 94,035 and
    54,854 shares of restricted stock, respectively, at a
    purchase price of $1.02 per share. The restricted stock vests
    monthly over a four-year period, beginning on the grant date.
    The price per share of the restricted stock is equal to the fair
    value of our common stock on the date of grant. This reflects
    the fair value of the restricted stock awards.
(3)
In January 2009, Ms. Heffernan was issued 125,000 stock
    options at an exercise price of $1.02 per share. The stock
    options vest 25% on November 4, 2009 and monthly thereafter
    over a remaining three-year period. The price per share of the
    stock option award is equal to the fair value of our common
    stock on the date of grant, as determined by an outside
    valuation expert and approved by our board of directors. This
    reflects the fair value of the stock option award.
(4)
This represents a 401(k) match of $2,500 for each individual and
    includes a car allowance for Mr. Wiehe of $38,439.
Grants of
    Plan-Based Awards in 2009
The following table provides information regarding grants of
    plan-based awards to our named executive officers in 2009.
All Other
Option
Estimated
All other
Awards:
Future
Stock
Number of
Exercise or
Grant Date
Payouts under
Awards:
Securities
Base Price
Fair Value
Non-Equity
Number of
Underlying
of Option
of Stock and
Incentive Plan
Shares of
Options
Awards
Option
Name
Grant Date
Target ($)(1)
Stock (#)
(#)
($/Share)
Awards ($)
Stephen J. Wiehe
January 22, 2009
$
150,000
94,035
—
—
$
95,916
Jennifer G. Kaelin
January 22, 2009
$
65,000
47,017
—
—
$
47,957
James B. Duke
January 22, 2009
$
125,000
94,035
—
—
$
95,916
Jeffrey A. Martini
January 22, 2009
$
285,000
54,854
—
—
$
55,951
C. Gamble Heffernan
January 22, 2009
$
64,750
—
125,000
$
1.02
$
127,500
(1)
Cash bonuses paid under the cash incentive bonus program for
    2009 are also disclosed in the "Summary Compensation
    Table."
Outstanding
    Equity Awards at December 31, 2009
The following table provides information concerning outstanding
    equity awards held by our named executive officers at
    December 31, 2009.
Option Awards
Stock Awards
Market
Number of
Number of
Number of
Value
Securities
Securities
Shares or
of Shares
Underlying
Underlying
Units of
or Units
Unexercised
Unexercised
Option
Option
Stock That
of Stock
Options
Options
Exercise
Expiration
Have Not
That Have
Name
Exercisable
Unexercisable
Price
Date
Vested
Not Vested
Stephen J. Wiehe
—
—
—
—
79,498
$
89,833
Jennifer G. Kaelin
—
—
—
—
109,325
$
123,537
James B. Duke
—
—
—
—
72,714
$
82,167
Jeffrey A. Martini
—
—
—
—
48,141
$
54,399
C. Gamble Heffernan
33,855
91,145
$
1.02
January 22, 2019(1
)
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(1)
This option vested 31,250 shares on November 4, 2009,
    with the remaining shares vesting in equal monthly installments
    of 2,604 shares thereafter beginning December 4, 2009
    until November 4, 2012.
Option
    Exercises and Stock Vested During 2009
The following table provides information regarding the exercise
    of stock options and the vesting of stock awards held by our
    named executive officers during 2009.
Stock Awards
Number of
Value
Shares Acquired
Realized on
Name
on Vesting
Vesting(1)
Stephen J. Wiehe
151,358
$
67,574
Jennifer G. Kaelin
66,858
$
25,719
James B. Duke
84,134
$
22,492
Jeffrey A. Martini
75,152
$
40,583
(1)
The value realized on vesting represents (1) the difference
    between (a) the value of our common stock (as most recently
    determined by our board of directors as of January 21,
    2010) and (b) the per share price (2) multiplied
    by the number of shares acquired on exercise.
(2)
None of our named executive officers exercised any stock options
    during 2009.
In March 2009, our board of directors approved a common stock
    option re-pricing program whereby 175,625 of our outstanding
    stock option awards and restricted stock awards granted during
    2008 were repriced. Under this program, qualifying stock options
    and restricted stock awards with original exercise or purchase
    prices ranging from $1.30 to $1.58 per share were cancelled and
    reissued with an exercise price equal to the then-current fair
    value of our common stock, $1.02 per share.
Pension
    Benefits
We do not offer pension benefits to our employees.
Non-qualified
    Deferred Compensation
We do not offer non-qualified deferred compensation to our
    employees.
Accounting
    and Tax Considerations
Section 162(m) of the Internal Revenue Code limits to
    $1.0 million the amount of compensation paid to our Chief
    Executive Officer and to each of our three most highly
    compensated executive officers that may be deducted by us for
    federal income tax purposes in any fiscal year.
    "Performance-based" compensation that has been
    approved by our stockholders is not subject to the
    $1.0 million deduction limit. Although the compensation
    committee cannot predict how the deductibility limit may impact
    our compensation program in future years, the compensation
    committee intends to maintain an approach to executive
    compensation that strongly links pay to performance. In
    addition, although the compensation committee has not adopted a
    formal policy regarding tax deductibility of compensation paid
    to our named executive officers, the compensation committee
    intends to consider tax deductibility under Section 162(m)
    as a factor in compensation decisions.
Employment
    Agreements
Our principal employees, including executive officers, are
    required to sign an agreement prohibiting their disclosure of
    any confidential or proprietary information and restricting
    their ability to compete with us during their employment and for
    a period of one year thereafter, restricting solicitation of
    customers and employees for a
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period of one year following their employment with us and
    providing for ownership and assignment of intellectual property
    rights to us.
Stephen J. Wiehe, our chief executive officer, has an employment
    agreement that provides for a one-year term that renews
    automatically for successive one-year terms unless either party
    gives at least 90 days prior notice to the other party of
    non-renewal. If our company terminates Mr. Wiehe for any
    reason other than for cause during the term of this agreement or
    if Mr. Wiehe terminates this agreement for good reason,
    Mr. Wiehe will receive an amount equal to his annual base
    salary then in effect and 18 months of medical coverage.
    The terms "cause" and "good reason" are each
    defined in the employment agreement.
Potential
    Payments upon Termination or Change of Control
We entered into Change of Control Agreements with Stephen J.
    Wiehe, our chief executive officer, and James B. Duke, our chief
    operating officer, each effective as of January 1, 2004,
    and with Rudy C. Howard, our chief financial officer,
    effective as of January 1, 2010. Each of these agreements
    provide that such officer will be entitled to receive payment if
    his employment is terminated either by us without
    "cause" or by the officer with "good reason"
    within three months prior to a "change of control" or
    within 24 months following a change of control provided
    that such change of control results in proceeds such that our
    implied enterprise value is at least equal to our market
    capitalization calculated based on the last 30 trading days in
    our fiscal quarter immediately preceding the initial
    announcement of such change of control. The terms
    "cause," "good reason" and "change of
    control" are each defined in the Change of Control
    Agreements. Upon such a termination, the officer will be
    entitled to receive a payment equal to the highest annual base
    salary received during the two-year period immediately prior to
    such termination.
Under our 2004 stock incentive plan, the vesting and
    exercisability of all unvested awards automatically accelerate
    by one year in the event of a change of control.
A change of control may also result in payments to participants
    under our Exit Event Bonus Plan if the change of control is a
    sale of our company with aggregate sale consideration of at
    least $210 million. Participants in the Exit Event Bonus
    Plan have not yet been determined, and the Exit Event Bonus Plan
    will terminate immediately following this offering. More
    detailed information regarding the Exit Event Bonus Plan is
    contained in the "Executive Compensation — Equity and
    Stock Option Plans" section of this prospectus.
The tables below set forth the benefits potentially payable to
    Messrs. Wiehe, Duke and Howard in the event of a change of
    control of our company where the named executive officer's
    employment is terminated under the circumstances described in
    the tables below. These amounts are calculated on the assumption
    that the employment termination and change of control event both
    took place on December 31, 2009. Amounts in the tables for
    the vesting of unvested stock options or shares of restricted
    stock are calculated based on the number of accelerated stock
    options multiplied by the difference between $1.13, the fair
    value of our common stock as of December 31, 2009, as
    determined by our board of directors, and the exercise price.
    The tables exclude any potential payments under the Exit Event
    Bonus Plan because the payments ultimately depend upon a
    determination of the participants in the plan and the valuation
    of the change of control event.
Stephen
    J. Wiehe
Vesting of Unvested
Salary, Bonus &
Health
Shares of
Triggering Event
Unused Vacation
Benefits
Restricted Stock
Termination by us without cause
$
700,000
$
4,408
$
12,275
Termination by executive for good reason
$
525,000
$
2,204
$
12,275
Death or disability
$
350,000
—
$
12,275
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James B.
    Duke
Vesting of Unvested
Shares of
Triggering Event
Salary
Restricted Stock
Termination by us without cause
$
245,000
$
4,948
Termination by executive for good reason
$
245,000
$
4,948
Death or disability
$
245,000
$
4,948
Rudy C.
    Howard
Vesting of Unvested
Triggering Event
Salary
Stock Options
Termination by us without cause
$
240,000
$
0
Termination by executive for good reason
$
240,000
$
0
Death or disability
$
240,000
$
0
The table below sets forth the benefits potentially payable to
    Mr. Martini, Ms. Kaelin and Ms. Heffernan in the
    event of a change of control of our company. These amounts are
    calculated on the assumption that the change of control event
    both took place on December 31, 2009. Amounts in the tables
    for the vesting of unvested stock options or shares of
    restricted stock are calculated based on the number of
    accelerated stock options multiplied by the difference between
    $1.13, the fair value of our common stock as of
    December 31, 2009, as determined by our board of directors,
    and the exercise price.
Vesting of
Vesting of
Unvested Shares
Unvested
of Restricted Stock
Stock Options
Jeffrey A. Martini
$
9,068
—
Jennifer G. Kaelin
$
6,968
—
C. Gamble Heffernan
—
$
3,437
Equity
    Plans
2004
    Stock Incentive Plan
We have adopted our 2004 Stock Incentive Plan, or our stock
    incentive plan, which provides for the issuance of equity-based
    awards, including incentive stock options, non-qualified stock
    options, restricted stock awards, restricted stock units and
    stock appreciation rights. No restricted stock units or stock
    appreciation rights have been granted under the stock incentive
    plan.
The material features of our stock incentive plan are summarized
    below. The complete text of our stock incentive plan is filed as
    an exhibit to the registration statement of which this
    prospectus forms a part.
General.
The total number of shares initially
    reserved for issuance is 6,615,472. Any shares that may be
    issued under our stock incentive plan to any person pursuant to
    an award are counted against this limit as one share for every
    one share granted.
Purposes.
The purpose of our stock incentive
    plan is to enable us to attract and retain highly qualified
    directors, officers, employees and other parties by providing an
    incentive to work to increase the value of our stock and a stake
    in our future that corresponds to the stake of each of our
    stockholders.
Administration.
Our stock incentive plan is
    administered by the compensation committee of our board. The
    compensation committee is comprised of individuals intended to
    be, to the extent provided by
Rule 16b-3
of the
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Securities and Exchange Act of 1934, "non-employee
    directors" and will, at such times as we are subject to
    Section 162(m) of the Internal Revenue Code, qualify as
    "outside directors" for purposes of
    Section 162(m) of the Internal Revenue Code. Subject to the
    terms of our stock incentive plan, the compensation committee
    may determine the types of awards and the terms and conditions
    of such awards, interpret provisions of our stock incentive plan
    and select participants to receive awards, such grants being
    subject to the approval of our board of directors.
Source of shares.
The shares of common stock
    issued or to be issued under our stock incentive plan consist of
    authorized but unissued shares and shares that have been
    reaquired. If any shares covered by an award are not purchased
    or are forfeited, if an award is settled in cash or if an award
    otherwise terminates without delivery of any shares, then the
    number of shares of common stock counted against the aggregate
    number of shares available under our stock incentive plan with
    respect to the award will, to the extent of any such forfeiture
    or termination, again be available for making awards under our
    stock incentive plan.
Eligibility.
All of our employees and
    non-employee directors are eligible to be granted awards under
    the stock incentive plan. Certain individual consultants,
    advisors and independent contractors who render services to us
    are also eligible to participate in the stock incentive plan.
    Participants in our stock incentive plan will be selected by our
    compensation committee, subject to the approval of our board of
    directors.
Amendment or termination of our stock incentive
    plan.
While the compensation committee may
    terminate or amend our stock incentive plan at any time, no
    amendment may adversely impair the rights of grantees with
    respect to outstanding awards without the affected
    participant's consent in writing to such amendment. In
    addition, an amendment will be contingent on approval of our
    stockholders to the extent required by law. Unless terminated
    earlier, our stock incentive plan will terminate in 2014, but
    will continue to govern unexpired awards.
Options.
Our stock incentive plan permits the
    granting of options to purchase shares of common stock intended
    to qualify as "incentive stock options" under the
    Internal Revenue Code, and options that do not qualify as
    incentive stock options are referred to as non-qualified stock
    options. We may grant non-qualified stock options to our
    employees, directors, officers, consultants or advisors in the
    discretion of our board of directors. Incentive stock options
    will only be granted to our employees.
The exercise price of each incentive stock option may not be
    less than 100% of the fair value of shares of our common stock
    on the date of grant. If we grant incentive stock options to any
    10% stockholder, the exercise price may not be less than 110% of
    the fair value of shares of our common stock on the date of
    grant. The exercise price of any non-qualified stock option will
    be determined by our board of directors and may be less than the
    fair value of shares of our common stock.
The term of each option may not exceed 10 years from the date of
    grant. The compensation committee will determine at what time or
    times each option may be exercised and the period of time, if
    any, after retirement, death, disability or termination of
    employment during which options may be exercised. Options may be
    made exercisable in installments. The vesting and exercisability
    of options may be accelerated by the compensation committee of
    our board. The exercise price of an option may not be amended or
    modified after the grant of the option.
In general, an optionee may pay the exercise price of an option
    by cash, by tendering shares of our common stock or such other
    methods of payment approved in the sole discretion of the
    compensation committee.
Options granted under our stock incentive plan may not be sold,
    transferred, pledged or assigned other than by will or under
    applicable laws of descent and distribution. However, we may
    permit limited transfers of
non-qualified
options for the benefit of immediate family members of a grantee
    if a grantee is incapacitated and unable to exercise his or her
    option.
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Restricted stock awards.
Restricted stock
    awards consist of shares of common stock that are subject to
    vesting restrictions. Shares subject to restricted stock awards
    may be issued for a purchase price or at no cost, subject to
    vesting restrictions. If the employment of a recipient of a
    restricted stock award is terminated for any reason other than a
    termination by our company for cause, then our company has the
    right to repurchase (1) all unvested shares subject to the
    restricted stock award at the original purchase price for such
    shares and (2) all vested shares subject to the restricted
    stock award at the then fair value of such shares. If the
    employment of a recipient of a restricted stock award is
    terminated by our company for cause, then our company has the
    right to repurchase all vested and unvested shares subject to
    the restricted stock award at the original purchase price for
    such shares.
Restricted stock awards may have restrictions that lapse based
    upon length of service of the recipient or based upon the
    attainment of performance goals. Unless otherwise specified in
    the agreement governing the restricted stock award, all shares
    subject to the restricted stock award shall be entitled to vote
    and shall receive dividends during the periods of restriction.
Adjustments for share dividends and similar
    events.
We will make appropriate adjustments in
    outstanding awards and the number of shares available for
    issuance under our stock incentive plan, including the
    individual limitations on awards, to reflect share dividends,
    share splits, spin-offs and other similar events.
Extraordinary vesting events.
If we experience
    a "change of control," as defined in the stock
    incentive plan, the compensation committee will have full
    authority to determine the effect, if any, on the vesting,
    exercisability, settlement, payment or lapse of restrictions
    applicable to an award. The effect of a change of control may be
    specified in a participant's award agreement or determined
    at a subsequent time, including, without limitation, the
    substitution of new awards, the termination or the adjustment of
    outstanding awards, the acceleration of awards or the removal of
    restrictions on outstanding awards. In addition, the vesting and
    exercisability of all unvested awards automatically accelerate
    by one year in the event of a change of control. A "change
    of control" under our stock incentive plan means
    (1) our merger, consolidation or reorganization with one or
    more other entities after which our stockholders prior to the
    consummation of the transaction do not own 50% or more of the
    combined voting power of all classes of our common stock and
    preferred stock; (2) a sale of all or substantially all of
    our assets to another person or entity; or (3) any
    transaction (including without limitation a merger or
    reorganization in which we are the surviving entity) which
    results in any person or entity (other than us, any fiduciary of
    one of our employee benefit plans or any corporation directly or
    indirectly owned by our stockholders) owning 50% or more of the
    combined voting power of all classes of our common and preferred
    stock.
Registration.
We intend to file with the SEC a
    registration statement on
Form S-8
covering the shares of our common stock issuable under the stock
    incentive plan following completion of this offering.
Exit
    Event Bonus Plan
In 2005, we established an Exit Event Bonus Plan in order to
    incentivize our executives to grow our company and achieve a
    favorable investment outcome for our stockholders following our
    going private transaction in 2004. We amended the plan in
    September 2007, April 2009 and March 2010. Participants in this
    plan will be eligible to receive payments out of a bonus pool in
    the event of our initial public offering or sale of our company.
The material features of our Exit Event Bonus Plan are
    summarized below. The complete text of our Exit Event Bonus Plan
    is filed as an exhibit to the registration statement of which
    this prospectus forms a part.
Administration.
Our Exit Event Bonus Plan is
    administered by our board of directors. Subject to the terms of
    our Exit Event Bonus Plan, our board of directors may select
    participants to receive units under the plan.
Source of shares.
The shares of common stock
    that may be issued under the Exit Event Bonus Plan consist of
    authorized but unissued shares.
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Eligibility.
Only executives or other
    employees who would qualify as a highly compensated employee
    within the meaning of the Employee Retirement Income Security
    Act of 1974 are eligible to participate in the Exit Event Bonus
    Plan.
Amendment or termination of our Exit Event Bonus
    Plan.
Our board of directors may terminate or
    amend the Exit Event Bonus Plan at any time. Unless terminated
    earlier, our Exit Event Bonus Plan will terminate in October
    2010, subject to automatic extension under certain
    circumstances. The Exit Event Bonus Plan will terminate
    immediately following an initial public offering or sale of our
    company. For purposes of this plan, a sale of our company means
    (1) our merger, consolidation or reorganization with one or
    more other entities after which our stockholders prior to the
    consummation of the transaction do not own 50% or more of the
    combined voting power of all classes of our common stock and
    preferred stock or (2) a sale of all or substantially all
    of our assets to another person or entity.
