AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

BY AND AMONG

 

WEBHIRE, INC.

 

KENEXA CORPORATION

 

KENEXA TECHNOLOGY, INC.

 

KENEXA ACQUISITION CORP.

 

AND

 

GAZAWAY L. CRITTENDEN, AS REPRESENTATIVE

 

Dated as of December 21, 2005

 

TABLE OF CONTENTS

 

 

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SCHEDULES AND EXHIBITS

 

Schedules

 

Company Disclosure Schedules

 

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of December 21, 2005, is by and among WEBHIRE, INC., a Delaware corporation (the “ Company ”), KENEXA CORPORATION, a Pennsylvania corporation (“ Parent ”), KENEXA TECHNOLOGY, INC., a Pennsylvania corporation and wholly-owned subsidiary of Parent (“ Kenexa Technology ”), KENEXA ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of Kenexa Technology (“ Acquisition Sub ”), and Gazaway L. Crittenden, solely as the representative (the “ Representative ”) of the Equityholders (as defined below).

 

RECITALS

 

WHEREAS, Kenexa Technology has formed Acquisition Sub for the purpose of merging it with and into the Company and acquiring the Company as a wholly-owned subsidiary of Kenexa Technology;

 

WHEREAS, the boards of directors of the Company, Parent, Kenexa Technology (on its own behalf and as the sole shareholder of Acquisition Sub) and Acquisition Sub have each adopted this Agreement and approved the Merger (as defined below), upon the terms and subject to the conditions set forth in this Agreement; and

 

WHEREAS, in order to induce Parent, Kenexa Technology and Acquisition Sub to enter into this Agreement, concurrently with the execution of this Agreement, the Company has delivered to Parent, Kenexa Technology and Acquisition Sub a copy of the minutes of the meeting of its board of directors, certified by the Company’s secretary, at which the Merger was approved and this Agreement was adopted by the affirmative vote of the requisite number of directors, including, without limitation, the affirmative vote of Steven J. Murray, and it was resolved that the approval of the Merger and adoption of this Agreement be recommended to, and submitted to a vote of, the Stockholders of the Company.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the respective covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1. Certain Definitions . As used herein, the terms below shall have the following meanings. Any such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference.

 

“ Action ” means any action, claim, suit, litigation, proceeding, labor dispute, arbitral action, governmental audit, criminal prosecution, unfair labor practice charge or complaint.

“ Affiliate ” means, with respect to any Person (as defined below), any other Person which directly or indirectly Controls, is Controlled by or is under common Control with such Person.

 

“ Aggregate Actual Option Exercise Price ” means the aggregate of the products of the number of shares of Common Stock underlying each In-The-Money Option with respect to which the Company has received an Option Exercise Agreement duly executed by the Option Holder, together with the payment of the exercise price therefor, prior to the Closing Date, multiplied by the applicable per share exercise price of such In-The-Money Option.

 

“ Aggregate Option Exercise Price ” means the aggregate of the products of the number of shares of Common Stock underlying each In-The-Money Option with respect to which the Company has received an Option Cancellation Agreement duly executed by the Option Holder prior to the Closing Date, multiplied by the applicable per share exercise price of such In-The-Money Option.

 

“ Alternative Transaction ” means, with respect to the Company and its Subsidiaries, any transaction or series of related transactions involving (i) the sale of all or a majority of the assets of the Company and its Subsidiaries, (ii) the issuance or sale of such number of shares of capital stock of the Company or of any Subsidiary entitling the holder thereof to elect a majority of the members of the board of directors of the Company or such Subsidiary, as applicable, or (iii) a merger, consolidation, recapitalization or similar transaction involving the Company or any Subsidiary.

 

“ Assets ” means all of the Company’s and its Subsidiaries’ right, title and interest in and to the business, properties, assets and rights of any kind, whether tangible or intangible, real or personal, used in connection with the Business and owned by the Company or a Subsidiary or in which the Company or a Subsidiary has any interest.

 

“ @viso Agreement ” means that certain Agreement dated as of December 29, 2000, between Webhire, Inc. and @viso Limited, under which certain registration rights were granted with respect to shares of Common Stock, which shares are held by Vivendi Universal, and SB Holdings (Europe) Ltd., an affiliate of Softbank Capital Partners.

 

“ Audited Balance Sheet ” means the audited, consolidated balance sheet of the Company and its Subsidiaries as of the Audited Balance Sheet Date.

 

“ Audited Balance Sheet Date ” means September 30, 2005.

 

“ Business ” means the Company’s business, conducted directly and through its Subsidiaries, of providing technology solutions to clients in a range of organizations and industries in order to enable them to manage their recruiting processes, including, attracting, hiring, and retaining employees, and providing related customer service.

 

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in the Commonwealth of Pennsylvania.

 

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“ Certificate of Incorporation ” means the Fourth Amended and Restated Certificate of Incorporation of the Company dated June 15, 2001 and filed with the Secretary of State of the State of Delaware on June 18, 2001.

 

“ Change In Control Amount ” means the aggregate amount due to the CIC Compensation Recipients as a result of the Merger (and, as applicable, the termination of their employment with the Company or any Subsidiary), pursuant to their respective employment or other agreements with the Company or any Subsidiary, copies of which have been delivered to Kenexa Technology, including, without limitation, any severance payments, transition bonuses, and payments in lieu of accrued but unused vacation time.

 

“ CIC Compensation Recipients ” means those individuals identified on Schedule 1.1 .

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Common Stock ” means the common stock, par value $.01 per share, of the Company.

 

“ Company Options ” means any options to acquire Common Stock.

 

“ Company Share Certificate ” means any certificate for shares of Common Stock issued and outstanding after the Effective Time of the Merger, other than certificates representing shares of Common Stock held in the Company’s treasury.

 

“ Control ” means, as to any Person, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise (the terms “ Controlled by ” and “ under common Control with ” shall have correlative meanings).

 

“ Costello Agreement ” means that certain Paid-Up Software License dated January 1, 1993, by MicroTrac Systems, Inc. (predecessor to the Company) in favor of Costello & Company, Inc.

 

“ Court Order ” means any judgment, decision, consent decree, injunction, ruling or order of any Governmental Authority that is binding on any Person or its property under applicable law.

 

“ Default ” means (i) any violation, breach or default, (ii) the occurrence of an event that, with the passage of time, the giving of notice or both, would constitute a violation, breach or default, or (iii) the occurrence of an event that, with or without the passage of time, the giving of notice or both, would give rise to a right of termination or acceleration.

 

“ Employee Plan ” means any “employee benefit plan” within the meaning of Section 3(3) of ERISA and any bonus, incentive compensation, deferred compensation, stock ownership, stock option, phantom stock, equity, premium conversion, medical, hospitalization, vision, dental, health, life, disability, severance, vacation, death benefit, or other employee benefit plan, program, arrangement, agreement or policy, whether or not subject to ERISA and

 

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whether written or unwritten, which the Company or any ERISA Affiliate sponsors, maintains, contributes to, is obligated to contribute to, is a party to, or is otherwise bound, or with respect to which the Company or any ERISA Affiliate may have any Liability, for the benefit of its current or former employees, directors, officers, consultants, contingent workers, leased employees, or independent contractors (or their dependents, spouses, or beneficiaries).

 

“ Encumbrance ” means any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, conditional sales agreement, encumbrance or other right of third parties, voluntarily incurred or arising by operation of law, and includes any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof.

 

“ Enterprise Value ” means $34,000,000, as adjusted by the operation of Section 2.13 (the Working Capital adjustment), plus the Aggregate Actual Option Exercise Price.

 

“ Environmental Law ” means any and all federal, state and local statutes, laws, common law, regulations, ordinances, rules, judicial and administrative orders, injunctions or decrees relating to occupational safety and health, the effect of the environment or Substances on human health or emissions, discharges or releases of Substances into the environment, including ambient air, surface water, groundwater or land, or otherwise relating to the Handling of Substances or the investigation, clean-up or other remediation or analysis thereof.

 

“ Equityholder ” means any Stockholder or any Option Holder.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ ERISA Affiliate ” means (i) a member of any “controlled group” (as defined in Section 414(b) of the Code) of which the Company is a member, (ii) a trade or business, whether or not incorporated, under common control (within the meaning of Section 414(c) of the Code) with the Company, (iii) a member of any affiliated service group (within the meaning of Section 414(m) of the Code) of which the Company is a member, or (iv) an entity required to be aggregated with the Company pursuant to Section 414(o) of the Code.

 

“ Escrow Agent ” means PNC Bank (or such other Person reasonably acceptable to both the Representative and Kenexa Technology), in its capacity as escrow agent under the Escrow Agreement.

 

“ Escrow Agreement ” means the Escrow Agreement among Kenexa Technology, the Representative and the Escrow Agent, in a form to be mutually agreed upon by and between Kenexa Technology and the Company, to effectuate the escrow arrangements contemplated by this Agreement.

 

“ Facilities ” means all plants, offices, warehouses, administration buildings, and related facilities.

 

“ Financial Statements ” means the Year-End Financial Statements and the Interim Financial Statements (each as defined below).

