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Exhibit
10.20
SERIES A REDEEMABLE
PARTICIPATING PREFERRED STOCK AND
CLASS C COMMON STOCK PURCHASE
AGREEMENT
by and among
KENEXA
CORPORATION,
and
WESTBURY EQUITY PARTNERS
SBIC, L.P.
Dated as of March 29,
2001
SERIES A REDEEMABLE
PARTICIPATING PREFERRED STOCK AND
CLASS C COMMON STOCK PURCHASE
AGREEMENT
This Series A Redeemable
Participating Preferred Stock and Class C Common Stock Purchase
Agreement (the “Agreement”) dated as of March 29, 2001
by and among Kenexa Corporation, a Pennsylvania corporation
(“Kenexa” and together with its Subsidiaries, the
“Company”) and Westbury Equity Partners SBIC, L.P., a
Delaware limited partnership (“Westbury” or the
“Investor”), provides for the issuance and sale of
certain shares of Series A Redeemable Participating Preferred Stock
and Class C Common Stock of the Company. To the extent the Investor
assigns certain of its rights under this Agreement to any
co-investment fund or Affiliate, such entities, together with the
Investor, will also be referred to as the
“Investor.”
Recitals
WHEREAS, the Company wishes
to issue and sell to the Investor and the Investor wishes to
purchase from the Company, upon the terms and conditions of this
Agreement, 6,000 shares of Series A Redeemable Participating
Preferred Stock, with a stated value $1,000 per share (the
“Series A Preferred”) and 280,000 shares of Class C
Common Stock, $.01 par value (“Class C Common”), of the
Company. The Series A Preferred and the Class C Common are referred
to herein collectively as the “Purchased Securities”;
and
WHEREAS, the terms of the
Series A Preferred and the terms of the Class C Common are set
forth in the Second Amended and Restated Articles of Incorporation
of the Company, a copy of which is set forth as Exhibit A hereto,
which has been approved by the Board of Directors and the
stockholders of the Company and has been filed by the Company with
the Pennsylvania Secretary of State’s office prior to the
Closing hereunder; and
WHEREAS, the Board of
Directors of the Company has approved and deems it advisable and in
the best interest of the Company to complete the transactions
hereinabove described upon the terms and subject to the conditions
set forth herein; and
WHEREAS, contemporaneously
with the execution of this Agreement, the parties hereto are
executing and delivering (1) the Second Amended and Restated
Registration Rights Agreement dated as of the date hereof among the
Company, Parthenon Investors, L.P., PCIP Investors, JMH Partners
Corp., Shad Run Investments, L.P., TSG Co-Investors, LLC, The
Shattan Group, LLC, Thomas S. Shattan, Gregory E. Mendel, G. Kevin
Fechtmeyer and Wafra Acquisition Fund 14, L.P. and Westbury, in the
form attached hereto as Exhibit B (the “Second Amended
Registration Rights Agreement”) pursuant to which the Company
has agreed to provide certain registration rights under the
Securities Act of 1933, as amended (the “Securities
Act”); and (2) the Second Amended and Restated Stockholders
Agreement dated as of the date hereof among the Company, Parthenon
Investors, L.P., PCIP Investors, JMH Partners Corp., Shad Run
Investments, L.P., TSG Co-Investors, LLC, The Shattan Group, LLC,
Thomas S. Shattan, Gregory E. Mendel, G. Kevin Fechtmeyer, Wafra
Acquisition Fund 14, L.P. and Westbury, in the form attached hereto
as Exhibit C (the “Second Amended Stockholders
Agreement”); and
WHEREAS, this Agreement, the
Second Amended Registration Rights Agreement and the Second Amended
Stockholders Agreement are being executed in connection with the
following documents which were entered into on the Initial Closing
Date by the Company and the other parties thereto: the Series A
Redeemable Participating Preferred Stock and Class C Common Stock
Purchase Agreement by and among the Company and Wafra Acquisition
Fund 14, L.P., the Series A Redeemable Participating Preferred
Stock and Class C Common Stock Purchase Agreement by and among the
Company, Parthenon Investors, L.P. and PCIP Investors, the Exchange
Agreement by and among the Company, Parthenon Investors, L.P., PCIP
Investors, JMH Partners Corp., Shad Run Investments, L.P and TSG
Co-Investors, LLC, the Put Termination Agreement between the
Company and each of Parthenon Investors, L.P., PCIP Investors, JMH
Partners Corp., Shad Run Investments, L.P and TSG Co-Investors,
LLC, the Call Termination Agreements between the Company and each
of Parthenon Investors, L.P., PCIP Investors, JMH Partners Corp.,
Shad Run Investments, L.P and TSG Co-Investors, LLC, Amendment No.