Units.
Participants are awarded units under
    the Exit Event Bonus Plan, which units permit the holder to
    participate in a bonus pool in the event of an initial public
    offering or sale of our company.
Bonus Pool.
In the event of an initial public
    offering, the bonus pool will consist of shares of our common
    stock, the number of which is determined by multiplying
    (i) the "applicable percentage" by (ii) the
    number of shares of common stock outstanding on a fully diluted
    basis immediately prior to the initial public offering.
In the event of a sale of our company, the bonus pool will
    consist of a portion of the aggregate consideration received by
    us
and/or
our stockholders in such sale, or the aggregate sale
    consideration, the amount of which is determined by multiplying
    (i) the "applicable percentage" by (ii) the
    aggregate sale consideration less the amount of such aggregate
    sale consideration payable in respect of our preferred stock
    outstanding at the time of such sale.
The applicable percentage ranges from 0% to 3%, depending upon
    our valuation in an initial public offering or the aggregate
    sale consideration in a sale of our company, as applicable. If
    the initial public offering valuation or aggregate sale
    consideration is $210 million or less, the applicable
    percentage will be 0%. If the initial public offering valuation
    or aggregate sale consideration is $250 million or greater,
    the applicable percentage will be 3%. For an initial public
    offering valuation or an aggregate sale consideration between
    $210 million and $250 million, the applicable
    percentage will be between 0% and 3% as determined on a
    proportional basis by multiplying 3% by a fraction where the
    numerator is the difference between the applicable valuation or
    aggregate sale consideration and $210 million and the
    denominator is $40 million.
For the purposes of the Exit Event Bonus Plan, our valuation in
    an initial public offering will be equal to the sum of:
•
the number of shares of our common stock outstanding, on a fully
    diluted basis, immediately prior to the initial public offering
    multiplied by the price at which our shares of common stock are
    offered to the public in the initial public offering; and
•
the amount of proceeds of the initial public offering that are
    used to redeem our outstanding preferred stock.
Payments under the plan.
Participants are
    entitled to participate in the bonus pool on a pro rata basis
    based on the respective number of units held by the
    participants. In the event of a sale of our company,
    participants are entitled to receive their payments under the
    Exit Event Bonus Plan at the same time and upon the same terms
    as our stockholders receive the aggregate sale consideration. In
    the event of an initial public offering, participants will be
    issued their shares of common stock within 30 days
    following the consummation of the initial public offering.
401(k)
    Plan
We maintain a deferred savings and retirement plan for our
    employees. Such plan is intended to qualify as a
tax-qualified
plan under Section 401 of the Internal Revenue Code. The
    deferred savings and retirement plan
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provides that each participant may contribute his or her pre-tax
    compensation up to the statutory limit ($16,500 in 2010). For
    employees 50 years of age or older, an additional
catch-up
contribution of $5,500 is allowable. In 2010, the statutory
    limit for those who qualify for
catch-up
contributions is $22,000. We match 50% of each employee's
    contributions up to a maximum of $2,500 per employee. All
    contributions are held in trust and are invested in accordance
    with the terms of the deferred savings and retirement plan.
    Under such plan, each employee is fully vested in his or her
    deferred salary contributions.
Limitation
    of Liability and Indemnification of Directors and
    Officers
Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, limits the liability of our directors for monetary
    damages to the fullest extent permitted by Delaware law.
    Consequently, no director will be personally liable to us or our
    stockholders for monetary damages for any breach of fiduciary
    duties as a director, except liability for:
•
any breach of the director's duty of loyalty to us or our
    stockholders;
•
any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;
•
unlawful payments of dividends or unlawful stock repurchases or
    redemptions as provided in Section 174 of the Delaware
    General Corporation Law; or
•
any transaction from which the director derived an improper
    personal benefit.
These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission. If Delaware law is amended to authorize the further
    elimination or limitation of the liability of a director, then
    the liability of our directors will be eliminated or limited to
    the fullest extent permitted by Delaware law as so amended.
Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, also provides that:
•
we will indemnify our directors and officers to the fullest
    extent permitted by law;
•
we may indemnify our other employees and agents to the same
    extent that we indemnify our directors and officers, unless
    otherwise determined by our board of directors; and
•
we will advance expenses to our directors and officers in
    connection with defending an action, suit or proceeding in
    advance of its final disposition to the fullest extent permitted
    by law.
The indemnification provisions contained in our amended and
    restated certificate of incorporation are not exclusive.
Section 145(g) of the Delaware General Corporation Law and
    our amended and restated certificate of incorporation permit us
    to secure insurance on behalf of any officer, director, employee
    or other agent for any liability arising out of his or her
    actions in connection with their services to us, regardless of
    whether Delaware General Corporation Law permits
    indemnification. We maintain a directors' and
    officers' liability insurance policy.
We have entered into indemnification agreements with each of our
    directors and executive officers. These indemnification
    agreements generally provide that we will indemnify them to the
    fullest extent permitted by Delaware law in connection with
    their service to us or on our behalf.
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At present, there is no pending litigation or proceeding
    involving any of our directors or officers as to which
    indemnification is required or permitted, and we are not aware
    of any threatened litigation or proceeding that may result in a
    claim for indemnification.
Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to directors, officers or
    persons controlling our company pursuant to the foregoing
    provisions, or otherwise, the opinion of the SEC is that such
    indemnification is against public policy as expressed in the
    Securities Act and is therefore unenforceable.
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CERTAIN
    RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since January 1, 2007, we have entered into no transactions
    in which the amount involved exceeded or will exceed $120,000
    and in which any of our directors, executive officers, holders
    of more than five percent of our voting securities, and
    affiliates of our directors, executive officers and five percent
    stockholders, had or will have a direct or indirect material
    interest, other than compensation arrangements with directors
    and executive officers, which are described under the
    "Executive Compensation" section of this prospectus,
    and the transactions described below.
Loan
    Forgiveness
In March 2010, we canceled aggregate indebtedness from
    Messrs. Wiehe, Duke and Martini and Ms. Kaelin in the
    following amounts: Stephen Wiehe ($376,612), James Duke
    ($268,965), Jeffrey Martini ($149,345) and Jennifer Kaelin
    ($220,884). This indebtedness was represented by promissory
    notes used to pay the purchase price for restricted stock awards
    to these individuals. Our board of directors made this decision
    in part to comply with the requirements of Section 402 of
    the Sarbanes-Oxley Act of 2002, which prohibits public companies
    from extending loans to its executive officers, and in part for
    other reasons that justified these recipients not paying the
    purchase price for these restricted stock awards. See the
    section titled "Executive Compensation
    — Compensation Discussion and Analysis" for
    additional information.
Stockholders
    Agreement
We have entered into a stockholders agreement with our preferred
    stockholders and Messrs. Wiehe, Duke and Gillis. This
    agreement provides for certain governance rights, rights of
    first refusal and co-sale and other rights relating to the
    shares of our common stock, which will terminate upon
    consummation of this offering. This agreement also provides for
    registration rights, which are described in the
    "Description of Capital Stock — Registration
    Rights" section of this prospectus.
Indemnification
    Agreements
We have entered into indemnification agreements with each of our
    directors and executive officers. These agreements, among other
    things, require us to indemnify each director and executive
    officer to the fullest extent permitted by Delaware law,
    including indemnification of expenses such as attorneys'
    fees, judgments, fines and settlement amounts incurred by the
    director or executive officer in any action or proceeding,
    including any action or proceeding by or in right of us, arising
    out of the person's services as a director or executive
    officer.
Employment
    Agreement
We have entered into an employment agreement with
    Mr. Wiehe. See the section titled "Executive
    Compensation — Employment Agreements" for
    additional information.
Change of
    Control Agreements
We have entered into change of control agreements with
    Messrs. Wiehe, Duke and Howard. See the section titled
    "Executive Compensation — Potential Payments upon
    Termination or Change of Control" for additional
    information.
Policy
    for Approval of Related Party Transactions
Prior to the completion of this offering, our board of directors
    will adopt a written statement of policy regarding transactions
    with related persons, which we refer to as our related person
    policy. Our related person policy will require that a
    "related person" (as defined in Item 404(a) of
Regulation S-K)
must promptly disclose to our Chief Financial Officer any
    "related person transaction" (defined as any
    transaction that is reportable by us under Item 404(a) of
Regulation S-K)
and all material facts with respect thereto. The Chief Financial
    Officer will then promptly communicate that information to our
    audit committee. In reviewing a transaction, our audit committee
    will consider all relevant facts and circumstances, including
    (1) the commercial reasonableness of the terms,
    (2) the
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benefit and perceived benefits, or lack thereof, to us,
    (3) opportunity costs of alternate transactions,
    (4) the materiality and character of the related
    person's interest, and (5) the actual or apparent conflicts
    of interest of the related person. Our audit committee will not
    approve or ratify a related person transaction unless it
    determines that, upon consideration of all relevant information,
    the transaction is in, or is not inconsistent with, the best
    interests of our company and stockholders. No related person
    transaction will be consummated without the approval or
    ratification of our audit committee. It will be our policy that
    directors interested in a related person transaction will recuse
    themselves from any vote relating to a related person
    transaction in which they have an interest.
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PRINCIPAL
    AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial
    ownership of our common stock as
    of          ,
    2010, and as adjusted to reflect the shares of common stock to
    be issued and sold in this offering assuming no exercise of the
    underwriters' option to purchase additional shares, by
    (i) each of our named executive officers; (ii) each of
    our directors; (iii) all of our executive officers and
    directors as a group; and (iv) each person or group of
    affiliated persons known by us to be the beneficial owner of
    more than 5% of our common stock.
Beneficial ownership in this table is determined in accordance
    with the rules of the SEC and does not necessarily indicate
    beneficial ownership for any other purpose. Under these rules,
    the number of shares of common stock deemed outstanding includes
    shares issuable upon exercise of options held by the respective
    person or group that may be exercised within 60 days
    after          ,
    2010. For purposes of calculating each person's or
    group's percentage ownership, stock options exercisable
    within 60 days
    after          ,
    2010 are included for that person or group.
Percentage of beneficial ownership is based
    on           shares
    of common stock outstanding as
    of          ,
    2010
    and           shares
    of common stock outstanding after completion of this offering.
Unless otherwise indicated and subject to applicable community
    property laws, to our knowledge, each stockholder named in the
    following table possesses sole voting and investment power over
    the shares listed, except for those jointly owned with that
    person's spouse. Unless otherwise noted below, the address
    of each person listed on the table is
c/o SciQuest,
Inc., 6501 Weston Parkway, Suite 200, Cary, North
    Carolina 27513. Beneficial ownership representing less than 1%
    is denoted with an asterisk (*).
Shares Beneficially
Number of
Owned if
Shares Beneficially
Number
Shares Beneficially
Shares to be Sold
Underwriters'
Owned Prior to the
of
Owned
if Underwriters'
Option is Exercised in
Offering
Shares
After the Offering
Option is
Full
Name
Shares
Percentage
Offered
Shares
Percentage
Exercised in Full
Shares
Percentage
Named Executive Officers and Directors:
Stephen J. Wiehe(1)
James B. Duke
Jeffrey A. Martini
Jennifer G. Kaelin
C. Gamble Hefferman(2)
Noel J. Fenton(3)
Daniel F. Gillis
Jeffrey T. Barber
Timothy J. Buckley
All executive officers and directors as a group (10 people)
5% Stockholders:
Funds associated with Trinity Ventures(4)
Funds associated with Intersouth Partners(5)
River Cities SBIC III, L.P.
Other Selling Stockholders:
(1)
Includes           shares
    held by Mr. Wiehe as custodian for Andrew John Wiehe and
    Stephanie Elizabeth Wiehe, over which Mr. Wiehe has voting
    and investment power.
(2)
Includes           shares
    subject to options that are exercisable within 60 days of
    the date of the table.
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(3)
Includes           shares
    held by Trinity Ventures VII, L.P., Trinity VII
Side-By-Side
Fund, L.P., Trinity Ventures VIII, L.P., Trinity VIII
Side-By-Side
Fund, L.P. and Trinity VIII Entrepreneurs' Fund, L.P.
    Mr. Fenton may be deemed to have shared voting and
    investment power over the shares held by these limited
    partnerships, but disclaims beneficial ownership of such shares.
(4)
Consists of shares held by Trinity Ventures VII, L.P., Trinity
    VII
Side-By-Side
Fund, L.P., Trinity Ventures VIII, L.P., Trinity VIII
Side-By-Side
Fund, L.P. and Trinity VIII Entrepreneurs' Fund, L.P.
(5)
Consists of shares held by Intersouth Partners V, L.P.,
    Intersouth Affiliates V, L.P., and Intersouth Partners VI,
    L.P.
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DESCRIPTION
    OF CAPITAL STOCK
The following description of our capital stock and certain
    provisions of our amended and restated certificate of
    incorporation and amended and restated bylaws are summaries and
    are qualified by reference to the amended and restated
    certificate of incorporation and amended and restated bylaws
    that will become effective upon completion of this offering.
    Copies of these documents have been filed with the SEC as
    exhibits to the registration statement of which this prospectus
    forms a part. The descriptions of common stock and preferred
    stock reflect changes to our capital structure that will occur
    upon completion of this offering.
Authorized
    Capital Stock
Upon completion of this offering, our authorized capital stock
    will consist
    of           shares
    of common stock, $0.001 par value per share,
    and           shares
    of preferred stock, $0.001 par value per share. Concurrent
    with the consummation of this offering, all of our shares of
    preferred stock that are currently outstanding will be redeemed.
    Accordingly, no shares of our preferred stock will be
    outstanding immediately following completion of this offering.
As of February 28, 2010, there were 28,589,233 shares
    of common stock outstanding held by 49 stockholders of record.
    As of February 28, 2010, there were 222,073 shares of
    preferred stock outstanding held by 10 stockholders of
    record.
Common
    Stock
Voting.
Except as otherwise required by
    Delaware law, holders of our common stock are entitled to one
    vote for each share held of record on all matters submitted to a
    vote of the stockholders. There is no cumulative voting in the
    election of directors.
Dividend Rights.
Subject to dividend
    preferences that may be applicable to any outstanding preferred
    stock, holders of our common stock are entitled to receive
    equally, on a per share basis, such dividends or other
    distributions in cash, securities or other property of our
    company as may be declared from time to time by our board of
    directors out of assets and funds legally available for dividend
    payments. It is our present intention not to pay dividends on
    our common stock for the foreseeable future. Our board of
    directors may, at its discretion, modify or repeal our dividend
    policy. See "Dividend Policy."
Liquidation and Preemptive Rights.
In the
    event of our liquidation, dissolution or
winding-up,
holders of our common stock are entitled to share equally on a
    per share basis in all assets remaining after payment or
    provision of payment of our debts and amounts payable upon
    shares of preferred stock entitled to a preference, if any, over
    holders of common stock upon a liquidation, dissolution or
    winding up. Holders of our common stock have no conversion,
    exchange, preemption or other subscription rights. There are no
    redemption or sinking fund provisions applicable to our common
    stock.
Listing.
We intend to apply to have our common
    stock listed on the NYSE under the symbol ''SQI."
Transfer Agent and Registrar.
The transfer
    agent and registrar for our common stock
    is          .
    Its address
    is          ,
    and its telephone number
    is          .
Preferred
    Stock
Our board of directors is authorized, without further vote or
    action by the stockholders, to issue from time to time up to an
    aggregate
    of           shares
    of preferred stock in one or more series and to fix the
    designations, rights, preferences and privileges and any
    qualifications, limitations or restrictions of the shares of
    each such series of preferred stock, including the dividend
    rights and rates, conversion rights, voting rights, the terms of
    redemption including price and sinking fund provisions,
    liquidation preferences and the number of shares constituting
    any series or designations of that series.
We believe that the ability of our board of directors to issue
    one or more series of preferred stock will provide us with
    flexibility in structuring possible future financings and
    acquisitions, and in meeting other corporate needs that may
    arise. The authorized shares of preferred stock, as well as
    authorized and unissued shares of common stock,
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will be available for issuance without action by our
    stockholders, unless such action is required by applicable law
    or the rules of any stock exchange or automated quotation system
    on which our securities may be listed or traded.
Our board of directors may authorize, without stockholder
    approval, the issuance of preferred stock with voting and
    conversion rights that could adversely affect the voting power
    and other rights of holders of common stock. Although our board
    of directors has no current intention of doing so, it could
    issue a series of preferred stock that could have the effect of
    discouraging, delaying or preventing a change in control of us
    or an unsolicited acquisition proposal that some, or a majority,
    of our stockholders might believe to be in their best interests
    or in which stockholders might receive a premium for their stock
    over the then-current market price. Any issuance of preferred
    stock could therefore have the effect of decreasing the market
    price of our common stock.
Our board of directors will make any determination to issue
    shares of preferred stock based on its judgment as to the best
    interests of our company and our stockholders. We have no
    current plans to issue any shares of preferred stock after this
    offering.
Registration
    Rights
Holders, or their transferees, of
    approximately           shares
    of our common stock are entitled to certain registration rights
    with respect to these securities as set forth in a stockholders
    agreement, dated July 28, 2004, between us and the holders
    of these securities. The following description of the terms of
    the stockholders agreement is intended as a summary only and is
    qualified in its entirety by reference to the stockholders
    agreement filed as an exhibit to the registration statement, of
    which this prospectus forms a part.
Demand Registration Rights.
At any time after
    the earlier to occur of 180 days after the consummation of
    this offering and expiration of the applicable
lock-up
agreements, the holders of more than 30% of the registrable
    shares may request that we register all or a portion of their
    registrable shares for sale under the Securities Act. We are
    required to effect the registration as requested unless, in the
    good faith judgment of our board of directors, such registration
    should be delayed. We may be required to effect two of these
    registrations. In addition, when we are eligible for the use of
Form S-3,
or any successor form, holders of registrable shares may make up
    to two requests in any
12-month
period that we register all or a portion of their registrable
    shares for sale under the Securities Act on
Form S-3,
or any successor form, so long as the aggregate price to the
    public in connection with any such offering is at least
    $1 million.
Piggyback Registration Rights.
After the
    completion of this offering, in the event that we propose to
    register any of our securities under the Securities Act (except
    for the registration of securities to be offered pursuant to an
    employee benefit plan on
Form S-8
or pursuant to a registration made on
Form S-4
or any successor forms then in effect), we will include in these
    registrations all securities with respect to which we have
    received written requests for inclusion under our registration
    rights agreement, subject to certain limitations.
Expenses of Registration.