 

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“ Funded Indebtedness ” means the sum of all amounts (including principal, interest, prepayment penalties or fees, premiums, breakage amounts, expense reimbursements or other amounts payable in connection with prepayment), if any, necessary to repay all Indebtedness other than the Oracle Loan in full on the Closing Date, and to obtain the release of all Encumbrances securing any Indebtedness other than the Oracle Loan.

 

“ GAAP ” means accounting principles generally accepted in the United States, consistently applied and maintained throughout the applicable periods.

 

“ General Escrow Account ” means the account into which the General Escrow Amount is deposited with the Escrow Agent and held by it, subject to disbursement as provided in Article II , Article VIII and in the Escrow Agreement.

 

“ General Escrow Amount ” means $5,000,000, together with any dividends, interest, gains and other distributions on such escrowed amounts, as reduced from time to time by the amount of monies distributed therefrom in accordance with Article II , Article VIII and the Escrow Agreement.

 

“ Governmental Authority ” means any federal, state, municipal, national, local, foreign or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the United States or a jurisdiction outside the United States, or a state, territory or possession thereof, or the District of Columbia, in each case having jurisdiction over the applicable Person.

 

“ Handling ” means the production, use, generation, emission, storage, treatment, transportation, recycling, disposal, discharge, release or other handling or disposition of any kind of any Substance.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

“ In-The-Money Option ” means any Company Option having a per share exercise price less than the Per Share Merger Consideration.

 

“ Indebtedness ” means, without duplication, (i) any obligations of the Company or any of its Subsidiaries for borrowed money (including all obligations for principal, interest, premiums, penalties, fees, expenses and breakage costs), (ii) any obligations of the Company or any of its Subsidiaries evidenced by any note, bond, debenture or other debt security, (iii) any obligations of the Company or any of its Subsidiaries for or on account of capitalized leases, other than those capitalized leases disclosed in Schedule 3.6 , (iv) any obligations of a Person other than the Company or its Subsidiaries secured by an Encumbrance against any of the Company’s or its Subsidiaries’ Assets, (v) all obligations of the Company or any of its Subsidiaries for the reimbursement of letters of credit, bankers’ acceptance or similar credit transactions, (vi) any obligations of the Company or any of its Subsidiaries under any currency or interest rate swap, hedge or similar protection device, and (vii) all obligations of the types described in clauses (i)  through (vi)  above of any Person other than the Company or its

 

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Subsidiaries, the payment of which is guaranteed, directly or indirectly, by the Company or any of its Subsidiaries.

 

“ Intellectual Property ” means all of the following in any jurisdiction throughout the world: (i) patents, patent applications and patent disclosures; (ii) trademarks, service marks, trade dress, trade names, corporate names, logos and slogans (and all translations, adaptations, derivations and combinations of the foregoing) and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) any moral rights and copyrights in any work of authorship recognized by foreign or domestic law or otherwise (including, but not limited to, databases, computer software, source code, object code, schematics, flowcharts, designs and drawings); (iv) registrations and applications for any of the foregoing; (v) trade secrets, confidential information, and know-how; (vi) computer software (including but not limited to source code, executable code, data, databases and documentation); (vii) any invention or discovery (including, but not limited to, processes, machines, manufactures, compositions of matter, formulas, techniques, concepts and ideas) whether patentable or not; (viii) any and all mask works; (ix) all other intellectual property rights protectable under any laws or international conventions throughout the world; (x) any improvements to or derivatives from any of the foregoing, and (xi) the right to prosecute, enforce, obtain damages relating to, settle or release any past, present or future infringement or misappropriation of any of the foregoing.

 

“ Interim Balance Sheet ” means the unaudited, consolidated balance sheet of the Company and its Subsidiaries as of the Interim Balance Sheet Date.

 

“ Interim Balance Sheet Date ” means November 30, 2005.

 

“ Interim Financial Statements ” means the Interim Balance Sheet and the unaudited, consolidated statements of operations of the Company and its Subsidiaries for the period ended on the Interim Balance Sheet Date.

 

“ KFI Agreement ” means that certain Stock Purchase Agreement dated July 10, 2000, by and among the Company, Korn/Ferry International, Softbank Capital Partners LP, GMN Investors II, L.P., and Aventine International Fund and Bricoleur Partners II, L.P.

 

“ Knowledge ” of the Company means the actual knowledge of the executive officers of the Company and its Subsidiaries, and the knowledge that such individuals should have had if they performed the duties applicable to their positions with the Company or any Subsidiary, as applicable, in a reasonably prudent manner.

 

“ Leased Real Property ” means all Real Property leased by the Company or a Subsidiary and, in either case, described in the Real Property Leases.

 

“ Liability ” means any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, whether known or unknown, and whether accrued, absolute, contingent, matured or unmatured.

 

“ Material Adverse Effect ” means (i) with respect to the Company, any material adverse effect or change (whether or not the underlying events, circumstances or facts are

 

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foreseeable or known as of the date of this Agreement or the Closing Date) in the financial condition, business or results of operations of the Company and its Subsidiaries, taken as a whole, or the ability of the Company to consummate this Agreement or the transactions contemplated hereby, and (ii) with respect to Parent, Kenexa Technology or Acquisition Sub, any material adverse effect or change in the ability of Parent, Kenexa Technology or Acquisition Sub to consummate this Agreement or the transactions contemplated hereby; provided , however , that the foregoing definitions exclude (A) the effect of any change that is generally applicable to the industry and markets in which the Company and its Subsidiaries operate, or (B) the effect of any change that is generally applicable to the United States economy or securities markets or the world economy or international securities markets; provided , however , that the effects of any change described in clause (A)  or (B)  do not disproportionately affect the Company or any of its Subsidiaries in any material respect.

 

“ Net Merger Consideration ” means the Total Merger Consideration less the General Escrow Amount.

 

“ Option Exercise Agreement ” means an agreement in form and substance reasonably acceptable to the Company and Kenexa Technology by which an Option Holder, among other matters, agrees to exercise a Company Option, acknowledges the appointment of the Representative pursuant to the provisions of, and the authority granted in, Section 8.8 , and agrees to indemnify the Representative in accordance with the terms of Section 8.8 and the Representative Agreement.

 

“ Option Holders’ Portion ” means that portion of the Net Merger Consideration, Net Adjustment Amount, balance of the General Escrow Amount, if any, or any other amount payable to the Option Holders pursuant to this Agreement.

 

“ Oracle Loan ” means the credit facility established by the Company with Oracle Credit Corporation pursuant to a payment plan agreement and other related documents and all amounts due thereunder, which credit facility has been established for the acquisition of goods and services from Oracle Corporation.

 

“ Ordinary Course of Business ” or “ Ordinary Course ” or any similar phrase means the ordinary course of the Business, consistent with the past customs and practice of the Company and its Subsidiaries.

 

“ Owned Real Property ” means all Real Property owned in fee by the Company or any Subsidiary, including all rights, easements and privileges appertaining or relating thereto and all buildings, fixtures and improvements located thereon.

 

“ Payment Agent ” means Computershare Shareholder Services, Inc. and EquiServe Trust Company, N.A., or such other Person selected by the Company and reasonably acceptable to Kenexa Technology.

 

“ Payment Agent Agreement ” means the agreement among Kenexa Technology, the Representative and the Payment Agent, in a form to be mutually agreed upon by and between Kenexa Technology and the Company, to effectuate the exchange and Stockholder payment arrangements contemplated by this Agreement.

 

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“ Per Share Merger Consideration ” means (i) the sum of the Total Merger Consideration plus the Aggregate Option Exercise Price, divided by (ii) the sum of the number of shares of Common Stock outstanding immediately prior to the Effective Time plus the number of shares of Common Stock underlying the In-The-Money Options with respect to which the Company has received Option Cancellation Agreements duly executed by the respective Option Holders prior to the Closing Date.

 

“ Per Share Net Merger Consideration ” means (i) the sum of the Net Merger Consideration plus the Aggregate Option Exercise Price, divided by (ii) the sum of the number of shares of Common Stock outstanding immediately prior to the Effective Time plus the number of shares of Common Stock underlying the In-The-Money Options with respect to which the Company has received Option Cancellation Agreements duly executed by the respective Option Holders prior to the Closing Date.

 

“ Permits ” means all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any Governmental Authority necessary for the conduct of the Business.

 

“ Permitted Encumbrances ” means (i) liens for Taxes, assessments and other governmental charges not yet due and payable, (ii) inchoate statutory, mechanics’, laborers’ and materialmen’s liens arising in the Ordinary Course of Business for sums not yet due, (iii) statutory and contractual landlord’s liens under leases pursuant to which the Company or a Subsidiary is a lessee and not in Default, (iv) with regard to Real Property, (A) any and all matters of record in the jurisdiction where the Real Property is located, including restrictions, reservations, covenants, conditions, oil and gas leases, mineral severances and liens, and (B) any easements, rights-of-way, building or use restrictions, prescriptive rights, encroachments, protrusions, rights and party walls, in each case of clauses (A)  and (B) , not incurred in connection with the borrowing of money or the advance of credit and that do not materially detract from the value or otherwise interfere with the current use of any of the Company’s or its Subsidiaries’ Real Property or otherwise materially impair the Company’s or its Subsidiaries’ operation of the Business, and (v) such other imperfections of title as do not materially detract from the value or otherwise interfere with the current use of any of the Company’s or its Subsidiaries’ properties or otherwise impair the Company’s or its Subsidiaries’ operation of the Business.