1 to the Class B Common Stock and Warrant Purchase Agreement by and
among the Company, Parthenon Investors, L.P., PCIP Investors, JMH
Partners Corp., Shad Run Investments, L.P and TSG Co-Investors,
LLC, Amendment to Class A-1 and Class A-2 Common Stock Purchase
Warrants, Amendment to Class B Common Stock Purchase Warrants,
Amendment to Class D Common Stock Purchase Warrants and Amendment
to Class E Common Stock Purchase Warrants.
Agreement
Therefore, in consideration
of the foregoing and the mutual agreements and covenants set forth
below, the parties hereto hereby agree as follows:
1. DEFINITIONS.
Certain capitalized terms are
used in this Agreement as specifically defined herein. These
definitions are set forth or referred to in Section 10
hereof.
2. THE ISSUANCE AND
SALE.
2.1 The Issuance and
Sale . On the Closing Date (as defined in Section 3.1 below),
subject to the terms and conditions set forth in this Agreement,
the Investor will purchase and the Company will issue and sell: (a)
6,000 shares of the Company’s Series A Preferred at a price
per share of $1,000.00, and (b) 280,000 shares of the
Company’s Class C Common at a price per share of $.01. The
aggregate purchase price (the “Purchase Price”) for the
Purchased Securities equals $6,002,800.
3. THE CLOSING.
3.1 Time and Place of
Closing . The closing of the purchase and sale of the Purchased
Securities and the other transactions contemplated by this
Agreement and the other Transaction Documents (the
“Closing”) shall take place at the offices of Pepper
Hamilton LLP, 3000 Two Logan Square, 18th and Arch Streets,
Philadelphia, or such other location as the parties may agree, at
10:00 a.m. (Philadelphia time) on March 29, 2001 or if the
conditions to Closing set forth in Sections 8 and 9 hereof shall
not have been satisfied at such date, at such later time or date
prior to termination of this Agreement as the Investor may specify
by not fewer than three (3) business days prior written notice to
the Company (such date being referred to herein as the
“Closing Date”).
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3.2. Closing Date
Transfers . At the Closing:
3.2.1 The Investor will
deliver the Purchase Price to the Company by wire transfer of
immediately available federal funds as directed by the Company;
and
3.2.2 the Company will issue
to the Investor certificates in substantially the Form of Exhibits
F-1 and F-2 hereto, representing the Purchased
Securities.
4. REPRESENTATIONS AND
WARRANTIES REGARDING THE COMPANY.
In order to induce the
Investor to enter into and perform this Agreement and to consummate
the transactions contemplated hereby, the Company represents and
warrants to the Investor as follows:
4.1. Organization, Power,
Standing and Authorization .
4.1.1 The Company and each of
its Subsidiaries is a corporation duly organized or formed, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or formation, has all requisite corporate power
and authority to execute, deliver and perform each of the
Transaction Documents to which it is a party, to carry on the
Business as currently conducted and to consummate the transactions
contemplated hereby. The Company has heretofore delivered to the
Investor a true and complete copy of (a) the Charter and By-laws of
the Company and each of its Subsidiaries other than Synex
Technologies and Talentpoint UK Limited, (b) the minute books of
the Company and each of its Subsidiaries other than Synex
Technologies and Talentpoint UK Limited and (c) the stock or other
ownership interest ledger of the Company and each of its
Subsidiaries other than Synex Technologies and Talentpoint UK
Limited, each of which including that of Synex Technologies and
Talentpoint UK Limited is accurate and complete through the date
hereof. The Company is duly qualified or licensed to do business as
a foreign corporation, and is in good standing as such, in each
jurisdiction listed on Schedule 4.1, and the jurisdictions so
listed are the only jurisdictions where the failure to be so
qualified or licensed and in good standing would have a Material
Adverse Effect.
4.1.2 The execution and
delivery of this Agreement and the other Transaction Documents by
the Company, the issuance of the Purchased Securities to the
Investor by the Company, and the performance of the obligations of
the Company contemplated hereby and by the other Transaction
Documents have been duly and validly authorized by all necessary
corporate and stockholder action, as the case may be.
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4.2. Capitalization and
Investments .
4.2.1 The total capital stock
authorized and the capitalization of the Company is as set forth on
Schedule 4.2.1. Schedule 4.2.1 also sets forth the total capital
stock authorized and the capitalization of the Company after giving
effect to all of the Company’s issuances of shares of Series
A Preferred and Class C Common on the date hereof. All of the
outstanding shares of capital stock of the Company are duly
authorized and validly issued, fully paid and
nonassessable.