We will pay all
    registration expenses, other than underwriting discounts and
    commissions and any transfer taxes related to any demand or
    piggyback registration. With respect to demand registrations,
    these expenses include all reasonable expenses that any
    stockholder incurs in connection with the registration of its
    securities, subject to certain limitations.
Indemnification.
The stockholders agreement
    contains indemnification provisions pursuant to which we are
    obligated to indemnify the selling stockholders and any person
    who might be deemed to control any selling stockholder in the
    event of material misstatements or omissions in the registration
    statement or related violations of law attributable to us. The
    stockholders agreement requires that, as a condition to
    including their securities in any registration statement filed
    pursuant to demand or piggyback registration rights, the selling
    stockholders indemnify us for material misstatements or
    omissions attributable to them.
Anti-Takeover
    Effects of Our Amended and Restated Certificate of Incorporation
    and Amended and Restated Bylaws
Certain provisions (including, among others, those summarized
    below) of our amended and restated certificate of incorporation
    and our amended and restated bylaws, each of which will become
    effective upon the closing of this offering, may delay or
    discourage transactions involving an actual or potential change
    of control of our
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company or a change in our management, including transactions in
    which stockholders might otherwise receive a premium for their
    shares or transactions that our stockholders might otherwise
    consider to be in their best interests or in our best interests.
    Therefore, these provisions could adversely affect the price of
    our common stock.
Authorized but Unissued Shares.
The authorized
    but unissued shares of our common stock and preferred stock are
    available for future issuance without stockholder approval,
    subject to any limitations imposed by applicable law or the
    rules of any stock exchange or automated quotation system on
    which our securities may be listed or traded. As discussed
    above, our board of directors may designate the rights,
    preferences and privileges of such authorized but unissued
    preferred stock. These additional shares may be used for a
    variety of corporate purposes, including acquisitions and
    employee benefit plans, but they could also be issued in order
    to deter or prevent an attempt to acquire us.
Board Matters.
Our amended and restated
    certificate of incorporation and amended and restated bylaws
    provide that upon completion of this offering, our board of
    directors will be divided into three classes with staggered
    three-year terms. The board of directors, or its remaining
    members, even if less than a quorum, is empowered to fill
    vacancies on the board of directors occurring for any reason for
    the remainder of the term of the class of directors in which the
    vacancy occurred. The authorized number of directors may be
    changed by resolution of the board of directors. Members of the
    board of directors may only be removed for cause and only by the
    affirmative vote of 75% of our outstanding voting stock. These
    provisions are likely to increase the time required for
    stockholders to change the composition of the board of directors
    and could make it more difficult for a third party to acquire,
    or discourage a third party from seeking to acquire, control of
    our company.
No Cumulative Voting.
Our amended and restated
    certificate of incorporation and amended and restated bylaws do
    not permit cumulative voting in the election of directors.
    Cumulative voting allows a stockholder to vote a portion or all
    of its shares for one or more candidates for seats on the board
    of directors. The absence of cumulative voting may make it more
    difficult for a minority stockholder to gain a seat on our board
    of directors to influence decisions regarding takeovers or other
    matters.
Stockholder Action; Special Meeting of Stockholders; Advance
    Notice Requirements for Stockholder Proposals and Director
    Nominations.
Our amended and restated certificate
    of incorporation and our amended and restated bylaws provide
    that any action required or permitted to be taken by our
    stockholders at an annual meeting or special meeting may only be
    taken if it is properly brought before such meeting and may not
    be taken by written consent in lieu of a meeting. Our amended
    and restated bylaws provide that, except as otherwise required
    by law, special meetings of stockholders can only be called by
    our chairman of the board, our president or chief executive
    officer or our board of directors. Our amended and restated
    bylaws also provide that stockholders seeking to present
    proposals before a meeting of stockholders or to nominate
    candidates for election as directors at a meeting of
    stockholders must provide notice in writing in a timely manner
    and also specify requirements as to the form and content of a
    stockholder's notice. These provisions could have the
    effect of delaying until the next stockholder meeting
    stockholder actions that are favored by a majority of our
    standing voting securities. These provisions also may have the
    effect of precluding the conduct of certain business at a
    meeting if the proper procedures are not followed.
Super Majority Stockholder Vote Required for Certain
    Actions.
The Delaware General Corporation Law
    provides generally that the affirmative vote of a majority of
    the shares entitled to vote on any matter is required to amend a
    corporation's certificate of incorporation or bylaws,
    unless the corporation's certificate of incorporation or
    bylaws, as the case may be, requires a greater percentage. Our
    amended and restated bylaws may be amended or repealed by a
    majority vote of our board of directors or the affirmative vote
    of the holders of at least 75% of the voting power of all shares
    entitled to vote generally in the election of directors. In
    addition, the affirmative vote of the holders of at least 75% of
    the voting power of all shares entitled to vote generally in the
    election of directors is required to amend or repeal or adopt
    any provision inconsistent with the provisions of our amended
    and restated certificate of incorporation described above.
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Delaware
    Anti-Takeover Statute
We are subject to Section 203 of the Delaware General
    Corporation Law. Section 203 prohibits a publicly-held
    Delaware corporation from engaging in a "business
    combination" with an "interested stockholder" for
    a period of three years after the date of the transaction in
    which the person became an interested stockholder, unless:
•
prior to the date of the transaction, the board of directors of
    the corporation approved either the business combination or the
    transaction that resulted in the stockholder becoming an
    interested stockholder;
•
upon completion of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding for purposes of determining the number of shares
    outstanding (1) shares owned by persons who are directors
    and also officers and (2) shares owned by employee stock
    plans in which employee participants do not have the right to
    determine confidentially whether shares held subject to the plan
    will be tendered in a tender or exchange offer; or
•
at or subsequent to the date of the transaction, the business
    combination is approved by the board of directors and authorized
    at an annual or special meeting of stockholders, and not by
    written consent, by the affirmative vote of at least two-thirds
    of the outstanding voting stock that is not owned by the
    interested stockholder.
Section 203 defines a business combination to include:
•
any merger or consolidation involving the corporation and the
    interested stockholder;
•
any sale, transfer, pledge or other disposition involving the
    interested stockholder of 10% or more of the assets of the
    corporation;
•
subject to exceptions, any transaction that results in the
    issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder; and
•
the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
Subject to various exceptions, an "interested
    stockholder" is a person who, together with his or her
    affiliates and associates, owns, or within the past three years,
    did own, 15% or more of the outstanding voting stock of the
    corporation. Section 203 could discourage mergers or other
    takeover or change of control attempts, including attempts that
    might result in the payment of a premium over the market price
    for shares of our common stock.
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SHARES ELIGIBLE
    FOR FUTURE SALE
Prior to this offering, there was no public market for our
    common stock, and a liquid trading market for the common stock
    may not develop or be sustained after this offering. We cannot
    predict the effect, if any, that market sales of shares of our
    common stock or the availability of shares of our common stock
    for sale will have on the market price of our common stock
    prevailing from time to time. Sales of substantial amounts of
    our common stock in the public market, including shares issued
    upon exercise of outstanding options or in the public market
    after this offering, or the anticipation of these sales, could
    adversely affect the market prices of our common stock and could
    impair our future ability to raise capital through the sale of
    our equity securities.
Upon completion of this offering, based on our outstanding
    shares as
    of          ,
    2010, and assuming no exercise of outstanding options, we will
    have outstanding an aggregate
    of           shares
    of our common stock
    (           shares
    if the underwriters' over-allotment option is exercised in
    full). Of these shares, all of the shares sold in this offering
    (plus any shares sold as a result of the underwriters'
    exercise of the over-allotment option) will be freely tradable
    without restriction or further registration under the Securities
    Act, unless those shares are purchased by our affiliates as that
    term is defined in Rule 144 under the Securities Act.
The
    remaining           shares
    of common stock to be outstanding after this offering and the
    443,361 shares issuable upon exercise of outstanding
    warrants will be "restricted securities" under
    Rule 144. Of these restricted
    securities,           shares
    will be subject to transfer restrictions for 180 days from
    the date of this prospectus pursuant to
lock-up
agreements. Restricted securities may be sold in the public
    market only if they have been registered or if they qualify for
    an exemption from registration under Rules 144 or 701 under
    the Securities Act.
Lock-Up
Agreements
All of our officers and directors, and holders
    of           shares
    of our common stock and holders
    of           shares
    of our common stock issuable upon exercise of outstanding
    options, have entered into
lock-up
agreements pursuant to which they have agreed, subject to
    limited exceptions, not to offer, sell or otherwise transfer or
    dispose of, directly or indirectly, any shares of common stock
    or securities convertible into or exchangeable or exercisable
    for shares of common stock for a period of 180 days from
    the date of this prospectus without our prior written consent
    or, in some cases, the prior written consent of Thomas Weisel
    Partners LLC. We have agreed, subject to limited exceptions,
    that for a period of 180 days from the date of this
    prospectus, we will not, without the prior written consent of
    Thomas Weisel Partners LLC, offer, sell or otherwise transfer or
    dispose of any shares of common stock or securities convertible
    into or exchangeable or exercisable for shares of common stock,
    except for the shares of common stock offered in this offering
    and the shares of common stock issuable upon exercise or
    conversion of options, warrants or securities outstanding on the
    date of this prospectus and the shares of our common stock that
    are issued under our stock option or employee stock purchase
    plans, provided that such recipients agree to be bound by these
    restrictions during the
180-day
period. Thomas Weisel Partners LLC has advised us that it has no
    current intent or arrangement to release any of the shares
    subject to the
lock-up
agreements prior to the expiration of the
lock-up
period. There are no contractually specified conditions for the
    waiver of
lock-up
restrictions and any waiver is at the sole discretion of Thomas
    Weisel Partners LLC, which may be granted by Thomas Weisel
    Partners LLC for any reason. The
180-day
lock-up
period will be extended automatically if (i) during the
    last 17 days of the
180-day
restricted period we issue an earnings release or announce
    material news or a material event or (ii) prior to the
    expiration of the
180-day
restricted period, we announce that we will release earnings
    results during the
15-day
period following the last day of the
180-day
period, in which case the restrictions described in this
    paragraph will continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
    announcement of the material news or material event. After the
lock-up
period, these shares may be sold, subject to applicable
    securities laws. See "Underwriting."
Rule 144
In general, under Rule 144 as currently in effect, once we
    have been subject to public company reporting requirements for
    at least 90 days, a person who is not deemed to have been
    one of our affiliates for purposes of the Securities Act at any
    time during the 90 days preceding a sale and who has
    beneficially owned the shares
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proposed to be sold for at least six months, including the
    holding period of any prior owner other than our affiliates, is
    entitled to sell those shares without complying with the manner
    of sale, volume limitation or notice provisions of
    Rule 144, subject to compliance with the public information
    requirements of Rule 144. If such a person has beneficially
    owned the shares proposed to be sold for at least one year,
    including the holding period of any prior owner other than our
    affiliates, then that person is entitled to sell those shares
    without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our
    affiliates or persons selling shares on behalf of our affiliates
    are entitled to sell upon expiration of the
lock-up
agreements described above, within any three-month period
    beginning 90 days after the date of this prospectus, a
    number of shares that does not exceed the greater of:
•
1% of the number of shares of our common stock then
    outstanding; or
•
the average weekly trading volume of the common stock during the
    four calendar weeks preceding the filing of a notice on
    Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates are also subject to
    manner of sale provisions and notice requirements and to the
    availability of current public information about us.
Upon expiration of the
lock-up
period described
    above,          
    additional shares of our common stock will be eligible for sale
    under Rule 144, including shares eligible for resale
    immediately upon the closing of this offering as described
    above. We cannot estimate the number of shares of our common
    stock that our existing stockholders will elect to sell under
    Rule 144.
Rule 701
Rule 701 generally allows a stockholder who purchased
    shares of our common stock pursuant to a written compensatory
    plan or contract and who is not deemed to have been an affiliate
    of our company during the immediately preceding 90 days to
    sell these shares in reliance upon Rule 144, but without
    being required to comply with the public information, holding
    period, volume limitation or notice provisions of Rule 144.
    Rule 701 also permits affiliates of our company to sell
    their Rule 701 shares under Rule 144 without
    complying with the holding period requirements of Rule 144.
    All holders of Rule 701 shares, however, are required
    to wait until 90 days after the date of this prospectus
    before selling those shares pursuant to Rule 701.
Stock
    Options and Restricted Stock Awards
We intend to file a registration statement on
Form S-8
under the Securities Act covering all of the shares of our
    common stock subject to options outstanding or reserved for
    issuance under our stock incentive plan and all shares of common
    stock issued pursuant to restricted stock awards under our stock
    incentive plan. We expect to file this registration statement as
    soon as practicable after this offering. In addition, we intend
    to file a registration statement on
Form S-8
or such other form as may be required under the Securities Act
    for the resale of shares of our common stock issued upon the
    exercise of options that were not granted under Rule 701.
    We expect to file this registration statement as soon as
    permitted under the Securities Act. However, the shares
    registered on
Form S-8
will be subject to volume limitations, manner of sale, notice
    and public information requirements of Rule 144 and will
    not be eligible for resale until expiration of the
lock-up
agreements to which they are subject.
Registration
    Rights
After the completion of this offering, holders
    of           shares
    of common stock will be entitled to specific rights to register
    those shares for sale in the public market. See
    "Description of Capital Stock — Registration
    Rights." Registration of these shares under the Securities
    Act would result in the shares becoming freely tradable without
    restriction under the Securities Act, except for shares
    purchased by affiliates, immediately upon the effectiveness of
    the registration statement relating to such shares.
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MATERIAL
    U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-U.S.
HOLDERS OF OUR COMMON STOCK
The following discussion summarizes certain material
    U.S. federal income and estate tax considerations relating
    to the acquisition, ownership and disposition of our common
    stock purchased pursuant to this offering by a
non-U.S. holder
(as defined below). This discussion is based on the provisions
    of the U.S. Internal Revenue Code of 1986, as amended,
    final, temporary and proposed U.S. Treasury regulations
    promulgated thereunder and current administrative rulings and
    judicial decisions, all as in effect as of the date hereof. All
    of these authorities may be subject to differing interpretations
    or repealed, revoked or modified, possibly with retroactive
    effect, which could materially alter the tax consequences to
non-U.S. holders
described in this prospectus.
There can be no assurance that the IRS will not take a contrary
    position to the tax consequences described herein or that such
    position will not be sustained by a court. No ruling from the
    IRS or opinion of counsel has been obtained with respect to the
    U.S. federal income or estate tax consequences to a
non-U.S. holder
of the purchase, ownership or disposition of our common stock.
This discussion is for general information only and is not
    tax advice. All prospective
non-U.S. holders
of our common stock should consult their own tax advisors with
    respect to the U.S. federal, state, local and
non-U.S. tax
consequences of the purchase, ownership and disposition of our
    common stock.
As used in this discussion, the term
"non-U.S. holder"
means a beneficial owner of our common stock that is not any of
    the following for U.S. federal income tax purposes:
•
an individual who is a citizen or a resident of the United
    States;
•
a corporation or other entity taxable as a corporation for
    U.S. federal income tax purposes that was created or
    organized in or under the laws of the United States, any state
    thereof or the District of Columbia;
•
an estate whose income is subject to U.S. federal income
    taxation regardless of its source;
•
a trust (a) if a U.S. court is able to exercise
    primary supervision over the trust's administration and one
    or more U.S. persons have the authority to control all of
    the trust's substantial decisions or (b) that has a
    valid election in effect under applicable U.S. Treasury
    regulations to be treated as a U.S. person; or
•
an entity that is disregarded as separate from its owner if all
    of its interests are owned by a single person described above.
An individual may be treated, for U.S. federal income tax
    purposes, as a resident of the United States in any calendar
    year by being present in the United States on at least
    31 days in that calendar year and for an aggregate of at
    least 183 days during a three-year period ending in the
    current calendar year. The
183-day
test
    is determined by counting all of the days the individual is
    treated as being present in the current year, one-third of such
    days in the immediately preceding year and one-sixth of such
    days in the second preceding year. Residents are subject to
    U.S. federal income tax as if they were U.S. citizens.
This discussion assumes that a prospective
non-U.S. holder
will hold shares of our common stock as a capital asset
    (generally, property held for investment). This discussion does
    not address all aspects of U.S. federal income and estate
    taxation that may be relevant to a particular
non-U.S. holder
in light of that
non-U.S. holder's
individual circumstances. In addition, this discussion does not
    address any aspect of U.S. state or local or
non-U.S. taxes,
or the special tax rules applicable to particular
non-U.S. holders,
such as:
•
insurance companies and financial institutions;
•
tax-exempt organizations;
•
controlled foreign corporations and passive foreign investment
    companies;
•
partnerships or other pass-through entities;
•
regulated investment companies or real estate investment trusts;
•
pension plans;
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•
persons who received our common stock as compensation;
•
brokers and dealers in securities;
•
owners that hold our common stock as part of a straddle, hedge,
    conversion transaction, synthetic security or other integrated
    investment; and
•
former citizens or residents of the United States subject to tax
    as expatriates.
If a partnership or other entity treated as a partnership for
    U.S. federal income tax purposes is a beneficial owner of
    our common stock, the treatment of a partner in the partnership
    generally will depend on the status of the partner and the
    activities of the partnership. We urge any beneficial owner of
    our common stock that is a partnership and partners in that
    partnership to consult their tax advisors regarding the
    U.S. federal income tax consequences of acquiring, owning
    and disposing of our common stock.
Distributions
    on Our Common Stock
Any distribution on our common stock paid to
non-U.S. holders
will generally constitute a dividend for U.S. federal
    income tax purposes to the extent paid from our current or
    accumulated earnings and profits, as determined under
    U.S. federal income tax principles. Distributions in excess
    of our current and accumulated earnings and profits will
    generally constitute a return of capital to the extent of the
non-U.S. holder's
adjusted tax basis in our common stock, and will be applied
    against and reduce the
non-U.S. holder's
adjusted tax basis. Any remaining excess will be treated as
    capital gain, subject to the tax treatment described below in
    "— Gain on Sale, Exchange or Other Disposition of
    Our Common Stock."
Dividends paid to a
non-U.S. holder
that are not treated as effectively connected with the
non-U.S. holder's
conduct of a trade or business in the United States generally
    will be subject to withholding of U.S. federal income tax
    at a rate of 30% on the gross amount paid, unless the
non-U.S. holder
is entitled to an exemption from or reduced rate of withholding
    under an applicable income tax treaty. In order to claim the
    benefit of a tax treaty or to claim an exemption from
    withholding, a
non-U.S. holder
must provide a properly executed IRS
Form W-8BEN
(or successor form) prior to the payment of dividends. A
non-U.S. holder
eligible for a reduced rate of withholding pursuant to an income
    tax treaty may be eligible to obtain a refund of any excess
    amounts withheld by timely filing an appropriate claim for a
    refund with the IRS.