 

“ Permitted Transaction Expenses ” means (i) (A) the fees and disbursements of, or other similar amounts charged by, counsel to the Company, including those of Goodwin Procter LLP, (B) the fees and expenses of, or other similar amounts charged by, any accountants (including Brown & Brown, LLP), agents (including the Escrow Agent and the Payment Agent), financial advisors (including Newbury Piret & Co., Inc.), consultants and experts employed by the Company, (C) the out-of-pocket expenses, if any, incurred by the Company, (D) the Representative’s Retainer, (E) to the extent purchased by Parent, Kenexa Technology or the Surviving Corporation, the cost of any directors’ and officers’ liability insurance or extended reporting period endorsement (tail coverage) covering Persons who are as of the date of this Agreement, or have been prior to the date hereof, or who become prior to the Effective Time, officers or directors of the Company or any Subsidiary for claims against them in such capacity arising out of events or occurrences that occurred on or prior to the Effective Time, and

 

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(F) printing and other costs related to mailings to the Equityholders and (G) the amount of payroll Taxes payable by the Company or the Surviving Corporation with respect to compensation income to be recognized by Option Holders who are continuing as employees of the Surviving Corporation after the Effective Time in connection with their Option Cancellation Agreements (which amount is estimated as of the date of this Agreement to be $85,586), to the extent that the amounts described in this clause (i)  arise from the provision of services prior to the Closing, or have been or are expected to be incurred, or an obligation to pay has been incurred on or prior to the Closing Date, on behalf of the Company or the Representative in connection with the preparation, negotiation and execution of this Agreement and the consummation of this Agreement and the transactions contemplated hereby (including the Merger); provided , however , that the aggregate of the amounts described in this clause (i)  shall not exceed $780,000; and (ii) the Change in Control Amount, other severance payments, transition bonuses, and payments in lieu of accrued but unused vacation time payable to employees of the Company whose employment will be terminated in connection with the Merger, and Medicare payroll Taxes payable by the Company or the Surviving Corporation with respect to compensation income to be recognized by CIC Recipients in connection with the payment of the Change in Control Amount and by such other employees in connection with the payment of such severance payments, transition bonuses, and payments in lieu of accrued but unused vacation time, as applicable.

 

“ Person ” means any person or entity, whether an individual, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture or Governmental Authority.

 

“ Personal Property ” means all machinery, equipment, furniture, motor vehicles, other miscellaneous supplies, tools, fixed assets and other tangible personal property owned or leased by or used by the Company or a Subsidiary in connection with the Business.

 

“ Preferred Stock ” means the preferred stock, par value $.01 per share, of the Company.

 

“ Real Property ” means all Owned Real Property or Leased Real Property.

 

“ Real Property Leases ” means all leases, subleases or occupancy agreements pursuant to which the Company or any of its Subsidiaries leases, subleases, uses or occupies any Real Property (other than the Owned Real Property) or Facilities.

 

“ Regulations ” means any laws (including common law), statutes, ordinances, regulations, rules, notice requirements, court decisions, agency guidelines, principles of law and orders of any federal, state or local government and any other Governmental Authority.

 

“ Representative’s Retainer ” means $30,000 to be paid on or about the Closing Date to the Representative for his services under this Agreement and in connection with the transactions contemplated hereby.

 

“ Shares ” means shares of Common Stock and Preferred Stock.

 

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“ Softbank Agreement ” means that certain Stock Purchase Agreement dated July 19, 1999, by and between the Company and Softbank Capital Partners LP.

 

“ Stock Option Plan ” means the Amended and Restated Webhire, Inc. 1996 Stock Option and Grant Plan.

 

“ Stockholder ” means any holder of Shares other than Option Holders who have exercised Company Options after the date of this Agreement, as contemplated by Section 2.10(d) and Section 2.11 . For avoidance of doubt, any such Option Holders shall continue to be considered Option Holders after such exercise for the purposes of determining the Option Holders’ Portion.

 

“ Stockholders’ Portion ” means that portion of the Net Merger Consideration, Net Adjustment Amount, balance of the General Escrow Amount, if any, or any other amount payable to the Stockholders pursuant to this Agreement.

 

“ Subsidiary ” means a corporation or other entity of which 50% or more of the voting power or value of the equity securities or equity interests is owned, directly or indirectly, by the Company.

 

“ Substance ” means any “hazardous substance,” “hazardous waste,” “pollutant,” “contaminant” or “toxic substance” (as defined or regulated by any Environmental Law, including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq ., the Resources Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq ., the Clean Water Act, 33 U.S.C. Section 1251 et seq ., the Clean Air Act, 42 U.S.C. Section 7401 et seq ., or the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq ., and regulations promulgated thereunder, or any analogous state and local laws and regulations), petroleum and petroleum products, polychlorinated biphenyls or asbestos.

 

“ Total Merger Consideration ” means the Enterprise Value less the Funded Indebtedness, if any.

 

“ Transaction Documents ” means this Agreement, the agreements listed as exhibits hereto, and any other agreements, documents and instruments contemplated hereby, including the Letter of Transmittal and the Certificate of Merger.

 

“ Transaction Expenses ” means all out-of-pocket fees, expenses and other similar amounts arising from the provision of services prior to the Closing, or which have been or are expected to be incurred, or an obligation to pay has been incurred on or prior to the Closing Date, on behalf of the Company or the Representative in connection with the preparation, negotiation and execution of this Agreement and the consummation of this Agreement and the transactions contemplated hereby (including the Merger), which expenses shall include, but shall not be limited to, the Permitted Transaction Expenses.

 

“ Working Capital ” means the difference between (i) the sum of the amounts shown on the Company’s consolidated balance sheets in the line items described on Exhibit A under the heading, “Current Assets,” and (ii) the sum of the amounts shown on the Company’s

 

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consolidated balance sheets in the line items described on Exhibit A under the heading, “Current Liabilities,” and as otherwise calculated in accordance with this Agreement.

 

“ Working Capital Target ” means the Working Capital as determined from the Company’s audited, consolidated balance sheet dated as of September 30, 2005, less (i) an amount equal to the Permitted Transaction Expenses (to the extent reflected in the Estimated Working Capital or Closing Working Capital, as applicable, to which the Working Capital Target is being compared), and less (ii) $150,000 per month during the period between September 30, 2005 and the Closing Date, provided, that any portion of such period which is less than one full month shall be a prorated based upon a thirty (30) day month.

 

“ Year-End Financial Statements ” means the Company’s audited, consolidated balance sheet dated as of September 30, 2003, September 30, 2004 and September 30, 2005, and the related audited, consolidated statements of operations, changes in shareholders’ equity and cash flow for the each of the years ended September 30, 2003, September 30, 2004 and September 30, 2005.

 

Section 1.2. Terms Defined Elsewhere . The following is a list of additional terms used in this Agreement and a reference to the Section hereof in which such term is defined:

 

 

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Section 1.3. Interpretation . In this Agreement, unless otherwise specified or where the context otherwise requires:

 

(a) the headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement;

 

(b) words importing any gender shall include other genders;

 

(c) words importing the singular only shall include the plural and vice versa;

 

(d) the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation;”

 

(e) the words “hereby,” “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(f) references to “Articles,” “Exhibits,” “Sections” or “Schedules” shall be to Articles, Exhibits, Sections or Schedules of or to this Agreement; and

 

(g) references to any Person include the successors and permitted assigns of such Person.

 

ARTICLE II

THE MERGER

 

Section 2.1. The Merger . At the Effective Time and upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), Acquisition Sub shall be merged with and into the Company (the “ Merger ”). Following the Merger, the Company shall continue as the surviving corporation (the “ Surviving Corporation ”) and the separate corporate existence of Acquisition Sub shall cease.

 

Section 2.2. Effective Time . Subject to the terms and conditions set forth in this Agreement, a Certificate of Merger in customary form reasonably acceptable to Kenexa Technology and the Representative (the “ Merger Certificate ”) shall be duly executed and acknowledged by the Company and thereafter delivered to the Secretary of State of the State of Delaware for filing pursuant to the DGCL on the Closing Date. The Merger shall become effective at such time as a properly executed and certified copy of the Merger Certificate is duly filed with the Secretary of State of the State of Delaware in accordance with the DGCL or such later time as Kenexa Technology and the Company may agree upon and set forth in the Merger Certificate (such time as the Merger becomes effective, the “ Effective Time ”).

 

Section 2.3. Closing of the Merger .

 

(a) The closing of the Merger (the “ Closing ”) will take place at a time and on a date (the “ Closing Date ”) to be specified by the parties, which shall be no later than the second Business Day after satisfaction of the latest to occur of the conditions set forth in Article VI

 

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(other than any such conditions which by their nature cannot be satisfied until the Closing Date, which shall be required to be so satisfied or (to the extent permitted by applicable law) waived on the Closing Date), at the offices of Pepper Hamilton LLP, 3000 Two Logan Square, Philadelphia, Pennsylvania, unless another time, date or place is agreed to in writing by the parties hereto.