4.2.2 Except as set forth on
Schedule 4.2.2, there is no Contractual Obligation or Charter or
By-law provision which obligates the Company to issue, purchase or
redeem, or make any payment in respect of, any shares of capital
stock or other securities convertible into or exchangeable for
shares of capital stock or which provides for any stock
appreciation or similar right or grants any right to share in the
equity, income, revenues or cash flow of the Company.
4.2.3 Except as set forth on
Schedule 4.2.3, there are no voting trusts, stockholder agreements,
commitments, undertakings, understandings, proxies or other
restrictions to which any Existing Stockholder or the Company is a
party which directly or indirectly restrict or limit in any manner,
or otherwise relate to, the voting, sale or other disposition of
any shares of capital stock of the Company.
4.2.4 Except as disclosed on
Schedule 4.2.4, all of the outstanding shares of capital stock of
the Subsidiaries of the Company are duly authorized, validly
issued, fully paid and nonassessable and are owned, beneficially
and of record, by the Company free and clear of any Liens. Except
as disclosed on Schedule 4.2.4, there are no (i) outstanding
options obligating any of the Subsidiaries to issue or sell shares
of capital stock of such Subsidiary or to grant, extend or enter
into any such option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor
of any person other than the Company with respect to the voting of,
or the right to participate in dividends or other earnings on, any
capital stock of the Subsidiaries.
4.2.5 The Company does not
have an Investment in any Person other than Investments in (a)
demand deposit or money market accounts, (b) cash equivalents
(i.e., marketable obligations issued or guaranteed by the
government of the United States that mature within 180 days of the
acquisition thereof or money market funds that invest in securities
similar to such United States government securities) and (c)
Investments listed on Schedule 4.2.5.
4.2.6 The purchase and sale
of the Purchased Securities pursuant to this Agreement does not
contravene applicable federal and state securities laws.
4.3. Financial Statements,
etc .
4.3.1 Financial
Information . The Company has heretofore delivered to the
Investor true and complete copies of each of the
following:
(a) The audited combined
balance sheets of the Company as of December 31, 1998 and 1999, and
the combined statements of operations,
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of stockholders’ equity
(deficiency), and of cash flow for the respective fiscal years
ended December 31, 1998 and 1999, together with the notes thereto
and reports thereon by Deloitte & Touche for the financial
statements as of and for the year ended December 31, 1998 and the
notes thereto and reports thereon by Price Waterhouse Coopers for
the financial statements as of and for the year ended December 31,
1999 (the “Year End Financials”).
(b) Monthly unaudited
financial statements of the Company, consisting of a balance sheet
and related statements of earnings and changes in retained earnings
and cash flow, for each calendar month since December 31, 1999
through December 31, 2000 (the “Interim Financials” and
together with the Year End Financials, the “Financial
Statements”).
4.3.2 Character of
Financial Information . Except as set forth on Schedule 4.3.2,
the Financial Statements (including the notes thereto) were
prepared in accordance with GAAP (as defined in Section 6.5.1
hereof) consistently applied throughout the periods specified
therein. Except for errors or omissions which would not have in the
aggregate a Material Adverse Effect, the Financial Statements are
correct and complete and present fairly the financial position and
results of operations of the Company for the periods specified
therein, and are consistent with books and records of the Company
subject in the case of the Interim Financials to an absence of
notes and normal year-end adjustments which will not in the
aggregate have a Material Adverse Effect.
4.4. Title to Assets .
The Company has good and marketable title to or, in the case of
property held under lease or other Contractual Obligation, a valid
and Enforceable right to use, all of its Assets, including without
limitation all properties, rights and assets reflected in the
December 31, 1999 balance sheet (except for Assets which have been
sold or otherwise disposed of since the Balance Sheet Date as
permitted under Section 4.12 hereof). The Assets are not subject to
any Lien other than Liens described on Schedule 4.4. The tangible
Assets are in good working order, operating condition and state of
repair, ordinary wear and tear excepted. The Assets constitute all
properties, rights and assets held for, used in or necessary for
the conduct of the Business of the Company as currently
conducted.