Dividends paid to a
non-U.S. holder
that are treated as effectively connected with a trade or
    business conducted by the
non-U.S. holder
within the United States (and, if an applicable income tax
    treaty so provides, are also attributable to a permanent
    establishment or a fixed base maintained within the United
    States by the
non-U.S. holder)
are generally exempt from the 30% withholding tax if the
non-U.S. holder
satisfies applicable certification and disclosure requirements.
    To obtain the exemption, a
non-U.S. holder
must provide us with a properly executed IRS
Form W-8ECI
(or successor form) prior to the payment of the dividend.
    Dividends received by a
non-U.S. holder
that are treated as effectively connected with a U.S. trade
    or business generally are subject to U.S. federal income
    tax at rates applicable to U.S. persons. A
non-U.S. holder
that is a corporation may, under certain circumstances, be
    subject to an additional "branch profits tax" imposed
    at a rate of 30%, or such lower rate as specified by an
    applicable income tax treaty between the United States and such
    holder's country of residence.
A
non-U.S. holder
who provides us with an IRS
Form W-8BEN
or
Form W-8ECI
must update the form or submit a new form, as applicable, if
    there is a change in circumstances that makes any information on
    such form incorrect.
Gain On
    Sale, Exchange or Other Disposition of Our Common
    Stock
In general, a
non-U.S. holder
will not be subject to any U.S. federal income tax or
    withholding on any gain realized from the
non-U.S. holder's
sale, exchange or other disposition of shares of our common
    stock unless:
•
the gain is effectively connected with a U.S. trade or
    business (and, if an applicable income tax treaty so provides,
    is also attributable to a permanent establishment or a fixed
    base maintained within the United States by the
non-U.S. holder),
in which case the gain will be taxed on a net income basis
    generally in the
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same manner as if the
non-U.S. holder
were a U.S. person, and, if the
non-U.S. holder
is a corporation, the additional branch profits tax described
    above in "— Distributions on Our Common
    Stock" may also apply;
•
the
non-U.S. holder
is an individual who is present in the United States for
    183 days or more in the taxable year of the disposition and
    certain other conditions are met, in which case the
non-U.S. holder
will be subject to a 30% tax on the net gain derived from the
    disposition, which may be offset by
U.S.-source
capital losses of the
non-U.S. holder,
if any; or
•
we are, or have been at any time during the five-year period
    preceding such disposition (or the
non-U.S. holder's
holding period, if shorter), a "United States real property
    holding corporation."
Generally, we will be a "United States real property
    holding corporation" if the fair value of our
    U.S. real property interests equals or exceeds 50% of the
    sum of the fair values of our worldwide real property interests
    and other assets used or held for use in a trade or business,
    all as determined under applicable U.S. Treasury
    regulations. We believe that we have not been and are not
    currently, and do not anticipate becoming in the future, a
    "United States real property holding corporation" for
    U.S. federal income tax purposes.
Backup
    Withholding and Information Reporting
We must report annually to the IRS and to each
non-U.S. holder
the amount of distributions paid to such holder and the amount
    of tax withheld, if any. Copies of the information returns filed
    with the IRS to report the distributions and withholding may
    also be made available to the tax authorities in a country in
    which the
non-U.S. holder
is a resident under the provisions of an applicable income tax
    treaty or agreement.
The United States imposes a backup withholding tax on the gross
    amount of dividends and certain other types of payments
    (currently at a rate of 28%). Dividends paid to a
non-U.S. holder
will not be subject to backup withholding if proper
    certification of foreign status (usually on IRS
Form W-8BEN)
is provided, and we do not have actual knowledge or reason to
    know that the
non-U.S. holder
is a U.S. person. In addition, no backup withholding or
    information reporting will be required regarding the proceeds of
    a disposition of our common stock made by a
non-U.S. holder
within the United States or conducted through certain
    U.S. financial intermediaries if we receive the
    certification of foreign status described in the preceding
    sentence and we do not have actual knowledge or reason to know
    that such
non-U.S. holder
is a U.S. person or the
non-U.S. holder
otherwise establishes an exemption.
Non-U.S. holders
should consult their own tax advisors regarding the application
    of the information reporting and backup withholding rules to
    them.
Backup withholding is not an additional tax. Amounts withheld
    under the backup withholding rules from a payment to a
non-U.S. holder
can be refunded or credited against the
non-U.S. holder's
U.S. federal income tax liability, if any, provided that
    certain required information is furnished to the IRS in a timely
    manner.
U.S.
    Federal Estate Tax
An individual
non-U.S. holder
who is treated as the owner, or who has made certain lifetime
    transfers, of an interest in our common stock may be required to
    include the value of the common stock in his or her gross estate
    for U.S. federal estate tax purposes, and may be subject to
    U.S. federal estate tax unless an applicable estate tax
    treaty provides otherwise. Under current U.S. federal law,
    all federal taxes on the value of an individual's estate at
    death have been temporarily repealed through December 31,
    2010. Beginning January 1, 2011, absent further act by the
    United States Congress, the estate tax automatically will be
    reinstated at 2001 levels. This federal estate tax would apply
    to any individual
non-U.S. holder
if such person owned our common stock at the time of his or her
    death on or after January 1, 2011.
Currently, numerous proposals are under review by the United
    States Congress to determine how best to reform the
    U.S. federal estate tax. None of the current proposals
    support repeal of the estate tax, and all of the proposals
    preserve and continue some form of federal tax on the value of
    an individual's estate (at tax rates ranging from
    approximately 35% to 45%). Several of the legislative proposals
    provide for a credit or other exemption that would be applied
    before imposing any federal estate tax (for example, one
    proposal provides that no estate tax would be imposed until the
    value of the total estate exceeds approximately $3,500,000
    U.S. dollars). It is unclear whether such a credit or
    exemption would apply to
non-U.S. holders
of our common stock. As a result of the widely
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differing proposals for federal estate tax reform, it is
    difficult to predict how the tax laws will apply, and all
    prospective
non-U.S. holders
are urged to consult their tax advisor to determine possible
    application of the U.S. federal estate tax, if any.
Obama
    Administration Legislative Proposals
The Obama Administration recently has proposed legislation that
    would limit the ability of a
non-U.S. holder
to claim relief from U.S. federal withholding tax in
    respect of dividends paid on the common stock if such holder
    holds the common stock through a
non-U.S. intermediary
that is not a "qualified intermediary." The Obama
    Administration's proposals also would limit the ability of
    certain
non-U.S. entities
to claim relief from U.S. federal withholding tax in
    respect of dividends paid to such
non-U.S. entities
unless those entities have provided documentation of their
    beneficial owners to the withholding agent. In addition, other
    proposals would impose a 20% withholding tax on the gross
    proceeds of the sale of common stock effected through a
non-U.S. intermediary
that is not a qualified intermediary and that is not located in
    a jurisdiction with which the United States has a comprehensive
    income tax treaty having a satisfactory exchange of information
    provision. It is unclear whether, or in what form, these
    proposals may be enacted.
Non-U.S. holders
are encouraged to consult with their tax advisors regarding the
    possible implications of the Obama Administration's
    proposals on their investment in respect of the common stock.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
    agreement, each of the underwriters named below has severally
    agreed to purchase from us and the selling stockholders the
    aggregate number of shares of common stock set forth opposite
    their respective names:
Underwriters
Number of Shares
Thomas Weisel Partners LLC
William Blair & Company, L.L.C.
JMP Securities LLC
Pacific Crest Securities LLC
Thomas Weisel Partners LLC is the book-running manager and
    William Blair & Company, L.L.C., JMP Securities LLC
    and Pacific Crest Securities LLC are co-managers.
Of
    the           shares
    to be purchased by the
    underwriters,          shares
    will be purchased from us
    and          
    will be purchased from the selling stockholders.
The underwriting agreement provides that the obligations of the
    several underwriters are subject to various conditions,
    including approval of legal matters by counsel. The nature of
    the underwriters' obligations commits them to purchase and
    pay for all of the shares of common stock listed above if any
    are purchased.
The underwriting agreement provides that we and the selling
    stockholders will indemnify the underwriters against liabilities
    specified in the underwriting agreement under the Securities
    Act, or will contribute to payments that the underwriters may be
    required to make relating to these liabilities.
Thomas Weisel Partners LLC expects to deliver the shares of
    common stock to purchasers on or
    about          ,
    2010.
Over-Allotment
    Option
We have granted a
30-day
over-allotment option to the underwriters to purchase up to a
    total
    of          
    additional shares of our common stock from us at the initial
    public offering price, less the underwriting discount payable by
    us, as set forth on the cover page of this prospectus. If the
    underwriters exercise this option in whole or in part, then each
    of the underwriters will be separately committed, subject to the
    conditions described in the underwriting agreement, to purchase
    the additional shares of our common stock in proportion to their
    respective commitments set forth in the table above. If any
    additional shares of common stock are purchased, the
    underwriters will offer the additional shares on the same terms
    as those on which the shares are being offered.
Determination
    of Offering Price
Prior to this offering, there has been no public market for our
    common stock. The initial public offering price will be
    determined through negotiations between us and the underwriters.
    In addition to prevailing market conditions, the factors to be
    considered in determining the initial public offering price will
    include:
•
the valuation multiples of publicly-traded companies that the
    representatives of the underwriters believe are comparable to us;
•
our financial information;
•
our history and prospects and the outlook for our industry;
•
an assessment of our management, our past and present
    operations, and the prospects for, and timing of, our future
    revenues; and
•
the above factors in relation to market values and various
    valuation measures of other companies engaged in activities
    similar to ours.
We cannot assure you that an active or orderly trading market
    will develop for our common stock or that our common stock will
    trade in the public markets subsequent to this offering at or
    above the initial offering price.
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Commissions
    and Discounts
The underwriters propose to offer the shares of common stock
    directly to the public at the public offering price set forth on
    the cover page of this prospectus, and at this price less a
    concession not in excess of $      per
    share of common stock to other dealers specified in a master
    agreement among underwriters who are members of the Financial
    Industry Regulatory Authority, Inc. The underwriters may allow,
    and the other dealers specified may reallow, concessions not in
    excess of $      per share of common
    stock to these other dealers. After this offering, the offering
    price, concessions and other selling terms may be changed by the
    underwriters. Our common stock is offered subject to receipt and
    acceptance by the underwriters and to other conditions,
    including the right to reject orders in whole or in part.
The following table summarizes the compensation to be paid to
    the underwriters by us and the proceeds, before expenses,
    payable to us and the selling stockholders:
Total
Without Over-
Per Share
Allotment
With Over-Allotment
Public offering price
$
$
$
Underwriting discount
Proceeds, before expenses, to us
Proceeds, before expenses, to selling stockholders
Indemnification
    of Underwriters
We and the selling stockholders will indemnify the underwriters
    against some civil liabilities, including liabilities under the
    Securities Act and liabilities arising from breaches of our
    representations and warranties contained in the underwriting
    agreement. If we or the selling stockholders are unable to
    provide this indemnification, we and the selling stockholders
    will contribute to payments the underwriters may be required to
    make in respect of those liabilities.
No Sales
    of Similar Securities
The underwriters will require all of our directors and officers,
    the selling stockholders and certain other of our stockholders
    to agree not to offer, sell, agree to sell, directly or
    indirectly, or otherwise dispose of any shares of common stock
    or any securities convertible into or exchangeable for shares of
    common stock except for the shares of common stock offered in
    this offering without the prior written consent of Thomas Weisel
    Partners LLC for a period of 180 days after the date of
    this prospectus.
We have agreed that for a period of 180 days after the date
    of this prospectus, we will not, without the prior written
    consent of Thomas Weisel Partners LLC, offer, sell or otherwise
    dispose of any shares of common stock, except for the shares of
    common stock offered in this offering and the shares of common
    stock issuable upon exercise of outstanding options on the date
    of this prospectus.
The
180-day
restricted period described in the preceding two paragraphs will
    be automatically extended if: (1) during the last
    17 days of the l80-day restricted period we issue an
    earnings release or announce material news or a material event
    or (2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
    results during the
15-day
period following the last day of the
180-day
period, in which case the restrictions described in the
    preceding paragraph will continue to apply until the expiration
    of the
18-day
period beginning on the issuance of the earnings release or the
    announcement of the material news or material event.
New York
    Stock Exchange
We have applied to have our common stock listed on the NYSE
    under the symbol "SQI."
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Short
    Sales, Stabilizing Transactions and Penalty Bids
In order to facilitate this offering, persons participating in
    this offering may engage in transactions that stabilize,
    maintain or otherwise affect the price of our common stock
    during and after this offering. Specifically, the underwriters
    may engage in the following activities in accordance with the
    rules of the SEC.
Short Sales.
Short sales involve the sales by
    the underwriters of a greater number of shares than they are
    required to purchase in the offering. Covered short sales are
    short sales made in an amount not greater than the
    underwriters' overallotment option to purchase additional
    shares from us in this offering. The underwriters may close out
    any covered short position by either exercising their
    over-allotment option to purchase shares or purchasing shares in
    the open market. In determining the source of shares to close
    out the covered short position, the underwriters will consider,
    among other things, the price of shares available for purchase
    in the open market as compared to the price at which they may
    purchase shares through the over-allotment option. Naked short
    sales are any short sales in excess of such over-allotment
    option. The underwriters must close out any naked short position
    by purchasing shares in the open market. A naked short position
    is more likely to be created if the underwriters are concerned
    that there may be downward pressure on the price of the common
    stock in the open market after pricing that could adversely
    affect investors who purchase in this offering.
Stabilizing Transactions.
The underwriters may
    make bids for or purchases of the shares for the purpose of
    pegging, fixing or maintaining the price of the shares, so long
    as stabilizing bids do not exceed a specified maximum.
Penalty Bids.
If the underwriters purchase
    shares in the open market in a stabilizing transaction or
    syndicate covering transaction, they may reclaim a selling
    concession from the underwriters and selling group members who
    sold those shares as part of this offering. Stabilization and
    syndicate covering transactions may cause the price of the
    shares to be higher than it would be in the absence of these
    transactions. The imposition of a penalty bid might also have an
    effect on the price of the shares if it discourages presales of
    the shares.
The transactions above may occur on the NYSE or otherwise.
    Neither we nor the underwriters make any representation or
    prediction as to the effect that the transactions described
    above may have on the price of the shares. If these transactions
    are commenced, they may be discontinued without notice at any
    time.
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LEGAL
    MATTERS
The validity of the shares of common stock offered hereby and
    certain other legal matters will be passed upon for us by
    Morris, Manning & Martin, LLP, Atlanta, Georgia. The
    underwriters have been represented in connection with this
    offering by Choate, Hall & Stewart LLP.
EXPERTS
The financial statements of SciQuest, Inc. at December 31,
    2008 and 2009, and for each of the three years in the period
    ended December 31, 2009, appearing in this prospectus and
    registration statement have been audited by Ernst &
    Young LLP, independent registered public accounting firm, as set
    forth in their report thereon appearing elsewhere herein, and
    are included in reliance upon such report given on the authority
    of such firm as experts in accounting and auditing.
WHERE YOU
    CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1,
including exhibits, schedules and amendments filed with the
    registration statement, of which this prospectus is a part. This
    prospectus does not contain all of the information set forth in
    the registration statement and exhibits and schedules to the
    registration statement. The rules and regulations of the SEC
    allow us to omit from this prospectus certain information
    included in the registration statement. For further information
    with respect to our company and the shares of our common stock
    to be sold in this offering, we refer you to the registration
    statement, including the exhibits and schedules thereto.
    Statements contained in this prospectus as to the contents of
    any contract or other document referred to in this prospectus
    are not necessarily complete and, where that contract or other
    document has been filed as an exhibit to the registration
    statement, each statement in this prospectus is qualified in all
    respects by the exhibit to which the reference relates. Copies
    of the registration statement, including the exhibits and
    schedules to the registration statement, may be examined without
    charge at the public reference room of the SEC,
    100 F Street, N.E., Washington, DC 20549. You may
    obtain information about the operation of the public reference
    room by calling the SEC at
1-800-SEC-0330.
Copies of all or a portion of the registration statement can be
    obtained from the public reference room of the SEC upon payment
    of prescribed fees. Our SEC filings, including our registration
    statement, are also available to you, free of charge, on the
    SEC's website at
http://www.sec.gov.
As a result of this offering, we will become subject to the
    information and periodic reporting requirements of the Exchange
    Act and will file annual, periodic and current reports, proxy
    statements and other information with the SEC. These reports,
    proxy statements and other information will be available for
    inspection and copying at the SEC's public reference
    facilities and the website of the SEC referred to above.
REPORTS
    TO STOCKHOLDERS
Following this offering, we will file annual, periodic and
    special reports with the SEC as required by the SEC's rules
    and regulations. In addition, our annual proxy statement will be
    mailed to our stockholders accompanied or preceded by an annual
    report which meets the requirements of the SEC's rules and
    regulations no later than 120 days following the end of our
    fiscal year. Our periodic quarterly reports will be filed with
    the SEC within 45 days following the end of the quarter,
    unless a shorter period is required by the rules and regulations
    of the SEC. Our annual reports will contain financial statements
    audited by our independent registered public accounting firm.
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INDEX TO
    FINANCIAL STATEMENTS
SciQuest, Inc. — Financial Statements
Page
Report of Ernst & Young LLP,
    Independent Registered Public Accounting Firm
F-2
Balance Sheets as of December 31, 2008 and
    2009
F-3
Statements of Operations for the years ended
    December 31, 2007, 2008 and 2009
F-4
Statements of Stockholders' Deficit for the
    years ended December 31, 2007, 2008 and 2009
F-5
Statements of Cash Flows for the years ended
    December 31, 2007, 2008 and 2009
F-6
Notes to Financial Statements
F-7
F-1
Table of Contents
REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of SciQuest, Inc.
We have audited the accompanying balance sheets of SciQuest,
    Inc. as of December 31, 2008 and 2009, and the related
    statements of operations, stockholders' deficit, and cash
    flows for each of the three years in the period ended
    December 31, 2009. These financial statements are the
    responsibility of the Company's management. Our
    responsibility is to express an opinion on these financial
    statements based on our audits.
We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. We were not engaged to perform an
    audit of the Company's internal control over financial
    reporting. Our audits included consideration of internal control
    over financial reporting as a basis for designing audit
    procedures that are appropriate in the circumstances, but not
    for the purpose of expressing an opinion on the effectiveness of
    the Company's internal control over financial reporting.