 

(b) At the Closing, Kenexa Technology shall deliver to the Company:

 

(i) a certificate, duly executed by an authorized executive officer of Kenexa Technology, dated the Closing Date, certifying that the conditions specified in Section 6.2(a) and (b)  have been fulfilled;

 

(ii) a certificate, duly executed by an authorized Secretary or Assistant Secretary of Kenexa Technology, dated the Closing Date, to the effect that: (A) (1) the certificate of incorporation and bylaws of Kenexa Technology and Acquisition Sub attached to such certificate are true, correct and complete, and were in full force and effect in the form as attached to such certificate on the date of adoption of the resolutions referred to in clause (3)  below, (2) no amendment to such certificate of incorporation or bylaws of any of Kenexa Technology or Acquisition Sub has occurred since the date of adoption of the resolutions referred to in clause (3)  below, and (3) the resolutions adopted by the respective boards of directors of Parent, Kenexa Technology and Acquisition Sub authorizing this Agreement and the transactions contemplated hereby, including the Merger, were duly adopted at a duly convened meeting thereof, at which a quorum was present and acting throughout, or by written consent, and such resolutions remain in full force and effect, and have not been amended, rescinded or modified; and (B) the respective officers of Parent, Kenexa Technology and Acquisition Sub executing this Agreement and the other Transaction Documents to be executed and delivered by Parent, Kenexa Technology or Acquisition Sub pursuant to this Agreement are incumbent officers of Parent, Kenexa Technology or Acquisition Sub, as applicable, and the specimen signatures on such certificate are their genuine signatures;

 

(iii) a subsistence certificate with respect to each of Parent, Kenexa Technology and the Acquisition Sub, certified by the Secretary of State or other appropriate governmental official of the state of Parent’s, Kenexa Technology’s or Acquisition Sub’s incorporation, as applicable, dated as of a date not more than ten (10) days prior to the Closing Date;

 

(iv) the Representative Agreement, duly executed by Kenexa Technology;

 

(v) the Escrow Agreement, duly executed by Kenexa Technology; and

 

(vi) the Payment Agent Agreement, duly executed by Kenexa Technology.

 

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(c) At the Closing, the Company shall execute and deliver, or cause to be executed and delivered, to Kenexa Technology:

 

(i) a certificate, duly executed by an authorized executive officer of the Company, dated the Closing Date, certifying that the conditions specified in Section 6.3(a) and (b)  have been fulfilled;

 

(ii) a certificate, duly executed by an authorized Secretary or Assistant Secretary of the Company, dated the Closing Date, to the effect that: (A) (1) the certificate of incorporation and bylaws attached to such certificate are true, correct and complete, and were in full force and effect in the form as attached to such certificate on the date of adoption of the resolutions referred to in clause (3)  below, (2) no amendment to the certificate of incorporation or bylaws has occurred since the date of adoption of the resolutions referred to in clause (3)  below, and (3) the resolutions adopted by the board of directors and shareholders of the Company authorizing this Agreement and the transactions contemplated hereby, including the Merger, were duly adopted at a duly convened meeting thereof, at which a quorum was present and acting throughout, or by written consent, and such resolutions remain in full force and effect, and have not been amended, rescinded or modified; and (B) the Company’s officers executing this Agreement and the Transaction Documents to be executed and delivered by the Company pursuant to this Agreement are incumbent officers and the specimen signatures on such certificate are their genuine signatures;

 

(iii) a subsistence certificate with respect to the Company and each Subsidiary, certified by the Secretary of State or other appropriate governmental official of the state of the Company’s or such Subsidiary’s incorporation, as applicable, dated as of a date not more than ten (10) days prior to the Closing Date;

 

(iv) the Representative Agreement, duly executed by the Company and the Representative;

 

(v) the Escrow Agreement, duly executed by the Representative;

 

(vi) the Payment Agent Agreement, duly executed by the Representative;

 

(vii) resignation letters from each director (or Person performing a similar function) of the Company and each Subsidiary resigning as a director of such entity effective as of the Effective Time;

 

(viii) resignation letters from each officer of the Company and each Subsidiary resigning as an of officer of such entity effective as of the Effective Time;

 

(ix) to the extent requested by Kenexa Technology at least five (5) Business Days prior to Closing, the documentation necessary to remove existing signatories to all bank accounts of the Company and its Subsidiaries as of the Closing Date and to replace such signatories effective as of the Closing Date with individuals designated by Kenexa Technology; and

 

(x) a certification pursuant to Sections 897 and 1445 of the Code and the Treasury Regulations promulgated thereunder, in form and substance reasonably satisfactory

 

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to Kenexa Technology, that the Company has not been a United States real property holding corporation within the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

Section 2.4. Effects of the Merger . The Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Acquisition Sub shall vest in the Surviving Corporation and all debts, Liabilities and duties of the Company and Acquisition Sub shall become the debts, Liabilities and duties of the Surviving Corporation.

 

Section 2.5. Certificate of Incorporation and Bylaws . The certificate of incorporation of the Acquisition Sub in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation at and immediately after the Effective Time, until thereafter amended in accordance with applicable law. The bylaws of Acquisition Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation at and immediately after the Effective Time, until thereafter amended in accordance with applicable law as provided therein and under the DGCL.

 

Section 2.6. Board of Directors . The directors of Acquisition Sub at the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until such director’s successor is duly elected or appointed and qualified.

 

Section 2.7. Officers . The officers of the Acquisition Sub at the Effective Time initially shall hold and serve in such offices of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until such officer’s successor is duly elected or appointed and qualified.

 

Section 2.8. Conversion of Shares .

 

(a) At the Effective Time, each issued and outstanding share of Common Stock (other than shares of Common Stock held in the Company’s treasury) shall, by virtue of the Merger and without any action on the part of Acquisition Sub, the Company or the holder thereof, be canceled, extinguished and converted into and shall become the right to receive an amount equal to the Per Share Merger Consideration, in cash, without interest. Notwithstanding the foregoing, if, between the date of this Agreement and the Effective Time, the shares of Common Stock shall have been changed into a different number of shares or a different class by reason of any dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, then the Per Share Merger Consideration contemplated by the Merger shall be correspondingly adjusted to reflect such dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares of Common Stock.

 

(b) At the Effective Time, each outstanding share of common stock, par value $.01 per share, of Acquisition Sub shall be converted into one share of common stock, par value $.01 per share, of the Surviving Corporation.

 

(c) At the Effective Time, each share of Common Stock held in the treasury of the Company immediately prior to the Effective Time shall, by virtue of the Merger and

 

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without any action on the part of Acquisition Sub, the Company or the holder thereof, be canceled and retired and cease to exist and no payment shall be made with respect thereto.

 

Section 2.9. Closing Estimates . No later than two (2) Business Days prior to the Closing, the Company will provide to Kenexa Technology:

 

(a) a true, complete and correct list (the “ Transaction Expense Statement ”) of the amount of the Transaction Expenses, including, but not limited to the Permitted Transaction Expenses, and reasonable detail setting forth the Change In Control Amount, and the respective portions of the Change In Control Amount to which each CIC Compensation Recipient is entitled; and

 

(b) a statement with reasonable detail setting forth the amount of Funded Indebtedness, if any, in substance reasonably satisfactory to Kenexa Technology, together with all pay-off letters related thereto.

 

Section 2.10. Payment of Merger Consideration and other Amounts .

 

(a) Promptly after the Effective Time on the Closing Date (or such later date as such payments may be due), Kenexa Technology will make (or cause to be made) the following payments:

 

(i) to an account, in the name of the Payment Agent, that is designated in writing by the Representative, by wire transfer of immediately available funds, an amount equal to the Stockholders’ Portion of the Net Merger Consideration;

 

(ii) to the Surviving Corporation, an amount equal to the Option Holders’ Portion of the Net Merger Consideration;

 

(iii) to the General Escrow Account, by wire transfer of immediately available funds, an amount equal to the General Escrow Amount;

 

(iv) on behalf of the Company, in accordance with the pay-off letters described in Section 2.9(b) , such amount, in the aggregate equal to the Funded Indebtedness, if any; and

 

(v) to the Surviving Corporation, for payment by the Surviving Corporation to the appropriate recipients, the Transaction Expenses, including the Change In Control Amount payments.

 

(b) As promptly as practicable after the Effective Time, the Payment Agent shall cause to be mailed to each Stockholder (other than those holding Dissenting Shares) a letter of transmittal in a form approved by Kenexa Technology and the Company in their reasonable discretion prior to the Closing Date (the “ Letter of Transmittal ”) and instructions for surrendering the Company Share Certificates held by such Stockholder, and facilitating the delivery of that portion of the Total Merger Consideration to which each such Stockholder is entitled. The Letter of Transmittal shall (i) specify that delivery shall be effected, and risk of loss and title to the Company Share Certificates shall pass, only upon proper delivery of the

 

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Company Share Certificates to the Payment Agent and instructions for use in effecting the surrender of the Company Share Certificates; and (ii) acknowledge the appointment of the Representative pursuant to the provisions of, and the authority granted in Section 8.8 . Upon the surrender of each Company Share Certificate for cancellation to the Payment Agent, together with a properly completed Letter of Transmittal and such other documents as may reasonably be required by Kenexa Technology: (A) the Payment Agent shall reasonably promptly issue and deliver in exchange therefor, that portion of the Net Merger Consideration to which such Stockholder is entitled and (B) the Company Share Certificates so surrendered shall be canceled.