4.5. Compliance with Laws,
etc . The operations of the Business as heretofore or currently
conducted were not and are not in violation of, nor is the Company
in default or violation under, any Legal Requirement, except for
such violations or defaults as have not had and will not have in
the aggregate a Material Adverse Effect. To the Knowledge of the
Company, all future expenditures with respect to the operations of
its Business as currently conducted that are required to meet the
provisions of any Legal Requirement currently in effect (or, to the
Knowledge of the Company, enacted but to take effect in future)
will not in the aggregate have a Material Adverse Effect. The
Company has been duly granted all licenses, permits, franchises and
other authorizations under any Legal Requirement necessary for the
conduct of the Business as currently conducted or currently
proposed to be conducted, except licenses, permits, franchises and
other authorizations the failure of which to have been obtained has
not had and will not have in the aggregate a Material Adverse
Effect. Notwithstanding the foregoing, no
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representation is made under this
Section 4.5 with respect to compliance with any Legal Requirement
where a representation with respect to compliance with laws or
legal requirements is made in another subsection of this Section 4,
including subsections 4.7.2(g), 4.15, 4.17 and 4.18.
4.6. Non-Contravention,
etc . Neither the execution and delivery of this Agreement nor
the consummation by the Company of any of the transactions
contemplated hereby does or will constitute, result in or give rise
to (a) a breach of or a default or violation under any provision of
the Charter or By-laws of the Company or any of its Subsidiaries or
(b), except as set forth on Schedule 4.6, (i) a breach or violation
under any provision of any Contractual Obligation of the Company or
any of its Subsidiaries, (ii) the acceleration of the time for
performance of any obligation under any such Contractual
Obligation, (iii) the imposition of any Lien upon or the forfeiture
of any Asset of the Company or any of its Subsidiaries (including,
without limitation, any Asset held under a lease or license), (iv)
a requirement that any consent under, or waiver of, any such
Contractual Obligations, Charter or By-law provision be obtained
that has not already been obtained or (v) any severance payments,
right of termination, modification of terms, or any other right or
cause of action under any such Contractual Obligation or Charter or
By-law provision, except in the case of clause (b)(i) above where
such breaches, defaults, events or violation would not have a
Material Adverse Effect.
4.7. Real Property
.
4.7.1 Schedule 4.7.1 sets
forth a list of the addresses of each location at which any
equipment or inventory is located or where the Company has an
office or other place of business.
4.7.2 The Company does not
and has never owned any real property. Schedule 4.7.2 lists all
contracts for the lease or sublease of real property by the Company
currently in effect (the “Leases”). The Company has
delivered to the Investor correct and complete copies of the Leases
(as amended to date). With respect to each Lease:
(a) such Lease is Enforceable
against the Company, and to the best of the Company’s
Knowledge, Enforceable against the other party or parties to such
Lease;
(b) such Lease will continue
to be Enforceable against the Company on identical terms following
the consummation of the transactions contemplated
hereby;
(c) the Company is not, and,
to the Company’s Knowledge, no other party to such Lease is
in material breach or default, and no event has occurred which,
with notice or lapse of time or both, would constitute a material
breach or default or permit termination, modification, or
acceleration thereunder or impair any right of the Company to
exercise and obtain the benefit of any options contained in such
Lease;
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(d) there are no disputes,
oral agreements, or forbearance programs in effect as to such
Lease;
(e) with respect to each such
Lease that is a sublease, the representations and warranties set
forth in subsections (a) through (d) above are true and correct
with respect to the underlying Lease;
(f) the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in each such Lease; or
(g) all facilities leased or
subleased under such Lease have received all approvals of
governmental authorities (including licenses and permits) required
to be obtained by the tenant in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
4.8. Litigation, etc .
Except as set forth on Schedule 4.8, there is no litigation, at law
or in equity, or any proceeding before or investigation by any
Governmental Authority pending (or, to the Knowledge of the
Company, threatened) against the Company, or any basis therefor,
except for such potential litigation or proceedings which have not
had and will not have in the aggregate a Material Adverse Effect.
There is no litigation at law or in equity, or any proceeding
before, or investigation by, any Governmental Authority, pending
(or, to the Knowledge of the Company, threatened) against the
Company, or any basis therefor, which seeks rescission of, seeks to
enjoin the consummation of, or otherwise relates to, this Agreement
or any other Transaction Document or any of the transactions
contemplated hereby or thereby. No judgment, decree or order of any
Governmental Authority has been issued against the Company. With
regard to the litigation with Gallup, Inc. d/b/a The Gallup
Organization, set forth on Schedule 4.8, as of the Closing Date, to
the Company’s Knowledge and based on what has been learned by
the Company so far in the discovery related to that litigation, the
Gallup litigation will not have a Material Adverse Effect and if,
as a result of this litigation, the Company is no longer permitted
to use the copyright that is the subject matter of this litigation,
there would be no Material Adverse Effect to the particular line of
business of the Company currently using such copyright.