    Accordingly, we express no such opinion. An audit includes
    examining, on a test basis, evidence supporting the amounts and
    disclosures in the financial statements. An audit also includes
    assessing the accounting principles used and significant
    estimates made by management, as well as evaluating the overall
    financial statement presentation. We believe that our audits
    provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
    present fairly, in all material respects, the financial position
    of SciQuest, Inc. at December 31, 2008 and 2009, and the
    results of its operations and its cash flows for each of the
    three years in the period ended December 31, 2009, in
    conformity with U.S. generally accepted accounting
    principles.
/s/  Ernst &
    Young LLP
Raleigh, North Carolina
March 25, 2010
F-2
Table of Contents
SCIQUEST,
    INC.
BALANCE
    SHEETS
As of December 31,
2008
2009
(In thousands except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
$
13,502
$
17,132
Restricted cash
350
350
Accounts receivable
3,506
4,846
Prepaid expenses and other current assets
874
834
Total current assets
18,232
23,162
Property and equipment, net
1,353
1,307
Goodwill
6,765
6,765
Intangible assets, net
1,743
1,340
Deferred project costs
4,786
5,148
Other
43
43
Total assets
$
32,922
$
37,765
Liabilities and Redeemable Preferred Stock
Current liabilities:
Accounts payable
$
301
$
46
Accrued liabilities
3,308
2,981
Line of credit
350
350
Deferred revenues
23,947
27,066
Total current liabilities
27,906
30,443
Deferred revenues, less current portion
7,643
7,209
Restructuring liability, less current portion
287
—
Redeemable preferred stock at redemption value, $0.001 par
    value; 500,000 shares authorized; 222,073 shares
    issued and outstanding
31,477
34,072
Commitments and contingencies
Stockholders' deficit
Common stock, $0.001 par value; 29,500,000 shares
    authorized;
28,352,041 and 28,684,596 shares issued and outstanding
28
29
Additional paid-in capital
—
—
Notes receivable from stockholders
(617
)
(769
)
Accumulated deficit
(33,802
)
(33,219
)
Total stockholders' deficit
(34,391
)
(33,959
)
Total liabilities, redeemable preferred stock, and
    stockholders' deficit
$
32,922
$
37,765
The accompanying notes are an integral part of the financial
    statements.
F-3
Table of Contents
SCIQUEST,
    INC.
STATEMENTS
    OF OPERATIONS
Years Ended December 31,
2007
2008
2009
(In thousands, except
per share amounts)
Revenues
$
20,107
$
29,784
$
36,179
Cost of revenues
6,101
6,723
7,494
Gross profit
14,006
23,061
28,685
Operating expenses:
Research and development
6,908
8,307
8,059
Sales and marketing
7,213
9,280
10,750
General and administrative
2,717
3,942
3,703
Litigation settlement and associated legal expenses
—
—
3,189
Amortization of intangible assets
2,286
537
403
Total operating expenses
19,124
22,066
26,104
Income (loss) from operations
(5,118
)
995
2,581
Other income (expense):
Interest income
209
200
37
Interest expense
(90
)
(22
)
(6
)
Other expense, net
(1
)
(65
)
(4
)
Total other income, net
118
113
27
Income (loss) before income taxes
(5,000
)
1,108
2,608
Income tax benefit
—
9
20
Net income (loss)
(5,000
)
1,117
2,628
Dividends on redeemable preferred stock
2,207
2,395
2,595
Net income (loss) attributable to common stockholders
$
(7,207
)
$
(1,278
)
$
33
Net income (loss) attributable to common stockholders per share:
Basic
$
(0.27
)
$
(0.05
)
$
0.00
Diluted
$
(0.27
)
$
(0.05
)
$
0.00
Weighted average shares outstanding used in computing per share
    amounts:
Basic
26,985
27,600
28,122
Diluted
26,985
27,600
28,900
The accompanying notes are an integral part of the financial
    statements.
F-4
Table of Contents
SCIQUEST,
    INC.
STATEMENTS
    OF STOCKHOLDERS' DEFICIT
Total
Common Stock
Additional Paid-In
Notes Receivable
Accumulated
Stockholders'
Shares
Amount
Capital
from Stockholders
Deficit
Deficit
(In thousands except share amounts)
Balance as of December 31, 2006
27,495,120
$
27
$
—
$
(50
)
$
(26,381
)
$
(26,404
)
Issuance of restricted stock
445,055
1
30
(31
)
—
—
Exercise of common stock options
23,296
—
1
—
—
1
Payments on notes receivable from stockholders
—
—
—
39
—
39
Stock-based compensation
—
—
110
—
—
110
Dividends accrued on redeemable preferred stock
—
—
(141
)
—
(2,066
)
(2,207
)
Net loss
—
—
—
—
(5,000
)
(5,000
)
Balance as of December 31, 2007
27,963,471
28
—
(42
)
(33,447
)
(33,461
)
Issuance of restricted stock
584,275
—
760
(724
)
—
36
Repurchase of restricted stock
(260,209
)
—
(229
)
130
—
(99
)
Exercise of common stock options
36,273
—
2
—
—
2
Payments on notes receivable from stockholders
—
—
—
19
—
19
Issuance of common stock
3,231
—
4
—
—
4
Stock-based compensation
25,000
—
386
—
—
386
Dividends accrued on redeemable preferred stock
—
—
(923
)
—
(1,472
)
(2,395
)
Net income
—
—
—
—
1,117
1,117
Balance as of December 31, 2008
28,352,041
28
—
(617
)
(33,802
)
(34,391
)
Issuance of restricted stock
318,053
1
195
(171
)
—
25
Repurchase of restricted stock
(15,604
)
—
(16
)
1
—
(15
)
Exercise of common stock options
30,106
—
6
—
—
6
Payments on notes receivable from stockholders
—
—
—
18
—
18
Stock-based compensation
—
—
365
—
—
365
Dividends accrued on redeemable preferred stock
—
—
(550
)
—
(2,045
)
(2,595
)
Net income
—
—
—
—
2,628
2,628
Balance as of December 31, 2009
28,684,596
$
29
$
—
$
(769
)
$
(33,219
)
$
(33,959
)
The accompanying notes are an integral part of the financial
    statements.
F-5
Table of Contents
SCIQUEST,
    INC.
STATEMENTS
    OF CASH FLOWS
Years Ended December 31,
2007
2008
2009
(In thousands)
Cash flows from operating activities
Net income (loss)
$
(5,000
)
$
1,117
$
2,628
Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:
Depreciation and amortization
2,909
1,285
1,214
Stock-based compensation expense
110
386
365
Loss (gain) from disposal of property and equipment
(1
)
—
140
Changes in operating assets and liabilities:
—
—
—
Accounts receivable
694
(285
)
(1,340
)
Prepaid expense and other current assets
(871
)
(117
)
40
Deferred project costs and other assets
(550
)
(833
)
(362
)
Accounts payable
95
(181
)
(255
)
Accrued liabilities and other
347
(257
)
(614
)
Deferred revenues
6,960
5,467
2,685
Net cash provided by operating activities
4,693
6,582
4,501
Cash flows from investing activities
Addition of capitalized software development costs
(362
)
(99
)
(220
)
Purchase of property and equipment
(695
)
(480
)
(685
)
Restricted cash
—
(350
)
—
Net cash used in investing activities
(1,057
)
(929
)
(905
)
Cash flows from financing activities
Issuance of common and restricted stock
—
40
25
Repurchases of restricted stock
—
(99
)
(15
)
Repayment of notes receivable from stockholders
39
19
18
Proceeds from exercise of common stock options
1
2
6
Issuance of preferred stock
—
96
—
Repayment of notes payable
(1,103
)
—
—
Net cash provided by (used in) financing activities
(1,063
)
58
34
Net increase in cash and cash equivalents
2,573
5,711
3,630
Cash and cash equivalents at beginning of year
5,218
7,791
13,502
Cash and cash equivalents at end of year
$
7,791
$
13,502
$
17,132
Supplemental disclosure of cash flow information
Cash paid for interest
$
88
$
22
$
6
Supplemental disclosure of non-cash flow information
Dividends on redeemable preferred stock
$
2,207
$
2,395
$
2,595
The accompanying notes are an integral part of the financial
    statements.
F-6
Table of Contents
SCIQUEST,
    INC.
NOTES
    TO FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
1.
Description
    of Business
SciQuest, Inc. (the Company) provides an on-demand strategic
    procurement and supplier enablement solution that integrates
    customers with their suppliers to improve procurement of
    indirect goods and services, such as office supplies, laboratory
    supplies, furniture, MRO (maintenance, repair and operations)
    supplies, and food and beverages. The Company's on-demand
    software enables organizations to more efficiently source
    indirect goods and services, manage their spend, and obtain the
    benefits of compliance with purchasing policies and negotiating
    power with suppliers. The Company's on-demand strategic
    procurement software suite coupled with its managed supplier
    network forms the Company's integrated solution, which is
    designed to achieve rapid and sustainable savings. The
    Company's solution is designed to optimize tasks throughout
    the cycle of finding, procuring, receiving and paying for
    indirect goods and services, which can result in increased
    efficiency, reduced costs and increased insight into an
    organization's buying patterns. The Company's current
    target markets are higher education, life sciences, healthcare
    and state and local governments.
On April 10, 2004, the Company entered into a definitive
    agreement to be acquired in connection with a going private
    transaction led by Trinity Ventures. After approval by the
    stockholders on July 15, 2004, the acquisition was
    completed on July 28, 2004. As part of this transaction,
    the Company's outstanding publicly-traded common stock was
    repurchased, converting SciQuest into a privately-held company.
    The Company recorded this acquisition using the purchase method
    of accounting.
2.
Summary
    of Significant Accounting Policies
Basis of
    presentation
The financial statements of the Company have been prepared in
    accordance with accounting principles generally accepted in the
    United States.
Use of
    Estimates
The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States
    (GAAP) requires management to make estimates and assumptions
    that affect the reported amounts of assets and liabilities at
    the date of the financial statements and the reported amounts of
    revenues and expenses during the reporting period. Actual
    results could differ materially from those estimates.
Revenue
    Recognition
The Company primarily derives its revenues from subscription
    fees for its on-demand strategic procurement and supplier
    enablement software solution and associated implementation
    services. Revenue is generated from subscription agreements and
    related services permitting customers to access and utilize the
    Company's hosted software. Customers may on occasion also
    purchase a perpetual license for certain software modules.
    Revenue is recognized when there is persuasive evidence of an
    agreement, the service has been provided or delivered to the
    customer, the collection of the fee is probable and the amount
    of the fee to be paid by the customer is fixed or determinable.
The Company's contractual agreements generally contain
    multiple service elements and deliverables. These elements
    include access to the hosted software, implementation services
    and, on a limited basis, perpetual licenses for certain software
    modules and related maintenance and support. Subscription
    agreements do not provide customers the right to take possession
    of the hosted software at any time, with the exception of a
    triggering event in source code escrow arrangements. In applying
    the multiple element revenue recognition guidance, the Company
    determined that it does not have objective and reliable evidence
    of the fair value of the subscription agreement and related
    services. The Company therefore accounts for fees received under
    multiple element agreements as a single
F-7
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2.
Summary
    of Significant Accounting Policies (continued)
unit of accounting and recognizes the agreement consideration
    ratably over the term of the subscription agreement, which is
    generally three to five years. The term of the subscription
    agreement commences on the start date specified in the
    subscription agreement, which is the date access to the software
    is provided to the customer, provided all other revenue
    recognition criteria have been met. Fees for professional
    services that are contingent upon future performance are
    recognized ratably over the remaining subscription term once the
    performance milestones have been met. The Company recognizes
    revenue from any professional services that are sold separately
    as the services are performed.
Deferred revenue primarily consists of billings or payments
    received in advance of revenue recognition from the
    Company's software and services described above. For
    multiple year subscription agreements, the Company generally
    invoices its customers in annual installments. Accordingly, the
    deferred revenue balance does not represent the total contract
    value of these multi-year subscription agreements. The
    Company's services, such as implementation, are generally
    sold in conjunction with subscription agreements. These services
    are recognized ratably over the remaining term of the
    subscription agreement once any contingent performance
    milestones have been satisfied. The portion of deferred revenue
    that the Company anticipates will be recognized after the
    succeeding
12-month
period is recorded as non-current deferred revenue and the
    remaining portion is recorded as current deferred revenue.
Cost of
    Revenues
Cost of revenues primarily consists of costs related to hosting
    the Company's subscription software services, compensation
    and related expenses for implementation services, supplier
    enablement services, customer support staff and client partners,
    amortization of capitalized software development costs, and
    allocated fixed asset depreciation and facilities costs. Cost of
    revenues is expensed as incurred.
Deferred
    Project Costs
The Company capitalizes sales commission costs that are directly
    related to the execution of its subscription agreements. The
    commissions are deferred and amortized over the contractual term
    of the related subscription agreement. The deferred commission
    amounts are recoverable from the future revenue streams under
    the subscription agreements. The Company believes this is the
    appropriate method of accounting, as the commission costs are so
    closely related to the revenues from the subscription agreements
    that they should be recorded as an asset and charged to expense
    over the same period that the subscription revenues are
    recognized. Amortization of deferred commissions is included in
    sales and marketing expense in the accompanying statements of
    operations. The deferred commissions are reflected within
    deferred project costs in the accompanying balance sheets.
Concentrations
As of December 31, 2009, three customers comprised 17%, 12%
    and 12%, respectively, of the accounts receivable balance. As of
    December 31, 2008, two customers comprised 14% and 12%,
    respectively, and three customers each comprised 10%, of the
    accounts receivable balance. During each of the years ended
    December 31, 2007, 2008 and 2009, no individual customer
    comprised more than 10% of the Company's revenues. During
    each of the years ended December 31, 2007, 2008 and 2009,
    approximately 93% of the Company's revenues were from sales
    transactions originating in the United States.
F-8
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2.
Summary
    of Significant Accounting Policies (continued)
Cash and
    Cash Equivalents
The Company considers all highly liquid debt investments with an
    original maturity of three months or less at the date of
    purchase to be cash equivalents. The Company maintains cash
    balances at financial institutions that may at times exceed
    federally insured limits. The Company maintains this cash at
    high credit quality institutions and, as a result, believes
    credit risk related to its cash is minimal. In accordance with
    the Company's outstanding credit arrangement, the Company
    maintains restricted cash in an amount equal to its outstanding
    line of credit. As of December 31, 2008 and 2009,
    restricted cash totaled $350.
Accounts
    Receivable
The Company assesses the need for an allowance for doubtful
    accounts based on estimates of probable credit losses. This
    assessment is based on several factors including aging of
    customer accounts, known customer specific risks, historical
    experience and existing economic conditions. The Company
    generally does not require collateral for receivable balances.
    Accounts would be charged against the allowance after all means
    of collection were exhausted and recovery was considered remote.
    Any required provisions for doubtful accounts would be recorded
    in general and administrative expense. Based on
    management's analysis of its outstanding accounts
    receivable, the Company concluded no allowance was necessary at
    December 31, 2008 and 2009.
Property
    and Equipment
Property and equipment are recorded at cost and depreciated
    using the straight-line method over their estimated useful lives
    which are usually seven years for furniture and three to five
    years for computer software and equipment. Historically,
    property and equipment have included certain equipment under
    capital leases. These items are depreciated over the shorter of
    the lease period or the estimated useful life of the equipment.
    Leasehold improvements are amortized over the shorter of the
    estimated useful lives of the assets or the expected term of the
    leases. Costs for repairs and maintenance are expensed as
    incurred. Upon retirement or sale, the cost of the disposed
    assets and the related accumulated depreciation are removed from
    the accounts, and any resulting gain or loss is credited or
    charged to operations.
Software
    Development Costs
The Company incurs certain costs associated with the development
    of its on-demand solution, which are accounted for as
    internal-use software. Certain qualifying costs incurred during
    the application development phase are capitalized and amortized
    to expense over the estimated useful life of the related
    applications, which is generally three years.
Costs incurred in connection with the development of the
    Company's licensed software products are accounted for as
    costs of software to be sold, leased or otherwise marketed.
    Capitalization of software development costs begins upon the
    establishment of technological feasibility (based on a working
    model approach), subject to net realizable value considerations.
    To date, the period between achieving technological feasibility
    and the general availability of such software has substantially
    coincided; therefore, software development costs qualifying for
    capitalization have been immaterial. Accordingly, the Company
    has not capitalized any software development costs related to
    its licensed software products and has charged all such costs to
    research and development expense.
Goodwill
Goodwill represents the excess of the cost of an acquired entity
    over the net fair value of the identifiable assets acquired and
    liabilities assumed. The Company reviews the carrying value of
    goodwill at least annually to assess impairment since it is not
    amortized. Additionally, the Company would also review the
    carrying value of goodwill
F-9
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2.
Summary
    of Significant Accounting Policies (continued)
whenever events or changes in circumstances indicated that its
    carrying amount may not be recoverable. The Company has
    concluded that it has one reporting unit for purposes of its
    annual goodwill impairment testing. To assess goodwill
    impairment, the first step is to identify if a potential
    impairment exists by comparing the fair value of a reporting
    unit with its carrying amount, including goodwill. If the fair
    value of a reporting unit exceeds its carrying amount, goodwill
    of the reporting unit is not considered to have a potential
    impairment and the second step of the impairment test is not
    necessary. The Company performed its annual assessment on
    December 31, 2009. The estimated fair value of the
    Company's reporting unit exceeded its carrying amount,
    including goodwill, and as such, no potential goodwill
    impairment was recorded.
Long-Lived
    Assets
The Company evaluates the recoverability of its property and
    equipment and other long-lived assets, including acquired
    technology and customer relationships, when events change or
    circumstances indicate the carrying amount may not be
    recoverable. If such events or changes in circumstances are
    present, the undiscounted cash flow method is used to determine
    whether the asset is impaired. An impairment loss is recognized
    when, and to the extent, the net book value of such assets
    exceeds the estimated future undiscounted cash flows
    attributable to the assets or the business to which the assets
    relate. Cash flows would include the estimated terminal value of
    the asset and exclude any interest charges. The discount rate
    utilized would be based on the Company's best estimate of
    the related risks and return at the time the impairment
    assessment is made. As discussed in Note 3, the Company
    recorded an impairment charge for leasehold improvements of $140
    during 2009 in connection with a lease renegotiation. There were
    no other impairments of its long-lived assets during the years
    ended December 31, 2007, 2008 and 2009.