 

(c) As promptly as practicable after the Effective Time, the Surviving Corporation shall pay to the appropriate recipients, the Transaction Expenses, including the Change In Control Amount payments.

 

(d) As promptly as practicable after the Effective Time, and in any event no later than five (5) Business Days after the Effective Time, the Surviving Corporation shall pay to each Option Holder who duly exercised an In-The-Money Option in accordance with the Stock Option Plan and such Option Holder’s applicable grant agreement or executed and delivered to the Company an Option Cancellation Agreement with respect to an In-The-Money Option prior to the Closing Date, that portion of the Net Merger Consideration to which such Option Holder is entitled.

 

(e) If any consideration is to be paid to a Person other than the Person in whose name the Company Share Certificates or Company Options surrendered in exchange therefor are registered, it shall be a condition to such exchange that the Person requesting such exchange shall deliver such Company Share Certificates or Company Options accompanied by all documents required to evidence and effect such transfer and shall pay to the Surviving Corporation any transfer or other Taxes required by reason of the payment of such consideration to a Person other than that of the registered holder of the Company Share Certificates or Company Options so surrendered, or such Person shall establish to the reasonable satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable. In the event that any Company Share Certificates shall have been lost, stolen or destroyed, the Payment Agent shall pay such portion of the Net Merger Consideration as may be required pursuant to this Agreement in exchange therefore upon the making of an affidavit of that fact by the holder thereof, together with an indemnity in customary form, together with a bond, if required, in favor of the Surviving Corporation, as a condition precedent to the payment of such portion of the Net Merger Consideration.

 

(f) At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no transfers of any Shares. Until surrendered as contemplated by this Section 2.10 , each Company Share Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender such portion of the Total Merger Consideration as may be required pursuant to this Agreement in exchange therefore in respect of such security represented by such Company Share Certificates. If, after the Effective Time, Company Share Certificates are presented to the Surviving Corporation, they shall be canceled, delivered to the Payment Agent and exchanged for the applicable portion of the Total Merger Consideration, as provided in this Article II .

 

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(g) Any portion of the Total Merger Consideration made available to the Payment Agent pursuant to this Article II that remains unclaimed by Stockholders on the nine (9) month anniversary of the Closing Date will be returned to Kenexa Technology upon demand. Any such Stockholder who has not exchanged Company Share Certificates for the applicable portion of the Total Merger Consideration in accordance with this Article II prior to that time thereafter will look only to Kenexa Technology for payment of any applicable portion of the Total Merger Consideration in respect thereof. Neither Kenexa Technology nor the Company shall be liable to any Stockholders for cash from the Total Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

 

Section 2.11. Stock Options . As soon as practicable after the date hereof, but in any event within the time required by the terms of the Stock Option Plan and grant agreements made pursuant to the Stock Option Plan, each Option Holder shall be provided notice, in accordance with the terms of the Stock Option Plan and his or its respective grant agreements, of his or its right to exercise each Company Option. Such notice shall be in form and substance reasonably acceptable to the Company and Kenexa Technology and shall provide each Option Holder the right to elect to have any In-The-Money Options, to the extent such In-The-Money Options would be vested and exercisable upon consummation of the Merger, after giving effect to any applicable acceleration provisions set forth in the Stock Option Plan or the applicable grant agreements, canceled in exchange for a portion of the Total Merger Consideration, payable in accordance with this Section 2.11 (each, an “ Option Cancellation Agreement ”). Any Option Holder may make the election described in the preceding sentence by completing, countersigning and returning the Option Cancellation Agreement, to the Company within twenty (20) days of the date of the notice. Each Option Cancellation Agreement shall (i) specify that delivery shall be effected, and risk of loss shall pass, only upon proper delivery of the Option Cancellation Agreement and original Company Option to the Company; and (ii) acknowledge the appointment of the Representative pursuant to the provisions of, and the authority granted in Section 8.8 . Any Option Holder making the election set forth in the preceding sentence shall receive a portion of the Total Merger Consideration with respect to his or its In-The-Money Options, in the amount and payable as follows: (i) at the Effective Time, in cash, that portion of the Net Merger Consideration equal to the Per Share Net Merger Consideration less the per share exercise price of the applicable In-The-Money Option, multiplied by the number of shares of Common Stock underlying the applicable In-The-Money Option, and (ii) subsequent to the Effective Time, (A) that portion of the balance of the Net Adjustment Amount, if any, to which such Option Holder is entitled in accordance with Section 2.13(g) ; and (B) that portion of the balance of the General Escrow Account, if any, to which such Option Holder is entitled in accordance with Section 8.9 . None of Parent, Kenexa Technology, Acquisition Sub or the Surviving Corporation shall assume any of the Company Options in connection with the transactions contemplated by this Agreement.

 

Section 2.12. Withholding Rights . Each of the Company, Surviving Corporation, Kenexa Technology and the Payment Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article II such amounts as it is required to deduct and withhold with respect to the making of such payment under any law or regulation. If the Company, Surviving Corporation, Kenexa Technology or the Payment Agent, as the case may be, so withholds any such amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the applicable Person in respect of which the

 

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Company, Surviving Corporation, Kenexa Technology or the Payment Agent, as the case may be, made such deduction and withholding.

 

Section 2.13. Working Capital Adjustment .

 

(a) (i) The parties have estimated that the Working Capital of the Company as of 11:59 p.m. Eastern Standard Time on the day immediately preceding the Closing Date (the “ Closing Working Capital ”), as calculated in accordance with this Agreement and the Statement of Net Working Capital attached hereto as Exhibit A (the “ Form Working Capital Statement ”), will equal the Working Capital Target.

 

(ii) For purposes of this Agreement, Working Capital shall be calculated in accordance with this Agreement (including Exhibit A to this Agreement and Section 2.14 ) and with GAAP applied using the same accounting methods, policies, practices and procedures, with consistent classifications, judgments and estimation methodology, as were used in preparation of the Company’s audited, consolidated balance sheet as of September 30, 2005; provided , however , Working Capital shall not be calculated to include any changes in assets or liabilities as a result of purchase accounting adjustments or other changes arising from or resulting as a consequence of this Agreement or the transactions contemplated hereby other than as expressly set forth on Exhibit A attached hereto.

 

(b) No later than four (4) Business Days prior to the Closing, the Company shall cause to be prepared and delivered to Kenexa Technology, a certificate signed by the Chief Financial Officer of the Company attaching a reasonable and good faith estimate of the Closing Working Capital (the “ Estimated Working Capital ”). The Estimated Working Capital shall be calculated in the same manner as Working Capital is to be calculated pursuant to this Agreement and shall be presented in the same form as the Form Working Capital Statement. Upon delivery of the Estimated Working Capital to Kenexa Technology, the Company shall provide Kenexa Technology and its representatives with reasonable access to the officers, employees, agreements and books and records of the Company to verify the reasonableness of such amount. At the Closing, the Enterprise Value (and as a result, the Total Merger Consideration and the Net Merger Consideration) shall be reduced on a dollar for dollar basis by the Estimated Working Capital Adjustment. “ Estimated Working Capital Adjustment ” shall mean an amount to be determined as follows: (i) in the event that the Estimated Working Capital is less than the Working Capital Target, and the amount by which the Estimated Working Capital is less than the Working Capital Target exceeds $150,000, the Estimated Working Capital Adjustment shall be the amount by which the Estimated Working Capital is less than the Working Capital Target; or (ii) (A) in the event that the Estimated Working Capital is less than the Working Capital Target, but the amount by which the Estimated Working Capital is less than the Working Capital Target is less than or equal to $150,000, or (B) in the event that the Estimated Working Capital is equal to or exceeds the Working Capital Target, then (in the case of (A) or (B)) the Estimated Working Capital Adjustment shall be zero.

 

(c) Kenexa Technology shall cause to be prepared and, as soon as practical, but in no event later than ninety (90) days after the Closing Date, shall cause to be delivered to the Representative, a calculation of the Closing Working Capital (the “ Initial Calculation ”), together with such schedules and data with respect to the determination of the Closing Working

 

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Capital as may be appropriate to support such Initial Calculation and a report of BDO Seidman, LLP on the Initial Calculation, which report shall set forth in reasonable detail the basis for such determination. The Closing Working Capital shall be determined in accordance with this Agreement and shall be in the same form as the Form Working Capital Statement. Kenexa Technology agrees that, following the Closing through the date that the Closing Working Capital becomes final and binding on the parties hereto in accordance with the terms of this Agreement, it will not take, and will not permit the Surviving Corporation to take, any actions with respect to any accounting books, records, policies or procedures on which the Closing Working Capital is to be based or derived from that would impede or delay the determination of the Closing Working Capital in the manner and utilizing the methods required by this Agreement.