4.9. Intellectual Property
Rights . For purposes of this Agreement,
“Intangibles” shall mean: all trade and product names;
foreign letters patent, patents, patent applications, and
unpatented proprietary developmental records; trademarks, service
marks, logos and copyrights (including registrations and
applications); trade secrets, know-how and other proprietary or
confidential information; computer software; and other intangible
property and rights that are directly or indirectly owned, licensed
or otherwise used by the Company. Schedule 4.9 lists all material
Intangibles owned or used by the Company. Except as set forth on
Schedule 4.9, the Company owns or has the valid right to use all
Intangibles used in or necessary for the conduct of its Business as
presently conducted free and clear of all Liens or licenses of any
kind. Except as set forth on Schedule 4.9, the Company has never
received any charge, complaint, claim, demand, or notice alleging
any interference, infringement, misappropriation, or violation,
including any claim that the Company must license or refrain from
using any Intangibles. The use by the Company of the Intangibles
does not infringe or misappropriate and has not infringed
or
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misappropriated any rights of any third
party, and, to the Company’s Knowledge, no activity, except
as set forth on Schedule 4.9 hereto, of any third party infringes
upon or misappropriates the rights of the Company with respect to
any of the Intangibles. The Company does not own any patents, and
has no pending patent applications, relating to the Business.
Except as set forth on Schedule 4.9 hereto, no other Person has any
ownership of or right to use the Intangibles (except such right to
use such Intangibles as would not have a Material Adverse Effect).
The Company has no knowledge of a claim by any Person claiming any
ownership of or right to use any Intangibles.
4.10. Contracts, etc
.
4.10.1 Certain Contractual
Obligations . Set forth on Schedule 4.10.1 hereto is a true and
complete list of all of the following Contractual Obligations of
the Company:
(a) All collective bargaining
agreements and other labor agreements, all employment or consulting
agreements, and all other plans, agreements, arrangements,
practices or other Contractual Obligations (other than any Employee
Plan) which constitute Compensation or benefits, including post
retirement benefits, to any of the officers or employees or former
officers or employees (or any spouse or family member of any such
current or former officer or employee) of the Company.
(b) All Contractual
Obligations under which the Company is or may become obligated to
pay any legal, accounting, brokerage, finder’s or similar
fees or expenses in connection with, or has incurred any severance
pay or special Compensation obligations which would become payable
by reason of, this Agreement or consummation of the transactions
contemplated hereby.
(c) All Contractual
Obligations (including, without limitation, options) to sell or
otherwise dispose of any Assets other than in the Ordinary Course
of Business.
(d) All Contractual
Obligations under which the Company has or will after the Closing
Date have any liability or obligation to or for the benefit of any
Existing Stockholder or any other Affiliate of the
Company.
(e) All Contractual
Obligations under which the Company has any liability or obligation
for Debt or constituting or giving rise to a Guarantee of any
liability or obligation of any Person, or under which any Person
has any liability or obligation constituting or giving rise to a
Guarantee of any liability or obligation of the Company (including,
without limitation, partnership and joint venture
agreements).
(f) All Contractual
Obligations, other than this Agreement, under which the Company is
or may become obligated to pay any amount
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in respect of deferred or
conditional purchase price, indemnification obligations, purchase
price adjustment or otherwise in connection with any (i)
acquisition or disposition of assets or securities, (ii) merger,
consolidation or other business combination, or (iii) series or
group of related transactions or events of a type specified in
subclauses (i) and (ii).
(g) All Contractual
Obligations for the sale of products or provision of services by
the Company that (i) individually involve products or services
having a value of at least $100,000, (ii) have a term extending
more than one year after the Initial Closing Date, (iii) to which
the United States federal government or any state, local or foreign
government or any agency or department of any of the foregoing is a
party, or (iv) that renders the Company a subcontractor at any tier
to any prime Contractual Obligation to which the United States
federal government or any state, local or foreign government or any
agency or department of any of the foregoing is a party.
(h) All purchase obligations
(whether or not in the Ordinary Course of Business), which require
minimum purchases by the Company.
(i) All advertising
contracts.
(j) All standard forms of
purchase orders and sales orders.
(k) All leases or other
Contractual Obligations (including all amendments) under which any
real property or other tangible asset is held or used by the
Company.
(l) All leases or other
Contractual Obligations under which the Company is liable as lessor
with respect to any real property or other tangible
asset.
(m) All licenses or other
Contractual Obligations (including all amendments) under which any
Intangible is held or used by the Company.
(n) All licenses or other
Contractual Obligations under which the Company is liable as
licensor with respect to any Intangibles.