Investment
As of December 31, 2008 and 2009, the Company had
    outstanding warrants to purchase a 15% equity interest in an
    unaffiliated private company for an aggregate consideration of
    one cent at any time until December 31, 2024. Due to the
    lack of quoted prices from an active market for these or similar
    equity instruments of the investee, the Company carries this
    investment at its cost basis of zero in the accompanying balance
    sheets.
Sales and
    Marketing Expenses
Sales and marketing expenses consist primarily of costs,
    including salaries and sales commissions, of all personnel
    involved in the sales process. Sales and marketing expenses also
    include costs of advertising, trade shows, certain indirect
    costs, and allocated fixed asset depreciation and facilities
    costs. Advertising costs are expensed as incurred. Advertising
    expense totaled approximately $486, $524 and $433 for the years
    ended December 31, 2007, 2008 and 2009, respectively.
Stock-Based
    Compensation
As of January 1, 2006, the Company adopted new accounting
    guidance using the prospective application method, which
    requires that all stock-based payments to employees, including
    grants of employee stock options, are recognized in the income
    statement based on their fair values. Stock-based compensation
    cost is measured at the grant date based on the fair value of
    the award and is recognized as expense on a straight-line basis
    over the requisite service period, which is the vesting period.
Stock-based compensation costs are based on the fair value of
    the underlying option calculated using the
Black-Scholes
option-pricing model on the date of grant for stock options.
    Determining the appropriate fair value model and related
    assumptions requires judgment, including estimating stock price
    volatility, forfeiture rates, and expected term. The expected
    volatility rates are estimated based on the actual volatility of
    comparable public
F-10
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2.
Summary
    of Significant Accounting Policies (continued)
companies over the expected term. The expected term for the
    years ended December 31, 2007, 2008 and 2009 represents the
    average time that options that vest are expected to be
    outstanding based on the mid-point between the vesting date and
    the end of the contractual term of the award. The Company has
    not paid dividends and does not anticipate paying a cash
    dividend in the foreseeable future and, accordingly, uses an
    expected dividend yield of zero. The risk-free interest rate is
    based on the rate of U.S. Treasury securities with
    maturities consistent with the estimated expected term of the
    awards.
Earnings
    Per Share
Basic net income (loss) per share is computed by dividing net
    income (loss) attributable to common stockholders by the
    weighted-average number of shares of common stock outstanding
    for the period. Outstanding unvested restricted stock purchased
    by employees is subject to repurchase by the Company and
    therefore is not included in the calculation of the
    weighted-average shares outstanding until vested. Diluted net
    income (loss) per share is computed giving effect to all
    potentially dilutive common stock, including options and
    restricted stock. The dilutive effect of outstanding awards is
    reflected in diluted earnings per share by application of the
    treasury stock method.
The following summarizes the calculation of basic and diluted
    net income (loss) attributable to common stockholders per share:
Year Ended December 31,
2007
2008
2009
Basic:
Net income (loss)
$
(5,000
)
$
1,117
$
2,628
Less: Dividends on redeemable preferred stock
2,207
2,395
2,595
Net income (loss) attributable to common stockholders
$
(7,207
)
$
(1,278
)
$
33
Weighted average common shares, basic
26,984,942
27,599,536
25,248,493
Basic net income (loss) attributable to common stockholders per
    share
$
(0.27
)
$
(0.05
)
$
0.00
Diluted:
Net income (loss) attributable to common stockholders
$
(7,207
)
$
(1,278
)
$
33
Weighted average common shares, basic
26,984,942
27,599,536
28,122,014
Dilutive effect of:
Options to purchase common stock
—
—
345,325
Warrants to purchase common stock
—
—
426,109
Nonvested shares of restricted stock
—
—
6,863
Weighted average common shares — Diluted
26,984,942
27,599,536
28,900,311
Diluted net income (loss) attributable to common stockholders
    per share
$
(0.27
)
$
(0.05
)
$
0.00
F-11
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2.
Summary
    of Significant Accounting Policies (continued)
The treasury effect of the following equity instruments has been
    excluded from diluted net income (loss) per common share as
    their effect would be anti-dilutive:
Year Ended December 31,
2007
2008
2009
Unvested restricted stock
680,718
456,174
78,383
Common stock options
466,829
593,765
10,250
Common stock warrants
443,361
443,361
—
Total
1,590,908
1,493,300
88,633
Segment
    Data
The Company manages its operations on a consolidated basis for
    purposes of assessing performance and making operating
    decisions. Accordingly, the Company has determined that it has a
    single reporting segment.
Fair
    Value of Financial Instruments
Effective January 1, 2008, the Company adopted new
    accounting guidance that clarifies the definition of fair value,
    prescribes methods for measuring fair value, establishes a fair
    value hierarchy based on the inputs used to measure fair value
    and expands disclosures about fair value measurements. Inputs
    used in the valuation techniques to derive fair values are
    classified based on a three-level hierarchy, as follows:
Level 1:
Quoted prices (unadjusted) in active markets that are accessible
    at the measurement date for assets or liabilities. The fair
    value hierarchy gives the highest priority to Level 1 inputs.
Level 2:
Observable prices that are based on inputs not quoted on active
    markets, but corroborated by market data.
Level 3:
Unobservable inputs are used when little or no market data is
    available. The fair value hierarchy gives the lowest priority to
    Level 3 inputs.
Observable inputs are based on market data obtained from
    independent sources. As of December 31, 2008 and 2009, the
    Company had cash equivalents of $9,013 and $16,776,
    respectively, which consist of money market accounts. These cash
    equivalents are classified within Level 1 of the fair value
    hierarchy since they are valued using quoted market prices. As
    of December 31, 2008 and 2009, the Company did not have any
    financial assets or liabilities without observable market values
    that would require a high level of judgment to determine fair
    value (Level 3).
Income
    Taxes
Deferred income taxes are provided using tax rates enacted for
    periods of expected reversal on all temporary differences.
    Temporary differences relate to differences between the book and
    tax basis of assets and liabilities, principally intangible
    assets, property and equipment, deferred subscription revenues,
    pension assets, accruals, and stock-based compensation.
    Valuation allowances are established to reduce deferred tax
    assets to the amount that will more likely than not be realized.
    To the extent that a determination is made to establish or
    adjust a valuation allowance, the expense or benefit is recorded
    in the period in which the determination is made.
Judgment is required in determining the provision for income
    taxes. Additionally, the income tax provision is based on
    calculations and assumptions that are subject to examination by
    many different tax authorities and to changes in tax law and
    rates in many jurisdictions. The Company would adjust its income
    tax provision in the period in which it becomes probable that
    actual results differ from management estimates.
F-12
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2.
Summary
    of Significant Accounting Policies (continued)
On January 1, 2007, the Company adopted new guidance which
    prescribed a recognition threshold and measurement attribute for
    the financial statement recognition and measurement of a tax
    position taken or expected to be taken in a tax return. This
    guidance also provides guidance on derecognition,
    classification, interest and penalties, accounting in interim
    periods, disclosure and transition. The Company's policy is
    to recognize interest and penalties accrued on any unrecognized
    tax positions as a component of income tax expense. The
    Company's adoption of this new guidance did not have a
    material effect on its financial position or results of
    operations. The Company does not believe there will be any
    material changes in its unrecognized tax positions over the next
    twelve months. As of the date of adoption of this guidance, the
    Company did not have any accrued interest or penalties
    associated with any unrecognized tax positions, and there were
    no such interest or penalties recognized during the year ended
    December 31, 2009.
New
    Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB)
    issued The FASB Accounting Standards Codification
    (Codification), which is the single source of authoritative GAAP
    recognized by the FASB to be applied by nongovernmental
    entities. Rules and interpretive releases of the Securities and
    Exchange Commission (SEC) under authority of federal securities
    laws are also sources of authoritative GAAP for SEC registrants.
    The Codification supersedes all non-SEC accounting and reporting
    standards. All other non-grandfathered non-SEC accounting
    literature not included in the Codification is
    non-authoritative. The Codification is effective for financial
    statements issued for interim and annual periods ending after
    September 15, 2009. The Codification did not change or
    alter existing GAAP and therefore, did not have an impact on the
    Company's balance sheets, statements of operations and cash
    flows.
In October 2009, the FASB's Emerging Issues Task Force
    revised its guidance on revenue recognition for
    multiple-deliverable revenue arrangements. The amendments in
    this update will, in certain circumstances, enable companies to
    separately account for multiple revenue-generating activities
    (deliverables) that they perform for their customers. Existing
    U.S. GAAP requires a company to use vendor-specific
    objective evidence (VSOE) or
third-party
evidence of selling price to separate deliverables in a
    multiple-deliverable arrangement. The update will allow the use
    of an estimated selling price if neither VSOE nor third-party
    evidence is available. The update will require additional
    disclosures of information about an entity's
    multiple-deliverable arrangements. The requirements of the
    update may be applied prospectively for revenue arrangements
    entered into or materially modified in fiscal years beginning on
    or after June 15, 2010, although early adoption is
    permitted. The Company is currently evaluating the impact of the
    update on its financial position and results of operations and
    does not plan to early or retroactively adopt the new guidance.
3.
Property
    and Equipment
Property and equipment consist of the following as of
    December 31, 2008 and 2009:
2008
2009
Furniture and equipment
$
505
$
579
Computer software and equipment
3,016
3,483
Leasehold improvements
487
231
Total costs
4,008
4,293
Less accumulated depreciation and amortization
(2,655
)
(2,986
)
Property and equipment, net
$
1,353
$
1,307
F-13
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
3.
Property
    and Equipment (continued)
Depreciation expense related to property and equipment
    (excluding capitalized internal-use software) for the years
    ended December 31, 2007, 2008 and 2009 was $509, $594 and
    $644, respectively. The Company disposed of fully-depreciated
    computer software and equipment with a cost of $231 during the
    year ended December 31, 2009.
During 2009, the Company renegotiated a lease, which reduced the
    total leased office space at that property. Accordingly, the
    Company wrote-off leasehold improvements with an original cost
    of $389 and accumulated amortization of $249. The Company
    recognized a loss in the accompanying statements of operations
    of $140 during the year ended December 31, 2009 related to
    the disposal of these leasehold improvements.
Computer software and equipment includes capitalized software
    development costs incurred during development of the
    Company's on-demand solution. The Company capitalized
    software development costs of $362, $99 and $220 during the
    years ended December 31, 2007, 2008 and 2009, respectively.
    Net capitalized software development costs totaled $280 and $333
    as of December 31, 2008 and 2009, respectively.
    Amortization expense for the years ended December 31, 2007,
    2008 and 2009 related to capitalized software development costs
    was $114, $154 and $167, respectively, which is classified
    within cost of revenues in the accompanying statements of
    operations.
4.
Goodwill
    and Other Intangible Assets
The Company acquired goodwill and certain identifiable
    intangible assets as part of the going private transaction in
    July 2004. A summary of intangible assets as of
    December 31, 2008 and 2009 follows:
2008
2009
Gross Carrying
Accumulated
Net Carrying
Gross Carrying
Accumulated
Net Carrying
Amount
Amortization
Amount
Amount
Amortization
Amount
Goodwill
$
6,765
$
—
$
6,765
$
6,765
$
—
$
6,765
Acquired technology
8,100
(8,100
)
—
8,100
(8,100
)
—
Customer relationships
5,200
(3,887
)
1,313
5,200
(4,290
)
910
Trademarks
430
—
430
430
—
430
Total
$
20,495
$
(11,987
)
$
8,508
$
20,495
$
(12,390
)
$
8,105
Acquired technology was amortized to expense on a straight-line
    basis over the estimated useful life of three years. Related
    amortization expense for the year ended December 31, 2007
    was $1,575 and was included in amortization of intangible assets
    in the accompanying statement of operations for the year ended
    December 31, 2007. This asset was fully amortized as of
    December 31, 2007.
The customer relationships asset is being amortized over a
    ten-year estimated life in a pattern consistent with which the
    economic benefit is expected to be realized. Related
    amortization expense was $711, $537 and $403 for the years ended
    December 31, 2007, 2008 and 2009, respectively.
F-14
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
4.
Goodwill
    and Other Intangible Assets (continued)
The Company estimates the following amortization expense related
    to its customer relationships for the years ended December 31:
2010
$
301
2011
225
2012
167
2013
125
2014
92
$
910
5.
Accrued
    Liabilities
Current accrued liabilities are comprised of the following as of
    December 31, 2008 and 2009:
2008
2009
Accrued compensation
$
2,313
$
2,321
Accrued consulting and professional services
271
96
Accrued restructuring charges, current
262
—
Accrued rent
226
239
Other
236
325
Total
$
3,308
$
2,981
In years prior to 2007, the Company restructured certain
    operations to eliminate excess leased office space and to reduce
    the workforce. As of December 31, 2008, the remaining total
    liability of $549 ($262 current and $287 non-current) reflected
    lease commitments for unused office space. During the year ended
    December 31, 2009, the Company renegotiated the operating
    lease for which the reserve was originally established and
    reduced the total leased office space. As a result, the
    restructuring reserve for unused office space was no longer
    necessary and was reduced to $0 at the time the renegotiation
    was finalized.
The following summarizes the restructuring liability for the
    years ended December 31, 2008 and 2009:
Restructuring Liability
Balance as of December 31, 2007
$
891
Payments
(333
)
Change in estimate
(83
)
Accretion
74
Balance as of December 31, 2008
549
Payments
(296
)
Decrease in liability due to lease termination
(287
)
Accretion
34
Balance as of December 31, 2009
$
—
F-15
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
5.
Accrued
    Liabilities (continued)
6.
Debt
On October 30, 2008, the Company entered into a credit
    agreement with a bank which provides for borrowings of up to
    $2,500, of which $350 is outstanding as of December 31,
    2009. Interest accrues on the unpaid principal balance at the
    LIBOR Market Index Rate plus 1.5%. As of December 31, 2009,
    the interest rate was 1.7%. In accordance with the terms of the
    agreement, the Company maintains a restricted cash balance in
    the amount equal to the outstanding credit balance.
On July 29, 2004, the Company entered into a senior
    revolving credit facility with an availability of $2,500 which
    was renewable annually. During 2008, this line of credit was
    fully repaid by the Company and closed. In conjunction with this
    facility, a warrant was issued to purchase 52,160 shares of
    the Company's common stock at a price of $0.04 per share,
    which expires on July 29, 2011 (see Note 8).
7.
Redeemable
    Preferred Stock
Redeemable
    Preferred Stock
Authorized Shares —
The Company is authorized
    to issue up to 500,000 shares of $0.001 par value
    redeemable preferred stock.
Issuance of Stock
— As of December 31,
    2008 and 2009, the Company had outstanding 222,073 shares
    of $0.001 par value redeemable preferred stock. All of the
    shares were issued at a price of $100 per share.
Rank
— The Board of Directors is empowered to
    authorize classes of preferred stock and their related rights
    and preferences. The preferred stock ranks senior to all common
    stock with respect to dividend rights and rights on liquidation
    or dissolution.
Dividends
— Holders of redeemable preferred
    stock shall be entitled to receive, when, as and if declared by
    the Board of Directors, dividends at the rate per share of 8% of
    the accreted value per annum, calculated on a fiscal quarter
    basis at a rate of 2%. The accreted value is defined as $100 per
    share plus the cumulative calculated dividends resulting in a
    quarterly compounding effect on previously accrued dividends.
    The accreted value of the redeemable preferred stock dividends
    is recorded on a quarterly basis as an increase to the preferred
    stock value and a decrease to additional paid-in capital. Due to
    the absence of retained earnings, in circumstances where the
    additional paid-in capital balance is reduced to zero, remaining
    accretion amounts are applied to accumulated deficit. As of
    December 31, 2009, cumulative accrued dividends on the
    Company's redeemable preferred stock totaled $11,864.
Liquidation
— Upon any liquidation (including a
    merger event), the holders of redeemable preferred stock shall
    be entitled to receive for each outstanding share an amount in
    cash equal to the accreted value, including calculated and
    unpaid cumulative dividends. Beyond the accreted value, the
    holders of redeemable preferred stock are not entitled to any
    distribution in liquidation or dissolution. If insufficient
    legally available funds were not available for distribution, the
    payments would be distributed ratably among the holders of the
    redeemable preferred stock.
Redemption
— The redeemable preferred shares
    are only redeemable at the option of the Company at a price
    equal to the issuance price plus cumulative preferred dividends.
    No portion of the redeemable preferred stock may be redeemed
    unless the full cumulative dividends (whether or not declared)
    on all outstanding shares of redeemable preferred stock shall
    have been paid or contemporaneously are declared and paid or set
    apart for payment for all dividend periods terminating on or
    prior to the applicable redemption date, unless the redemption
    of the shares are being calculated on a pro rata basis due to
    the insufficiency of legally available funds.
F-16
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
7.
Redeemable
    Preferred Stock (continued)
Voting
— Holders of shares of redeemable
    preferred stock are not entitled to any voting rights, except in
    actions proposed by the Company that would adversely affect the
    preferences, rights or powers of the redeemable preferred stock
    including the creation of classes of stock with superior rights
    to the preferred and the payment of a dividend or distribution
    on or redemption of shares of equal or fewer rights or powers,
    i.e., other preferred or common classes of stock.
The following summarizes preferred stock carrying amount and
    activity for the years ended December 31, 2008 and 2009:
Number of
Redeemable
Redeemable Preferred
Preferred Shares
Stock
Outstanding
Balance as of December 31, 2007
$
28,986
221,115
Issuance of preferred stock
96
958
Dividends accrued on redeemable preferred stock
2,395
—
Balance as of December 31, 2008
31,477
222,073
Issuance of preferred stock
—
—
Dividends accrued on redeemable preferred stock
2,595
—
Balance as of December 31, 2009
$
34,072
222,073
8.
Stockholders'
    Deficit
Stock
    Incentive Plan
On August 27, 2004, the Company adopted a stock incentive
    plan (the Plan) which allowed the Company to grant up to
    4,307,815 common stock options, stock appreciation rights
    (SARs) and restricted stock awards to employees, board members
    and others who contribute materially to the success of the
    Company. In February 2007, the Company increased the number of
    shares of common stock reserved for issuance under the Plan by
    500,000 to an aggregate of 4,807,815 shares. In February
    2008, the Company increased the number of shares of common stock
    reserved for issuance under the Plan by 1,807,657 to an
    aggregate of 6,615,472 shares. The Company's Board of
    Directors approves the terms of stock options granted.
    Individual option grants generally become exercisable ratably
    over a period of four years from the grant date. The contractual
    term of the options is approximately ten years from the date of
    grant.
The Company recognizes compensation expense associated with
    restricted stock and common stock options based on the
    grant-date fair value of the award on a straight-line basis over
    the requisite service period of the individual grantees, which
    generally equals the vesting period.