 

(d) If the Representative disagrees in whole or in part with the Initial Calculation, then within forty-five (45) days after its receipt of the Initial Calculation, it shall notify Kenexa Technology of such disagreement in writing (the “ Notice of Disagreement ”), setting forth in reasonable detail the particulars of any such disagreement; provided , however , that any such objection shall be limited to any failure on the part of Kenexa Technology to prepare the Initial Calculation in accordance with this Section 2.13 , Section 2.14 and Exhibit A and to mathematical or similar errors. To be effective, any such Notice of Disagreement shall include a copy of Kenexa Technology’s Initial Calculation marked to indicate those specific line items that are in dispute (the “ Disputed Line Items ”) and shall be accompanied by the Representative’s calculation of each of the Disputed Line Items and the Representative’s revised Initial Calculation setting forth its determination of the Closing Working Capital. Kenexa Technology shall provide to Representative, in response to any reasonable request submitted by Representative during the fifteen (15) day period after Representative’s receipt of the Initial Calculation, within ten (10) Business days of such request by Representative, access to the working papers, schedules and calculations of Kenexa Technology solely for the purpose of reviewing the Initial Calculation to the extent any such information is not otherwise included in the information provided to Representative by Kenexa Technology in accordance with Section 2.13(c) . To the extent the Representative provides a Notice of Disagreement within such 45-day period, all items that are not Disputed Line Items shall be final, binding and conclusive for all purposes hereunder. In the event that the Representative does not provide a Notice of Disagreement within such 45-day period, the Representative shall be deemed to have accepted in full the Initial Calculation as prepared by Kenexa Technology, which shall be final, binding and conclusive for all purposes hereunder. In the event any Notice of Disagreement is timely provided and contains the proper information as aforesaid, Kenexa Technology and the Representative shall use commercially reasonable efforts for a period of thirty (30) days (or such longer period as they may mutually agree) to resolve any Disputed Line Items. During such 30-day (or longer) period, Kenexa Technology and the Representative shall have access to the working papers, schedules and calculations of the other used in the preparation of the Initial Calculation and the Notice of Disagreement and the determination of the Closing Working Capital and Disputed Line Items, and reasonable access to the officers, employees, agents, agreements and books and records of the other. If, at the end of such period, Kenexa Technology and the Representative are unable to resolve such Disputed Line Items, then Grant Thornton LLP or, failing such independent accounting firm’s willingness to so serve, such other independent accounting firm of recognized national standing as may be mutually selected by Kenexa Technology and the Representative shall resolve any remaining Disputed Line Items; provided , however , if Kenexa Technology and the Representative are unable to so agree within 5 days after

 

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Grant Thornton LLP informs either Kenexa Technology or the Representative of its unwillingness to so serve (the “ Decline Date ”), then within 10 days after the Decline Date, each of Kenexa Technology and the Representative shall select an office of an independent accounting firm of recognized national standing and such two firms shall, within 15 days after the Decline Date, then select a third independent accounting firm of recognized national standing to resolve any remaining Disputed Line Items (any such accountants selected pursuant to this Section 2.13 to resolve Disputed Line Items, the “ Settlement Accountants ”). Kenexa Technology and the Representative will enter into reasonable and customary arrangements for the services to be rendered by the Settlement Accountants under this Section 2.13 . The Settlement Accountants shall determine as promptly as practicable (and in any event within 30 days from the date that the dispute is submitted to it), whether the Initial Calculation was prepared in accordance with this Section 2.13 , Section 2.14 and Exhibit A and whether and to what extent (if any) the Closing Working Capital requires adjustment, limiting its review, however, only to the Disputed Line Items so submitted. The Settlement Accountants shall only resolve each Disputed Line Item by choosing the amounts submitted by either Kenexa Technology or the Representative for such Disputed Line Item. The Surviving Corporation and the Representative shall each furnish to the Settlement Accountants such workpapers and other documents and information relating to the disputed issues, and shall provide interviews and answer questions, as such Settlement Accountants may reasonably request. The determination of the Settlement Accountants shall be final, conclusive and binding on the parties. The fees and expenses of the Settlement Accountants shall be paid one half by each of Kenexa Technology and the Representative (such expenses of the Representative being chargeable to the General Escrow Account pursuant to Section 8.10 ). Each of Kenexa Technology and the Representative shall be responsible for its own costs and expenses incurred in connection with this Section 2.13 (including the amount it is required to pay to the Settlement Accountants).

 

(e) “ Final Working Capital Adjustment ” shall mean an amount to be determined as follows: (i) in the event that the Closing Working Capital as finally determined in accordance with this Section 2.13 is less than the Working Capital Target, and the amount by which such Closing Working Capital is less than the Working Capital Target exceeds $150,000, the Final Working Capital Adjustment shall be the amount by which the Closing Working Capital as finally determined in accordance with this Section 2.13 is less than the Working Capital Target; or (ii) (A) in the event that the Closing Working Capital as finally determined in accordance with this Section 2.13 is less than the Working Capital Target, but the amount by which such Closing Working Capital is less than the Working Capital Target is less than or equal to $150,000, or (B) in the event that the Closing Working Capital as finally determined in accordance with this Section 2.13 is equal to or exceeds the Working Capital Target, then (in the case of (A) or (B)) the Final Working Capital Adjustment shall be zero.

 

(f) The “ Net Adjustment Amount ,” which may be positive or negative, shall mean the Final Working Capital Adjustment minus the Estimated Working Capital Adjustment.

 

(g) If the Net Adjustment Amount is negative, then Kenexa Technology shall, or shall cause the Surviving Corporation to deliver, by wire transfer of immediately available funds to the Payment Agent for the benefit of the Stockholders, an amount equal to the absolute value of the Stockholders’ Portion of the Net Adjustment Amount, and to the Surviving Corporation for the benefit of the Option Holders, an amount equal to the absolute value of the

 

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Option Holders’ Portion of the Net Adjustment Amount, in each case, together with interest thereon from the Closing Date to the date of payment at a rate of interest of 4% per annum. Kenexa Technology and the Representative shall direct and cause the Payment Agent to promptly transmit upon receipt of such amounts by the Payment Agent (or if such amount is deemed by the Representative to be insufficient to justify a separate payment, to retain such amount until it may be transmitted with additional amounts) to each Stockholder his, her, or its pro rata portion of such amount and interest, subject to applicable withholding, and Kenexa Technology shall cause the Surviving Corporation to pay to each Option Holder, his or her respective portion of such amount and interest, subject to applicable withholding, promptly upon receipt of such amounts by the Surviving Corporation.

 

(h) If the Net Adjustment Amount is a positive number, then Kenexa Technology and the Representative shall provide a joint written instruction to the Escrow Agent to deliver from the General Escrow Account to the Surviving Corporation, by wire transfer of immediately available funds to an account designated in writing by the Surviving Corporation, an amount equal to the Net Adjustment Amount, together with interest thereon from the Closing Date to the date of payment at a rate of interest of 4% per annum.

 

(i) The Net Adjustment Amount paid pursuant to this Section 2.13 , if any, shall be deemed an adjustment to the Enterprise Value. For purposes of this Section 2.13 , all computations of interest shall be made on the basis of a year of 365 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Any payments made by the Surviving Corporation or the Escrow Agent pursuant to this Section 2.13 shall be made by wire transfer of immediately available funds within ten (10) days after the date on which the Closing Working Capital is final and binding on the parties.

 

Section 2.14. Calculations . Except as otherwise expressly provided in this Agreement, the parties hereto covenant and agree that no amount shall be (or is intended to be) included, in whole or in part (either as an increase or a reduction), more than once in the calculation of (including any component of) the Enterprise Value, the Total Merger Consideration, Estimated Working Capital, Closing Working Capital or any other calculated amount pursuant to this Agreement if the effect of such additional inclusion (either as an increase or a reduction) would be to cause such amount to be over- or under-counted for purposes of such calculation. The parties hereto further covenant and agree that if any provision of this Agreement requires an amount or calculation to be “determined in accordance with this Agreement and GAAP” (or words of similar import), then to the extent that the terms of this Agreement (including Exhibit A ) conflict with, or are inconsistent with, GAAP in connection with such determination, the terms of this Agreement (including Exhibit A ) shall control.

 

Section 2.15. Net Operating Loss Adjustment .

 

(a) The Company has completed a summary assessment of its federal income Tax net operating loss carryforwards (“ NOLs ”) and has estimated that, as of the Closing Date (giving effect to the transactions contemplated by this Agreement, including the Merger, and all adjustments to the consideration paid hereunder), following the Closing, $1,300,000 of NOLs

 

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(the “ Targeted NOL Amount ”) will be available annually to offset federal taxable income of the Surviving Corporation up to an aggregate amount of $20,000,000 of NOLs.

 

(b) Within ninety (90) days following the Closing Date, Kenexa Technology shall cause to be prepared and delivered to the Representative an equity roll-forward analysis that determines the availability, as of the Closing Date (giving effect to the transactions contemplated by this Agreement, including the Merger, and all adjustments to the consideration paid hereunder), of the NOLs under Section 382 of the Code to offset federal taxable income of the Surviving Corporation (the “ NOL Study ”), such determination of availability to be made without reference to any Tax attributes of the Surviving Corporation or its Affiliates. The availability of the NOLs as determined pursuant to the NOL Study shall not take into account any transactions not contemplated by or made in connection with this Agreement which take place on the Closing Date after the Closing. The Representative shall fully cooperate in the preparation of the NOL Study, including by obtaining and providing any information and documentation from Stockholders reasonably requested by Kenexa Technology. To the extent that information necessary to complete the NOL Study is not available or provided, Kenexa Technology shall make reasonable assumptions to account for the unavailable information. If Kenexa Technology shall not have delivered the NOL Study to the Representative within such 90-day period, the Targeted NOL Amount shall conclusively be deemed available for all purposes of this Agreement.