(o) All Contractual
Obligations under which the Company is or may be prohibited or
restricted from competing (i) in any business, (ii) in any
geographic area and/or (iii) for any current or potential customers
anywhere in the world.
(p) All Contractual
Obligations (other than purchase orders or sales orders or
contracts for services entered into in the Ordinary Course of
Business) not required to be listed on Schedule 4.10.1 pursuant to
clauses (a) through (n) above which individually involve
liabilities of the Company in excess of $100,000.
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4.10. The Company has
heretofore delivered to the Investor a true and complete copy of
each of the Contractual Obligations, or a narrative description of
those Contractual Obligations that are not in writing, listed on
Schedule 4.10.1 hereto, each as in effect on the date hereof and as
it will be in effect on the Closing Date, including, without
limitation, all amendments thereto.
4.10.2 Nature of
Contracts, etc. Each Contractual Obligation to which the
Company is a party is, and after giving effect to the Closing
hereunder and the consummation of the transactions contemplated
hereby will be, Enforceable by the Company except for such failures
to be so Enforceable as have not had and will not have in the
aggregate a Material Adverse Effect. No breach or default by the
Company under any Contractual Obligation to which it is a party has
occurred and is continuing, and no event has occurred which with
notice or lapse of time would constitute such a breach or default
or permit termination, modification or acceleration by any other
Person under any of such contracts, other than such breaches,
defaults and events as have not had and will not have in the
aggregate a Material Adverse Effect. No breach or default has
occurred by the Company under any Contractual Obligation or Legal
Requirement to which it is a party or by which it or any of its
property is bound or affected with respect to any Government Order.
To the Knowledge of the Company, except as set forth on Schedule
4.10.2 hereto, no breach or default by any other Person under any
of the foregoing has occurred and is continuing, and no event has
occurred which with notice or lapse of time would constitute such a
breach or default or permit termination, modification or
acceleration by the Company under any of the foregoing, other than
breaches, defaults and events which have not had and will not have
in the aggregate a Material Adverse Effect.
4.11. Liabilities .
The Company does not have any liabilities or other obligations,
whether absolute, accrued, contingent, due, to become due, or
otherwise, other than: (a) obligations and liabilities of the
Company set forth on the Financial Statements (or described
specifically in the notes thereto); (b) obligations and liabilities
of the Company incurred since the Balance Sheet Date in the
Ordinary Course of Business; and (c) obligations and liabilities of
the Company in respect of Contractual Obligations or otherwise that
either individually or in the aggregate will not exceed
$100,000.
4.12. Change in
Condition . From and after the Balance Sheet Date to and
including the date hereof, the Company has conducted its Business
only in the Ordinary Course of Business and has maintained the
value of its Business as a going concern and, except as set forth
on Schedule 4.12, its relationships with customers, distributors,
suppliers, vendors, employees, agents and others. Without limiting
the generality of the foregoing, except as set forth on Schedule
4.12, which matters have not had and will not have in the aggregate
a Material Adverse Effect, since the Balance Sheet Date the Company
has not:
(a) Entered into any
transaction otherwise than on an arms’ length basis or any
transaction with any Existing Stockholder or any Affiliate
thereof;
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(b) Made any capital
expenditure in excess of $100,000 individually or $500,000 in the
aggregate;
(c) Incurred or otherwise
become liable in respect of any Debt, except for borrowings in the
Ordinary Course of Business under the Loan and Security Agreement
dated as of December 13, 2000, between Kenexa Financial, Inc. and
Citicorp USA, or become liable in respect of any
Guarantee;
(d) Created or suffered the
imposition of any Lien (other than capital leases not in excess of
$100,000) upon any assets, whether tangible or intangible, of the
Company;
(e) (i) Sold, leased to
others or otherwise disposed of any of its Assets, (ii) entered
into any Contractual Obligation relating to (A) the purchase by the
Company of any capital stock of or interest in any Person (other
than purchases by the Company from terminated employees), (B) the
purchase of assets constituting a business or (C) any merger,
consolidation or other business combination, (iii) canceled or
compromised any Debt or claim (other than compromises of accounts
receivable in the Ordinary Course of Business), (iv) waived or
released any right of substantial value or (v) instituted, settled
or agreed to settle any material Action;
(f) (i) Made any changes in
the rate of Compensation of any director, officer, employee, or
consultant to, or agent of the Company, except for changes in the
Ordinary Course of Business to the compensation of Persons other
than directors and officers of the Company, or (ii) paid or agreed
to pay any extra Compensation to any such Person (including,
without limitation, any such payments to be made in connection with
and/or from the proceeds of the transactions contemplated hereby or
by the other Transaction Documents);
(g) Suffered any material
damage, destruction or loss (whether or not covered by insurance)
to any of its Assets;
(h) Made any change in its
customary methods of accounting or accounting practices, pricing
policies or payment or credit practices, or failed to pay any
creditor any amount owed to such creditor when due, or granted any
extensions of credit other than in the Ordinary Course of
Business;
(i) Made any
Distributions;
(j) Entered into any
Contractual Obligation to do any of the things referred to in
clauses (a) through (i) above; and
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(k) Suffered or incurred any
Material Adverse Effect, nor any event or events which in the
aggregate will have a Material Adverse Effect.