Restricted
    Stock
As part of the Plan, the Company has issued restricted shares of
    its common stock to certain employees. Upon employee
    termination, the Company has the option to repurchase the
    shares. The repurchase price is the original purchase price plus
    interest for unvested restricted shares and the current fair
    value (as determined by the Board of Directors) for vested
    restricted shares. The shares generally vest ratably over two to
    four years. As of December 31, 2009, there were
    4,496,492 shares of vested and unvested restricted stock
    outstanding.
F-17
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
8.
Stockholders'
    Deficit (continued)
The following summarizes the activity of nonvested shares of
    restricted stock for the year ended December 31, 2009:
Weighted-
Average Grant
Number of Shares
Date Fair Value
Nonvested as of December 31, 2008
456,174
$
0.51
Issued
318,053
0.85
Vested
(419,438
)
0.52
Repurchased
(793
)
0.47
Nonvested as of December 31, 2009
353,996
$
0.81
The total unrecognized compensation cost related to nonvested
    shares of restricted stock is approximately $287 at
    December 31, 2009. This amount is expected to be recognized
    over a weighted-average period of 2.7 years.
In conjunction with the issuance of these restricted shares,
    subscription note agreements were executed for certain
    employees. The notes are payable in four annual payments due
    January 1 of each calendar year and bear interest at 6%. As of
    December 31, 2008 and 2009, the balance outstanding for
    these subscription note agreements was $617 and $769,
    respectively. Although the outstanding balance was not modified,
    the payment terms for all outstanding notes receivable issued
    during the year ended December 31, 2008 were amended during
    January 2009 such that the notes become due at the earlier of a
    change in control, as defined by the Plan, or five years from
    the modification date. The outstanding notes receivable as of
    December 31, 2008 and 2009 are considered a separate
    component of additional
paid-in-capital.
Due to the absence of sufficient additional
paid-in-capital,
such amounts are presented separately in the accompanying
    balance sheets.
The Company accounts for restricted shares granted prior to the
    adoption of the fair value method as variable awards, and
    accordingly, remeasures the compensation expense for the
    unvested shares each period as of the balance sheet date, based
    on changes in the fair value of these awards. The Company
    recognized stock-based compensation of $91, $83 and $11 during
    the years ended December 31, 2007, 2008 and 2009,
    respectively, related to such awards.
Restricted stock awards granted after December 31, 2005 are
    recognized in the income statement based on their fair values.
    As a result of the notes receivable being deemed nonrecourse for
    accounting purposes and other contractual provisions in the
    agreements, the related restricted stock grants are considered
    stock options for accounting purposes. Stock-based compensation
    expense of $13, $147 and $214 was recorded during the years
    ended December 31, 2007, 2008 and 2009, respectively, in
    connection with these restricted stock awards.
During 2009, the Company repurchased 15,604 shares of
    vested and unvested restricted stock for $15 in connection with
    the termination of one employee. During 2008, the Company
    repurchased 260 shares of vested and unvested restricted
    stock for $99 in connection with the termination of two
    employees, and recognized additional stock-based compensation
    expense of $60 related to these repurchased shares.
F-18
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
8.
Stockholders'
    Deficit (continued)
Stock
    Options
The Company also issues common stock options under the terms of
    the Plan. The following summarizes stock option activity for the
    years ended December 31, 2009:
Weighted-
Aggregate
Average
Intrinsic Value
Weighted-
Remaining
as of
Number of Options
Range of Exercise
Average
Contractual
December 31,
Outstanding
Prices
Exercise Price
Term (In Years)
2009
Balance as of December 31, 2008
593,765
$
0.04-$1.58
$
0.49
Options granted
559,724
$
0.95-$1.02
$
1.02
Options exercised
(30,106
)
$
0.04-$1.02
$
0.19
Options canceled
(236,159
)
$
0.05-$1.58
$
1.24
Balance as of December 31, 2009
887,224
$
0.04-$1.58
$
0.63
7.5
$
443
Vested and expected to vest at December 31, 2009
807,128
$
0.04-$1.58
$
0.60
7.3
$
426
Exercisable as of December 31, 2009
488,778
$
0.04-$1.58
$
0.40
6.5
$
359
In March 2009, the Company approved a common stock option
    re-pricing program whereby 175,625 of the Company's
    outstanding stock option awards granted during the year ended
    December 31, 2008 were repriced. Under this program,
    qualifying options with an original exercise price, ranging from
    $1.30 to $1.58 per share, were cancelled and reissued with an
    exercise price equal to the then-current estimated fair value of
    the Company's common stock, $1.02 per share. The
    incremental fair value resulting from the modification of
    unvested awards is being recognized as expense on a
    straight-line basis over the remaining requisite service period,
    which is the vesting period. The incremental fair value
    resulting from the modification of the vested awards was
    recognized as expense at the modification date. The incremental
    compensation expense of approximately $4 recognized in
    connection with this stock option modification was not material
    to the Company's financial statements. The modified options
    are included as cancellations and grants in the above table for
    the year ended December 31, 2009.
The aggregate intrinsic value in the table above represents the
    difference between the exercise price of the underlying awards
    and the estimated fair value of the Company's common stock
    at December 31, 2009 multiplied by the number of shares
    that would have been received by the option holders had all
    option holders exercised their options on December 31,
    2009. The aggregate intrinsic value of options exercised during
    the years ended December 31, 2007, 2008 and 2009 was $1,
    $47 and $24, respectively.
The total unrecognized compensation cost related to outstanding
    stock options is $326 at December 31, 2009. These amounts
    are expected to be recognized over a weighted-average period of
    2.6 years.
F-19
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
8.
Stockholders'
    Deficit (continued)
The following table summarizes information about stock options
    outstanding and exercisable at December 31, 2009:
Options Outstanding
Options Exercisable
Weighted-Average
Remaining
Weighted-
Weighted-
Range of
Contractual Life
Average
Average
Exercise Price
Number
(Yrs.)
Exercise Price
Number
Exercise Price
$0.04 — $0.07
355,360
5.7
$
0.05
314,547
$
0.05
$0.95 — $1.02
521,614
8.7
1.02
169,196
1.02
$1.30 — $1.58
10,250
8.2
1.38
5,035
1.36
Total
887,224
7.5
$
0.63
488,778
$
0.40
The fair value of common stock options for employees and
    non-employees is estimated on the date of grant using the
    Black-Scholes option-pricing model with the following
    assumptions used:
2008
2009
Estimated dividend yield
0
%
0
%
Expected stock price volatility
100.0
%
100.0
%
Weighted-average risk-free interest rate
2.6% — 3.6
%
1.9% — 2.8
%
Expected life of options (in years)
6.25
6.25
Stock-based compensation expense of $6, $56 and $140 was
    recorded during the years ended December 31, 2007, 2008 and
    2009, respectively, related to the Company's outstanding
    stock options. The weighted average grant date fair value per
    share for stock options granted in 2007, 2008 and 2009 was
    $0.26, $1.12, and $0.91, respectively. The fair value of options
    that vested during the years ended December 31, 2007, 2008
    and 2009 was $2, $53 and $196, respectively.
During the year ended December 31, 2008, the Company issued
    25,000 shares of unrestricted common stock as employee
    compensation and recognized the estimated fair value of $40 as
    stock-based compensation expense during the period.
Warrants
As of December 31, 2008 and 2009, the Company had warrants
    outstanding representing 443,361 shares of common stock,
    with all of the warrants being exercisable as of
    December 31, 2008 and 2009, to purchase the Company's
    common stock at $0.04 per share. These warrants expire during
    2011. The fair value of each warrant was estimated on the date
    of grant using the Black-Scholes option pricing model with the
    following weighted average assumptions: risk free interest rate
    of 3.47%; expected lives of five years; dividend yield of 0%;
    and volatility factor of 80%. All warrants were issued in
    conjunction with prior credit agreements that have since
    terminated and the fair value of the warrants was recorded as a
    financing cost and amortized to interest expense over the term
    of the related debt.
9.
Income
    Taxes
Deferred income taxes reflect the net tax effects of temporary
    differences between the carrying amounts of assets and
    liabilities for financial reporting purposes and the amounts
    used for income tax purposes.
F-20
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
9.
Income
    Taxes (continued)
Significant components of the Company's deferred tax assets
    and liabilities as of December 31, 2008 and 2009 are as
    follows:
2008
2009
Deferred tax assets:
Net operating loss carryforwards
$
74,493
$
73,587
Research and development tax credits
1,386
1,547
Compensation accruals
182
177
Lease termination
212
—
Deferred revenues
2,952
2,785
Depreciation and amortization
52
24
Other credits
28
74
Other
3
4
Total gross deferred tax assets
79,308
78,198
Less: valuation allowance for deferred tax assets
(78,527
)
(77,552
)
Net deferred tax assets
781
646
Deferred tax liabilities:
Depreciation and amortization
—
—
Customer contracts
507
351
Trade names
166
166
Capitalized software costs
108
129
Total deferred tax liabilities
781
646
Net deferred tax asset (liability)
$
—
$
—
The Company has established a valuation allowance against its
    net deferred tax assets due to the uncertainty surrounding the
    realization of such assets.
As of December 31, 2009, the Company has federal and state
    net operating loss carryforwards of approximately
    $199.4 million and $124.7 million, respectively, which
    will begin to expire in 2014 for federal tax purposes and began
    to expire in 2009 for state tax purposes. The Tax Reform Act of
    1986 contains provisions that limit the ability of companies to
    utilize net operating loss carryforwards and tax credit
    carryovers in the case of certain events including significant
    changes in ownership. These limitations may significantly impact
    the amount of net operating loss and tax credit carryovers
    available to offset future taxable income. The Company believes
    that federal net operating loss carryforwards originating prior
    to July 28, 2004 of approximately $185 million have
    substantial limitations on future utilization.
F-21
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
9.
Income
    Taxes (continued)
Income taxes computed at the statutory federal income tax rate
    of 34% are reconciled to the provision (benefit) for income
    taxes for the years ended December 31:
2007
2008
2009
US federal tax at statutory rate
34
%
34
%
34
%
State taxes (net of federal benefit)
5
%
5
%
4
%
Change in valuation allowance
(41
)%
(39
)%
(37
)%
Other nondeductible expenses
(2
)%
17
%
7
%
Increase in credit carryforwards
4
%
(17
)%
(8
)%
Other
—
(1
)%
(1
)%
Income tax benefit
0
%
(1
)%
(1
)%
During the years ended December 31, 2008 and 2009, the
    Company recorded a benefit from income taxes of $9 and $20 under
    the Housing and Economic Recovery Act of 2008 resulting from a
    research and development credit refund for credits generated
    prior to 2006. Due to the losses incurred in 2007 and the
    recording of the valuation allowance, no tax provision or
    benefit was recorded in the statement of operations for 2007.
At December 31, 2008 and 2009, unrecognized tax benefits of
    $165, net of federal tax benefits, would have increased the
    Company's deferred tax assets with a corresponding increase
    to the valuation allowance if recognized. There would be no
    effect on the effective tax rate, net of valuation allowance,
    had these tax benefits been recognized as of December 31,
    2008 and 2009. There were no gross increases or settlements of
    the Company's unrecognized tax benefits during the years
    ended December 31, 2007, 2008, or 2009. The Company's
    open tax years that are subject to federal examination are
    inception through 2009.
10.
Commitments
    and Contingencies
Operating
    Leases
The Company leases office space and certain equipment under
    non-cancelable operating leases. The Company did not have any
    capital lease obligations as of December 31, 2009. The
    Company is committed to a lease agreement for office space for
    its headquarters through January 2014 and is also committed to
    another lease through February 2016. Future minimum lease
    payments required under leases in effect as of December 31,
    2009 are as follows:
Operating Leases
2010
$
771
2011
765
2012
784
2013
803
2014 and thereafter
361
Total future minimum lease payments
$
3,484
Rent expense is calculated on a straight-line basis over the
    term of the lease. Rent expense recognized under operating
    leases totaled approximately $652, $717 and $886 for the years
    ended December 31, 2007, 2008 and 2009, respectively.
F-22
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
10.
Commitments
    and Contingencies (continued)
Exit
    Event Bonus Plan
In 2005, the Company established an Exit Event Bonus Plan. Under
    the terms of the Exit Event Bonus Plan, upon the occurrence of
    an Exit Event, as defined, a bonus pool will become due and
    payable to the participants in the Exit Event Bonus Plan.
    Participation in the Exit Event Bonus Plan will be limited to
    those employees selected by the Board and awarded units
    thereunder, which has not occurred as of December 31, 2009.
    Accordingly, the Company has not recognized any stock-based
    compensation related to the Exit Event Bonus Plan, since a grant
    date has not occurred as of December 31, 2009. In the case
    of an Exit Event that is an initial public offering, the bonus
    pool will consist of shares of common stock, the number of which
    is determined by multiplying (i) the applicable percentage,
    as defined, by (ii) the number of shares of common stock
    outstanding on a fully diluted basis immediately prior to the
    initial public offering. In the event of an Exit Event that is a
    sale of the Company, the bonus pool will consist of a portion of
    the aggregate consideration received by the Company
and/or
its
    stockholders in such sale, or the aggregate sale consideration,
    the amount of which is determined by multiplying (i) the
    applicable percentage, as defined, by (ii) the aggregate
    sale consideration less the amount of such aggregate sale
    consideration payable to the holders of preferred stock
    outstanding at the time of such sale. The applicable percentage
    ranges from 0% to 3%, depending upon the Company's
    valuation in the initial public offering or sale of the Company,
    as applicable. If the valuation is $210 million or less,
    the applicable percentage will be 0%. If the valuation is
    $250 million or greater, the applicable percentage will be
    3%. For valuations between $210 million and
    $250 million, the applicable percentage will be between 0%
    and 3% as determined on a proportional basis by multiplying 3%
    by a fraction where the numerator is the difference between the
    applicable valuation and $210 million and the denominator
    is $40 million. During the year ended December 31,
    2009, the Exit Event Bonus Plan was amended to change the
    maximum "applicable percentage" to 3%.
Legal
    Contingencies
On May 22, 2009, a company filed a patent infringement
    action in the United States District Court for the Eastern
    District of Virginia against SciQuest, Inc. and other, unrelated
    companies. On August 19, 2009, SciQuest, Inc. and the
    company entered into a settlement agreement in exchange for a
    one-time settlement payment. The settlement and related legal
    costs totaling $3,189 were recorded in operating expenses in the
    accompanying statement of operations for the year ended
    December 31, 2009.
In 2001, the Company was named as a defendant in several
    securities class action complaints filed in the United States
    District Court for the Southern District of New York originating
    from its December 1999 initial public offering. The complaints
    alleged, among other things, that the prospectus used in the
    Company's initial public offering contained material
    misstatements or omissions regarding the underwriters'
    allocation practices and compensation and that the underwriters
    manipulated the aftermarket for the Company's stock. These
    complaints were consolidated along with similar complaints filed
    against over 300 other issuers in connection with their initial
    public offerings. After several years of litigation and appeals
    related to the sufficiency of the pleadings and class
    certification, the parties agreed to a settlement of the entire
    litigation, which was approved by the Court on October 5,
    2009. Notices of appeal to the Court's order have been
    filed by various appellants. The Company has not incurred
    significant costs to date in connection with its defense of
    these claims since this litigation is covered by its insurance
    policy. The Company believes it has sufficient coverage under
    its insurance policy to cover its obligations under the
    settlement agreement. Accordingly, the Company believes the
    ultimate resolution of these matters will not have an impact on
    its financial position and, therefore, it has not accrued a
    contingent liability as of December 31, 2008 and 2009.
From time to time, the Company is subject to legal proceedings
    and claims that arise in the ordinary course of business. The
    Company records an accrual for a contingency when it is both
    probable that a liability has been incurred and the amount of
    the loss can be reasonably estimated. The Company does not
    currently believe the resolution of these actions will have a
    material adverse effect upon the Company's financial
    position, results of operations or cash flows.
F-23
Table of Contents
SCIQUEST,
    INC.
NOTES TO
    FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
10.
Commitments
    and Contingencies (continued)
Warranties
    and Indemnification
The Company's hosting service is typically warranted to
    perform in a manner consistent with general industry standards
    that are reasonably applicable under normal use and
    circumstances. The Company's arrangements also include
    certain provisions for indemnifying customers against
    liabilities if its products or services infringe a third
    party's intellectual property rights. The Company to date
    has not incurred costs to settle claims or pay awards under
    these indemnification obligations. The Company accounts for
    these indemnity obligations as contingencies and records a
    liability for these obligations when a loss is probable and
    reasonably estimable. To date, the Company has not incurred any
    material costs as a result of these indemnifications and has not
    accrued any liabilities related to the obligations in the
    accompanying financial statements.
The Company enters into service level agreements with its
    on-demand solution customers warranting certain levels of uptime
    reliability. To date, the Company has not incurred any material
    costs and has not accrued any liabilities related to such
    obligations.
11.
Employee
    Benefit Plan
The Company has established a defined contribution plan (the
    Contribution Plan) which qualifies under Section 401(k) of
    the Internal Revenue Code. All employees of the Company who have
    attained 21 years of age are eligible for participation in
    the Contribution Plan after one month of employment. Under the
    Contribution Plan, participating employees may defer up to the
    Internal Revenue Service annual contribution limit. The Company
    may elect to make contributions to the Contribution Plan at its
    discretion. During the years ended December 31, 2008 and
    2009, the Company paid $252 and $277, respectively, in
    discretionary contributions to the Contribution Plan. During the
    year ended December 31, 2007, the Company did not make any
    discretionary contributions to the Contribution Plan.
12.
Subsequent
    Events
The Company evaluated subsequent events through March 25,
    2010, which is the date the financial statements were available
    to be issued.
On January 21, 2010, in accordance with the Company's
    stock incentive plan, the Company issued 447,198 options to
    purchase common stock and 191,724 shares of restricted
    stock to certain employees and a director of the Company at a
    grant price of $1.13 per share. Subscription notes receivable of
    $177 were executed in connection with the issuance of shares of
    restricted stock.
In January 2010, the Company repurchased 287,087 shares of
    vested restricted stock for $273 in connection with the
    termination of one employee.
In March 2010, the Company fully repaid the outstanding balance
    under its line of credit of $350, plus accrued interest, and
    closed the credit agreement. In accordance with the terms of the
    credit agreement, the restricted cash balance became
    unrestricted upon the repayment and closing of the credit
    agreement.
In March 2010, the outstanding warrants to purchase a 15% equity
    interest in an unaffiliated private company were purchased back
    by the unaffiliated company for total cash consideration of
    $1.7 million, which will be recorded as a gain in the
    statement of operations for the three months ended
    March 31, 2010.