 

(c) In the event that the amount of NOLs that would be available to offset federal taxable income of the Surviving Corporation in any taxable year ending after the Closing Date (regardless of the actual amount of federal taxable income in any such year), as determined by the NOL Study (the “ Available NOL Amount ”), is less than the Targeted NOL Amount, the Surviving Corporation shall be entitled to receive, from the General Escrow Account, an amount equal to (i) the difference between the Targeted NOL Amount and the Available NOL Amount, multiplied by (ii) 40%, discounted by (iii) the mid-term applicable federal rate for the month in which the Closing Date occurs, compounded annually for the number of years after the year including the Closing Date in which the Available NOL Amount is projected to be used according to the NOL Study (the “ NOL Adjustment Payment ”). Notwithstanding anything else in this Agreement, in no event shall the NOL Adjustment Payment exceed the balance of the General Escrow Account at the time such payment is made. An example of the calculations described in this Section 2.15(c) is attached hereto as Exhibit B .

 

(d) If the Representative does not provide Kenexa Technology with written notice within 30 days of its receipt of the NOL Study of its disagreement with the results of such study (the “ Notice of NOL Disagreement ”), the Representative shall be deemed to have accepted in full the results of the NOL Study, which shall be final, binding and conclusive for all purposes hereunder. In the event a Notice of NOL Disagreement is timely provided to Kenexa Technology, Kenexa Technology and the Representative shall use commercially reasonable efforts for a period of 15 days (or such longer period as they may mutually agree) to resolve any and all disagreements contained therein. During such 15-day (or longer) period, Kenexa Technology and the Representative shall have access to the working papers, schedules and calculations of the other used in the preparation of the NOL Study and the Notice of NOL Disagreement and the determination of the Available NOL Amount. If, at the end of such period, Kenexa Technology and the Representative are unable to resolve such disagreements,

 

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then an independent accountant (selected in accordance with the procedure set forth in Section 2.13) shall resolve any remaining disagreements. Kenexa Technology and the Representative will enter into reasonable and customary arrangements for the services to be rendered by such accountant under this Section 2.15 . The accountant shall determine as promptly as practicable (and in any event within 30 days from the date that the dispute is submitted to it) whether and to what extent (if any) the Available NOL Amount as determined pursuant to the NOL Study requires adjustment. Kenexa Technology and the Representative shall each furnish to such accountant such work papers and other documents and information relating to the disputed issues, and shall provide interviews and answer questions, as such accountant may reasonably request. The determination of the accountant shall be final, conclusive and binding on the parties. The fees and expenses of the accountant shall be paid one half by each of Kenexa Technology and the Representative (such expenses of the Representative being chargeable to the General Escrow Account pursuant to Section 8.10 ).

 

(e) Upon the final determination of the Available NOL Amount, Kenexa Technology and the Representative shall provide a joint written instruction to the Escrow Agent to deliver from the General Escrow Account to the Surviving Corporation, by wire transfer of immediately available funds to an account designated in writing by the Surviving Corporation, an amount equal to the NOL Adjustment Payment.

 

Section 2.16. Dissenting Shares .

 

(a) Notwithstanding any provision of this Agreement to the contrary, shares of Common Stock that are outstanding immediately prior to the Effective Time and which are held by Stockholders who have exercised and perfected appraisal rights for such shares of Common Stock in accordance with the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive the applicable portion of the Total Merger Consideration. Such Stockholders shall be entitled to receive payment of the appraised value of such shares of Common Stock held by them in accordance with the DGCL, unless and until such Stockholders fail to perfect or effectively withdraw or otherwise lose their appraisal rights under the DGCL. All Dissenting Shares held by Stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their right to appraisal of such shares of Common Stock under the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the applicable portion of the Total Merger Consideration in accordance with this Agreement, without any interest thereon.

 

(b) The Company shall give Kenexa Technology prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to the DGCL and received by the Company. Prior to the Effective Time, the Company shall not, except with the prior written consent of Kenexa Technology, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. After the Effective Time, the Representative shall direct all negotiations and proceedings with respect to demands for appraisal under the DGCL, but shall not, except with the prior written consent of Kenexa Technology, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. If, as a result of any settlement or a determination that any Stockholder is entitled to receive as payment for his or its Common Stock an amount per share that exceeds the Per Share Merger Consideration (the

 

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aggregate amount of such excess for all dissenting Company stockholders, the “ Dissenting Shares Reduction Amount ”), then Kenexa Technology and the Representative shall provide a joint written instruction to the Escrow Agent to deliver from the General Escrow Account to the Surviving Corporation, by wire transfer of immediately available funds to an account designated in writing by the Surviving Corporation, an amount equal to the absolute value of the Dissenting Shares Reduction Amount.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth on the disclosure schedule delivered by the Company to Kenexa Technology in connection with this Agreement (the “ Company Disclosure Schedule ”), the Company hereby represents and warrants to each of Parent, Kenexa Technology and Acquisition Sub as follows:

 

Section 3.1. Organization . The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to conduct the Business as it is currently being conducted and to own or lease, as applicable, the Assets. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect on the Company. Copies of the Company’s Certificate of Incorporation and bylaws, and all amendments thereto, heretofore delivered to Kenexa Technology, are true, correct and complete as of the date hereof. Copies of the certificate of incorporation and bylaws of each Subsidiary, and all amendments thereto, heretofore made available to Kenexa Technology, are true, correct and complete as of the date hereof. Schedule 3.1 lists the jurisdictions in which the Company is qualified to do business as a foreign corporation.

 

Section 3.2. Subsidiaries .

 

(a) Except as set forth on Schedule 3.2 , the Company does not have any Subsidiaries and does not, directly or indirectly, own any interest in any other Person.

 

(b) Each Subsidiary is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as reflected on Schedule 3.2 , with full power and authority to conduct its business as it is currently being conducted and to own or lease, as applicable, its Assets. Each Subsidiary is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect on the Company. Schedule 3.2 lists the jurisdictions in which each Subsidiary is organized and qualified to do business as a foreign entity.

 

(c) Schedule 3.2 sets forth the authorized capital of each of the Subsidiaries, together with the number of issued and outstanding securities of each Subsidiary that are owned by the Company or one of its Subsidiaries. All the outstanding securities of each of the

 

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Subsidiaries have been duly authorized and validly issued and are fully paid, nonassessable and have not been issued in violation of preemptive rights.

 

(d) None of the Subsidiaries has granted any outstanding options, warrants, rights or other securities convertible into or exchangeable or exercisable for shares of common stock of such Subsidiary or any other commitments or agreements providing for the issuance of additional shares, the sale of treasury shares or for the repurchase or redemption of shares of such Subsidiary’s capital stock. There are no (i) agreements of any kind which obligate any of the Subsidiaries to issue, purchase, redeem or otherwise acquire any of its outstanding capital, including statutory or contractual preemptive rights or rights of first refusal with respect to the capital stock of any Subsidiary, (ii) stock appreciation rights, phantom stock or similar plans or rights pursuant to which any Subsidiary has any obligations or (iii) voting trusts, proxies, or similar agreements to which the Company or any Subsidiary is a party with respect to the capital stock of any Subsidiary. No bonds, debentures, notes or other instruments or evidence of indebtedness having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which any Subsidiary’s stockholders may vote are issued or outstanding.

 

Section 3.3. Authorization .

 

(a) The Company has all requisite corporate power and authority, and has taken all corporate action necessary, to execute, deliver and perform this Agreement and the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly approved by the board of directors of the Company. No other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, other than obtaining the Stockholder Approval. This Agreement and the other Transaction Documents to which the Company or any of its Subsidiaries is a party have been, or will be, duly executed and delivered by the Company or such Subsidiary (as applicable) and, assuming the due authorization, execution and delivery hereof by Parent, Kenexa Technology and Acquisition Sub, are, or will be, the valid and binding obligation of the Company or any such Subsidiary, as applicable, enforceable against it in accordance with their terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and except insofar as the availability of equitable remedies may be limited by applicable law. The officers and directors of the Company and each Subsidiary are listed on Schedule 3.3 .

 

(b) The affirmative vote of the holders of a majority of all shares of Common Stock outstanding on the record date and voting together as a single class are the only votes necessary (under applicable law, the Certificate of Incorporation, the bylaws or any agreement, contract or instrument to which the Company is a party or by which it is expressly bound) to be obtained from the holders of any class or series of the capital stock of the Company to approve this Agreement and the Merger (such affirmative vote, whether at a meeting of shareholders of

 

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the Company, however called, or in connection with any written consent of the shareholders of the Company, shall herein be referred to as “ Stockholder Approval ”).

 

(c) The board of directors of the Company has approved this Agreement, and the Transaction Documents to which the Company is a party, and the transactions contemplated hereby or thereby, and has directed that this Agreement be submitted to shareholders for their approval.

 

Section 3.4. Capitalization .