4.13. Insurance . Set
forth on Schedule 4.13(a) is a list of all liability (including,
without limitation, public liability, products liability and
automobile liability), workers’ compensation, property,
casualty, directors and officers, errors and omissions and other
policies by which the Company has been insured since December 31,
1997 and, in the case of liability policies, since December 31,
1995 (the “Insurance Policies”), true and complete
copies of which have been furnished to the Investor. Such list
includes the type of policy, form of coverage, policy number and
insurer, coverage dates, named insured, limit of liability and
deductible. Except for the matters set forth on the loss runs
annexed to Schedule 4.13(b) and the matters set forth on Schedule
4.13(b), there have been no liability claims which have been made
against the Company or, to the Knowledge of the Company, any
occurrence which may give rise to any such claim against the
Company. The Company maintains adequate insurance for its Business
similar in scope and nature to the insurance maintained by similar
companies in the same industry or industries as the
Company.
4.14. Transactions with
Affiliates . Except as set forth on Schedule 4.14(a) (the
“Affiliate Relationships”), none of the Affiliates of
Existing Stockholders (other than the Company) or of the Company is
an officer, director, employee, consultant, competitor, customer,
distributor, supplier or vendor of the Company. During the
preceding two-year period ending on the Closing Date, (a) the terms
of the Affiliate Relationships have not been altered in any respect
which has had or will have in the aggregate a Material Adverse
Effect, and (b) except as set forth on Schedule 4.14(b), there have
been no transactions between the Company, on the one hand, and any
Existing Stockholder or any Affiliate thereof, on the other hand,
other than the Affiliate Relationships and other relationships,
Contractual Obligations and transactions the termination or
non-continuation of which has not had and will not have in the
aggregate a Material Adverse Effect. Except as set forth on
Schedule 4.14(c), all transactions between the Company on the one
hand, and the Existing Stockholders or any Affiliate thereof on the
other hand, which occurred during the periods covered by the
Financial Statements are reflected in the Financial Statements at
amounts which do not overstate the net worth or net income of the
Company as compared with fair market values and prices which would
have been charged and paid between parties at arms’ length at
the time of the entering into of the transactions in
question.
4.15. Tax Matters .
Except as set forth on Schedule 4.15:
4.15.1 all Tax Returns that
are required to have been filed by or with respect to the Company
or any of its Subsidiaries have been duly and timely filed in
accordance with all applicable Legal Requirements and such Tax
Returns are true, correct and complete, and no claim has been made
by any taxing authority in a jurisdiction where the Company or any
of its Subsidiaries does not file Tax Returns that the Company or
any of its Subsidiaries is or may be subject to taxation by that
jurisdiction,
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4.15.2 all Taxes due and
payable (whether or not shown on any Tax Return) in respect of the
Company and each of its Subsidiaries have been paid in
full,
4.15.3 the unpaid Taxes of
the Company and its Subsidiaries (A) did not as of the most recent
fiscal month’s end exceed the reserve for Taxes (other than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of
the most recent unaudited balance sheet (other than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the
past custom and practice of the Company and its Subsidiaries in
filing their Tax Returns,
4.15.4 except as set forth on
Schedule 4.15.4, no Tax Return referred to in Section 4.15.1 has
been the subject of examination or audit by the Internal Revenue
Service (“IRS”) or the appropriate state, local or
foreign taxing authority,
4.15.5 no deficiencies have
been asserted that have not been fully paid or assessments made as
a result of any examinations of the Tax Returns referred to in
Section 4.15.1 by the IRS and/or a state, local or foreign taxing
authority,
4.15.6 there is no action,
suit, proceeding, audit, claim, deficiency or assessment pending or
threatened with respect to any Taxes of the Company or any of its
Subsidiaries, and there are no Liens on or other security interests
in any of the assets of the Company or any of its Subsidiaries that
arose in connection with any failure (or alleged failure) to pay
any Tax other than for current Taxes not yet due and
payable,
4.15.7 no waivers of statutes
of limitations have been given or requested by or with respect to
any Taxes of the Company or any of its Subsidiaries,
4.15.8 no powers of attorney
with respect to Taxes of the Company or any of its Subsidiaries are
currently in force,
4.15.9 except as set forth on
Schedule 4.15.9, the Company and each of its Subsidiaries do not