In March 2010, the Board authorized the forgiveness of the
    outstanding balance under subscription note agreements issued by
    certain employees in connection with their previous purchases of
    the Company's restricted stock. A total of $1,016 was
    forgiven, which included the outstanding principal note amount
    plus accrued but unpaid interest, which will be recorded as
    additional compensation expense in the statement of operations
    for the three months ended March 31, 2010.
F-24
Table of Contents
Table of Contents
Shares
Common
    Stock
PROSPECTUS
[Month
    Day, Year]
Thomas
    Weisel Partners LLC
William Blair & Company
JMP Securities
Pacific Crest Securities
Neither we nor any
    of the underwriters have authorized anyone to provide
    information different from that contained in this prospectus.
    When you make a decision about whether to invest in our common
    stock, you should not rely upon any information other than the
    information in this prospectus. Neither the delivery of this
    prospectus nor the sale of our common stock means that
    information contained in this prospectus is correct after the
    date of this prospectus. This prospectus is not an offer to sell
    or solicitation of an offer to buy these shares of common stock
    in any circumstances under which the offer or solicitation is
    unlawful.
Through and
    including          ,
    2010 (the 25th day after the date of this prospectus), all
    dealers that effect transactions in shares of our common stock,
    whether or not participating in this offering, may be required
    to deliver a prospectus. This is in addition to the
    dealers' obligation to deliver a prospectus when acting as
    underwriters and with respect to their unsold allotments or
    subscriptions.
Table of Contents
PART II
INFORMATION
    NOT REQUIRED IN PROSPECTUS
Item 13.
Other
    expenses of issuance and distribution.
The following table itemizes the expenses, other than the
    underwriting discounts and commissions, incurred by us in
    connection with the issuance and distribution of the securities
    being registered hereunder. All amounts shown are estimates
    except for the Securities and Exchange Commission, or SEC,
    registration fee, the Financial Industry Regulatory Authority,
    Inc., or FINRA, filing fee and the New York Stock Exchange, or
    NYSE, listing fee.
SEC registration fee
$
5,348
FINRA filing fee
8,000
NYSE listing fee
*
Legal fees and expenses
*
Accounting fees and expenses
*
Printing and engraving expenses
*
Transfer agent and registrar fees and expenses
*
Director and officer liability insurance policy premium
*
Miscellaneous expenses
*
Total
$
*
*
To be completed by amendment.
Item 14.
Indemnification
    of directors and officers.
We are a corporation organized under the laws of the State of
    Delaware. Section 145 of the Delaware General Corporation
    Law provides that a corporation may indemnify any person who was
    or is a party or is threatened to be made a party to an action
    by reason of the fact that he or she was a director, officer,
    employee or agent of the corporation or is or was serving at the
    request of the corporation against expenses (including
    attorneys' fees), judgments, fines and amounts paid in
    settlement actually and reasonably incurred by him or her in
    connection with such action if he or she acted in good faith and
    in a manner he or she reasonably believed to be in, or not
    opposed to, the best interests of the corporation and, with
    respect to any criminal action or proceeding, had no reasonable
    cause to believe his or her conduct was unlawful, except that,
    in the case of an action by or in right of the corporation, no
    indemnification may generally be made in respect of any claim as
    to which such person is adjudged to be liable to the
    corporation. Our amended and restated certificate of
    incorporation, in the form that will become effective upon the
    closing of this offering, provides that we will indemnify and
    advance expenses to our directors and officers (and may choose
    to indemnify and advance expenses to other employees and agents)
    to the fullest extent permitted by the Delaware General
    Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law
    permits a corporation to provide in its certificate of
    incorporation that a director of the corporation shall not be
    personally liable to the corporation or its stockholders for
    monetary damages for breach of fiduciary duties as a director,
    except for liability for any:
•
breach of a director's duty of loyalty to the corporation
    or its stockholders;
•
act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
•
unlawful payment of dividends or redemption of shares; or
•
transaction from which the director derives an improper personal
    benefit.
II-1
Table of Contents
Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, provides that our directors are not personally liable
    for breaches of fiduciary duties to the fullest extent permitted
    by the Delaware General Corporation Law.
These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission.
Section 145(g) of the Delaware General Corporation Law and
    our amended and restated certificate of incorporation permit us
    to secure insurance on behalf of any officer, director, employee
    or other agent for any liability arising out of his or her
    actions in connection with their services to us, regardless of
    whether Delaware General Corporation Law permits
    indemnification. We maintain a directors' and
    officers' liability insurance policy.
As permitted by the Delaware General Corporation Law, we have
    entered into indemnity agreements with each of our directors
    that require us to indemnify such persons against various
    actions including, but not limited to, third-party actions where
    such director, by reason of his or her corporate status, is a
    party or is threatened to be made a party to an action, or by
    reason of anything done or not done by such director in any such
    capacity. We indemnify directors against all costs, judgments,
    penalties, fines, liabilities, amounts paid in settlement by or
    on behalf of such directors, and for any expenses actually and
    reasonably incurred by such directors in connection with such
    action, if such directors acted in good faith and in a manner
    they reasonably believed to be in or not opposed to the best
    interests of the corporation, and with respect to any criminal
    proceeding, had no reasonable cause to believe their conduct was
    unlawful. We also advance to our directors expenses (including
    attorney's fees) incurred by such directors in advance of
    the final disposition of any action after the receipt by the
    corporation of a statement or statements from directors
    requesting such payment or payments from time to time, provided
    that such statement or statements are accompanied by an
    undertaking, by or on behalf of such directors, to repay such
    amount if it shall ultimately be determined that they are not
    entitled to be indemnified against such expenses by the
    corporation.
The indemnification agreements set forth certain procedures that
    will apply in the event of a claim for indemnification or
    advancement of expenses, including, among others, provisions
    about providing notice to the corporation of any action in
    connection with which a director seeks indemnification or
    advancement of expenses from the corporation, and provisions
    concerning the determination of entitlement to indemnification
    or advancement of expenses.
Prior to the closing of this offering, we plan to enter into an
    underwriting agreement, which will provide that the underwriters
    are obligated, under some circumstances, to indemnify our
    directors, officers and controlling persons against specified
    liabilities.
Item 15.
Recent
    sales of unregistered securities.
In the three years preceding the filing of this registration
    statement, we issued the securities indicated below that were
    not registered under the Securities Act of 1933, as amended, or
    the Securities Act.
On July 18, 2007, we issued 958 shares of our
    preferred stock and 125,000 shares of our common stock to
    Brad Stevens, our then Vice President of Marketing, for
    aggregate cash consideration of $100,000.
On September 24, 2008, we issued an aggregate of
    25,000 shares of our common stock for no cash consideration
    to the family members of a recently deceased employee in
    recognition and appreciation of his past services.
The above-described sales of securities were made in reliance
    upon the exemption from registration requirements of the
    Securities Act available under Section 4(2) of the
    Securities Act. These sales did not involve any underwriters,
    underwriting discounts or commissions or any public offering.
    The recipients of the securities in these transactions
    represented that they intended to acquire the securities for
    investment only and not with a view to, or for sale in
    connection with, any distribution thereof, and appropriate
    legends were affixed to the share certificates and instruments
    issued in such sales. We believe that the purchasers either
    received adequate information about us or had adequate access,
    through their relationships with us, to such information.
II-2
Table of Contents
The following table sets forth information on stock options
    issued by us to our employees in the three years preceding the
    filing of this registration statement.
Current
Number of
Grant Date
Grant Date
Exercise
Date of Issuance
Options Granted
Exercise Price
Fair Value
Price
July 18, 2007
60,000
$
0.07
$
0.07
$
0.07
January 23, 2008(1)
147,125
$
1.30
$
1.30
$
1.02
July 23, 2008(1)
63,000
$
1.58
$
1.58
$
1.02
January 22, 2009
349,099
$
1.02
$
1.02
$
1.02
July 22, 2009
35,000
$
0.95
$
0.95
$
0.95
January 21, 2010
447,198
$
1.13
$
1.13
$
1.13
(1)
Represents stock options that were amended to reduce the
    exercise price for substantially all of the shares subject to
    stock options granted on January 23, 2008 and July 23,
    2008. The amendments reduced the exercise price of the
    previously granted options to $1.02 per share, which was the
    fair value of our common stock on the date of the amendments.
    The amendments did not affect the vesting provisions or the
    number of shares subject to any of the option awards. For
    financial statement reporting, we treat the previously granted
    options as being forfeited and the amendments as new option
    grants.
No consideration was paid to us by any recipient of any of the
    foregoing options for the grant of such options. All of the
    stock options described above were granted under our 2004 Stock
    Incentive Plan to our officers, directors and employees in
    reliance upon an available exemption from the registration
    requirements of the Securities Act, including those contained in
    Rule 701 promulgated under Section 3(b) of the
    Securities Act. Among other things, we relied on the fact that,
    under Rule 701, companies that are not subject to the
    reporting requirements of Section 13 or Section 15(d)
    of the Securities Exchange Act of 1934, as amended, or the
    Exchange Act, are exempt from registration under the Securities
    Act with respect to certain offers and sales of securities
    pursuant to "compensatory benefit plans" as defined
    under that rule. We believe that our 2004 Stock Incentive Plan
    qualifies as a compensatory benefit plan.
II-3
Table of Contents
The following table sets forth information on shares of common
    stock issued to our employees and former employees upon the
    exercise of stock options in the three years preceding the
    filing of this registration statement.
Number of
Per Share
Date of Issuance
Shares Issued
Exercise Price
March 28, 2007
1,250
$
0.04
July 11, 2007
1,125
0.05
August 27, 2007
16,421
0.04
August 28, 2007
1,125
0.07
September 25, 2007
1,375
0.05
November 30, 2007
1,250
0.05
December 14, 2007
750
0.07
January 16, 2008
5,260
0.04
March 8, 2008
21,199
0.04
March 19, 2008
1,063
0.07
March 26, 2008
3,231
1.30
April 1, 2008
1,438
0.07
April 23, 2008
750
0.07
July 17, 2008
875
0.07
October 1, 2008
875
0.05
December 1, 2008
4,250
0.19
December 10, 2008
563
0.07
February 18, 2009
2,125
0.05
March 11, 2009
1,875
0.07
April 3, 2009
5,599
0.04
May 8, 2009
6,105
0.12
August 6, 2009
1,125
0.95
November 16, 2009
826
0.23
December 29, 2009
12,451
0.25
All of the shares of common stock issued upon the exercise of
    stock options described above were issued in reliance upon an
    available exemption from the registration requirements of the
    Securities Act, including those contained in Rule 701
    promulgated under Section 3(b) of the Securities Act. Among
    other things, we relied on the fact that, under Rule 701,
    companies that are not subject to the reporting requirements of
    Section 13 or Section 15(d) of the Exchange Act are
    exempt from registration under the Securities Act with respect
    to certain offers and sales of securities pursuant to
    "compensatory benefit plans" as defined under that
    rule. We believe that our 2004 Stock Incentive Plan qualifies as
    a compensatory benefit plan.
The following table sets forth information on restricted stock
    awards issued by us to our employees and
non-employee
directors in the three years preceding the filing of this
    registration statement.
Number of
Grant Date
Grant Date
Date of Issuance
Shares Issued
Purchase Price
Fair Value
January 23, 2008(1)
584,275
$
1.30
$
1.30
January 22, 2009
318,053
$
1.02
$
1.02
January 21, 2010
191,724
$
1.13
$
1.13
(1)
Represents restricted stock awards that were amended to reduce
    the purchase price for such shares issued on January 23,
    2008. The amendments reduced the purchase price of the
    previously issued restricted stock to
II-4
Table of Contents
$1.02 per share, which was the fair value of our common stock on
    the date of the amendments. The amendments did not affect the
    vesting provisions or the number of shares subject to any of the
    restricted stock awards.
All of the restricted stock awards described above were granted
    under our 2004 Stock Incentive Plan to our officers, directors
    and employees in reliance upon an available exemption from the
    registration requirements of the Securities Act, including those
    contained in Rule 701 promulgated under Section 3(b)
    of the Securities Act. Among other things, we relied on the fact
    that, under Rule 701, companies that are not subject to the
    reporting requirements of Section 13 or Section 15(d)
    of the Exchange Act are exempt from registration under the
    Securities Act with respect to certain offers and sales of
    securities pursuant to "compensatory benefit plans" as
    defined under that rule. We believe that our 2004 Stock
    Incentive Plan qualifies as a compensatory benefit plan.
Item 16.
Exhibits
    and financial statement schedules.
(a)
Exhibits.
Reference is made to the
    Exhibit Index attached hereto, which is made a part hereof
    by reference thereto.
(b)
Financial statement schedules.
See
page F-1
for an index of the financial statements and schedules that are
    being filed as part of this Registration Statement.
Item 17.
Undertakings.
(a) Insofar as indemnification for liabilities arising
    under the Securities Act may be permitted to directors, officers
    and controlling persons of the registrant pursuant to the
    foregoing provisions, or otherwise, the registrant has been
    advised that in the opinion of the SEC such indemnification is
    against public policy as expressed in the Securities Act and is,
    therefore, unenforceable. In the event that a claim for
    indemnification against such liabilities (other than the payment
    by the registrant of expenses incurred or paid by a director,
    officer or controlling person of the registrant in the
    successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered, the registrant
    will, unless in the opinion of its counsel the matter has been
    settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Act and will be governed by the final adjudication of such
    issue.
(b) The undersigned registrant hereby undertakes to provide
    to the underwriters at the closing specified in the underwriting
    agreement, certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
(c) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
(ii) For the purposes determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered herein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
    amended, the registrant has duly caused this registration
    statement to be signed on its behalf by the undersigned,
    thereunto duly authorized, in the city of Cary, State of North
    Carolina, on March 26, 2010.
SciQuest, Inc.
By:
/s/  Stephen
    J. Wiehe
Stephen J. Wiehe
President and Chief Executive Officer
POWER OF
    ATTORNEY
Each person whose signature appears below hereby constitutes and
    appoints Stephen J. Wiehe and Rudy C. Howard, and each of them,
    as his attorney-in-fact and agent, with full power of
    substitution and resubstitution for him in any and all
    capacities, to sign any or all amendments or post-effective
    amendments to this registration statement, or any registration
    statement for the same offering that is to be effective upon
    filing pursuant to Rule 462(b) under the Securities Act of
    1933, and to file the same, with exhibits thereto and other
    documents in connection therewith or in connection with the
    registration of the shares of common stock under the Securities
    Exchange Act of 1934, as amended, with the Securities and
    Exchange Commission, granting unto such attorney-in-fact and
    agent full power and authority to do and perform each and every
    act and thing requisite and necessary in connection with such
    matters and hereby ratifying and confirming all that such
    attorney-in-fact and agent or his substitutes may do or cause to
    be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
    amended, this registration statement has been signed by the
    following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/  Stephen
    J. Wiehe
Stephen
    J. Wiehe
President, Chief Executive Officer and Director
(Principal Executive Officer)
March 26, 2010
/s/  Rudy
    C. Howard
Rudy
    C. Howard
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 26, 2010
/s/  Noel
    J. Fenton
Noel
    J. Fenton
Chairman of the Board of Directors
March 26, 2010
/s/  Daniel
    F. Gillis
Daniel
    F. Gillis
Director
March 26, 2010
/s/  Jeffrey
    T. Barber
Jeffrey
    T. Barber
Director
March 26, 2010
/s/  Timothy
    J. Buckley
Timothy
    J. Buckley
Director
March 26, 2010
II-6
Table of Contents
EXHIBIT LIST
Exhibit No.
Description
1
.1*
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation of SciQuest,
    Inc. to be effective immediately prior to the closing of the
    offering
3
.2*
Amended and Restated Bylaws of SciQuest, Inc. to be effective
    immediately prior to the closing of the offering
4
.1*
Specimen Certificate representing shares of common stock of
    SciQuest, Inc.
4
.2
Stockholders Agreement, by and among SciQuest, Inc. and certain
    of its stockholders, dated July 28, 2004
5
.1*
Opinion of Morris, Manning & Martin, LLP
10
.1
SciQuest, Inc. 2004 Stock Incentive Plan**
10
.2
Amendment No. 2 to SciQuest, Inc. 2004 Stock Incentive
    Plan**
10
.3
Form of Stock Option Grant Certificate under the SciQuest, Inc.
    2004 Stock Incentive Plan**
10
.4
Form of Management Subscription Agreement under the SciQuest,
    Inc. 2004 Stock Incentive Plan**
10
.5
Second Amended and Restated Exit Event Bonus Plan**
10
.6
Amendment No. 1 to Second Amended and Restated Exit Event
    Bonus Plan**
10
.7
Employment Agreement by and between SciQuest, Inc. and Stephen
    J. Wiehe, dated February 5, 2002**
10
.8
Change of Control Agreement by and between SciQuest, Inc. and
    Stephen J. Wiehe, dated January 1, 2004**
10
.9
Change of Control Agreement by and between SciQuest, Inc. and
    James B. Duke, dated January 1, 2004**
10
.10
Change of Control Agreement by and between SciQuest, Inc. and
    Rudy C. Howard, dated January 1, 2010**
10
.11
Amended and Restated Subscription Agreement by and between
    SciQuest, Inc. and Daniel F. Gillis, dated January 21,
    2010**
10
.12
Subscription Agreement by and between SciQuest, Inc. and Daniel
    F. Gillis, dated January 21, 2010**
10
.13*
Form of Indemnification Agreement
10
.14
Office Lease by and between SciQuest, Inc. and Duke Realty
    Limited Partnership, dated May 17, 2005
10
.15
First Amendment to Office Lease by and between SciQuest, Inc.
    and Duke Realty Limited Partnership, dated February 21, 2008
10
.16
Second Amendment to Office Lease by and between SciQuest, Inc.
    and Duke Realty Limited Partnership, dated February 27, 2008
10
.17
Assignment of Lease by and between SciQuest, Inc. and Kroy
    Building Products, Inc., dated February 11, 2008
10
.18
Office Lease by and between Duke Realty Limited Partnership and
    Kroy Building Products, Inc., dated September 29, 2006
10
.19
Second Amendment to Office Lease by and between SciQuest, Inc.
    and Duke Realty Limited Partnership, dated February 21, 2008
23
.1
Consent of Ernst & Young LLP
23
.2*
Consent of Morris, Manning & Martin, LLP (included in
    Exhibit 5.1)
24
.1
Power of Attorney (included on
Page II-6)
*
To be filed by amendment.
**
Indicates management contract or compensatory plan or
    arrangement.