 

(a) The Company’s authorized capital stock consists of thirty-five million (35,000,000) shares, of which:

 

(i) thirty million (30,000,000) shares are designated as common stock, par value $.01 per share, of which 4,530,281 shares are issued and outstanding; and

 

(ii) five million (5,000,000) shares are designated as preferred stock, par value $.01 per share, none of which are issued and outstanding.

 

All such issued and outstanding Shares have been duly authorized and validly issued and are fully paid and non-assessable and have not been issued in violation of any preemptive rights. There have been no anti-dilution adjustments under the terms of any of the Company’s outstanding securities. The Company has 137,380 treasury shares of Common Stock.

 

(b) Except as set forth on Schedule 3.4 , there are no (i) outstanding options, warrants, agreements, convertible or exchangeable securities or other commitments pursuant to which the Company is or may become obligated to issue, sell, transfer, purchase, return or redeem any securities of the Company, (ii) securities of the Company reserved for issuance for any purpose, (iii) agreements pursuant to which registration rights in the securities of the Company have been granted, (iv) statutory or contractual preemptive rights or rights of first refusal with respect to the Shares, (v) stock appreciation rights, phantom stock or similar plans or rights pursuant to which the Company has any obligations or (vi) voting trusts, proxies, or similar agreements with respect to the capital stock of the Company. No bonds, debentures, notes or other instruments or evidence of indebtedness having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which the Company’s stockholders may vote are issued or outstanding.

 

(c) Attached hereto as Schedule 3.4 is an accurate and complete list of the holders of Company Options (the “ Option Holders ”), which list sets forth the name of each Option Holder, the Company Options held by such Option Holder, the exercise price for such Company Options.

 

(d) At the Effective Time, each outstanding Company Option, whether vested or unvested in accordance with its terms (including by reason of this Agreement and the transactions contemplated hereby), other than Company Options with respect to which the Company has received an Option Cancellation Agreement, duly executed by the Option Holder, shall be canceled without consideration pursuant to the applicable provisions of the Stock Option Plan.

 

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Section 3.5. Assets; Personal Property . Except as set forth on Schedule 3.5 , the Company and the Subsidiaries have good and marketable title to, or in the case of leased or licensed Assets (other than Leased Real Property, which is covered by Section 3.7(b) ), valid and subsisting leasehold or licensed interests in, the Assets owned, leased or licensed by them as of the date of this Agreement, free and clear of all Encumbrances, except for Permitted Encumbrances. The Assets constitute all of the assets, rights and properties, tangible or intangible, real or personal, which are used in connection with the operation of the Business, as currently operated. All of the Personal Property owned by the Company and the Subsidiaries is in good operating condition and repair (except for ordinary wear and tear and scheduled maintenance).

 

Section 3.6. Material Contracts .

 

(a) Schedule 3.6 discloses all written contracts, agreements or instruments described in clauses (i) through (xiii)  below, currently in effect, to which the Company or a Subsidiary is a party or by which it or its Assets is bound (“ Material Contracts ”):

 

(i) each agreement or arrangement of the Company or any Subsidiary that requires the payment or incurrence of Liabilities by the Company or any Subsidiary, subsequent to the date of this Agreement, of more than $10,000 annually;

 

(ii) each agreement or arrangement of the Company or any Subsidiary that requires the rendering of services by the Company or any Subsidiary, subsequent to the date of this Agreement, of more than $10,000 annually;

 

(iii) each material sale, distribution, commission, marketing, agent, franchise, technical assistance or similar agreement relating to or providing for the marketing and/or sale of products or services to which the Company or any Subsidiary is a party or by which any of them is otherwise bound;

 

(iv) each material acquisition, partnership, joint venture, teaming arrangement or other similar contract, arrangement or agreement entered into by the Company or any Subsidiary;

 

(v) each agreement, arrangement, contract, commitment or obligation of the Company or any Subsidiary restricting or otherwise affecting the ability of the Company or any Subsidiary to compete in the Business or otherwise in any jurisdiction;

 

(vi) each contract with any of its directors, officers, Equityholders or Affiliates, and with any financial advisors, employees or consultants that requires the payment or incurrence of Liabilities of more than $100,000 annually, under which there are remaining obligations of either party after the Closing, including indemnification agreements and any financial advisory, oversight or similar agreement;

 

(vii) each contract or commitment involving any Governmental Authority;

 

(viii) each power of attorney;

 

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(ix) each lease for capital equipment that provides for ongoing payments by the Company or any Subsidiary in excess of $10,000 annually;

 

(x) each shareholders agreement, registration rights agreement, voting agreement, voting trust agreement or similar agreements to which the Company or any Subsidiary is subject;

 

(xi) each contract or commitment either (A) requiring any payments or (B) the terms of which provide for an increase in the amount of any payment, in either case solely because of the consummation of the transactions contemplated by this Agreement or the other Transaction Documents;

 

(xii) any indenture, mortgage, promissory note, loan agreement or other agreement or commitment for the borrowing of money, for a line of credit or for any capital leases; and

 

(xiii) each other existing agreement of the Company or any Subsidiary, not otherwise covered by clauses (i) through (xii) , the loss of which would result in a Material Adverse Effect on the Company.

 

(b) True, correct and complete copies of such Material Contracts have heretofore been made available to Kenexa Technology. Except as set forth in Schedule 3.6 , each Material Contract is in full force and effect and is valid and enforceable by and against the Company or a Subsidiary and, to the Knowledge of the Company, each Material Contract is valid and enforceable against the other parties thereto, in each case in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors’ rights generally and except insofar as the availability of equitable remedies may be limited by applicable law. Neither the Company nor any Subsidiary is in Default under any Material Contract, nor has it received written notice or, to the Knowledge of the Company, oral notice of any Default under any such Material Contract.

 

(c) For the avoidance of doubt, Material Contracts do not include Real Property Leases, which are covered in Section 3.7(b) , contracts in connection with Company Intellectual Property, which are covered in Section 3.17(d) , or contracts in connection with Employee Plans, which are covered in Section 3.16 .

 

Section 3.7. Property; Facilities .

 

(a) Owned Real Property . Neither the Company nor any Subsidiary has any Owned Real Property.

 

(b) Leased Real Property . Schedule 3.7(b) sets forth a true, correct and complete list of the Real Property Leases (including all modifications and amendments thereto, including any subordination, non-disturbance and attornment agreements entered into by the Company or a Subsidiary). All Real Property is held by the Company or a Subsidiary under valid leasehold interests. Each of the Real Property Leases is valid and enforceable by and against the Company or a Subsidiary and, to the Knowledge of the Company, each Real Property

 

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Lease is valid and enforceable against the other parties thereto, in each case in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors’ rights generally and except insofar as the availability of equitable remedies may be limited by applicable law. Neither the Company nor any Subsidiary is in Default under, or has received written notice or, to the Knowledge of the Company, oral notice, of any Default under any of the Real Property Leases.

 

Section 3.8. No Conflict or Violation; Required Consents . Except as set forth in Schedule 3.8 , neither the execution, delivery or performance of this Agreement or the other Transaction Documents nor the consummation of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof, will (i) violate or conflict with any provision of the certificate of incorporation, bylaws, certificate of formation or other organizational documents of the Company or any Subsidiary, (ii) violate, conflict with, or result in or constitute a Default under, or result in the termination of, or accelerate the performance required by, any of the terms, conditions or provisions of any Material Contract, Real Property Lease, contracts listed on Schedule 3.17(a) and (d)  or contracts listed on Schedule 3.16(a)(ii) or (b)(i) , (iii) violate, conflict with, contravene or give any Person the right to exercise any remedy or obtain any relief under, any Court Order or Regulation, or (iv) result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the properties or Assets of the Company or any of its Subsidiaries.

 

Section 3.9. Financial Statements .

 

(a) The Company heretofore has delivered to Kenexa Technology true, correct and complete copies of the Financial Statements and, in the case of the Year-End Financial Statements, the related notes thereto and accompanied by true and correct copies of the reports thereon of Brown & Brown, LLP. The Interim Financial Statements were prepared on a basis, and using principles, consistent with the preparation of the Year-End Financial Statements. The Financial Statements and notes thereto (i) have been prepared from the books and records of the Company and the Subsidiaries, (ii) have been prepared in accordance with GAAP on a consistent basis throughout the indicated periods, except that the unaudited financial statements contain no footnotes or year end adjustments, none of which would, to the Knowledge of the Company, have a Material Adverse Effect on the Company, and (iii) present fairly in all material respects the consolidated financial condition, results of operations, cash flow and shareholders’ equity of the Company and the consolidated Subsidiaries for the periods covered and as of the respective dates thereof.

 

(b) Neither the Company, nor any Subsidiary, nor, to the Knowledge of the Company, any director, officer, employee, auditor, accountant, or representative of the Company or any Subsidiary has received or otherwise had or obtained knowledge of any complaint, allegation, assertion, or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Subsidiary or its respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or such Subsidiary has engaged in questionable accounting or auditing or auditing practices.

 

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(c) There is not now, nor has there been at any time: (i) any significant deficiencies in the design or operation of the Company and its Subsidiaries’ internal controls; (ii) any material weaknesses in the Company and its Subsidiaries’ internal controls; or (iii) any fraud, whether or not