have any equity interest in another entity that is classified for
tax purposes as a corporation or partnership,
4.15.10 the Company and each
of its Subsidiaries have not made nor are obligated nor are a party
to an agreement that could obligate it to make any
compensation-related payments that would not be deductible by
reason of Code sections 162, 280G or 404,
4.15.11 the Company and each
of its Subsidiaries do not have any liability for the Taxes of any
Person under Treas. Reg. § 1.1502-6 (and/or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, or is a party to or bound by
any Contractual Obligation relating to any allocation or sharing of
Taxes,
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4.15.12 the Company has
provided to the Investor true, complete, and correct copies of the
1999 federal income tax return and 1999 Pennsylvania income tax
return filed by it,
4.15.13 the Company and each
of its Subsidiaries have withheld and paid to the IRS or the
appropriate state, local or foreign taxing authority all amounts
required to be withheld from the wages of the employees,
independent contractors, creditors, stockholders or other third
parties of the Company and each of its Subsidiaries under state
law, foreign law and the applicable provisions of the
Code,
4.15.14 all contributions and
other Taxes due from the Company or any of its Subsidiaries
pursuant to any unemployment insurance or workers compensation laws
and all sales or use Taxes which are due or payable by the Company
or any of its Subsidiaries prior to the date hereof have been paid
in full and will be so paid through the Closing Date,
4.15.15 no consent to the
application of Section 341(f) of the Code has been made by or on
behalf of the Company or any of its Subsidiaries with regard to any
assets or property held, acquired or to be acquired by the Company
or any of its Subsidiaries,
4.15.16 the Company and each
of its Subsidiaries has disclosed on its Tax Returns all positions
taken that could give rise to a substantial understatement of
federal income tax within meaning of Code Section 6662 and any
similar foreign, state and local provision,
4.15.17 prior to December 16,
1999, the Company had been a validly electing S corporation within
the meaning of Code Section 1361 and 1362 (or any similar provision
of state and local law) at all times since inception,
and
4.15.18 none of the Company
or its Subsidiaries have agreed to any extension of time with
respect to a tax assessment or deficiency.
Notwithstanding anything to
the contrary in this Section 4.15, the Investor agrees that the
Company will have no liability with respect of any breach of
representation or warranty contained in this Section 4.15 to the
extent that the Company is obligated to make and has made a Cash
Payment (as defined in Section 6.6) or is obligated to issue and
has issued any shares of its Class A common stock, par value $.01
per share (“Class A Common”) pursuant to the terms of
Section 6.6 hereof as a result of the existence of a Tax Liability
that has given rise to such breach.
4.16. No Illegal Payments,
etc . No Existing Stockholder nor the Company, nor any of their
respective officers, employees or agents, has (a) directly or
indirectly given or agreed to give any gift, contribution, payment
or similar benefit to any supplier, customer, governmental
employee
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or other Person who was, is or may be in
a position to help or hinder the Company (or assist in connection
with any actual or proposed transaction) or made or agreed to make
any contribution, or reimbursed any political gift or contribution
made by any other Person, to any candidate for federal, state,
local or foreign public office, in either case (i) which would
subject the Company or the Investor to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, or (ii)
the non-continuation of which has had or will have in the aggregate
a Material Adverse Effect, or (b) established or maintained any
unrecorded fund or asset or made any false entries on any books or
records for any purpose.
4.17. Employee Benefit
Plans.
4.17.1 Disclosure .
Schedule 4.17 sets forth an accurate, current and complete list of
all Employee Plans. With respect to each Employee Plan, the Company
has provided to the Investor accurate, current and complete copies
of each of the following: (i) where the plan has been reduced to
writing, the plan document together with all amendments; (ii) where
the plan has not been reduced to writing, a written summary of all
material plan terms; (iii) where applicable, copies of any trust
agreements, custodial agreements, insurance policies,
administration agreements and similar agreements, and investment
management or investment advisory agreements; (iv) copies of any
summary plan descriptions, employee handbooks or similar employee
communications; (v) in the case of any plan, if any, that is
intended to be qualified under Section 401(a) of the Code, a copy
of the most recent determination letter from the IRS and a copy
of
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